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RSCAL YEAR

1979

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402
Stock Number 041-001-00157-3

THE BUDGET DOCUMENTS
Data and analyses relating to the budget for 1979 are published in
four documents:
The Budget of the United States Government, 1979 contains the information that most users of the budget would normally need, including
the Budget Message of the President. The Budget presents an overview
of the President's budget proposals and includes explanations of
spending programs in terms of national needs, agency missions, and
basic programs, an analysis of estimated receipts and a discussion of
the President's tax proposals. This document also contains a description of the budget system and various summary tables on the budget
as a whole. (Price $4.00.)
The Budget of the United States Government, 1979—Appendix contains detailed information on the various appropriations and funds
that comprise the budget. The Appendix contains more detailed
information than any of the other budget documents. It includes for
each agency: the proposed text of appropriation language, budget
schedules for each account, explanations of the work to be performed
and the funds needed, proposed general provisions applicable to the
appropriations of entire agencies or groups of agencies, and schedules
of permanent positions. Supplemental and rescission proposals for the
current year, and new legislative proposals, are presented separately.
Information is also provided on certain activities whose outlays are not
part of the budget totals. (Price $12.00.)
Special Analyses, Budget of the United States Government, 1979
contains 16 special analyses that are designed to highlight specified
program areas or provide other significant presentations of Federal
budget data. This document includes analytical information about:
alternative views of the budget, i.e., current services and national
income accounts; economic and financial analyses of the budget
covering Government finances and operations as a whole; Government-wide program and financial information for Federal education,
training and employment, health, income security, civil rights, environment, and research and development programs. (Price $3.25.)
The United States Budget in Brief, 1979 provides a more concise,
less technical overview of the 1979 budget than the above volumes.
Summary and historical tables on the Federal budget and debt are
also provided, together with graphic displays. (Price $1.75.)
Each of these documents is for sale by the Superintendent of
Documents, U.S. Government Printing Office, Washington, D.C.
20402. (Paper covers only.)
G E N E R A L NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Detail in the tables, text, and charts of this volume may not add
to the totals because of rounding.
2

TABLE OF CONTENTS
Page

PART 1. ALTERNATIVE VIEWS OF THE BUDGET
A. Current services estimates
B. Federal transactions in the national income accounts
PART 2. ECONOMIC AND FINANCIAL ANALYSES OF THE
BUDGET TOTALS
C. Funds in the budget
D. Investment, operating, and other budget outlays
E. Borrowing, debt, and investment
F. Federal credit programs
G. Tax expenditures
H. Federal aid to State and local governments
I. Civilian employment in the executive branch
PART 3. SELECTED FEDERAL PROGRAMS
J. Education

5
7
45
69
71
83
97
119
148
175
200
211
213

K. Training and employment

228

L. Health
M. Income security
N. Civil rights activities

242
262
275

0 . Environment
P. Research and development

287
305

PART 1

ALTERNATIVE VIEWS OF
THE BUDGET

INTRODUCTION
Part 1 includes alternative views of the budget. It provides two
different standards against which the budget totals may be measured—
current services estimates and national income accounts. These special
analyses are designated A and B.
Special Analysis A (Current Services Estimates) presents the
estimates required by the Congressional Budget Act of 1974 (31
U.S.C. 11a). These estimates reflect the anticipated costs of continuing ongoing Federal programs and activities at present levels
without policy changes (that is, ignoring all new initiatives, Presidential or congressional, that are not yet law).
Special Analysis B (Federal Transactions in the National Income
Accounts) presents the Federal budget estimates in terms of the
national income accounts. It also explains the relationships of the
unified budget of the Federal Government to the national income
accounts, which constitute the most widely used measure of aggregate
economic activity in the United States.
6

SPECIAL ANALYSIS A
CURRENT SERVICES

ESTIMATES

The Congressional Budget Act of 1974 (Public Law 93-344) established a requirement for the presentation of current services estimates.
Section 605(a) of the act requires that the President submit to the
Congress estimates of the outlays and budget authority needed to
maintain current Government services and activity levels. More
specifically, the act defines the current services levels as
. . . the estimated outlays and proposed budget authority
which would be included in the Budget to be submitted pursuant
to section 201 of the Budget and Accounting Act, 1921, for the
ensuing fiscal year if all programs and activities were carried on
during such ensuing fiscal year at the same level as the fiscal year
in progress and without policy changes in such programs and
activities.
The Act further requires the President to submit the economic and
programmatic assumptions underlying the estimates and calls for
the Joint Economic Committee of the Congress to review the estimates.
Since current services estimates show what would happen if no
policy changes were made, they provide a "base" with which the
administration's budget proposals, or other proposals, may be compared. Such comparisons are made in various parts of the budget and
serve to highlight the effects of recommended policy changes.1
This year, in an experiment agreed to by the Congress, the current
services estimates are presented in conjunction with the President's
January budget (rather than in November), and are based on identical
economic assumptions. Changes in economic conditions significantly
affect budget estimates because of their effects on tax receipts, unemployment benefits, cost-of-living adjustments, and Federal pay raises.
As a result, it can be very difficult to separate the effects of policy
change from those of change in the economic outlook when comparing
budget estimates made at two different times. Presentation of this
year's current services estimates on the basis of the same economic
assumptions as the presidential budget facilitates such comparisons.
Also, since the estimates were prepared simultaneously, they reflect
the same status of enacted legislation and the same technical methods
for making estimates.
The economic assumptions common to the budget and the current
services estimates are summarized in table A-l. For further details
and discussion of these economic assumptions, see Part 3 of the budget,
"Economic Assumptions and Long-Range Budget Projections."
1 Summary comparisons are in the Budget of the United States Government, Fiscal Year 1979,
Part 2. "Budget Summary," and Part 3, "Economic Assumptions and Long-Range Budget Projections."

THE

BUDGET

FOR

FISCAL Y E A R

Table A-1. S U M M A R Y O F E C O N O M I C

19 7 9

ASSUMPTIONS

(Calendar years)

Gross national product (in billions of current dollars)
Rate of growth of constant-dollar GNP (percent change)
Unemployment rate (percent)
Consumer Price Index (percent change)

1977

1978

1979

1,890
4.9
7.0
6.5

2,099
4.7
6.3
5.9

2,335
4.8
5.9
6.1

One premise underlying the economic assumptions is that the
President's budget proposals will all be adopted. Continuation of all
programs and tax laws unchanged at current services levels would
likely result in a somewhat different economic performance. Other
factors being the same, in the absence of the net tax reductions and the
net increase in outlays above the current services level proposed in
the President's budget, economic growth would be expected to be
weaker in 1979 and unemplo}^ment would be higher. The rate of price
increase would be slightly lower in 1978, due primarily to exclusion
of the energy program. These changes in economic performance
would produce a higher current services deficit in 1979 that is shown
in table A-2.
THE

C U R R E N T SERVICES

CONCEPT

The current services estimates are neither recommended amounts
nor forecasts as to what the figures for 1978 and 1979 will actually be.
Rather, they provide a base against which budgetary alternatives may
be assessed. This base represents the cumulative effects of all past
congressional and presidential budgetary choices. Since the estimates
indicate the near-term budgetary implications of the current directions
of Federal programs and activities, they in effect answer the question:
"How would the budget come out if we simply left the Federal Government on automatic pilot through next year?"
The current services concept used in this analysis, and in previous
current services estimates submitted by the executive branch, is not
the only one possible. It has proved, however, to be both a practical
and a useful formulation. Under the concept adopted, the current
services estimates for 1979 reflect the anticipated costs of continuing
ongoing Federal programs and activities at 1978 levels without policy
changes; that is, omitting all proposed and pending new initiatives,
Presidential or congressional, that are not now enacted. In general,
the 1978 level on which the current services estimates are based is that
which is implied by enacted 1978 appropriations or, for those few 1978
appropriations not yet enacted, by the level authorized or implicit in
continuing resolutions. The estimates allow for the future implications
of current law, and for anticipated changes of a relatively uncontrollable nature (as distinct from policy changes).
More specifically:
—For entitlement programs (such as social security), the current
services estimates take into account inflation adjustments that

SPECIAL ANALYSIS A

are mandatory under current law, changes in the benefit base
(usually earnings), and changes in the anticipated numbers of
beneficiaries.
—Grants to State and local governments in 1979 are assumed to be
funded at the same dollar amount as in 1978 unless the grants
are: (a) scheduled to increase by specified amounts as a result of
legislation; (b) tied to cost-of-living increases by legislation; (c)
affected by changes in beneficiary populations or other factors
that affect benefit payments under entitlement programs; or (d)
affected by spending from prior-year commitments; for example,
highway grants.
—Entitlement programs that are not linked by law to the cost of
living (such as veterans compensation) are assumed to remain
level except for changes in the benefit base and in the number of
people eligible.
—Procurement and construction activities are assumed to proceed
in an orderly fashion, consistent with current law and appropriation levels. Outlays for these programs are largely determined by
prior-year contracts and obligations. Some appropriations provide
for anticipated inflation in the cost of multiyear projects. In such
instances, the current services estimates take into account anticipated inflation (consistent with the economic assumptions). In
addition, section 806, title VIII, of the Defense Authorization
Act of 1977 requires that the President's budget requests reflect
anticipated increases in the cost of operations and maintenance.
Current services estimates for Department of Defense military
programs are adjusted accordingly. Comparable nondefense accounts are not adjusted in this way.
—Outlays for Federal pay are assumed to increase in accordance
with projected results of the annual pay comparability survey.
—Interest on the public debt is estimated on the basis of the current
services deficit and the assumption that market interest rates will
not change from their levels at the time the estimates are made.
—Offsetting receipts are estimated on the basis of judgment as to
their most likely level, assuming no change in current law.
—Budget authority for certain major trust funds consists of trust
fund receipts. These are estimated using standard revenue estimating techniques.
—Proposed rescissions of budget authority are not reflected.
—It is assumed that deferral actions continue in effect for the period
specified in the special message transmitted to the Congress under
the Impoundment Control Act of 1974 (unless they have been
overturned by the Congress).
Many Federal programs are authorized for a limited number of
years, but are routinely renewed. If such programs are scheduled
to expire before or during 1979, it is assumed for purposes of current services estimates that they will be renewed. In addition, the
current services estimates assume continued renewal of the laws authorizing temporary employment assistance and the antirecession
fiscal assistance program, each of which has already been renewed at

THE

BUDGET FOR

FISCAL Y E A R

19 7 9

least once. The estimates, however, assume no additional funding of
the local public works program enacted last year under temporary
legislation.
For purposes of estimating receipts on a current service basis, some
temporary provisions of existing law are assumed to be extended. In
other instances, the estimates assume future tax changes as scheduled
under current law.
A guiding principle in establishing a conceptual basis for the current
services estimates was to make the results useful to the Congress and
the public. Clearly, however, alternative assumptions could have been
made and might be more useful for certain purposes. Because of this,
rough estimates are presented in a later section indicating a number
of adjustments that might be made to the current services outlay
estimates if different approaches were used.
C U R R E N T SERVICES B U D G E T

TOTALS

Current services budget authority is estimated to be 7.8% higher in
1979 than in 1978, and outlays, 6.9% higher. Receipts for 1979 are
estimated to increase 15.7% on a current services basis. The resulting
1979 deficit would be $28.5 billion, 52% lower than that for 1978.
Tabic A-2. C U R R E N T S E R V I C E S B U D G E T

TOTALS

(In billions of dollars)

Receipts
Outlays
Deficit ( - ) .
Budget authority. _

1977
actual

1978
estimate

1979
estimate

356.9
401.9

400.7
460.4

463.8
492.4

-45.0

-59.7

-28.5

465.2

499.5

538.3

Receipts.—Under the current services concept, the 1979 receipts
estimate assumes extension of most of the temporary provisions of the
Tax Reduction and Simplification Act of 1977 that are currently
scheduled to expire December 31, 1978. The only major exception is
the employment tax credit, which was enacted as a 2-year economic
stimulus measure. The estimates also take into account the scheduled
increases in payroll taxes that have already been enacted.
For purposes of comparison, table A-3 shows receipts by major
source on a current services basis for 1978 and 1979. As the table
shows, current services receipts are projected to increase by $63
billion from 1978 to 1979. This is largely due to assumed increases in
incomes, reflecting both real economic growth and inflation.

SPECIAL

ANALYSIS

Table A - 3 . C U R R E N T S E R V I C E S R E C E I P T S B Y

SOURCE

(In billions of dollars)
Current services
1977
actual
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions.
Excise taxes.
Other.
Total

1978
estimate

1979
estimate

1979
administration
proposals

156.7
54.9
108.7
17.5
19.0

180.5
59.5
124.1
18.3
18.3

214.0
68.8
142.5
18.7
19.8

190.1
62.5
141.9
25.5
19.7

356.9

400.7

463.8

439.6

Individual income taxes are estimated to increase by $33.5 billion
from 1978 to 1979 on a current services basis. This increase of 19%
is due largely to rising personal incomes. Higher incomes not only
increase the aggregate tax base, they also push individual taxpayers
into higher tax brackets and thereby raise the average effective tax
rate. The assumed extension of the general tax credit and the earned
income credit beyond the current expiration date of December 31,
1978, reduces individual income taxes by $7.2 billion in 1979.
Corporation income taxes are estimated to increase by $9.3 billion,
or 16%> from 1978 to 1979 on a current services basis, largely as a result
of the assumed increase in corporate profits. The assumed extension
of the temporary corporate rate reductions in the Tax Reduction and
Simplification Act of 1977 reduces corporation income taxes by
$1.1 billion in 1979.
Social insurance taxes are estimated to increase by $18.4 billion on a
current services basis. The estimates reflect assumed increases in
total wages and salaries paid, and increases under current law in the
combined employee and employer social security tax rate from 12.1%
in calendar year 1978 to 12.26% in 1979. Similarly, the social security
taxable earnings base is scheduled to rise from $17,700 in calendar year
1978 to $22,900 in 1979.
Other receipts (excise taxes, estate and gift taxes, customs duties,
and miscellaneous receipts) are projected to increase by $1.7 billion
from 1978 to 1979 on a current services basis. These estimates reflect
continued phaseout of the telephone excise tax by 1 percentage
point each January.
Outlays.—The level of outlays necessary to maintain current
services is estimated at $492.4 billion for 1979. The increase in current
services outlays from 1978 to 1979 is $32 billion.

THE

BUDGET FOR FISCAL YEAR

Table A-4. C U R R E N T

19 7 9

SERVICES O U T L A Y S BY FUNCTION
(In billions of dollars)

1978
estimate

1979
estimate

1979
administration
proposals

107.7
6.7
4.8
7.5
11.7
9.0
3.5
16.3
9.5
26.9
44.3
147.5
18.9
4.0
4.1
9.9
43.8

116.8
7.4
5.1
7.6
12.0
5.5
3.1
17.1
8.5
29.4
50.3
159.2
18.9
4.1
4.2
9.5
48.7

117.8
7.7
5.1
9.6
12.2
5.4
3.0
17.4
8.7
30.4
49.7
160.0
19.3
4.2
4.3
9.6
49.0

l.l

1.1
1.7

Current services
1977
actual

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 and services.
Administration of justice
General government
General purpose fiscal assistance
Interest
Allowances:
Civilian pay raises
Contingencies
Undistributed offsetting receipts:
Employer share, employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf
Total outlays

97.5
4.8
4.7
4.2
10.0
5.5
_ *

14.6
6.3
21.0
38.8
137.0
18.0
3.6
3.4
9.5
38.1

-4.5
-8.1
-2.4

-5.0
-8.6
-2.0

-5.2
-9.1
-1.8

401.9

460.4

492.4

500.2

*$50 million or less.

Table A-4 shows current services outlays by function. Estimates by
agency are presented in table A-5. The major increases from 1978
to 1979 occur in the largest functions; that is, those with the most
outlays in 1978: income security, national defense, health, and
interest.

SPECIAL ANALYSIS

Table A-5. C U R R E N T S E R V I C E S O U T L A Y E S T I M A T E S B Y

AGENCY

(In billions of dollars)

1977
actual

Legislative branch
The Judiciary.
Executive Office of the President
Funds appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Defense—Civil
Department of Energy
Department of Health, Education, and Welefare.
Department of Housing and Urban Development.
Department of the Interior
Department of Justice
Department of Labor.
Department of State
Department of Transportation
Department of the Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration..
Veterans Administration
Other independent agencies
Allowances
Undistributed offsetting receipts
Total outlays

•

1.0
.4
. tI
2.5
16.7
2.6
95.7
2.3
5.2
147.5
5.8
3.2
2.3
22.4
1.1
12.5
49.6
4.4

Current services
1978
estimate

1979
estimate

3.9
18.0
19.9

1.1
.5
. tI
4.3
22.3
4.5
105.3
2.5
8.4
164.6
8.4
3.8
2.5
23.7
1.2
14.4
55.8
5.0
.3
4.0
18.9
24.4

-15.1

-15.6

1.1
.5
. i1
4.2
17.9
4.2
114.3
2.7
9.0
182.1
9.5
3.7
2.5
24.5
1.3
15.5
60.3
5.5
.3
4.3
18.9
24.8
1.1
-16.0

401.9

460.4

492.4

_ *

1979
administration
proposals

1.2
.5
i
. 1
5.1
17.7
4.4
115.2
2.5
10.1
181.3
9.5
4.0
2.5
25.1
1.4
15.8
62.6
5.7
.3
4.3
19.2
24.9
2.8
-16.0
500.2

*$50 million or less.

Budget authority.—Increases in budget authority between 1978 and
1979 generally reflect the higher funding levels that would be necessary
to permit the higher level of outlays estimated to be required to
maintain 1978 services levels in 1979. In the case of trust funds, however, the funds' receipts automatically become budget authority; thus
increases in budget authority for these funds simply reflect year-toyear growth in expected receipts. Budget authority for some programs
displays erratic year-to-year changes due to sporadic funding patterns or advance funding. Temporary employment assistance, for
example, receives $7 billion in budget authority in 1977 and $6
billion in 1979, but none in 1978.

THE

BUDGET FOR FISCAL YEAR

1979

Tables A-6 and A-7 show the current services budget authority estimates by function and by agency, respectively.
Table A-6. C U R R E N T S E R V I C E S B U D G E T A U T H O R I T Y B Y

FUNCTION

(In billions of dollars)
Current services
1977

actual
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 and services
Administration of justice
General government
General purpose fiscal assistance
Interest
Allowances:
Civilian pay raises
Contingencies
Undistributed offsetting receipts:
Employer share, employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental
Shelf
Total budget authority

_ .

1978

estimate

1979

estimate

1979
administration

proposals

110.4
6.6
4.6
5.0
9.5
2.4
5.5
10.4
12.8

117.8
10.9
4.9
7.2
12.4
3.6
5.4
15.3
8.4

126.4
11.5
5.2
6.9
12.2
6.6
6.5
15.5
7.2

128.4
13.8
5.2
9.5
12.7
7.2
6.6
18.6
7.7

30.4
40.4
168.6
19.1
3.6
3.9
9.3
38.1

22.2
46.5
180.0
19.1
3.9
4.0
9.7
43.8

29.1
52.1
189.2
18.6
3.9
4.2
9.5
48.7

33.6
52.6
190.9
19.1
4.1
4.4
16.6
49.0

1.2

1.2
3.0

-4.5
-8.1

-5.0
-8.6

-5.2
-9.1

-2.4

-2.0

-1.8

465.2

499.5

538.3

568.2

SPECIAL

Table A-7.

ANALYSIS

CURRENT SERVICES BUDGET A U T H O R I T Y ESTIMATES
AGENCY

(In billions of dollars)
Current services
1977
actual

Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President-- _
Department of Agriculture
Department of Commerce
Department of Defense—Military. _
Department of Defense—Civil
Department of Energy
_
Department of Health, Education, and Welfare _ _
Department of Housing and Urban DevelopmentDepartment of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration. _
Veterans Administration
Other independent agencies
Allowances
Undistributed offsetting receipts
Total budget authority

1978
estimate

1979
estimate

147.6
33.9
3.7
2.3
31.2
1.2
9.3
49.4
2.8
.3
3.8
19.0
28.3

1.0
.5
.1
8.2
16.8
2.2
115.2
2.7
10.0
162.2
38.1
4.1
2.4
20.7
1.4
13.5
55.9
5.4
.2
4.1
19.0
31.4

-15.1

-15.6

1.1
.5
.1
8.4
19.3
2.3
123.7
2.6
9.8
181.0
32.4
4.1
2.4
29.1
1.4
13.8
60.6
5.4
.3
4.4
18.6
31.9
1.2
-16.0

465.2

499.5

538.3

1.0
.4
.1
4.6
15.5
8.2
108.4
2.5
6.6

1979
ad ministration
proposals

1.2
.5
.1
11.0
20.0
2.7
125.6
2.5
11.6
185.0
33.1
4.5
2.5
29.9
1.5
17.4
69.6
5.6
.3
4.4
19.0
32.2
4.2
-16.0
568.2

T H E O U T L A Y IMPACT OF A L T E R N A T I V E APPROACHES

Since the concept of current services might be defined in different
ways, table A-8 indicates the effect on current services outlays of some
of the possible alternative approaches.
As indicated above, in estimating current services outlays, not all
programs are adjusted for the effects of inflation: most operating
expenses (other than salaries), most veterans benefits, and many
grants to State and local governments are not. If, in developing the
estimates, inflation adjustments were made for all programs not
limited by statutory ceilings, current services outlays would be about
$3.0 billion higher in 1979.

THE

BUDGET FOR FISCAL Y E A R

19 7 9

For current services purposes, programs that expire under existing
law are assumed to be carried forward unless the activities are clearly
temporary or nonrecurring. However, there are always borderline
cases. Thus the estimates assume that the temporary employment assistance program, which the Congress has already reauthorized twice,
would be carried forward in 1979. If this program were terminated
Table A-8. O U T L A Y I M P A C T O F A L T E R N A T I V E

APPROACHES

(In billions of dollars)
1979
outlays

Nonmandatory adjustments for inflation:1
Benefit payments for individuals (largely veterans benefits)
Nonindexed grants
Other programs not adjusted for inflation
Effect of nonrenewal of programs that expire under existing law:
Temporary employment assistance
Antirecession fiscal assistance
Total

0.6
.7
1.7
—5.2
—1.0
—3.3

1 Includes only those programs not adjusted for inflation under current law. The adjustment is
calculated separately for each major function.

before 1979, outlays in 1979 would be reduced by $5.2 billion. The current services estimates also assume that the antirecession financial
assistance program is reauthorized to continue in 1979 at $1.0 billion.
On the other hand, the local public works program established under
temporary legislation last year is assumed to receive no additional
funding. No estimate is made of the outlays effect of resuming this
program because there is no firm basis for developing assumptions
about possible amounts of additional funding.
D I F F E R E N C E S B E T W E E N C U R R E N T SERVICES E S T I M A T E S FOR
1978 AND 1979

Table A-9 shows the major components of the changes in current
services budget authority and outlays between 1978 and 1979. Outlays
for income security programs are estimated to rise from $147.5 billion in
1978 to $159.2 billion in 1979. Outlays for this function increase by $11.7
billion due to automatic cost-of-living increases in many benefit programs, higher earnings records for new retirees, and increases in the
number of beneficiaries. In the case of social security, for example,
about half of the 1978 to 1979 outlay increase is due to cost-of-living
adjustments, with higher earnings records and net increase in beneficiaries each accounting for about a quarter. On the other hand, outlays

SPECIAL ANALYSIS

for unemployment compensation decrease by $539 million, consistent
with the projected decline in the number of unemployed. Table A-10
shows caseload projections for major benefit programs, and other
selected programmatic assumptions.
Table A-9 — C H A N G E IN C U R R E N T S E R V I C E S B U D G E T A U T H O R I T Y A N D
O U T L A Y S , 1978 T O 1979
(In billions of dollars)

1978 current services estimate
1978-79 changes:
Income security:
Social security
Federal employee retirement
Unemployment compensation
Housing assistance
Other income security programs
Medicare and medicaid
Education, employment, and training:
Elementary and secondary education
Higher education
Temporary employment assistance
Employment and training assistance.
National defense:
Department of Defense^—Military:
Procurement
Operation and maintenance
Military and civilian pay raises
Military retired pay
Other defense military
Other national defense
Allowance for civilian agency pay raises
Net interest
Mortgage purchase activities (GNMA)
Farm income stabilization
Small Business Administration disaster loans
All other programs, net
1979 current services estimate

Budget
authority

Outlays

499.5

460.4

12.1
1.6
1.9
—7.2
.8
5. 6

10.6
1.2
—.5
.5
—.2
5.6

*
.2
6.0
.5

.8
.5
1.2
*

2.5
1.5
2.4
.9
1.2
.1
1.2
4.4
1.5
3.0
—1.2
—.2

2.5
2. 2
2.4
.9
1.1
.1
1.1
4.4
.3
—3.5
—.6
1.2

538.3

492.4

*$50 million or less.

Current services outlays for the military functions of the Department
of Defense are estimated to increase by $9 billion between 1978 and
1979. Pay raises for military and civilian personnel, including retired
military personnel, account for $3.3 billion of this increase. Current

260-700 O - 78 - 2

T H E BUDGET FOR FISCAL YEAR

19 79

services outlays for defense purchases (excluding pay) are estimated
to increase by $5.7 billion. The corresponding increases for budget
authority are $3.3 billion for pay raises and $5.2 billion for purchases
for a total of $8.5 billion.
Current services outlays for the medicare and medicaid programs are estimated to increase by $5.6 billion between 1978 and 1979,
largely as a result of increases in medical care prices. Current services
outlays for employment and training programs increase by $1.3
billion in 1979, when enacted 1978 increases for public sector jobs and
programs for youths operate for a full year.
Current services budget authority is estimated to total $538.3 billion
in 1979, $38.8 billion more than in 1978. The major increases in budget
authority are for income security (excluding housing assistance) and
health ($22.0 billion); this results largely from higher social security
(including medicare) receipts, which constitute budget authority for
these programs, and for medicaid. Other large increases include the
Department of Defense—military ($8.5 billion), temporary employment assistance ($6.0 billion), and net interest ($4.4 billion). Budget
authority for housing assistance declines by $7 billion because $6 billion
will carry over from 1978 to help fund the program in 1979.
Table A-10. C A S E L O A D S A N D P R O G R A M M A T I C

ASSUMPTIONS
Fiscal years
1978

Beneficiaries (annual average, in thousands):
Social security (OASDI) _ _
Railroad retirement
_.
Federal civilian retirees.
Military retirement
Veterans compensation and pensions
CI bill
Disabled coal miners.
Supplemental security income
Public Assistance (AFDC)
Medicaid.
Medicare:
Hospital insurance
Supplemental medical insurance
Public sector jobs____
Automatic benefit adjustments (percent) :
Social security (June)
Federal employee retirement:
March
September
Food stamps:
January
July
Interest rate (91-day bills, calendar years)
Budget deficit (current services)
Unemployment rate (calendar years):
Total
Insured

1979

34,300
1,100
1,583
1,222
3,264
1,561
456
4,208
11,014
21,348

35,300
1, 100
1,636
1,265
3,265
1,347
433
4,235
11,022
21,378

6,000
15,500
600

6,100
16,400
725

6.2

6.1

2.5
2.9

3.1
2.9

3.3
3.4
6.1
—59.7

3.5
3.5
6.1
—28.5

6.6
4.1

6.2
3.6

SPECIAL

DIFFERENCES

ANALYSIS

B E T W E E N C U R R E N T SERVICES AND
B U D G E T R E Q U E S T S FOR 1 9 7 9

ADMINISTRATION

The differences between the administration budget estimates for
1978 and the current services levels estimated for this year are relatively small because most appropriation action for the year has been
completed, and because those administration proposals that are still
pending will have relatively little impact before the end of the year.
For 1979, however, the administration estimates add, in aggregate,
a net of $ 2 9 . 9 billion in budget authority and $ 7 . 8 billion in outlays
to the current services levels estimated for that year, and receipts are
reduced by a net of $ 2 4 . 3 billion below the current services level.
Receipts.—The administration's income tax reform and reduction
proposals call for a net reduction in 1 9 7 9 receipts of $ 2 3 . 5 billion below
the current services level. Of this amount, $18.3 billion is a net reduction in individual income taxes, and $5.1 billion is a net reduction in
corporate income taxes below the current services levels. Proposed
reduction in the unemployment tax rate and elimination of the telephone excise tax involve reductions in receipts of $0.6 billion and
$1.0 billion, respectively, below current services levels. The administration's energy proposals entail a net increase in 1979 receipts of
$1.1 billion.
Table A-11.

EFFECTS

ADMINISTRATION

TAX

PROPOSALS

(In billions of dollars)
1978

Current services receipts estimates
Individual income tax proposals:
Reductions and reforms
Energy tax proposals
Other
Subtotal, individual income tax proposals
Corporation income tax proposals:
Reductions and reforms
Energy tax proposals
Other
Subtotal, corporation income tax proposals

1979

400. 7

463.8

—. 2
—1.4

—18.3
—5.6
*

—1.7

—23.9

—.6

—5.1
—1.2

—.6

—6.4

Social insurance tax: Reduction in unemployment tax rate

—.6

Subtotal, social insurance tax proposals
Excise:
Energy tax proposalsRepeal telephone tax
Other
Subtotal, excise

—.6
_

1.8

7.9
—1.0
-.1

1.8

6.8

Other

-.2
Subtotal, other

—.2

Total proposed changes

—.4

—24.3

Proposed receipts, President's budget

400.4

439.6

*$50 million or less.

THE

BUDGET FOR FISCAL YEAR

19 7 9

Outlays.—Table A-12 shows the major differences from the 1979
current services levels proposed in the administration's 1979 budget
request. The major proposed reductions from current services outlaylevels reflect administration proposals to place a limit on allowable
price increases under the medicare and medicaid programs, and to
reform some aspects of the social security system. The largest outlay
increases arise from energy proposals, which add $3.4 billion in 1979,
including tax refunds classified under income security; education,
training, employment and social services (+$1.0 billion); and defense
(+$1.0 billion). In addition, the Presidential budget figures include
a $1.7 billion allowance for contingencies which the current services
estimates exclude.
Budget authority.—The difference in budget authority for
general purpose fiscal assistance ($7.1 billion) reflects the proposed
taxable municipal bond option, which would allow States and local
governments the option of receiving a Federal interest subsidy if they
issue conventional taxable bonds instead of tax-free ones. Budget
authority for the education, training, employment and social services
function is $4.5 billion higher in 1979, largely because of proposed
shifts to advance funding. Transportation has $3.0 billion more than
the current services level, largely due to mass transit proposals; and
energy, $2.7 billion more. The Presidential allowance for contingencies
is $3 billion; the current services figure is zero.
Table A-12. D I F F E R E N C E S BETWEEN A D M I N I S T R A T I O N 1979
R E Q U E S T A N D C U R R E N T S E R V I C E S LEVELS

BUDGET

(In billions of dollars)
Budget
authority

Current services estimates for 1979
Proposed reductions:
Medicare and medicaid hospital price increase limitations
Social security changes
Other
Subtotal, reductions
Proposed increases:
Energy programs
Fuel efficiency tax refund
Education, training, employment and social services
Defense.
International affairs
Transportation
Taxable municipal bond option
Allowance for contingencies
Other
Subtotal, increases
President's request for 1979
*$50 million or less.

Outlays

538.2

492. 4

—.1
*
.5

—.7
—.6
-.4

—1.8

2.7
1.3
4.5
2.1
2.3
3.0
7. 1
3.0
3.5

2.1
1.3
1.0
1.0
.3
.3
.1
1.7
1.8

29.5

9.6

568.2

500.2

SPECIAL ANALYSIS
Table A—13. C U R R E N T

SERVICES BUDGET A U T H O R I T Y
AND P R O G R A M

FUNCTION

(In millions of dollars)
1977
actual

050

NATIONAL

Current services
1978
estimate

1979
estimate

DEFENSE

051 Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Procurement
Research, development, test, and evaluation
Military construction
Family housing
Revolving funds and other
Allowances: Civilian and military pay raises:
Existing law..__
Proposed legislation
Other legislation:
Retired military personnel
Military personnel and 0. & M_

26,118
8,238
32,108
27,922
10,439
2,204
1,258
139

27,282
9,240
34,869
29,487
11,338
1,633
1,355
3

27.479
10,149
36,399
31,954
12,020
1,909
1,455
—55

27,211
10,149
37,376
31,928
12,468
2,677
1,576
—123

2,371

2,371
—136

Subtotal, Department of Defense—Military..
053 Atomic energy defense activities
054 Defense-related activities:
Existing law._______

23
46
108,425

115,205

123,680

125,567

2,089

2,512

2,663

2,829

-81

Proposed legislation

Deductions for offsetting receipts
Total budget authority
INTERNATIONAL

222
— 177

Subtotal, defense-related activities

150

1979
administration
request

—81

—*

—2

—2.

126, 384

128,439

110,432

W7J7S

AFFAIRS

151 Foreign economic and financial assistance:
International financial institutions
International organizations
Agency for International Development
Food for Peace
Security supporting assistance (AID) _ _
Other foreign economic andfinancialassistance. _.
Subtotal, foreign economic and financial assistance

1,141
244
1,121
1,169
1, 758
193

1,926
231
1,286
923
2,219
192

1,926
232
1, 365
806
1,854
174

3,505
282
1,651
806
1,854
237

5,626

6,777

6,357

8,335

152 Military assistance:
Grant military assistance
Foreign military training
Foreign military credit sales
Offsetting receipts and other

265
25
698
-312

220
30
676
-302

134
32
672
-297

1 34
32
672
-297

676

624

541

Subtotal, military assistance

541

THE

BUDGET FOR FISCAL YEAR

Table A—13. C U R R E N T

19 79

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

150

INTERNATIONAL

Current services
1978
estimate

1979
estimate

1979
administration
request

AFFAIRS—Continued

153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations and conferences
Other

650
376
27

736
441
30

768
412
34

792
413
35

1,054

1,206

1,213

1,240

400

451

481

500

-744

2,400

377
3,100

660
3,100

-20

—744

2,380

3,457

3,740

Deductions for offsetting receipts

—425

—540

—555

Total budget authority

6,587

10,898

11,493

13,801

783
351
2

868
397
2

920
426
2

939
426
2

1,136

1,267

1, 349

1, 368

2,138

2,198

2,256

2,247

254 Space, science, applications, and technology...

964

1,056

1,201

1,210

255 Supporting space activities

340

369

393

Deductions for offsetting receipts

—2

4,576

4,889

5,197

5,216

3,519

3,510

3,469

431
—379
156
-219
95

210
—492
138
-262
96

210
—553
145
-304
96

3,436
—163
186
—553
152
- 304
115

3,603

3,200

3,063

2,869

Subtotal, conduct of foreign affairs...
154 Foreign information and exchange activities...
155 International financial programs:
Export-Import Bank
Military sales trust fund (net)
Participation in International Monetary Fund
Other offsetting receipts
Subtotal, international financial programs

250

GENERAL SCIENCE,
NOLOGY

SPACE, AND T E C H -

251 General science and basic research
National Science Foundation programs
Energy research programs
Scientific information exchange activities
Subtotal, general science and basic research
253 Spaceflight

Total budget authority
270

ENERGY

SPECIAL ANALYSIS
Table A—13. C U R R E N T

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

270

Current services
1978
estimate

1979
estimate

1979
administration
request

ENERGY—Continued

272 Energy conservation:
Fuel efficiency tax refund (proposed legislation)_ _
Other energy conservation
Subtotal, energy conservation.__ __
274 Emergency energy preparedness:
Department of Energy
_
Department of the Interior
FAP: Petroleum reserves

242

457

484

500
1,010

242

457

484

1,510

2,797

2,486

4,255

_ *

— *

367
445

2,797

2,485

4,255

462

508

590

249

292

328

670
5
331

711

800

917

1,006

Deductions for offsetting receipts

-23

—26

-95

Total budget authority

4,978

7,228

6,855

9,544

3,664

3,645

3,527

3,284

302 Conservation and land management:
Management of national forests and forestry
research
Management of public lands
Surface mining reclamation
Conservation of agricultural lands
Other, including offsetting receipts

1,234
340
1
641
-650

1,432
356

1,450
367

512
-525

512
-705

1,570
386
109
388
-697

Subtotal, conservation and land management _ _

1,566

1,775

1,624

1,755

561
675

656
959

630
975

755
1,003
11

1,236

1,615

1,605

1,769

1,980
711

4,500
778

4,500
824

4,500
1,024
180

2,691

5,278

5,324

5,704

Subtotal, emergency energy preparedness
276 Energy information, policy, and regulation:
Department of Energy—Operations.
Proposed legislation. __
Nuclear Regulatory Commission
Subtotal, Energy information, policy, and regulation

300

NATURAL
MENT

301

RESOURCES

AND

ENVIRON-

Water resources

303 Recreational resources:
Land and water conservation fund
Operation of recreation resources
Proposed legislation
Subtotal, recreational resources
304 Pollution control and abatement:
Sewage plant construction grant program
Regulatory and research programs
Proposed legislation
Subtotal, pollution control and abatement. . _
See footnote at end of table.

THE

Table A—13. C U R R E N T

BUDGET FOR FISCAL YEAR

19 79

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

300

NATURAL RESOURCES
MENT—Continu ed

AND

Current services
1978
estimate

1979
estimate

1979
administration
request

ENVIRON-

306 Other natural resources

1,087

1,207

1,254

1,331

Deductions for offsetting receipts _

-786

-1,084

-1,178

9,457

12,436

12,156

12,664

899

2,054

5,005

102
141
51
157

12
165
14
171

12
144
38
171

5,022
478
12
144
37
228

1,351

2,416

5,369

5,920

420
242
104

490
269
66

481
269
66

530

183
110
16
61
-51

209
124
52
65
-55

210
124
54
65
-59

222
133
54
72
—59
—7

1,084

1,220

1,210

1,282

Deductions for offsetting receipts

-11

-3

-6

Total budget authority

2,424

3,633

6,574

7,197

10
661
850

7
555
750

1,507
555
750

1,507
451
800

522

747

337

442
6

2,044

2,059

3,149

3,206

2,266

1,787

1,830

Total budget authority
350

AGRICULTURE

351 Farm income stabilization:
Price-support and related programs. _
Proposed legislation
Federal Crop Insurance Corporation.
Agricultural credit insurance fund
Other programs
Unallocated salaries and expenses
Subtotal, farm income stabilization.
352 Agricultural research and services:
Research programs
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programs
Economic intelligence
Other
Unallocated overhead
Offsetting receipts
Proposed legislation
Subtotal, agricultural research and services.

370

COMMERCE AND HOUSING

Subtotal, mortgage credit and thrift insurance.

374 Federal Financing Bank.

CREDIT

371 Mortgage credit and thrift insurance:
Mortgage purchase activities (GNMA)
Mortgage credit (FHA)
Housing for the elderly and handicapped.
Department of Agriculture—rural housing programs
Proposed legislation
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board and other

372 Postal Service:
Existing law

262

-143

SPECIAL ANALYSIS
Table A—13. C U R R E N T

SERVICES BUDGET A U T H O R I T Y
AND P R O G R A M — C o n t i n u e d

FUNCTION

(In millions of dollars)
1977
actual

370

Current services
1978
estimate

1979
estimate

1979
administration
request

C O M M E R C E AND HOUSING CREDIT—Con.

376 Other advancement and regulation of commerce:
Small business assistance
Technology utilization
Economic and demographic statistics
Other

692
179
112
335

824
195
142
370

670
200
263
381

637
222
310
394

Subtotal, other advancement and regulation of
commerce

1,318

1,532

1,514

1,564

-4

-3

5,481

5,375

6,491

6,597

3,848

7,411

7, 574

583

551

458

1,224
—120
58

2,060

1,927

3,967
4,146
219
2,665
2,015
—279
69

5,593

10,084

10,029

12,803

2,564

2,795

2,884

378
82
23

441
74
25

554
69
26

3,094
-3
522
69
27

Subtotal, air transportation.

3,047

3,336

3,523

3,709

403 Water transportation:
Marine safety and transportation.
Ocean shipping
Regulation

1,286
388
9

1,385
519
10

1,423
525
10

1,494
537
11

Subtotal, water transportation.

1,683

1,914

1,959

2,042

-42

-86

-44

-66

10,363

15,334

15,549

18,573

Deductions for offsetting receipts
Total budget authority
400

TRANSPORTATION

401 Ground transportation:
Highway improvement and construction.
Proposed legislation
Mass transit._..__
Proposed legislation
Railroads
Proposed legislation
Regulation
Subtotal, ground transportation

402 Air transportation:
Airways and airports
Proposed legislation
Aeronautical research and technology
Air carrier subsidies
Regulation

407 Other transportation
Deductions for offsetting receipts...
Total budget authority

THE

Table A—13. C U R R E N T

BUDGET FOR FISCAL YEAR

19 79

SERVICES BUDGET A U T H O R I T Y
AND P R O G R A M — C o m t i n u e d

FUNCTION

(In millions of dollars)
1977
actual

450

Current services
1978
estimate

1979
estimate

1979
administration
request

C O M M U N I T Y AND REGIONAL DEVELOPMENT

451 Community development:
HUD: Community development block grants
HUD: Expiring categorical programs
HUD: Rehabilitation loans
HUD: Research and planning
HUD: Other programs
Proposed legislation
HUD: Departmental management
Rural development grant program
Pennsylvania Avenue development
Other programs

3,248
3
50
118
89

4,000
3
109
135

4,000
18
45
109
63

129
285
30
17

156
265
21
17

156
265
27
17

4,150
18
95
119
68
10
170
275
27
20

3,969

4,706

4,700

4,952

640
418
6,000
115
282
734
250
-285

489
411

522
411

115
106
797
458
-402

4
106
796
456
-392

531
656
11
4
106
858
485
-392

8,153

1,974

1,902

2,259

453 Disaster relief and insurance:
Small Business Administration disaster loans.
Disaster relief
Flood insurance
Other

291
300
75
17

1,515
150
91
18

340
150
120
18

190
200
114
19

Subtotal, disaster relief and insurance

684

1,774

628

523

-16

—17

-18

12,790

8,438

7,213

7,716

2,722

3,191

3,181

3,395
Ann

793

800

841

469
1,166
589
525

623
733
632
676

856
676
972
726
683
735

6,265

6,654

6,686

8,443

Subtotal, community development
452 Area and regional development:
Department of Agriculture: Community and
business assistance
Economic development assistance
Local public works programs
Coastal energy impact
Other Department of Commerce
Indian programs
Appalachian programs
Offsetting receipts and other.
Subtotal, area and regional development

Deductions for offsetting receipts
Total budget authority
500

EDUCATION, TRAINING, EMPLOYMENT,
AND SOCIAL SERVICES

501 Elementary, secondary, and vocational education:
Elementary and secondary education.
Proposed legislation
Impact aid
Proposed legislation
Eucation for the handicapped
Occupational, vocational, and adult education
Other aid to education agencies.
Child development
Subtotal, elementary, secondary, and vocational
education

SPECIAL ANALYSIS
Table A-13. C U R R E N T

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

500

Current services
1978
estimate

1979
estimate

1979
administration
request

EDUCATION, TRAINING, EMPLOYMENT,
AND SOCIAL SERVICES—Continued

502 Higher education:
Student aid and institutional support.
Special institutions—
Subtotal, higher education

503 Research and general education aids:
Special projects and training
Proposed legislation
National Institute of Education
Other educational research
Cultural activities
Other.
Subtotal, research and general education aids _ _
504 Training and employment:
Temporary employment assistance
Employment and training assistance
Older workers
Work incentive program
Proposed legislation
Federal-State employment service
Other programs
Subtotal, training and employment.
505 Other labor services
506 Social services:
Grants to States for social and child welfare services.
Proposed legislation
Retroactive claims (proposed legislation)
Services for the disabled, elderly, and other special
groups.
Community service programs
Domestic volunteer programs
Other social services
Proposed legislation
Subtotal, social services
Deductions for offsetting receipts
Total budget authority

3,622
143

4,136
160

4,369
175

4,414
175

3,765

4,296

4, 544

4,588

101

70
22
425
475

90
28
498
515

90
28
507
525

105
11
100
40
560
524

1,078

1,232

1,251

1, 339

6,847
5,890
150
370

3,454
220
365

5,955
3,980
228
365

636
76

693
91

739
90

5,955
4,853
228
365
50
745
91

13,969

4,824

11,359

12,287

383

442

464

490

2, 730

2,519

2,578

2,578
285

1,383
631
109
71

1,548
598
118
7

1,542
543
118
10

2,913
538
131
13
3

4,924

4,790

4,792

6,461

—7

—5

30,377

22,234

29,090

33,604

THE

BUDGET FOR FISCAL YEAR

Table A-13. C U R R E N T

19 7 9

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

550

Current services
1978
estimate

1979
estimate

1979
administration
request

HEALTH

551 Health care services:
Medicare
....
Proposed legislation
Medicaid
Proposed legislation
Other health care services
Proposed legislation
Unallocated overhead
Proposed legislation

22,757

27,482

31,703

10,229

10,699

12,065

3,041

3,495

3,623

110

124

12,065
—113
4,130
18
124
60

36,107

41,786

47,515

47,987

2,367

2,640

2,678

173
115

180
68
71

222
68
74

2,654

2,959

3,043

177
561

205
555

207
345

109

111

111
6

Subtotal, education and training of health care
work force

847

868

663

669

554 Consumer and occupational health and safety:
Occupational safety and health
Consumer product safety

226
544

249
610

249
627

290
627

Subtotal, consumer and occupational health
and safety

770

859

876

917

—10

—12

40,368

46,461

52,085

52,604

79,962

88,042

100,138

3,597
992
3

3,973
995
4

3,902
1,048
5

100,138
15
3,902
1,048
5
1

84,553

93,013

105,093

Subtotal, health care services
552 Health research:
National Institutes of Health research
....
Alcohol, Drug abuse, and Mental Health Administration research
Other research
Unallocated overhead
Subtotal, health research
553 Education and training of health work force:
National Institutes of Health training
Health Resources Administration training
Alcohol, Drug abuse, and Mental Health Administration training
Other

Deductions for offsetting receipts
Total budget authority
600

INCOME

SECURITY

601 General retirement and disability insurance:
Social security (OASDI)
Proposed legislation
Railroad retirement
Special benefits for disabled coal miners
Other..
Proposed legislation
Subtotal, general retirement and disability
insurance

105,109

SPECIAL ANALYSIS A

Table A—13. C U R R E N T

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
Current services

1977
actual

600

INCOME

1979
estimate

1979
administration
request

SECURITY—Continued

602 Federal employee retirement and disability:
Retirement and disability programs.
Federal employee compensation
Subtotal, Federal employee retirement and disability

603 Unemployment compensation:
Federal unemployment benefits
Unemployment insurance (trust fund)
Proposed legislation
Advances to the UI and other trust funds
Offsetting receipts. _
Proposed legislation
Subtotal, unemployment compensation
604 Public assistance and other income supplements:
Supplemental security income
AFDC and other...
Proposed legislation
Fuel efficiency tax refund (proposed legislation)__
Food stamps
School lunch and other nutrition programs
Proposed legislation
Housing assistance
Proposed legislation
Refugee assistance
Other
Subtotal, public assistance and other income
Deductions for offsetting receipts.
Total budget authority
700

1978
estimate

16,665
307

17,844
292

19,426
228

16,972

18,136

19,654

860
14,439

1,200
14,760

950
16,682

5,000
-3,442

950
16,677
—600

-600

-400

-400
400

16,857

15,360

17,232

17,027

5,895
6,306

5,250
6,542

5,715
6,823

5,506
3,369

5,618
3,399

5,779
3,438

28,629

32,272

25,078

132
346

196
194

148
208

5,715
6,823
23
1,333
5,779
3,681
—217
25,519
74
1 48
217

50,184

53,472

47,189

-1

49,096
-1

168,566

179,981

189,168

190,885

8,982

9,606

9,577

913
37
7
-486

972
38
2
-507

964
36
6
-469

9,577
421
964
36
6
-469

9,454

10,112

10,114

10,535

VETERANS BENEFITS AND SERVICES

THE

Table A—13. C U R R E N T

BUDGET FOR FISCAL YEAR

19 79

SERVICES BUDGET A U T H O R I T Y
AND P R O G R A M — C o n t i n u e d

FUNCTION

(In millions of dollars)
1977
actual

700

VETERANS BENEFITS
Continued

AND

Current services
1978
estimate

1979
estimate

1979
administration
request

SERVICES—

702 Veterans education, training, and rehabilitation:
Existing law
Proposed legislation

3,984

2,665

2,193

2,193
-100

3,984

2,665

2,193

2,093

4,374

4,925

5,080

508
192

499
224

316
233

5,280
-142
422
236

5,074

5,648

5,630

5,795

531

611

626

628

558

637

653

-1

-3

19,069

19,059

18,587

19,074

513
168
119
604
121
159

554
188
129
685
135
184

552
193
134
690
144
185

557
193
136
729
144
256

1,685

1,875

1,898

2,015

752 Federal litigative and judicial activities:
Civil and criminal prosecution and representation__
Federal judicial activities
Representation of indigents in civil cases

333
404
125

358
472
205

359
478
205

384
495
255

Subtotal, Federal litigative and judicial activities

863

1,036

1,042

1,133

753 Federal correctional activities

297

308

293

353

754 Criminal justice assistance

758

656

659

651

Deductions for offsetting receipts

-2

-8

3,601

3,867

3,884

4,144

Subtotal, veterans education, training, and rehabilitation
703 Hospital and medical care for veterans:
Medical care and hospital services
Proposed legislation
Construction
Medical administration, research, and other
Subtotal, hospital and medical care for veterans.
705 Other veterans benefits and services:
Undistributed expenses and other
Proposed legislation
Non-VA support programs
Subtotal, other veterans benefits and services.__
Deductions for offsetting receipts
Total budget authority
750

-1

A D M I N I S T R A T I O N OF JUSTICE

751 Federal law enforcement activities:
General investigation
Narcotics violation investigation
Alcohol, tobacco, andfirearmsinvestigations.
Border enforcement activities
Protection activities
Other enforcement
Subtotal, Federal law enforcement activities

Total budget authority

SPECIAL ANALYSIS A
Table A—13. C U R R E N T

SERVICES B U D G E T A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
1977
actual

800

GENERAL

GOVERNMENT

Current services
1978
estimate

1979
estimate

1979
administration
request

871

868

913

941

1,808

1,955

1,976

155

215

297

2,047
31
300

1,963

2,170

2,273

2,378

132
157
185

-66
168
177

9
168
178

9
167
189

475

279

355

365

109

119

121

123
1

109

119

121

124

160
153
51
6
167

132
207
51
8
241

128
147
53
8
266

157
147
53
8
266

538

639

602

632

Deductions for offsetting receipts

-186

-156

-159

Total budget authority

3,851

3,997

4,184

4,361

6,652
6

6,855
8

6,855
7

6,658

6,863

6,862

801

Legislative functions

802

Executive direction and management

803 Central fiscal operations:
Collection of taxes
Proposed legislation
Other fiscal operations
Subtotal, central fiscal operations
804 General property and records management:
Real property
Personal property
Other
Subtotal, general property and records management
805 Central personnel management:
Existing law.
Proposed legislation
Subtotal, central personnel management
806 Other general government:
Territories
Treasury claims
Panama Canal Zone
Federal Election Commission
Other..

Subtotal, other general government

850

GENERAL PURPOSE FISCAL ASSISTANCE

851 General revenue sharing:
General revenue sharing payments
Administration

Subtotal, general revenue sharing..

THE

Table A—13. C U R R E N T

BUDGET

FOR

FISCAL

YEAR

19 7 9

SERVICES BUDGET A U T H O R I T Y
AND PROGRAM—Continued

FUNCTION

(In millions of dollars)
Current services

1977
actual

GENERAL PURPOSE FISCAL
ASSISTANCE—Continued
852 Other general purpose fiscal assistance:
Antirecession fiscal assistance
Payments and loans to the District of Columbia __
Mineral impact loan assistance (proposed legislation)
New York City seasonal financing fund
Taxable municipal bond option (proposed legislation
Payments to States from Forest Service receipts._
Payments to States and counties from Federal
land management activities
Other

1978
estimate

1979
estimate

1979
administration
request

850

1,570
317

1,400
348

1,040
436

40
1

226

242

7,094
242

248
427

393
462

429
483

434
483

Subtotal, other general purpose fiscal assistance.

2,614

2,829

2,631

9,770

Total budget authority

9,272

9,691

9,493

16,632

41,900

48,600

55,100

55,400

-3,807

-4,759

-6,409

-6,410

38,092

43,841

48,691

48,990

1,197

1,150

900 INTEREST
901 Interest on the public debt
902

Other interest
Total budget authority

920
921 ALLOWANCES
Civilian agency pay raises
923

Contingencies for other requirements

3,000

Total budget authority
950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement
952 Interest received by trust funds
953 Rents and royalties on the Outer Continental
Shelf
Total budget authority
Total budget authority
* —$500 thousand or less.

1,197

4,150

—4,548
-8,131

—5,024
-8,595

—5,157
-9,060

—5,157
- 9 , 064

-2,374
-15,053

-2,000
-15,619

—1,800
-16,017

-1,800
-16,021

465,231

499,517

538,274

568,172

SPECIAL

ANALYSIS

Table A—14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N A N D P R O G R A M
(In millions of dollars)

1977
actual

050

NATIONAL

1978
estimate

1979
estimate

1979
administration
request

DEFENSE

051 Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Procurement
Research, development, test and evaluation
Military construction
Family housing
Revolving funds and other
Allowances: Civilian and military pay raises:
Existing law
Proposed legislation
Other legislation:
Retired military personnel
Military personnel and 0 . & M
Subtotal, Department of Defense-Military.
053

Current services

Atomic energy defense activities

054 Defense-related activities:
Existing law

25,715
8,216
30,587
18,178
9, 795
1,914
1,358
—114

26,832
9,211
33,494
21,546
10, 714
1,919
1,455
123

27,122
10, 122
35,655
24,072
11,600
1,941
1,365
68

26,866
10,122
36,454
24,208
11, 861
1,976
1,436
—11

2,353

2,353
—135
23
46

95,650

105,294

114,309

115,200

1,936

2,308

2,446

2,536

-84

222

Proposed legislation
Subtotal, defense-related activities
Deductions for offsetting receipts
Total outlays
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
International financial institutions
International organizations
International fund for agricultural development...
Agency for International Development
Food for P e a c e Security supporting assistance (AID)
Other foreign economic and financial assistance. __
Subtotal, foreign economic and financial assistance
152 Military assistance:
Grant military assistance
Foreign military training
Foreign military credit sales
Offsetting receipts and other
Subtotal, military assistance
See footnotes at end of table.

260-700 O - 78 - 3

—177
—84

—*

—2

107,661

116,794

117,779

976
850
1,062
201

838
233
10
1,160
1,068
1,813
168

844
230
20
1,203
1,069
1,666
142

909
270
20
1,293
1,069
1, 666
180

4,214

5,289

5,174

5,407

209
25
570
-311

190
29
540
-302

200
31
530
-296

494

457

465

97,501

875
250

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
1977
actual

150

INTERNATIONAL

Current services
1978
estimate

1979
estimate

1979
administration
request

AFFAIRS—Continued

153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations and conferences
Other.

587
368
26

672
408
31

743
409
33

766
409
35

981

1,111

1,184

1,211

386

443

469

480

340
-1,159

196
-200
—20

391
300
—20

404
300
—20

—819

—24

671

684

—425

—540

—555

4,831

6,736

7,409

7,691

753
324
2

825
363
2

848
415
2

857
415
2

1,078

1,190

1,264

1,274

253 Spaceflight

2,252

2,192

2,271

2,264

254 Space, science, applications, and technology

1,006

1,018

1,144

1,150

255 Supporting space activities

343

358

390

Deductions for offsetting receipts

—2

4,677

4,757

5,068

5,077

2,526

3,053

3,291

107
—379
1,136
-219
95

405
—492
1,309
-262
121

304
—553
1,416
-304
104

3,280
—163
300
—553
1,427
-304
126

3,266

4,134

4,258

4,113

143

398

363

500
902

143

398

363

1,402

Subtotal, conduct of foreign affairs
154 Foreign information and exchange activities.. _
155 International financial programs:
Export Import Bank....
Military sales trust fund (net)
Other offsetting receipts
Subtotal, international financial programs
Deductions for offsetting receipts
Total outlays
250

GENERAL SCIENCE, SPACE, AND
NOLOGY

TECH-

251 General science and basic research:
National Science Foundation programs
Energy research programs
Scientific information exchange activities

Subtotal, general science and basic research

Total outlays
270

ENERGY

271 Energy supply:
Department of Energy—Operations
Proposed legislation
Petroleum reserves
Petroleum reserves—receipts
Power marketing
Other offsetting receipts
Other energy supply
Subtotal, energy supply
272 Energy conservation:
Fuel efficiency tax refund (proposed legislation)__
Other energy conservation
Subtotal, energy conservation

SPECIAL ANALYSIS

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
Current services

1977
actual

270

Subtotal, emergency energy preparedness.
276 Energy information, policy, and regulation:
Department of Energy—Operations
Proposed legislation
Nuclear Regulatory Commission
Subtotal, energy information, policy, and regulation
...
Deductions for offsetting receipts.
Total outlays

301

1979
estimate

1979
administration
request

ENERGY—Continued

274 Emergency energy preparedness:
Department of Energy
Department of the Interior
FAP: Petroleum Reserves

300

1978
estimate

NATURAL
MENT

RESOURCES

AND

1,923

122

245

123

2,205

3,285

2,168

2,205

3,284

433

518

547

619

231

275

304

307

664

793

851

930

—23

-26

-95

4,172

7,467

7,582

9,634

3,241

3,628

3,617

3,392

ENVIRON-

Water resources

302 Conservation and land management:
Management of national forest and forestry research
Management of public lands
Surface mining reclamation
Conservation of agricultural lands
Other, including offsetting receipts

1,109
367

1,331
335

1,385
344

468
-665

649
-547

456
-719

1,407
382
70
432
-711

Subtotal, conservation and land management. _

1,279

1,768

1,466

1,579

344
670

472
845

520
925

554
980
11

Subtotal, recreational resources.

1,014

,317

1,445

1,545

304 Pollution control and abatement:
Sewage plant construction grant program.
Regulatory and research programs
Proposed legislation

3,530
750

4,135
795

4,660
773

4,660
905
50

4,279

4,930

5,433

5,615

973

1,171

1,202

1,268

-786

-1,084

-1,178

10,000

11,730

11,986

12,222

303 Recreational resources:
Land and Water Conservation fund
Operation of recreation resources
Proposed legislation

Subtotal, pollution control and abatement
306

Other natural resources

Deductions for offsetting receipts
Total outlays
See footnote at end of table.

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND PROGRAM—Continued
(In millions of dollars)
1977
actual

350

Current services
1978
estimate

1979
estimate

1979
• administration
request

AGRICULTURE

351 Farm income stabilization:
Price-support and related programs...
Federal Crop Insurance Corporation.
Agricultural credit insurance fund
Other programs
Unallocated salaries and expenses

4,128
91
393
-288
160

7,136
99
183
183
167

3,996
20
-188
305
167

4,013
27
-388
305
224

Subtotal, farm income stabilization.

4,485

7,769

4,300

4,180

415
240
95

498
268
70

481
266
66

192
105
11
45
-51

220
124
52
64
-55

221
124
54
64
-59

511
263
74
1
219
133
54
71
-59
-7

1,052

1,241

1,217

1,259

-11

-3

-6

5,526

9,007

5,511

5,433

-1,082
492
4

39
407
335

332
407
713

333
221
713

100

455

-103

-852
-1,933

-379
-390

-947
-503

-99
6
-945
-503

-3,270

467

-101

-274

372 Postal Service

2,267

1,787

1,830

374 Federal Financing Bank

-143

352 Agricultural research and services:
Research programs
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programs
Economic intelligence
Other
Unallocated overhead
Offsetting receipts
Proposed legislation
Subtotal, agricultural research and services
Deductions for offsetting receipts
Total outlays
370

COMMERCE AND HOUSING

CREDIT

371 Mortgage credit and thrift insurance:
Mortgage purchase activities (GNMA)
Mortgage credit (FHA)
Housing for the elderly and handicapped
Department of Agriculture—rural housing programs
Proposed legislation
Federal Deposit Insurance Corporation
Federal Home Loan Bank and other
Subtotal, mortgage credit and thrift insurance. _

SPECIAL ANALYSIS

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND PROGRAM—Continued
(In millions of dollars)
1977
actual

370

Current services
1978
estimate

1979
estimate

1979
administration
request

COMMERCE AND HOUSING CREDIT—Con.

376 Other advancement and regulation of commerce:
Small business assistance
Technology utilization
Economic and demographic statistics
Other

516
175
102
326

547
190
133
388

576
196
228
380

543
212
275
386

Subtotal, other advancement and regulation of
commerce

1,118

1,258

1,380

1,415

Deductions for offsetting receipts

—4

—3

-31

3,508

3,106

2,969

6,301

7,115

7,801

7, 785

2,000

2,180

1,991

2,311

1,676
59

1,776
62

1,854
68

1,825
69

10,037

11,133

11,714

11,990

2,369

2,753

2,865

344
80
23

415
77
24

476
69
26

2,877
—3
466
69
27

2,816

3,269

3,436

403 Water transportation:
Marine safety and transportation
Ocean shipping
Regulation

1,149
591
8

1,350
546
10

1,385
531
10

1, 403
532
10

Subtotal, water transportation

1, 749

1,906

1,926

1,946

—42

—86

—44

—66

14,636

16,303

17,116

17,399

Total outlays
400

TRANSPORTATION

401 Ground transportation:
Highway improvement and construction
Proposed legislation
Mass transit.
Proposed legislation
Railroads..,
Regulation
Subtotal, ground transportation
402 Air transportation:
Airways and airports
Proposed legislation
Aeronautical research and technology
Air carrier subsidies
Regulation
Subtotal, air transportation

407 Other transportation
Deductions for offsetting receipts
Total outlays

THE

BUDGET FOR FISCAL YEAR

19 79

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
1977
actual

450

Current services
1978
estimate

1979
estimate

1979
administration
request

COMMUNITY AND REGIONAL DEVELOPMENT

451 Community development:
HUD: community development block grants
HUD: expiring categorical programs.
HUD: Rehabilitation loans
HUD: research and planning
HUD: other programs
Proposed legislation
HUD: Departmental management
Rural development grant program
Pennsylvania Avenue Development
Other programs...

2,089
905
41
140
86

2,584
667
43
124
140

2, 793
440
54
114
61

120
122
1
22

149
297
25
20

156
292
34
17

2,803
440
85
118
63
2
167
260
34
20

3,526

4,049

3,961

3,991

343
305
585
122
719
351
-285

313
325
2,300
4
258
681
459
-401

334
338
2,001
15
109
673
449
-392

344
400
2,011
15
109
743
458
-392

2,139

3,940

3,526

3, 689

453 Disaster relief and insurance:
Small Business Administration disaster loans
Disaster relief
Flood insurance
Other

184
331
97
23

1,195
174
144
23

632
225
152
23

550
284
150
24

Subtotal, disaster relief and insurance

634

1,536

1,032

1,007

—16

—17

—18

6,283

9,509

8,502

8,669

2, 352

2,574

2,988

765

787

830

249
693
530
489

367
740
594
587

561
804
616
636

3,003
28
838
—58
562
803
642
664

5,078

5,649

6,436

6,484

Subtotal, community development
452 Area and regional development:
Department of Agriculture: Community and business assistance
Economic development assistance
Local public works programs
Coastal energy impact
Other Department of Commerce
Indian programs.
Appalachian programs
Offsetting receipts and other
Subtotal, area and regional development

Deductions for offsetting receipts
Total outlays
500

501

EDUCATION, TRAINING, EMPLOYMENT,
AND SOCIAL SERVICES

Elementary, secondary, and vocational education:
Elementary and secondary education
Proposed legislation
Impact aid.
Proposed legislation
Education for the handicapped
Occupational, vocational and adult education
Other aid to education agencies
Child development
Subtotal, elementary, secondary, and vocational
education

SPECIAL ANALYSIS A
Table A-14. C U R R E N T SERVICES O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
1977
actual

500

Current services
1978
estimate

1979
estimate

1979
ad ministration
request

EDUCATION, TRAINING, EMPLOYMENT,
AND SOCIAL SERVICES—Continued

502 Higher education:
Student aid and institutional support Special institutions.
Subtotal, higher education

503 Research and general education aids:
Special projects and training
Proposed legislation
National Institute of Education
Other educational research
Cultural activities
Other
Subtotal, research and general education aids__
504 Training and employment:
Temporary employment assistance
Employment and training assistance.
Older workers
Work incentive program
Job opportunities program
Proposed legislation
Federal-State employment service
Other programs
Subtotal, training and employment _
505 Other labor services
506 Social services:
Grants to States for social and child welfare services
Proposed legislation
Retroactive claims (proposed legislation)
Services for the disabled, elderly, and other special
groups.
Community service programs
Domestic volunteer programs
Other social services
Proposed legislation
Subtotal, social services
Deductions for offsetting receipts
Total outlays

2,953
152

3,626
162

4,104
182

4,107
182

3,104

3,788

4,286

4,289

64
19
409
392

80
24
519
476

86
27
473
513

92
2
90
32
501
530

927

1,173

1,187

1,247

2,340
3,291
72
361
98

4,765
4,852
150
365
13

5,956
4,878
198
365

5,956
5,400
198
365

627
88

693
91

739
88

35
745
88

6,877

10,930

12,224

12,787

374

432

452

477

2,551

2,703

2,578

2,578
264

1,379
529
109
64

1,463
613
116
28

1,532
561
116
10

1,597
558
128
13
3

4,632

4,924

4,798

5,142

—7

—5

-5

20,985

26,890

29,377

30,421

THE

BUDGET FOR FISCAL YEAR

19 79

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
1977
actual

Current services

1979
administration
request

1978
estimate

1979
estimate

21,549

25,611

30,039

9,876

10,851

12,065

3,045

3, 325

3,559

114

34,527

39,901

45,756

45,097

2,103

2,454

2,612

167
122
151

173
61
50

199
65
60

2, 543

2,738

2,935

150
728

188
537

203
459

104

110

109

109
-1

Subtotal, education and training of health
care work force

981

836

771

770

554 Consumer and occupational health and safety:
Occupational safety and health
Consumer product safety

222
521

237
599

241
613

273
613

Subtotal, consumer and occupational health
and safety

743

835

855

887

—10

—12

38,785

44,299

50,306

49,677

83,861

93,088

103,725

3,800
978
3

4,094
1,006
4

4,280
1,029
5

103,725
—644
4,280
1,029
5
1

88,642

98,192

109,039

550

HEALTH

551 Health care services:
Medicare
....
Proposed legislation
Medicaid
....
Proposed legislation
Other health care services
Proposed legislation
Unallocated overhead
Proposed legislation
Subtotal, health care services

552 Health research:
National Institutes of Health research
Alcohol, Drug abuse, and Mental Health Administration research
Other research
Unallocated overhead
Subtotal, health research
553 Education and training of health care work
force:
National Institutes of Health training
Health Resources Administration training
Alcohol, Drug abuse, and Mental Health Administration training
Other..

Deductions for offsetting receipts
Total outlays
600

INCOME

30,039
—629
12,067
—113
3, 604
18
94
20

SECURITY

601 General retirement and disability insurance:
Social security (OASDI)
Proposed legislation
Railroad retirement
Special benefits for disabled miners
Other
Proposed legislation
Subtotal, general retirement and disability
insurance

108,396

SPECIAL ANALYSIS

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND PROGRAM—Continued
(In millions of dollars)
Current services

1977
actual

600

INCOME

1979
estimate

1979
administration
request

SECURITY—Continued

602 Federal employee retirement and disability:
Retirement and disability programs
Federal employee compensation
Subtotal, Federal employee retirement and disability
603 Unemployment compensation:
Federal unemployment benefits.
Unemployment insurance (trust fund) _ _
Proposed legislation
Advances to the UI and other trust funds
Offsetting receipts._
Proposed legislation

Subtotal, unemployment compensation
604 Public assistance and other income supplements:
Supplemental security income
AFDC and other...
Proposed legislation
Fuel efficiency tax refund (proposed legislation)...
Food stamps
School lunch and other nutrition programs
Proposed legislation
Housing assistance
Proposed legislation
Refugee assistance
Other....
Subtotal, public assistance and other income supplements
Deductions for offsetting receipts
Total outlays
700

1978
estimate

9,228
275

10,519
292

11, 767
228

9,503

10,811

11,995

833
13,529

1,200
11,160

950
11,271

4, 338
-3,442

600
-600

950
11,277
—400

-400

-400
400

15,258

12,360

11,821

11,827

5,297
6,351

5,974
6,712

5,555
6,823

5,399
3,129

5,655
3,588

5,748
3,548

2,957

3,756

4,275

180
289

189
243

166
210

5,555
6,823
23
1,333
5,748
3, 744
—216
4,359
52
166
219

23,601

26,118

26,326

27,807

—1

137,004

147,481

159,181

160,024

9,000

9,564

9,586

698
71
—67
—486

700
64
—75
—507

750
69
—56
—469

9,586
395
750
69
—56
—469

9,216

9,745

9,880

10,275

3,710

3,142

2,730

2,730
—100

3,710

3,142

2,730

2,630

—1

VETERANS BENEFITS AND SERVICES

701 Income security for veterans:
Veterans compensation and pension
Proposed legislation
National service life insurance trust fund
U.S. Government life insurance trust fund
All other insurance programs
Insurance program receipts
Subtotal, income security for veterans
702 Veterans education, training and rehabilitation:
Existing law
Proposed legislation.
Subtotal, veterans education, training, and
rehabilitation
See footnote at end of table.

THE

BUDGET FOR FISCAL YEAR

19 79

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y
AND P R O G R A M — C o n t i n u e d

FUNCTION

(In millions of dollars)
1977
actual

Current services

1979
administration
request

1978
estimate

1979
estimate

4,291

4,904

5,077

242
176

325
205

397
210

5,276
— 142
409
214

4, 708

5,434

5,684

5, 757

1
—139
-7

54
—75
-10

27
—73
-9

—145

—31

—55

524

598

624

626
—1
27

549

625

651

652

—1

—3

18,038

18,914

18,889

19,257

520
167
117
592
123
154

550
190
127
680
135
197

551
195
133
688
143
189

555
194
135
727
143
258

1, 673

1, 880

1, 899

2,011

752 Federal litigative and judicial activities:
Civil and criminal prosecution and representation-.
Federal judicial activities
Representation of indigents in civil cases

317
400
125

354
468
154

356
481
205

378
497
243

Subtotal, Federal litigative and judicial activities

842

976

1,042

1,118

753 Federal correctional activities

240

319

304

373

754 Criminal justice assistance

847

817

819

717

Deductions for offsetting receipts

—2

—8

3,600

3,984

4,056

4,211

700

VETERANS BENEFITS
Continued

AND

SERVICES—

703 Hospital and medical care for veterans:
Medical care and hospital services
Proposed legislation
Construction
_
Medical administration, research and other
Subtotal, hospital and medical care for veterans.
704 Veterans housing:
Loan guaranty revolving fund
Direct loan revolving fund
Other (HUD PC sales fund)
Subtotal, veterans housing
705 Other veterans benefits and services:
Undistributed expenses and other
Proposed legislation
Non-VA support programs
Subtotal, other veterans benefits and services. _
Deductions for offsetting receipts
Total outlays
750

A D M I N I S T R A T I O N OF JUSTICE

751 Federal law enforcement activities:
General investigation
Narcotics violation investigation
Alcohol, tobacco, and firearms investigations
Border enforcement activities
Protection activities
Other enforcement
Subtotal, Federal law enforcement activities _ _ _ _

Total outlays

SPECIAL ANALYSIS

Table A—14. C U R R E N T S E R V I C E S O U T L A Y S B Y F U N C T I O N
AND P R O G R A M — C o n t i n u e d
(In millions of dollars)
1977
actual

800

GENERAL

1978
estimate

1979
estimate

1979
administration
request

GOVERNMENT

801 Legislative functions
802 Executive direction and management
803 Central fiscal operation:
Collection of taxes.
Proposed legislation
Other fiscal operations
Subtotal, Central fiscal operations
804 General property and records management:
Real property
Personal property
Other
Subtotal, general property and records management
805 Central personnel management:
Existing law.....
Proposed legislation
Subtotal* central personnel management
806 Other general government:
Territories
Treasury claims
Panama Canal Zone
Federal Election Commission
Other
Subtotal, other general government
Deductions for offsetting receipts
Total outlays
850

Current services

841

898

914

941

1,790

1,948

1,974

140
1,930

216
2,164

295
2,268

2,039
30
298
2,367

-124
103
162

9
168
186

11
167
191

141

364

369

100

120

118

120
1

100

120

118

121

130
153
48
7
117

160
207
53
8
198

158
147
53
8
234

144
147
53
8
233

455

626

600

586

— 186

—156

— 159

3,357

4,097

4,183

4,304

6,758
4

6,827
8

6,852
8

6,762

6,835

6,860

GENERAL PURPOSE FISCAL ASSISTANCE

851 General revenue sharing:
General revenue sharing payments
Administration

Subtotal, general revenue sharing.

THE

BUDGET FOR FISCAL YEAR

19 79

Table A-14. C U R R E N T S E R V I C E S O U T L A Y S B Y
AND P R O G R A M — C o n t i n u e d

FUNCTION

(In millions of dollars)
Current services

19 77
actual

850

GENERAL
PURPOSE
ANCE—Continued

FISCAL

1,699
316

1, 573
370
1

1,050
426
1

40
1

226

242

99
242

247
424

395
461

429
483

434
483

Subtotal, other general purpose fiscal assistance.

2, 737

3,026

2,632

2,776

Total outlays

9,499

9,860

9,492

9,636

41,900
-3,808

48,600
-4,759

55,100
-6,409

55,400
-6,409

38,092

43,841

48,691

48,991

1,145

1,100
1,700

1,145

2,800

INTEREST

Total outlays
ALLOWANCES

921 Civilian agency pay raises
923 Contingencies for other requirements
Total outlays

950

1979
administration
request

901 Interest on the public debt
902 Other interest

920

1979
estimate

ASSIST-

852 Other general purpose fiscal assistance:
Antirecession fiscal assistance
Payments and loans to the District of Columbia __
Mineral impact loan assistance (proposed legislation)
New York City seasonalfinancingfund
Taxable municipal bond option (proposed legislation)
Payments to States from Forest Service receipts. _
Payments to States and counties from Federal
land management activities
Other

900

1978
estimate

UNDISTRIBUTED OFFSETTING RECEIPTS

951 Employer share, employee retirement
952 Interest received by trust funds
953 Rents and royalties on the Outer Continental
Shelf.

—4,548
-8,131

—5,024
-8,595

—5,157
-9,060

—5,157
-9,064

-2,374

-2,000

-1,800

Total outlays

-15,053

-15,619

-16,017

-16,021

Total outlays

401,902

460,424

492,376

500,174

* — $500 thousand or less.

SPECIAL ANALYSIS B
F E D E R A L T R A N S A C T I O N S IN T H E N A T I O N A L I N C O M E

ACCOUNTS

The budget is designed to serve several purposes:
• It is an economic document that reflects the taxing and spending
policies of the Government for promoting economic growth, high
employment, relative price stability, and a strong balance-ofpayments position.
• It proposes an allocation of resources between the private and
public sectors and within the public sector. Through its impact on
consumption and investment decisions and the distribution of
income it also affects allocation decisions within the private sector.
• It sets forth the President's request to the Congress for appropriation action on existing or new programs and for changes in tax
legislation.
• It is a report to the Congress and the people on how the Government
has spent the funds entrusted to it in past years.
No single budget concept can satisfy all these purposes fully. The
budget document and related Treasury reports provide complete,
detailed information on thefinancesof the Federal Government and on
the tax and spending programs proposed by the President. For study
of aggregate economic activity, however, the Federal sector of the
national income accounts (NIA) of the United States provides the
most useful measures.
This special analysis shows Federal finances as measured in the
national income accounts. The analysis is divided into three major
sections. The first shows the size, composition, and trends in Federal
sector receipts and expenditures. Additional details will be published
in the February 1978 issue of the Department of Commerce publication, Survey of Current Business. The second section of this analysis
presents quarterly estimates of Federal sector receipts and expenditures seasonally adjusted at annual rates, and the final section explains
the major differences between the budget and the NIA concepts. A
brief discussion of fiscal policy can be found in Part 2 of the Budget
of the United States, and a more detailed one in the Economic Report
of the President.
F E D E R A L SECTOR R E C E I P T S AND

EXPENDITURES

Table B - l shows Federal sector NIA receipts, expenditures, and
deficits for 1977-79.

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table B-1. F E D E R A L R E C E I P T S A N D E X P E N D I T U R E S IN T H E N A T I O N A L
I N C O M E A C C O U N T S (in billions of dollars)
Description

1977
actual

1978
estimate

1979
estimate

RECEIPTS

Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts

165.5
57.4
24.6
116.5

1 85.5
63.1
28.5
133.7

1 95.6
69.7
34.8
151.3

364.0

410.8

451.4

140.7
(92.0)
(48.7)
169.7
(166.5)
(3.2)
66.0
29.3
6.1

158.4
(99.8)
(58.6)
184.2
(180.7)
(3.5)
77.0
34.5
9.5

171.6
(108.1)
(63.5)
201.8
(198.0)
(3.8)
81.6
39.8
9.2

411.8

463.6

504.0

-47.8

-52.8

-52.6

EXPENDITURES

Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")...
Foreign. _
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises.
Total expenditures...
Deficit ( - )

Trends in Federal sector receipts.—Table B-1 divides receipts
into four major categories, which are also illustrated in the chart on
the distribution of Federal sector receipts by category.
Personal tax and nontax receipts.—The largest receipt category—
personal tax and nontax receipts—is composed primarily of individual
income taxes but also includes estate and gift taxes and some miscellaneous receipts. Increases in income, because of both real growth and
inflation, automatically increase these receipts. Since personal income
taxes are progressive, these receipts normally grow at a faster rate
than personal income. However, tax reductions enacted periodically
over the past three decades have offset much of the increase in effective
tax rates resulting from the progressive tax structure. Table B-2
shows Federal sector receipts at 10-year intervals as a percent of the
gross national product (GNP).
Table B-2. F E D E R A L S E C T O R R E C E I P T S A S A P E R C E N T O F G N P

Description

Personal tax and nontax receipts
Corporate profits tax accruals.
Indirect business tax and nontax accrualsContributions for social insurance
Total receipts

1947-49
average
actual

1957-59
average
actual

1967-69
average
actual

1977-79
average
estimate

7.6
4.5
3.3
2.0

8.3
4.5
2.6
2.8

9.0
4.0
2.1
4.7

8.9
3.1
1.4
6.5

17.3

18.1

19.8

19.9

SPECIAL ANALYSIS A

D i s t r i b u t i o n of F e d e r a l S e c t o r R e c e i p t s b y C a t e g o r y
5 - Y e a r Averages

Contributions for
Social Insurance

Indirect Business Tax
a n d N o n t a x Accruals
Corporate Profits
Tax A c c r u a l *

1950-54
Fiscal Years

1955-59

Corporate profits tax accruals.—These tax accruals vary significantly
from year to year because corporate profits are among the most volatile
components of national income. The NIA corporate profits taxes
generally differ from the corresponding budget category primarily
because: (1) The NIA includes the deposit of earnings by the Federal
Reserve System as corporate profits taxes, while the budget treats
these collections as miscellaneous receipts; and (2) the NIA records
corporate profits taxes when the profits are earned (that is, accrued),
while the unified budget records the cash receipts.
Estimates of corporate profits tax accruals are normally subject to
greater error than any other category of receipts. The NIA estimate
is derived from estimates of corporate profits before tax, estimated tax
rates, and adjustments for tax changes. These estimates are subject to
significant revisions based on later data. As is shown in table B-8, the
estimated corporate profits tax accruals for 1976 are now $1.2 billion
higher than was estimated a year ago, even though both estimates
were for a period that had ended. There is about a 3-year lag between
initial and final estimates of corporate tax liability data; in the interim,
successive estimates are made using the better data that gradually
become available.
The secular decline in corporate profits tax receipts relative to GNP
and (as shown in the chart above) to total receipts results mainly

THE BUDGET FOR FISCAL YEAR

19 79

from three factors: (1) a long-term decline in corporate profits relative to GNP; (2) a narrowing of the corporate profits tax base resulting from changes in the definition of corporate profits for tax purposes
(largely increases in permissible depreciation allowances); and (3)
reductions in effective tax rates on corporate profits resulting from
statutory rate reductions and provision for investment tax credits.
Indirect business tax and nontax accruals.—These receipts are composed of excise taxes, customs duties, and various miscellaneous receipts such as rents and royalties. The import fees on crude oil and
petroleum products, most of which have been eliminated, are classified as an indirect business tax; these began in 1975 and amounted to
$1.9 billion in the peak year of 1976. In 1979 these taxes will total
$0.2 billion. Over time, indirect business tax and nontax accruals have
become a much less important part of total Federal sector receipts,
partly because they normally do not rise in proportion to the growth
in the economy and partly because some of them, such as the automobile and telephone excise taxes, have been reduced or repealed.
This trend is expected to be reversed due to proposed new taxes to
discourage energy consumption in general and to encourage the conversion away from the use of oil and natural gas to other types of fuel.
Contributions for social insurance.— This group of receipts constitutes the second largest category of Federal sector receipts. The increase since World War II has been caused by the growth in the labor
force and in wage rates, the expanded coverage of existing social insurance programs, the enactment of new ones, and increases in the
taxable wage base and tax rates needed to finance liberalization of
benefits. As a result of the rapid rise in social insurance taxes (mainly
social security) and the passage of legislation reducing or eliminating
individual income taxes for many low- and moderate-income individuals and families, millions of Americans now pay significantly
higher social insurance taxes than income taxes.
Major tax changes.—Federal sector receipts in the budget reflect
both the impact of tax changes scheduled under current law and proposed tax legislation. The major changes in taxes reflected in the
budget are the following:
—Permanent individual and corporation income tax reductions,
generally effective October 1, 1978, and tax reforms, generally
effective January 1, 1979, are proposed. In comparison to current
law, these reductions—which would replace some of the temporary provisions of the Tax Reduction and Simplification Act of
1977—would reduce receipts by about $34 billion in 1979. In
comparison to the receipts that would result from extending the
temporary provisions of the Tax Reduction and Simplification
Act of 1977, the reductions are $24 billion in 1979.
—The social security tax base increased from $16,500 in calendar
year 1977 to $17,700 in 1978 and the rate increased from 11.7%
to 12.1%. Prior to recent legislation, the base was scheduled to

SPECIAL ANALYSIS A

increase to $18,900 in 1979. The Social Security Amendments of
1977 legislated further increases in the rate and base in future
years beyond what was previously scheduled. In calendar year
1979, the rate is scheduled to rise to 12.26% and the base is
scheduled to increase to $22,900. The increases resulting from the
1977 legislation will raise 1979 receipts by $3.2 billion.
—The administration's energy tax proposals were announced last
year. They include the crude oil equalization tax, the oil and
natural gas consumption tax, and other excises designed to raise
the price of oil and gas. The proposals also include several tax
incentives for energy-saving investments, such as home insulation
and solar heating devices. They also provide for per capita
refunds of the excise tax collections.
—Legislation is proposed to eliminate the telephone excise tax
effective October 1, 1978, and to reduce the Federal unemployment insurance tax rate from 0.7% to 0.5% effective January 1,
1979.1
Part 4 of the budget discusses tax changes and proposed legislation
in greater detail.
Trends in Federal sector expenditures.—Federal sector expenditures are also divided into several n
distinction is between purchases
divided between defense and nondefense purchases) and all other
transactions. Purchases are that portion of the Nation's output that
is bought directly by the Federal Government and, therefore, included
in GNP. The other expenditure categories consist primarily of payments to individuals and grants to State and local governments. These
individuals and governments, in turn, can use the income to finance
their own consumption or purchases of goods and services, to save,
and—in the case of States and localities—to hold down taxes or to
make transfer payments.
A major shift.in the composition of Federal sector expenditures has
been underway for years. As the chart on expenditures indicates,
defense purchases of goods and services have been a declining share of
Federal spending ever since the Korean war. This pattern was temporarily reversed for 2 years during the Vietnam period, but by
1970 the defense share was well below the pre-Vietnam percentage.
There has been a corresponding rise in other components, especially
grants-in-aid and domestic transfer payments. While this shift has
been underway for a quarter of a century, it accelerated in the past
decade due to the sharp increases in Federal transfer payments and
grants. Defense purchases in current prices dropped significantly
after the 1969 peak, but have since risen again largely in response to
the impact of inflation on the defense budget. Defense purchases are
expected to total 21.4% of Federal sector expenditures in 1979; they
were 22.3% in 1977.
1 The Federal unemployment tax finances administrative expenses of the Unemployment
Insurance Service and the Federal-State Employment Service as well as the Federal share of extended
unemployment benefits paid when unemployment is high. State taxes deposited in the fund finance
benefits.

260-700 O - 78 - 4

THE

BUDGET FOR FISCAL YEAR

D i s t r i b u t i o n of F e d e r a l S e c t o r E x p e n d i t u r e s b y

19 7 9

Category

5 - Y e a r Averages
Interest a n d O t h e r

Grants-in-Aid

Domestic
Transfer Payments

1950-54

1955-59

1960-64

1965-69

1970-74

1975-79

Fiscal Years

Estimate

Table B-3 shows average Federal sector expenditures by category
for 3-year periods as a percent of GNP at 10-year intervals.
Table B-3. F E D E R A L S E C T O R E X P E N D I T U R E S A S A P E R C E N T O F G N P
Description

Defense purchases
Nondefense purchases
Domestic transfer payments
Foreign transfer payments
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Total expenditures.

1947-49
average
actual

1957-59
average
actual

1967-69
average
actual

1977-79
average
estimate

4.3
2.0
3.4
1.3
.7
1.7

9.9
1.6
3.9
.4
1.1
1.2

8.7
2.4
5.1
.3
2.0
1.3

4.9
2.8
8.9
.2
3.6
1.7

13.8

18.6

20.4

22.4

Defense purchases and foreign transfer payments are, of course,
largely devoted to the conduct of our national defense and foreign

SPECIAL ANALYSIS A

affairs.2 In 1947-49 defense purchases—reduced by receipts from largescale sales of World War II materials—were only 4.3% of GNP,
while foreign transfer payments were 1.3% of GNP. The total of
these—5.6%—reflects roughly the cost of the conduct of external
affairs. The years 1957-59, while a post-Korean war peacetime period,
reflected a higher level of defense expenditures than was prevalent
prior to the Korean war. In that period, defense purchases and foreign
transfers combined were equal to 10.3% of GNP. Even though the
1967-69 period included the peak spending for the Vietnam war,
defense purchases and foreign transfers were down to 8.9% of GNP.
In the 1977-79 peacetime period, they are expected to be equal to
5.0% of GNP.
In contrast, spending on most other expenditure categories relative
to GNP has risen dramatically, especially nondefense purchases,
domestic transfer payments, and grants-in-aid. In 1947-49, spending
for everything except defense purchases and foreign transfer payments
was equal to 8.1% of GNP; in 1977-79 it is estimated to equal 17.4%
of GNP.
Defense purchases of goods and services.—Defense purchases consist
of all purchases of goods and services under programs included in
the national defense function in the budget document. Almost all
defense purchases are made by the Department of Defense—Military,
but some are made by the Department of Energy (for atomic weapons)
and other accounts included in the defense function. In addition, defense purchases include purchases of goods and services by the military
assistance programs that are now classified in the international affairs
function in the budget.
The budget calls for an increase in defense purchases of $8.3 billion
in 1979 over 1978. This increase more than offsets the impact of
inflation, thus continuing the reversal of the pattern of a steady
decline in real terms from 1968 through 1976. While NIA defense
purchases are not estimated in constant prices,3 the budget includes
constant price estimates of outlays in the national defense function.
This category and defense purchases in the NIA are sufficiently
similar so that these figures give a rough approximation of the same
transactions. The unified budget estimates of outlays in constant
prices for the national defense function are as follows (in billions
of 1972 dollars):
At 5-year intervals:
1949
1954
1959
1964
1969
1974
1979 estimate
1
2
3
4
6
8

27.5
88.0
75.3
77.0
97.9
67.9
70.3

For selected years:
19501
19532
19563
1965 4
19682
19765
19776
1978 estimate

29.4
96.3
72.9
69.3
101.4
65.5
66.5
68.9

Last year prior to Korean war.
Wartime peak year.
Post-Korean war low in the- 1950's.
Lowest year between Korean and Vietnam wars.
Lowest year since Vietnam war.
Last year for which actual data are available.

2 However, in recent years a significant portion of foreign transfers has arisen from payments
under general domestic social programs—for example, payments to social security retirees living
abroad.
3 The Department of Commerce is developing a data series on constant price defense purchases,
and according to current plans will publish the data this calendar year.

THE

BUDGET FOR FISCAL YEAR

19 7 9

Nondefense purchases of goods and services.—This category covers
the goods and services purchased by Federal nondefense agencies.
These include such programs as operation of national forest, park, and
recreation areas; space exploration; promotion of commerce; acquisition and disposal of agricultural commodities; construction of flood
control and navigation projects; operation of the Federal airway system; a wide variety of medical, energy, space, and other scientific research; the capital outlays of Government enterprises; Federal law
enforcement; and operation of veterans hospitals. Table B-4 shows the
composition of this spending by agency for the years 1975 through
1979.
Table B-4. N O N D E F E N S E P U R C H A S E S O F G O O D S A N D S E R V I C E S B Y
A G E N C Y (in billions of dollars)
1975

actual
Legislative branch
The judiciary—
Agriculture:
Commodity Credit Corporation (CCC)
Other
Commerce
Defense—Civil
Energy 1
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice.
Labor
State..
Transportation
Treasury
Civil Service Commission
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration.
Postal Service 2
Tennessee Valley Authority
Veterans Administration.
All o t h e r 3 . . . .
Total

1976

actual

1977

actual

1978

1979

estimate estimate

0.7
.3

0.8
.3

1.0
.4

1.1
.5

1.2
.5

.2
2.4
.9
2.1
1.8
5.3
.8
1.8
1.3
.7
.7
3.0
2.5
.8
.5
.4
3.2
.7
1.0
4.1
2.3

.2
2.3
1.0
2.2
2.4
5.7
.5
1.4
1.4
.9
.9
3.2
2.7
1.0
.5

2.7
2.9
1.1
2.4
3.1
6.3
.6
2.8
1.6
1.1
1.0
3.6
2.9
1.1
.6

3.6
.7
1.1
4.6
3.4

3.9
.4
1.2
5.2
2.8

3.0
3.8
1.2
2.6
5.9
7.0
.6
3.3
1.9
1.6
1.1
4.1
3.2
1.3
.7
.3
3.9
.5
1.5
6.0
3.9

.9
3. 6
1.5
2.6
6.6
7.6
.5
3.3
2.0
2.4
1.2
4.6
3.4
1.5
.8
.3
4.2
.5
1.5
6.4
6.3

37.6

40.7

48.7

58.6

63.5

*$50 million or less.
1975 and 1976 figures are spending by predecessor agencies.
2 Not included in outlays shown in the Federal budget.
3 Includes allowances for civilian agency pay raises and contingencies.
1

Note.— Excludes the transition quarter.

Nondefense purchases consist mainly of the cost of operating the
various nondefense agencies. In the case of Government enterprises
(including the CCC and the Postal Service), however, the purchases
figures reflect net capital formation.
Domestic transfer payments.—This is now the largest category of
Federal sector expenditures. Spending for domestic transfers has
expanded rapidly in recent years, mainly because of more beneficiaries

SPECIAL ANALYSIS A

and higher benefit payments under social insurance programs.4 As can
be seen, spending on human resources programs—especially income
security programs—dominates domestic transfer payments. This
spending is expected to continue to rise in 1979, largely due to demographic and economic conditions—increases in the covered population
and adjustments to compensate for inflation. Program trends (on a
unified budget basis) are discussed extensively in Part 5 of the Budget
and elsewhere in the budget documents.
C o m p o s i t i o n of F e d e r a l S e c t o r E x p e n d i t u r e s
$ Billions
300

S Billions
300

250

250-

Grants-in-Aid and
Domestic Transfej Payments

200

150

100

Defense Purchases

200

/
150

too

Grants-in-aid.—These expenditures help State and local governments to provide general public services and to finance programs for
the needy. There is a substantial degree of substitutability between
grants-in-aid and domestic transfer payments and—to a lesser degree—nondefense purchases. For example, low-income veterans could
be eligible for free medical care under medicaid (grants), in a veterans
hospital (nondefense purchases), or, perhaps, medicare (transfer payments). The supplemental security income transfer payments have
substituted for the previous program of grants to States for public
assistance for the elderly and handicapped. (The State and local
spending of Federal grant money for public assistance programs is
4 Table B - 3 shows the growth in domestic transfer payments as a percent of G N P at 10-year intervals, and the chart on the distribution of Federal sector expenditures by category shows this growth
trend over time relative to total Federal sector expenditures. Table B - 5 provides data on the composition of domestic transfer payments by budget functional category and major program.

H
Table B-5. F U N C T I O N A L C O M P O S I T I O N O F D O M E S T I C T R A N S F E R P A Y M E N T S (in billions of dollars)
Actual
Description
HUMAN RESOURCES

Subtotal, Income security

Subtotal, Health

1970

1971

1973

1972

1974

1975

1976

1977

O
M

1979

1978

O
5d

PROGRAMS

Income security:
Social security (OASDI)
Railroad retirement
Civil service retirement
Unemployment benefits
Benefits for coal miners
Supplemental security income
Food and nutrition
Special payments, Treasury1
Workmen's compensation
Other

Health:
Medicare.
Other.

1969

1968

W
©
Estimate

22.5
1.4
2.1
2.2

25.8
1.5
2.4
2.2
__

28.6
1.6
2.7
3.0
*

34.0
1.9
3.2
5.6
.3

38.0
2.1
3.7
6.5
.4

46.6
2.4
4.5
4.8
.9

70.3
3.4
8.2
18.2
1.0
4.6
4.8
.9
.5
.2

81.2

90.3
4.0

100.0

11.3

10.7

1.5

1.8

2.2

53.2
2.6
5.6
5.5
1.0
1.9
2.7

.1
*

.1
.1

.2
.1

.3
.1

61.5
3.0
7.0
12.2
.9
4.2
4.2
1.7
.4
.1

28.5

32.3

36.7

46.7

52.8

61.7

72.8

95.2

112.2

120.4

129.1

141.1

5.0
.3

6.2
.3

6.7
.4

7.5
.4

8.3
.4

9.0
.4

10.9
.4

14.0
.5

16.8
.6

20.6
.7

24.4
.7

28.1

5.4

6.6

7.2

7.9

8.8

9.4

11.4

14.5

17.4

21.3

25.1

28.9

3.7
9.4
14.1
.9
4.7
4.6
.9

.6
.2

10.8

1.0

4.8
4.8
1.2
.7

4.2

w
o

12.0

1.0

5.3
5.0
2.0
.7

t?3
>

W
CO

Education, training, employment, and social
services:
Education
Training, employment, and social services.

.4
.6

.4
.7

.5
.7

.7
.9

.9
.9

1.0
.7

1.5
.4

2.1
.3

2.7
.3

3.2
.4

3.8
.4

Subtotal, education, training, employment, and social services

1.0

1.3

1.5

1.7

1.9

2.4

3.0

3.6

4.1

5.6

6.2

6.9

8.0

8.8

9.7

10.4

12.8

14.3

13.3

]X2

112

40.5

46.1

52.0

64.2

72.1

82.6

96.3

124.4

146.1

157.9

171.0

187.3

2.1
.1

2.4
.2

2.8
.2

3.3
.2

3.8
.2

4.3
.2

5.1
.4

6.2
.5

7.2
.6

8.1
.5

9.1
.6

10.1.6

2.2

2.6

3.0

3.5

4.0

4.5

5.4

6.7

7.8

8.6

9.7

10.7

42.7

48.7

55.0

67.7

76.1

87.1

101.7

131.1

153.9

166.5

180.7

198.0

Veterans benefits and services
Total, human resources programs
ALL OTHER

FUNCTIONS

National defense (military retired pay)
All other functions
Total functions not included in human
resources grouping
Total domestic transfer payments

*$50 million or less.
Includes both $50 tax rebates and earned income tax credits in excess of tax liabilities; the latter are now counted in the budget as refunds of receipts.

Note.— Excludes the transition quarter.

Oi
Oi

O*
Table B-6. F U N C T I O N A L C O M P O S I T I O N O F F E D E R A L G R A N T S - I N - A I D (in billions of dollars)
Actual

Estimate

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

Income security:
Public assistance cash__ _ _
Child nutrition and related programs
Other

3.2
.2
.2

3.6
.3
.3

4.1
.4
.3

5.5
.6
.4

6.6
.9
.4

5.9
1.1
.5

5.4
1.2
.5

5.1
1.7
.7

5.8
2.1
1.0

6.3
2.6
1.3

6.7
2.9
1.3

6.8
2.7
1.5

Subtotal, income security

3.7

4.2

4.8

6.5

7.8

7.5

7.1

7.5

8.9

10.2

10.9

W
d
o
o
w
^

1.8

2.3

2.7

3.4

4.6

5.8

6.8

8.5

9.8

10.8

11.9

o
w

1.2

1.5

1.7

2.0

2.6

3.1

2.9

3.0

3.1

2.7

3.1

4.0

4.6

6.1

6.3

7.8

9.4

11.6

13.0

13.8

15.0

Description
HUMAN RESOURCES

PROGRAMS

Health:
Medicaid. _ _ _
...
Other (includes research, construction, services, and medical training)
.
Subtotal, health

_ _ _ _ _._ _

w
H

3.1
.8
.9

3.1
.7
1.0

3.4
.8
1.4

3.7
1.1
1.6

4.0
1.7
2.9

4.0
2.2
2.6

3.9
1.9
2.5

4.8
3.4
3.4

4.9
5.6
3.4

5.3
6.1
3.9

5.9
9.6
4.7

6.6
10.7
4.3

Subtotal, education, training, employment, and social services

4.8

5.6

6.4

8.6

8.7

8.4

11.7

13.9

15.2

20.2

21.7

22.6

22.5

23.3

28.6

34.5

38.5

44.9

47.7

Total, human resources programs.. . _

tr1

Education, training, employment, and social
services:
Education... _
Training and employment. __
__
Social services

Veterans benefits and services

h-t

oC>P
H
>
W
CO
CO

11.2

12.2

14.4

17.5

ALL OTHER

FUNCTIONS

Natural resources and environment:
Environment
Natural resources

.7
.3

1.6

2.0

2.5

3.7
.4

4.3
.5

4.8

1.1

2.0

2.4

3.1

4.1

4.8

5.5

2
5

1.0
.9

1.2
.8

1.3
.7

1.2
1.3

4
1

.5
.2

.5
.1

.5
.2

.6
.3

.9
2.2
.6
.5
.3

.6
2.7
2.3
.6
.4

.4
2.9
2.0
.5
.4

2.6

2.7

2.8

3.3

4.4

6.6

6.2

Subtotal, natural resources and environment
Community and regional development:
Urban renewal
Other HUD grants
Local public works
Area and regional development.
Other
Subtotal, community
development

and

regional

oo
^
M
O

£t*
w
t—I
GO

Table B-6. F U N C T I O N A L

COMPOSITION

FEDERAL

GRANTS-IN-AID

(in bUlions of dollars)-Continued

Actual
Description

1968

1969

1970

1971

1972

Estimate
1973

1974

1975

1976

1977

1978

1979

Transportation:
Highways (including safety)
Urban mass transit
Other (mainly airport construction)

4.2
.1
.1

4.4
.1
.1

4.6
.2
.1

4.7
.3
.1

4.7
.4
.2

4.5
.5
.2

4.7
.8
.3

6.2
1.0
.3

6.0
1.3
.4

6.8
1.4
.6

7.6
1.4
.6

Subtotal, transportation

4.3

4.4

4.6

4.9

5.1

5.3

5.8

7.5

7.7

8.8

9.6

6.6
.4

6.1
.4

6.1
.5

6.2
.5

6.8
2.3

6.8
2.5

6.9
2.2

Subtotal, general purpose fiscal assistance

7.0

6.5

6.7

9.0

9.3

9.0

All other functions (includes allowance for
contingencies in 1979)

1.0

l.l

1.3

1.7

1.9

2.1

2.3

2.5

3.6

Total functions not included in the human
resources grouping

6.6

7.0

8.1

9.2

10.0

17.9

18.4

19.8

23.0

27.5

32.1

33.9

17.8

19.2

22.6

26.8

32.6

40.4

41.6

48.4

57.5

66.0

77.0

81.6

General purpose fiscal assistance:
General revenue sharing
Other

Total grants-in-aid
*$50 million or less.
Note.—Excludes the transition quarter.

SPECIAL ANALYSIS A

classified as State and local government transfer payments.) In
addition, there is significant substitutability between different grant
programs; for example, the substitution of block grants and general
revenue sharing for categorical grants can significantly change
administrative controls without changing the total size of grants.
In some cases a more accurate picture of Federal efforts to meet
domestic needs through income transfers is obtained by treating
grants and domestic transfer payments together, rather than looking
at them separately, as is done in the preceding chart.
The chart on the composition of Federal sector expenditures combines grants-in-aid and domestic transfer payments. Table B-6 shows
detail on grants-in-aid by budget function and major activity, and
table B-5 shows similar detail for domestic transfer payments.
Grant expenditures are discussed in greater detail in Special Analysis
H of this document. While the definition of Federal aid used in that
analysis differs somewhat from that used in the NIA, the two sets of
data largely overlap. Special Analysis H explains the relationship
between the two data series.
Foreign transfer payments.—There are three major types of foreign
transfer payments: expenditure of dollars to assist foreign economic
development, grants of surplus agricultural products, and payments
under social security and similar programs to individuals living
abroad. Although payments to individuals are gradually rising
(roughly in proportion with the rise in GNP), total foreign transfer
payments have been stable (and a declining proportion of GNP) for
many years.
Net interest paid.—Net interest depends on the size of Federal debt,
loans outstanding, and the interest rates on borrowing and lending.
For the 1947-49 period, net interest paid amounted to 12.3% of total
Federal sector NIA expenditures; since 1952 it has generally ranged
between 6% and 7% of the total. In 1977 net interest comprised 7.2%
of total Federal sector expenditures and it is expected to rise to 7.9%
in 1979.
Subsidies less current surplus of Government enterprises.—Subsidies
less current surplus of Government enterprises consist of two elements:
(1) Subsidy payments to resident business (including farms); and (2)
the "current surplus" or "deficit" of Government enterprises. In this
context, a subsidy is a monetary grant to a unit engaged in commercial
activities. Examples are housing subsidies, subsidies for railroads,
and the construction and operating differential subsidies paid to operators of U.S.-flag merchant ships.
"Government enterprise" is the term used in the NIA to designate
certain business-type operations of the Government, which usually
appear in the budget as public enterprise revolving funds. The operating costs of Government enterprises are, to a great extent, covered by
the sale of goods and services to the public, as distinguished from tax
receipts. The difference between the sales and the current operating
expenses of a Government enterprise constitutes its surplus or deficit.
As noted above, the capital formation of Government enterprises is

THE BUDGET FOR FISCAL YEAR

19 79

classified as nondefense purchases. The largest Government enterprises are the Commodity Credit Corporation, the Postal Service
(which is not now included in the budget), and the Tennessee Valley
Authority.
Table B-7 shows the composition of this aggregation by major
category.
Wage disbursements less accruals.—This is an adjustment item occasionally made in the NIA to take account of the fact that wages
and salaries are not always received at the same time as they are
earned. The national income component of wages and salaries is
counted in the GNP on an accrual basis; that is, when the income is
earned rather than when it is received. Personal income, however,
including wage and salary disbursements, is estimated on the basis
of when the cash is received.
Ordinarily, wage and salary payments disbursed in one period but
earned in the preceding period are approximately offset by payments
disbursed in the next period but earned in the current period, thus
making the adjustment between national income and personal income
small or zero. No adjustment for wage accruals by the Government
is anticipated for the 3 years covered by this budget.

Table B-7. S U B S I D I E S L E S S C U R R E N T S U R P L U S O F G O V E R N M E N T E N T E R P R I S E S (in billions of dollars)
Description

Subsidies:
Commodity Credit Corporation
Other Department of Agriculture
Maritime
Housing (HUD)
Railroad and mass transit
Energy related subsidies
Other (mainly airline subsidies) 1
Subtotal
Enterprise surpluses (—) or deficits:
Commodity Credit Corporation
Postal Service
Tennessee Valley Authority
Federal Housing Administration
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance
Corporation
All other 2
Subtotal
Total subsidies less current surplus.

Actual
1968

1969

1970

1971

Note.— Excludes the transition quarter.

Estimate
1973

1974

1975

1976

1977

1978

2.6
.5
.3
.3

3.0
.5
.3
.4

3.1
.4
.3
.5

3.6
.3
.4
.8
*

3.0
.3
.4
1.3
.1

4.0
.4
.4
1.7
.1

2.4
.2
.4
1.9
.1

0.6
.4
.5
2.2
.4

0.3
.2
.5
2.5
1.1

0.6
.3
.6
2.9
1.3

3.7

4.2

4.4

5.2

7.3

5.2

4.2

.3
.9
—.1
—.2
—.1

.5
.9
—.1
—.2
—.1

.6
1.3
—.2
—.2
—.1

.6
2.0
—.2
—.3
—.1

.6
1.4
—.2
—.3
—.2

1.3
1.3
—.2
—.3
—.1

1.5
2.0
—.3
—.1
—.1

-.1
-.3

-.1
-.2

-.1
-.3

-.1
-*

-.1
1

1.1

1.6

1.2

4.1

4.6

5.4

6.8

6.4

*$50 million or less.
Includes subsidies by the disaster loan fund of $0.7 billion in 1973.
Includes impact of retroactive pay raises.

1
2

1972

1979

2.0
.3
.5
4.2
1.4

2.4
.4
.5
3.5
1.4
.2
.2

6.9

5.7

8.7

9.4

.3
2.2
—.3
—.2
—.2

.2
2.3
—.4
—.2
—.2

.2
1.3
—.5
—.2
—.2

.5
1.7
—.8
—.2
—.3

.6
.8

-.2
-.1

-.2
-.3

-.2
-.*

-.2
-*

-.2

1.8

2.7

1.5

1.2

-.2

9.1

8.0

5.7

6.1

9.5

9.2

.8
.2

-.9
-.2
-.3
_ *

THE

BUDGET FOR FISCAL Y E A R

1 9 79

Estimating errors.—Estimates of NIA receipts and expenditures are
necessarily imprecise. Data are frequently not available when needed
and in the detail desired, yet it is important that the estimates be
prepared in a timely manner. In addition, the budget process does not
generate all of the data needed to make precise NIA estimates, so
approximations are required in the NIA translation. Table B-8 provides some indication of the magnitudes of these estimating errors.
When the 1978 budget was published a year ago, fiscal year 1976 had
been over for 7 months, and the 1976 estimates were labeled "actual";
yet, as table B-8 shows, the figures for 1976 are now significantly
different. These data, therefore, need to be recognized as approximations, not precise figures.
Table B-8. F E D E R A L R E C E I P T S A N D E X P E N D I T U R E S IN T H E N A T I O N A L
I N C O M E A C C O U N T S F O R 1976: C O M P A R I S O N O F J A N U A R Y 1977 A N D
J A N U A R Y 1978 E S T I M A T E S
(In billions of dollars)
"Actuals"
for 1976
shown
in 1978
budget

Description

Change

Currently
reported
"actuals"
for 1976

RECEIPTS

Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts

137.2
51.0
24.5
100.9

—*
1.2
—.3
—.4

137.2
52.2
24.2
100.5

313.6

314.1

EXPENDITURES

Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign..
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Total expenditures
Deficit ( - )

—

127.2
(85.8)
(41.4)
156.7
(153.6)
(3.1)
57.5
25.8
5.8

—0.7
(*)
(-.7)
.1
(. 3)
(-.1)
*
-.4
.3

126.5
(85.8)
(40.7)
156.8
(153.9)
(3.0)
57.5
25.4
6.1

373.0

-.7

372.3

-59.4

1.2

-58.2

*$50 million or less.

QUARTERLY

ESTIMATES

Table B-9 presents quarterly NIA receipts and expenditures
estimates (at seasonally adjusted annual rates) for the period covered
by the budget.

Table B-9. FEDERAL RECEIPTS AND EXPENDITURES IN T H E N A T I O N A L I N C O M E A C C O U N T S , Q U A R T E R L Y , 1977-79
(In billions of dollars; seasonally adjusted at annual rates)
Actual
Description

Estimated

Oct.Dec.
1976

Jan.Mar.
1977

Apr.June
1977

JulySept.
1977

Oct.—
Dec.
1977*

Jan.Mar.
1978

Apr.June
1978

JulySept.
1978

Oct.Dec.
1978

Jan.Mar.
1979

Apr.June
1979

JulySept.
1979

157.1
55.1
23.8
108.4

170.0
55.4
24.2
115.4

168.6
59.9
24.6
118.1

168.6
59.5
25.4
119.7

175.5
63.2
25.2
122.4

180.0
61.6
25.7
134.6

185.1
63.0
30.9
137.9

197.5
64.5
32.0
141.4

188.7
69.0
31.1
143.0

188.6
67.0
34.9
154.8

195.0
70.0
36.0
157.3

206.8
72.8
37.3
159.8

344.5

364.9

371.2

373.2

386.3

401.9

416.9

435.4

431.8

445.3

458.3

476.7

134.2
(88.4)
(45.8)
166.3
(163.1)
(3.2)
65.5
28.5

136.3
(89.7)
(46.7)
170.7
(167.8)
(2.9)
62.0
28.6

143.6
(93.4)
(50.2)
169.3
(166.4)
(2.9)
63.6
29.1

148.1
(95.6)
(52.5)
174.8
(171.2)
(3.6)
72.7
29.4

153.8
(98.6)
(55.2)
177.6
(174.0)
(3.6)
72.2
30.9

156.8
(99.5)
(57.3)
180.3
(176.9)
(3.4)
75.6
33.4

160.0
(100.3)
(59.7)
184.3
(180.8)
(3.5)
79.3
35.8

163.3
(101.0)
(62.3)
193.6
(190.1)
(3.5)
80.9
37.8

169.2
(104.4)
(64.8)
197.1
(193.5)
(3.6)
81.7
39.0

168.6
(106.7)
(61.9)
198.7
(195.0)
(3.7)
81.6
39.5

172.3
(109.3)
(63.0)
201.3
(197.4)
(3.9)
81.8
40.1

176.2
(111.9)
(64.3)
210.0
(206.0)
(4.0)
81.7
40.6

RECEIPTS

Personal tax and nontax receipts
Corporate profits tax accrues
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts
EXPENDITURES

Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic (to "persons")
Foreign
Grants-in-aid to State and local governments..
Net interest paid
Subsidies less current surplus of Government
enterprises
Total expenditures
Deficit ( - )

6.0

6.1

5.9

7.2

12.3

10.2

8.6

8.1

10.4

9.3

9.0

8.2

400.4

403.7

411.5

432.1

446.7

456.3

468.0

483.7

497.4

497.7

504.5

516.7

-55.9

-38.8

-40.3

-58.9

-60.4

-54.4

-51.1

-48.3

-65.6

- 52.4

-46.2

-40.0

""Preliminary.
Note.—Because of the methods normally used in seasonally adjusting NIA data, the average of seasonally adjusted data for the 4 quarters of a fiscal year may not be
equal to the unadjusted fiscal year total.

THE

BUDGET FOR FISCAL Y E A R

1 9 79

As noted above, the translation of the budget into the national
income accounts categories is inexact. The budget itself is a mixture
of a forecast of what receipts and outlays are expected to be for
some items under current law and a Presidential request for congressional approval of proposed amounts for others. In compiling
this special analysis, each budget receipt and outlay is analyzed and
translated into NIA categories. Nonetheless, one can anticipate
revisions similar to those shown in table B-8 even for the "actuals"
each year. The margin of error for the estimated years (1978 and 1979
in this budget) is even greater, since they involve estimating errors
and differences between proposals and what is realized in the basic
unified budget, as well as errors in translating unified budget transactions into NIA terms. When these annual estimates are converted
into quarterly distributions that are seasonally adjusted at annual
rates, greater imprecision should be expected. The data presented in
table B-9 are the best available estimates of the quarterly NIA
receipts and expenditures consistent with the 1979 budget, but should
be used with clear recognition of their limitations.
R E L A T I O N S H I P OF THE B U D G E T TO THE F E D E R A L SECTOR
OF THE N A T I O N A L I N C O M E ACCOUNTS

Table B-10 shows the major differences between the budget and the
Federal sector of the NIA. These differences are explained below.
Table B-10.

RELATIONSHIP
OF T H E B U D G E T T O
SECTOR, NIA (in billions of dollars)
Description

1977
actual

THE

FEDERAL

1978
estimate

1979
estimate

RECEIPTS
Total budget receipts

Government contributions for employee retirement (grossing) __
Other netting and grossing
Adjustment to accruals
Other
...
Federal sector, NIA receipts

356.9

400.4

439.6

6.4
3.7
—1.9
-1.0

7.1
3.9
.5
-1.1

7.5
4.4
1.1
-1.2

364.0

410.8

451.4

401. 9

462.2

500.2

—1.3
6.4
3.7
2.7
1.5
-3.2

—7.1
7.1
3.9
.3
1.2
-4.0

—4.7
7.5
4.4
—.2
.9
-4.1

411.8

463.6

504.0

EXPENDITURES
Total budget outlays
Lending and financial transactions
Government contribution for employee retirement (grossing)...
Other netting and grossing
Defense timing adjustment
Bonuses on Outer Continental Shelf land leases
Other
Federal sector, NIA expenditures..

Lending and financial transactions.—Conceptually, the national
income accounts measure the Nation's current income and production,
and therefore do not include transactions, such as loans, that are an
exchange of existing assets and liabilities rather than current income or

SPECIAL ANALYSIS E

production. Loan transactions have a significant economic impact,
affecting income and output, but they are analyzed more appropriately
within a financial market framework, such as provided by the flowof-funds data of the Federal Reserve Board. Special Analysis E
(Borrowing, Debt, and Investment) and Special Analysis F (Federal
Credit Programs) both contain information on the financial market
implications of the budget.
Most of the lending and financial transactions displayed in table
B-10 are shown in Special Analysis F. However, this total differs
from the total for direct loans shown in Special Analysis F because:
(a) the NIA records nonrecourse agricultural commodity loans as
purchases rather than loans; (b) capital contributions to international
financial institutions, while not technically loans, are treated as
financial transactions and, therefore, excluded from the NIA; and
(c) Special Analysis F also shows lending by off-budget Federal
entities, which do not require reconciliation with the NIA because
they are not included in the budget.
Government contribution jor employee retirement.—The contributions
of Government agencies to the retirement trust funds of their employees are not included in the budget totals. While the outlays are recorded
in each agency's budget, they are offset by an intragovernmental
deduction. However, the NIA counts Government payments for
employee retirement as part of the compensation paid to Government
employees and, therefore, as Government expenditures; this treatment
maintains comparability with the treatment of employee retirement
contributions in the rest of the economy. This category includes contributions by Government enterprises such as the Postal Service.
Government enterprise contributions are recorded as an increase in
the current deficit of enterprises whereas the contributions by other
accounts are recorded as purchases of goods and services. The receipt
of these retirement contributions is treated in the NIA as contributions
for social insurance. Since receipts and expenditures are increased by
identical amounts, this treatment has no effect on the surplus or
deficit. Around 80% of these payments go to the civil service retirement fund, while most of the remainder is for Federal employees
insured under social security.
Other netting and grossing.—The budget normally counts as receipts
only income from taxation or similar sources that arises from the
exercise of governmental power to compel payment* Money received
in the course of business-type transactions, therefore, is normally
shown as offsets against expenditures. For instance, receipts from social
insurance programs operated by the Veterans Administration (such as
the National Service Life Insurance and U.S. Government Life Insurance) are netted against expenditures in the budget since these programs are voluntary, commercial-type activities. However, in the NIA
these insurance premiums are treated as social insurance receipts just
as are receipts from compulsory Government programs. Adjustments
of this type affect total receipts and expenditures identically and, thus,
do not alter the surplus or deficit of either the budget or the Federal
sector of the NIA.
Other netting and grossing includes some imputed contributions for
social insurance for unemployment compensation and workmen's com260-700 O - 78 - 5

THE BUDGET FOR FISCAL YEAR

19 79

pensation for Federal employees. The 1979 budget reflects a reclassification of receipts in excess of tax liabilities otherwise owed (the earned
income credit) from being budget outlays to being offsets to receipts.
This reduced the recorded budget receipts and outlays for 1976 by
$0.8 billion and for 1977 to 1979 by $0.9 billion each year. The NIA
treats these payments as transfer payments, therefore requiring a
grossing adjustment between the two data series. Similarly, the NIA
treats a proposed energy tax refund (amounting to $0.3 billion in
1979) as subsidies rather than as tax refunds.
Timing adjustments.—The budget records receipts at the time the
cash is collected regardless of when the income is earned, and outlays
(except interest paid to the public) are generally recorded at the time
the checks are issued. The NIA attempt to record most receipts from
the business sector in the time period in which the income is earned
rather than when taxes are actually paid, while personal income
taxes and social insurance contributions are recorded at the time of
payment by the individual taxpayer rather than when the liability
is accrued or the cash is received by Treasury.
The principal timing adjustment to expenditures is for defense
purchases. The major defense timing adjustment normally involves
procurement items (such as missiles and airplanes) purchased under
most fixed-price contracts. These items are recorded in the Federal
sector NIA as defense purchases at the time of delivery to the Federal
Government, rather than when the payment is made (as the budget
does) or when they are fabricated. Work in progress is counted as
part of private business inventories until the goods are completed and
delivered to the Government. An additional defense timing adjustment is made to convert foreign military sales, which are recorded on
a cash basis in the unified budget, to a basis consistent with net exports
in the NIA. In addition, some accounting adjustments are included
with the defense timing adjustment in this translation.
Since in both the budget and the NIA accounts public debt interest
to the public is recorded when it accrues, no timing adjustment is
needed for most interest transactions.
Bonuses on Outer Continental Shelf land leases.—In recent years
bonuses paid on the Outer Continental Shelf oil leases have become
a significant reconciliation item between the unified budget and the
NIA. The budget records these bonuses as proprietary receipts and,
therefore, deducts them from budget outlays. The NIA excludes these
transactions as being a transfer of assets, because the payments are
not included in calculating book profits under current corporate
accounting practice.
Other.—This category includes some miscellaneous adjustments,
largely for certain specialized aspects of the national income accounts,
such as the purchase and sale of land and geographical exclusions
arising out of transactions with Puerto Rico, the Virgin Islands, and
other U.S. territories. Geographical exclusions will reduce NIA receipts
by about $1.3 billion and NIA expenditures by about $3.3 billion in
1979. Certain nondefense timing adjustments—for example, the
difference between State withdrawals of unemployment benefits and
actual payments to individuals—are included here because of the

SPECIAL ANALYSIS E

difficulty in separating them from other adjustment categories. This
also includes a $0.4 billion shift of cash payments from 1978 to 1979 in
the supplemental security income transfer payments. Under new
legislation, when these payments fall due on a weekend or holiday the
payments are to be made early. The budget records 13 such monthly
payments for 1978 and 11 for 1979; the NIA records 12 for each year.
This category includes adjustments for certain foreign currency transactions that are not included in the budget, and transactions of Federal
entities or activities that are excluded from the budget but included
in the Federal sector NIA.

Table B-11. F E D E R A L T R A N S A C T I O N S IN T H E N A T I O N A L I N C O M E A C C O U N T S , 1968-79 (in bUlions of dollars)
Actual
1968

Description

1969

1970

1971

1972

Estimate
1973

1974

1975

1976

1977

1978

1979

R E C E I P T S , N A T I O N A L I N C O M E BASIS

Personal taxes and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance._ ___ _ _ _
Total receipts, national income basis
EXPENDITURES, NATIONAL
BASIS

national

income

Excess of receipts ( + ) or expenditures (—),
national income basis
Note.— Excludes the transition quarter.

90.0
37.0
18.6
44.5

93.6
33.0
19.2
49.2

87.5
32.0
20.0
52.9

100.3
34.2
19.9
59.1

107.3
41.0
20.7
71.5

122.6
43.7
21.4
84.2

127.3
42.1
22.1
92.1

137.2
52.2
24.2
100.5

165.5
57.4
24.6
116.5

185.5
63.1
28.5
133.7

195.6
69.7
34.8
151.3

160.0

190.1

194.9

192.5

213.5

240.5

271.8

283.6

314.1

364.0

410.8

451.4

95.0
(74.9)
(20.1)
44.8
(42.7)
(2.1)
17.8
10.5

98.0
(76.1)
(21.9)
50.9
(48.7)
(2.2)
19.2
12.1

97.0
(75.3)
(21.7)
57.0
(55.0)
(2.0)
22.6
13.6

94.8
(72.1)
(22.7)
70.1
(67.7)
(2.3)
26.8
14.2

100.9
(72.5)
(28.4)
78.9
(76.1)
(2.8)
32.6
14.1

101.7
(73.3)
(28.4)
89.7
(87.1)
(2.7)
40.4
15.9

104.6
(74.1)
(30.5)
104.7
(101.7)
(3.0)
41.6
19.8

117.9
(80.3)
(37.6)
134.2
(131.1)
(3.1)
48.4
21.9

126.5
(85.8)
(40.7)
156.8
(153.9)
(3.0)
57.5
25.4

140.7
(92.0)
(48.7)
169.7
(166.5)
(3.2)
66.0
29.3

4.1

4.6

5.4
-.1

6.8
.1

6.4

9.1
-.5

8.0
.2

5.7
.4

6.1

9.5

9.2

172.2

184.7

195.6

212.7

232.9

256.2

278.8

328.7

372.3

411.8

463.6

504.0

-12.2

+5.4

-.6

-20.2

-19.5

-15.7

-7.0

-45.0

-58.2

-47.8

-52.8

-52.6

INCOME

Purchases of goods and services
__
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments __
Net interest paid
Subsidies less current surplus of Government
enterprises
Wage disbursements less accruals.
Total expenditures,
basis

71.4
33.2
17.1
38.4

171.6
158.4
(99.8) (108.1)
(58.6) (63.5)
184.2 201.8
(180.7) (198.0)
(3.5)
(3.8)
77.0
81.6
39.8
34.5

PART 2

ECONOMIC AND FINANCIAL
ANALYSES OF
THE BUDGET TOTALS

INTRODUCTION
Part 2 provides analyses and tabulations of the budget totals that
cover Government finances and operations as a whole, and reflect the
ways in which Government finances affect the economy. These special
analyses are designated C through I.
Special Analysis C (Funds in the Budget) classifies budget information by the groups of funds (Federal and trust) that comprise the
budget.
Special Analysis D (Investment, Operating, and Other Budget
Outlays) classifies budget outlays in terms of the duration and nature
of the benefits derived, distinguishing those of an investment or developmental type from those that primarily yield current benefits.
Apart from this analysis, the U.S. budget, unlike those of some other
governments, includes outlays that are for "capital" or investmenttype activities in the same accounts in which "current" activities and
costs are shown.
Special Analysis E (Borrowing, Debt, and Investment) describes
current developments and trends in Federal borrowing and debt, and
the investment by Government accounts in Federal securities. It
summarizes Federal and federally assisted borrowing from the public
in order to display a measure of the Government's impact on the
credit market.
Special Analysis F (Federal Credit Programs) covers direct lo ans,
guarantees of private loans, and loans of Government-sponsored
enterprises. It includes aggregate measures of total credit supplied to
the public, and raised from the public, under Federal auspices.
Special Analysis G (Tax Expenditures) provides a discussion of
revenue losses due to provisions of the Federal income tax laws that
allow a special exclusion, exemption, or deduction from gross income
or that provide a special credit, preferential rate of tax, or deferral of
tax liability.
Special Analysis H (Federal Aid to State and Local Governments)
contains information on Federal grants to State and local governments and assistance provided through loans and tax expenditures. It
shows Federal aid for past years and relates it to the finances of both
the Federal Government and State and local governments. This
analysis provides a profile of Federal grants by region, a description
of the State and local government sector of the national income
accounts, and other grant information sources.
Special Analysis I (Civilian Employment in the Executive Branch)
deals with the levels of civilian employment in the executive branch.
It also contains figures on total Federal personnel costs (including
military personnel).
70

SPECIAL ANALYSIS C
F U N D S IN T H E

BUDGET

This analysis classifies budget information by the two major groups
of funds, Federal and trust, that comprise the budget. It also presents
information on the nature of receipts and outlays for the largest
trust funds.
DISTRIBUTION

OF T O T A L S ,

BY F U N D

GROUPS

Table C - l shows the distribution of total budget receipts and outlays between the Federal funds and the trust funds. The two groups
together, after deducting for transactions that flow between them,
make up the budget totals.
Table C - l . B U D G E T R E C E I P T S A N D O U T L A Y S , B Y F U N D

GROUP

(In millions of dollars)
Description

1977
actual

1978
estimate

1979
estimate

RECEIPTS

Federal funds:
Total in fund accounts
__
__
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities

_ ___ _

Receipts, Federal funds
Trust funds:
Total in fund accounts
_
___
Intrafund transactions.
Proprietary receipts from the public..
Receipts from off-budget Federal entities. _ _ _ _
Receipts, trust funds.
Inter fund transactions

_
__

__
_____

__
__

___

Total budget receipts

250,490
-1,530
-6,308
-2,241

279,013
-1,797
-6,611
-2,716

302,254
-2,116
-6,944
-4,098

240,412

267,889

289,095

165,565
-1,231
-10,386
-1,186

181,181
-1,687
-9,766
-1,238

200,913
-1,381
-10,300
-1,242

152,763

168,490

187,991

-36,313

-35,992

-37,497

356,861

400,387

439,588

305,027
-1,530
-6,308
-2,241

351,160
-1,797
-6,611
-2,716

376,739
-2,116
-6,944
-4,098

294,948

340,036

363,580

156,069
-1,231
-10,386
-1,186

170,881
-1,687
-9,766
-1,238

187,015
-1,381
-10,300
-1,242

143,267

158,190

174,092

-36,313

-35,992

-37,497

401,902

462,234

500,174

-45,040

-61,847

-60,586

OUTLAYS

Federal funds:
Total in fund accounts _ _
Intrafund transactions
Proprietary receipts from the public _ _
Receipts from off-budget Federal entities
Outlays, Federal funds
Trust funds:
Total in fund accounts
__
Intrafund transactions
___
Proprietary receipts from the public.
__ _ _
Receipts from off-budget Federal entities
Outlays, trust funds
Interfund transactions
Total budget outlays
Budget deficit

_ __

THE

BUDGET FOR FISCAL YEAR

FEDERAL

19 79

FUNDS

Federal funds are derived mainly from taxes and borrowing, and
are used for the general purposes of the Government. There are
four types of Federal funds—the general fund, special funds, public
enterprise (revolving) funds, and intragovernmental funds. Intragovernmental funds are further subdivided into revolving and management funds.
Table C-2. F E D E R A L F U N D R E C E I P T S A N D O U T L A Y S (in millions of dollars)
Description

1977
actual

1978
estimate

1979
estimate

RECEIPTS BY SOURCE

Individual income taxes
Corporation income taxes
Excise taxes!
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total receipts, Federal funds

156, 725
54, 892
9,648
7,327
5,150
6, 670

178,828
58,949
11,657
5,618
5,792
7,045

190,077
62,487
1 6,778
6,067
6,390
7,296

240,412

267,889

289,095

975
418
73

1,053
456
78

1,172
487
78

3,227
423
16,803
2,605
95, 711
2,263
5,219
48, 776
5,838
3,208
2,350
11,710
1,107
5,511
49,636
4,365
—32
3,944
17,781
15,411

3,969
1,144
22,636
4,522
105,295
2,521
8,152
53,974
8,411
4,008
2,527
12,537
1,285
6,479
56,879
5,063
288
3,980
18,722
18,057

4,035
754
17,751
4,386
115,190
2,532
10,087
57,314
9,529
4,093
2,533
13,529
1,392
7,148
62,755
5,679
306
4,269
18,973
18,589
2,800

-2,374

-2,000

-1,800

294,948

340,036

363,580

-54,536

-72,147

-74,485

OUTLAYS BY AGENCY

Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Other
Agriculture
Commerce
Defense-Military *
Defense—Civil
Energy 2
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
.
Labor
State...
Transportation
Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies
Allowances 3
Undistributed offsetting receipts: Rents and royalties on the Outer
Continental Shelf
Total outlays, Federal funds
Excess of outlays ( - )

1 Includes allowances for civilian and military pay raises for Department of Defense.
2 This agency assumes the energy activities previously performed by the Energy Research and
Development Administration, the Federal Energy Administration, and several other agencies.
3 Includes allowances for civilian agency pay raises and contingencies.

SPECIAL ANALYSIS

Budget receipts and outlays.—The receipts of the general and special
funds in 1979 are estimated at $289.1 billion. Outlays of all the Federal
funds are estimated at $363.6 billion. The distribution of receipts by
source, and outlays by agency, is shown in table C-2. The proprietary
receipts of the general fund and special funds, the Federal intrafund
receipts and the collections credited to public enterprise and intragovernmental funds, have all been offset in arriving at the outlays for
each agency.
Obligations.—The obligations (net) for Federal funds are estimated at
$420.0 billion for 1979, as set forth in table C-3. These transactions
largely flow from budget authority for Federal funds of $414.8 billion
for the year, although in part the obligations were authorized by
prior years' budget authority.
Table C-3. O B L I G A T I O N S I N C U R R E D , N E T , IN F E D E R A L F U N D S
(In millions of dollars)
Department or other unit

Legislative branch. _ __
_
._
_
_ __
The Judiciary.
_
__
Executive Office of the PresidentFunds appropriated to the President:
International Security Assistance
_ __________
International Development Assistance. _
__
Other
Agriculture
_ _ _ _ _ _ __
_
Commerce.
___
_
_
_____
Defense—Military 1
______
Defense—Civil
.
____
__
___
Energy2 __
_ _
_
_
_____
Health, Education, and Welfare.. __ ___ _ _
_
Housing and Urban Development
__ _
__
Interior
__
___ __ __
Justice. _
__ _
Labor.
.
__
_ _
State
Transportation
_
_ _ _ _ _ _ _ _ _ _ _ _ __
. _ _ ____
Treasury
______
____
Environmental Protection Agency
General Services Administration. _
_ _
__
National Aeronautics and Space Administration. _ _
_
Veterans Administration. __
__
_ _
Civil Service Commission _
_____
_____
Export-Import Bank. _
_____ __ ____
_
Federal Home Loan Bank Board
U.S. Postal Service
Railroad Retirement Board
___
_ _ __
Other independent agencies _ _ _ _
_
__
Allowances:
Civilian agency pay raises..
Contingencies for other requirements
Undistributed offsetting receipts: Rents and royalties on the Outer
Continental Shelf..
._
___ _ _ _ _ _ _
Total

1977
actual

1978
estimate

1979
estimate

1,043
419
75

1,141
461
75

1,181
489
79

2,275
1,744
921
20,054
8,119
108,671
2,418
6,682
50,296
32,559
3,584
2,196
15,344
1,149
6,674
49,638
7,944
47
3,841
17,942
7,855
-1,619
-1,925
2,266
310
6,912

2,905
2,577
921
23,415
2,508
114,390
2,841
11,272
57,878
41,086
4,714
2,547
10,197
1,478
8,362
56,888
5,079
384
4,374
18,948
8,041
488
-374
1,787
300
9,542

2,392
3,446
633
19,104
2,969
125,083
2,563
10,305
61,894
38,723
4,374
2,465
13,056
1,412
7,970
69,754
6,129
280
4,377
19,056
9,102
1,722
-465
1,830
343
7.416
1,150
3,000

—2,374

-2,000

-1,800

355,058

392,225

420,034

THE

BUDGET

FOR

FISCAL Y E A R

19 7 9

Balances of prior authority.—Table C-4 shows the balances of budget
authority carried forward in Federal funds at the end of each fiscal
year. To the extent that valid Government obligations have been
incurred and remain unpaid, amounts sufficient to pay them may be
carried over into the next year. Unobligated balances may be carried
forward in accordance with specific provisions of law, usually in order
to permit completion of major procurement or major construction,
programs that are fully funded, to provide funding for activities of
a continuing nature (such as research and development), for financing
loan programs, for standby emergency purposes (such as backup
financing for insurance of the Federal Deposit Insurance Corporation), or for reserves for losses and debt redemption.
PUBLIC ENTERPRISE

FUNDS

The public enterprise funds are a subgroup of Federal funds. They
carry on a cycle of business-type operations, primarily with the
public, on behalf of the Government. Some are incorporated enterprises; others are unincorporated. These funds are usually supplied
with capital from the general fund, and in a few cases they may borrow
from the public or from the Federal Financing Bank (FFB). These
funds are also supplied with capital through asset sales to the FFB.
Data on public enterprise funds are included on a net outlay basis in
tables C-2 through C-4. Gross outlays and applicable receipts are
shown in table C-5.
Of setting collections and outlays.—Collections of public enterprise
funds are estimated at $33.5 billion in 1979, and gross outlays are
planned to total $42.9 billion, resulting in net outlays of $9.4 billion.
TRUST

FUNDS

The trust funds are collected and used for specific purposes. They
include trust revolving funds, which, like the public enterprise funds,
carry on a cycle of business-type operations and are normally stated
net of collections by the funds.
Cash operations.—Trust fund receipts are estimated at $188.0 billion in 1979, with outlays planned at $174.1 billion, as shown in tableC-6. The transactions of the Federal old-age and survivors and disability insurance funds are far larger than any other trust fund.
In fiscal periods 1977-79, this group of funds has excesses of receipts
of the following amounts (in millions of dollars):
Total receipts, trust funds
Total outlays, trust funds
Excess of receipts or outlays (—), trust funds.

1977
actual
152.783
143.267

1978
estimate
168.490
158.190

1979
estimate
187.991
174.092

9.496

10.300

13.899

Budget receipts by funds.—Table C-7 presents information classifying the trust fund receipts by major fund, and by source for each such
fund.
Budget outlays by funds.—Corresponding information on trust fund
outlays, classifying the data for the larger funds, is found in table C-8.

Table C-4. F E D E R A L FUND B A L A N C E S O F B U D G E T A U T H O R I T Y
Department or other unit

Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
International security assistance
International development assistance
Other
Agriculture
Commerce
Defense—Military1
Defense—Civil
Energy2
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Civil Service Commission
Export-Import Bank
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board
Railroad Retirement Board
Other independent agencies
Allowances3
Total

Start 1977
Obligated

(in millions of dollars)

End 1977

Unobligated

Obligated

End 1978

Unobligated

Obligated

End 1979

Unobligated

Obligated

Unobligated

144
39
14

200
12

211
41
15

180
10

298
46
12

88
12

307
49
13

64
7

2,927
4,036
928
5,814
1,720
30,246
657
2,171
16,334
140,038
1,482
1,172
2,173
232
3,055
303
9,500
292
814
1,754
11
7,619

222
10,711
316
12,086
698
20,966
227
1,910
1,859
33,725
780
144
1,444
60
12,360
2,718
6,857
199
406
2,946
2

3,617
4,141
1,393
9,058
7,222
42,651
812
3,635
17,556
166,748
1,847
1,007
5,656
249
4,198
295
13,077
370
709
1,897
19
5,660

4,250
5,058
1,133
9,821
5,209
51,746
1,132
6,754
21,667
199,423
2,543
1,027
3,326
437
6,080
304
13,094
465
1,102
2,124
20
5,951

22
11,363
28
637
640
20,605
173
937
1.16316,774
289
92
3

16
12,766
25
1,536
392
20,883
53
2,139
1,187
9,125
201
84
3

5,694

7,346
165
2,097
152
72
2,925
5
1,097
3,000
9,781
5
7,629

4,511
6,644
967
11,182
3,793
61,640
1,162
6,973
26,247
228,618
2,824
960
2,853
456
6,901
7,303
13,544
439
1,210
2,207
24
7,269

348,714

87,101

3,000
7,492

3,910

11,625

4,244

120
10,844
293
6,904
778
19,883
284
1,712
3,533
33,426
800
275
5,708
86
10,388
2,621
1,673
374
383
3,452
5
1,619
3,000
9,417
5
9,856

237,412

132,964

296,341

127,630

13
*

-1

7,365
195
1,596
158
66
2,271
6

"3,666
10,246

5,729
1,350

~"5,"909

405,176

79,291

* $500 thousand or less.
1 Includes balances of allowances for civilian and military pay raises for Department of Defense.
2 This agency assumes the energy activities previously performed by the Energy Research and Development Administration, the Federal Energy Administration, and
several other agencies.
3 Includes balances of allowances for civilian agency pay raises and contingencies.

T H E BUDGET FOR FISCAL YEAR

19 7 9

Table C-5. P U B L I C E N T E R P R I S E FUND T R A N S A C T I O N S
(In millions of dollars)
Description

Funds appropriated to the President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporation
Farmers Home Administration
Federal Grain Inspection Service
Federal Crop Insurance Corporation
Commerce
Defense:
Military
Civil (Panama Canal Company)
Department of Energy1
Health, Education, and Welfare
Housing and Urban Development:
Government National Mortgage Association
Urban renewal fund
Low-rent public housing fund
Federal Housing Administration
Other
Interior:
Bureau of Reclamation
Other
Transportation
Treasury
Environmental Protection Agency
General Services Administration
Veterans Administration
Other independent agencies:
Emergency Loan Guarantee Board. _
Export-Import Bank
Farm Credit Administration
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolving fund
National Credit Union Administration.
Pennsylvania Avenue Development
Corporation
Small Business Administration
Tennessee Valley Authority
Total
Offsetting collections from the public._
Offsetting collections from other accounts

Applicable collections
1977
actual

1978
estimate

Gross outlays

1979
estimate

1977
actual

1978
estimate

1979
estimate

11
100

10
83

3
89

12
244

5
85

1
89

4,079
8, 727
8
92
49

7,104
10,513
33
103
52

7,372
11,658
34
110
60

7,579
9,376
15
171
29

14,631
11,244
37
213
30

11,899
11,282
34
124
34

3
287
380
107

3
312
367
138

5
328
437
191

4
286
381
257

7
312
421
919

12
330
477
936

2,777
344
270
1,143
292

2,353
152
608
1,267
409

2,949
32
608
1,300
486

1,687
1,194
238
1,635
488

2,395
752
608
1,674
1,191

3,284
382
608
1,521
1,560

58
15
44
2,061
1
2
1,093

65
17
42
956

58
19
43
1

161
23
61
2,060

213
31
177
955

190
28
194
1

2
1,018

2
1,102

1
940

2
1,046

2
1,103

5
2,113
9

2,098
10

2,100
11

2,453
8

2
2,294
10

2,504
11

575
1,600
47

577
49
55

636
52
64

151
110
27

216
50
26

170
52
28

77
602
2,046

"679
2,516

770
2,967

U 274
3,146

21
2,254
3,786

25
1,725
4,341

28,978

31,635

33,546

34,018

45,614

42,949

(25,966) (28,905) (30,794)
(3,012)

(2,731)

(2,752)

*$500 thousand or less.
1 This agency assumes the energy activities previously performed by the Energy Research and
Development Administration, the Federal Energy Administration, and several other agencies.

SPECIAL ANALYSIS E
Table C-6. O U T L A Y S A N D R E C E I P T S O F T R U S T

FUNDS

(In millions of dollars)
Outlays

Description

1977
actual

1979
estimate

1977
actual

94,729
4,094
764
10,999
11,800
25,571
6,824
1,094

104,458
4,280
819
12,283
11,600
29,410
7,507
1,143

81,169
3,597
950
16,692
14,986
22,757
7,302
1,384

89,723
3,973
1,010
17,873
15,400
27,482
7,730
1,496

101,530
3,902
1,000
19,457
16,800
31,703
8,105
1,327

6,827
8,500
673
-995

6,852
9,500
668
-1,507

6,655
9,369
703

6,855
8,700
939

6,855
9,200
1,034

156,069 170,881 187,015 165,565
—1,231 - 1 , 6 8 7 -1,381 -1,231
— 10, 386 - 9 , 7 6 6 -10,300 -10,386

181,181
-1,687
-9,766

200,913
-1,381
-10,300

Federal old-age, and survivors, and
disability insurance trust funds
85,068
Railroad employees retirement funds.
3,800
Veterans life insurance trust funds
769
Federal employees retirement funds. _
9,652
Unemployment trust fund
14,103
Health insurance trust funds
21,549
Highway trust funds
6,147
Airport and airway trust funds
853
State and local government fiscal
assistance trust fund
6,760
Foreign military sales trust fund
8,210
Other trust funds (nonrevolving)
609
Trust revolving funds
—1,450
Subtotal....
I ntrafund transactions
Proprietary receipts from the public _ _
Receipts from off-budget Federal entities
Total

Receipts

1978
estimate

1979
estimate

—1,186

-1,238

-1,242

-1,186

-1,238

-1,242

143,267

158,190

174,092

152,763

168,490

187,991

Table C-7. T R U S T FUND R E C E I P T S (in millions of dollars)
[Amounts under proposed legislation are shown separately!
Description

Federal old-age, survivors, and disability insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments)
Proposed legislation
Subtotal Federal old-age, survivors, and disability insurance trust funds
Railroad employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
Receipts from other trust funds
Other (mainly receipts of special Federal payments)
Subtotal railroad employees retirement funds
Veterans life insurance trust funds:
Interest on Federal securities
Other receipts
Subtotal, veterans life insurance trust funds

1977
actual

1978
estimate

1979
estimate

76,817
2,649
977
726

85,540
2, 377
1,065
741

97,630
1,973
1,151
761
15

81,169

89,723

101,530

1,908
230
1,208
251

1,858
200
1, 681
234

2,053
175
1, 377
297

3,597

3,973

3,902

464
486

503
507

531
469

950

1,010

1,000

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

Table C-7. TRUST FUND RECEIPT (in millions of dollars)-Continued
[Amounts under proposed legislation are shown separately!
Description

Federal employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement (including payment on prior year liabilities):
Entities included in budget
Entities excluded from budget
Other receipts
Supplemental now requested
Subtotal Federal employees retirement funds
Unemployment trust fund:
Social insurance taxes and contributions.
Interest on Federal securities
Advances from general fund
Proposed legislation
Subtotal unemployment trust fundHealth insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirementOther (mainly receipts of special Federal payments) _ _.
Subtotal health insurance trust funds.
Highway trust funds:
Excise taxes
Interest on Federal securities
Other receipts
Proposed legislation

1977
actual

1978
estimate

1979
estimate

2,968
2,856

3,300
3,254

3,320
3,826

9,668
1,186
14

9,638
1,238

11,070
1,242

16, 692

17,873

19,457

11,312
232
3,442

14,420
380
600

16,922
478

14,986

15,400

16,800

15,677
902
175
6,002

18,996
1,019
207
7,260

22,557
1,131
235
7,780

22,757

27,482

31,703

6,709
593

7,099
644

7,427
687

443

-600

"""-13

-9

7,302

7,730

8,105

1,191
194

1,287
209

1,412
249
—334

1,384

1,496

1,327

State and local government fiscal assistance trust fund: Deposits
for general revenue sharing

6,655

6,855

Foreign military sales trust fund

9,369

8,700

9,200

Other trust funds (nonrevolving)

703

939

1,034

165,565
-1,231
-10,386
-1,186

181,181
-1,687
-9,766
-1,238

200,913
-1,381
-10,300
-1,242

152,763

168,490

187,991

Subtotal, highway trust funds.
Airport and airway trust funds:
Excise taxes
Interest on Federal securities
Proposed legislation
Subtotal, airport and airway trust funds

Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities _
Total receipts
*$500 thousand or less.

SPECIAL ANALYSIS E

Balances of the trust funds.—The balances of the trust funds continue
to increase, as shown in the following end-of-year figures (in millions
of dollars):
TQ
actual

Open book balances
Investments in U.S. securities:
Public debt
Agency debt
Total...

1977
actual

1978
estimate

1979
estimate

7,000

8,178

8,499

8,470

134,697
1,340

143,140
1,215

153,319
1,015

167,247
1,015

143,037

152,533

162,833

176,732

A summary of the balances by fund is presented in table C-9. The
amounts include both open-book balances with Treasury and investments in U.S. securities. These balances include both obligated and
unobligated balances. The balances on a budget authority basis
exceed the cash balances because for a few accounts budget authority
is not the same as receipts; these differences are listed in the note
appended to the table.

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table C-8. T R U S T FUND O U T L A Y S (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description

Federal old-age, survivors, and disability insurance trust funds:
Benefit payments
,
Payments to other trust funds
Administrative expenses and other
Proposed legislation

1977
actual

19 78
estimate

1979
estimate

82,406
1,208
1,455

91,628
1,681
1,460
—40

102,124
1,377
1, 601
—644

85,068

94,729

104,458

3,768
31

4,060
34

4,246
34

3,800

4,094

4,280

769

764

819

9,360
274
18

10,630
345
24

11,851
409
24

9,652

10,999

12,283

12,519

10, 199

1,584

1, 601

9,843
400
1, 757
—400

14, 103

11,800

11,600

20, 770
778

24, 604
1,007
—40

28, 954
1,085
—629

21,549

25,571

29,410

6,147

6,824

7,501
6

6,147

6,824

7,507

853

1,094

1,143

State and local government fiscal assistance trust fund: Payments
for general revenue sharing

6, 760

6,827

6,852

Foreign military sales trust fund

8, 210

8,500

9,500

Other trust funds (nonrevolving)
Trust revolving funds

609
-1,450

673
-995

668
-1,507

156,069
—1,231
—10, 386
—1,186

170,881
—1, 687
—9, 766
—1,238

187,015
— 1, 381
—10, 300
— 1,242

143, 267

158,190

174, 092

Subtotal Federal old-age, survivors, and disability insurance
trust funds
Railroad employees retirement funds:
Benefit payments and claims
Administrative expenses and other
Subtotal railroad employees retirement funds
Veterans life insurance trust funds
Federal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Subtotal Federal employees retirement
Unemployment trust fund:
Withdrawals for benefit payments
Repayment of advances from general fund
Administrative expenses and other
Proposed legislation
Subtotal, unemployment trust fund
Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation
Subtotal, health insurance trust funds
Highway trust funds (mainly grants to States):
Current.
Proposed legislation
Subtotal, highway trust funds
Airport and airway trust funds

Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
Total outlays

SPECIAL ANALYSIS

Table C-9. T R U S T FUND B A L A N C E S (in millions of dollars)
As of Sept. 30

Description

TQ
actual

Federal old-age, survivors, and disability insurance
trust funds
.. .
_
Railroad retirement accounts. __
Veterans life insurance funds.
Federal employees retirement funds
Unemployment trust fund
Health insurance trust funds
Highway trust funds __
...
Airport and airway trust funds
...
_
State and local government fiscal assistance trust fund.
Foreign military sales trust fund
Other trust funds (nonrevolving)
Trust revolving funds
Total

1977
actual

1978
estimate

1979
estimate

43,528
3,470
7,844
42,868
5,545
12,186
9,009
2,736
1,862
3,407
788
9,793

39,629
3,222
8,026
49,908
6,474
13,394
10,164
3,268
1,757
4,566
882
11,243

34,622
3,101
8,272
56,782
10,074
15,304
11,069
3,670
1,785
4,766
1,149
12,238

31,694
2,723
8,453
63,956
15,274
17,597
11,667
3,854
1,788
4,466
1,515
13,744

143,037

152,533

162,833

176,732

Note.— The balances shown here cover the amounts on deposit with Treasury, and the U.S. securities held. In addition, certain funds have authority to obligate in advance of receiving moneys
and to borrow from the public. The reconciliation is as follows:

Balance available on an authorization basis.
Unfinanced contract authority:
Airport and airway trust fund
Highway trust funds
Foreign military sales trust fund
Other
Unappropriated receipts:
Available as needed, on an indefinite basis
Available
for
appropriation
by
Congress:
Soldiers' Home permanent fund
Airport and airway trust fund
Highway trust funds
Other
Retained as permanent endowment
Balance
basis

available

cash

TQ
171,172

1977
166,578

1978
178,179

1979
194,988

-542
- 19,354
-19,067
-1

-689
-16,002
-9,220
-1

-904
-17,035
-11,620

-929
- 17,526
-14,720

92
1,976
8,749
1
6

92
2,491
9,269
2
6

92
3,082
10.906
122
6

93
3,098
11,476
240
6

143,037

152,533

162,833

176,732

For 1979 the largest net investments are expected to be those of the
trust funds established by the Social Security Act, as amended, and
by the Federal employees retirement fund.
Trust revolving funds.—The activities of the trust revolving fund
subgroup are shown in table C-10. The largest of these funds are
those used by the Civil Service Commission to buy insurance for
Government employees.

260-700 O - 78 - 6

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table C-10. T R U S T R E V O L V I N G FUND T R A N S A C T I O N S (in millions of dollars)
Description

Civil Service Commission (employees' life
insurance and health benefits)
Federal Deposit Insurance Corporation
All other trust revolving funds
Total trust revolving funds1
Receipts from the public
Receipts from other accounts

Offsetting collections
1977
act.

1978
est.

1979
est.

Gross outlays
1977
act.

1978
est.

3,599
1,132
419

4,108
995
387

4,580
1,045
404

3,134
280
285

3,547
616
332

4,052
100
371

5,150

5,490

6,029

3,699

4,495

4,523

(3,004) (3,085) (3,334)
(2,146) (2,405) (2,696)

l Excludes right-of-way revolving fund which is a part of the highway trust fund.

1979
est.

SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS

This analysis divides budget outlays between those of an investment
or "capital" nature, and those devoted to operating or "current" purposes. Investment-type outlays are those that yield benefits over
several years, either from the acquisition of physical or financial
assets, or by other means. They include the purchase of physical
assets, the promotion of education and research (human capital),
and financial investments. Current outlays provide benefits primarily
in the year they are made, such as retirement pensions or welfare
payments; payments to agriculture, business, labor, or homeowners
that are not for the purchase of physical assets; payments for the
repair, maintenance, and operation of physical assets; regulatory
activities; and the administrative expenses of Federal departments
and agencies. The allowance for contingencies, proprietary receipts,
and a few other items are not classified in either of these categories.
The Federal Government has never produced a capital budget, i.e.,
one in which capital or investment types of programs would be
financed separately from current expenditures. One major reason is
that a capital budget would be misleading as a measure of the Government's effect on the demand for economic resources. Another reason
is that such a budget would tend to favor programs with intensive
expenditures for physical assets relative to other programs for which
future benefits could not be capitalized, such as education or research.
Likewise, physical assets would be favored relative to current operations in any given program, since deficit financing for capital facilities
would be easier to justify. Even if it were desirable, a capital budget
would pose formidable accounting problems involving the measurement of depreciation on Government property, especially weapons
systems.
There are inevitable classification difficulties even in preparing the
more modest analysis described here. Grants to State and local governments, as well as to private individuals, are classified with regard to
the recipient's expected use. However some grants, such as community development grants and general revenue sharing, can be used
for both current and investment purposes. Outlays for these programs
are classified in the category where most of the outlays are anticipated
to occur. Another difficulty is that current expenses for special assistance to a particular sector, such as labor, business, or homeowners,
can be misleading since they are incomplete indicators of Federal aid.
For example, the category "aids to business" reflects current benefits
such as reduced or nonexistent tolls for the use of federally operated
waterways. It does not include subsidies for the production of private
merchant ships, which are classified as additions to private assets.

THE BUDGET FOR FISCAL YEAR

19 79

A third difficulty is that several alternative classifications are possible, once the basic decision is made on whether the outlay is of a
current or investment nature. For example, aid to education in the
form of grants to construct education facilities could logically be
placed in either physical assets or education. Since complete discussions and tables of the total amount of education outlays are available
elsewhere in the budget, which is not true for Federal outlays for
physical assets, outlays for physical assets are placed in that category.
This principle is also observed in the treatment of the categories
"research and development" and "other investment." It is applied in
addition to all outlays for financial investments, so that a complete
presentation of all Federal outlays for financial and physical assets is
available.
Table D - l is a summary table; details are shown in table D-2, at the
end of the text. In 1979, investment-type outlays make up approximately one-third of total defense outlays, but only about one-fifth of
total nondefense (or civil) outlays. The latter includes income transfers
and net interest, for which the counterparts in the defense function
are relatively small. (In this analysis defense refers to the national
defense function as defined in the budget; all other outlays are classified as civil.) The predominant type of defense investment is the
procurement of major equipment; physical assets account for almost
half of civil investment, and education and training for another
one-third.
Repair, maintenance, and operation account for about half of
defense current outlays with almost all of the remainder devoted to
military personnel, both active and retired. Retirement and other
social insurance benefits make up over half of civil current outlays.
The next largest category consists of current expenses for special
assistance to such areas as agriculture, business, veterans, and health.
The remainder of the text discusses in greater detail the components
and rationale for classifying the various types of budget outlays. For
each type of outlay classified in the investment category the means
is shown whereby that type yields benefits in the future, either in the
form of physical or financial assets or other less tangible benefits. The
remaining outlays, by definition, are classified as current.

SPECIAL ANALYSIS

Table D-1. S U M M A R Y O F I N V E S T M E N T , O P E R A T I N G , A N D O T H E R
B U D G E T O U T L A Y S (in billions of dollars)
1977
actual

National defense:
Investment-type outlays:
Public works
Major equipment
Research, development, testing, and evaluation
Other (mainly atomic energy defense activities) _ _

1978

estimate

1979

estimate

2,271
18,276
10,875
930

2,351
21,678
11,901
1,066

2,278
24,336
13,097
1,200

32,352

36,997

40,911

_
__
_

31,640
25,304
8,216
312

34,696
26,391
9,211
726

37,807
26,415
10,122
3,104

___ _

65,472
-322

71,024
-395

77,448
-580

97,501

107,626

117,779

3,279
23,938
19,650
10,569
317

8,604
32,665
24,486
11,722
562

5,002
33,175
27,285
12,605
589

57,753

78,039

78,655

Current outlays:
Expenses for aids and special services to:
Agriculture, business, labor, homeowners and tenants, veterans, foreign nations, and other _
_
_ _ _ _
Health and welfare
__
___
_
_ __
Retirement and social insurance benefits. __
_ _
__
Miscellaneous operations and administration
_ _
Net interest
_
____
_
___

34,767
39,546
131,705
21,065
29,960

41,719
42,793
143,524
24,171
35,245

46,491
43,292
158,776
23,566
39,927

Subtotal, current outlays. _
_ _ _
______
Unclassified., _ __
________
______
__ __

257,043
-10,396

287,452
-10,883

312,052
-8,312

304,400

354,608

382,395

401,902

462,234

500,174

Subtotal, investment-type outlays
Current outlays:
Repair, maintenance, and operation
Military personnel__ _
Retired military personnel
Other

Subtotal, current outlays._
Proprietary receipts from the public (—)
Total, national defense. _ _ _ _ _ _ _ _ _ _ _ _
Civil:
Investment-type outlays:
Net loans and financial investments
Physical assets
___
Education and training..
Research and development
_
Other

_
_

Subtotal, in vestment-type outlays

Total, civil
Total, outlays

_ __
__
___

_ __

_____

_ __

_________
____

___

Loans and financial investments.—A loan creates afinancialasset equal to the outlay. For domestic loans within the United States,
the assets held by the Government are matched with a liability held
by the private sector. However, most Federal loans finance an increase
in either physical or human capital. Loans to foreign borrowers are an
increase in financial assets held by the United States. Most foreign
loans are for economic development programs or the promotion of
U.S. exports. Net loan outlays are expected to total $4.1 billion in 1979.
(A detailed discussion of lending is contained in Special Analysis F,
"Federal Credit Programs.")

THE BUDGET FOR FISCAL YEAR

19 79

Investments in international financial institutions are designed to
enhance economic and social development in many parts of the world,
which is expected, in turn, to be beneficial to the United States both in
the present and future. Outlays for investments in international institutions in 1979 are expected to be $0.9 billion.
Physical assets.—Investments in major equipment, major commodity inventories, buildings, and land are of a long-term nature. Thus,
purchases of these assets are treated as investment-type outlays regardless of whether the asset is owned by the Federal Government, or
by State, local, or private entities. A large portion of Federal outlays
for civil physical assets is, in fact, in the form of grants-in-aid to State
and local governments. Total outlays for physical assets are estimated
at $60.9 billion; of this amount $27.8 billion are in the national defense function and $21.3 billion are in the form of grants to State and
local governments. Most outlays in the national defense function for
physical assets are for the procurement of military equipment. Highway and pollution control construction grants are the largest items
in civil outlays for physical assets, accounting for $7.4 billion and
$4.7 billion respectively, or 36% of total civil outlays for physical
assets.
Education and training.—Education and training outlays add to
the stock of human capital. As with physical capital, the benefits
usually last over a considerable period of time. Current outlays for
education and training (excluding buildings and major equipment) are
estimated at $27.3 billion in 1979. Employment and training programs
of the Department of Labor amount to $11.3 billion or 41% of education and training outlays. Outlays for higher and continuing education
(including student assistance), $3.1 billion, elementary and secondary
education, $3.0 billion, and veterans, $2.9 billion, account for another
33%.
Research and development.—Outlays for research and development are intended to provide long-term benefits. Not all outlays lead
to actual successes, but learning that a particular line of inquiry is not
fruitful is also an addition to knowledge. Total outlays for the conduct
of research and development are estimated at $25.7 billion in 1979.
of which $13.1 billion is in the national defense function. The major
civil outlays are by the Department of Health, Education, and Welfare
(largely for biomedical research), $2.3 billion, the Department of
Energy, $3.1 billion, and the National Aeronautics and Space Administration, $4.1 billion. These three agencies account for 76% of total
civil research and development outlays.
Other investment.—This category consists of outlays for engineering and natural resource surveys, which benefit both the present
and future. Outlays of $0.6 billion are proposed for 1979.

SPECIAL ANALYSIS E

Current outlays.—Outlays for current operations are broken into
several major categories. Current outlays for aids and special services
consist of assistance to agriculture, business, labor, homeowners and
tenants, veterans, and foreign nations. This category also encompasses health, welfare, and miscellaneous aids and services. Total
outlays are estimated at $89.9 billion in 1979.
Outlays for health and welfare benefits and services, the largest
category of current outlays for aids and special services, are estimated
at $43.3 billion. Major programs included in this category are medicaid
($12.0 billion), assistance payments ($6.8 billion), supplemental
security income ($5.4 billion), food stamps ($5.7 billion), and grants
to States for social and child welfare services ($4.2 billion). The next
largest current expense for special assistance is aid to veterans, with
outlays estimated at $16.3 billion; 61% of veterans assistance is for
compensation and pensions; another 30% is for medical care.
Retirement and social insurance benefits are estimated at $158.8
billion in 1979. Proposed retirement, survivors, and disability payments total $118.5 billion. Medicare payments are estimated at $29.0
billion and unemployment benefits at $10.8 billion.
Other current outlays are largely for current operations of the
Federal Government. They include such activities as the repair,
maintenance, and operation of physical assets, tax collection, regulatory activities, military personnel, and other administrative expenses.
Total other current outlays, except interest, are estimated at $100.9
billion in 1979, of which $77.3 billion are in the national defense
function. Most of the outlays in the defense function are for operation
and maintenance ($37.8 billion), military personnel ($26.4 billion),
and retired military personnel ($10.1 billion). Proposed civil outlays
for the category total $23.6 billion in 1979. The largest outlays are
for general revenue sharing ($6.9 billion) and for the operations of the
Internal Revenue Service ($2.0 billion).
Net interest payments are estimated at $39.9 billion in 1979. These
outlays include $55.7 billion of interest payments offset by $15.8
billion of interest collections.
Unclassified.—Those outlays that have not been placed in either
the investment or the current category consist of the allowance for
contingencies ($1.7 billion), the allowance for future pay increases of
Government workers ($3.4 billion), the employer share of employee
retirement ( — $5.2 billion), and certain proprietary receipts from the
public (—$6.5 billion).

THE

BUDGET FOR FISCAL YEAR

19 79

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)
Description

•»»
actual

estimate

National defense investment-type outlays
Public works—sites and direct construction:
Military construction
Family housing
Atomic energy defense activities
Major equipment:
Military procurement
Atomic energy defense activities
Other physical assets—acquisition and improvement: Atomic
energy defense activities
Research and development, testing and evaluation:
Defense—Military
....
Atomic energy defense activities
Other investments
Total national defense activities investment-type outlays. _ _

1,767
286
218

1,781
246
324

1,837
101
340

18,178
98

21,552
126

24,208
128

862

1,000

1,142

10,210
664
69

11,161
741
66

12,319
777
59

32,352

36,997

40,911

30,506
1,040
93

33,417
1,163
116

36,366
1,292
149

25,304
8,216
312

26,391
9,211
726

26,415
10,122
816

National defense current outlays
Repair, maintenance, and operation of physical assets:
Operation and maintenance
Family housing
....
Atomic energy defense activities
Other operation and administration:
Military personnel
Retired military personnel
All other national defense current outlays
Defense—Military: Allowances:
Civilian and military pay raises
Other legislation
Total national defense current outlays
Proprietary receipts from the public (—)
Total national defense budget outlays

2,218
70
65,472

71,024

77,448

—322

—395

—580

97,501

107,626

117,779

2,626

3,036

941

116

—51

—1,264

361

620

497

394

809

—1,452
—1,529
147
723
—54

—293
31
1,260
599
310

—147
6
660
395
287

1,010

5,906

2,184

Civil functions investment-type outlays
ADDITIONS T O FEDERAL

ASSETS

Loans:
To domestic private borrowers:
Department of Agriculture:
Commodity Credit Corporation price support and related
programs
Farmers Home Administration (largely rural housing
insurance)
Department of Health, Education, and Welfare (largely
student assistance)
Department of Housing and Urban Development:
Housing programs (largely housing for the elderly or
handicapped)
Government National Mortgage Association (largely
special assistance functions)
Federal Home Loan Bank Board
Small Business Administration (largely disaster loans)
U.S. Railway Association purchase of ConRail securities
All other loan programs
Total to domestic private borrowers

SPECIAL ANALYSIS

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions investment-type outlays—Continued
ADDITIONS T O FEDERAL ASSETS—Continued

To State and local governments (largely District of Columbia) __

179

To foreign borrowers:
International security assistance
Expenses, Public Law 480, foreign assistance programs
Export-Import Bank of the United States
Other agencies (largely international development assistance) _ _

319
587
446
12

836
335
-112

830
553
581
-125

Total to foreign borrowers

1,364

1,681

1,839

Total loans

2,405

7,766

4,093

875

838

909

188
1,442
547
140

339
1,500
1,044
252

386
1,467
1,088
250

603

553
116
141
69

460
152
154
94

274
105
234
1,204

201

285
132
314
1,498
303

252
154
396
1,434
232

5,159

6,546

6,519

106

374

113

378

1,192
1,790
5

322
3,250
1

483

3,361

3,686

139
74
39

194
133
88

187
198
88

252

415

473

Other financial investments: International financial institutions.__
Public works—sites and direct construction:
Department of Agriculture (largely Forest Service)
Corps of Engineers
Deparment of Energy (largely energy supply)
Department of Health, Education, and Welfare
Department of the Interior:
Bureau of Reclamation
National Park Service
Bureau of Indian Affairs
Other Interior
Department of Transportation (largely Federal Aviation
Agency)
National Aeronautics and Space Administration
Veterans Administration
Tennessee Valley Authority
Other agencies
Total public works—sites and direct construction
Major commodity inventories:
Petroleum reserves
Department of Agriculture: Commodity Credit Corporation:
Price support and related programs
Department of Energy (largely emergency energy preparedness).
Other agencies
Total major commodity inventories
Major equipment:
Department of Energy (largely energy supply)
Department of Transportation (largely Coast Guard)
Other agencies
Total major equipment

125
30

622

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions investment-type outlays—Continued
ADDITIONS T O FEDERAL ASSETS—Continued

Other physical assets—acquisition and improvement:
Department of Agriculture (largely Forest Service)
Department of Housing and Urban Development: Housing
programs
Department of the Interior:
Bureau of Outdor Recreation
Other Interior
Other agencies (largely energy supply)
Total other physical assets—acquisition and improvement.
Total additions to Federal assets

146

193

146

289

405

201

181
54
70

276
62
36

266
81
-432

740

972

262

9,912

19,898

15,941

213
168

254
116

264
188

259

424

377

805

2,582

2,209

3,146
281

3,391
348

3,301
457

335

540

565

5,884
1,049
3,530
747

6,656
1,198
4,135
461

7,356
1,362
4,660
554

16,417

20,105

21,293

565
219
104

901
185
180

541
168
233

1,266

942

21,372

22,236

ADDITIONS T O STATE, LOCAL, AND PRIVATE ASSETS

State and local assets:
Appalachian regional development programs
Disaster relief
Department of Agriculture (largely rural development and conservation operations)
Department of Commerce: (largely local public works program)
_
Department of Housing and Urban Development (largely community development grants)
Department of the Interior (largely recreational resources)
Department of Transportation:
Federal Aviation Administration grants-in-aid for airports
Federal Highway Administration (largely Federal-aid highways)
Urban Mass Transportation Administration
Environmental Protection Agency construction grants
Other agencies (largely energy conservation)
Total State and local assets
Private assets:
Department of Agriculture (largely conservation and land
management)
Department of Commerce ship construction
Other agencies (largely energy conservation)
Total private assets
Total additions to State, local, and private assets

17,305

SPECIAL ANALYSIS

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions investment-type outlays—Continued
OTHER DEVELOPMENTAL EXPENDITURES

Education and training:
Department of Agriculture (largely Extension Service)
Department of Health, Education, and Welfare:
Health Resources Administration
Office of Education:
Elementary and secondary education
School assistance in federally affected areas
Education for the handicapped
Occupational, vocational, and adult education
Student assistance
Higher and continuing education
Other Office of Education
Human Development Services
Other Health, Education, and Welfare
Department of Labor:
Employment and training assistance
Temporary employment assistance
Other Labor Department
Veterans Administration (largely readjustment benefits)
Other agencies

288

340

319

306

282

2, 352
750
249
651
2,640
603
488
655

2,574
791
367
716
2,235
302
1,218
714
623

3,031
756
562
784
2,716
336
1,324
863
679

3,230
2,340
143
3,957
998

4,802
4,765
236
3,401
1,096

5, 356
5,956
316
2,928
1,077

19,650

24,486

27,285

521
217
2,269

609
250
2,793

575
276
3,085

1,314
559
286
315
255
3,842
668
323

1,585
572
355
337
285
3,851
724
361

1,720
629
375
350
298
4,116
752
428

10,569

11,722

12,605

317

562

589

Total other developmental expenditures

30,536

36,770

40,478

Total civil functions investment-type outlays

57, 753

78,039

78,655

Total education and training
Research and development:
Department of Agriculture
Department of Commerce
Department of Energy (largely energy supply)
Department of Health, Education, and Welfare:
National Institutes of Health
Other Health, Education, and Welfare
Department of the Interior
Department of Transportation
Environmental Protection Agency
National Aeronautics and Space Administration
National Science Foundation
Other research and development
Total research and development
Engineering and natural resources surveys (largely Geological
Survey)

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions current outlays
C U R R E N T EXPENSES F O R AIDS AND SPECIAL
SERVICES

Agriculture:
Commodity Credit Corporation
Farmers Home Administration
Other Agriculture
Other agencies
Total agriculture
Business:
Department of Commerce:
Maritime Administration
Other Commerce.
Corps of Engineers
Department of Transportation:
Coast Guard..
--: — v
Federal Aviation Administration
Federal Railroad Administration
Small Business Administration
Other agencies
Total business
Labor:
Department of Labor:
Employment and Training Administration (largely unemployment trust fund)
Other Labor
......
Other agencies (largely human development work incentives) _.
Total labor
Homeowners and tenants:
Department of Agriculture: Farmers Home Administration
Department of Housing and Urban Development:
Subsidized housing programs
Payments for operation of low-income-housing projects
Government National Mortgage Association
Other Housing and Urban Development (largely insurance) __
Federal Home Loan Bank Board
Other agencies „
Total homeowners and tenants
Veterans:
Compensation and pensions
Medical care.
General operating expenses
National service life insurance and U.S. Government life
insurance
Other benefits to veterans
Total veterans

441
443
468
10

3,227
520
572
14

3,291
598
492
16

1,362

4,333

4,397

337
366
402

313
405
452

317
431
440

620
1,613
847
574
120

728
1, 756
954
505
138

724
1,858
1,169
456
144

4,879

5,251

5,539

1,693
370
490

1,694
476
438

1,812
594
389

2,553

2,608

2,795

267

472

523

2,422
506
370
213
-370
1

3,022
612
332
101
-401
11

3,556
686
479
179
-476
14

3,409

4,149

4,961

9,000
4,065
510

9,564
4,652
582

9,981
4,869
621

767
-3

766
18

820
38

14,339

15,582

16,329

SPECIAL ANALYSIS

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions current outlays—Continued
C U R R E N T EXPENSES F O R AIDS A N D SPECIAL
SERVICES—Continued

International aids:
International security assistance
International development assistance
Expenses, Public Law 480 (Food for Peace)
Other international aids
Total international aids
Health and welfare aids:
Department of Agriculture:
Food stamp program
*
Child nutrition programs
Special supplemental food program (WIC)
Other Agriculture
_
Department of Health, Education, and Welfare:
Health services
National Institutes of Health
,
Alcohol, drug abuse, and mental health
Health resources
Grants to States for medicaid
Public assistance
Special benefits for disabled coal miners
Supplemental security income program
Assistance payments program
Human development services, grants to States for social
services and child welfare services
Other Health, Education, and Welfare
Other agencies
Total health and welfare aids
Other aids and special services:
Department of Commerce
Department of Health, Education, and Welfare:
Payment for vocational rehabilitation of social security
beneficiaries
Other Health, Education, and Welfare
Department of the Interior (largely Bureau of Indian Affairs) _
Department of Transportation (largely urban mass transportation)
Department of the Treasury fuel efficiency incentive and
crude oil tax programs
ACTION
Community Services Administration
Postal Service
Other agencies
Total other aids and special services
Total current expenses for aids and special services

189
886
583
97

1,337
1,017
301
68

1,700
1,192
253
38

1,755

2,723

3,183

5,399
2,635
245
304

5,655
2,639
360
611

5, 748
2,608
526
422

1,338
772
515
468

1,525
811
604
314
10,846

1,653
846
645
248
11,952

968
5,874
6,711

988
5,433
6,846

1,358
1,372
314

4,021
1,466
388

4,218
975
184

39,546

42,793

43,292

187

235

415

970
540
565

1,099
571
571

1,062
657
641

919

1,138

1,325

109
526
2,267
387

317
117
610
1,787
629

1,833
128
546
1,830
850

6,470

7,074

9,287

74,313

84,512

89, 783

18,634
942
5,250

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions current outlays—Continued
RETIREMENT AND SOCIAL INSURANCE

BENEFITS

General retirement benefits:
Health care
financing
Retirement and survivors benefit payments
Disability benefit payments
Railroad retirement benefit payments

20,770
71,271
11,135
3,769

24,604
78,898
12,600
4,058

28,954
87,137
14,343
4,245

Total general retirement benefits

106,944

120,160

134,679

833
896
12,523

1,200

950

10,200

9,844

14,252

11,400

10,794

Retirement and social insurance benefits for Federal employees:
Government payment for annuitants, employees health benefits.
Civil service retirement and disability
Other benefits

437
9, 550
521

507
10,866
590

606
12, 133
564

Total retirement and social insurance benefits for Federal
employees
-

10,508

11,963

13,303

131,705

143,524

158,776

Unemployment benefits:
Federal unemployment benefits and allowances
Advances to the unemployment trust fund and other funds
Unemployment trust fund
Total unemployment benefits

Total retirement and social insurance benefits
OTHER SERVICES AND CURRENT
EXPENSES

OPERATING

Repair, maintenance, and operation of physical assets (excluding
special services):
Department of Agriculture: Forest Service
Corps of Engineers
Department of Energy (largely energy supply)
Department of the Interior (largely Bureau of Land Management and National Park Service)
Tennessee Valley Authority
.
Other repair, maintenance and operation

622
250
365

795
307
467

706
342
524

720
-268
192

792
-459
198

829
-280
228

Total repair, maintenance, and operation of physical assets.

1,881

2,100

2, 349

389

456

487

446

544

545

218

257

268

Regulation and control:
The Judiciary
Department of Agriculture (largely Animal and Plant Health
Inspection Service)
Department of Health, Education, and Welfare (largely Food
and Drug Administration)

SPECIAL ANALYSIS

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued

Regulation and control—Continued
Department of Justice:
Federal Bureau of Investigation
Law Enforcement Assistance Administration
Other Justice Department (largely legal activities and Federal Prison System).. _
_
Department of Transportation (largely Coast Guard)
Department of the Treasury (largely Customs Service)
Environmental protection (largely abatement and control)
Federal Deposit Insurance Corporation
Nuclear Regulatory Commission
Other regulatory agencies

519
664

548
619

554
540

947
355
553
434
—852
231
565

1,092
379
637
489
—379
275
656

1,183
395
668
542
—945
307
688

4,469

5,573

5,232

554
373
324
52

610
417
356
66

656
422
385
70

Total international activities

1,303

1,449

1,533

Federal financial activities:
Department of the Treasury:
Internal Revenue Service
Other Treasury Department
Other Federal financial activities

1,737
429
-141

1,926
496
79

2,008
559
111

2,025

2,501

2,678

716

708

810

347

431

483

160
123
—365
772

207
337
—441
867

148
344
—407
1,001

1,753

2,109

2,379

Total regulation and control
Other operation and administration:
International activities:
Department of State:
Administration of foreign affairs
International organizations and other.
International Communication Agency.
Other international activities

Total Federal financial activities
Other direct Federal programs:
Legislative branch
Department of Commerce (largely National Oceanic and Atmospheric Administration)
Department of the Treasury (largely claims, judgments, and
relief acts)
General Services Administration
Civil Service Commission (largely employees' life insurance) _ _
Other programs
Total other direct Federal programs

THE

BUDGET FOR FISCAL YEAR

19 79

Table D-2. I N V E S T M E N T , O P E R A T I N G , A N D O T H E R B U D G E T

OUTLAYS

(In millions of dollars)—Continued
Description

1977
actual

1978
estimate

1979
estimate

Civil functions current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued

Shared revenues and grants-in-aid:
Department of the Interior
Department of the Treasury:
Antirecession financial assistance
General revenue sharing
Claims, judgments, and relief acts
Other Treasury Department
Federal payment to District of Columbia
Other shared revenues

345

501

528

1,699
6, 758

1,050
6,852

395
276
162

1,573
6,827
543
425
276
294

9, 635

10,439

9, 395

14,716

16, 499

15,985

41,900

48,600

55,400

326

331

336

42,225

48,931

55,736

—11,738

— 12,974

— 15,005

—527

—712

—804

Total net interest

29,960

35,245

39,927

Total other services and current operating expenses

51,026

59, 416

63,493

257,043

287,452

312,052

Total shared revenues and grants-in-aid
Total other operations and administration
Interest:
On the public debt
Other interest
Total interest
Intragovernmental interest transactions (—)
Proprietary receipts from the public (—)

Total civil functions current outlays

447
317
201

OTHER

Allowances for:
Civilian agency pay raises
Contingencies
Employer share, employee retirement (—):
Interfund transactions ( - )
Receipts from off-budget Federal entities (—)
All other proprietary receipts from the public (—)
Total civil functions budget outlays
Total budget outlays

1,100
1,700
-3,362
—1,186
—5,848
304,400

-3.786
—1,238
—5,859
354,608

-3,915
— 1,242
—5, 955
382,395

401,902

462,234

500,174

SPECIAL ANALYSIS E 97
BORROWING, DEBT, AND

INVESTMENT

The major fiscal operations of the Federal Government include
not only taxation and expenditure but also:
• the borrowing of cash to meet current outlays not covered by
receipts and to refinance maturing debt;
• the investment of balances that trust funds and other Government accounts do not currently need for outlays; and
• the provision of assistance, including guarantees, for certain
private borrowing.
This analysis summarizes current developments in Federal borrowing. It also discusses the size and growth of the Federal debt and the
interest on the Federal debt, agency borrowing, agency investment
in U.S. Government securities, the statutory debt limit, borrowing
by Government-sponsored enterprises, and Government-guaranteed
borrowing. The analysis concludes with a brief discussion of the
trend in Federal and federally assisted borrowing and the relationship
of this trend to the total funds raised by the nonfinancial sector of
the economy. Excluded from this analysis are other types of Federal
liabilities, which include accounts payable, obligations for undelivered
orders, long-term contracts, insurance commitments, and the obligation for such future payments as social security, employee retirement,
and veterans compensation.1
Special Analysis F examines the related subject of Federal credit
programs, which include direct loans, guaranteed loans, and loans
by Government-sponsored enterprises. The factors discussed in
both Special Analyses E and F are significant in appraising the impact
on financial markets of the programs contained in the 1979 Federal
budget.
B O R R O W I N G AND R E P A Y I N G

DEBT

The Federal Government borrows from two principal sources.
First, it sells debt to the public, primarily in order to finance Federal
deficits. Second, it sells debt to the Government agencies that accumulate surpluses in separate funds, primarily trust funds, required
by law to be invested in Federal securities. Most Federal debt has been
issued by the Treasury and is called "public debt," but a small portion has been issued by other Government agencies and is called
"agency debt." 2
Borrowing from the public includes borrowing from the Federal
Reserve System as well as borrowing from commercial banks, foreign
central banks, other financial institutions and businesses, and individuals. "Borrowing from the Federal' Reserve System" does not
ordinarily mean that the Treasury sells debt securities directly to the
1 Information on many of these liabilities is contained in Department of the Treasury, Bureau
of Government Financial Operations, "Statement of Liabilities and Other Financial Commitments
of the United States Government."
2 The term "agency debt" is defined more narrowly in the budget than in the securities market,
where it may include not only the debt of the Government agencies listed in table E - 5 but also the
debt of the Government-sponsored enterprises listed in table E - 9 and certain Governmentguaranteed securities.

260-700 O - 78 - 7

THE BUDGET FOR FISCAL YEAR

19 79

Federal Reserve. This occurs only in exceptional circumstances and
then in amounts limited by statute. The Federal Reserve System
instead buys debt securities in the open market.
Borrowing from the public—whether by the Treasury or by an
agency—has a significant impact on financial markets and the rest of
the economy, and it is consequently an important concern of Federal
fiscal policy. For most purposes borrowing from the Federal Reserve
System should be distinguished from borrowing from the rest of the
public. Federal Reserve purchases of debt are undertaken to carry out
monetary policy, not to earn income, and affect the economy by
expanding bank reserves and the money stock. They thus have a
markedly different motivation and effect on financial markets than do
purchases by other sectors of the public. The debt held outside the
Federal Reserve System enters into investment portfolios of businesses
and individuals and by this means affects interest rates, other financial
conditions, and the size and composition of private assets. Almost all
interest received by the Federal Reserve System is returned to the
Treasury as receipts, called deposits of earnings, so the net cost to
the Government of Federal Reserve holdings of debt is very small.
The estimates in this analysis for the current and future years do not
divide the debt held by the public between the Federal Reserve
System and the rest of the public, despite the significance of this
division, because the Federal Reserve's open market operations depend on future economic developments and on policy decisions not
yet made.
Table E - l summarizes Federal borrowing from 1976 through 1979.
In 1977 the total Federal borrowing (net of the refunding of securities)—that is, the rise in gross Federal debt—was $62.8 billion. The
borrowing from Government agencies was $9.2 billion, and the borrowing from the public was $53.5 billion. Of the increase in the debt held
by the public, $8.3 billion was purchased by the Federal Reserve
System and $45.2 billion by the rest of the public.
Borrowing from the public has fluctuated sharply. It rose steadily
from $3.0 billion in 1974 to $82.9 billion in 1976 and then declined to
$53.5 billion in 1977. The exceptionally large borrowing in 1975 and
1976 occurred primarily because the recession automatically reduced
tax receipts and raised unemployment benefits and because tax reductions and some expenditure programs were enacted to stimulate the
economy. The decline in borrowing in 1977 resulted from economic
recovery.
Borrowing from the public is estimated to rise to $66.0 billion in
1978 and $73.0 billion in 1979. This increased borrowing over the
1977 amount is due in large measure to further effects of the 1977
stimulus program and, in 1979, to the $25 billion of tax reductions
and reforms (excluding the energy program) proposed by the administration for that year. By the end of 1979 gross Federal debt is expected
to be $873.7 billion, with 79% held by the public (including the Federal
Reserve System) and the remainder by the agencies. Almost all of the
gross Federal debt will have been issued by the Treasury.

SPECIAL ANALYSIS E

Table E - l . F E D E R A L B O R R O W I N G (in millions of dollars)
Borrowing or repayment ( —) of debt

Description

Gross Federal debt:
Treasury debt _ _
Agency debt 1

________

1976
actual

1977
actual

87,244
64,139
19 - 1 , 3 8 0

_ __ __

Gross Federal debt 1

1978
estimate

1979
estimate

Debt outstanding
end 1979
estimate

77,965
-1,520

89,595
-1,509

866,400
7,268

87,263

62,759

76,445

88,086

873,668

4,328
13

9,385
-142

10,776
-331

15,116
-30

181,382
1,444

Debt held by Government agencies

4,341

9,243

10,445

15,086

182,826

Total, debt held by the public _ _

82,922

53,516

66,000

73,000

690,843

9,721
73,201

8,302
45,214

NA
NA

Less debt held by Government agencies:
Treasury debt
Agency debt

Composed of:
Debt held by the Federal Reserve System.
Debt held by others

N A = N o t available.
1 Agency borrowing, gross Federal borrowing, and borrowing from the public in 1976 exclude the
retroactive reclassification as of July 1, 1977, of $471 million of Export-Import Bank certificates of
beneficial interest from loan assets to debt.

Until a few years ago the Federal debt was held almost entirely by
individuals and institutions in the United States. After World War II
the debt held in foreign balances and international accounts tended to
grow gradually and by the end of 1969 amounted to $10 billion.3
However, due to international monetary developments, the foreign
and international holdings began to grow much faster in 1970, and
by the end of 1977 they had risen to $95 billion. Most of the Treasury
debt held abroad is owned by foreign central banks. The annual
borrowing from abroad since 1971 is shown below in comparison with
the annual borrowing from the domestic public, exclusive of the
Federal Reserve System (in billions of dollars):
1972

1973

1974

1975

1976

1977

Foreign and international
Domestic (excluding Federal Reserve
System)

1970

3.8

1971

17.8

17.3

10.3

-2.6

9.2

3.8

20.5

-3.6

-6.2

-3.8

5.3

37.3

69.5

24.7

Total borrowing from the public
(excluding Federal Reserve System)

11.6

13.5

15.5

-2.5

46.5

73.2

45.2

Whereas before 1970 the total borrowing from the public was nearly
the same as borrowing from the domestic public, this table shows
that since that time they have sometimes been quite different. During
1970-73, $49 billion was borrowed from abroad while $8 billion of
debt held by the domestic public (exclusive of the Federal Reserve
8 The estimates of Federal debt held in foreign balances and international accounts do not include
agency debt, the holdings of which are believed to be small.

100

THE

BUDGET

FOR FISCAL Y E A R

19 7 9

System) was repaid. In the next 3 years borrowing from abroad was
relatively small, but in 1977, despite the large Federal deficit, borrowing from abroad was almost half of the total borrowing from the
public (exclusive of the Federal Reserve System).
B O R R O W I N G AND G O V E R N M E N T

DEFICITS

Table E-2 shows how borrowing from the public is related to the
Federal deficit. Until a few years ago the budget deficit comprised
practically the entire deficit of the Federal Government, but the
deficit of the off-budget Federal entities has now become significant.
These entities, such as the Federal Financing Bank and the Postal
Service, are parts of the Federal Government that have been excluded
from the budget under provisions of law.
The Government deficit is financed either by borrowing from the
public or by several other means. These other means of financing the
deficit may be either positive, in which case they finance part of
the deficit; or negative, in which case they, like the deficit, must
themselves be financed by borrowing from the public. In 1977 the
total Government deficit was $53.7 billion. Almost all of this amount,
$53.5 billion, was financed by borrowing from the public, and the
remaining $0.2 billion was financed by other means.
Table E-2. M E A N S O F F I N A N C I N G T H E F E D E R A L D E F I C I T
(In millions of dollars)
Description

Budget surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities *
Total, surplus or deficit ( - )
Means of financing other than borrowing from the public:
Decrease or increase (—) in cash and monetary assets
Increase or decrease (—) in liabilities for:
Checks outstanding, etc.2
Deposit fund balances
Seigniorage on coins
Total, means of financing other than borrowing from the
public
Total, requirements for borrowing from the public
Change in debt held by the public

1977
actual

1978
estimate

1979
estimate

-45,040
-8,693

-61,847
-11,514

-60,586
-12,538

-53,733

-73,361

-73,124

—2,209

7,104

1,765
253
407

222
—518
553

-142
—224
490

217

7,361

124

—53,516

—66,000

—73,000

53,516

66,000

73,000

1 The off-budget Federal entities consist of the Rural electrification and telephone
revolving
fund, Rural telephone bank, Pension Benefit Guaranty Corporation, Exchange stabilization fund,
Federal Financing Bank, Postal Service fund, and certain activities of the U.S. Railway Association.
2 Besides checks outstanding, includes military payment certificates, accrued interest (less unamortized discount) payable on Treasury debt, and, as an offsetting change in assets, certain collections in transit.

The means of financing a deficit other than borrowing from the
public are:
• a decrease in cash or monetary assets;
• an increase in monetary liabilities for checks outstanding, etc.;

SPECIAL

ANALYSIS

101

• an increase in deposit fund balances, which include amounts held
by the Government as an agent for others (such as State income
taxes withheld from Federal employees' salaries and not yet paid
to the State) or amounts held in suspense temporarily before
being refunded or paid into some other fund; and
• seigniorage, which is the face value of minted coins less the cost
of their production.
Table E-2 explains an unusual relationship between the change in
the budget deficit from 1978 to 1979 and the change in borrowing from
the public. The budget deficit decreases by $1.3 billion, whereas
borrowing from the public increases by $7.0 billion. To a small extent
the rise in borrowing is due to a $1.0 billion increase in the deficit of
the off-budget Federal entities, but it is mostly caused by an estimated
$7.2 billion decrease in the means of financing other than borrowing
from the public. In 1978 the other means of financing are unusually
large because of a $7.1 billion decrease in cash and monetary assets.
A large amount of cash and monetary assets was held at the end of
1977, partly so that the Treasury could build up its operating funds
before the expiration at the end of the year of the temporary increment to the statutory debt limit. In particular, the Treasury acquired
$2.5 billion of cash by issuing a special security directly to the Federal
Reserve. The resources from the large cash balances at the end of
1977 are available to finance part of the 1978 deficit but have no
counterpart in 1979.
Notwithstanding the effect that these other means of financing are
estimated to have on the trend in borrowing from 1978 to 1979, even
in 1978 these other means are small relative to borrowing from the
public. The size of these other means of financing is limited by their
own nature. Decreases in cash, for example, are necessarily limited
by past accumulations, which themselves required financing when
they were built up. Thus, the extent to which means other than borrowing can finance a deficit are limited in any year and tend to be
still more limited over a longer period of time. The total Federal
Government deficit is the principal determinant of borrowing from
the public.
The sale of debt to Federal agencies largely depends on the surpluses
of the trust funds, which own 92% of the Federal debt held by Government agencies. Agency investment in Federal securities and the total
trust fund surplus during 1976-79 are compared in the table below
(in billions of dollars):
Agency investment in Federal debt
Total trust fund surplus or deficit ( — )

1976
actual

1977
actual

1978
estimate

4.3
2.4

9.2
9.5

10.4
10.3

1979
estimate
15.1
13.9

As the table shows, the agency investment in Federal securities is
similar in size to the total trust fund surplus throughout the period.
The differences are accounted for by two factors. Certain agencies
other than trust funds buy and sell Federal debt, as shown in table E-6,
and the trust funds may increase or decrease their open book
balances.4
4 Open book balances comprise cash assets not currently invested. As shown in Special Analysis
C, they are very small relative to trust fund holdings of Federal debt.

102

THE

BUDGET

SIZE

AND

FOR

GROWTH

FISCAL

YEAR

19 79

OF F E D E R A L

DEBT

Gross Federal debt has risen substantially over most of the past
half century, from $ 1 6 billion in 1 9 2 9 to $ 7 0 9 . 1 billion at the end of
1977. Table E-3 presents the detail of Federal debt since 1954 and
shows that a sizable part of the increase is held in Federal Government
accounts (primarily trust funds) rather than being owed to the public.
From the end of 1954 to the end of 1977, gross Federal debt rose by
162% while debt held by the public rose by 146%. Federal debt held
by the public apart from the Federal Reserve System rose still less,
by 124%—an annual compound rate of growth of 3.5% over the
Table E - 3 . C O M P A R I S O N

NATIONAL

TRENDS

PRODUCT

FEDERAL

DEBT

AND

GROSS

(in billions of dollars)

Debt outstanding, end of year
Held by
Fiscal year

Gross
Federal
debt

Federal
Government
accounts

The public
Total

Federal
Reserve
System

GNP
Other

Debt
held by
public as
percent
of G N P

1954
1955
1956
1957
1958
1959

270.8
274.4
272.8
272.4
279.7
287.8

46.3
47.8
50.5
52.9
53.3
52.8

224.5
226.6
222.2
219.4
226.4
235.0

25.0
23.6
23.8
23.0
25.4
26.0

199.5
203.0
198.5
196.4
200.9
209.0

363.6
380.0
411.0
432.7
442.1
473.3

61.7
59.6
54.1
50.7
51.2
49.7

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1

53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7

237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5

26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1

210.7
211.4
218.7
222.4
222.8
222.5
222.5
220.8
238.4
225.4

497.3
508.3
546.9
576.3
616.2
657.1
721.1
774.4
829.9
903.7

47.7
46.9
45.4
44.2
41.8
39.8
36.7
34.5
35.0
30.9

382.6
409.5
437.3
468.4
486.2
544.1
631.9
646.4
709.1
785.6
873.7

97.7
105.1
113.6
125.4
140.2
147.2
151.6
148.1
157.3
167.7
182.8

284.9
304.3
323.8
343.0
346.1
396.9
480.3
498.3
551.8
617.8
690.8

57.7
65.5
71.4
75.2
80.6
85.0
94.7
96.7
105.0
NA
NA

227.2
238.8
252.3
267.9
265.4
311.9
385.6
401.6
446.8
NA
NA

959.0
1,019.3
1,110.5
1,237.5
1,359.2
1,454.6
1,625.4
1,727.3
1,838.0
2,043.2
2,274.6

29.7
29.9
29.2
27.7
25.5
27.3
29.5
28.9
30.0
30.2
30.4

1970 2
1971
1972
1973 3
1974
1975
1976 4
TQ
1977
1978 estimate
1979 estimate

N A = Not available.
1 During 1969, 3 Government-sponsored enterprises became completely privately owned, and
their debt was removed from the totals for the Federal Government. At the dates of their conversion, gross Federal debt was reduced $10.7 billion, debt held by Government accounts was reduced
$0.6 billion, and debt held by the public was reduced $10.1 billion.
2 Gross Federal debt and debt held by the public increased $1.6 billion due to a reclassification
of the Commodity Credit Corporation certificates of interest from loan assets to debt.
3 A procedural change in the recording of trust fund holdings of Treasury debt at the end of the
month increased gross Federal debt and debt held in Government accounts by about $4.5 billion.
4 Gross Federal debt and debt held by the public increased $0.5 billion due to a retroactive reclassification of the Export-Import Bank certificates of beneficial interest from loan assets to debt.

SPECIAL ANALYSIS E

103

P e r c e n t D i s t r i b u t i o n of N e t I n d e b t e d n e s s 1

Federal net indebtedness 1. the Federal debt held b y the public (including the Federal Reserve System). Private net indebtednew include, the debt of the Government-sponsored enterprises, which ore federally established a n d chartered but privately owned.

23 years—because during this period the Federal Reserve System
bought a large quantity of Federal debt in the market, thereby expanding the reserves of the banking system and providing for growth in the
Nation's money stock.
During the depression of the 1930's and during World War II,
Federal debt held by the public increased greatly, not only in absolute
amount but also, as shown in the above chart, as a proportion of
total net indebtedness: Federal, State and local, and private. Whereas
Federal debt held by the public was only 9% of total net debt at the
end of calendar year 1929, it had risen to 62% by the end of calendar
year 1945. Federal borrowing was large during these years, particularly
to finance World War II, and borrowing by other sectors was restricted
by low incomes and poor credit-worthiness during the depression and
by controls and scarcities during the war.
From 1945 to 1974, however, private debt increased as a proportion
of total debt in every year, and in every year the Federal debt held by
the public decreased as a proportion of the total. This uninterrupted
trend ended in calendar year 1975 because of the large Federal deficit
caused by the recession. The large Federal deficit in 1976 caused Federal debt held by the public to rise as a percentage of total debt again
in that year. As the chart shows, the recent rise in the proportion of
Federal debt does not appreciably affect the comparison of trends over
the last three decades. From the end of calendar year 1956 to the end
of 1976, for example, Federal debt held by the public rose 130%,

104

THE BUDGET FOR FISCAL YEAR

19 79

whereas State and local government debt rose 431 % and private debt
rose 506%. By the end of calendar year 1976, Federal debt held by the
public was 15% of total debt. As a result of these trends, Federal debt
and borrowing, although still important, have become relatively much
smaller influences in the financial market.
During the same period Federal debt has decreased relative to gross
national product. As shown in table E-3, debt held by the public
equaled 62% of gross national product at the end of 1954 but declined
steadily to 25% by the end of 1974. In 1975, however, debt held by the
public rose as a percentage of gross national product, and it has risen
further since then. The percentage is estimated to rise slightly in
1978 and 1979.
The interest cost of the debt may be more significant than the
amount of the debt for some types of comparison designed to measure
the importance of Federal indebtedness. Interest on the debt held by
the public has risen much faster than the debt itself, due to a strong
upward trend since World War II in the interest rates paid on new
borrowings and on refunded debt. Between 1954 and 1977 the Federal
debt held by the public more than doubled, but, as shown in table E-4,
the interest paid to the public increased by more than six times. For
this period as a whole, interest payments to the public grew faster than
gross national product. In the first 5 years, 1954-58, interest was equal
to 1.4% of gross national product, whereas by the last 5 years,
1973-77, the proportion has risen moderately to 1.7%. On the other
hand, the proportion of budget outlays devoted to paying interest on
the debt held by the public did not show any trend over the period as
a whole. It ranged between 7.0% and 8.7% with an average of 7.7%.
Interest as a percentage of both gross national product and budget
outlays—assuming the market interest rates that prevailed when the
budget estimates were made—is estimated to rise in 1978 and again
in 1979.
Since the end of World War II, the composition of the Federal
debt has changed, with an increasingly large proportion of marketable securities having a relatively short maturity. One contributing
factor is the statutory ceiling of 4%% that has been maintained since
1918 on the interest rate that can be paid on Treasury bonds. Because
long-term market rates exceeded 4%% after 1965, the ceiling eventually prevented the Treasury from selling long-term obligations.
This restriction on Treasury borrowing has been relaxed in two
ways. One method has been to increase the maximum maturity of
notes, which are not subject to the interest rate ceiling. The maximum
maturity was raised by law from 5 years to 7 years in 1967 and to
10 years in 1976. As of December 31, 1977, the amount of notes outstanding with a maturity over 5 years was $110.1 billion, of which
$17.1 billion had a maturity over 7 years. The other method of
relaxing the restriction has been to allow limited amounts of bonds
to be sold at interest rates above the ceiling. In 1971, Treasury was
allowed by law to issue up to $10 billion of bonds at interest rates
above 4}{%. In 1973, those bonds held by Government accounts
and the Federal Reserve System were exempted from the interest
rate limit, and during 1976 the amount of the exception was raised
in two steps to $17 billion. In October 1977 the exception was raised
further to $27 billion. As of December 31, 1977, $30.1 billion of bonds
outstanding had been sold since the change of law in 1971, including

SPECIAL

ANALYSIS

105

bonds held by Government accounts and the Federal Reserve System.
The effective interest rates have ranged from 6.1% to 8.4%.
Notwithstanding the initial relaxations of the interest rate ceiling,
the average maturity of Treasury debt decreased from about 5 years
at the end of 1965 to about 2% years at the end of 1976. Since then,
however, as the restriction has been relaxed further by both methods,
the average maturity has lengthened to almost 3 years.
Table E - 4 . C O M P A R I S O N
ON

OF TRENDS

FEDERAL DEBT

INTEREST

(in billions of dollars)

Interest on the gross Feder al debt

Interest on debt
held by the public
as a percent of

Paid to
Fiscal year

Total

Federal

The public

ment
accounts

Total

Federal
Reserve
System 1

Other

GNP

Budget
outlays 2

1954
1955
1956
1957
1958
1959

6.4
6.4
6.8
7.3
7.8
7.8

1.3
1.2
1.3
1.4
1.4
1.4

5.2
5.2
5.6
5.9
6.3
6.4

0.5
.4
.5
.7
.7
.8

4.7
4.8
5.1
5.3
5.6
5.6

1.42
1.36
1.35
1.37
1.43
1.35

7.29
7.56
7.90
7.73
7.68
6.96

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

9.5
9.3
9.5
10.3
11.0
11.8
12.6
14.2
15.6
17.6

1.5
1.5
1.6
1.6
1.8
2.0
2.1
2.6
3.0
3.5

8.1
7.8
7.9
8.7
9.2
9.8
10.4
11.6
12.6
14.1

1.0
1.0
1.0
1.1
1.2
1.4
1.7
2.0
2.4
2.9

7.1
6.8
6.9
7.6
8.0
8.4
8.7
9.6
10.2
11.2

1.62
1.53
1.45
1.50
1.50
1.49
1.45
1.50
1.52
1.56

8.73
7.96
7.40
7.78
7.80
8.29
7.75
7.36
7.07
7.66

20.0
21.6
22.5
24.8
30.0
33.5
37.7
8.3
42.6
49.2
55.9

4.4
5.3
5.8
6.3
7.7
8.8
9.0
.6
9.6
10.1
10.7

15.6
16.3
16.6
18.5
22.4
24.7
28.7
7.6
33.0
39.1
45.2

3.5
3.7
3.7
4.3
5.5
6.1
6.3
NA
6.3
NA
NA

12.2
12.6
12.9
14.2
16.9
18.6
22.5
NA
26.7
NA
NA

1.63
1.60
1.50
1.50
1.64
1.70
1.77
1.77
1.80
1.92
1.99

7.95
7.73
7.16
7.49
8.29
7.56
7.86
8.07
8.21
8.47
9.04

1970
1971
1972
1973
1974
1975
1976
TQ
1977
1978 estimate
1979 estimate

__.

NA = Not available.
Estimated as the average of calendar year figures. The 1977 estimate is tentative
Budget outlays for 1954-79 are published in the Budget. Part 9, table 21.

1
2

BORROWING

FEDERAL

AGENCIES

A few Government agencies are authorized to sell their own debt
instruments to the public and to other Government agencies and
funds. This agency borrowing is part of the gross Federal debt. The
authorization to borrow is budget authority, and the disbursement
of such borrowed money is an outlay. Agency debt includes the
borrowings of the off-budget Federal entities.
Agency borrowing was shown in total in table E - l and is shown
by agency in table E-5. In all three years, the repayment of agency

106

THE

BUDGET FOR FISCAL YEAR

19 79

Table E-5. AGENCY BORROWING * (in millions of dollars)

Description

—

Borrowing from the public:
Agriculture: Farmers Home Administration2
Defense
Health, Education, and Welfare 2
Housing and Urban Development:
College housing loans 23
Federal Housing Administration.
Housing for elderly or handicapped 2
Government National Mortgage Association2.
Revolving fund (liquidating programs) 2 3
Transportation: Coast Guard
Veterans Administration2
Export-Import Bank
Postal Service
Small Business Administration 2
Tennessee Valley Authority
Total, borrowing from the public.

Borrowing or repayment ( —)
of debt
1977
actual

1978
estimate

Debt
outstanding end
1979
estimate

1979
estimate

-86
-103
-29

-48
-97
-5

-69
-9
-15
-38
-20

-1
-11
-2
-90
-2

109
-733

-122
-799

-91
-1,154

-94
-150

-12

-1,238

-104

181
691
95

-100

494
47
450
304
1
505
904
250
176
1,725

-1,189

-1,479

5,825

-15

137
90
80

-64

Borrowing from other funds:
Agriculture: Farmers Home Administration2...
Defense
Health, Education, and Welfare2
Housing and Urban Development:
College housing loans 23
Federal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Association2
Revolving fund (liquidating programs) 23
Veterans Administration2
Small Business Administration2

45
-18
21

-84
-19
-9

66
10
15
-127
15
-162
-8

-1
8
-3
-82
-4
-116
-20

-3

Total, borrowing from other funds.

-142

-331

-30

1,444

-1,380

-1,520

-1,509

7,268

1,155
1,145
-1,067
214

996
1,165
933
79

1,559
1,460
246

8,479
6,505
3,360
389

1,447

3,173

3,265

18,733

Total, agency borrowing included in gross
Federal debt

-9

-4

108
45
291
290
267
134

MEMORANDUM

Borrowing from Federal Financing Bank:
Export-Import Bank
Tennessee Valley Authority
Postal Service
United States Railway Association
Total, agency borrowing from Federal Financing Bank

*$500 thousand or less.
Excludes agency borrowing from Treasury.
Certificates of participation in loans issued by the Government National Mortgage Association on behalf of several agencies.
3 The debt of the
College housing fund ($462 million) is scheduled to be transferred to the
Revolving fund (liquidating programs) on Oct. 1, 1978.
1

SPECIAL ANALYSIS E

107

debt exceeds new agency borrowing by about $1.5 billion. The agency
debt outstanding on September 30, 1979, is estimated to be $7.3
billion, which is less than 1% of gross Federal debt.
As shown in the memorandum section of table E-5, the Federal
Financing Bank (FFB) is having a profound effect on agency borrowing.5 The FFB was created in December 1973 under the Treasury
Department as an off-budget Federal entity and began financial
operations in May 1974. Its purposes were to assist and coordinate
agency borrowing and guaranteed borrowing and to reduce the cost
to the Government of some of its borrowing activities. It was given
the authority to purchase agency debt and Government-guaranteed
obligations and, in turn, to finance these transactions by borrowing
from the Treasury. With the approval of the Secretary of the Treasury,
the FFB is authorized to borrow from the Treasury without a statutory limitation on the amount.6 Since the FFB can borrow from the
Treasury at low^er interest rates than other agencies would have to
pay in the market, this procedure reduces the cost of agency borrowing.
The FFB thus serves as a conduit for agency borrowing, and Treasury
securities replace the securities of other agencies in the market.
Agency borrowing from the FFB is not included in gross Federal debt.
It w^ould be triple counting to add together the agency borrowing
from the FFB, the FFB borrowing from Treasury, and the Treasury
borrowing from the public that was necessary to provide the FFB
with funds to lend to the agencies.
Four agencies that would otherwise borrow mostly in the market
borrowed $1.4 billion from the FFB in 1977 and are estimated to
borrow $3.2 billion in 1978 and $3.3 billion in 1979. The only new
borrowing in the market by these agencies has arisen from special
arrangements made by the Export-Import Bank. Because borrowing
from the FFB by these agencies has generally replaced borrowing
from the public, almost no new agency borrowing in the market took
place in the last 3 years or is scheduled to take place in the future.
The change in agency debt outstanding is thus determined almost
solely by the repayment of maturing debt and consequently is very
small or negative throughout the period. If the FFB had not been
created, the agency component of gross Federal debt would be substantially larger than it is now, though not by the exact amount
that agencies have borrowed from the FFB. The Treasury component
would be correspondingly smaller.
By the end of 1979, $2.9 billion of agency debt, or two-fifths of the
total, will be obligations of the four agencies listed in table E-5 that
plan to borrow in the future almost exclusively from the FFB. A total
of $3.0 billion, or another two-fifths of all agency debt, will consist of
certificates of participation in pools of loans issued by the Government
5 FFB purchases of guaranteed obligations are shown in table E-10.
® The FFB also is authorized to have outstanding up to $15 billion of publicly issued debt. Treasury classifies this as public debt rather than agency debt. The FFB borrowed $1.5 billion in 8-month
bills from the public in July 1974. All of its other borrowing has been from Treasury, because Treasury can borrow from the public at slightly lower interest rates than FFB would have to pay. No
further borrowing from the public is planned

108

THE

BUDGET

FOR FISCAL

YEAR

19 7 9

National Mortgage Association as trustee on behalf of several agencies, which are identified in table E-5. These certificates have not been
issued since 1968. A further $0.8 billion of agency debt will be family
housing mortgages assumed by the Defense Department under a
program terminated more than a decade ago. The remaining agency
debt, which is mostly for programs that will continue to borrow from
the public, will constitute only 8% of the total—$602 million of Federal
Housing Administration debentures issued in payment of insurance
claims for defaulted loans, and $4 million of other obligations.
An adjustment within table E-5 arises from the transfer of all
assets and liabilities of the College housing fund to the Revolving
fund (liquidating programs) in the Department of Housing and Urban
Development. Debt of $462 million is scheduled to be transferred on
October 1, 1978. This transfer does not constitute borrowing by the
Revolving fund (liquidating programs) or repayment of debt by the
College housing fund.
The Treasury provides capital to business-type Government enterprises both in the form of capital stock and in the form of debt. The
provision of debt is shown as "borrowing from Treasury" on the
statements of financial condition for enterprises in the Budget Appendix. However, the equity and the debt instruments are the same in
substance; and it would be double counting to add together the agency
borrowing from the Treasury and the Treasury borrowing from the
public that was necessary to provide the agencies with this capital.
Therefore, agency borrowing from Treasury is excluded from figures on
agency borrowing and debt in all other parts of the budget documents.
A G E N C Y INVESTMENT IN F E D E R A L

SECURITIES

Trust funds and some public enterprise funds accumulate cash in
excess of current requirements in order to meet future claims and
demands. Such cash surpluses are invested mostly in Treasury debt
and, to a very small extent, in agency debt. Purchases of these securities are not counted as budget outlays, and redemptions are not
counted as budget receipts.
Net investment by trust funds and other Federal agencies fell from
a peak of $14.8 billion in 1974 to $4.3 billion in 1976 and then rose to
$9.2 billion in 1977. As shown in table E-6, agency investment is
expected to continue to rise, reaching $10.4 billion in 1978 and $15.1
billion in 1979.
The decrease in agency investment from 1974 to 1976 was primarily
caused by two factors. The large rise in unemployment substantially
increased the benefit payments of the unemployment insurance trust
fund and to some lesser degree reduced the employment tax receipts
of the unemployment and social security trust funds; and the social
security trust funds had financial problems besides their reduced tax
receipts. The rise in agency investment in 1977 was caused to a large
extent by the continued economic recovery, which reduced unemployment benefits and raised trust fund tax receipts. A second important
cause of the 1977 increase was the increased payments from the general
fund to the Civil Service retirement and disability trust fund.
The further increase in agency investment estimated for 1978 and
1979 is caused in large measure by further declines in unemployment,
by another large rise in the general fund payment to the Civil Service

SPECIAL ANALYSIS

109

Table E-6. A G E N C Y I N V E S T M E N T IN F E D E R A L S E C U R I T I E S
(In millions of dollars)
Description

Investment in Treasury debt:
Health, Education, and Welfare:
Federal old-age and survivors insurance trust fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust
fund
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association
Other
Labor: Unemployment trust fund
Transportation:
Highway trust fund
Airport and airway trust fund
Treasury:
Exchange stabilization fund 1
Federal Financing Bank
Veterans Administration:
National service life insurance trust fund
Other trust funds
Other. _
...
Civil Service Commission:
Civil Service retirement and disability trust fund _
Other trust funds
Federal Deposit Insurance Corp.: Trust fund
Federal Home Loan Bank Board: FSLIC
Postal Service
Railroad Retirement Board: Trust fund
Other Federal funds
Other trust funds
Other off-budget Federal entities
Total, investment in Treasury debt
Investment in agency debt:
Agriculture: CCC
Health, Education, and Welfare:
Federal old-age and survivors insurance trust fund
Federal hospital insurance trust fund
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association
Veterans Administration: National service life insurance trust fund
Civil Service Commission: Civil Service retirement
and disability trust fund
Federal Home Loan Bank Board: FSLIC
Railroad Retirement Board: Trust fund

Increase or decrease ( —)
in holdings
1977
actual

1978
estimate

1979
estimate

Holdings
end of
1979
estimate

-1,645
-2,211
-36

-4,706
-349
730

-3,158
229
1,632

26,991
4,123
13,285

988

1,344

661

4,237

161
-95
44
1,073

139
-274
17
3,600

149
72
20
5,200

1,960
1,308
253
14,787

1,127
534

940
407

591
183

11,610
3,836

520
-86

107

2,050
243

294
12
28

372
29
25

212
4
25

7,834
1,089
432

6,931
496
855
433
-160
-121
81
145
15

6,861
560
379
408
129
-84
45
96

7,078
528
1,045
473
230
-378
109
100
11

63,161
4,055
8,886
5,417
1,630
2,720
754
633
87

9,385

10,776

15,116

181,382

-6

555
50
*

-1

-1
-78

-75

-100

-10
-50

-100
-46

-4
-14

186
145
135

-6

275
79

Total, investment in agency debt

-142

-331

-30

1,444

Total, agency investment in Federal debt.

9,243

10,445

15,086

182,826

636
8,318
290

229
9,980
236

818
13,928
339

10,553
168,262
4,010

MEMORANDUM

Investment by Federal funds
Investment by trust funds
Investment by off-budget Federal entities.

*$500 thousand or less.
1 The change in holdings is not estimated due to the uncertainties in foreign exchange,
and
the estimated 1979 yearend holdings are taken to be the actual holdings at the end of 1977.

110

THE

BUDGET

FOR

FISCAL

YEAR

19 79

retirement and disability trust fund, by increased deposits of State
unemployment insurance taxes (which are included in Federal receipts), and by legislated Federal tax increases. Legislation enacted in 1976 is estimated to raise unemployment insurance trust fund
receipts by $1.5 billion in 1978 and $3.1 billion in 1979, to be offset in
1979 by a $0.6 billion tax-rate cut proposed by the administration. The
recently enacted Social Security Amendments of 1977 are estimated to
increase social security trust fund receipts by $3.2 billion in 1979.
Without these tax increases, total agency investment would not be
estimated to change much in 1978 and 1979 from the 1977 level of $9.2
billion.
Total agency holdings of Federal securities will reach an estimated
$182.8 billion by September 30, 1979. This will comprise 21% of the
gross Federal debt. Two trust funds—the old age and survivors insurance trust fund and the Civil Service retirement and disability trust
fund—will account for 50% of total agency holdings, and all the trust
funds together will account for 92%. Almost all of the holdings will be
Treasury debt, and the holdings of agency debt will continue to decline by small amounts each year.
LIMITATIONS

ON F E D E R A L

DEBT

Statutory limitations have customarily been placed on Federal
debt. Until World War I, the Congress ordinarily authorized a specific
amount for each issue of debt. Beginning with the Second Liberty
Bond Act in 1917, however, the limitation developed in several steps
to become a ceiling on the total amount of most Federal debt outstanding. The latter type of limitation has been in effect since 1942.
The limit currently applies to the total of:
• almost all public debt issued by the Treasury since September
1917, whether held by the public or by the Government;
• agency debt in the form of participation certificates issued
during 1968 under the Participation Sales Act of 1966; and
• other debt issued by Federal agencies (and the District of
Columbia Armory Board) that, according to explicit statute, is
fully guaranteed as to principal and interest by the United
States.
The debt subject to statutory limit7 includes virtually all Treasury
debt. The small amount of Treasury debt not subject to limit is shown
in table E-7. It consists almost entirely of currencies no longer being
issued, such as silver certificates and national bank notes, which
were generally reclassified as Treasury debt sometime after being
discontinued.
The major part of agency debt is not subject to the general statutory
limit. The only categories now included are the debentures issued by
the Federal Housing Administration and the participation certificates
sold in 1968. Together, these securities comprise less than one-quarter
of all agency debt. However, most other agency debt is subject to
special statutory limits. For example, the Postal Service is limited to
$2 billion of annual borrowing and $10 billion of bonds outstanding.
7 The statutory debt limit is sometimes called the public debt limit. However, as explained in
the text, the limit does not apply to all public debt and does apply to some debt other than public
debt.

111

SPECIAL ANALYSIS E

Table E-7. D E B T S U B J E C T T O S T A T U T O R Y L I M I T (in millions of dollars)
Descriptions

—

Federal debt held by the public
Federal debt held by Government agencies
Total, gross Federal debt
Deduct:
Treasury debt not subject to limit.
Agency debt not subject to the general limit:
Department of Defense
Export-Import Bank
Tennessee Valley Authority
Postal Service
Participation certificates L
Coast Guard
Total, Federal debt not subject to limit
Federal debt subject to statutory limit
District of Columbia Armory Board bonds
Total, debt subject to statutory limit

___

End of year
1977
actual

1978
estimate

1979
estimate

551,843
157,295

617,843
167,740

690,843
182,826

709,138

785,583

873,668

611

1,016
2,858
1,825
250
2,633
2

900
2,059
1,825
250
2,031
2

781
904
1,725
250
1,869
1

9,195

7,677

6,142

699,943
20

777,906
20

867,527
20

699,963

777,926

867,547

1 Certificates of participation in loans issued by the Government National Mortgage Association
on behalf of several agencies (excluding certificates issued during 1968).

The only other significant component of debt subject to limit is the
small issue of stadium bonds sold by the District of Columbia Armory
Board in 1960. Unlike the rest of the debt subject to limit discussed
above, the stadium bonds are not part of the Federal debt.
Under legislation enacted earlier, the statutory limit on the Federal debt rose to $682 billion on October 1, 1976, and to $700 billion
on April 1, 1977. This limit consisted of a permanent limit of $400
billion, which has been in effect since 1971, and a temporary increment
of $300 billion. This temporary increment expired on September 30,
1977, without having been extended, so for a few days the Federal
debt exceeded the statutory limit. During this period all sales of
savings bonds and other new debt instruments were temporarily
suspended. On October 4, 1977, new legislation temporarily raised the
limit to $752 billion. This increase expires on March 31, 1978, after
which a further increase will be needed to permit the Federal Government to meet its obligations.
The outstanding debt subject to limit is shown in table E-7 and
compared with the gross Federal debt and the Federal debt held by
the public. The debt subject to limit was $700.0 billion at the end
of 1977 and is estimated to rise to $867.5 billion by the end of 1979.
These amounts are substantially more than the permanent limit of
$400 billion. As shown in table E-7, the debt subject to limit is much
larger than the debt held by the public and is almost as large as the
gross Federal debt. Almost all of the difference between gross Federal
debt and debt subject to limit is accounted for by agency debt not
subject to the general limitation.

112
FEDERAL

THE

FUNDS

BUDGET

FINANCING

FOR

AND

FISCAL

YEAR

19 79

THE

CHANGE

TO S T A T U T O R Y

DEBT

SUBJECT

LIMIT

The year-to-year change in debt subject to limit, unlike the change
in debt held by the public, is not principally determined by the total
Government deficit, that is, the sum of the budget deficit and the
deficit of the off-budget Federal entities. The trust fund surplus or
deficit, which makes up part of the budget surplus or deficit, has no
essential effect. This is shown below in a discussion that is more technical than the rest of this special analysis.
The budget is divided into two major groups of funds: Federal
funds and trust funds.8 The trust funds collect certain taxes and other
receipts for specified purposes, such as the payment of social security
and unemployment insurance benefits. .The Federal funds comprise
the rest of the budget. Their resources are derived mainly frcm taxes
and borrowing and are used for the general purposes of the Government. The off-budget Federal entities make up a third group of
fiscal operations, analagous to the Federal funds and trust funds
groups. If the off-budget entities were included in the budget, almost
all of them would be classified in the Federal funds group.
When the Federal funds have a deficit, that deficit must generally
be financed by borrowing. This requirement is unaffected by whether
or not trust funds have a surplus, since trust fund surpluses are mostly
invested in Federal debt securities and this investment is a form of
Federal funds borrowing.-The Federal funds borrowing is almost exclusively done by the Treasury selling debt securities that are subject to
the statutory limit. The deficits of the off-budget Federal entities are
generally financed in the same way as the Federal funds deficit. Thus,
the Federal funds deficit and the deficit of the off-budget Federal
entities generally have to be financed by selling debt securities that
are subject to the statutory limit.
Table E-8 shows in detail the relationship of the change in debt
subject to limit to the Federal funds deficit and the deficit of the
off-budget Federal entities. The sum of these deficits is an amount that
has to be financed. Some relatively small portion may be financed by
means other than borrowing, such as seigniorage and a decrease in
those cash assets held by Federal funds and off-budget Federal entities (if the sum of these other means of financing is negative, then
these other means must themselves be financed).9 Some small portion
may be financed by decreasing investments in Federal debt. Another
small portion may be financed by selling debt not subject to limit.
The remainder of the amount to be financed, ordinarily comprising
most of the total, must be financed by selling debt securities that are
subject to the statutory limit. Thus, the deficits of the Federal funds
and the off-budget Federal entities are shown to be the principal
determinants of the change in debt subject to statutory limit.
The trust fund surplus does not have an explicit effect in table E-8.
However, to the extent that trust fund surpluses are used to increase
Data for Federal funds and trust funds are presented in Special Analysis C,"Funds in the Budget."
The means of financing other than borrowing that are shown in table E - 8 exclude amounts
attributable to trust funds. It is not known how the trust fund open book balances are divided between cash and monetary assets and liabilities for checks outstanding, etc. In this table they are
all assumed to be in liabilities for checks outstanding, etc.
8

SPECIAL ANALYSIS E

113

Table E-8. F E D E R A L F U N D S F I N A N C I N G A N D C H A N G E IN D E B T S U B J E C T
T O S T A T U T O R Y L I M I T (in billions of dollars)
Description

Federal funds surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities
Total, amount to be

financed

Means of financing other than borrowing:
Decrease or increase (—) in cash and monetary assets
Increase or decrease (—) in liabilities for:
Checks outstanding, etc
Deposit fund balances
Seigniorage on coins
Total, means of financing other than borrowing
Decrease or increase (—) in Federal funds and off-budget entity
investments in Federal debt
Increase or decrease (—) in Federal funds and off-budget entity
debt not subject to limit
Total, requirements for borrowing subject to debt limit
Change in debt subject to limit

1977
actual

1978
estimate

1979
estimate

-54,536
- 8 , 693

- 7 2 , 147
-11,514

- 7 4 , 485
- 1 2 , 538

-63,229

-83,661

-87,023

—2,209

7,104

2,944
253
405

542
—518
553

-171
—224
490

1, 395

7, 681

—925

—465

—1,158

-1,381

-1,518

-1,535

—64,142

—77,962

—89, 621

64,142

77,962

89,621

the trust fund holdings of open book balances instead of Federal
debt securities, the debt subject to limit is reduced. The increase in
open book balances is recorded as an increase in Federal funds liabilities for checks outstanding, etc., in table E-8. This increases the
Federal funds means of financing other than borrowing, which in
turn reduces the requirements for borrowing subject to the statutory
limit. The trust fund open book balances do change from year to year,
but they do not usually change a great deal. By law the trust fund
surpluses must generally be invested in Federal debt, and during 197077 the increase in trust fund holdings of Federal debt equaled 93%
of the cumulative trust fund surplus. Consequently, the effect of the
trust fund surplus on debt subject to limit is minor.
Since the trust fund holdings of Federal debt are included almost
entirely in debt subject to limit, but not in debt held by the public,
the amount of debt held by the public is substantially less than the
amount of debt subject to limit. Since the trust funds as a group
usually have a surplus, the change in debt held by the public from
one year to the next is usually less than the change in debt subject to
limit. As can be calculated from table E-7, during 1978 and 1979 the
debt subject to limit is estimated to increase by $167.6 billion, whereas
the debt held by the public is estimated to increase by $139.0 billion.
The present analysis helps to show the difficulties in preventing the
Federal debt from continuing to rise. Table E-2 showed that the
Government would have to borrow from the public even if the budget
were balanced, because it would have to finance the deficit of the
off-budget Federal entities. Table E-8 shows that the debt subject to

260-700 O - 78 - 8

114

THE BUDGET FOR FISCAL YEAR

19 79

statutory limit would continue to rise even if the budget had a surplus
and that surplus was equal to the off-budget deficit. In order for the
debt subject to limit not to rise, it would be necessary—as an approximation—for the Federal funds alone (apart from the trust funds)
to have a surplus equal to the deficit of the off-budget Federal entities.
The same approximate condition is necessary for the gross Federal
debt not to rise.
FEDERALLY

ASSISTED

BORROWING

The effect of the Government on borrowing includes not only its
own borrowing to finance Federal operations but also its assistance
to certain borrowing by the public. Federally assisted borrowing is of
two types: borrowing by Government-sponsored enterprises, and
Government-guaranteed borrowing.
The Government-sponsored enterprises were established and chartered by the Federal Government to perform specialized credit
functions, but they are now entirely privately owned. The rule
governing the budget treatment of these enterprises was established
in 1967 in accordance with a recommendation by the President's
Commission on Budget Concepts. The Commission, whose report led
to the adoption of the unified budget, recommended that the budget
exclude those Government-sponsored enterprises that are entirely
privately owned.10 Therefore the transactions of these enterprises
are not included within the Federal budget, and their debt is not part
of gross Federal debt.
The seven Government-sponsored credit enterprises are essentially
financial intermediaries, borrowing in the securities market and lending their borrowed funds for specifically authorized purposes either
directly or by purchasing loans originated by the private group that
they were established to assist. The borrowing programs of these
enterprises are subject to Federal supervision. In addition, they all
consult the Treasury Department, either by law or by custom, in
planning their market offerings. The Federal National Mortgage Association and the Federal home loan banks are required to obtain
Treasury approval of the terms and timing of specific offerings. The
Student Loan Marketing Association borrows exclusively from the
Federal Financing Bank.11 Besides their Federal sponsorship, all of the
enterprises have a history of successful financial performance. Hence,
despite the absence of Federal guarantees, the obligations of these
enterprises are sold at interest rates only moderately higher than the
rates on comparable Treasury issues.
As shown in table E-9, borrowing by the Government-sponsored
enterprises was $7.0 billion in 1977 and is estimated to be $17.2 billion
in 1978 and $13.9 billion in 1979. In order to show the borrowing by
this sector as a whole from the rest of the market, these figures are
calculated net of the borrowing by one Government-sponsored enterprise from another. Most of this adjustment during 1977-79 is ac10 Report of the President's Commission on Budget
Concepts (Washington: U.S. Government
Printing Office, 1967), pp. 29-30.
u T h e Student Loan Marketing Association is the only Government-sponsored enterprise whose
securities are guaranteed by the Federal Government and can therefore be bought by the FFB.

SPECIAL ANALYSIS
Table E-9. B O R R O W I N G

115

BY GOVERNMENT-SPONSORED

ENTERPRISES

(In millions of dollars)

Description

Health, Education, and Welfare: Student Loan Marketing Association
Housing and Urban Development: Federal National
Mortgage Association.
Farm Credit Administration:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corporation

Borrowing or repayment ( — )
1977
actual

1978
estimate

1979
estimate

Debt outstanding
end 1979
estimate

105

130

735

807

2,095

372

33,959

864
1,589
2,682

726
1,825
2,562

583
2,082
2,961

6,288
16,562
25,058

-1,409
1,045

4,534
4,971

3,464
4,276

25,157
17,867

5,683

16,807

13,868

125,627

Less increase in holdings of debt issued by Government-sponsored enterprises

—1,365

—413

—67

2,189

Total, borrowing by Government-sponsored
enterprises

7,048

17,221

13,935

123,438

Total

counted for by the Federal Home Loan Mortgage Corporation
(FHLMC) repaying its debt to the Federal home loan banks.
During these years, as in most periods, borrowing by Governmentsponsored enterprises will fluctuate. These fluctuations are dominated
by the three enterprises that support the housing market. The yearto-year changes in borrowing by the Federal National Mortgage
Association and FHLMC are largely accounted for by changes in
their mortgage purchases. The fluctuation in borrowing by the Federal
home loan banks is mostly due to fluctuations in its net advances
(new advances less repayments) to its member savings institutions
and to the FHLMC. The notable rise in borrowing by the Federal
home loan banks in 1978 is estimated to occur because of sharp
decreases in the repayment of past advances to savings institutions
and to the FHLMC together with some increases in new advances to
members and in its holdings of short-term securities. These three
Government-sponsored enterprises together will have issued threefifths of the debt outstanding at the end of 1979. Special Analysis F
discusses lending by the Government-sponsored enterprises.
The other type of federally assisted borrowing, Governmentguaranteed borrowing, consists of loans for which the Federal Government guarantees the payment of the principal and/or interest in whole
or in part. Guaranteed (or insured) loans have diverse characteristics.
The loans may be made to individuals, businesses, State and local
governments, or foreign governments. The guaranteed obligation
may be a loan made by a bank or other institutional lender, it may be a
security sold in the capital market, or it may be a security sold to the

116

THE

BUDGET

FOR FISCAL

YEAR

19 7 9

Federal Financing Bank. Government-guaranteed borrowing is the
same as Government-guaranteed lending.
Guaranteed loans include most loan assets sold by Federal agencies.
Loan asset sales occur when an agency makes a direct loan and then
sells it. A guarantee by the selling agency is usually attached. In
some cases the agency sells the direct loans themselves, and in other
cases the agency sells securities (sometimes called participation
certificates or certificates of beneficial ownership) that are backed by
loans that the agency continues to hold and service. Loan asset sales
are offsets to the outlays of the agency that sells them, so if the selling
agency is in the budget they reduce the amount by which the direct
loans of Federal agencies add to budget outlays. The certificates of
beneficial ownership sold by the Farmers Home Administration and
Rural electrification and telephone revolving fund are a type of loan
asset and would be classified as Federal debt instead of guaranteed
loans according to the recommendations of the President's Commission
on Budget Concepts.12 However, according to statute the sale of these
certificates is required to be treated as the sale of loan assets instead of
Federal borrowing. These certificates of beneficial ownership are sold
almost exclusively to the FFB. Sales to the FFB during 1977-79 are
shown below (in millions of dollars):
Farmers Home Administration
Rural electrification and telephone revolving fund

1977 actual 1978 estimate 1979 estimate
4,965
6, 575
7,180
455
720

Loan guarantees are designed to allocate economic resources toward
particular uses by providing credit at more favorable terms than
would otherwise be available in the private market. The major use
of guaranteed loans is to support housing, but in recent years guarantees have increasingly been used for other purposes. As shown in
table E-10, guaranteed borrowing net of repayments (but before
purchases by Federal agencies or Government-sponsored enterprises)
was $20.5 billion in 1977 and is estimated to be $27.0 billion in 1978
and $34.5 billion in 1979. Special Analysis F presents detailed data
on guaranteed loans and loan asset sales.
T O T A L F E D E R A L AND F E D E R A L L Y ASSISTED

BORROWING

Table E-10 summarizes Federal and federally assisted borrowing
from the public. Federal borrowing from the public is presented in
total. Borrowing by Government-sponsored enterprises and guaranteed borrowing are presented both in total and as net amounts, the
latter having been adjusted in order to remove double counting in
the derivation of total Federal and federally assisted borrowing from
the public. Double counting would otherwise occur when a Federal
agency or a Government-sponsored enterprise bought or sold a Federal or federally assisted debt security.
Federal and federally assisted borrowing from the public during
1977-79 is made up predominantly of Federal borrowing to finance
the large budget deficits. Federal borrowing also finances the Federal
Financing Bank's purchases of guaranteed obligations (net of repayments), which are two-fifths of the total increase in guaranteed
12 Ibid., pp. 8, 47-48, and 54-55.

SPECIAL ANALYSIS

117

Table E-10. NET B O R R O W I N G F R O M T H E P U B L I C B Y
GOVERNMENT-SPONSORED
ENTERPRISES,
AND
G U A R A N T E E D B O R R O W E R S (in billions of dollars)

GOVERNMENT,
GOVERNMENT-

Borrowing or repayment (—)

Description

1978
estimate

1979
estimate

Debt outstanding
end 1979
estimate

53.5

66.0

73.0

690.8

7.0
—2. 9

17.2
.2

13.9
.1

123.4

—1.5
.1

11.4

16.9

13.7

121.7

20.5

27.0

34.5

302.0

8.1
—1.0

10.7
-.1

12.6
-.2

46.4
3.0

-1.1

27.0

1977
actual

Federal borrowing from the public 1
enterprises2

Borrowing by Government-sponsored
Less increase in holdings of Federal debt
Less increase in Government-sponsored debt held by
Federal agencies:
Federal Home Loan Bank Board
Federal Financing Bank
Net Government-sponsored borrowing from the
public
Government-guaranteed borrowing
Less increase in Government-guaranteed loans held
by:
Federal agencies:
Federal Financing Bank
Government National Mortgage Corporation._ _
Government-sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation
3

1.0

.1
—.5
—*
—.2

—

-.2

.1
1.2

Net Government-guaranteed borrowing from
the public

14.1

16,

23.2

223.6

Total, Federal and federally assisted borrowing from the public

78.9

99.4

109.9

1,036.1

*$50 million or less.
1 See table E - l .
2 See table E - 9 .
3 The same as Government-guaranteed lending. See table F—5.

obligations outstanding. Since the FFB finances these purchases by
borrowing from the Treasury, which in turn borrows from the public,
these transactions substitute Federal borrowing for guaranteed borrowing in the market. As shown in table F-5 of Special Analysis F, the
FFB expects to buy a smaller share, about one-quarter, of the gross
new loans guaranteed (before repayments) in these years.
The following chart depicts the trends in Federal and federally
assisted borrowing from the public between 1966 and 1979. The
series are volatile, and the recent and estimated fluctuations are dominated by the Federal deficit. Total Federal and federally assisted
borrowing fell to $24.1 billion in 1974 because of a sharp drop in the
Federal deficit and then rose dramatically to $97.9 billion in 1976 due
to the large deficit in that yeaj. The total fell to $78.9 billion in 1977
but is estimated to rise coipidc Jj>ly in 1978 and 1979 due to higher
deficits than in 1977 and due to increases in both Government-sponsored borrowing and guaranteed borrowing from the public.

118

THE BUDGET FOR FISCAL YEAR

19 79

Federal a n d Federally Assisted Borrowing
$ Billions

100-

As the chart shows, Federal and federally assisted borrowing is now
substantially higher than a decade ago. Much of the increase parallels
the growth in the economy and in the total funds raised by the nonfinancial sector through the sale of debt securities and other forms of
borrowing and through the sale of corporate equities. However,
although the existence of trends is difficult to discern because of the
volatility of the series, to some extent the total Federal and federally
assisted borrowing from the public seems to have increased as a proportion of the total funds raised. This proportion increased from 15%
during 1960-67 to 21% during 1968-74 and to 33% in 1975-77.
Thus, Government programs since 1968 have influenced the allocation
of funds raised in financial markets more than they did in the immediately preceding years. During 1975-77 the Government impact
was unusually large, and the estimated totals for Federal and federally
assisted borrowing imply that it will remain large relative to most
earlier years in 1978 and 1979.

SPECIAL ANALYSIS F
FEDERAL CREDIT

PROGRAMS

Federal credit programs play a significant role in allocating our
Nation's economic resources. These programs have a number of
objectives. They may aim to encourage certain types of economic
activity or they may merely aim to help certain borrowers participate
in that activity; they may seek to provide liquidity for lenders and
investors or provide cyclical stability for a particular industry. In
nearly every case, they provide a subsidy to the selected constituency.
Credit programs frequently aim to fill credit "gaps" by making
credit available to special classes of borrowers, or on special terms
and conditions, or for special purposes. Often this credit assistance
provides for longer maturities and higher loan-to-value ratios than
are otherwise readily available. The interest costs to the borrower
are lower than the rate available on private loans with comparable
terms. In most cases, the benefits are achieved through the Government's assumption of risks that lenders are either unwilling to undertake or will accept only at a substantial premium in interest charges.
Federal credit assistance is provided to borrowers in a number of
ways. Federal agencies make direct loans (sometimes off-budget) and
also guarantee or insure the payment of principal and interest on
loans supplied by private lenders. Direct loans are also made by
Government-sponsored, privately owned credit enterprises that are
federally franchised with special privileges in the capital markets.
Because of the complex institutional arrangements that have evolved,
several of these forms of credit assistance are sometimes combined
in a single program; and sometimes a single activity is aided by
two or more programs.
When a credit program is directly aimed at lowering interest rates
to specific borrowers, the interest subsidy may be fairly visible, if
not explicit, as in the case of direct loans where legislation provides
for interest rates that are less than market rates; or it may be implicit,
as in the case of guaranteed loans where the Government assumes
most or all of the credit risk. The interest rate on guaranteed loans
is sometimes further reduced by explicit interest rate subsidies.
Also, Government assistance in the development of secondary markets can achieve lower interest rates by providing greater liquidity.
For example, Government guarantees of some residential mortgages,
combined with special borrowing privileges for federally sponsored
enterprises such as the Federal National Mortgage Association
(FNMA) and the Federal Home Loan Mortgage Corporation
(FHLMC) have helped create well-organized special markets for
residential mortgages. Another implicit (and substantial) interest
rate subsidy results from the tax exemption of interest on securities
issued by State and local governments.1
1 The credit subsidy effects of the tax-exempt status of State and local borrowing is not analyzed in
this analysis. However, see Special Analysis G, " T a x Expenditures."

119

120

THE

BUDGET

FOR

FISCAL

YEAR

19 79

This analysis is a compilation of basic information on Government
credit plans over the budget period, rather than an evaluation of
programs and policies. The chapter highlights major trends in the
credit activity of the Federal Government and Government-sponsored
enterprises over the last 10 years, and presents the details of direct
loans and loan guarantees by major program category from 1977 to
1979.
Questions of considerable analytical difficulty remain unanswered
about the impact and the distribution of the benefits and costs of
credit assistance. It is possible to surmise only in a general way the
degree to which federally assisted credit substitutes for private credit
transactions that would have taken place without Government assistance or the extent to which Government credit support for some
borrowers may reduce the amount of credit available to the unassisted
sectors of the economy. In addition, to the extent that credit is reallocated by these programs, it is not at all clear what effect this allocation has on important aggregate economic variables such as employment, production, and economic growth, or even on the supply of
and demand for credit market resources.
The information on budget accounts and programs in this analysis
is summarized by major agencies and program groupings. Some
additional detail is available elsewhere. The Treasury Bulletin provides data on direct and guaranteed loans outstanding 2 in the most
recently completed year or quarter—for both accounts and programs
within accounts. Part 5 of the budget also supplies some detail,
arranged by function; and individual direct loan program accounts
are detailed in the Appendix volume of the budget.
TRENDS

AND

DIRECTIONS

The total amount of credit provided under Federal auspices has
risen rapidly during the past decade, due to both the expansion of
existing programs and the initiation of new ones. Table F - l summarizes data on Federal participation in domestic credit markets
over the last decade.
Overall, the total amount of credit provided under Federal auspices
has risen rapidly during the past decade, due to the initiation of new
programs as well as the expansion of existing ones. However, with
the exception of 1970 and 1976 Federal and federally assisted advances have been within the narrow range of 13% to 16% of all
funds advanced in U.S. credit markets. In 1975, the Federal participation rate increased to 14.9%. This was a result of reduced private
credit demands and expanded Federal mortgage credit programs that
were intended to increase housing production. As a result of recent
declines in interest rates and increases in the flow of funds to depository institutions, the relative need for Federal credit assistance has
decreased, and the proportion of credit advanced under Federal auspices
has eased to 11/2% of all credit. But on the demand side, Federal use of
credit has climbed steeply—both in amount and in share of total
flows—mainly reflecting the major expansion in budget deficits starting in 1975. Table F - l summarizes data on Federal participation in
domestic credit markets over the last decade.
2 Sec table GA 11-2, Treasury Bulletin.

Table F-1. F E D E R A L P A R T I C I P A T I O N

IN D O M E S T I C C R E D I T M A R K E T S (dollars in billions)
Actual

Total funds advanced in U.S. credit markets
cludes equities)
Advanced under Federal auspices2
Direct loans:
On-budget
Off-budget
Guaranteed loans
Sponsored agency loans
Federal participation rate (percent)
Total funds raised in U.S. credit markets1
Raised under Federal auspices2
Federal borrowing from public
Guaranteed borrowing
Sponsored agency borrowing
Federal participation rate (percent)
1
3
3

(in-

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

97.0
14.9

96.9
15.0

93.6
17.4

124.9
16.5

164.3
22.8

205.4
26.7

193.1
26.6

180.9
26.9

242.6
26.9

67.3
26.6

317.5
36.6

(3)
51.8

(3)
55.4

8.0

2.9

4.5

3.0

5.6
1.3
15.4

7.8
4.3
15.5

2.3
10.6
18.6

12.2
1.3
13.2

2.7
.2
15.6
4.3
13.9

.3
.7
14.0
11.6
13.0

2.2
2.2
6.2
16.3
13.8

4.3
8.5
5.7
8.5
14.9

4.2
6.7
10.3
5.4
11.0

1.1
2.6
-.1
2.9
9.7

2.6
9.0
14.1
11.0
11.5

7.9
11.1
16.5
16.3

4.3
13.0
23.2
14.8

97.0
31.3
23.1
5.6
2.6
32.2

96.9
11.3
-1.0
7.8
4.5
11.7

93.6
16.4
3.8
2.3
10.3
17.5

124.9
32.3
19.4
12.2
.6
25.9

164.3
39.7
19.4
15.6
4.7
24.2

205.4
46.4
19.3
14.0
13.2
22.6

193.1
24.1
3.0
6.2
14.8
12.5

180.9
64.7
50.9
5.7
8.2
35.8

242.6
97.5
82.9
10.3
4.3
40.2

67.3
19.1
18.0
-.1
1.2
28.3

317.5
78.9
53.5
14.1
11.4
24.9

(3)
99.4
66.0
16.5
16.9

(3)
109.9
73.0
23.2
13.7

Nonfinancial sectors. Source: Federal Reserve Board Flow of Funds Accounts.
Estimates from table E-10.
Not estimated.

Estimates

1968

122

THE

BUDGET FOR FISCAL YEAR

19 79

Certain programs by their nature have highly volatile levels of
activity. The Federal home loan banks, for example, have high loan
levels during periods of tight money, but experience high repayment
flows when money market conditions ease. These fluctuations have not
always been successfully anticipated in agency budget plans; and
shifts in a few large but volatile programs sometimes mask the trends
in overall activity. Other similar patterns occur between the programs
of the FNMA and the mortgage-backed security guarantee program
of the Government National Mortgage Association (GNMA). These
are alternative outlets for mortgage lenders, and are subject to a form
of arbitrage as changing market conditions favor one over the other.
The Federal participation rate for borrowing has been higher and
more variable than that for lending since 1968, fluctuating in a range of
12% to 41% of funds raised in U.S. credit markets. The difference
between the Federal proportions of borrowing and lending is primarily
due to the surplus or deficit in the Federal budget. The budget deficits
in 1975 and 1976 increased Federal borrowing significantly as taxes
were cut and expenditures increased in order to stimulate the economy.
The 1978 and 1979 deficits, which are each expected to exceed $60
billion, will result in a continued high level of Federal credit demands.
The credit component within the budget is not a useful indicator of
Federal credit activities because a relatively small share of Federal
credit assistance is in the form of on-budget direct loans. A large portion of Federal credit assistance is not included in the budget because
of the utilization of loan guarantee programs instead of direct loan
programs; sales of loan assets from Federal agency portfolios to the
public or the Federal Financing Bank (FFB); the creation of enterprises that are Government sponsored but privately owned; and the
legislated removal of some Government programs and agencies from
the budget.
While most direct Federal outlays are subject to periodic review in
both the executive branch and the congressional budget process,
several direct lending programs and all loan guarantees are not included in the budget, except for payment of claims on defaults, certain
repurchases, interest subsidies, or other installment payments. As a
result, the budget understates the extent to which the Government is
involved in redirecting the credit resources of the Nation. To deal
more effectively and responsibly with this problem, the administration
plans to forward a proposal for credit program review and control to
the Congress this year. The proposal would subject credit programs
to a review and control process similar to that applied to budget
programs.
DIRECT LOANS

Direct loans are made by both on- and off-budget Federal entities,
and are financed by Treasury or agency borrowing, loan repayments,
and other fiscal resources such as taxes. The major Federal programs
that provide direct loans are identified in table F-2.
Commitments to make direct loans tend to forecast future financial
flows because commitments are often made well in advance of the
time when funds are actually disbursed. This is particularly the case
where construction activity is involved. Previous editions of the special
analysis have reported only new commitments. Beginning this year,
new data on commitments outstanding provide a more comprehensive
set of measures.

Table F-2. D I R E C T LOAN T R A N S A C T I O N S O F F E D E R A L A G E N C I E S (in millions of dollars)—Continued
Commitments

Agency or program

Funds appropriated to the President:
International security assistance __

1977
actual

_____

International development assistance

New transactions
Net loans
_ _ __
Outstandings. _
_

Agriculture:
Farmers Home Administration

Commodity Credit Corporation

Public Law 480 long-term export credit

Commerce:
Economic Development Administration. __

Coastal energy impact fund_ _

Maritime Administration

___

__ __

_ _

1978
estimate

Loans made
1979
estimate

1977
actual

1,084
816
3,669

1,091
832
4,501

404
128
11,235

385
115
11,350

352
56
11,406

7,121
116
2,366

8,741
-51
2,315

8,421
-1,264
1,050

6,018

4,376
2,626
4,513

7,935
2,972
7,485

6,018
797
8,282

728

863

738
587
5,333

728
622
5,954

863
738
6,693

165

103

181

77
51
545

147
117
662

103
65
727

110

219

208

11
11
12

1,316

1,095

3,142

3,371

365

436

471

1,321

1,367

1,482

New transactions.
Net loans
Outstandings

8,051

8,853

8,684

2,943

3,058

3,324

New transactions. __ _ _
Net loans
___
Outstandings

4,376

7,935

New transactions _
Net loans__
Outstandings. _ _

738

New transactions
Net loans
Outstandings
New transactions
Net loans__
Outstandings
New transactions
Net loans _ _ _
Outstandings

1979
estimate

541
277
2,854

1,079

New transactions. __ __
Net loans
Outstandings

1978
estimate

1
28
20
55

4
-2
61

4
- /

Table F-2. D I R E C T L O A N T R A N S A C T I O N S OF F E D E R A L A G E N C I E S (in millions of dollars)—Continued
Commitments
,97g
,9?9
actual
estimate
estimate

Agency or program

]977

Health, Education, and Welfare:
Health programs

New transactions
Net loans
Outstandings

Claims on insured student loans

Other education programs

Housing and Urban Development:
Low-rent public housing—interim

financing

126

314

258

New transactions,.,
Net loans__
Outstandings

181

306

250

New transactions
Net loans
Outstandings

310

348

310

392

405

394

232

343

290

694

412

New transactions
Nei loans
Outstandings

Federal Housing Administration—insurance claims 1

New transactions
Net loans
Outstandings

Housing for the elderly or handicapped 2

New transactions
Net loans
Outstandings

Government National Mortgage Association:
FHA/VA tandem plans

New transactions
Net loans
Outstandings

850

750

794

1,561

1,956

2,017

2,091

2,300

4,268

4,793

4,243

Loans made
,9J7
actual

J978

estimate

,9J9
estimate

106
49
625

129
70
695

83
—13
682

161
141
606

302
280
925

246
216
1,141

187
173
3,624

335
319
3,904

321
305
4,210

238
-26
32

600

319
97
3,259

365
46
3,306

294
53
3,359

21
15
523

355
347
870

733
725
1,595

528
-810
896

1,660
-15
881

2,450
-27
854

Conventional tandem plan

Other.

Community development loans

New transactions
Net loans
Outstandings

399
-448
150

New transactions
Net loans
Outstandings

374

173

150

885

199

-150

*
-200
2,452

-132
2,320

-126
2,194

359
—2
390

170
-4
386

137
81
467

New communities fund

New transactions
Net loans
Outstandings

69
69
106

93
93
198

11
11
209

Other credit

New transactions
Net loans
Outstandings

137

134

16
-73
3,587

101
-11
3,575

127
26
3,602

New transactions
Net loans
Outstandings

41
35
328

74
66
394

76
67
67
460

Justice: LEAA loans.

New transactions
Net loans
Outstandings

41
—11
154

41
-3
151

35
-12
139

Transportation

New transactions
Net loans
Outstandings

185

261

300

123
122
472

323
270
742

300
197
939

New transactions
Net loans
Outstandings

2,050

950

Interior.

Treasury:
New York City seasonal financing.

64
950

M
Q
fe;
r

^
[h
g*

See footnotes at end of table.

fcO

Table F-5.GUARANTEEDL O A N T R A N S A C T I O N S OF F E D E R A L A G E N C I E S (In millions of dollars)—Continued
Commitments

Agency or program

Treasury—Continued

1977
actual

Loans made
1979
estimate

New transactions
Net loans
Outstandings. _
New transactions _
Net loans
Outstandings

Veterans Administration:

Corporation. 3

Federal Deposit Insurance
Federal Home Loan Bank Board

1977
actual

1978
estimate

1979
estimate

-30
4,049

-124
3,925

-128
3,797

2
—8
49

-9
40

-8
31

434
-183
1,448

478
-82
1,366

534
-77
1,289

New transactions.
Net loans
Outstandings _

437

481

536

New transactions
Net loans
Outstandings

134

118

115

134
9
1,158

118
6
1,164

115
7
1,171

New transactions
Net loans
Outstandings _

122

113

131

126

104

113

121
51
1,248

135
91
1,339

121
99
1,438

1,221

3,413

4,300

4,015

4,753

6,216

1,787
446
11,538

1,627
335
11,873

1,788
581
12,454

4
-1.529
43

38
31
74

26
6

New transactions
Net loans
_ __
Outstandings.

1978
estimate

New transactions
Outstandings

Small Business Administration:
Business and investment loans

Disaster loans. _

United States Railway Association 4__

Other agencies and programs..

Total budget agencies.

__ _

_ _

...

__ _

New transactions
Net loans_ _ _
Outstandings

535

543

172

203

202

New transactions
Net loans
Outstandings

357

1,770

310

216

605

163

New transactions
Net loans
_
Outstandings..

723

599

New transactions
Net loans
Outstandings

...

Net loans__

DIRECT

Rural electrification and telephone fund...

Rural Telephone Bank._

__ _

__ . . .

United States Railway Association

514
198
1,939

222
34
1,428

1,290
1.100
2,779

715
462
3,241

396

723
723
1,031

599
599
1,630

396
396
2,026

21
-10
232

85
52
284

91
55
339

32,859

21,854

29,361

26,575

h-l
&

2,550

7,931

4,329

68,160

76,091

80,420

28,942

__ __
20,235

Outstandings
OFF-BUDGET

469
160
1,741

1
25,312

New transactions

465
113
1,832

21,709

22,336

Hd
H
O

CO
HH
CO

LOANS

New transactions
Net loans
Outstandings
New transactions
Net loans
Outstandings
New transactions __
Net loans _ __
Outstandings.

1,083

1,017

985

1,694

1,676

1,411

160

185

230

438

513

603

223

100

875
599
8,817

1,035
280
9,097

1,250
205
9,302

81
77
476

110
99
575

140
126
701

223
220
317

100
100
417

27
27
444

See footnotes at end of table.

fcO

Table F-5.GUARANTEEDL O A N T R A N S A C T I O N S OF F E D E R A L A G E N C I E S (In millions of dollars)—Continued
Commitments

Agency or program

1977
actual

1978
estimate

Loans made
1979
estimate

1977
actual

1978
estimate

1979
estimate

Exchange Stabilization Fund.3
Federal Financing Bank

New transactions
Net loans
Outstandings. _ _

New transactions __

Total off-budget agencies

25,163

12,379
8,087
23,123

15,626
10,670
33,793

16,158
12,600
46,392

22,591

13,558

16,871

17,575

8,983

11, 149

12,957

19,042

19,770

21,349

15,829

19,972

20,509

21,070

Net loans-

Grand total

_ _

Outstandings _ ___

17,965

22,161

27,177

32,733

43,882

56,839

New transactions

45,821

53,931

51,533

35,412

46,232

44,151

11,533

19,079

17,288

Net loans
Memorandum:
Foreign currency loans 5 __

Outstandings
_

_ New transactions
Net loans„
Outstandings __

38,196

43,870

49,512

100,893

119,972

137,260

1
-156
2,089

1
-82
1,966

-83
1,847

• Less than $0.5 million.
1 Claims paid under insurance and guarantee programs become classified as direct loans until acquired loans or collateral are paid off or liquidated. Proceeds of liquidations are classified as repayments and realized losses then become writeoffs.
2 Returned to on-budget status by statute.
3 Agency did not report.
4 Includes both debentures and repayable preferred stock of ConRail.
5 Foreign currency transactions are in budget totals only upon conversions to or from dollars.

SPECIAL ANALYSIS F

129

The table also shows both gross and net outlays of loan principal
amounts for direct loan programs and outstanding loan levels for 197779. Net loan outlays of on-budget Federal agencies are counted in
budget outlays, and thus are reflected in the budget surplus or deficit.
Direct lending of off-budget Federal entities has economic effects
that are identical to those of direct loan programs included in the
budget. Therefore they are also presented in table F-2, under a
separate heading.
Repayments of outstanding loans are not classified as budget
receipts. Rather they are offset against new loan disbursements in the
case of loan revolving accounts, and against agency outlays in the case
of nonrevolving accounts. For this reason, net outlays for loans on
table F-2 are net of repayments (and loan sales), and therefore often
much less than the level of new lending. New loans provide a more
comprehensive measure of program activity.3
Net loan outlays displayed in table F-2 are the difference between
the volume of loans outstanding at the beginning of the year and the
outstanding volume at the end of the year. This year-to-year net
change in loan outlays is equal to the total of gross loan disbursements
during the year (new loan disbursements, disbursements for guarantee
claims and purchases of existing loans) less repayments and prepayments of loans, proceeds of collateral liquidation and sales of loan
assets to the public (including Government-sponsored enterprises),
and to the FFB.
LOAN ASSET

SALES

Several agencies sell loan assets from their direct loan portfolios.
Prior to the advent of the FFB, these were sold to the public. Now,
however, the majority are sold to the FFB. Loan asset sales occur for
several reasons. Three programs of the Farmers Home Administration
(FmHA) were essentially designed with this intent. In substance,
these are direct loan programs, and the sale of certificates of beneficial
ownership (CBO's) would ordinarily be classified as a means of
financing budget outlays (that is, borrowing, except for special provisions of law). Second, where loan guarantee or insurance programs are
the primary delivery mechanism for credit assistance, direct loans may
be acquired by the agency through backstop direct loan programs,
payments on guarantee claims, or through sale of required collateral
using purchase money mortgages. Refinancing of these direct loans
under the agencies' primary guarantee programs is a fairly standard
practice. A third and somewhat unique source of direct loans is the
brokerage and subsidy operation under the GNMA "tandem" plan.
Loan asset sales are of special interest to budget analysts because they
are counted as a loan repayment, or negative outlay—thus reducing
the expenditure totals.
3 Some guaranteed loans are ultimately supported by direct loans as a result of claims paid under
guarantee programs when the Government receives either the original loan or the collateral.

260-700 O - 78 - 9

Table F - 3 . L O A N A S S E T S A L E S O F F E D E R A L A G E N C I E S ( w i t h r e p a y m e n t s a n d a c c o u n t i n g a d j u s t m e n t s )

[In millions of dollars]
Agency or program

Agricultural (Farmers Home Administration):
Agricultural credit insurance fund
Rural housing insurance fund
Rural development insurance fund_
Health, Education, and Welfare:
Health maintenance organization loans.
Medical facilities loans
Treasury: New York City seasonal financingVeterans Administration:
Direct loan revolving fund
Loan guarantee revolving fund
Other agencies and programs
Subtotal, budget agencies, excluding tandem plans.

Loan sales
1977
actual

1978
estimate

Repayments and adjustments
1979
estimate

1977
actual

1978
estimate

1979
estimate

_ Public sales/repayments
FFB sales/adjustments. . . .

180
1,250

155
1,891

130
1,876

879
13

1,001
16

1,208
19

_ Public sales/repayments _ __
FFB sales/adjustments

254
3,105

150
3,773

40
4,195

626
13

815
22

1,019
22

46
610

20
912

18
1,108

26
-1

35
-1

47
-1

Public sales/repayments
FFB sales/adjustments

3
M
W
d
o
o
H
H3
O

Public sales/repayments
FFB sales/adjustments

Public sales/repayments.*
FFB sales/adjustments

Public sales/repayments
FFB sales/adjustments..

2,050

950

. Public sales/repayments.
FFB sales/adjustments..

105

Public sales/repayments..
FFB sales/adjustments. _

288

268

h*
a
>
57
307

Public sales/repayments.
FFB sales/adjustments..

Public sales/repayments _

873

645

551

FFB sales/adjustments...

7,116

7,580

7,271

91
2

85
4

81
4

93
39

87
65

89
74

6,912
1

8,762

8,915

2,204

2,561

3,000

<1
o

Housing and Urban Development (GNMA):
Tandem plan sales—FHA/VA mortgages
Tandem plan sales—conventional mortgages
Subtotal, budget agencies (with tandem)

Public sales/repayments _
Public sales/repayments..

1,265
815

1,610
150

2,450

74
33

Public sales/repayments..

2,952

2,405

3,001

8,733

10,849

11,386

FFB sales/adjustments. _

7,116

7,580

7,271

455

720

276

300

325

Sales from off-budget accounts: Rural electrification and telephone
fund
Public sales/repayments...
FFB sales/adjustments
Total—all loan sales

Public2 sales/repayments..

2,952

2,405

3,001

FFB 3 sales/adjustments. _

7.H6

8,035

7,990

Repurchases/net sales
1977
actual

Repurchases and tandem plan purchases:

Tandem plan purchases, conventional loans
Total—budget agencies

1978
estimate

1979
estimate

Repurchases. _ _
Net sales.
_.

1,578
3,866

1,768
5,132

1,897
5,471

Purchases...
Net sales

2,091
-826

2,300
-690

2,300
150

815

150

Repurchases.

3,669

4,068

4,197

Net sales

6,399

5,917

5,975

PurchasesNet sales. _

_____

* Less than $0.5 million.
All loans sold, except conventional tandem plans, are guaranteed upon sale, and are reflected in guaranteed loan total in table F—5.
See table F - 4 for detail of FFB purchases.
3 "Public" includes sponsored agencies such as F N M A and F H L M C who are among principal purchasers of H U D and VA mortgages.

m
hd
H
O
£
c

t—H

132

THE

BUDGET

FOR FISCAL Y E A R

T H E FEDERAL FINANCING

19 7 9

BANK

The FFB, which began operating in May 1974, is a significant
factor in the organization of Federal credit. The bank, an entity
staffed within the U.S. Treasury, was created to provide more efficient
financing for obligations issued, sold, or guaranteed by Federal
agencies, thereby reducing costs to the Government and the assisted
borrowers. With some exceptions, the Treasury may require Federal
agencies authorized to borrow from the public to borrow from the
FFB instead, and may also direct agency sales of loan assets to the
FFB. The FFB is also authorized to originate loans under Feneral
agency guarantee programs. The FFB's authority to borrow from the
Treasury at the Treasury's own borrowing rate enables it to charge
lower interest rates than would be available to the program agency if
that agency were to finance its program funding directly in private
capital markets. Although this support involves no visible cost to the
Government, the assisted borrowers may receive substantial implicit
subsidies in the form of lower interest rates. Because the FFB is outside the budget by law, loan disbursements by the FFB are not counted
as budget outlays. Transactions of the FFB are summarized in table
F-4. As the table indicates, the FFB now holds a large volume of
debt incurred by private individuals, Government-sponsored enterprises, and Federal agencies.
Table F-4. F F B A C Q U I S I T I O N S O F A G E N C Y

OBLIGATIONS

(in millions of dollars)
Agency or program

1977
actual

Guaranteed loans—purchases of Federal
agency loan assets:
FAP: Overseas Private Investment Corp.

USD A:
Farmers Home Administration

Rural Electrification Administration. __

HEW:
Medical facilities guarantees

Health Maintenance Organizations

New acquisitions
Net loans
Outstandings. _ __

1979
estimate

49
46
46

5
41

-5
36

4,965
4,965
14,615

6,575
6,575
21,190

7,180
7,180
28,370

New acquisitions
Net loans
Outstandings
_

354

455
455
809

720
720
1,529

New acquisitions. _.
Net loans
Outstandings

22
22
152

19
19
171

171

New acquisitions. __
Net loans
_ _
Outstandings.. ___

29
29
29

36
36
65

91
91
156

2,050
82
1,157

950
-1,157

-27
133

-12
121

New acquisitions
Net loans
Outstandings.

Treasury: NYC seasonal financing notes.

New acquisitions
Net loans
Outstandings

Small Business Administration

New acquisitions
Net loans
Outstandings
__

1978
estimate

—15
106

SPECIAL ANALYSIS F
Table F-4. F F B A C Q U I S I T I O N S O F A G E N C Y

133

OBLIGATIONS—Continued

(In millions of dollars)
Agency or program

1977
actual

Guaranteed loans—Continued
Total, purchases of agency loan assets. New acquisitions

8,035

7,990

5,117

5,911

7,971

16,486

22,397

30,368

1,383
1,383
2,156

1,584
1,584
4,100

1,585
1,585
5,685

1,222
1,222
2,382

2,500
2,500
4,882

2,500
2,500
7,382

105
105
510

95
95
605

130
130
735

58
58
58

39
-28
30

-21

347
-18
578

255
225
803

228
198
1,001

New acquisitions .
Net loans .
Outstandings

177

New acquisitions.__
Net loans
_ ...
Outstandings

29
29
142

120
118
260

126
123
383

New acquisitions
Net loans
_ .
Outstandings..

57
57
57

198
198
255

154
154
409

New acquisitions
Net loans
Outstandings. _ .

85
85
176

84
84
260

46
-17
243

New acquisitions
Net loans
Outstandings

1,977
41
41

2,716
-17
24

3,400
-24

New acquisitions

5,263

7,591

8,169

Net loans

2,970

4,759

4,628

Outstandings-. .

6,637

11,396

16,024

New acquisitions

12,379

15,626

16,159

8,087

10,670

12,600

23,123

33,793

46,392

Net loans
Outstandings. __ _

214
310

79
389

389

-1,067
2,181

933
3,114

246
3,360

__ _

Outstandings
Guaranteed FFB originations:
DOD (FAP): International security loans. New acquisitions _. _
Net loans
Outstandings . .
New acquisitions. _ _
Net loans
_ .
Outstandings

HEW: Guarantees of SLMA obligations._

New acquisitions
Net loans . . .
.
Outstandings

Interior: Territorial issues

New acquisitions
Net loans _
Outstandings __

DOT:
Rail programs._

__ _ _

WMATA bonds

GSA: Public building CBI's

NASA: Lease guarantees
SBA:
SBIC debentures _ _

Other agencies and programs

Total, guaranteed loan originations.

Total, all guaranteed loans

____

New acquisitions.
Net loans
_ _
Outstandings.. . .

Net loans
Outstandings..
Debt issues—off-budget agencies:
U.S. Railway Association
U.S. Postal Service

1979
estimate

7,116

Net loans _

USDA: Rural Electrification Administration
_
_ _

1978
estimate

Net loans
Outstandings.. _

134

THE

BUDGET FOR FISCAL YEAR

19 79

Table F-4. FFB ACQUISITION OF AGENCY OBLIGATIONS-Continued
(In million of dollars)
Agency or program

1977
actual

Debt issues—budget agencies:
Export-Import Bank__
_ __ .
Tennessee Valley Authority

_ New loans.
Outstandings

. _ _ _ Net loans _ _
Outstandings

Total debt issues

. . _

Net loans_.

Outstandings
Total, all FFB holdings

Net loans_
Outstandings

GUARANTEED

1978
estimate

1979
estimate

1,155
5,923

996
6,920

1,559
8,479

1,145

1,165

1,460

3,880

5,045

6,505

1,447

3,173

3,265

12,294

15,468

18,733

9,533

13, 843

15,865

35,417

49,261

65,125

LOANS

Guaranteed loans 4 are loans made by private lenders or investors,
for which the Federal Government assumes responsibility for payment
of all or a portion of principal and interest in the event that the borrower defaults on his obligation. Included are Government guarantees
of marketable securities, as well as loans made and serviced by individual financial institutions. The nature of the guarantee differs widely
among programs. In the case of fully guaranteed loans, the Government guarantees the repayment of all principal and interest if the
borrower defaults. Guaranteed loans also include loans on which the
Government pays a share of the interest, even though principal repayments are not assured. In other cases, the Government may
guarantee a portion of the outstanding principal. Various contractual
agreements including long-term Federal leases, guarantees of private
leases, and contracts to make subsidy payments over extended periods
are also used to guarantee credit—without being explicitly labeled as
loan guarantee programs.
Loan guarantee data are shown in table F-5 for the major agencies
and programs. The tables reflect the full principal amount of guaranteed loans, although in some cases the Government guarantees less
than 100% of the principal. The presentation in table F-5 is comparable to table F-2 for direct loans. The aggregation of guaranteed
loans with other forms of Federal credit assistance requires some
adjustments to eliminate double counting. These adjustments are
required when the same credit extension is guaranteed twice, as in the
case of GNMA's guarantee of passthrough securities that are backed
4

As used here, guaranteed loans include those designated as "insured."

SPECIAL ANALYSIS F

135

by FHA-insured and VA-guaranteed mortgages. Guaranteed loans
that are converted to direct loans when purchased by a Federal agency
must also be deducted because they have been already included in
table F-2. Additional adjustments are made for double counting in
table F-6 for credit activities of Government-sponsored enterprises.
These adjustments are also reflected in the aggregate totals in Table
F-7.
Table (F-5) summarizes the net changes in guaranteed loans and
the total dollar value of guaranteed loans outstanding at the end of
1977-79 by agency and program. Guaranteed loans outstanding are
expected to grow rapidly, up to almost $300 billion in 1979, Before
1975, guaranteed loans and securities were typically held by private
investors. However, the FFB has since become a major purchaser
of guaranteed obligations, thereby converting them into direct but
off-budget loans. After adjustment for double counting including
FFB purchases, the total of outstanding guaranteed loans amounts
to $224 billion in 1979.
Guaranteed loans, like off-budget direct loans, are not reflected in
the budget at the time credit is extended. Budget outlays from loan
guarantee programs, excepting explicit subsidies and administrative
costs, occur only when defaults require the Federal Government to
pay lenders' claims. Losses for the older guaranteed loan programs
have been relatively low, partly because most of the loans under
these programs were protected with liens on marketable property.
However, loans made under some newer housing subsidy programs
have had very high default and loss rates in spite of the security of real
property. Other recent programs have high risks because they require
little or no collateral and, as a result, these programs are experiencing
much higher losses.

Table F-5. G U A R A N T E E D LOAN T R A N S A C T I O N S O F F E D E R A L A G E N C I E S (In millions of dollars)—Continued
Commitments

Agency or program

Funds Appropriated to the President:
International security assistance

International development assistance.
Agriculture:
Farmers Home Administration

Rural Electrification Administration..
Commerce:
Maritime Administration

1977
actual

Loans guaranteed

1978
estimate

1979
estimate

1977
actual

1978
estimate

1979
estimate

New transactions
Net loans
Outstandings

1,383

1,584

1,585

1,383
1,249
4,036

1,584
1,452
5,487

1,585
1,445
6,932

New transactions
Net loans
Outstandings

168

187

165

172

213

228

206

146
105
788

126

914

188
140
1,054

New transactions
Net loans
Outstandings

5,965

8,146

8,494

691

1,086

1,307

6,066
3,526
21,940

7,750
5,315
17,255

8,278
5,736
32,991

New transactions
Net loans
Outstandings..

3,986

4,555

4,820

5,823

7,323

8,823

1,222
1,222
2,923

3,055
3,055
5,979

3,320
3,320
9,298

1,470

2,080

764

1,055

1,900

1,354

1,323
1, 125
4,717

1,165
1,005
5,722

1,310
1,130
6,852

New transactions
Net loans
Outstandings

NO A A Fishing vessel guarantees

New transactions
Net loans
Outstandings

16
13
25

29
25
50

40
35
85

Economic development assistance

New transactions
Net loans
Outstandings

1
—23
143

1
-23
119

-23
96

180

Defense: Tanker charters

New transactions
Net loans
Outstandings

Energy:
Geothermal resources development fund..

Coal loan guarantees
Health, Education, and Welfare:

New transactions.
Net loans
Outstandings

New transactions.
Net loans
Outstandings
22

Medical facilities guarantees

New transactions.
Net loans
Outstandings

Health programs

New transactions.
Net loans
Outstandings

Health professions graduate student loans.

New transactions
Net loans
Outstandings

Student loan insurance fund

New transactions
Net loans
Outstandings.

15
40

2
2
2

25
25
27

8
8
35

62
62
62

62
52
114

271
215
1,355

69
55
1,410

—13
1,397

31
31
106

40
38
144

97
95
95
239

120

1,470

1,586

1,773

120
118
118
1,470
5/7
517
* 100
6,193

1,586
364
*6,557

77,046

1,773
489

Guarantees of SLMA Obligations

New transactions.
Net loans
Outstandings

105
105
510

95
95
605

130
130
735

College facilities: subsidized loans

New transactions.
Net loans
Outstandings

36
17
1,345

-19
1,325

-21
1,305

2
H
O
^
V

>
£
^

See footnotes at end of table.

Table F-5. G U A R A N T E E D L O A N T R A N S A C T I O N S OF F E D E R A L A G E N C I E S (In millions of dollars)—Continued
Commitments

Agency or program

Housing and Urban Development:

1977
actual

Interior:
Indian programs

Other

1979
estimate

11,003

12,932

14,110

8,317

10,371

11,875

New transactions.
Net loans _
Outstandings

19,776

20,262

24,709

8,960

10,605

11,290

New transactions
Net loans_
Outstandings

New transactions.
Net loans_ _
Outstandings
Other mortgage credit

1978
estimate

New transactions _ _
Net loans_
Outstandings
_ _

New transactions.
Net loans_
Outstandings

__ _

17,019

16,000

15,500

New transactions_
Net loans
Outstandings

00
00

Loans guaranteed
1977
actual

1978
estimate

1979
estimate

9,118
477
14,203

10,653
1,353
16,556

12,381
2,281
17,837

12,929
4,864
93,754

13,384
4,732
98,486

18,231
7,479
105,965

26
-984
1,221

15
-600
621

16
-418
202

5
-47
169

84
20
189

80
80
269

17,019
14,238
42,932

16,000
12,068
55,000

15,500
9,900
64,900

-4
536

536

3
a
w

o
o
M
H3
O
w

Q
>
f

H
H
>

New transactionsNet loans
Outstandings

35
34
49

72
61
109

1
—13
96

New transactions.
Net loans
Outstandings

58
58
58

39
39
97

Transportation:
Rail programs

WMATA bonds

New transactions
Net loans
Outstandings

145

350

180

New transactions
Net loans
Outstandings
New transactions
Net loans
Outstandings

102

2,050

Guarantee of NYC notes sold to FFB_.

New transactions
Net loans
Outstandings

General Services Admin: Public buildings.

New transactions
Net loans
Outstandings

Aircraft loans
Treasury:

41
950

444

324

197

198

154

NASA: Long term lease

New transactions
Net loans
Outstandings

15,412

1 6,513

1 6,704

Veterans Administration: Housing loans..

New transactions
Net loans
Outstandings

2,894

3,209

3,294

Emergency Loan Guarantee Board

New transactions
Net loans
Outstandings

Export-Import Bank

New transactions
Net loans
Outstandings

7,254

10,704

13,791

5,693

6,189

7,356

125
-18
732

253
206
938

393
374
1,312

997

91
81
182

41
24
206

-20
186

2,050
75
1,150

950
-1,150

29
-49
864

120
107
971

126
111
1,082

Q
£
t<

57
57
57

198
198
254

154
154
408

%
>
^

13,436
7,161
71,923

14,874
7,879
79,803

-80
60

-60

4,379
397
5,324

6,145
1,564
6,889

15,230
8,076
87,878

|
^

7,846
2,579
9,468

Federal Deposit Insurance Corporation.1
See footnotes at end of table.

OO
CD

Table F-5. G U A R A N T E E D L O A N T R A N S A C T I O N S OF F E D E R A L A G E N C I E S (in millions of dollars)—Continued
Commitments

Agency or program

Small Business Administration:
Loan guarantees

1977
actual

New transactions
Net loans
Outstandings
New transactions
Net loans
Outstandings

_ __

New transactions

Loans guaranteed

1978
estimate

1979
estimate

2,724

3,170

3,530

1,096

1,409

1,648

90,172

99,557

1979
estimate

2,530
1,076
6,856

2,913
1,245
8,101

9
-2
36

7
-I
36

107,044

73,514

80,997

89,788

35,091

39,196

44,518

35,530

42,839

47,522

284,290

323,486

368,004

17,019

16,000

15,500

17,019
14,238
42,932

16,000
12,068
55,000

15,500
9,900
64,900

New transactions.__
Net loans _ .
Outstandings _ _ _ _

105

130

105
105
510

95
95
605

130
130
735

New transactions. __
Net loans __
Outstandings

131

222
219
316

73
71
388

10
8
396

2,092

2,300

4,269

4,793

4,243

528
-1,010
3,348

1,660
-147
3,201

2,450
-152
3,048

Outstandings.

1978
estimate

2,076
684
5,780

Net loans

Less secondary guarantees:5

1977
actual

New transactions __
Net loans __
Outstandings
_

New transactions
Net loans... _ _
Outstandings

_ __

Total, primary guarantees (before summary table adjustments).

New transactions

77,826

81,161

89,114

Net loans

Less guaranteed loans held as direct loans:
By off-budget federal agency (FFB)
By federally sponsored enterprises:
Student Loan Marketing Association

Federal National Mortgage Association

Federal Home Loan Banks

Federal Home Loan Mortgage Corporation

Total guaranteed loans (adjusted)

55,640

63,169

71,698

21,545

27,109

34,632

Outstandings

31,179

38,036

43,279

237,184

264,293

298,925

New transactions
Net loans
Outstandings

19,042

19,770

21,349

15,829

19,972

25,163

12,379
8,087
23,123

15, 626
10,670
33,793

16,158
12,600
46,392

New transactions
Net loans
Outstandings

225

205

196

225
117
519

205
97
615

196
137
752

New transactions
Net loans
Outstandings

5,362

5,265

4,427

2,062

1,358

1,340

2,203
-487
28,061

2,668
61
28,122

1,987
-1,128
26,994

2
—16
58

1
*
58

2
—5
53

39
-189
1,499

-180
1,319

-158
1,161

40,794

44,669

53,354

14,027

16,461

23,188

New transactions
Net loans
Outstandings
New transactions
Net loans
Outstandings
New transactions.

46,140

55,921

63,139

Net loans
Outstandings..
Memorandum:
FAP: International Financial Institutions: Callable capital sub- New transactions
scriptions.
Net loans
Outstandings

13,288

16,706

16,776

183,924

200,385

223,573

737

822

1,376

737
737
10,325

822
182
11,472

1,376
1,376
12,523

1 Agency did not report,
2 Secondary guarantees are defined in this table to cover securities representing loans assets which are also guaranteed. Secondary guarantees by Export-Import Bank
of the debt of the Private Export Finance Corporation have not been estimated and are excluded from both sections of the table.

ui
§
Q

H—1
hf^
L 1

142

THE BUDGET FOR FISCAL YEAR

GOVERNMENT-SPONSORED

19 79

ENTERPRISES

Several major Government-sponsored credit enterprises, were
created to facilitate the financing of selected kinds of economic
activity. Although they are privately owned and managed, all are
chartered by the Government, are subject to some form of Federal
supervision, and consult the Treasury Department in planning the
marketing of their debt obligations. The enterprises included in this
category are the Federal Home Loan Bank System, the three components of the farm credit system, and the Student Loan Marketing
Association.
These enterprises differ from other private institutions in that
they have been given special preferences, including rights to assess
their constituents, certain tax exemptions and preferences, and preferential eligibility for investment in their securities for federally
regulated institutions and other fiduciaries. These advantages, together with the enterprises' Federal relationship, give their security
obligations a preferred position in the securities market. This enables
them to borrow at interest rates below the rates on the best grade
corporate securities, and marginally above those of the Treasury.
All Government-sponsored credit enterprises are essentially financial
intermediaries, channeling funds from one sector of the capital market
to another. They borrow mainly in the "agency sector" of the bond
market, and disburse these funds for specifically authorized purposes,
either directly to lenders or by purchasing loans originated by them.5
Some of the agencies also serve as reserve facilities or provide secondary marketing functions, furnishing liquidity for constituent lenders by making temporary advances or buying portfolio loans for resale.
Funds lent by Government-sponsored credit enterprises are obtained mostly from borrowings in the capital markets. Sale of capital
stock and retained earnings provide a small portion of resources used
for lending. The timing of borrowing and lending varies from year
to year. The lending of FNMA and FHLBS largely depends on
conditions in the mortgage credit market and is thus highly volatile.
Table F-6 shows both the lending and borrowing of these credit
institutions. Totals have been adjusted to avoid double counting that
would otherwise result from loans between agencies.
s The program of the Government National Mortgage Association (a budget agency in HUD)
to guarantee mortgage-backed securities achieves a very similar "intermediation" result. G N M A
guarantees securities issued against privately held pools of federally guaranteed or insured mortgages.
The F R B flow-of-funds data, for example, include this G N M A program within the definition of
Government-sponsored credit enterprises. GNMA data appear in entries of table F-5, covering
guaranteed loans.

Table F-6. C R E D I T A D V A N C E D A N D R A I S E D B Y F E D E R A L L Y S P O N S O R E D C R E D I T

INTERMEDIARIES

(In millions of dollars)
Net change
1977
actual

1978
estimate

Outstanding
1979
estimate

1976
actual

1978
estimate

1979
estimate

LENDING (Funds advanced)

Student Loan Marketing Association
Federal National Mortgage Association 1
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation: 1
Corporation accounts
Participation certificate pool 2
Total lending (unadjusted)..
Less loans between sponsored agencies: FHL banks to FHLMC
Less loans from Federal agencies:
FFB to SLMA
FHLBB to FHL banks
Total primary lending
See footnotes at end of table.

117
1,001

97
2,285

137
455

519
33,018

615
35,303

752
35,758

768
1,703
2,941

824
1,918
2,972

689
2,201
3,344

5,235
13,286
21,548

6,060
15,204
24,521

6,749
17,405
27,865

—541

4,173

3,895

19,575

23,748

27,643

—744
2,814

—406
4,066

-169
4,323

3,381
5,339

2,975
9,406

2,806
13,729

8,131
—1,517

15,930
—474

14,875
-100

101,902
2,464

117,832
1,990

132,707
1,890

105
-1,491

130

510

605

735

11,033

16,309

14,845

98,928

115,237

130,082

Table F-6. C R E D I T A D V A N C E D A N D R A I S E D B Y F E D E R A L L Y S P O N S O R E D C R E D I T I N T E R M E D I A R I E S — C o n t i n u e d
(In millions of dollars)
Outstanding

Net change
1977
actual

1978
estimate

1979
estimate

1977
actual

1978
estimate

1979
estimate

BORROWING (Funds raised)

Student Loan Marketing Association
Federal National Mortgage Association 1
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:
Corporation accounts
Participation certificates 2
Total borrowing (unadjusted)
Less: Borrowing from other sponsored agencies:
FHLB loans to FHLMC
Other
_
Less: Borrowing from Federal agencies:
FFB loans to SLMA
FHLBB loan to FHL banks
Less: Loans to Federal agencies:
Investments in Federal securities
Total borrowing (adjusted)
1
2

105
807

95
2,095

130
372

510
31,492

605
33,587

735
33,959

864
1,589
2,682

726
1,825
2,562

2,082

583

2,961

4,979
12,656
19,535

5,705
14,480
22,097

16,562
25,058

—1,409

4,534

3,464

17,159

21,693

25,157

—1,769
2,814

905
4,066

-47
4,323

3,281
5,339

4,185
9,406

4,138
13,729

5,683

16,807

13,868

94,951

111,759

125,627

-1,517
152

-474

-100
133

2,364
305

1,890
365

1,790
399

105
-1,491

130

510
1,491

605

735

—2,919

184

103

748

931

1,034

11,353

16,942

13,702

91,025

107, 967

121,669

Loans purchased at discount are recorded at acquisition cost.
Participation certificates sold against mortgage pools are counted as sales of loan assets and are therefore not reflected on the Corporation's balance sheet.

6,288

SPECIAL ANALYSIS

FUNCTIONAL

AREAS

SUPPORTED

145

FEDERAL

CREDIT

ASSISTANCE

The functional distribution of direct loans and federally guaranteed
loans discussed in previous years in this analysis is now displayed
more comprehensively in Part 5 of the main budget document. It is
accordingly now omitted from the special analysis.
SUMMARY

OF F E D E R A L AND F E D E R A L L Y ASSISTED
TRANSACTIONS

CREDIT

Table F-7 summarizes the major components of Federal financial
activity. Components within the aggregates vary widely from year to
year for many reasons. Recent FFB purchases of large amounts of
guaranteed loans returned them to off-budget direct loans; and recent
legislation has shifted the Export-Import Bank from off-budget to
on-budget status in 1977. FFB lending has similar effects on borrowing
reducing the volume of guaranteed borrowing while increasing the
volume of Federal borrowing from the public. In addition, Federal
borrowing from the public varies from year to year largely reflecting
the changing size of the unified budget deficit.

260-700 O - 78 - 10

Table F-7. S U M M A R Y O F C R E D I T A D V A N C E D A N D C R E D I T R A I S E D U N D E R F E D E R A L A U S P I C E S (in billions of dollars)
Net change
1977
actual

1978
estimate

Outstanding
1979
estimate

1977
actual

1978
estimate

1979
estimate

LENDING (Credit advanced)

Direct loans (from table E - 2 ) :
On-budget agencies
Off-budget agencies
Guaranteed loans (primary, adjusted, from table E-5)
Loans by federally sponsored credit intermediaries (from E-6)

2.6
9.0
14.1
11.0

7.9
11.1
16.5
16.3

4.3
13.0
23.2
14.8

Total, credit advanced to the public under Federal auspices 1

36.6

51.8

55.4

Outside the budget

34.1

43.8

51.1

53.5
14.1
11.4

66.0
16.5
16.9

73.0
23.2
13.7

78.9
—42.3

99.4
—47.6

109.9
—54.5

68.2

32.7
183.9
98.9

76.1
43.8
200.4
115.2

80.4
56.8
223.6
130.1

383.7
315.6

435.5
359.4

490.9
410.5

551.8
183.9
91.0

617.8
200.4
108.0

690.8
223.6
121.7

826.8

926.2

1,036.1

B O R R O W I N G (Credit raised)

Federal borrowing
from(same
the public
(from table
C-1)
Guaranteed
borrowing
as guaranteed
loans,
above)
Borrowing by federally sponsored credit intermediaries (net. frbm table E-6)
Total, credit raised from the public under Federal auspices 1
Net credit advanced

Excludes Federal Reserve credit.

SPECIAL

INTEREST

ANALYSIS

147

SUBSIDIES

Most frequently, the favorable terms of Federal credit programs
take the form of an interest rate that is lower than the rate charged by
private lenders, although the maturity of the loan and the loan-tovalue ratio are also more favorable. Other credit subsidies may result
from fees or premiums inadequate to cover costs of administration and
losses on credit guarantees and insurance programs, waivers of such
fees or premiums, or forgiveness of part or all of the loan principal.
Although intended to be illustrative rather than definitive measurements, previous attempts to estimate subsidy values in this analysis
have been questioned on a number of counts. While there has been
general acceptance and increasing use of the present value method of
valuation (as recommended by the 1967 President's Commission on
Budget Concepts), there are significant differences of view on the
selection of interest rate standards for both subsidy measurement and
for capitalization. Also, past treatment has not included the interest
subsidies provided through tax-exempt interest—a subsidy item that
is substantially larger than all other credit subsidies combined. Accordingly, further publication of the detailed interest subsidy table in
this analysis is being deferred pending broader analysis and resolution
of these issues.

SPECIAL ANALYSISF148
TAX

EXPENDITURES

The Congressional Budget Act of 1974 requires a listing of tax expenditures in the budget. Tax expenditures are defined by that act as
"revenue losses attributable to provisions of the Federal tax laws
which allow a special exclusion, exemption, or deduction from gross
income or which provide a special credit, a preferential rate of tax, or a
deferral of tax liability.'' Tax expenditures are one means by which
the Federal Government pursues public policy objectives and, in
most cases, can be viewed as alternatives to budget outlays, credit
assistance, or other policy instruments.
Tax expenditures have varied objectives. Nearly all tax expenditures
are meant either to encourage certain economic activities or to reduce
income tax liabilities for taxpayers in special circumstances. Among
the economic activities encouraged by tax expenditures are investment, housing, petroleum exploration and development, borrowing by
State and local governments, and support of charitable institutions.
The deductibility of medical expenses, casualty losses, and personal
exemptions for the aged and blind are examples of adjustments of tax
liabilities to meet special circumstances.
The benefits of tax expenditures designed to encourage certain types
of economic activity typically do not rest fully or even mostly with the
corporations or individuals whose taxes are initially affected. An initial
reduction in taxes tends to attract more resources to the preferred
activity, thereby competing away some or all of the shortrun advantage conferred to particular taxpayers by the tax expenditures.
Thus benefits often accrue to others in the form of lower prices for
particular goods or services, or in other ways become widely diffused.
For example, the deductibility of charitable contributions does not
merely lower individual or corporate liabilities; the institutions that
receive the contributions also benefit as do the beneficiaries of those
institutions.
This special analysis provides measures of the quantitative importance of various tax expenditures but does not attempt to evaluate
their effectiveness. It should be emphasized that the listing of specific
tax expenditure items does not imply either approval or disapproval
of specific provisions of the tax system.
Major changes in tax expenditures resulting from the Tax Reduction
and Simplification Act of 1977 are noted in the text. The analysis
concludes with a discussion of changes in tax expenditures resulting
from the tax proposals that are part of the 1979 budget. Some changes
in tax expenditures are proposed as a part of the President's tax
reform program specifically to improve the efficiency and equity of
the tax system and to simplify it.
148

SPECIAL

ANALYSIS

DEFINING T A X

149

EXPENDITURES

Income tax provisions resulting in tax expenditures are further
defined in the legislative history of the Congressional Budget Act as
exceptions to the "normal structure" of the individual and corporation
income taxes. They reduce tax liabilities for particular groups of taxpayers. Excluded from further discussion in this analysis are negative
tax expenditures or tax penalties; that is, exceptions to the normal
structure of income taxes that result in increased tax liabilities for
certain groups of taxpayers. There are only a few such exceptions; one
example is the nondeductibility of gambling losses in excess of gambling gains where gambling is engaged in for profit; another is limitations on the deductibility of capital losses. Two were added by the Tax
Reform Act of 1976: deductibility of the costs associated with the
demolition of certain historic buildings was disallowed; and certain
normal tax treatment was denied for taxpayers who cooperate with or
participate in an international boycott.
The "normal structure" is not defined in the tax code. The concept
has evolved from various congressional and public reviews of the
U.S. tax system focusing on the definition of the income tax base and
the rates applied to that base. Conceptually, it would be more appealing to begin with a theoretically pure income tax base and use for
this purpose "economic income," defined as receipts available to
support consumption or additions to net wealth, the imputed value
of in-kind consumption, and imputed changes in net wealth. Some tax
expenditures, such as those resulting from exclusions of certain
types of income or special deductions, could then be identified as the
result of departures from a theoretically pure tax base. Howrever,
this is not possible. The concept of the normal structure recognizes
that it is impractical to make the necessary imputations. Furthermore,
the normal structure includes the separate taxation of individual and
corporate incomes whereas a theoretically pure income tax structure
would integrate these two taxes. Theoretically pure tax bases could
also be specified for other types of taxes, such as a tax on consumption
spending rather than on economic income.
Although a theoretically pure income tax base can be specified, there
is no theoretical foundation upon which to support any particular
degree of progressivity in the individual income tax rate structure or
any particular corporate income tax rate. For purposes of identifying
tax expenditures, such as those resulting from special tax rates or tax
credits, the structure of progressive rates and provisions that exclude
low-income persons from tax liability embodied in current law are
deemed a part of the normal tax structure.
When the rate structure and threshold levels for tax liability are
changed, for whatever reason, the new rates and threshold levels
become part of the normal structure used in the analysis of tax expenditures. The Tax Reduction and Simplification Act of 1977 increased
the standard deduction (now known as the "zero bracket amount")
and eliminated the distinction between the low-income allowance
(minimum standard deduction) and the percentage standard deduction, thus altering the normal tax structure. Those alterations
reduced the estimated revenue losses associated with many tax
expenditure items primarily because fewer taxpayers will itemize
their deductions. The President's proposal to replace the deduction

150

THE BUDGET FOR FISCAL YEAR

19 79

for personal exemptions and the general tax credit with a credit and
to reduce tax rates will have a similar impact on tax expenditures.
The existing rate structure for individuals, ranging from 14% to
70%, and the 48% corporate tax rate cannot be presumed to exist
independently from current tax expenditures. If major tax expenditure items were deleted and budget outlays remained constant, tax
rates would undoubtedly be set at lower levels so as to maintain an
appropriate fiscal policy. For example, the reductions in tax rates
proposed by the President are related to proposed reductions in tax
expenditures.
Some of the more technical issues and ambiguities involved in
distinguishing between the normal structure of the income tax system
and tax expenditure provisions are discussed in the following paragraphs. In a few cases the conceptual ambiguities require that essentially arbitrary distinctions be made.
• Threshold levels for tax liability.—Tax code provisions that determine threshold levels of income below which no tax liability is
imposed for the different types and sizes of taxpaying units are
part of the normal structure. Personal exemptions and the lowincome allowance have determined these thresholds in recent
years. Legislation enacted during 1975, 1976, and 1977 temporarily added the general tax credit to these provisions. The Tax
Reduction and Simplification Act of 1977 made a permanent
change in the provisions that establish threshold levels for tax
liability by repealing the low-income allowance and the percentage standard deduction and substituting flat standard deductions (zero bracket amounts) for different types of filing units.
However, deductions or credits for additional personal exemptions
for taxpayers over 65 and for the blind do result in tax expenditures because they depend upon more special circumstances. The
percentage standard deduction, to the extent it exceeded the
low-income allowance, also resulted in a tax expenditure because
it substituted for itemized deductions that are mostly tax expenditure items.
• The progressive rate schedules for the individual income tax.—No
tax expenditure results because some income is taxed at lower
rates than other income when progressive rate schedules are applied to all taxable income. The income averaging provision of
the code is a part of the normal structure since it limits the impact
of progressive rates when income increases significantly. The
maximum tax of 50% on personal service income is treated as a
tax expenditure item because it fits the definitional term "preferential rate of tax."
• Separate rate schedules for single and married taxpayers, married
taxpayersfilingseparately, and heads of households.—Existing provisions regarding the definition of taxpaying units and separate
rate schedules for different types of taxpayers are accepted as
part of the normal tax structure.
• Imputed income from owner-occupied housing and other sources.—A
theoretically pure income tax would include in its base an imputation for the income received in kind from the occupancy of a
home owned by the taxpayer and imputations for in-kind income
from the ownership of other durable assets. Because such imputations are difficult to make and are contrary to usual concepts of

SPECIAL ANALYSIS F

151

income, they are not considered in the computation of tax expenditures even though such exclusions of imputed income affect
the allocation of the economy's resources, particularly by stimulating owner-occupied housing. If income on owner-occupied
housing were imputed, deductions for mortgage interest and
property taxes would be an appropriate part of the normal
structure in order to measure the amount of net income that
should be included in the tax base. Without the imputation, those
two deductions result in tax expenditures.
• The value of Government benefits received in kind.—The exclusion
from gross income of direct cash payments to individuals by the
Government, such as social security payments, does result
in tax expenditures. Other Government programs extend benefits
in kind to individuals. Examples are medicare and public education. Since these benefits are received in kind they cannot be
used, like cash, for purposes fully consistent with the recipient's
preferences. Moreover, their cash value is often difficult to identify
with certainty. Thus the exclusion of in-kind benefits from income
subject to tax is not considered to result in tax expenditures.
The dividing line between nontaxable Government benefits that
do result in tax expenditures and those that do not is essentially
arbitrary. The most ambiguous case is food stamps. They are so
nearly the equivalent of cash that their exclusion from income
subject to tax might be considered to result in a tax expenditure,
but this is not done in the analysis that follows.
• Capital gains and losses.—Although the base of a theoretically
pure income tax would include net capital gains as they accrue,
practical problems prevent identifying and taxing unrealized
capital gains for many types of assets. Hence, the normal structure
taxes such wealth accruals only when "realized." The exclusion
from taxable income of one-half of realized capital gains, and the
option of having up to $50,000 of realized capital gains taxed
at a 25% rate, clearly results in a tax expenditure. At death,
an individual may hold assets that have appreciated in value.
When, as under current law, these gains are not deemed to have
been realized in the year of death, they have been completely
excluded from income subject to tax during the lifetime of the
decedent. The failure to deem unrealized capital gains as income
in the year of death is considered, for purposes of this analysis,
to result in a tax expenditure. Prior to the enactment of the Tax
Reform Act of 1976, the estate, an heir, or other beneficiary
would take the market value of the decedents' assets at the date
the estate was valued as the basis against which to measure
realized gain or loss. Thus gains which had accrued before death
were never subject to tax. Under the 1976 act, the estate or
beneficiaries are to carry over the decedent's basis and thus be
subject to tax on gains which accrued during the lifetime of the
decedent as well as gains which accrued subsequent to inheritance.
As a means of phasing in this provision, a decedent's basis is
generally deemed to be the assets' value on December 31, 1976,
or, if acquired later, the acquisition date. The tax on such gains
partially offsets the tax expenditure resulting from the failure to
include capital gains in income subject to tax in the year of death.

152

THE BUDGET FOR FISCAL YEAR

19 79

• Gifts and bequests.—The tax system subjects gifts and bequests,
which are usually made within a family, to taxes separate from
the income tax. Therefore their exclusion from the recipient's
taxable income under the individual income tax does not result
in a tax expenditure. Another set of tax expenditures could be
defined for departures from a "normal structure" for gift and
estate taxes, but to do so would be beyond the scope of this
analysis.
• Forms of business organization.—The tax law recognizes different
forms of business organization including corporations, partnerships, small corporations treated in a manner similar to partnerships, cooperatives, mutual insurance companies, and individual
proprietorships. The provisions of the tax law that accommodate
different forms of business organization do not generally result in
tax expenditures so long as income is subject to tax at either the
business entity or individual level.
• Treatment of individuals and corporations as separate taxpaying
entities.—A theoretically pure income tax would integrate the
taxation of individual and corporate income to avoid multiple taxation of any particular type of income. Only individuals
would be taxed; corporate income would be taxed to shareholders,
whether or not it was distributed in the form of dividends. However, for practical reasons, separate taxation is accepted as part
of the normal tax structure for puropses of this analysis.
• Deduction of business expenses.—The deduction of business expenses is necessary to determine taxable income. Tax expenditures do not ordinarily result from applying the definitions of
business expenses prescribed by the Internal Revenue Code and
Internal Revenue Service interpretative regulations. This rule is
followed in tax expenditure analysis even when the deduction of
certain expenses, such as those for entertainment and meals, can
be challenged on normative grounds. Tax expenditures do occur
when the tax code permits business or investment expenditures
that are capital outlays in economic terms to be treated as current expenses. In the case of depreciation the Internal Revenue
Code allows as a deduction "a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for
obsolescence)" on property used in a trade or business or for
the production of income. To avoid judging every taxpayer's
depreciation deductions against a standard of reasonableness, the
code permits standard depreciation techniques and guideline lives
to be used. In some cases, tax expenditures result because the permitted technique clearly results in excess depreciation being
claimed. In other cases, tax expenditures result because the useful
life is artificially short. With respect to machinery and equipment,
the asset depreciation range (ADR) system, which became effective in 1971, defines a band within which estimates of useful life
are deemed to be "reasonable". That band is determined by reference to guideline lives for broad classes of property and ranges
20% up and 20% down from the "asset guideline period." This
analysis treats the ADR system as resulting in a tax expenditure
when taxpayers who use the ADR system reduce the lives of
depreciable assets below the guideline period.

SPECIAL ANALYSIS

153

• Foreign tax credits.—To avoid the double taxation of income
earned abroad, and thus accommodate the U.S. tax system to
international norms, the normal structure of income taxes includes tax credits for foreign income taxes paid.
• Income of controlled foreign corporations.—The income of foreign
corporations controlled by U.S. corporations or citizens is generally not subject to U.S. tax until that income is repatriated.
There are certain exceptions in order to avoid abuse in tax-haven
countries. The deferral of income of controlled foreign corporations has been included as a tax expenditure item in this analysis,
since it is an exception to the basic precept of our tax system that
U.S. corporations and citizens are subject to tax on their worldwide income.
The above discussion does not exhaust the definitional complexities
inherent in the tax expenditure concept nor does this analysis consider
all special tax provisions. Some items have not been considered
because the issues have not been fully studied or because there is
insufficient information available on which to base a sound estimate.
Some items are omitted because the revenue loss is relatively small
(less than $5 million).
The distinction between the normal tax structure and those exceptions leading to tax expenditures does not imply that the features of
the normal tax system should be exempt from periodic analysis and
review. Like tax expenditures, many features of the normal tax
structure have major effects upon the level and composition of
economic activity and the distribution of income; some features
affect the everyday activities of corporations, trusts, and partnerships.
Budget outlays, or other policy instruments, are alternative means to
achieve the objectives of some features of the normal tax structures
just as they are often a potential substitute for tax expenditures.
MEASURING T A X

EXPENDITURES

The tax expenditure estimates reported below in table G - l have
been prepared by the Treasury Department and are based upon tax
law as of December 31, 1977. The estimates show the loss of budget
receipts resulting from each of these particular features of the tax system by fiscal years. For those tax expenditures resulting from the
exclusion from taxable income of Federal Government payments to
individuals, the underlying estimates of payments upon which the tax
expenditure estimates are based are those shown elsewhere in the
budget; hence they reflect any proposed changes in those programs.
Each estimate assumes that the tax provision in question had never
been a part of the tax system but that all other features of the tax
system, including the structure of rates, remain unchanged. In most
cases, the hypothetical deletion of the special tax provision would
increase taxable income for certain corporations or individuals;
existing marginal tax rates are then applied to the estimated change in
taxable income to compute the tax expenditures. For each itemized
nonbusiness deduction for individuals, the estimated revenue loss is
based upon the amount by which the standard deduction is exceeded.
Tax expenditures resulting from credits are simply equal to the estimated credits claimed by all taxpayers. Economic conditions are

154

THE BUDGET FOR FISCAL YEAR

19 79

assumed to remain unchanged in response to the hypothetical change
in the tax laws. No "second order" effect is included in the estimate
because it is assumed that some offsetting fiscal or other action would
be taken to keep economic aggregates on the same path that underlies
all budget estimates.
Taxpayer behavior is assumed to remain unchanged in response
to the hypothetical repeal of a tax expenditure provision even though,
to the extent that tax expenditures intended to encourage certain
economic activities have been successful, their elimination would
presumably change taxpayer behavior. This change would alter the
mix of economic activity within the assumed, constant economic
aggregates. Any effect on receipts of a different mix of activity is not
reflected in the estimates.
Whenever possible, sample data from tax returns have been used to
estimate tax expenditures. These data are not, however, available for
the years presented in this analysis, as these returns have not yet been
filed or tabulated. Consequently, the estimates must be made by
extrapolating sample tax return data from past years by means of
other, more current information including the economic forecast used
in estimating budget receipts and outlays. Many tax expenditures
result from excluded income, not reported on tax returns. In these
cases estimates must be based upon other data sources. Any changes
scheduled by existing law, such as the phasing in or out of specific
provisions, are accounted for in the estimates.
The estimates are reduced by any minimum tax liabilities associated
with particular items. The minimum tax on tax preferences was
introduced in 1969 in an attempt to assure that individuals and corporations receiving tax preferences do not escape bearing a share of
the tax burden. Several tax expenditure items are included in the base
of the minimum tax. The Tax Reform Act of 1976 increased the minimum tax rate from 10% to 15%. For individuals the exemption level
was reduced from $30,000 plus regular taxes paid to the greater of
$10,000 or one-half regular taxes paid. For corporations the exemption
level was reduced from $30,000 plus regular taxes paid to the greater
of $10,000 or regular taxes paid. The Tax Reduction and Simplification Act of 1977 removed the expensing of intangible drilling costs to
the extent of related oil and gas income from the base of the minimum
tax for calendar year 1977.
The Tax Reform Act of 1976 also introduced "at risk" rules that
limit deductions attributable to an individual's investment to the
amount of the investment plus the debts for which the taxpayer is
personally liable. These limitations apply to certain types of investments: farming, exploring for or exploiting oil and gas resources,
motion picture films and video tapes, and equipment leasing. Some of
the deductions that are disallowed by these rules result in tax expenditures and some do not, hence there is no good way to reduce tax
expenditure estimates for particular items by the revenue gained as a
result of the at-risk rules.
Some tax expenditure items affect the timing of deductions or the
receipt of taxable income. Examples are depreciation in excess of
straight line for buildings and rental housing and the deferral of income
by domestic international sales corporations (DISC's). These provisions create a permanent tax expenditure even though for a particu-

SPECIAL ANALYSIS

155

lar taxpayer, transaction, or asset the special provision may defer a tax
rather than eliminate it. However, for a stable or growing business
with an indefinite life, the deferral of taxes continues forever under
most of these provisions. Furthermore, as the economy grows, these
amounts increase over time. Estimates for these items show the difference between budget receipts under current law and budget receipts
if a different law had always been in effect. These figures therefore
generally show more than the revenue that could be obtained in the
first years of a transition from one tax law to another. They are longrun estimates at the levels of economic activity assumed for the years
in question.
Tax expenditure estimates cannot be simply added together to form
totals for functional areas or a grand total. In some cases the revenue
gain resulting from the deletion of two tax expenditure items would be
greater than the sum of the individual estimates. For example, if
interest income from State and local government securities were made
taxable and capital gains were taxed at ordinary rates, many more
individuals would be pushed into higher tax brackets than if just one of
these sources of income became fully taxable; the combined effect on
revenue would be greater than the sum of the two separate estimates.
In other cases, the revenue gain from the deletion of two items would
be smaller than the sum of the individual estimates. For example, if
the deductibility of mortgage interest payments and homeowner
property taxes were both repealed, and the standard deduction
unchanged, many individuals who now itemize their deductions would
opt for the standard deduction, thus limiting the revenue gain. In
general, elimination of multiple items that are personal deductions
would increase revenue by less than the simple sum of the revenue
gains from eliminating each item measured separately, since many
taxpayers would switch to using the standard deduction. Conversely,
elimination of multiple items that are exclusions from adjusted gross
income would increase revenue by more than the sum of the individual
gains as taxpayers would be pushed into higher tax brackets.
To illustrate the aggregation problem, the revenue gain resulting
from a hypothetical repeal of all itemized deductions that result in
tax expenditures would be $24.7 billion in 1979, whereas the simple
sum of the tax expenditure for each separate item is $32.9 billion. The
estimate for the combined effect of all such deductions was derived
from a model of the tax system that accounts for the interaction
between tax expenditures provisions and the provisions of the normal
structure. Because of this aggregation problem, the repeal of the tax
expenditure items proposed in the President's tax reform program will
not yield as much revenue as the sum of the tax expenditures affected.
The aggregations of related tax expenditure items that are presented
and discussed in the next section have been specially estimated so as
to account for the interactions referred to above. Where tax expenditures for both individuals and corporations result from the same tax
code provision, such as the investment tax credit, the two estimates
may appropriately be added together.
T A X E X P E N D I T U R E S BY F U N C T I O N

Estimates of tax expenditures are grouped together by functional
category and presented in table G - l . The estimates are shown sep-

156

THE BUDGET FOR FISCAL YEAR

19 79

arately for individuals and corporations. In prior years, three special
categories were used to classify certain tax expenditure items—
business investment, personal investment, and other tax expenditures.
This practice has been discontinued this year in order to conform
with the classifications used by the Congressional Budget Office and
various congressional committees. In this analysis, all tax expenditures have been classified according to the functional categories used
for budget outlays into which they most closely fit. A brief description
of each of the special tax provisions for which a tax expenditure
estimate is shown in table G - l follows.
National defense.—The housing and meals provided military personnel, either in cash or in kind, are excluded from income subject to
tax. Disability-related military pensions received by current retirees
are largely excluded from taxable income. The Tax Reform Act of
1976 terminated the exclusion of noncombat related disability pensions for those who entered the armed services after September 24,
1975. However, most of those who would qualify for such retirement
could choose to receive disability compensation from the Veterans
Administration which remains free of taxes.
International affairs.—Prior to 1976, a U.S. citizen was generally
able to exclude up to $20,000 a year of foreign earnings if the taxpayer
was a bona fide resident of a foreign country. After 3 years of foreign
residence a taxpayer could exclude up to $25,000 a tax year of foreign
earnings. The Tax Reform Act of 1976 modified these provisions,
limiting the exclusion to $20,000 only for employees of U.S. charitable
organizations and reducing it to $15,000 for all others, denying tax
credits for foreign taxes paid on excluded income, and taxing income
beyond the amount eligible for exclusion at the higher bracket rates
that would apply if the excluded income were also subject to tax.
The effective date of the 1976 act provision was delayed by one year,
until January 1, 1977, by the Tax Reduction and Simplification Act
of 1977. The estimates also reflect the tax-exempt status of certain
allowances received by Federal employees working abroad.
The profits of a domestic international sales corporation (DISC)
are not taxed to the DISC but instead are taxed to the shareholders
when distributed to them. This deferral is available for 50% of the
export income of a DISC. Deferral is permitted to the extent that
current export gross receipts exceed 67% of the DISC's average for a
4-year moving base period. DISC's with less than $150,000 of taxable
income are exempt from the incremental rule.
Taxes on the income of controlled foreign corporations are deferred
until that income is repatriated to parent U.S. taxpayers. The
estimate for the resulting tax expenditure is net of any foreign tax
credits that would be claimed if the income of foreign subsidiaries
were subject to U.S. tax on a current basis.
The Tax Reform Act of 1976 phased out the 14-percentage-point
tax rate reduction provided under prior law for domestic corporations
qualifying as Western Hemisphere trade corporations.
General science, space, and technology.—Research and development
expenditures typically result in new products or processes, cost reductions, or other outcomes the benefits from which will, in nearly all

SPECIAL ANALYSIS F

157

cases, continue into the future. For tax purposes businesses may deduct
all research and development expenditures in the year during which
they are incurred rather than amortizing them over a number of
years. The tax expenditure is estimated as if such expenditures were
amortized over a 10-year period.
Energy.—Certain capital costs necessary to bring a mineral deposit
into production may be deducted as current expenses rather than
spread over the useful life of the property. Included in this category
are the intangible drilling costs of oil wells, such as the wages of drilling
crews, and the cost of developing other mineral deposits, such as
expenditures for mine shafts, tunnels and stripping. The Tax Reform Act of 1976 added to the base of the minimum tax for individuals intangible drilling costs in excess of the amount that would
be deductible if capitalized and amortized over 10 years or if deducted
pursuant to a cost depletion method. The Tax Reduction and Simplification Act of 1977 limited this element of the base of the minimum
tax to amounts in excess of related income for calendar yea rl977.
Extractive industries generally use percentage depletion rather than
cost depletion. Under cost depletion, actual outlays, to the extent
not immediately expensible, may be deducted over the productive
life of the property, much as businesses may take deductions for
the depreciation of other capital goods. Under percentage depletion,
businesses in the extractive industries may deduct a prescribed percentage of gross income (at rates ranging from 22% for oil and gas
to 5% for certain minerals, but not more than 50% of net income from
the property or 65% of taxable income in the case of oil and gas).
Percentage depletion is not limited to the cost of the investment as is
cost depletion. The basis for "cost depletion" is reduced to the extent
certain costs are recovered through expensing of exploration and discovery costs and intangible drilling costs. There is no comparable
reduction in "percentage depletion" for costs which are allowed as
expenses. The Tax Reduction Act of 1975 limited the application of
percentage depletion to independent oil and gas producers and royalty
owners and to specific quantities of output. The act phased the percentage depletion rate for oil and gas down from 22% through 1980
to 15% in 1984 and thereafter.
Royalties from coal deposits are treated as capital gains, rather than
ordinary income.
Natural resources and environment.—The interest income on State
and local government bonds issued to finance the pollution control
facilities of private firms is exempt from Federal income tax. The
volume of outstanding bonds issued for this purpose has been growing
rapidly in recent years.

158

THE, BUDGET FOR FISCAL YEAR

1979

Table G - l . T A X E X P E N D I T U R E E S T I M A T E S B Y F U N C T I O N i
(In millions of dollars)
Description

National defense:
Exclusion of benefits and allowances to
Armed Forces personnel
Exclusion of military disability pensions. __
International affairs:
Exclusion of income earned abroad by U.S.
citizens
Deferral of income of domestic international
sales corporations (DISC)
Deferral of income of controlled foreign
corporations
Special rate for Western Hemisphere trade
corporations
General science, space, and technology:
Expensing of research and development
expenditures
Energy:
Expensing of exploration and development
costs
Excess of percentage over cost depletion. __
Capital gains treatment of royalties on
coal
Natural resources and environment:
Exclusion of interest on State and local
government pollution control bonds
Exclusion of payments in aid of construction
of water and sewage utilities
5-yr amortization on pollution control
facilities
Tax incentives for preservation of historic
structures
Capital gains treatment of certain timber
income
Capital gains treatment of iron ore
Agriculture:
Expensing of certain capital outlays
Capital gains treatment of certain ordinary
income
Deductibility of noncash patronage dividends and certain other items of cooperatives
Commerce and housing credit:
Dividend exclusion
Exclusion of interest on State and local industrial development bonds
Exemption of credit union income
Excess bad debt reserves of financial institutions
Deductibility of mortgage interest on owneroccupied homes
Deductibility of property tax on owneroccupied homes
Deductibility of interest on consumer creditExpensing of construction period interest
and taxes
Excessfirst-yeardepreciation
Depreciation on rental housing in excess of
straightline
See footnote at end of table.

Corporations
1977

1978

Individuals
1979

1977

- -

945

1,135

1,335

570

615

665

1,395

1,450

1,520

1,090

820

885
1,120

965
1,210

170

1979

\97S

1,095
105

1,260
115

1,370
120

545

360

385

15 .
30

210
305

300
340

300
370

220

265

110

130

-80

-130

-45
5

5
185
5

205
5

230
10

55
5

60
5

65
10

375

445

460

330

350

365

455

490

525

-165

-175

-185

450

475

505

115

135

4,490

4,985

5,530

4,205
1,785

4,665
2,120

5,180
2,350

195
70

235
80

270
90

535

705

790

....

475
45

500
45

525
50

150
140

140
145

90
155

320

300

290

159

SPECIAL ANALYSIS G

Table G-l. T A X E X P E N D I T U R E E S T I M A T E S B Y F U N C T I O N i—Continued
(In millions of dollars)
Description

Commerce and housing credit—Continued
Depreciation on buildings (other than rental
housing) in excess of straight line
Asset depreciation range
Capital gains (other than farming, timber,
iron ore, and coal)
Deferral of capital gains on home sales
Capital gains at death
Corporate surtax exemption
Investment credit
Credit for purchase of new homes
Transportation:
Deductibility of nonbusiness State gasoline
taxes
...
5-yr amortization on railroad rolling
stock
____
Deferral of tax on shipping companies
Community and regional development: 5-yr
amortization for housing rehabilitation
Education, training, employment, and social
services:
Exclusion of scholarship and fellowship
income
Parental personal exemption for students
age 19 or over
...
Exclusion of employee meals and lodging
(other than military)
Exclusion of contributions to prepaid legal
services plans
Investment credit for employee stock ownership plans (ESOPs)__
Deductibility of charitable contributions
(education)
Deductibility of charitable contributions to
other than education and health
Maximum tax on personal service income. _
Credit for child and dependent care expenses
Credit for employment of AFDC recipients
and public assistance recipients under
work-incentive programs
Jobs credit
Health:
Exclusion of employer contributions for
medical insurance premiums and medical
care
Deductibility of medical expenses
Expensing of removal of architectural and
transportation barriers to the handicapped..
Deductibility of charitable contributions
(health)
Income security:
Exclusion of social security benefits:
Disability insurance benefits
OASI benefits for retired workers
Benefits for dependents and survivors.__
Exclusion of railroad retirement system
benefits
See footnote at end of table.

Corporations
1977

Individuals
1979

1978

1977

1978

1979

160
1,955

140
2,245

130
2,640

140
100

125
115

115
135

520

540

575

3,875
8,880

3,885
10,735

3,540
12,320

6,910
890
7,280

7,430
935
8,120

7,990
980
8,975

2,075
100

2,390

2,725

685

760

840

245

295

330

750

770

790

280

300

325

-35
130

-40
105

-40
85

245

255

305

235

255

285

525

585

645

290

315

350

3,935
555
475

4,370
665
525

4,855
800
575

15
565

15
1,475

20
1,035

125

985

860

5,560
2,230

6,340
2,435

7,225
2,655

145

160

175

790

875

970

470
3,790
860

550
4,210
950

605
4,700
1,040

250

265

280

160

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table G-1. T A X E X P E N D I T U R E ESTIMATES BY FUNCTION i—Continued
(In millions of dollars)

Income security—Continued
Exclusion of workmen's compensation benefits..
Exclusion of special benefits for disabled coal
miners
.
Exclusion of unemployment insurance benefits
—
Exclusion of public assistance benefits
Exclusion of sick pay
Net exclusion of pension contributions and
earnings:
Employer plans
Plans for self-employed and others
Exclusion of other employee benefits:
Premiums on group term life insurance
Premiums on accident and disability
insurance
Income of trusts tofinancesupplementary
unemployment benefits
Exclusion of interest on life insurance savings.
Exclusion of capital gains on home sales for
persons age 65 and over
Additional exemption for elderly
Additional exemption for the blind
Excess of percentage standard deduction
over minimum standard deduction
Deductibility of casualty losses
Tax credit for the elderly
Earned income credit:
Nonrefundable portion
Refundable portion
Veterans benefits and services:
Exclusion of veterans disability compensation
Exclusion of veterans pensions
Exclusion of GI bill benefits
General government: Credits and deductions
for political contributions
General purpose fiscal assistance:
Exclusion of interest on general purpose
State and local debt..
Deductibility of nonbusiness State and local
taxes (other than on owner-occupied
homes and gasoline)..
....
Tax credit for corporations doing business
in U.S. possessions
Interest: Deferral of interest on savings bonds.

Corporations
1977

3,105

1978

3,470

Individuals
1979

3,865

1977

1978

1979

720

835

970

1,500
330
110

1,200
345
75

1,135
360
60

8,715
1,390

9,940
1,650

11,335
1,920

860

905

955

1,850

2,025

2,225

40
1,140
20

70
1,155
20

70
1,215
20

530
320
230

360
250

395
255

365
900

285
945

265
900

745
35
260

840
40
200

830
40
170

oo
VJl

Description

1,725

1,925

2,150

7,660

8,505

9,440

585

625

670

450

485

520

730
3,470

775
3,925

840
4,400

15,555
1,905

17,020
2,150

18,515
2,415

670

730

810

11,105
5,250

12,325
5,830

13,680
6,470

MEMORANDUM

Combined effect of provisions disaggregated
above:
Capital gains
Exclusion of interest on State and local debt.
Deductibility of State and local nonbusiness
taxes
Deductibility of charitable contributions...
1

All estimates are based on the tax code as of Dec. 31, 1977.

SPECIAL ANALYSIS F

161

Certain payments made by customers to water and sewage disposal
utilities for the purpose of aiding the construction of new facilities
are treated as contributions to capital rather than income.
From 1969 through 1975 a taxpayer could elect 5-year amortization
of certified pollution control facilities installed in connection with a
plant that was in operation before 1969. The taxes previously deferred
under this provision are now being paid and as a result negative
numbers appear in table G - l . In these years greater amounts of tax
will be paid than if this provision had not been enacted. The Tax
Reform Act of 1976 extended the 5-year amortization provision
to pollution control facilities installed in connection with plants
in operation before 1976. Under prior law, if taxpayers elected the
5-year amortization they could not claim the investment tax credit
on the capital cost of the facility. The 1976 act provides that onehalf of the investment tax credit can be claimed for such facilities.
Revenue losses will result from these provisions in years after 1979.
Expenditures to preserve and restore certain historic structures
are eligible for special accelerated depreciation. This provision does not
apply to owner-occupied housing.
The gain on the cutting of timber and royalties from iron ore
deposits are taxed at rates applicable to long-term capital gains,
rather than at ordinary income rates.
Agriculture.—Farmers, other than certain corporations and partnerships engaged in agriculture, are allowed to deduct certain costs
as current expenses even though these expenditures were for inventories on hand at the end of the year or for capital improvements
that would not be expensed under normal accrual accounting. Capital
gains treatment generally applies to the sale of livestock, orchards,
vineyards, and comparable agricultural products.
Cooperatives may deduct cash and noncash patronage dividends
based on net income earned on business done with patrons provided
that 20% of the total dividend is paid in cash and the patron has
agreed to include the entire dividend in income. Per-unit retains,
that is, amounts retained from the value of products marketed for
patrons, may be deducted by the cooperative if patrons agree to take
the face amounts into current income. Agricultural cooperatives
meeting certain requirements are permitted to deduct dividends on
capital stock and payments to patrons from nonpatronage income.
Rural electric and telephone cooperatives may deduct noncash
patronage dividends, and patrons generally need not take such dividends into income. The tax expenditures result from the deductibility of noncash patronage dividends, retains, dividends on capital
stock, and payments to patrons out of nonpatronage income. If noncash patronage dividends and retains were not deductible by cooperatives, they would no longer be taken into current income by patrons
and hence individual income taxes would be lower.
Commerce and housing credit.—Included here are a number of tax
expenditure provisions that also affect economic activity in other
functional categories. In general, provisions related to investment,
such as some depreciation rules and the investment tax credit, also

260-700 O - 78 - 11

162

THE BUDGET FOR FISCAL YEAR

19 79

affect economic activity in the natural resources and environment,
energy, agriculture, and transportation categories. Some of the items
in this category primarily affect individuals as investors, consumers,
and holders of real and financial assets.
The first $100 ($100 per taxpayer on a joint return) of dividend
income may be excluded from taxable income.
The interest on industrial development bonds issued by State and
local governments is excluded from taxable income though the proceeds are used to finance private investment in manufacturing plants
and other facilities. For that reason this item is classified here rather
than under general purpose fiscal assistance.
Credit unions are exempt from Federal income taxes. Commercial
banks, mutual savings banks, and savings and loan associations are
permitted to deduct additions to bad debt reserves in excess of actual
loss experience and reasonable expectations as to future losses. Commercial banks may maintain a reserve of 1.2% of uninsured loans.
The ratio will phase down to 0.6% in calendar year 1982. Mutual
savings banks and savings and loan associations may deduct 41% of
income in calendar year 1978, provided they maintain stipulated
fractions of their assets in "qualifying assets," primarily residential
mortgages. Under current law their maximum deduction will decrease
to 40% in 1979 and thereafter.
Owner-occupants of homes may deduct mortgage interest and
property taxes (but not maintenance outlays or depreciation because
the in-kind income from homeownership is not recognized) as itemized
nonbusiness deductions. The tax expenditure from these two items
combined is $9.8 billion for 1979. This is less than the sum of the
two separately because if both were deleted more taxpayers would
save by using the standard deduction.
Interest paid on consumer credit for any purpose is allowed as an
itemized nonbusiness deduction for individuals.
Prior to the Tax Reform Act of 1976 taxpayers could deduct
on a current basis interest and property tax payments made during
the period when a building was under construction rather than include
these costs of construction, along with other costs, in the value of the
completed structure, which would then be depreciated over its useful
life. The 1976 act reduced this tax expenditure by providing that, for
noncorporate taxpayers, construction period interest and taxes be
capitalized and amortized over a 10-year period. The new provision is
to be phased in over a 7-year period with more generous transition
rules for Government-subsidized housing projects.
To the extent that allowable depreciation for tax purposes exceeds
the rate at which assets actually depreciate, business tax liabilities are
deferred. Businesses may employ a variety of depreciation schedules
for tax purposes, some of which cause a much larger part of asset
values to be written off in early years of the asset's useful life than do
others. An extra first-year depreciation deduction of 20% may be
claimed for $10,000 of tangible personal property ($20,000 on a joint
return) having a useful life of at least 6 years. The revenue costs of
allowing buildings and rental housing to be depreciated for tax purposes by methods that reduce asset value more rapidly than straightline depreciation (the method typically used in financial statements)
are shown. The asset depreciation range (ADR) system permits the

SPECIAL ANALYSIS F

163

guideline lives of depreciable equipment to be reduced by 20%. The
ADR system does not apply to property used abroad.
Half of net long-term gains from the sale of capital assets is excluded
from income and up to $25,000 of included gains may be taxed at a
rate of 50%. The excluded half of net long-term capital gains is
included in the base of the minimum tax. Capital losses may be
deducted from gains but only a limited amount of net losses may be
deducted in any 1 year from ordinary income. The Tax Reform Act
of 1976 lengthened the holding period over which capital assets must
be held to qualify as long-term gains and losses from 6 months to 9
months in 1977 and to 12 months in 1978 and thereafter. The act also
increased the amount of ordinary income against which net capital
losses may be offset in any 1 year from $1,000 to $2,000 in 1977 and
to $3,000 in 1978 and thereafter.
Corporations may elect a 30% alternative tax rate on capital gains.
The tax expenditure is estimated on the assumption that these gains
would otherwise be taxed at 48%.
Capital gains on the sale of a home are recognized only to the
extent that the "adjusted sales price" exceeds the cost of a new home
purchased and occupied within 18 months before or after the sale. If a
new house is constructed it must be occupied within 2 years after the
sale. The "adjusted sales price" is the amount realized (gross proceeds less selling expenses) minus qualified "fixing up" expenses. A
loss on a sale of a home is not deductible. To the extent the gain on
the sale of a home is not recognized, the basis of the home purchased
is reduced thereby resulting in a deferral of the gain.
Capital gains on assets held at the owner's death are not subject
to income tax. The estimate assumes that such gains would be treated
as ordinary income in the year of death and is adjusted for any taxes
paid by heirs on such gains under the carryover basis provisions of
the Tax Reform Act of 1976. The estimate is not reduced by the
reduction in estate taxes that would result if capital gains at death
were taxed.
Under the permanent tax code, corporations pay income tax at the
rate of 22% on all taxable income plus a surtax of 26% on taxable
income in excess of $25,000. Each corporation therefore receives a
surtax exemption of $25,000. This exemption is intended to encourage
small or new business. For 1975 only, the Tax Reduction Act of 1975
provided that the tax rate on the first $25,000 of taxable income be
reduced to 20% and that the surtax exemption extend to the second
$25,000 of taxable income. This temporary provision has been extended
through December 31, 1978.
The investment tax credit was temporarily increased from 7% to
10% (from 4% to 10% in the case of public utilities) by the Tax
Reduction Act of 1975. The higher rate was extended through 1980
by the Tax Reform Act of 1976. The percentage is applied to the cost
of qualifying property (generally, tangible personal property used in
a trade or business) having a useful life of over 7 years. The investment
tax credit cannot be claimed for investments in land or buildings or
for property used abroad. Lower rates apply to property with useful
lives of 3 to 7 years. The investment tax credit may be claimed as
progress payments are made on property that takes 2 or more years
to construct. The maximum credit that may be offset directly against

164

THE BUDGET FOR FISCAL YEAR

19 79

income tax liability in a taxable year is generally limited to $25,000
plus one-half of the excess of tax liability over $25,000. Excess credits
may generally be carried back 3 taxable years and forward 7 taxable
years, after which they expire if still unused.
The Tax Reduction Act of 1975 provided, for part of calendar year
1975 only and subject to certain conditions, a tax credit equal to 5%
of the purchase price of a new home, up to a maximum credit of
$2,000. In a few cases taxpayers were not able to claim the credit
until they filed their 1976 returns during fiscal year 1977.
Transportation.—Individuals who itemize their deductions may
deduct State and local gasoline taxes. The deduction of excise taxes
on gasoline used for ordinary business purposes does not result in
a tax expenditure since the}^ would in any case be deductible as a
business expense.
Specified classes of railroad rolling stock are eligible for amortization over a 5-year period, whether owned by railroad companies or by
lessors, rather than their longer, expected useful life. If 5-year amortization is elected the investment tax credit cannot be claimed. These
provisions apply only to rolling stock placed in service before 1976.
Greater amounts of tax are currently paid than if this provision had
not been enacted because in most cases the 5-year amortization period
has expired. Tax liabilities are now greater because no further depreciation can be claimed, hence the negative figures in table G - l .
Certain companies that operate U.S.-flag vessels on foreign trade
routes receive an indefinite deferral of income taxes on that portion
of their net income which is used for shipping purposes, primarily
construction, modernization, and major repairs of ships. An investment credit of one-half the regular credit may be claimed on the
tax-deferred amounts withdrawn from capital construction funds.
Community and regional development.—Taxpayers may, under certain
conditions, elect to depreciate rehabilitation expenditures for lowand moderate-income rental housing over a 5-year period. Qualified
rehabilitation expenditures may not exceed $20,000 per dwelling unit
and must exceed $3,000. This provision expires on December 31, 1978.
Education, training, employment, and social service.—Recipients of
scholarships and fellowships may exclude such amounts from taxable
income, subject to certain limitations. The exclusion of educational
benefits under the GI bill is included in the veterans benefits and
services function.
Taxpayers may claim personal exemptions, and the related $35
general tax credit, for dependent children 19 or over who receive
income of $750 or more per year only if the children are full-time
students. The student may also claim an exemption on his or her
own return, in effect providing a double exemption, one on the parents'
return and one on the student's. The extra exemption for parents
results in a tax expenditure.
Many employers provide employee benefits that are excluded from
employee income. The employer's costs for these benefits are deductible business expenses. Included in the meals and lodging item is the
exclusion of housing allowances and the rental value of parsonages

SPECIAL ANALYSIS F

165

from the taxable income of ministers. Beginning in calendar year
1977, employer contributions to prepaid legal services plans and the
value of legal services received under the plans are excluded from employee income. A corporation may claim an additional 1% investment
tax credit if an equivalent amount of its common stock is set aside
in an employee stock ownership plan (ESOP). A further one-half of
1 % investment tax credit may be claimed if the resulting addition to
an ESOP is matched by employee or employer contributions. Employees are generally prohibited from withdrawing their share of an
ESOP for 7 years. The tax expenditures resulting from additional
investment tax credits claimed under the ESOP provisions primarily
benefit employees rather than the corporations which claim the tax
credit. The exclusion of certain other benefits from employee income
results in tax expenditures classified in the income security function.
Contributions to charitable, religious, and certain other nonprofit
organizations are allowed as an itemized deduction for individuals,
generally up to 50% of adjusted gross income. Taxpayers whose contributions to charitable or educational organizations are in the form
of capital assets, usually securities, that have appreciated in value
above their cost, obtain a deduction for the contribution at the appreciated value of the asset without taxation on the appreciation in
value. Corporations may deduct charitable contributions up to 5%
of their income. Tax expenditures resulting from the deductibility of
contributions are shown separately here for contributions to educational institutions and to certain other institutions. Contributions to
health institutions are reported under the health category.
The 50% maximum tax on personal service income applies to
earned income and certain pensions, annuities, and deferred compensation. The amount to which the maximum tax applies is offset by preference items included in the base of the minimum tax.
A 20% tax credit may be claimed by married couples for child and
dependent care expenses incurred to enable both spouses to work or
when one spouse works part-time or is a student. The credit may also
be claimed by a divorced or separated parent who has custody of a
child. Expenditures up to a maximum of $2,000 for one dependent and
$4,000 for two or more are eligible for the 20% credit.
A credit is allowed against income tax liability equal to 20% of
first-year wages and salaries of employees who were placed in employment under the work incentive program or were previously AFDC
recipients. The credit for a taxable year cannot exceed $50,000 plus
50% of the excess ever that amount.
The jobs credit was introduced by the Tax Reduction and Simplification Act of 1977. For calendar years 1977 and 1978 employers whose
employment has increased by more than 2% over the previous year
will generally be able to claim a tax credit of $2,100 per additional
employee. The aggregate credit is limited to $100,000 per employer.
An additional credit of $420 may be claimed for each newly hired
handicapped worker who has undergone a program of vocational
rehabilitation. This additional credit may be claimed without regard
to the $100,000 limit. Wages offset by the credit may not be treated
as deductible business expenses.
Health.—Payments by employers for health insurance premiums
and other medical expenses are deducted as business expenses by

166

THE BUDGET FOR FISCAL YEAR

19 79

employers and excluded from income by employees. The exclusion
from employees' income gives rise to the tax expenditure.
Medical expenses in excess of 3% of adjusted gross income, including
expenditures for prescribed drugs and medicines in excess of 1% of
adjusted gross income, may be deducted by individuals as itemized
nonbusiness deductions. Individuals may also deduct half of the
premiums they pay for medical care insurance up to a maximum
deduction of $150 per year, without regard to the 3% limitation.
Taxpayers may elect to deduct up to $25,000 per year as a current
expense expenditure that would otherwise be treated as a capital outlay for removing architectural and transportation barriers to the
handicapped and elderly in any facility or public transportation
vehicle used in a trade or business.
Contributions to nonprofit health institutions are allowed as a
deduction for individuals and corporations. (See the discussion of
other charitable contributions under education, training, employment, and public services.)
Income security.—Most forms of government transfer payments to
individuals, such as social security and unemployment benefits, are
excluded from taxable income. If the taxpayer had no other source of
income, these payments, even if taxable, would not generally be
sufficient to result in any tax liability, given personal exemptions and
the standard deduction. Since some recipients have property income,
receive earnings (in some instances for only part of a year), or may file
jointly with working spouses, tax expenditures result from these
exclusions.
Under prior law, certain payments, up to $100 per week, financed by
an employer in lieu of wages during periods of employee injury or
sickness were excluded from the employee's taxable income. The Tax
Reform Act of 1976 repealed the sick pay exclusion except for persons
under the age of 65 who are permanently and totally disabled. For
these individuals the exclusion is reduced dollar for dollar for adjusted
gross income (including disability income) in excess of $15,000. The
Tax Reduction and Simplification Act of 1977 postponed the effective
date of the 1976 act provisions until January 1, 1977 for taxpayers
choosing to make such an election.
Certain contributions to pension plans paid by employers and
amounts set aside by the self-employed and employees not covered
by an employer's plan are excluded from the individual's gross income
in the year of contribution. The investment income earned by pension
funds is not taxable currently. The resulting tax expenditures are
composed of two elements: lower effective tax rates after retirement,
due to lower incomes and special tax provisions enjoyed by the aged;
and the excess of aggregate current contributions and investment
earnings over aggregate amounts paid out in benefits. Self-employed
persons can make deductible contributions to their own retirement
plans equal to 15% of their income up to a maximum of $7,500 per
year. Employees not covered by an employer's plan may deduct annual
contributions of 15% of compensation, up to a maximum of $1,500, or
$1,750 if the retirement account is owned jointly by a husband and
wife.
The exclusion from employee income of certain other employer
payments including payments for premiums on group life insurance and
accident and disability insurance are categorized here because of their

SPECIAL ANALYSIS F

167

relationship to income security. The exclusion of certain other fringe
benefits are listed under education, training, employment, and social
services.
Life insurance policies, other than term policies, generally have a
saving element in them. Savings in the form of policyholder reserves
are accumulated from premium payments, and interest is earned on
the reserves. Such interest income is taxable neither as it accrues
nor when received by beneficiaries.
A taxpayer 65 or older may exclude from gross income any capital
gain allocated to the first $35,000 of the adjusted sales price on a sale
of a personal residence. A taxpayer may take advantage of this
provision only once.
The Tax Reduction and Simplification Act of 1977 substituted
flat standard deductions, $2,200 for single taxpayers and $3,200 for
married couples filing jointly, for the option under prior law of a
low-income allowance or the percentage standard deduction. The
percentage standard deduction was a substitute for itemizing personal
deductions; the estimates shown are for the amount by which the
percentage standard deduction exceeded the low-income allowance
or the itemized deductions that would have been taken in the absence
of that provision, whichever was greater. The percentage standard
deduction limited tax liability for many taxpayers, predominately in
the middle-income range, and for that reason is classified under income
security.
Additional personal exemptions of $750 may be deducted by taxpayers who are over 65 or blind. These additional exemptions may not
be claimed for a taxpayer's dependents.
The retirement income tax credit was substantially changed by
the Tax Reform Act of 1976 and renamed the "credit for the elderly."
Under prior law, individuals w7ho were over age 65 could claim a
tax credit of 15% of retirement income from all sources except social
security, railroad retirement, and other tax-exempt benefits. The
maximum amount of retirement income to which the 15% credit
applied was $1,524 for a single person and $2,286 for a married couple
where one spouse had worked prior to retirement and $3,049 if both had
worked. The provision was designed to provide taxpayers with taxable
retirement income a tax benefit approximately comparable to that
accorded recipients of social security and similar tax-exempt benefit
payments. The 1976 act simplified eligibility rules and increased the
maximum base for the credit to $2,500 for a single person and to $3,750
for a married couple. It also eliminated the parallel to social security by making the credit available for earned income as well
as retirement income. Under the new act the base upon which the
credit is calculated continues to be reduced by tax-exempt social
security and retirement income and the credit is phased out at levels of
adjusted gross income above $7,500 for a single person and $10,000
for a married couple. The Tax Reduction and Simplification Act of
1977 postponed the effective date of the 1976 act provision until
January 1, 1977 for taxpayers choosing to make such an election.
The aggregate effect of excluding social security and railroad
retirement benefits for retirees, the additional exemption for persons
over 65, and the credit for the elderly is a revenue loss of $5.7 billion
in 1977, $6.2 billion in 1978, and $6.8 billion in 1979. These aggre-

168

THE BUDGET FOR FISCAL YEAR

19 79

gates are greater than the sum of the individual estimates because
more elderly persons would be pushed to tax paying levels of income
or into higher tax brackets if all of these items were deleted from the
tax code.
Life insurance policies, other than term policies, generally have a
saving element in them. Savings in the form of policyholder reserves
are accumulated from premium payments, and interest is earned on
the reserves. Such interest income is taxable neither as it accrues
nor when received by beneficiaries.
Taxpayers generally may deduct as an itemized nonbusiness
deduction the amount in excess of $100 for each loss due to fire,
theft, or other casualty to the extent not compensated by insurance
or other payments.
The Tax Reduction Act of 1975 established, on a temporary basis,
an earned income credit for low-income workers with dependents. The
maximum credit is 10% of a worker's first $4,000 of earned income
and phases out at $8,000 of earned income or adjusted gross income,
whichever is greater. Credits in excess of tax liabilities otherwise owed
are paid to individuals. The earned income credit has been extended
through calendar year 1978.
Veteran benefits and services.—All compensation due to death or
disability and pensions paid by the Veterans Administration are
excluded from taxable income. GI bill benefits are also excluded.
General Government.—Political contributions up to a maximum of
$100 ($200 in the case of joint returns) may be deducted, or tax
credits may be taken up to one-half of contributions but limited to
$25 ($50 on joint returns).
General purpose fiscal assistance.—The interest on State and local
government debt is excluded from Federal taxation. Both corporations,
mainly commercial banks, and individuals receive this tax-exempt
income. As a result, these governments are able to sell debt obligations
at a lower interest cost than would be possible if such interest were
subject to tax. The exclusion of interest on State and local government
securities issued to finance pollution control facilities and other industrial development bonds are classified elsewhere; only the effect of
excluding interest on general purpose obligations and revenue bonds
for public purposes such as toll roads is estimated for this function.
The estimated revenue loss from all tax-exempt bonds is $6.8 billion
for 1979.
The deductibility of nonbusiness State and local taxes provides
indirect assistance to these governments. The deductibility of property taxes on owner-occupied homes and excise taxes on gasoline are
classified elsewhere. The estimates shown here are primarily for the
deductibility of State and local income and sales taxes. The deductibility of all nonbusiness State and local taxes results in an estimated
tax expenditure of $13.7 billion in 1979.
U.S. corporations receiving income from sources in a U.S. possession
can, under certain conditions, claim a special tax credit equal to the
U.S. tax, but only on income from sources in a U.S. possession.

SPECIAL ANALYSIS

169

Interest.—Holders of U.S. savings bonds are not required to include
the interest on these securities in their taxable income until the bonds
are redeemed, thereby deferring tax liabilities.
PROPOSED C H A N G E S IN T A X

EXPENDITURES

The tax reduction and reform proposals that are part of the 1979
budget will affect nearly every tax expenditure item, either directly
by repealing or substantially modifying existing provisions or indirectly by altering the normal structure of the individual and corporation income tax. In addition, the proposed national energy plan
would introduce new tax expenditure items. A complete listing of tax
expenditures for 1979 based on all the tax proposals in the budget is
given in table G-2.
Table G-2. T A X E X P E N D I T U R E E S T I M A T E S F O R 1979 B Y F U N C T I O N
U N D E R T H E T A X P R O P O S A L S I N C L U D E D IN T H E 1979 B U D G E T
(In millions of dollars)
Description

National defense:
Exclusion of benefits and allowances to Armed Forces personnel
Exclusion of military disability pensions
International affairs:
Exclusion of income earned abroad by United States citizens
Deferral of income of domestic international sales corporations
(DISC)..
Deferral of income of controlled foreign corporations
Special rate for Western Hemisphere trade corporations
General science, space, and technology:
Expensing of research and development expenditures
Energy:
Expensing of exploration and development costs
Excess of percentage over cost depletion
Residential energy credits:
Thermal efficiency
Solar energy
Business energy credits:
Thermal efficiency
Cogeneration
Alternative energy
Capital gains treatment of royalties on coal
Natural resources and environment:
Exclusion of interest on State and local government pollution control
bonds
....
Exclusion of payments in aid of construction of water and sewage
utilities
5-yr amortization on pollution control facilities
Tax incentives for preservation of historic structures
Capital gains treatment of certain timber income
Capital gains treatment of iron ore.
Agriculture:
Expensing of certain capital outlays.
Capital gains treatment of certain ordinary income
Deductibility of noncash patronage dividends and certain other items
of cooperatives
See footnote at end of table.

Corporations

Individuals 1

1,165
100
365
870
495
15
1,455

935
1,140

330
350
705
100

245
60
10
15

95
55

260

125

10
135
5
190
5

5
60
5

70
10

430
330

500

—165

170

THE, BUDGET FOR FISCAL YEAR

1979

Table G-2. T A X E X P E N D I T U R E E S T I M A T E S F O R 1979 B Y F U N C T I O N
U N D E R T H E T A X P R O P O S A L S INCLUDED IN T H E 1979 B U D G E T — C o n .
(In millions of dollars)
Description

Commerce and housing credit:
Dividend exclusion
Exclusion of interest on State and local industrial development bonds.
Exemption of credit union income
Excess bad debt reserves of financial institutions
Deductibility of mortgage interest on owner-occupied homes
Deductibility of property tax on owner-occupied homes
Deductibility of interest on consumer credit
Expensing of construction period interest and taxes
Excessfirst-yeardepreciation
Depreciation on rental housing in excess of straightline
Depreciation on buildings (other than rental housing) in excess of
straightline..
Asset depreciation range
Capital gains (other than farming, timber, iron ore, and coal)
Deferral of capital gains on home sales
Capital gains at death
Corporate surtax exemption
Investment credit
Transportation:
5-yr amortization on railroad rolling stock
Deferral of tax on shipping companies
Community and regional development:
5-yr amortization for housing rehabilitation
Education, training, employment, and social services:
Exclusion of scholarship and fellowship income
Parental personal exemption for students age 19 or over
Exclusion of employee meals and lodging (other than military)...
Exclusion of contributions to prepaid legal services plans
Investment credit for employee stock ownership plans
Deductibility of charitable contributions (education)
Deductibility of charitable contributions to other than education
and health
....
Maximum tax on personal service income
Credit for child and dependent care expenses
Credit for employment of AFDC recipients and public assistance
recipients under work incentive programs
Jobs credit
Health:
Exclusion of employer contributions for medical insurance premium
and medical care
Deductibility of medical expenses and casualty losses
Expensing of removal of architectural and transportation barriers to
the handicapped
Deductibility of charitable contributions (health)
Income security:
Exclusion of social security benefits:
Disability insurance benefits
OASI benefits for retired workers
Benefits for dependents and survivors
Exclusion of railroad retirement system benefits
Exclusion of workmen's compensation benefits
Exclusion of special benefits for disabled coal miners
.
Exclusion of unemployment insurance benefits
Exclusion of public assistance benefits
Exclusion of sick pay
See footnote at end of table.

Corporations

260
75
460

500
50
65
100
2,540
500
4,228
14,445

Individuals

460
135
4, 285
4,095
1,820
90
155
290
105
135
7,245
890
8,140
30
2,640

—40
80
5

305
270
335

20
1,035

5
280
720
275
15
545
4,505
755
555
860
6,140
645

10
165

820
495
3,840
850
230
825
45
870
255
50

SPECIAL ANALYSIS

171

Income security—Continued
Net exclusion of pension contributions and earnings:
Employer plans
Plans for self-employed and others
Exclusion of other employee benefits:
Premiums on group term life insurance
Premiums on accident and disability insurance
Income of trusts tofinancesupplementary unemployment benefitsExclusion of interest on life insurance savings
Exclusion of capital gains on home sales for persons age 65 and over.__
Additional exemption for the elderly
Additional exemption for the blind
Tax credit for the elderly
Earned income credit:
Nonrefundable portion
Refundable portion
Veterans benefits and services:
Exclusion of veterans disability compensation
Exclusion of veterans pensions
Exclusion of GI bill benefits
General Government:
Credit and deductions for political contributions
General purpose fiscal assistance:
Exclusion of interest on general purpose State and local debt
Deductibility of nonbusiness State and local taxes (other than on
owner-occupied homes)
Tax credit for corporations doing business in U.S. possessions
Interest:
Deferral of interest on savings bonds

Corporations

Individuals

9,930
1,830
810
70
10
2,035
65
1, 390
20
205
50
1,115
750
35
155
70
3, 695
500

2, 125
5,745
610

MEMORANDUM

Combined effect of provisions disaggregated above:
Capital gains
Exclusion of interest on State and local debt
Deductibility of State and local nonbusiness taxes
Deductibility of charitable contributions
1

720
4,215
770

16,790
2,385
9,015
5,870

Assumes tax rates and structure in effect Jan. 1, 1979.

The normal structure of the individual income tax will be altered
by reducing rate schedules and substituting a personal credit of $240
for the current $750 deduction for personal exemptions and the general
tax credit, effective in calendar year 1978. The personal credit will be
augmented by $15 in calendar year 1978 and $30 in calendar year 1979
as a means of rebating the crude oil equalization tax proposed as part
of the national energy plan. In addition to reducing tax receipts,
these changes will reduce the revenue loss associated with many tax
expenditure items, particularly for those items that exclude amounts
from the income subject to tax of lower income taxpayers. The proposed personal credit will affect tax expenditures resulting from the
extra exemptions for parents of students over 18, the elderly, and the
blind. The proposed repeal of the deduction of one-half of regular taxes

172

THE BUDGET FOR FISCAL YEAR

19 79

paid from the base of the minimum tax for individuals will reduce
further the revenue loss associated with the tax expenditure items that
enter into the base of the minimum tax. The proposed expansion of the
"at risk" rules of the Tax Reform Act of 1976 to apply to a wider range
of tax shelter investments will have an indirect effect on some tax
expenditure items that cannot be reflected in the estimates.
The normal structure of the corporation income tax would be
altered by reducing the maximum corporate rate from 48% to 45%
beginning October 1978 and to 44% in 1980 and thereafter. This rate
reduction will reduce most tax expenditures associated with the
corporation income tax.
The administration's tax proposals are also discussed in Parts 2
and 4 of the budget. Some of these proposals, such as energy-related
excise taxes and limitations on allowable deductions for business
entertainment, meals and travel, do not affect tax expenditures.
The following discussion highlights proposals to eliminate or directly
modify existing tax expenditures or add new tax expenditure items.
The discussion is organized by functional area.
International affairs.—The deferral of income currently allowed
domestic international sales corporations will be phased out over a
3-year period beginning in calendar year 1979. The deferral of income
of controlled foreign corporations will also be phased out over that
same 3-year period. The effective date of the provision of the Tax
Reform Act of 1976 regarding income earned by Americans abroad
will be postponed until January 1, 1978.
Natural resources and environment.—The use of tax-exempt industrial
development bond financing for private pollution control facilities
will be terminated effective January 1, 1979. Pollution control facilities
and equipment will be eligible for the full 10% investment tax credit
even if the property is eligible for 5-year amortization. The effective
date of this provision will be January 1, 1978.
Energy.—As a part of the national energy plan new tax expenditures
will encourage energy conservation and the conversion from the use of
oil and natural gas to other energy sources. Taxpayers will be able to
claim a tax credit of 25% of the first $800 and 15% of the second
$800 spent for insulation or certain other energy-saving improvements
on the taxpayer's principal residence. The total amount of the credit
allowed for any individual with respect to the same principal residence
will be limited to $410 over taxable years 1977 through 1984. Taxpayers will be able to claim a tax credit of 40% of the first $1,000 and
25% of additional expenditures up to a maximum credit of $2,000
during taxable years 1977 through 1979 for certain home solar energy
equipment. The amounts of the credit will diminish for taxable years
1980 through 1984. Expenditures made after April 20, 1977, will be
eligible for both credits.
An additional 10% investment tax credit will apply to four separate
classes of energy related property—cogeneration property that allows
electricity to be produced together with production of heat or steam
for other purposes, alternative energy property that is associated
with the use of coal or other fuels other than oil and gas, solar energy

SPECIAL ANALYSIS F

173

equipment, and property that reduces the amount of energy consumed
to heat or cool buildings or to carry on manufacturing or production
processes. Expenditures for these classes of property may not be used
as credits against the proposed oil and gas use tax. The proposal to
set a 90% limit on investment tax credits that may be claimed as
offsets to regular tax liabilities would also apply to these new, additional investment tax credits.
The temporary provision of the Tax Reduction and Simplification
Act of 1977 that removed intangible drilling costs to the extent of
related income from the base of the minimum tax will be made permanent. The expensing of intangible drilling costs would be extended
to wells drilled for geothermal energy sources.
Agriculture.—All corporate farms with gross reciepts of more than
$1 million and not taxed like partnerships will be required to use
accrual accounting thus reducing the tax expenditures resulting from
the expensing of certain items.
Commerce and housing credit.—Credit unions would be subject to
tax but be allowed to claim bad debt deductions on the same basis as
savings and loan associations and mutual savings banks. To phase in
this provision, credit unions will be able to claim bad debt deductions
equal to 86% of net income in calendar year 1979; that percentage
will phase down to 30% in 1983. The percentage of net income that
savings and loan associations and mutual savings banks may claim as
a bad debt deduction will phase down from 41% in 1978 to 30% in
1983. The bad debt provision for commercial banks will be repealed
effective January 1, 1979.
Bonds issued by State or local governments but used to finance
private industrial parks and plants will generally be denied taxexempt status. Tax exemption will be retained for plants built in
economically distressed areas and the current law limit on the size
of projects eligible for such financing will be doubled to $10 million,
but the limit on the size of any issue will be retained at $1 million.
Taxpayers will generally be required to depreciate buildings under
the straight-line method over the average lives presently in use.
Accelerated depreciation will be permitted for multifamily housing
(150% declining balance method) and low-income housing (200%
declining balance method).
The alternative tax of 25% on up to $50,000 of capital gains will be
repealed effective January 1, 1979. The untaxed half of any gain
on the sale of a principal residence would be removed from the base
of the minimum tax.
The tax expenditure for the corporate surtax exemption will be
expanded by permanently reducing the corporate tax rate from 20%
to 18% on the first $25,000 of corporate income and from 22% to
20% on the second $25,000 of corporate income effective October 1,
1978.
The 10% investment tax credit will be extended to industrial and
utility structures and a flat 90% limit on the portion of tax that may
be offset with the investment tax credit will replace the current
provisions, which generally allows 100% of the first $25,000 of tax
liability to be offset and 50% of any additional tax liability. The 10%
rate will be made permanent.

174

THE BUDGET FOR FISCAL YEAR

19 79

Transportation.—The deductibility of nonbusiness State and local
gasoline taxes will be repealed.
Community and regional development.—The provision allowing
5-year amortization for housing rehabilitation will be extended.
Health.—The exclusion of employer contributions for medical
insurance premiums and medical care will continue to be permitted
only if such plans meet new tests to assure that lower compensated
employees are not discriminated against. The deductibility of medical
expenses will be modified to allow a deduction for medical expenses
and uninsured casualty losses only to the extent that they exceed
10% of adjusted gross income.
Income security.—Unemployment compensation will be subject to
tax for single individuals with income in excess of $20,000 and for
married couples with income in excess of $25,000. Unemployment
compensation will be brought into income subject to tax at the rate of
50 cents for each dollar of income above these threshold levels. The
exclusion of pension fund contributions and earnings from employee
income for plans which integrate with social security benefits will continue only for plans that meet new rules regarding integration to assure
that lower compensated employees are not discriminated against.
Similar rules will be applied to plans providing life insurance or disability insurance. The exclusion of employer paid death benefits will
be repealed. The earned income credit will be extended through
calendar year 1981 and then expanded in 1982 as part of welfare
reform. Interest will be taxed on a current basis on certain large
annuity contracts (not life insurance policies).
General government.—The deduction for political contributions will
be repealed; the credit will be retained.
General purpose fiscal assistance.—State and local governments will
be provided a Federal interest subsidy if they elect to issue securities
in a taxable rather than tax-exempt form. As this option is elected
for new issues, the revenue loss associated with tax exemption will
decline. An interest subsidy of 35% will be provided for bonds issued
in calendar years 1979 and 19S0, and 40% for bonds issued thereafter.
All securities currently eligible for tax exemption will be eligible for
tax exemption or this option except certain industrial development
bonds: those issued for private pollution control facilities, those issued
for industrial plants in areas that are not economically distressed, and
those issued for new hospitals that have not been certified as needed
by the State. The deductibility of State and local sales, personal
property, and certain miscellaneous taxes will be repealed effective
January 1, 1979.

SPECIAL ANALYSIS H
FEDERAL AID

TO STATE AND LOCAL GOVERNMENTS

State and local governments play a vital role in meeting the Nation's
needs. The Federal Government makes an important contribution to
that role by providing grants-in-aid and loans to State and local
governments.
Federal grant-in-aid outlays to State and local governments are
expected to be $85.0 billion in 1979, 6% higher than the estimated
1978 total of $80.3 billion, and 24% more than the 1977 total of $68.4
billion. The substantial increase in 1978 grants above 1977 is due
primarily to the economic stimulus programs. As these programs
phase out with economic recovery, the increase in grants diminishes.
From 1967 to 1977, the average annual increase in grants was 16.2%
while total Federal outlays grew by 9.8% per year, and gross national
product by 9.0% per year.
Federal G r a n t s to S t a t e a n d L o c a l Governments

FhcafYw

£»«««*«

1 Federal aid to State and local governments is defined as the provision of resources by the Federal
Government to support a State or local program of governmental service to the public. The three
primary forms of aid are grants-in-aid (including shared revenues), loans, and tax expenditures. Unless specifically indicated to the contrary, reference to "Federal aid" or "grants" in this analysis
is confined to grants-in-aid. including shared revenues.

175

176

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

The 1979 grant programs are characterized by:
• The strong underlying growth referred to above. Grants will
continue to account for one-sixth of total Fedeial spending and
more than one-quarter of State and local spending.
• Continued rapid growth in grants for human resources programs,
centering around:
—a major initiative to reform the existing welfare programs and
make them direct Federal programs;
—special attention to training and employment programs; and
—substantial increases for education, particularly for low income,
low achievers.
• A sharp upturn in ground transportation grants, with proposed
greater flexibility in allocating funds between highways and mass
transit.
• A determined effort to simplify the administrative requirements
related to grants. In this connection, extension of advance funding
to additional programs was announced in December 1977, and
significant progress has been made in reducing planning requirements.
HIGHLIGHTS OF THE F E D E R A L A I D P R O G R A M

Grant programs.—The administration's major initiative affecting
Federal aid is the better jobs and income proposal, designed to reform
the present welfare programs. This proposal consists of three parts:
reform of cash assistance; expansion of employment programs including, where appropriate, public service jobs; and expansion of the earned
income tax credit. The first two include major Federal aid programs.
The cash assistance component of this proposal would begin in 1981
and consolidate food stamps, supplemental security income, and aid
to families with dependent children (AFDC) into one cash payment
financed primarily by the Federal Government. The food stamps and
supplemental security income programs are now financed directly by
the Federal Government and are not grants-in-aid. The AFDC
program, currently a $6 billion grant-in-aid requiring an almost equal
amount of State and local matching funds, would become a direct
Federal program, with States having the options of both supplementing
the payments and providing staff to process client applications.
The employment opportunities component of the welfare reform
proposal, which is title II of the proposed Better Jobs and Income
Act, would begin in 1979, with an estimated $35 million in outlays
for States and localities to develop plans for the new program. The
actual placement, training, and related services systems, including
public service jobs, would begin in 1980. The proposed legislation
authorizes up to 1.4 million subsidized public sector jobs for primary
earners, in families with children, who are unable to find unsubsidized
work. Outlays would increase to about $11.1 billion in 1983.
Eneroy grants to States are estimated to increase significantly in
keeping with the national energy plan. Outlays for energy conservation grants are expected to increase 188% from 1978. Major emphasis
will be placed on the funding of energy conservation improvements for
schools, hospitals, and the homes of low-income individuals. Grants for
State planning of State and local energy conservation activities will
continue under these budget proposals. The budget also includes
funds for the expansion of the Energy Extension Service to a nationwide program. The Service is expected to provide energy conservation

SPECIAL ANALYSIS

177

and solar information to individuals, farmers, and small businesses.
Legislation to improve the State grants programs will be proposed
after completion in the spring of a study on the role of State governments in implementing energy policy.
Outlays for construction of water sewage treatment plants are
expected to increase from an estimated $4.1 billion in 1978 to $4.7
billion in 1979. This program provides grants to both State and local
governments for 75% of the cost of planning, designing, and constructing water sewage treatment plants. More than 11,000 projects are
already underway, and nearly all of the authorized $18 billion has
been obligated. Legislation has been enacted to provide $15.2 billion
in estimated outlays for 1980-82 to continue this program.
The administration is proposing several important changes in
existing ground transportation grants. Over a 4-year period the changes
would provide substantially more flexibility to States and localities in
the use of these grants by reducing the number of narrowly defined
programs and by allowing more flexibility in allocating funds between
highways and mass transit. In order to encourage completion of the
interstate system, States would be required to have completed all
environmental impact statements for this system by no later than
1982. If they choose, they may transfer interstate highway program
funds to substitute mass transit for highway projects by 1982.
Outlays for the Federal-aid for highways portion of ground transportation grants (financed from the highway trust fund) are estimated to
be $7.1 billion in 1979, an increase of $0.7 billion over 1978. All of
these funds go directly to State governments, and approximately half
are used to continue construction on incomplete segments of the
interstate highway system.
Outlays for urban mass transportation continue to grow, and are
estimated to be $2.2 billion in 1979, a 13% increase over 1978 and a
34% increase over 1977. More than four-fifths of the grant funds go
to the 25 metropolitan areas with a population of 1 million or more, a
number of which have or are building rapid transit systems. The
remainder is primarily for bus systems in smaller communities. In
1979 the administration is proposing to double the proportion of
transit funds allocated by formula. This will be achieved by decreasing
discretionary Federal allocations and will have the affect of increasing
funding predictability at the local level.
The community development block grant funds will continue to provide
assistance directly to local governments. Recipients have considerable
freedom in selecting projects for this program, so long as they are
within the general guidelines of community development. The reauthorization in 1978 changed the way funds are allocated to communities. The enacted legislation provides that entitlements may be
calculated using the original formula (population, poverty, and housing overcrowding) or an alternative formula (poverty, relative loss
of population, age of housing). Outlays for the program for 1979 are
estimated to be $2.8 billion, an increase of $0.2 billion over 1978. The
community development outlays include activities in the urban
development action grant program. This program provides one-time
grants to severely distressed cities and urban counties to supplement
local government and private sector financing for major urban
revitalization projects. For a discussion of other urban programs, see
the community and regional development section of Part 5 of the
Budget.
260-700 O - 78 - 12

178

THE BUDGET FOR FISCAL YEAR

19 79

The local public works program was expanded as part of the administration's economic stimulus program to assist local governments
with construction projects and to decrease unemployment. Outlays
are expected to be $2.3 billion in 1978, decreasing to $2.0 billion
in 1979.
For education grants, the 1979 budget includes $5.9 billion in
estimated outlays for elementary, secondary, and vocational education.
Funds are provided to State and local education agencies in the form
of formula and discretionary grants. The largest share of these funds
will provide supplementary educational services to low-income, lowachieving students under the basic title I, elementary and secondary
education program, with an estimated $3.0 billion in 1979 outlays for
disadvantaged students. Emphasis will be on improving basic skills—
especially reading. Budget authority for handicapped programs is
proposed to increase $339 million in 1979 to $804 million. This increase will assist States with the additional costs necessary for educating handicapped children.
The impact aid program compensates school districts for the extra
burden of educating children of Federal employees, since property
tax revenues of these districts have been reduced as the result of
Federal ownership of local property. Legislation is being proposed to
limit impact aid to those districts where an economic burden truly
exists because of reduced tax revenue.
In addition, 1979 budget authority of $680 million is requested for
the Head Start program, a $55 million increase over 1978, with estimated outlays of $612 million. The program will be expanded to increase enrollments nationwide.
Appropriations authorized for the major portions of the Comprehensive Employment and Training Act (CETA), which includes most
employment and training programs, expire at the end of 1978. The
administration proposes the continuation of CETA, with more
emphasis on programs that provide permanent, private sector employment and on targeting grants to individuals and areas of greater
need.
Total grant outlays for employment and training programs are
proposed to be $11.1 billion in 1979, an increase of 11% over 1978 and
75% more than in 1977. These programs were increased substantially
in 1977 and 1978 due to high unemployment, and although the
economy continues to improve, unemployment remains unacceptably
high and substantial aid is still needed. The administration sought
and received funds to provide 725,000 public service jobs by mid1978, and is requesting funds to continue at this level for 1979.
Improvements in the economy may permit gradual declines in seme
employment and training programs after 1979, although a permanent
program of public service jobs would be retained primaiily for areas
with high unemployment. In addition, standby authority will be
sought for public service jobs so that if future economic downturns
are severe, additional jobs could be funded.
Grants for social services also meet a critical national need. These
programs assist the disadvantaged and disabled to be self-sufficient.
Outlays for the public assistance portion of these programs in 1979 are
estimated to be $2.8 billion, 12% higher than the 1977 estimate. The
1978 estimate of $3.2 billion is unusually high because of $543 million of

SPECIAL ANALYSIS

179

retroactive payments for 1972. These payments result from claims
brought by the States for obligations incurred under former regulations
and not reimbursed by the Federal Government.
The medicaid program continues to be a large grant-in-aid with
estimated outlays of $12.0 billion in 1979. This program supports
State efforts to provide health services to eligible residents. Several
legislative initiatives will expand coverage under the program in 1979.
The child health assessment program (CHAP) will extend medical
screening and services to 1,700,000 low-income children and youth
under the age of 21 not previously covered. An additional 100,000125,000 lowT-income mothers and expectant mothers will become
eligible for needed medical services under another administration
proposal.
Outlays for assistance payments (aid to families with dependent
children) are expected to be $6.8 billion in 1979, about the same as
1978, Under the administration's welfare reform proposal, this grant
program would be terminated in 1981 and become a direct Federal
program.
Outlays for the public housing and State agency components of
the Department of Housing and Urban Development's assisted housing
programs are estimated to increase 20%, from $2.5 billion in 1978 to
$3.0 billion in 1979. These increases reflect the additional number of
low-income families receiving housing services from public housing
and State agency housing projects and the increased costs of providing
those services.
Outlays for law enforcement assistance grants are estimated to decrease $93 million to $537 million in 1979. Efforts are being made to
create a more efficient and effective program and limit unnecessary
administrative expenses.
General revenue sharing was first enacted in 1972 as an annual $.6
billion grant that gave virtually unlimited discretion for its use to
recipient governments. It was reauthorized in 1976 for 3% years,
through 1980, providing $25.6 billion during this period. The enacted
legislation will continue the program with outlays estimated at $6.9
billion in 1979. One-third of these funds go to State governments and
two-thirds to local governments. The legislation places increased
emphasis on eliminating discrimination and requires grantees to have
public hearings on the use of the funds. Units of government that
receive $25,000 or more in a year must have an independent audit of
all transactions at least every 3 years. Grantees are no longer limited
to spending the funds for activities formerly specified by the act, and
funds may now be used as the non-Federal matching share for other
Federal grants.
A temporary program designed to assist communities especially
troubled by unemployment is the antirecessionfiscalassistance program, reauthorized for the period through September 30, 1978. For
each quarter, $125 million is allocated, plus $30 million per quarter
for each one-tenth percentage point that the national unemployment
rate, lagged two quarters, exceeds 6%. In addition, the unemployment
rate must have been over 6% the last month of the quarter ending
two quarters earlier. For example, for the quarter beginning July
1977, $515 million was allocated because the national unemployment
rate was 7.3% the first quarter of calendar year 1977.
Two-thirds of the grants are for localities that had an average

180

THE BUDGET FOR FISCAL YEAR

19 79

unemployment rate of more than 4.5% two quarters earlier (the rate
for the last month of that quarter must also be over 4.5%). The other
third of the grants is distributed to States under the same formula.
The amount each State receives is determined by the excess unemployment rate over 4.5% and the size of its general revenue sharing
payment. The funds may be used to match other Federal grants.
Approximately 26,000 units of State and local governments are
expected to benefit from this program.
The administration is proposing an extension of this program.
Outlays are estimated to be $1.0 billion in 1979, $522 million less than
in 1978.
Loans.—Another form of Federal aid to State and local governments is direct loans. Short- and long-term direct loan disbursements
(excluding repayments) are expected to be $1.7 billion in 1979.
A major loan program now in effect is the New York City seasonal
financing fund. Under this program, which expires June 30, 1978,
the Treasury Department is authorized to lend New York City
up to $2.3 billion each year through June 1978. The city is charged
an interest rate 1 percentage point above the Treasury borrowing
rate and must repay all loans before June 30, the end of its fiscal
year. Because the loans are purchased by the off-budget Federal
financing bank, the outlays do not show in the budget totals. The
administration is reviewing this program, and recommendations
regarding its continuation will be made when the current review is
complete.
Tax expenditures.—Federal aid is also provided through two
major tax expenditures. (More information on tax expenditures is
provided in Special Analysis G.) First, the deductibility of most State
and local taxes permits a State or locality to raise a dollar of revenue
with less than a dollar net cost to its taxpayers who itemize deductions
on their Federal tax return. The receipts forgone by the Federal
Government in 1979 on the basis of current law are estimated to be
$0.8 billion for gasoline taxes, $5.2 billion for property taxes on
owner-occupied homes, and $9.4 billion for other nonbusiness State
and local taxes—primarily income and sales taxes.
The President's tax proposals include repealing the deductibility of
sales, gasoline, and certain miscellaneous taxes in order to simplify
the tax system. The proposed reduction in tax rates would more than
offset the increase on taxpayer liabilities. Deductibility would be
retained for income taxes, to prevent high marginal tax rates, and for
property taxes, to retain a tax incentive for home ownership.
Second, the exclusion of interest on State and local securities from
Federal taxable income permits these jurisdictions to borrow at
reduced interest rates. The tax expenditures for the exclusion of
interest on State and local general purpose debt is estimated on the
basis of current law to be $6.0 billion in 1979. The benefit going to
these governments in the form of reduced interest payments is about
70% of the Federal revenue loss, with the remaining benefits going to
taxpayers who hold these securities. Interest on industrial development
bonds—which are nominally governmental debt, but are backed only
by revenues from private industry—is also excluded from income.
Benefits from this tax-exempt borrowing go largely to private com-

SPECIAL ANALYSIS

181

panies. The exclusion on the debt to finance pollution control facilities
will, on the basis of current law, reduce Federal receipts an estimated
$0.4 billion, and the exclusion on other industrial development
borrowing an estimated $0.4 billion.
The President is proposing a taxable municipal bond option in order
to improve the efficiency of the municipal bond market and the equity
of the tax system. State and local governments would have the option
of issuing traditional tax exempt securities or taxable securities
for which the Federal Government would provide an interest subsidy.
The subsidy wrould be 35% for taxable securities sold in 1979 and 1980
and 40% thereafter. Outlays under this program would be considered
a grant-in-aid and are estimated to be $99 million in 1979. The outlays would be nearly offset by increased tax receipts. As a part of
this proposal, industrial development bonds used by private firms to
finance pollution control facilities would be denied tax-exempt status.
Moreover, industrial development bonds used to finance private
plant construction wrould be denied tax-exempt status unless the
plants were constructed in economically distressed areas. The current
limits on the size of eligible projects would be doubled, and tax exemption for bonds issued to finance industrial parks would be denied. Finally, bonds issued to finance hospital construction would be denied
tax exempt status unless there is certification by the State that a
new hospital is needed.
FEDERAL

GRANTS-IN-AID

FUNCTION,

AGENCY,

AND

REGION

Pursuant to the Congressional Budget Act of 1974, the Congress
reviews the budget and sets targets by function. Consequently, the
functional classification of the budget has become important not only
for analysis, but also as a control mechanism. Part 5 of the budget
discusses the entire Federal budget by function, and the associated
national needs met by these programs.
Table H - l provides a functional distribution of Federal grant-in-aid
outlays. The largest increase in 1979 outlays is for the education,
training, employment, and social services function, which is estimated
to increase $1.6 billion over 1978.
Table H-1. F E D E R A L G R A N T - I N - A I D O U T L A Y S B Y

FUNCTION

(In millions of dollars)
Function

National defense
Energy..
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional devlopment
Education, training, employment, and social services.
Health
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Total outlays

1977
actual

1978
estimate

1979
estimate

96
74
4,189
371
18
8,299
4,496
15,753
12,104
12,613
79
713
154
9,438

90
270
4,895
391
34
9,561
6,700
20,812
12,875
13,985
85
649
197
9,743

82
644
5,578
383
45
10,440
6,279
22,380
14,084
14,807
88
567
180
9,463

68,396

80,288

85,020

182

THE

BUDGET FOR FISCAL YEAR

19 7 9

The functional composition of the grant program has changed
significantly over the years, as shown in table H-2. The most dramatic growth has occurred in the health function, which has increased
from 4% of Federal aid in 1957 to an estimated 17% in 1979, reflecting
primarily increased spending for medicaid. Outla}^ for the education,
training, employment, and social services function have also increased
substantially from 8% to 26% over the same period. Other changes
are the addition of general revenue sharing, increases in outlays for
environmental protection, and the relative decline in grants for highways and income security. The latter is primarily due to the assumption by the Federal Government of the public assistance programs
for the aged, blind, and disabled. The proposals for welfare reform
would further shift financing of the remaining public assistance programs from joint Federal-State funding to a direct Federal program.
Table H-2. P E R C E N T A G E D I S T R I B U T I O N O F F E D E R A L
OUTLAYS BY FUNCTION
Function

Natural resources and environment.
Agriculture _ _
Transportation
Community and regional development. _
Education, training, employment,
and social services.__
Health
Income security
General purpose fiscal assistance
Other
Total

GRANT

Actual
1962

1957

1967

Estimate

1972

1976

1977

1978

1979

1
9
24

2
6
36

2
3
27

2
1
15

5
1
14

6
1
12

8
4
49
3
1

8
5
38
2
1

25
10
25
2

26
17
26
1
1

24
18
18
12
2

23
18
18
14
2

26
16
17
12
2

26
17
17
11
2

100

*0.5 % or less.

Table H-3 shows grant outlays by agency. The Department of
Health, Education, and Welfare will provide 37% of total estimated
grant-in-aid outlays in 1979, far more than any other agency.
Distribution of grants by region.—Table H-4 shows that Federal
aid on a per capita basis varies widely among regions. The thinly populated Western States traditionally rank high because of highway
construction grants and shared revenues from Federal land holdings.
For example, the Rocky Mountain States have a low regional population density, extensive Federal land holdings and, until recently,
the highest per capita aid.
This effect has diminished in recent years, however, as human
resource programs have grown relative to physical resource programs.
Further, the addition of general revenue sharing has tended to equalize
per capita figures among the regions. Region VIII, which had per
capita grants 37% above the national average in 1969, now has
grants only 5% over the average, while region V has risen from 22%
below the average to only 11% below. Regions II and III have experienced the most rapid growth during the period.

SPECIAL ANALYSIS

183

Table H-3. F E D E R A L G R A N T - I N - A I D O U T L A Y S B Y A G E N C Y
(In millions of dollars)
Agency

1977
actual

Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Energy
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of Transportation
Department of the Treasury
Environmental Protection Agency
Veterans Administration
Community Services Administration
District of Columbia
_
_
Washington Metropolitan Area Transit Authority
Other
Total outlays

1978
estimate

1979
estimate

4,125
955
96
136
27,535
4,962
644
707
6,881
8,007
8,852
3, 724
79
610
276
290
517

4,920
2,666
90
190
29,430
5,860
889
636
10,563
9,358
9,399
4,379
85
634
276
205
709

4,846
2,294
82
548
31,811
6,273
1,038
544
11,766
10, 380
8, 705
4,911
88
526
317
61
829

68,396

80,288

85,020

Table H-4. D I S T R I B U T I O N O F G R A N T O U T L A Y S B Y R E G I O N , SELECTED
FISCAL Y E A R S

Federal region

I. Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island
II. New York, New Jersey, Puerto Rico, Virgin
Islands
_
III. Virginia, Pennsylvania, Delaware, Maryland,
West Virginia, District of Columbia
__ _
IV. Kentucky, Tennessee, North Carolina, South
Carolina, Georgia, Alabama, Mississippi,
Florida. _
V. Illinois, Indiana, Michigan, Ohio, Wisconsin,
Minnesota
VI. Arkansas, Louisiana, Oklahoma, New Mexico,
Texas. _ _
VII. Iowa, Kansas, Missouri, Nebraska. _
VIII. Colorado, Montana, North Dakota, South
Dakota, Utah, Wyoming. _
IX. Arizona, California, Nevada, Hawaii, other territories. _
X. Idaho, Oregon, Washington, Alaska
United States _
1
2

I9772
total
grants

Per capita
1969

Percent
change,
1969-77

1977

$4.2

$102

$344

237

10.9

103

375

264

8.3

341

263

10.4

101

288

185

12.7

277

260

6.0
2.8

111
88

262
238

136
170

2.1

136

328

141

8.4
2.6

116
117

320
359

176
207

68.4

311

214

These are not the same regions as those used for national income account computations.
In billions of dollars, preliminary data.

Note.—See "Federal Aid to States," Department of the Treasury, for additional
concerning State distribution of Federal grants.

information

184

THE

BUDGET

FOR

HISTORICAL

FISCAL YEAR

19 7 9

PERSPECTIVES

Although grants from the National Government predate the
Constitution, they were very small until the end of the 19th century
and did not become a truly significant factor in government expenditure until after World War II. In 1950 Federal grants to State and local
governments totaled $2 billion, and by 1965 they had risen to $11
billion. ID 1977 they were $68.4 billion, an average annual increase
of 16.2% since 1967. This compares to an average annual growth of
9.8% for total Federal outlays over the same period. In 1979 Federal
grants are estimated to be 17.0% of total Federal outlays, and 22.7%
of domestic Federal outlays.
Table H-5 shows the growth in grant outlays since 1950. Apart from
a few one-time factors, such as a $1 billion advance payment of public
assistence funds in 1972 (with a corresponding decrease in 1973) and
retroactive payments of general revenue sharing entitlements in 1973,
the growth of Federal grant outlays has been relatively steady. The
sharp increase in grants as a percent of total Federal outlays in 1977
and 1978 is due primarily to the administration's economic stimulus
programs enacted in 1977.
Table H-5. H I S T O R I C A L T R E N D O F F E D E R A L G R A N T - I N - A I D

OUTLAYS

(Fiscal years; dollar amounts in millions)

Total
grants

1950
1955
1960
1965
1970
1971
1972
1973
1974
1975.
1976
TQ
1977
1978 estimate
1979 estimate
1
3

$2,253
3,207
7,020
10,904
24,018
28,109
34,372
41,832
43,308
49, 723
59,037
15,909
68,396
80,288
85,020

Composition of
grants-in-aid
Grants for
payments to
individuals

$1,421
1,770
2, 735
3,954
8,867
10, 789
13,421
13,104
14,030
16,106
19,511
5,122
23,002
25,151
27,190

Other

$832
1,437
4,285
6,950
15,151
17,320
20,951
28,728
29,278
33,618
39,526
10,787
45,394
55,137
57,830

Federal grants as a percent of
Federal outlays
Total

Domestic

5.3
4.7
7.6
9.2
12.2
13.3
14.8
16.9
16.1
15.2
16.1
16.8
17.0
17.4
17.0

8.8
12.1
15.9
16.6
21.1
21.4
22.8
24.8
23.3
21.3
21.8
22.7
22.8
23.1
22.7

State and
local expenditures 2

10.4
10.1
14.7
15.3
19.4
19.9
22.0
24.3
22.7
23.2
24.7
25.7
26.4
27.5
26.2

Excludes outlays for the national defense and international affairs functions.
As defined in the national income accounts.

Approximately one-third of estimated 1979 grants are to States or
localities for payments to individuals. Among the larger of these programs are medicaid, public assistance payments, housing payments,
and nutrition programs for children and the elderly. The public assistance program for the blind, disabled, and aged—known as supplemental security income—became a direct Federal program in January
1974. The figures for this program are therefore included as grants
through 1973 but not since then.

SPECIAL

Table H-5
expenditures.
1977, and for
one-fourth of

ANALYSIS

185

also shows grants-in-aid as a percent of State and local
This percent has increased from 15% in 1965 to 26% in
1978 and 1979 is estimated to continue to be more than
total State and local expenditures.

O T H E R SOURCES OF F E D E R A L A I D

INFORMATION

The budget grant-in-aid series is designed to provide a comprehensive picture of Federal grants-in-aid, focusing on programs that are
financed but not directly administered by the Federal Government.
The census series (published in Governmental Finances) and the
national income accounts (NIA) series (published in Special Analysis B
of this document and in the Survey of Current Business) are parts of a
broader statistical concept encompassing the entire economy, and as a
consequence they define Federal grants-in-aid somewhat differently
from the budget series. They both omit the following items that the
budget series includes:
—Federal aid to the Governments of Puerto Rico and U.S.
territories;
—payments in-kind, primarily commodities purchased by the
Department of Agriculture and donated to the school lunch and
other nutrition programs; and
—payments to private, nonprofit entities (such as nonprofit
hospitals and some manpower training programs) that operate
under State auspices or within a State plan.
Table H-6. T H R E E M E A S U R E S O F F E D E R A L G R A N T S - I N - A I D T O
A N D L O C A L G O V E R N M E N T S , 1972-76 (in billions of dollars)

STATE

1972

1973

1974

1975

1976

Budget (Special Analysis H)
Less principal exclusions:
Agricultural commodities
Geographical exclusions
Plus payments for research
All other (net)

34.4

41.8

43.3

49.7

59.0

—0.6
—0.4
1.1
-0.9

—0.5
—0.6
1.2
-0.2

—0.6
—0.7
1.3
-0.4

—0.5
—0.9
1.5
-0.2

—0.5
—1.2
1.7
-0.6

Federal payments (Census)
Less low-rent public housing
All other (net)

33.6
—0.7
-0.3

41.7
—1.0
-0.3

42.9
— I. 1
-0.2

49.6
—1.3

32.6

40.4

41.6

48.3

Grants-in-aid (national income accounts)

58.4
—1.5
0.6
57. 5

Excludes $10.6 billion for unemployment compensation that the census series included in its data.

One major group of payments excluded in the budget definition of
grants but included in the census and NIA series is payments for
research conducted by public universities. The budget series excludes
these payments because they are considered to be a purchase of
services for the Federal Government rather than aid for State or local
programs. Since both census and the NIA series focus on cash payments to State and local governments, they count these as grants. One
major kind of outlay included in the budget and census definitions but
excluded from the NIA series is payments for low-rent public housing,
which the NIA count as subsidies by the Federal Government rather
than as grants. Table H-6 shows other minor differences among the

186

THE

BUDGET

FOR FISCAL Y E A R

19 7 9

three series, but the differences are largely offsetting and, thus, these
three series reflect similar patterns.
In addition to these data sources, Federal Aid to States, published by
the Treasury Department, lists grant outlays by State using the budget
definition of grants, for more than 90 programs. The Catalog of Federal
Domestic Assistance, prepared by the Office of Management and
Budget and available from the Government Printing Office, provides
a detailed listing of grant-in-aid and other assistance programs, and
information on eligibility criteria, application procedures, estimated
obligations, and other information. This is a primary reference source
for communities wishing to apply for grants-in-aid. The Federal
Register is published daily by the Government Printing Office and
provides current information on agencies that are accepting applications for specific programs. This source also provides information on
eligibility criteria and application procedures.
Geographic Distribution of Federal Funds (formerly entitled Federal
Outlays), published by the Community Services Administration, uses
various proration techniques and financial concepts, primarily obligations, to estimate grant payments at the State, county, and largecity level. These grant estimates therefore differ from those in the
budget. These estimates are cross-referenced where possible with the
program identification number in the Catalog of Federal Domestic
Assistance.
Under a Budgetary Information System Federal agencies provide,
through Federal Regional Councils, data showing State-by-State
breakouts of certain formula grants relatively quickly after the President submits the budget, after enactment of an agency's appropriation
bill, and after any significant change in either program levels or geographic distribution.
The Office of Management and Budget has available upon request
a document entitled "Administrative Policies and Information Sources
Relating to Federal Domestic Assistance Programs". This guide is
a brief overview to these policies and information sources, with
particular emphasis on their interrelationships.
GRANTS

ADMINISTRATION

The rapid growth of the grant system in the late 1960's and early
1970's was accompanied by increasingly complex administrative requirements. In earlier years, many grants were designated for specific
categories by Federal legislation or regulation, and came to be known
as categorical grants. They frequently required matching funds from
the recipient governments, and gave little discretion in their use to
State and local officials. In the early 1970's, many persons involved
with grant administration at all levels of government looked for better
alternatives. As a result, most major new programs since then have
given considerably more discretion to State and local officials.
Table H-7 shows the increasing role of general-purpose and broadbased aid since 1972. General-purpose aid consists of grants with
almost complete discretion for their use at the State and local level;
broad-based aid gives State and local governments considerable discretion within a broadly defined program area, such as education or
community development. In 1972 there was virtually no general-

SPECIAL ANALYSIS

187

purpose or broad-based aid. Since that time these programs have
grown to be approximately one-fourth of total grants-in-aid. The
slight decrease in 1979 results from the phase-out of some broad based
stimulus grants and the increase of other aid, such as medicaid and
more restrictive employment and training grants.
Table H-7. O U T L A Y S F O R G E N E R A L - P U R P O S E , B R O A D - B A S E D , A N D
O T H E R G R A N T S - I N - A I D (dollar amounts in millions)
Actual
1972

Estimate

1975

1976

1977

1978

1979

$6,130

$6,243

$1,588

$6,758

$6,827

$6,852

General purpose aid:
General revenue sharing _
Other general purpose fiscal assistance and TVA 1 _

516

878

907

434

2,748

2,996

2,707

Subtotal, general purpose aid_

516

7,008

7,150

2,022

9,506

9,823

9,559

1,930
281

38
82
1,333
2,047
577

983
128
1,698
2,251
519

439
18
436
561
137

2,089
104
1,756
2,534
580

2,584
94
1,820
3,246
500

2,803
91
1,942
2,842
449

602

577

558

719
577

744
2,286

710
2,001

2,903

4,654

6,137

1,657

8,359

11,274

10,838

30,953

38,061

45,750

12,230 50,531

59,191

64,623

34,372

49,723

59,037

15,909

68,396

80,288

85,020

1.5
8.4
90.1

14.1
9.4
76.5

12.1
10.4
77.5

12.7
10.4
76.9

13.9
12.2
73.9

12.2
14.0
73.7

11.2
12.7
76.0

100.0

Broad based aid:
Community development block
grants. __ _
Comprehensive health grants
Employment and training2
Social services _
Criminal justice assistance
School aid in federally affected
areas.
Local public works __
Subtotal, broad based aid
Other aid_

Total

Addendum: Percent of Total

General purpose aid_ __
Broad based aid
Other aid__
_ _
Total

__ _
__

1 For detail, see grants in the general purpose fiscal assistance function, table 9 and shared revenues
from the Tennessee Valley Authority, shown in the energy function.
2 Comprehensive Employment and Training Act ( C E T A ) , Title I. An additional $8.0 billion
of
C E T A grant-in-aid outlays are estimated for 1979, but because there are some restrictions on allowable activities they are included in "other aid", not broad-based aid.
3 Includes $543 million in 1978 only for retroactive social services claims appearing in the 1979
Budget in the claims judgments, and relief acts account, Department of the Treasury.

Most general purpose and broad-based grants significantly reduce or
eliminate the requirement that recipients match Federal funds with
their own. Despite the increase in these grants, matching requirements for all grants have not changed significantly. In 1972, State and
local governments were estimated to provide approximately $1 of
matching funds for $3 of Federal aid, and this ratio is virtually unchanged for 1977. The decrease in matching requirements for generalpurpose and broad-based aid has been offset by the significant growth
in programs such as medicaid, which requires substantial matching aid.
Although the specific-purpose grants constitute a smaller portion
of the total than previously, there continue to be hundreds of grants

188

THE BUDGET FOR FISCAL YEAR

19 79

of this nature with different matching requirements, timing difficulties,
application procedures, duplication of programs, and other administrative problems.
The numerous efforts undertaken to correct some of these problems
include:
—Extension of advance funding to grants for vocational rehabilitation, maternal and child health care, and the aging. When fully
operational, advance funding in these programs and in education
programs, where it already exists, would amount to more than
$6 billion.
—Presidential initiation of Federal aid reform to simplify application and reporting requirements, restrict federally required
paperwork, and streamline certain financial management practices (OMB Circular A-102) and audit procedures (OMB Circular 73-2).
—Completion of an interagency review of Federal planning requirements aimed at eliminating, simplifying, or consolidating as many
Federal planning requirements as feasible. The review identified
approximately 4,000 separate planning requirements. Individual
agencies have already identified areas where simplification appears
to be possible. The Department of Health, Education, and
Welfare, for example, reports their review resulted in proposals
to eliminate, consolidate, or simplify close to 60% of the 1,392
requirements identified. EPA proposed changes in 55% of 316
identified planning requirements.
—Strengthening of Federal compliance with the system of State
and areawide clearinghouses to review and comment on proposals for Federal and federally assisted projects. Governors have
designated clearinghouses for every State, and more than 545 substate clearinghouses cover 95% of the population in the contiguous
United States. Approximately 300 grant programs are covered,
encompassing developmental, social, and economic activities
(OMB Circular A-95).
—Reconstituting the Federal regional council system, providing for
councils of top Federal regional officials from major grantmaking
agencies to improve Federal program coordination at the regional
level and develop closer working relations with States and
localities. As part of the Presidential reorganization project, a
review of regional coordination issues and possible revisions in
the council system or other regional coordinating devices is
underway.
—Announcement of new procedure for improving Federal Government regulations, which will reform the present process for
State and local government consultation on proposed regulations.
State and local interest groups can assist agencies in identifying
proposed regulations with special intergovernmental impact so
that State and local consultation can follow. (Replaces OMB
Circular A-85.)
—Completed assessment and began work with Federal Regional
Councils and State and local governments to improve implementation of joint funding legislation allowing submission of only one
application for projects requesting resources from several Federal
agencies. (OMB Circular A - l l l . )

SPECIAL

THE

STATE

AND

LOCAL

ANALYSIS

GOVERNMENT
INCOME

SECTOR

ACCOUNTS

189

THE

NATIONAL

The national income accounts (NIA) provide a comprehensive
statistical description of the U.S. economy that includes State and
local government receipts and expenditures. These State and local
data provide a measure of the relationship between these governments as a sector of the economy and other sectors. The data are
presented here to provide a context in which to compare the grantin-aid data.
There are three major differences between NIA data and the
budgetary accounting for a government's receipts and expenditures.
First, financial transactions and the purchase and sale of land are
excluded from NIA data but are generally included in budgetary data.
Second, a large number of transactions in the NIA accounts are recorded on an accural basis, while many governments show transactions
on a cash basis. Third, NIA data aggregate total State and local
transactions, whereas many governments separate general fund
data from that of special funds. As a result of these differences, NIA
totals are not the same as an aggregate of these governments' financial
budgets. However, they do provide timely estimates of total State and
local fiscal transactions not otherwise available, and with care, can
be used as financial indicators.
NIA State and local sector.—Table H-8 provides an historical
tabulation of these data with the surplus or deficit broken into two
basic components, social insurance funds and the operating account.2
The social insurance funds, primarily retirement programs, have
been in surplus since 1950. The funds accumulate assets to pay for
their future liabilities. Because surpluses of these insurance funds
are not generally available to pay for deficits in operating accounts,
the operating account is generally thought to be a better measure
of State and local fiscal condition than the surplus or deficit for the
sector as a whole. However, the accrued liability of many of these
social insurance funds exceeds their assets, posing a potential threat
to State and local financial health in future years.
Since the late 1940's the operating account has generally been in
deficit. This is not unusual, since it includes capital expenditures,
often financed through borrowing. Surpluses in 1972 and 1973 resulted
from the first general revenue sharing distributions and new receipts
generated by significant tax increases in 1971 and 1972.
In 1974, the operating account returned to a deficit situation. In
part, this reflected a return to previous patterns, as State and local
expenditure increases absorbed the new, higher income. It also reflected the worsening economic situation, with State and local governments opting to draw down on balances accumulated during 1972-73
rather than enact new tax increases. The fiscal position improved
1 Special
Analysis B of this volume provides general information on the national income
accounts.
2 The operating account is defined here as all activities except those of social insurance funds.
The operating account includes expenditures for capital investment.

190

THE

BUDGET

FOR FISCAL Y E A R

19 7 9

Table H-8. N A T I O N A L I N C O M E A C C O U N T S , S T A T E A N D L O C A L S E C T O R
(Calendar years; in billions of dollars)
Surplus or deficit (—)
Receipts

1950
1955
1960
1965
1970
1971
1972
1973
1974
1975
1976

21.3
31.7
49.9
75.1
134.9
152.6
177.4
193.5
210.4
235.7
264.7
SEASONALLY

1975:
I
II
III
IV
1976:
I
II
III
IV
1977:
I
II
III

Expenditures

Entire
sector

22.5
32.9
49.8
75.1
132.2
148.9
163.7
180.5
202.8
229.8
246.2

Social
insurance
funds

-1.2
-1.3
0.1
*

2.8
3.7
13.7
13.0
7.6
5.9
18.4

ADJUSTED, ANNUAL

Operating
account

0.7
1.3
2.3
3.4
6.8
7.5
8.1
8.9
10.5
12.1
14.5

-1.9
-2.6
-2.2
-3.4
-4.0
-3.8
5.6
4.1
-2.9
-6.2
3.9

RATES

223.7
231.8
240.8
246.4

220.0
227.3
234.2
237.5

3.7
4.5
6.6
8.9

11.3
11.8
12.3
13.1

-7.6
-7.2
-5.8
-4.2

253.8
258.4
269.0
277.5

240.5
245.5
247.9
251.1

13.3
12.9
12.1
26.5

13.7
14.4
14.8
15.2

-.4
-1.5
6.2
11.3

281.0
288.1
300.3

253.7
262.6
269.9

27.3
25.4
30.5

15.4
15.5
15.5

11.9
10.0
14.9

* $50 million or less.

substantially in 1976 compared to 1975, and this improvement continued into 1977. The operating account had a surplus in 1976 of
$3.9 billion, and the 1977 data show the surpluses averaging over
$12 billion at an annual rate for the first three-quarters. As a percent
of expenditures, these are the highest surpluses since the middle 1940's.
DETAILED FEDERAL AID

TABLES

The following two tables present detailed Federal aid data for the
3 budget years. Table H-9, "Federal Grants to State and Local Governments—Outlays and Budget Authority," provides detailed budget
authority and outlay data for grants and shared revenues. Table H-10,
"Federal Direct Loans to State and Local Governments," provides
disbursement and net outlay data for loan programs. Disbursements
do not include repayments, and net outlays are disbursements minus
repayments.

Table H-9. F E D E R A L G R A N T S T O S T A T E A N D L O C A L G O V E R N M E N T S — O U T L A Y S A N D B U D G E T

AUTHORITY

(In millions of dollars)
1977
actual

1978
estimate

1979
estimate

40
56

37
53

National defense:
Department of Defense—Military:
33
Civil Preparedness Agency.
_
49
National Guard centers construction

OUTLAYS

6
68

190
80

548
96

270

644

115
11
40

101
11
34

96
6
52

22
19

31
21

43
21

2
187
91
10
14
10

280
109
4
29
23

156
90
9

See footnotes at end of table.

Functional
code 1

Agency and program

1978
estimate

BUDGET

Total, national defense.

___

_ _

41
46

369

592

369

592

301
302
302

69
10
45

73
12
38

58
4
50

302
306

38
21

51
23

57
23

2
333
110

0
370
121

44
14

44
43

Natural resources and environment:
Department of Agriculture:
Watershed planning and flood control.
_
_ _
Resource conservation and development
_ _ _ _ _ _
Forest Service
_ _ _ _ _
Department of Commerce:
NO A A coastal zone management _
_
_
NOAA—Operations research and facilities_.
___
__
Department of the Interior:
Bureau of Reclamation
Land and water conservation fund
____
_ _ _ _
Fish and Wildlife Service
_ ___
_ __
Preservation of historic properties.
_________
Historic preservation fund
__
___
_____
Office of Surface Mining Reclamation and Enforcement

AUTHORITY

37
44

272
271 __
_ _

1979
estimate

42
55

051
051

Energy:
Department of Energy:
Energy
Tennessee Valley Authority (shared revenue) _ _
Total, energy _ _

1977
actual

301
303
303
303
303
302

168
123
10

Table H-9. F E D E R A L G R A N T S T O S T A T E A N D L O C A L G O V E R N M E N T S — O U T L A Y S A N D B U D G E T A U T H O R I T Y — C o n t i n u e d

(In millions of dollars)
1977
actusLl

1978
estimate

1979
estimate

Agency and program

194
3,530
2

244
4,135
3

Natural resources and environment—Continued
Environmental Protection Agency:
Abatement and control
251
Sewage treatment plant construction
4,660
Water Resources Council
3

4,189

4,895

5,578

OUTLAYS

117
198
56

143
223
23
2

139
221
23

371

391

383

10
8

21
13

29
16

Functional
code 1

1977
actual

1978
estimate

BUDGET AUTHORITY
304
304
301

Total, natural resources and environment

146
1,980
3

237
4,500
3

5,432
=

5,511
= = =

124
199

138
227

152
220

325

366

372

16
8

54
18

2,614

=
352
352
351
352

Total, agriculture

230
4,500
3

Agriculture:
Department of Agriculture:

Commerce and housing credit:

1979
estimate

W
§
o
H
^
nj
^

Ul
n
>
kJ
«

SI
371
376

<1
CD

7
335
33
55

6
540
39
93

3
565
29
130

Total, commerce and housing credit
Transportation:
Department of Housing and Urban Development: Urban transportation.
Department of Transportation:
State boating safety assistance
Airport and airway trust fund
Highway beautification
Off-systems road programs

401
403
402
401
401

__
6
510
27
275

6
555
18 __
162

3
590

5,799
42
98
22
1,615
2
290

6,445
133
120
69
1,909
3
205

7,120
127
168
74
2,161
3
61

8,299

9,561

10,440

313

168

303
1
116

122
4

297
4

260
1

165
577
2
64

180
2,286
57
64

148
2,001

2,089
899
79

2,584
650
92

76
2
1
1

62
3
*
1

2,803
356
82
2
56
4

4,496

6,700

246

188

1
6,279

Federal aid highways (trust fund)
Other highway aid 2
National Highway Safety Administration
Federal Railroad Administration
Urban Mass Transportation Administration
Research and special programs
Washington Metropolitan Area Transit Authority

401
401
401
401
401
407
401

Total, transportation
Community and regional development:
Funds appropriated to the President:
Appalachian regional development programs
Public works acceleration
Disaster relief
Department of Agriculture:
Rural development grant programs
Rural community fire protection grants
Department of Commerce:
Economic development assistance
Local public works
Drought assistance program
Regional Action Planning Commissions
Department of Housing and Urban Development:
Community development block grants
Urban renewal
Other categorical programs replaced by block grants
Urban extension program
Comprehensive planning grants
New Communities Administration
Joint grants management fund
Joint Federal-State Land Use Planning Commission for Alaska
Total, community and regional development

3,225
94
15
76
455
2
128

6,682
134
152
74
484
2
67

7,608
34
175
69
2,775
3
19

4,814

8,335

11,275

452
452
453

116

310

340

170

129

451
452

285
4

265
4

275

452
452
452
452

217
5,975
65
64

208

244

451
451
451
451
451
451
451
452

3,248

4,000

4,150

10
57

10,207

5,004

5,268

•d
H
H
>H

t-1

t
t-1

See footnotes at end of table.

Table H - 9 . F E D E R A L G R A N T S T O S T A T E A N D L O C A L G O V E R N M E N T S — O U T L A Y S A N D B U D G E T A U T H O R I T Y — C o n t i n u e d

(In millions of dollars)
1977
actual

1978
estimate

1979
estimate

OUTLAYS

98
2,340
47
719
241
120
692
83
160
28
5
3
473
348
2,534
1,347
5

2,556
56
744
280
236
739
25
192
50
1
3
570
352
3,246
1,403
6

3,015
61
710
302
400
802
13
218
55
1
4
647
352
2,842
1,534
6

2,940
3
2,340

4,151
30
4,765

53
551
500
103
20

54
616
581
119
24

3,984
40
5,956
35
22
698
526
120
38

15,753

20,812

22,380

Agency and program

Education, training, employment, and social services:
Department of Commerce: Job opportunities prograi
Department of Health, Education, and Welfare:
Elementary and secondary education
Indian education
School assistance in federally affected areas
Emergency school assistance
Education for the handicapped
Library resources.

Social services3
Youth, aging, and vocational rehabilitation programs
Department of the Interior: Bureau of Indian Affairs, Indian education programs.
Department of Labor:

Grants for employment services.

Total, education, training, employment and social services.

Functional
code 1

1977
actual

1978
estimate

1979
estimate

BUDGET AUTHORITY

504
501
501
501
501
501
501
502
503
503
503
501
501
504
506
506
501
504
504
504
504
504
504
506
503
503

Hi
H
&

2,709
55
734
290
315
1,164
15
226
68

3,173
58
763
308
465
732
8
236
81

3,778
73
1,456
330
804
725
233
104

3
509
357
2,713
1,348
5

3
659
352
3,062
1,483
6

4
718
352
2,863
2,850
6

OP
o>

4,850
30
6,847

2,827
44

89
524
599
103
20

54
616
563
119
24

3,785
46
5,955
50
22
698
502
120
38

23,576

15,636

25,510

a
o
M

Hi
H
>
w

<1
CO

17
10

740
71
3
471
421
462

812
75
6
564
233
271

9,876
2

10,846
3

34
1

12,104

12,875

38
271
2, 775
242
27
21
6,351
1,815
964
110

296
296
2, 794
360
31
30
6, 711
2,469
913
32
53

12,613

13,985

Health:
Department of Agriculture:
Animal and Plant Health Inspection Service—Meat and poultry
29
Food Safety and Quality Service
Department of Health, Education, and Welfare:
902
Health Services Administration
89
Center for Disease Control
7
Center for Disease Control
603
Alcohol, Drug Abuse, and Mental Health Administration
163
Health Resources Administration
272
Health Resources Administration
20
Adolescent health services and pregnancy prevention
11,952
Medicaid
Department of the Interior: Mining Enforcement and Safety Administration
Department of Labor:
42
Occupational Safety and Health Administration
4
Mine Safety and Health Administration
14,084

551
551
552
551
551
553
551
551
554
554
554

Total, health

Income security:
Department of Agriculture:
Food Safety and Quality Service—Funds for strengthening markets, income and
266
supply—donations
604
292
Food stamps—adminstration
604
2, 652
Chijd nutrition and special milk programs
604
526
Special supplemental food program (WIC)
604
13
Food donations
604
*
Elderly nutrition program
604
6, 846
Department of Health, Education, and Welfare: Public assistance—maintenance
604
2,970
Department of Housing and Urban Development: Housing assistance
604
986
Department of Labor: Unemployment trust fund: administration of payments
603
256
Department of the Treasury: Crude oil tax rebate for AFDC
604
Community Services Administration
604
14,807

See footnotes at end of table.

554
554

Total, income security

Table H - 9 . F E D E R A L G R A N T S T O S T A T E A N D L O C A L G O V E R N M E N T S — O U T L A Y S A N D B U D G E T A U T H O R I T Y — C o n t i n u e d
(In millions of dollars)
1977
actual

1979
estimate

1978
estimate

Functional
code 1

Agency and program

8
31

14
36

Veterans benefits and services:
Veterans Administration:
36
Medical care
_
___ _
*
Medical administrative expenses
_______
13
Grants for construction of State nursing homes.
39
Health training

OUTLAYS

706
6

6
630
13

8
537
22

713

649

567

36
84
20
13

47
108
24
18

40
97
25
18

154

197

180

Total, administration of justice

___
___

703
703
703
703

_
__

754
754
751

_
_
_

_____

General government:
Department of the Interior:
Administration of territories
_.
Trust territory of the Pacific Islands
General Services Administration
_ _ _ ._ _
Civil Service Commission (intergovernmental personnel assistance)._ ___ _
Total, general government

1979
estimate

1978
estimate

W
d
o
o
H

BUDGET AUTHORITY

Total, veterans benefits and services
Administration of justice:
National Institute of Corrections
Department of Justice: Criminal justice assistance
Equal Employment Opportunity Commission.

1977
actual

H3
w
E3

806
806
804
806

40
*

34
1

36
*

O
SJ

10
44

15
58

5
64

108

105

4
569
6

8
491
16

8
492
22

578

514

522

57
100

20
111

46
106

172

152

172

226
6

242
5

100
137
5
19

100
287
4
20

105
322
3
20

238
157
6,758
1,699
276

257
168
6,827
1,573
276

99
271
176
6,852
1,050
317

9,438

9,743

9,463

68,396

80,288

85,020

General purpose fiscal assistance:
Department of Agriculture: Forest Service (shared revenue)
__ ___ _ __ __ _
Department of Defense: Flood Control Act (shared revenue)
_ _____
Department of the Interior:
Payments in lieu of taxes
_ _ _ ___
_________
____
Miscellaneous shared revenues
______
__
_ _
_
__
Fish and Wildlife Service (shared revenue) _ _ _ _ _ _ _ _ _ _ _ _ _ _
_____
Internal revenue collections for the Virgin Islands (shared revenues) __
_
Department of the Treasury:
____
Taxable municipal bond option
_
Customs receipts for Puerto Rico and the Virgin Islands (shared revenue)
Internal revenue collections for Puerto Rico (shared revenues)-- _ __
General revenue sharing _
__
_
—
Antirecession financial assistance fund
__
_ _ _ _
Federal payment to the District of Columbia
Total, general purpose fiscal assistance
Total, grants-in-aid. _

. _ _

___
_ _

852
852

50
5

226
6

242
5

852
852
852
852

100
138
4
20

100
286
3
20

105
322
3
20

229
163
6,655
1,570
276

257
168
6,855
1,400
276

7,094
271
176
6,855
1,040
317

____

9,209

9,597

16,450

______

91,730

92,501

108,858

852 _
852
852
851
852
852

*$500 thousand or less.
1 For a description of the functions and their titles, see part 5 and table 13 in the 1979 Budget.
A small amount of domestic highway programs is classified in the budget in the international function. For
purposes of this special analysis the budget authority and outlays for these grants are in the Transportation function. The amounts are as follows (in millions):
1977
1978
1979
Budget authority
*
1.0
1.0
Outlays
0.2
1.1
1.0
2

3 Includes $543 million in budget authority and outlays in 1978 only for retroactive social services claims appearing in the claims, judgments, and relief acts account, Department of the Treasury.

198

THE

BUDGET FOR FISCAL YEAR

19 79

Table H-10. F E D E R A L D I R E C T L O A N S T O S T A T E A N D L O C A L
GOVERNMENTS
(In millions of dollars)
Agency and program by function

Natural resources and environment:
Department of the Interior: Recclamation loans
Agriculture:
Department of Agriculture:
Agriculture credit insurance
fund
Commerce and housing credit:
Department of Agriculture:
Rural housing insurance fund.
Transportation:
Department of Transportation:
Federal aid highways (trust
fund)
Right-of-way revolving fund.
Urban Mass Transportation
Administration
Total, transportation
Community and regional development:
Department of Agriculture:
Rural development insurance
fund
Department of Commerce: Economic development assistance.
Economic development revolving fund
Department of Housing and
Urban Development:
Urban renewal fund—loans
and planning advances
District of Columbia:
Loans for capital outlay
Advances to stadium sinking
fund, armory board
Total, community and
regional development
Education, training, employment,
and social services:
Department of Health, Education, and Welfare:
Student loan insurance fund..

Disbursements
1977
actual

Net outlays

1978
estimate

1979
estimate

-4

- 1

30
9

-53
51

-103
35

-2

-68

-4

-2

30
9
24
63

526

669

815

1977
actual

1978
estimate

- 2

1979
estimate

-2

290

100

-48

-50

-6

100

114

120

-1

922

886

963

SPECIAL ANALYSIS

199

Table H-10. F E D E R A L D I R E C T L O A N S T O S T A T E A N D L O C A L
GOVERNMENTS—Continued
(In millions of dollars)
Agency and program by function

Disbursements
1977
actual

1978
estimate

Net outlays

1979
estimate

1977
actual

1978
estimate

Health:
Department of Health, Education, and Welfare: Medical
facilities

Income security:
Department of Housing and
Urban Development: Lowrent public housing. ___ _

238

600

-26

General government:
Department of the Interior:
Administration of Territories.

2,050

950

-35

-6

Total, general purpose fiscal
assistance. _ _

2,070

970

-35

-6

Total

3,365

2,637

General purpose fiscal assistance:
Department of Treasury: New
York City seasonal financing,
fund ____
District of Columbia: Repayable
advances. __

* $500 thousand or less.

1,669

131

1979
estimate

112

SPECIAL ANALYSISF200
CIVILIAN EMPLOYMENT
FULL-TIME

IN T H E E X E C U T I V E

PERMANENT CIVILIAN

BRANCH

EMPLOYMENT

This analysis of Federal civilian employment identifies full-time
permanent employment separately from total employment, which also
includes part-time employees, intermittent employees and full-time
temporary employees. Excluding Postal Service employment, which by
law is not subject to Presidential control, and excluding other employment exempted from ceilings, full-time permanent employment in the
executive branch, as of September 30, 1979, is expected to be 1,931,600.
This is an increase of 1,500 above the level expected on September 30,
1978.
Full-time permanent employment as of September 30, 1977 was
1,908,988 or about 7,800 above the corresponding number for September 30, 1976.
The prior administration's 1978 budget recommended a full-time
permanent employment level (excluding the Postal Service) as of
September 30, 1977 of 1,953,300. Subsequently, a limited freeze was
placed on executive branch hiring, while agency employment plans
were reviewed. The hiring freeze was lifted in June 1977, and new
agency employment ceilings were announced, aggregating to 1,934,200
full-time permanent positions—a reduction of 19,100 positions from
the original level. Actual full-time permanent employment as of
September 30, 1977, was nearly 44,300 positions below the level
contemplated in the 1978 budget and about 25,200 below the ceilings
for September 30, 1977.
The projected increase in full-time permanent employment in the
executive branch (excluding the Postal Service and other ceilingexempt employment) from September 30, 1977, to September 30,
1979, is about 22,600, of which 1,500 is planned for the second year.
As noted, actual employment for September 30, 1977 was about
25,200 below the ceiling announced in June 1977. Most of the difference
occurred in the Department of Defense, where planned reductions
were achieved earlier than anticipated. Much of the remainder was
accounted for by the fact that a number of other agencies were behind
schedule in achieving planned increases.
200

SPECIAL ANALYSIS F

201

The other major reason for this lapse is not unique to 1977. Each
year, normal personnel turnover and processing procedures prevent
agencies from hiring up to their ceilings. This was true in 1977 and
earlier years and is expected to continue to happen in later years. For
this reason, table 1-1 shows an expected lapse to take account of the
fact that, on a Government-wide basis, end-of-year employment has
ranged from 0.5% to 1.25% below the budget estimates. The estimates
for 1978 and 1979 anticipate a difference of 0.75%.
In keeping with the administration's objective of constraining the
size of the Federal civilian workforce to the lowest number consistent
with efficient operation of the Government, increases in full-time
permanent employment in the executive branch (excluding the Postal
Service) have been held to a minimum. Projected increases from 1978
to 1979 in the Department of Housing and Urban Development, the
Department of Justice, the Treasury Department, the Environmental
Protection Agency, the Veterans' Administration, and the Tennessee
Valley Authority are partially offset by estimated decreases in the
Department of Agriculture and the Department of Defense.
Table 1-1 shows full-time permanent employment in executive
branch agencies as of September 30, 1977, as well as planned
changes between September 30, 1978, and September 30, 1979. The
Department of Energy, established as of October 1, 1977, is shown as
though it had existed on September 30 to facilitate year-to-year
comparisons. Adjustments to the September 30, 1977, employment of
other agencies have been made to reflect the transfers of employees
to this new department. Similar adjustments have been made to
reflect the establishment of the International Communication Agency.
The transfer of the Mining Enforcement and Safety Administration
from the Interior Department to the Labor Department is also
reflected.

202

THE

BUDGET FOR FISCAL YEAR

19 79

Table 1-1. S U M M A R Y O F F U L L - T I M E P E R M A N E N T C I V I L I A N
E M P L O Y M E N T IN T H E E X E C U T I V E B R A N C H *
[Excluding the Postal Service]
Agency

Agriculture
Commerce2
Defense-military functions2
Defense-civil functions
Energy2
Health, Education, and Welfare
Housing and Urban Development
___
Interior2
Justice
Labor 2 ..
State2
Transportation.
Treasury
Environmental Protection Agency
General Services Administration
.....
National Aeronautics and Space Administration..
Veterans Administration
Other:
Agency for International Development
Civil Service Commission.
International Communication Agency2
Nuclear Regulatory Commission
Panama Canal
Small Business Administration
Tennessee Valley Authority
Miscellaneous2

Sept. 30
1977
actual

1978
estimate

1979
estimate

Change
1978-79

82,051
29,491
911,637
28,912
18,078
140,389
15,261
53,291
50,986
18,948
22,412
71,550
107,150
9,779
34,040
23,569
195,175

84,800
29,800
912,100
28,700
19,500
144,300
16,000
55,700
53,400
20,800
22,800
72,800
109,700
10,200
35,900
23,200
202,400

84,000
29,800
904,900
28,600
19,100
145,100
17,400
56,000
55,100
20,800
22,800
73,100
112,500
10,800
36,000
23,200
203,000

5,712
6,875
8,519
2,499
12,914
4,307
17,060
38,383

5,900
7,000
8,600
2,700
13,500
4,500
17,300
40,800

5,900
7,200
8,600
2,800
13,500
4,600
18,000
41,200

Subtotal
Contingencies3

1,908,988

1,942,700
2,000

1,944,200
2,000

1,500

Subtotal
Expected lapse

1,908,988

1,944,700
-14,600

1,946,200
-14,600

1,500

1,908,988

1,930,100

1,931,600

Total

-800
- 7 , 200
-100
-400

800

1,400
300
1,700
300

,800

600
100

600
200
100
100
700
400

1,500

Excludes developmental positions under the worker trainee opportunity program ( W T O P ) , as
well as certain statutory exemptions.
2 Sept. 30, 1977, numbers have been adjusted to reflect the establishment of the Department of
Energy and its absorption of the Energy Research and Development Administration, Federal Energy
Administration, Federal Power Commission, and parts of other agencies. Similar adjustments have
been made to reflect establishment of the International Communication Agency and the transfer of
employees to it from the Department of State and the United States Information Agency. Transfer of the Mining Enforcement and Safety Administration from the Interior Department to the Labor
Department is also reflected.
* Subject to later distribution.
1

SPECIAL ANALYSIS F

203

Reductions in full-time permanent employment between the end
of 1978 and the end of 1979 are planned in the following agencies:
• The Department of Agriculture.—Employment will decline by
about 800 in 1979 as a result of: (a) a greater use of temporary
personnel in the installation of farm conservation measures, (b)
the elimination of new planning and construction starts for the
small watershed program, and (c) a shift from in-house to extramural research.
• The Department oj Defense (military functions).—Civilian employment will decline by about 7,200 positions, primarily as a result
of: (a) contracting out originally planned for 1978 for some services, but delayed, and (b) reductions in the training establishment and in aircraft depot maintenance activities.
The foregoing decreases are more than offset by necessary increases
in other agencies, such as:
• The Department of Health, Education, and Welfare.—An increase of
800 is planned; primarily for new social security legislation, welfare reform planning, and workload increases in health programs
and the Office of the Secretary.
• The Department of Housing and Urban Development.—An increase
of 1,400 is estimated for such programs as subsidized housing;
community development, and fair housing and equal opportunity.
• The Department of Justice.—A net increase of 1,700 positions
is projected, most of which is in the Immigration and Naturalization Service for increased emphasis on controlling the entry
of undocumented aliens into this country. Additional, though
smaller increases will occur in the Washington-based legal divisions, the Drug Enforcement Administration, U.S. Attorneys and
Marshals, and the Federal Prison system. These increases will
be partially offset by decreases in the Federal Bureau of Investigation.
• The Department of the Treasury.—A major portion of the overall
2,800 position increase will occur in the Internal Revenue Service,
reflecting increased workload stemming from the filing of more
tax returns and an increased emphasis on collections and audits.
Most of the remaining increase will be in the U.S. Customs
Service for additional border enforcement activities and for a
new export data verification program.
• The Environmental Protection Agency.—Employment for activities
directed chiefly toward improving air quality, providing safe
drinking water, and controlling toxic substances will increase by
600 positions. These increases are generally related to recently
enacted statutory requirements.
• The Veterans Administration.—Additional staff for planned new
medical programs and facilities will result in a net increase of
600 positions.
• The Tennessee Valley Authority.—An overall increase of about
700 positions is required for new construction and operating
workload increases in TVA's power program.

204

THE

BUDGET FOR FISCAL Y E A R

TOTAL FEDERAL

19 7 9

EMPLOYMENT

In 1979, full-time permanent employment will account for slightly
more than 88% of all civilian employees in the executive branch
(including the Postal Service). The remaining 12% is made up of
part-time employees, intermittent employees (those employed on an
irregular basis), and full-time temporary employees (those in positions
occupied for less than one year).
To provide more jobs for people unable to work full-time, the President has directed executive branch agencies to establish programs that
will expand employment opportunities for permanent part-time
workers. As a further step, the Office of Management and Budget and
the Civil Service Commission have been authorized to conduct an
experiment with full-time equivalent employment controls in a few
agencies. These agencies will measure employment by counting the
number of hours worked and converting the hours into work-years.
This experiment is designed to accomplish two objectives: (1) To
break down artificial barriers that may have inhibited the employment
of permanent part-time workers; and (2) to determine whether fulltime equivalent employment controls can improve personnel management, overcome some of the criticisms directed at the existing endof-year ceiling control system, and also limit the growth of the Federal
work force to appropriate activities.
This experiment will require the development of a new Governmentwide personnel accounting system that would measure Federal employment on a full-time equivalent basis. If successful, such a system
may ultimately be used as the primary means of controlling the size
and makeup of the Federal civilian work force.
Table 1-2, "Total Federal Employment," is composed of civilian
employees of the executive branch (including the Postal Service),
employees of the legislative and judicial branches, and military personnel. A separate entry in the table covers those categories of employees specifically exempted from employment controls, for example,
certain employees under the worker trainee opportunity program;
disadvantaged and part-time workers under such Civil Service
Commission programs as summer aides, stay-in-school, and junior
fellowship; and certain statutory exemptions.
The Department of Defense's share of total executive branch
employment (civilian and military) will have declined from 74%
as of September 30, 1969, to 62% as of September 30, 1979. The
Postal Service makes up 13% of the total work force, and the
Veterans Administration accounts for 5%.

SPECIAL

ANALYSIS I

Table 1-2. T O T A L F E D E R A L
Description

205

EMPLOYMENT
September 30
1978
estimate

1979
estimate

1,908,988
198,750

1,930,100
200,200

1,931,600
210,300

2,107,738

2,130,300

2,141,900

527,078
130,835

524,600
128,200

523,800
116,800

Subtotal

657,913

652,800

640,600

Exempt from ceilings 1

23,406

22,000

20,500

2,789,057

2,805,100

2,803,000

2,073,580
38,158

2,068,800
38,400

2,049,000
38,400

2,111,738

2,107,200

2,087,400

4,900,795

4,912,300

4,890,400

Civilian employment in the executive branch:
Full-time permanent (including lapse)
Other than full-time permanent
Subtotal
Postal Service:
Full-time permanent
Other than full-time permanent

Subtotal, executive branch civilian employment2
Military personnel on active duty:
Department of Defense
Department of Transportation (Coast Guard)

1977
actual

Subtotal, military personnel
Total executive branch employment
Legislative and judicial personnel:4
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches
Grand total

31,503
20,521
52,024
4,952,819

1 Developmental positions under the worker-trainee opportunity program; disadvantaged summer and part-time workers under such Civil Service Commission programs as summer aides, stayin-school, and junior fellowship; and certain statutory exemptions.
2 Excludes foreign nationals working under master labor contracts overseas. Actual employment
for 1977 was 83,395; employment for 1978 is estimated to be 85,400 and 78,000 for 1979.
3 Excludes reserve components.
4 1978 and 1979 estimates are not available.

P E R S O N N E L COMPENSATION AND B E N E F I T S

Direct compensation of the Federal work force includes regular
pay, premium pay for overtime, Sunday and holiday pay, differentials
for night work and overseas duty, and flight and other hazardous
duty pay. Related compensation in the form of personnel benefits
consists primarily of the Government's share (as employer) of health
insurance, term life insurance, and Federal retirement and old-age
survivors' disability insurance. Retirement costs include the direct
Treasury transfers to the civil service retirement trust fund to cover

206

THE BUDGET FOR FISCAL YEAR

19 79

the interest on the unfunded retirement liability (the excess of the
present value of the anticipated benefits payable from the fund over
the present value of fund assets and anticipated receipts) and payments to amortize increments of unfunded liability that result from
pay or benefit increases.
Additional benefits include uniform allowances (when paid in cash),
cost-of-living and overseas quarters allowances, and, in the case of
uniformed military personnel, reenlistment bonuses.
Obligations for civilian personnel compensation and benefits in
1979 are projected to reach $53.8 billion, excluding the Postal Service. The increase in obligations is due to pay adjustments, increased
employment, and increased interest payments to the civil service
retirement trust fund. The estimated costs for civilian and military
pay increases for 1979 are covered by lump sum allowances in the
1979 budget.
Under the Federal Pay Comparability Act, salary rates for Federal
employees under the "General Schedule" and most other statutory
pay systems are adjusted periodically so as to relate to rates paid for
the same work levels in the private sector. The bases for these adjustments are annual surveys conducted on a nationwide basis by the
Bureau of Labor Statistics. Under the act, the President may propose
an alternative pay plan if he considers the comparability pay adjustments inappropriate because of national emergency or economic
conditions affecting the general welfare. As part of an overall effort
to hold down inflationary trends, Federal agencies will be required to
limit the additional funds requested to cover the pay increase to no
more than six per cent. This is reflected in the estimates in the 1979
Budget and in table 1-3.
A number of activities are presently underway that may have
significant impact on future levels of compensation and benefits.
These include:
(a) The Federal Personnel Management Project, which is concluding a comprehensive reorganization study of civilian personnel
policies. Specific recommendations are presently being developed.
(b) The Civil Service Commission, in cooperation with the Bureau
of Labor Statistics, is investigating the feasibility of setting Federal
employees' pay and benefits on the basis of comparability with total
compensation, rather than pay alone.
(c) The President's Commission on Military Compensation is
considering significant unresolved issues concerning active duty
compensation. At the same time, a special Defense Department
group is reviewing related reserve compensation issues.

SPECIAL ANALYSIS

207

Table 1-3. P E R S O N N E L C O M P E N S A T I O N A N D B E N E F I T S
(In millions of dollars)
Description

Civilian personnel costs:
Executive branch:1
Direct compensation
Personnel benefits
Retirement liability interest payments.
Subtotal
judiciary:2

Legislative and
Direct compensation
Personnel benefits
Subtotal

1977
actual

1978
estimate

34,355
11,016
(4,191)

37,340
11,040
(5,230)

38,450
12,580
(6,250)

45,371

48,380

51,030

610
57

680
60

720
70

667

740

790

Allowance for civilian pay raise
Total, civilian personnel costs

1979
estimate

1,940
46,038

49,120

53,760

Military personnel
Direct compensation.
Personnel benefits 4_

22,489
1,683

23,800
1,810

23,630
1,880

Subtotal..

24,172

25,610

25,510

costs: 3

Allowance for military pay raise

1,380

Total, military pay costs

24,172

25,610

26,890

Grand total, personnel costs

70,210

74,730

80,650

1 Excludes the Postal Service, reflecting conversion to independent status, consistent with the
Postal Service Reorganization Act of 1970.
2 Excludes Members and officers of Congress.
3 Excludes Reserve components.
4 Excludes payments to current military retirees which amounted to $8,219 million in 1977 and are
estimated to be $9,240 million in 1978 and $10,149 million in 1979.

208

THE

BUDGET FOR FISCAL Y E A R

19 7 9

G O V E R N M E N T E M P L O Y M E N T AND L A B O R F O R C E COMPARISONS

As shown on the following chart, Government employment—Federal,
State, and local—comprised about 16.8% of the total employed
civilian labor force in 1979.
Within this segment, Federal civilian employment in the executive
branch accounts for nearly 2.9% of the total employed civilian labor
force, down from a high of about 3.8% in 1968.
The percentage of the total employed civilian labor force attributable to State and local government has grown steadily, from nearly
8.3% in 1957 to 13.9% in 1979.
G o v e r n m e n t Civilian

Employment
as a Percent of Tatar Civilian Employment

TOTAL

209

SPECIAL ANALYSIS F

G O V E R N M E N T E M P L O Y M E N T AND POPULATION

COMPARISONS

As illustrated in the following chart and in table 1-4, the Federal
segment of all governmental employment has declined significantly
over the last three decades, from nearly 35% in 1949 to an estimated
17.3% in 1979. Employment for all government has been steadily rising
due to increases in State and local government employment.
The ratio of Federal civilian employment to the total U.S. population is expected to be 12.7 per thousand in 1979—which is equal to
or lower than all of the 31 years displayed in table 1-4.
G o v e r n m e n t Civilian

260-700 O - 78 - 14

Employment

210

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table 1-4. G O V E R N M E N T E M P L O Y M E N T A N D P O P U L A T I O N , 1949-79
Government employment
Fiscal

Federal
year
executive
branch 1
(thousands)

1949
19502
19512
1952
1953
1954
1955
1956
1957
1958
1959
I960 2
19612
1962
1963 3
1964 3
1965
1966
1967
1968
1969 4
19702
19712
1972
1973
1974
1975
1976
1977 (act.) s
1978 (est.)_
1979 (est.).

2,075
1,934
2,456
2,574
2,532
2,382
2,371
2,372
2,391
2,355
2,355
2,371
2,407
2,485
2,490
2,469
2,496
2,664
2,877
2,951
2,980
2,944
2,883
2,823
2,775
2,847
2,848
2,832
2,789
2,805
2,803

State and
local governments
(thousands)

3,906
4,078
4,031
4,134
4,282
4,552
4,728
5,064
5,380
5,630
5,806
6,073
6,295
6,533
6,834
7,236
7,683
8,259
8,730
9,141
9,496
9,869
10,257
10,640
11,065
11,463
12,025
12,410
12,286

(6)
(6)

All governmental
units
(thousands)

5,981
6,012
6,487
6,708
6,814
6,934
7,099
7,436
7,771
7,985
8,161
8,444
8,702
9,018
9,324
9,705
10,179
10,923
11,607
12,092
12,476
12,813
13,140
13,463
13,840
14,310
14,873
15,242
15,075

Population
Federal as
percent of
all governmental
units

34.7
32.2
37.9
38.4
37.2
34.4
33.4
31.9
30.8
29.5
28.8
28.1
27.7
27.6
26.7
25.4
24.5
24.4
24.8
24.4
23.9
23.0
21.9
21.0
20.0
19.9
19.1
18.6
18.5
17.8
17.3

Total
United
States
(thousands)

149,767
152,271
154,878
157,553
160,184
163,026
165,931
168,903
171,984
174,882
177,830
180,671
183,691
186,538
189,242
191,889
194,303
196,560
198,712
200,706
202,677
204,878
207,053
208,846
210,410
211,901
213,540
215,078
217,329
219,068
220,821

Federal
employment per
1,000
population

13.9
12.7
15.9
16.3
15.8
14.6
14.3
14.0
13.9
13.5
13.2
13.1
13.1
13.3
13.2
12.9
12.8
13.6
14.5
14.7
14.7
14.4
13.9
13.5
13.2
13.4
13.3
13.2
12.8
12.8
12.7

1 Covers total end-of-year employment in full-time permanent, temporary, part-time, and i n termittent employees in the executive branch, including the Postal Service, and, beginning in 1970,
includes various disadvantaged youth and worker-trainee programs.
2 Includes temporary employees for the decennial census.
3 Excludes 7,411 project employees in 1963 and 406 project employees in 1964 for the public works
acceleration program.
4 On Jan. 1, 1969, 42,000 civilian technicians of the Army and Air Force National Guard converted by law from State to Federal employment status. They are included in the Federal employment figures in this table starting with 1969.
« Data for 1949 through 1976 are as of June 30; for 1977 through 1979, as of Sept. 30.
0 The percentages shown for these years are consistent with reasonable estimates based on recent
trends in State and local government.

PART

SELECTED FEDERAL PROGRAMS

211

INTRODUCTION
Part 8 furnishes Government-wide program and financial information in seven program areas—education, training and employment,
health, income security, civil rights, environment, and research and
development, designated J through P.
The figures used in these analyses differ from the data shown under
somewhat similarly titled categories of the functional classification
used in the Budget. In the functional classification, each activity is
categorized according to its major purpose; thus, all the military
spending of the Department of Defense falls into the functional
category, National defense. In these special analyses, however, all
spending for education, health, etc., is included, even if the activity
has a different primary purpose. Therefore, the tabulations here are
more comprehensive with regard to these particular types of programs.
Special Analysis J (Education) discusses education-related programs, including direct Federal activities, and programs that provide
aid to States and localities, to institutions of higher education, and to
individuals.
Special Analysis K (Training and Employment) identifies the
Federal programs designed to increase the skills and employment
opportunities of persons already in the work force and of persons who
desire to join the work force but lack vocational preparation or face
other employment barriers.
Special Analysis L (Health) summarizes Federal spending for health
and health-related activities.
Special Analysis M (Income Security) discusses Federal benefits to
maintain or supplement income of persons and families whose capacity
for self-support is reduced by old age, disability, illness, unemployment, poverty, or death of the primary wage earner.
Special Analysis N (Civil Rights Activities) summarizes Federal
spending for civil rights activities, concentrating on enforcement
efforts.
Special Analysis 0 (Environment) identifies Federal funding for
selected environmental activities, including pollution control and
abatement, environmental protection and enhancement, and understanding, describing, and predicting the environment.
Special Analysis P (Research and Development) identifies Federal
programs for the conduct of research and development, and for facilities related to such activities.
212

SPECIAL ANALYSIS J
EDUCATION

Federal support of education related programs are estimated to
be $ 2 2 . 7 billion in 1 9 7 9 . This support includes programs that provide aid to State and local education agencies, to institutions of
higher education, to individuals, and direct Federal activities.
The expenditure estimate includes those programs that support
student-teacher relationships for the communication of knowledge,
or provide services to the community-at-large aimed at expanding
individual opportunities for professional or career advancement.
The analysis is further organized by level of education and type of
support. As in previous years, all Federal programs directly supporting educational activities or involving the use of educational resources
to achieve other purposes are included. Amounts for noneducational
research conducted at academic institutions not falling within the
above purposes are excluded. For comparability with the analyses
that accompanied the 1973 and earlier budgets, these amounts are
shown at the bottom of table J-l.
OVERVIEW:

1979

Total Federal education outlays are estimated at $ 2 2 . 7 billion
in 1979. The total is composed of three principal components:
—$14. 1 billion for programs whose primary purpose is education;
—$8. 2 billion for programs that are beneficial to the interests
of education but are not primarily educational in purpose;
—$0. 4 billion for salary supplements in the form of educational
allowances.
In addition, four tax expenditures ranging in size of $155 million to
$815 million each will also support higher education in 1979.
213

214

THE

BUDGET FOR FISCAL YEAR

19 7 9

Table J-1. F E D E R A L O U T L A Y S F O R E D U C A T I O N
Outlays (millions)

Purpose and program

1977
actual

Office of Education:
Educationally deprived children
Support-innovation consolidation
Other elementary and secondary programs
Federally affected areas
Emergency school aid
Education for the handicapped
Occupational, vocational, adult
Basic opportunity grants
Other higher education student support programs
Other higher education
Library and instructional resources consolidation
Student loan insurance and guaranteed loans
Salaries and expenses
Other Office of Education
National Institute of Education
Special institutions
Student grants, Social Security Administration
Human development services
Other HEW
Other

1978
estimate

1979
estimate

1,930
173
249
765
241
249
693
1, 387
1,170
320
104
130
118
162
64
154
1,613
501
253
597

2,129
184
260
810
281
367
740
1,529
1,038
305
114
717
131
225
80
166
1,823
589
294
697

2,580
209
242
781
305
562
803
1,936
1,090
339
147
722
126
245
90
185
2,044
629
324
772

10,873

12,479

14,131

Federal outlays—education support for other basic purposes:
Health professions training
Veterans readjustment
Defense
Child nutrition
Other

658
3,406
1,111
2,792
1,324

505
2,815
1,127
2,811
2,078

470
2,341
993
2,699
1,747

Subtotal, education support for other purposes..
Federal outlays—salary supplements

9,291
274

9, 336
296

8,250
365

20,438

22,111

22,746

2,724

3,081

3,354

Subtotal, programs which are primarily educational

Total, education outlays
Amounts previously carried for academic research not directed
toward educational objectives

R E F O R M AND

RENEWAL

The major responsibility for education rests with the States; the
Federal role is limited but important. It is to help assure that every
American has access to education, stimulate and encourage improvements in the educational process through reform and innovation,
help build the capacity of States to fulfill their educational role,
encourage educational research and support the development and
dissemination of the arts and humanities. To carry out these missions,
the following proposals are included in the 1979 Budget:
• Increased funding for education for the disadvantaged with
increased emphasis on the basic skills—especially reading.
• Increased funding for States to fund the excess costs to educate
handicapped children.
• Expansion of the Head Start program to include an additional
34,000 children.

SPECIAL ANALYSIS F

215

• Reform of the impact aid program.
• Increased funding for school districts to assist them in complying
with school desegregation requirements.
• Funding for higher education institutions to renovate and reconstruct facilities to remove architectural barriers for handicapped
students.
• Full funding of the basic opportunity grant program with grants
up to $1,800 to help low and moderate income college students.
• Increased funding to increase the numbers of minorities and
women in graduate education.
• Focusing educational research on problems of educational equity
and student outcomes.
• Increased funding for the Arts and Humanities—especially to
serve underserved populations.
Impact aid.—In 1979, reform of this program is proposed to provide
funds for those districts that are adversely affected by the presence of
Federal activities. Payments under the revised impact aid program
would provide funds for construction of school facilities in districts
heavily impacted by Federal activity or Federal bases, and payments
to other Federal agencies for the education of Federal employees'
dependents, and for major disasters.
Emergency school aid.—In 1979, funds will continue to be provided
to school districts to aid them in their desegregation efforts. Increased
support will also be provided for title IV of the Civil Rights Act of
1964, which provides advisory support and technical assistance to
help educational agencies and institutions move toward achieving
equality of educational opportunity. These funds will aid school
districts in complying with school desegregation requirements.
Basic opportunity grants.—The $2,177 million requested for basic
grants will provide awards averaging $970 for 2.2 million full- and parttime undergraduate students in academic year 1979-80. Grants will
range from $200 to the maximum of $1,800. The size of the grant is
determined on the basis of the expected family and student contribution, specified by the needs analysis requirements approved annually
by Congress. The maximum grant which is an increase of $200 above
the current year's level and an increase in the asset reserve to $25
thousand will allow for greater participation of middle income families.
Education for the handicapped.—Funds will be provided to help
support State and local education agencies that educate handicapped
children. Increased funds will be used to pay 12% of the extra costs
required by States and local agencies to identify and educate these
children.
National Institute of Education.—The Institute (NIE) will continue
as a focal point for the conduct of educational research and development. New research during the fiscal year will increase studies in such
areas as student achievement and testing, improved teaching, and
urban education. Budget authority of $100 million is requested in
1979.

216

THE

BUDGET

FOR

OTHER PROGRAM

FISCAL Y E A R

19 7 9

DEVELOPMENTS

Health professions training support.—Federal support for health
professions training will include: institutional grants designed to improve the specialty and geographic distribution of health professionals
and student assistance programs which include service commitment
scholarships and guaranteed loans. A new federally insured loan program with loan guarantee authority of up to $500 million will enable
students to borrow from private lenders to help pay for the cost of
their medical education and training.
Veterans benefits.—In 1979, 1.3 million GI bill beneficiaries are
expected to enroll in education courses covered by this special analysis
at an average cost of $2,104, up from $1,977 in 1978.
Child nutrition.—The administration is proposing to moderate
growth in Federal subsidies for children from families with incomes
in excess of 195% of the income poverty guidelines.
PROGRAMS T H A T A R E P R I M A R I L Y

EDUCATIONAL

Programs whose primary purpose is education are estimated to account for $14.1 billion of educational expenditures in 1979. Elementary and secondary levels will receive $6. 8 billion of this amount.
Higher education will receive an estimated $6.1 billion and the remaining $1.2 billion will be directed toward adult and continuing
education, libraries, research, and cultural activities. Approximately
77% of Federal elementary and secondary school funds are administered by the U.S. Office of Education of the Department of Health
Education, and Welfare. Other HEW programs account for another
$1.3 billion.
The Office of Human Development will provide $680 million in
budget authority in 1979 for the Head Start program.
Under the social security system (OASDI), survivors of insured
workers between the ages of 18 and 22 who are still in school receive
benefits, while those not in school do not. Legislation is proposed to
limit the amount of benefits payable to eligible students to the maximum available under the Basic Educational Opportunity grants.

217

SPECIAL ANALYSIS F
Table J-2. F E D E R A L O U T L A Y S F O R P R O G R A M S W H I C H A R E
P R I M A R I L Y E D U C A T I O N A L B Y LEVELS
Purpose and program

Outlays (millions)
1977
actual

1978
estimate

1979
estimate

Elementary and secondary:
Office of Education:
Educational deprived children
Support-innovation consolidation
Other elementary and secondary programs
Federally affected areas
Emergency school aid
Education for the handicapped
Occupational, vocational, and adult education
Library resources consolidation
Office of Child Development
Human services development
Student grants, Social Security Administration
Other HEW..
_
Bureau of Indian Affairs, Interior
Other.

1,930
173
225
765
241
247
393
113
458
458
314
246
199
25

,129
184
225
810
281
366
417
121
536
536
351
309
203
35

2,580
209

Subtotal, elementary and secondary

5,329

5,967

6,794

1,387

1,534

1,936

620

686

762
329
193
558

99
1,181
133
56
61

347
176
559
184
133
112
1,338
157
56
56

4,628

5,338

6,075

134
42
138
88
110

147
64
134
86
62

152
62
150
107
56

492

493

527

118
33
12
33
58
103
16
51

131
158
12
30
119
14
155

126
163
13
32
63
120
22
196

424

681

735

10,873

12,479

14,131

Higher education:
Office of Education:
Basic opportunity grants
Work-study and supplementary grants, student incentive
grants
Guaranteed student loans
Direct student loans
Occupational, vocational, and adult education
Student loan insurance and guaranteed loans
Disadvantaged students and developing institutions
Other Office of Education
Special institutions
Student grants, Social Security Administration
Other HEW
_
National Science Foundation
Other
Subtotal, higher education
Adult and continuing education:
Office of Education:
Occupational vocational and adult education
Public libraries
Student grants, Social Security Administration
Library of Congress
Other
Subtotal, adult and continuing education
Other:
Office of Education:
Salaries and expenses
Student loan insurance and guaranteed loans
National Institute of Education
Special institutions
Smithsonian Institution
Corporation for Public Broadcasting
National Endowments for the Arts and the Humanities
Other
Subtotal, other
Total

247
245
166
97
130

206

202

781
305
560
458
148
566
566
390
344
217
34

226

148
126
1,505
175
55

218

THE

BUDGET

FOR

FISCAL Y E A R

19 7 9

The Federal Government aids or directly provides education for
groups such as Indians, Cuban refugees, and residents of Pacific territories. The National Science Foundation and the National Endowments for the Arts and the Humanities also provide some support to
elementary and secondary school levels.
An estimated $6.1 billion will be spent in 1979 for higher education,
an increase of $737 million from the 1978 level. Expenditures for
higher education are 43% of total Federal outlays for education.
The majority of the funds for educational purposes at the higher
education level is for student support. In 1972, the year in which
Congress enacted higher education amendments, $933 million for
Office of Education student support programs (work-study, supplementary grants, guaranteed student loan and direct student loans)
constituted 43% of the total. In 1979, under administration proposals,
Office of Education student aid expenditures will reach $3.5 billion
more than three times the 1972 level. Social security benefits to
students at institutions of higher education will provide an additional
$1,505 million of student support in 1979, an increase of $167 million
above the 1978 level. The focus of higher education aid will continue
to shift from institutional support to direct student support with the
full funding of basic opportunity grants.
Adult, continuing and other related activities will be provided
$1,260 million in 1979, a 7% increase over 1978. The Library of Congress and the Smithsonian Institution are among the activities included in this category.
EDUCATIONAL

SUPPORT

FOR

OTHER

PURPOSES

Over one-third the expenditures for education is in programs
directed toward multiple purposes.
One of the largest single programs in this category is veterans
readjustment benefits (the GI bill). Veterans readjustment is designed
primarily to compensate veterans for opportunities lost while they
were in the service. Expenditures reflect estimated use of program
benefits by veterans, active duty personnel and other beneficiaries.
Outlays for those education activities covered by this anatysis peaked
in 1976 at $5.5 billion. The 1979 expenditure of $2.3 billion reflects a
decreasing number of persons eligible to receive benefits. School
lunch, breakfast, milk, and other feeding programs provide $2.7
billion in benefits for nutrition in 1979, a decrease of $100 million
below 1978 levels.
The GI bill and child nutrition programs will comprise 61% of the
educational outlays from noneducation programs in 1979. The largest
training program is for defense personnel. The Department of Defense
trains inservice personnel and educates future service personnel
through the service academies and Reserve Officer Training Corps.
Outlays for training will total $149 million in 1979.

SPECIAL

ANALYSIS

219

Table J-3. F E D E R A L O U T L A Y S F O R O T H E R B A S I C P U R P O S E S B Y L E V E L
Outlays (millions)
—
1977
1978
1979
actual
estimate
estimate

Level and program

Elementary and secondary:
Child nutrition
U.S. Forest Service, Agriculture
Military personnel
Veterans readjustment
Other

Subtotal, elementary and secondary
Higher education:
Veterans readjustment
Military service academies
Reserve Officers Training Corps
Other defense.
Health professions training
Research training, National Institutes of Health
Alcohol, Drug, and Mental Health Administration
Other..
Subtotal, higher education
Adult and continuing education:
Agriculture Extension Service
Veterans readjustment
Other
Subtotal, adult and continuing education
Training of Federal military employees:
Defense..Coast Guard
Subtotal, training of Federal military employees
Other:
Public service jobs
International development assistance
Other
Subtotal, other
Total

2,792
25
23
92
50

2,811
113
24
76
56

2,699
120
25
66
53

2,982

3,080

2,963

2,802
245
183
228
657
125
69
103

2,316
255
200
216
504
155
82
114

2,009
291
218
206
470
172
81
106

4,412

3,842

3,553

239
512
105

254
423
104

252
267
149

856

781

668

339
25

345
28

119
30

364

373

149

462
62
153

1,004
88
168

619
129
169

677

1,260

917

9,291

9,336

8,250

S A L A R Y SUPPLEMENTS

Salary supplements in the form of educational allowances or direct
provision of education for Federal employees or for their dependents
will reach an estimated $365 million in 1979, a 9% increase over
1978. These supplements consist almost entirely of Defense Department expenditures for overseas dependents education. This program
accounts for $351 million in 1979.

220

THE

BUDGET FOR FISCAL

YEAR

19 7 9

Table J-4. F E D E R A L E D U C A T I O N O U T L A Y S F O R S A L A R Y

SUPPLEMENTS

Outlays (millions)
Level and program

actual

Total, salary supplements

estimate

274

296

365

Elementary and secondary
Higher education
Adult education
Other

271
1
1
1

292
1
1
2

361
1
1
2

Defense: Overseas dependents education
Other

261
13

282
14

351
14

EDUCATIONAL PERSONNEL T R A I N I N G AND R E S E A R C H

Educational personnel training and research is funded under many
programs already identified as directed toward education goals. They
account for $929 million in 1979 or 4% of total educational expenditures. Training funds ($261 million) increase in 1979 by $21 million
over 1978 levels. Educational research, estimated at $668 million
in 1979, will be $191 million above the 1977 and $88 million above
the 1978 levels.
The largest contributors to these categories are the Office of Education (74% of training funds) and 70% of research funds.
Table J-5. F E D E R A L O U T L A Y S F O R P E R S O N N E L T R A I N I N G
R E S E A R C H IN E D U C A T I O N

Program

Education personnel training:
Occupational, adult and vocational
Emergency school assistance
Education for the handicapped
Special projects and training
Elementary and secondary education
Human development services
National Science Foundation
Other

AND

Outlays (millions)
,97g
,979
actual
estimate
estimate
]9J7

27
60
38
10
13
30
6
23

32
73
39
21
14
38
9
14

24
80
48
24
18
39
11
17

207

240

261

133
61
98
27
9
64
30
35
20

176
75
105
52
11
80
22
41
18

184
105
114
64
14
90
27
43
27

Subtotal, educational research..

477

580

668

Total

684

820

929

Subtotal, education personnel training
Education research:
Elementary and secondary education
Education for the handicapped
._.
Occupational, vocational, and adult education
Special projects and training
Assistant Secretary for Education
___
National Institute of Education
National Endowments for the Arts and Humanities.
National Science Foundation.
Other

SPECIAL ANALYSIS

221

E D U C A T I O N A L SPENDING BY P U R P O S E AND

LEVEL

The table that follows (J—6) displays educational support funding
by purpose and level.
Table J-6. F E D E R A L O U T L A Y S F O R E D U C A T I O N B Y P U R P O S E A N D L E V E L
Outlays (millions)
1977
actual

Elementary and secondary:
Education
Other basic purposes
Salary supplements

Total, elementary and secondary
Higher education:
Education
Other basic purposes
Salary supplements
Total, higher education
Adult and continuing education:
Education
Other basic purposes
Salary supplements
Total, adult and continuing education
Other:
Education
Other basic purposes
Salary supplements
Total, other
Total, outlays for education

1978
estimate

1979
estimate

5,329
2,982
271

5,967
3,080
292

6,794
2,963
361

8,582

9,339

10,118

4,628
4,412
1

5,338
3,842
1

6,075
3,553
1

9,040

9,181

9,629

492
856
1

493
781
1

527
668
1

1,349

1,275

1,196

424
1,041
2

681
1,633
2

735
1,066
2

1,466

2,316

1,803

20,438

22,111

22,746

Elementary and secondary education support is provided primarily
through grants to State and local educational agencies, while higher
education support is not. Grants or loans are provided to an educational institution or to a student who then selects an institution to
attend. Federal support for higher education continues to shift from
institutional to student assistance. In 1979 an estimated $7.9 billion or
82% of total higher education outlays will be direct grants or subsidies via loans to students. Another $1.6 billion will go to institutions
for current operations or facilities and equipment. This amount is
essentially the same as the 1978 level.

222

THE

BUDGET FOR FISCAL YEAR

19 79

Table J-7. F E D E R A L O U T L A Y S F O R E L E M E N T A R Y A N D S E C O N D A R Y
E D U C A T I O N B Y SUBLEVEL A N D T Y P E O F S U P P O R T
Outlays (millions)

Sublevel and type of support

1977
actual

Total, elementary and secondary
Early childhood
Elementary and secondary
Supporting services
Current operations
Facilities and equipment
Student support
Education personnel training.
Educational research

_
_

1978
estimate

1979
estimate

8,582

9,339

10,118

915
7,309
358

1,059
7,825
455

1,177
8,409
532

7,510
158
414
157
343

8,076
184
440
198
441

8, 749
187
466
216
500

The Federal Government also aids education through four tax
benefits which are predominantly at the higher education level. The
exclusion from taxable income of veterans readjustment benefits
(the GI bill) is estimated to reduce Federal revenues by $155 million
in 1979. The similar exclusion for other scholarships and fellowships
results in a revenue loss of $280 million in 1979. Parents may claim
a personal exemption for full-time students over 18, even if the students have incomes of their own. This tax expenditure of $720 million
in 1979 aids families with older children in school. Finally, the deductibility of contributions by both individuals and corporations to
educational institutions is estimated to reduce Federal receipts by
$815 million in 1979.
Student support continues to be the predominant higher education
expenditure. Outlays for 2- and 4-year institutions in 1979 increase
by approximately 6% above the 1978 level.
Table J-8. F E D E R A L O U T L A Y S F O R H I G H E R E D U C A T I O N B Y T Y P E
OF INSTITUTION AND TYPE OF SUPPORT
Outlays (millions)
1977
actual

Total, higher education

1978
estimate

1979
estimate

9,040

9,181

9,629

2-year institutions
Other undergraduate.
Graduate and professional

3,016
4,506
1,518

2,956
4,854
1,371

3,078
5,202
1,349

Current operations
Facilities and equipment
Student support
Education personnel training
Educational research

1,200
386
7,320
40
94

1,301
220
7,521
33
106

1,412
196
7,860
42
119

SPECIAL ANALYSIS

STUDENT

223

SUPPORT

An estimated $7.9 billion will be available for student support in
1979, 91% of which is for undergraduate student assistance. The GI
bill will provide 20% of the total for all student assistance. The Office
of Education will spend another 91% or about $7.2 billion to support
various grant and loan programs.
The Office of Education estimates that about 2.5 million student
grants and loans will be made in 1979 under its programs. Students
receiving aid under more than one program account for at least onethird of this total.
Table J-9. S T U D E N T S U P P O R T B Y A G E N C Y : F E D E R A L O U T L A Y S A N D
NUMBER OF STUDENTS
Agency

Undergraduate:
Health, Education, and Welfare:
Office of Education. _
Social Security Administration
Health agencies
Veterans Administration
Defense
Justice
Bureau of Indian Affairs, Interior
Other
Subtotal, undergraduate
Graduate:
Health, Education, and Welfare:
National Institutes of Health
Office of Education
Health Resources Administration
Other H E W . . . . . .
Veterans Administration
National Science Foundation
Defense
Other
Subtotal, graduate
Total2_

Outlays (millions)
1977
actual

1978
estimate

Student (thousands)

1979
estimate

2,570
1,145
31
2,513
165
43
36
7

3,060
1,297
35
2,077
175
43
35
9

3,550
1,459
22
1,801
189
38
35
12

6,510

6,731

7,106

86
114
92
42
289
16
165
7

105
124
103
43
239
13
158
6

118
115
102
33
207
14
160
5

811

791

754

7,321

7,522

7,860

1977
actual

1978
estimate

1979
estimate

2,255
609
35
1,314
131
95
21
6

2,224
642
36
1,004
138
89
24
6

2,440
671
19
867
144
76
25
6

11
80
52
11
102
2
39
3

11
80
67
12
124
2
42
3

11
87
52
10
107
2
41
3

1 Fiscal year student totals correspond to relevant academic years such as 1977 reflects the 1976-77
school year.
2 Student totals not shown because some students receive awards under more than one program.

O U T L A Y S BY EDUCATIONAL

SUBLEVEL

In order to provide data in a form comparable with earlier education special analyses, the following tables are provided which display
program and agency outlays by education sublevels in 1977, 1978,
and 1979.

224

THE

BUDGET FOR FISCAL YEAR

19 79

Table J-10. F E D E R A L O U T L A Y S F O R E L E M E N T A R Y A N D S E C O N D A R Y
EDUCATION BY AGENCY
Outlays (millions)

Sublevel, agency and program

1977
actual

Early childhood:
Office of Education:
Elementary and secondary
Education for the handicapped
Appalachian regional development
Human development services
Other
Subtotal, early childhood
Elementary and secondary:
Child nutrition
Defense
_
Office of Education:
Educationally deprived children
Other elementary and secondary programs
Federally affected areas
Emergency school aid
Education for the handicapped
Occupational, vocational, and adult education
Library resources and library consolidation
Other, Office of Education
_
Student grants, Social Security Administration
Other HEW
Bureau of Indian Affairs, Interior
U.S. Forest Service, Agriculture
Veterans readjustment
Other

Subtotal, elementary and secondary
Supporting services:
Office of Education:
Educationally deprived children.
Other elementary and secondary programs
Support and innovation
Education for the handicapped.
Special projects and training
National Institute of Education
National Science Foundation
Other
—
Subtotal
Total

—-

1978
estimate

1979
estimate

371
52
14
458
20

418
68
14
536
23

473
98
14
566
26

915

1,059

1,177

2,792
271

2,811
291

2,699
359

1,716
267
765
22
111
393
112
47
314
120
193
25
92
69

1,896
236
810
30
213
417
119
56
351
134
197
113
76
75

2,295
213
781
34
357
458
147
60
390
149
211
120
66
70

7,309

7,825

8,409

64
82
48
83
20
43
3
15

69
122
52
85
48
54
9
16

86
138
59
105
54
62
11
17

358

455

532

8,582

9,339

10,118

225

SPECIAL ANALYSIS F

Table J - l l . F E D E R A L O U T L A Y S F O R H I G H E R E D U C A T I O N B Y A G E N C Y
Sublevel, agency and program

2-year institutions:
Office of Education:
Basic opportunity grants
Other higher education
Occupational and vocational education
Student grants, Social Security Administration
Health Resources Administration
Veterans readjustment
Other

Outlays (millions)
1977
actual

1978
estimate

1979
estimate

694
291
166
282
45
1,451
87

767
301
176
319
55
1,200
138

968
325
193
359
52
1,041
140

3,016

2,956

3,078

245
183
73

255
200
69

291
218
65

694
403
204
181
103
242
863
46
68
24
27
1,062
24
64

767
486

968
515

257
148
527
979
57
79
33
27
878
24
68

243
183
553
1,100
67
86
36
26
761
22
68

4,506

4,854

5,202

27
125
63
539
71
36
53
289
208
25
82

25
154
76
381
58
41
55
239
199
23
120

24
171
77
354
63
46
59
207
191
23
134

Subtotal, graduate and professional

1,518

1,371

1,349

Total

9,040

9,181

9,629

Subtotal, 2-year institutions
Other undergraduate:
Military service academies
Reserve Officers Training Corps
Health Resources Administration
Office of Education:
Basic opportunity grants
Work-study and supplementary grants.
Guaranteed student loans
Direct student loans
Disadvantaged students and developing institutions.
Other higher education. _
r
:
Student grants, Social Security Administration
Special institutions
Office of the Secretary
Other Office of Education and HEW
Bureau of Indian Affairs, Interior
Veterans readjustment
National Science Foundation
Other
Subtotal, other undergraduate
Graduate and professional:
Health Services Administration
Research training, National Institutes of Health
Alcohol, Drug, and Mental Health Administration
Health Resources Administration
Higher education (Office of Education)
Student grants, Social Security Administration
Special institutions
Veterans readjustment
Department of Defense
National Science Foundation
Other

260-700 O - 78 - 15

226

THE

BUDGET FOR FISCAL YEAR

19 79

Table J—12. F E D E R A L O U T L A Y S F O R A D U L T E D U C A T I O N A N D
ACTIVITIES BY AGENCY

OTHER

Outlays (millions)

Sublevel, agency and program

1977
actual

Adult basic and extension:
Agriculture extension service
Occupational, vocational and adult education
Other Office of Education
Social Security Administration
Veterans readjustment
Department of Defense
Other

1978
estimate

1979
estimate

239
129
77
118
512
87
27

254
142
29
134
423
86
28

252
147
17
150
267
132
30

Subtotal, adult basic and extension

1,189

1,096

995

Public and national library services:
Library of Congress
Library resources (Office of Education)
Other

88
42
26

86
64
23

107
62
27

156

173

196

Training of Federal, State, and local civilian employees:
Justice
Federal Aviation Administration
Commerce Department
Department of the Treasury
Other

13
17
11
11
11

16
16
13
12
12

17
17
16
14
13

Subtotal, training of public civilian employees. __

339
25

345
28

119
30

364

373

149

60
2

85
3

125
3

128

Subtotal, public and national library services

Training of Federal military employees:
Defense
Coast Guard
Subtotal, training of Federal military employees_
Foreign educational activities:
International development assistance
Department of Defense
Subtotal, foreign educational activities
Other:
Office of Education:
Salaries and expenses
Educationally deprived children
Assistant Secretary for Education
Special institutions
Office of the Secretary, HEW
National Institutes of Health
Smithsonian Institution
Corporation for Public Broadcasting
National Endowments for the Arts and Humanities
Public service jobs, Labor
Housing and Urban Development
International Communication Agency
Other
Subtotal, other
Total

118
56
22
33
34
21
58
103
16
462
—44
34
69

131
190
28
30
45
25
62
119
14
1,004
37
40
67

126
206
36
32
48
27
63
120
22
619
52
46
57

982

1,792

1,454

2,816

3,591

2,999

227

SPECIAL ANALYSIS F
Table J—13. F E D E R A L A I D F O R E D U C A T I O N B Y A G E N C Y
Outlays (millions)
1977
actual

Legislative branch:
Library of Congress
_
Funds appropriated to the President:
International Development Assistance
Appalachian Regional Commission
Agriculture
Commerce
Defense-Military
Defense—Civil.
Health, Education, and Welfare:
Office of Education
Other HEW
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Energy
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies:
ACTION
Corporation for Public Broadcasting
International Communication Agency
National Endowments for the Arts and Humanities. __
National Science Foundation
Smithsonian Institution
Other
Total

1978
est.

1979
est.

Budget
authority
(millions)
1979

107

102

62
43
3,063
16
1,372
10

88
48
3,196
18
1,409
11

129
45
3,090
21
1,343
11

129
32
3,025
21
1,399
18

7,691
3,505
—38
257
61
462
9
43
11
3
7
17
5
3,406

8,830
3,767
42
264
67
1,004
10
46
12
4
7
16
5
2,815

10,087
4,070
54
281
62
619
11
48
14
3
5
16
5
2,341

12,316
3,828
36
282
52
666
11
49
15
3
5
16
5
1,810

33
103
40
46
65
58

31
119
46
36
71
62
1

22
120
53
51
74
63
1

19
120
55
131
78
63
1

20,438

22,111

22,746

24,287

SPECIAL ANALYSISF228
TRAINING AND

EMPLOYMENT

PURPOSE AND GENERAL DESCRIPTION OF PROGRAMS

The purpose of Federal training and employment programs is to
increase the employment opportunities and work skills of persons
already in the labor force and of persons who desire to join the labor
force but lack vocational preparation or face other employment
barriers. These programs include on-the-job and classroom skill
training, vocational rehabilitation, transitional public sector employment experience, job placement assistance, equal employment opportunity enforcement, and related child care and support services.
These programs are distinguished from regular educational programs because they: (1) operate outside of the traditional educational
process; (2) provide training for nonprofessional jobs; (3) usually
provide services for less than 1 year; and (4) frequently target on the
disadvantaged or unemployed. Specifically excluded from this analysis
are programs of vocational and technical education and paraprofessional training such as those authorized by the Vocational Education
Act, Adult Education Act, and Elementary and Secondary Education
Act. These programs are covered in Special Analysis J (Education).
This analysis covers all programs classified as training and employment services in the functional classification of the budget. It also
includes programs with similar objectives in other classifications such
as income security or veterans benefits and services.
Overall training and employment outlays in 1979 are expected to be
$15.2 billion, about $1.9 billion more than 1978. Virtually all of this
increase (97%) occurs in Labor Department programs, primarily for
the Comprehensive Employment and Training Act (CETA), including
public service employment, youth programs, welfare reform demonstrations, and an initiative emphasizing private sector jobs.
T A X EXPENDITURES

Certain provisions of the personal and corporate income tax that
are designed to achieve particular economic and social objectives give
rise to revenue losses that are called tax expenditures. This concept
is discussed more fully in Special Analysis G (Tax Expenditures).
Three tax expenditures are specifically related to training and employment efforts. Since they do not result in obligation, workload, and
outlay figures comparable to the other activities in this analysis,
amounts for these tax expenditures are noted here, but are not included
in tables in the body of the analysis.
Child and dependent care expenses.—A 20% tax credit for child
and dependent care expenses incurred to permit a taxpayer and spouse
(or a single worker with dependents) to work may be taken, up to a
228

SPECIAL ANALYSIS

229

maximum credit of $400 for one child and $800 for two or more. These
provisions of the Tax Reform Act of 1976 replaced a deduction for
child and dependent care expenses which phased out at high-income
levels.
WIN/AFDC tax credit.—Employers may take a corporate income
tax credit equal to 20% of the first-year wages and salaries of employees placed in employment under the Work Incentive Program
(WIN). Beyond $50,000 a year, the credit is allowable only at half this
rate. The Tax Reduction Act of 1975 and Tax Reform Act of 1976
extended a similar credit to all AFDC recipients, and made the credit
applicable to private employers of domestics. However, in the case of
domestics, the maximum amount of wages on which credit may be
taken is $5,000.
Employment tax credit.—The Tax Reduction and Simplification
Act of 1977 contains a jobs credit for calendar years 1977 and 1978.
An employer may take an income tax credit equal to 50% of the
amount by which the employer's annual wages subject to the Federal Unemployment Tax Act ($4,200 per employee per year for
this program) exceed 102% of such wages in the previous year. There
is an additional 10% credit for hiring certain handicapped persons.
The allowable credit is limited in several ways, notably to $100,000
per year and to 50% of the amount by which total wages exceed 105%
of the previous year's total wages. The employer's tax deduction of
wages from gross income is reduced by the amount of the credit.
Estimates of the tax receipts lost due to these provisions are:
TAX EXPENDITURES
( I n millions of dollars)

Child and dependent care
WIN/AFDC.
Employment...
Total

1977 estimate

475
15
690

1978 estimate

1,180

525
15
2,460
3,000

1979 estimate

555
20
1,895

2,470

ECONOMIC STIMULUS PROGRAMS

Under the administration's economic stimulus policies, several programs have been initiated or expanded, providing substantial spending
in 1978 and 1979 to assist the economic recovery and to enhance efforts
to attack the problem of high unemployment. Programs which were
expanded include Job Corps, grants for Indians and migrants, and
temporary employment assistance (public service jobs). New funding
was provided for programs of classroom, on-the-job, and apprentice
training, and for outreach services for veterans.
The most important new activity is for youth training and employment. The Youth Employment and Demonstration Projects Act
of 1977 (YEDPA) authorized four new programs:
(1) A year-round conservation corps (Young Adult Conservation
Corps);

230

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

(2) a test, in a few communities, of the school attendance and completion effects of a job guarantee to all in-school poor youth (Youth
Incentive Entitlement Pilot Projects);
(3) grants to States and localities for work producing lasting physical
results, such as weatherization or public facility renovation (Youth
Community Conservation and Improvement Projects); and
(4) general training and employment grants to States and localities
(Youth Employment and Traming Programs).
The act focuses primarily on testing and demonstration, so that
future decisions on long-term policy direction can be made with better
information on the nature of youth employment problems and on the
effectiveness of various service approaches.
Detailed program data will not be available on most programs
until 1979.
STIMULUS PROGRAMS i
(Individuals in thousands, outlays in millions)
Individuals served
Program

Outlays
1977
actual

Job Corps
Temporary
employment
assistance
Youth
Other....
Total

1978
est.

Years of service
1979
est.

173

5,735
620
200

6,203
1,186
307

2,844

6,627

7,869

2,836

1977
actual

1978
est.

New enrollees

1979
est.

1977
actual

337

680
92
29

725
166
55

337

808

966

1978
est.

1979
est.
20

886

1,458
342
96

1,397
256
79

886

1,916

1,769

All programs shown in total budget figures except for Job Corps, which shows only the stimulus increment above the previous program level.
1

Not included in this special analysis is the employment impact of
the $6 billion stimulus program for local public works in the Commerce Department. It provided grants to States and localities for
construction, renovation, repair, and demolition of public works
facilities. It is estimated to create directly some 110,000 jobs in 1977
and 1978.
OTHER N E W

PROGRAMS

Three other programs are new in this year's analysis in addition
to the stimulus programs noted above. They are:
(1) Federal summer employment.—This analysis has in the past included the summer aide program of Federal hiring of disadvantaged
in-school youth. Joining the summer aide program in this analysis is
Federal summer employment, a companion program which hires
primarily college and high school students with specific skills for
identified projects during the summer vacation.
(2) Employment opportunities.—The administration's proposed Better Jobs and Income Act envisions a complete restructuring of the
nation's welfare system, including a strong emphasis on work (the

SPECIAL ANALYSIS

231

Employment Opportunities Program) and a uniform minimum
income level for persons in need. Full implementation requires several
years after enactment because of the magnitude of institutional
changes. However, the budget includes $50 million for planning
grants in 1979 for State and local prime sponsors to use with the
Employment Service and community organizations to develop the
administrative system. Also included is $200 million for large-scale
demonstration efforts run by the Departments of Labor and Health,
Education, and Welfare to learn more about various elements of the
program.
(3) Private sector initiative.—A major effort will be made to increase the orientation of training and employment programs toward
preparation for, and placement in, private sector jobs. Working
through States and localities, increased funding of $400 million in
budget authority will be provided in 1979 for training and employment
designed with the aid of local businesses. This initiative will be aimed
at serving the disadvantaged and unemployed, particularly young
people. Planning and initial developmental work will start in 1978.
Y O U T H PROGRAMS

Many programs provide training and employment services to
young people, either in part (for example, CETA Title I grants) or
in entirety (for example, Job Corps). In 1977, approximately 8.7
million youth (ages 14 to 22) were served, at a cost of $2.9 billion
(see table below). Of these, about 16% participated in programs
specifically designed to assist young people.
Federal youth programs fall primarily into four broad categories:
(1) training and skill development (for example, Job Corps); (2) summer work experience (for example, CETA summer employment,
Youth Conservation Corps, Federal summer employment); (3) yearround work experience and public service employment (for example,
high school work-study, stay-in-school, most activities in the four
programs authorized by YEDPA); and (4) job placement assistance
(for example, through the Employment Service).
Improving the understanding of youth labor force problems and
possibilities is the principal focus of a range of research and demonstration efforts in several agencies. Notable among these efforts is the explicitly experimental set of programs authorized by YEDPA. In addition to a large-scale test in several communities of the impact on school
attendance and completion rates of part-time job guarantees to all
in-school poor youth, YEDPA research and development efforts will
encompass a wide variety of projects, such as building better local
ties among schools, businesses, nonprofit agencies, and CETA prime
sponsors, evaluating costs and benefits of using different administrative agencies for youth programs, and testing private sector approaches
such as direct employment, apprenticeship, and training cost subsidies.

232

THE

BUDGET FOR FISCAL YEAR

1979

YOUTH PROGRAMS IN FISCAL YEAR 1977
(Individuals in thousands, outlays in millions)
New
enrollees

Program

Only for youth:
CETA summer
Youth Conservation Corps
Job Corps-CETA Title IV
High school work-study
Federal summer aide
Stay-in-school
Federal summer employment

Total
participants

Outlays

1,000.0
38.0
45.5
8.0
35.1
6.8
12.2

1,000.0
38.0
66.2
53.0
35.1
21.5
12.2

575.0
48.1
201.6
9.7
35.1
65.7
19.7

1,145.6

1,226.0

954.9

621.6
29.5
177.3
14.4
1.3
3.7
3.7
2.1
105.2
9.8
4,754.1

792.9
34.7
295.9
20.5
1.5
8.6
6.9
3.3
288.1
31.1
5,997.1

895.6
34.0
567.5
37.0
7.5
15.7
17.1
.1
137.6
15.8
188.0

Subtotal

5,722.7

7,480.6

1,915.9

Total

6,868.3

8,706.6

2,870.8

Subtotal
Serving youth and others
CETA-Title I
CETA-Title III (except summer)
Temporary employment assistance
WIN
HUD-community development
Veterans Administration programs
Bureau of Indian Affairs programs
Justice Department programs
HEW-vocational rehabilitation
HEW-institutional training
Employment Service (includes food stamp recipient services) _. .
1

1 Outlays for these programs are prorated based on the percentage of youth
participants. All
figures are for youth only. WIN data represent on-the-job training, institutional training, work
experience, and public service employment program approaches only.

PROGRAM

APPROACHES

Training and employment programs are classified into major
approaches as follows:
—On-the-job training provides training for private sector job vacancies by reimbursing employers for the added costs of hiring and
training disadvantaged individuals. Employers are expected to
retain the individual once reimbursement ends.
—Institutional training provides instruction in vocational skills and
job-related remedial education in a classroom setting.
—Vocational rehabilitation helps individuals overcome physical and
mental handicaps to employment through skill training, counseling, allowances, and supportive services.
—Work experience provides temporary employment experience, generally part time, primarily for youth and older workers.
—Public service employment provides employment in public sector
jobs, intended to be transitional, for individuals who need to

SPECIAL ANALYSIS

233

acquire work discipline and skills to compete for nonsubsidized
jobs, or who are temporarily unable to find regular employment
because of slack labor markets.
—Labor market services encompasses services such as (a) job placement assistance, (b) collection and analysis of labor market
information, (c) equal employment opportunity enforcement
activities (excluding individual agency civil rights activities other
than contract compliance—see Special Analysis N, Civil Rights
Activities), and (d) other miscellaneous activities.
—Federal program support includes research, development and
evaluation activities, as well as planning, technical assistance,
and program direction.
Some programs can be classified entirely under one approach.
Others, such as the Work Incentive Program (WIN) and Comprehensive Employment and Training Act (CETA) programs, offer a
range of work and training services, and are divided among several
approaches.
Estimates by approach for CETA State and local programs are
based on the actual distribution by approach in the 1977 programs.
Approaches actually used will be those which local sponsors determine
are most appropriate to the individuals they serve and to the local
labor market. The actual 1978 and 1979 uses may therefore vary
considerably from the estimates.
PROGRAM

MEASURES

The three principal measures used to summarize the level of program
services are:
—Years of service, which is average year-round enrollment;
—New enrollees, which is the number of individuals beginning the
activity during the year; and
—Outlays, which is the amount of actual spending during the year.
Because 1978 was a buildup year for many stimulus programs, the
new enrollments are correspondingly high. Small declines in new
enrollments—but small increases in outlays and years of service—are
expected in 1979 based on achievement of more even, steady-state
operating levels.
Table K - l . D I S T R I B U T I O N O F S E R V I C E S B Y A P P R O A C H (in percent)
Program

Public service employment. _
Work experience
On-the-job training
Institutional training
Vocational rehabilitation
Labor market services

Years of service

Outlays
1977
act.

32
20
6
12
11
20

1978
est.

44
20
4
10
8
14

1979
est.

41
23
5
10
7
13

1977
act.

14
24
5
13
43
NA

1978
est.

23
24
5
12
36
NA

New enrollees

1979
est.

24
25
6
12
33
NA

1977
act.

21
41
6
16
16
NA

1978
est.

26
42
5
14
13
NA

1979
est.

25
41
7
13
13
NA

NA = Not applicable.

Historical trends in training and employment programs, summarized by service approach, are shown for each program measure in
the following charts:

234
New

THE

BUDGET FOR FISCAL YEAR

19 79

Enrollees
Million*

6.0

1969 1970
fiscal Year*

1971

1972

1973

1974

1975

1976

1971

1972

1973

1974

1975

1976

1977

1978
1979
Estimate

Y e a r s of S e r v i c e
Millions

3.2

1969 f970
Fiscal Years

1977

1978
1979
Estimate

SPECIAL ANALYSIS

235

Outlays

1964

1966

1968

1970

1972

P R O G R A M S BY

1974

1976

1978 1979

APPROACH

The following tables show service levels of major programs by
approach. Narratives with each table reference only significant
changes and include brief program descriptions if necessary. More
complete program descriptions may be found under the appropriate
account title in the Budget Appendix.1
On-the-job training (OJT).—The decline in outlays for veterans
is a result of a large group of veterans reaching the end of their GI bill
eligibility. The 1979 increase in ETA reflects the private sector
initiative described above. For the purposes of this analysis, the entire
amount is categorized as OJT; actual uses may well vary.
1 The tables show CETA programs by the two appropriation accounts funding them: "Temporary
employment assistance" ( T E A ) for titles II and VI; and "Employment and training assistance"
( E T A ) for the remainder. TEA will contain PSE formerly funded from titles II and VI starting in
1979, but for ease of comparison in this analysis TEA will refer to both titles in 1977 and 1978 as well.

236

THE

BUDGET FOR FISCAL YEAR

19 79

Table K-2. O N - T H E - J O B T R A I N I N G (outlays in millions, individuals in thousands)
Individuals served
Program

Outlays
1977
act.

Employment and training
assistance
WIN...
On-the-job
training
for
veterans
Other
Total

1978
est.

Years of service
1979
est.

1977
act.

1978
est.

New enrollees

1979
est.

233
106

297
100

574
100

50
11

64
12

175
4

141
5

124
6

61
1

518

543

804

127

138

1977
act.

120
12
1

1978
est.

170
27
1

187

1979
est.

205
28
1

240

340
28

28
1

18
1

261

388

Institutional training.—Included in this approach under ETA is
the Job Corps, a specialized program conducted in a residential setting
for youth aged 16 to 22, for which an outlay of $375.5 million is
expected in 1979. ETA also reflects stimulus program increases and
an increase in CETA Title I.
The entry for social services includes programs operated by State
agencies for public assistance recipients but is exclusive of service to
WIN participants.
Other institutional training includes programs for Indians and for
prisoners preparing for employment after release.
Table K-3. I N S T I T U T I O N A L T R A I N I N G (outlays in millions, individuals in thousands)
Individuals served
Program

Outlays
1977
act.

Employment and training
assistance
WIN
Social services training
Other
Total

1978
est.

Years of service
1979
est.

917 1,190 1,401
50
52
52
79
79
81
18
18
22
1,063

1,338

1,555

Table K-4. V O C A T I O N A L

1977
act.

1978
est.

New enrollees

1979
est.

1977
act.

1978
est.

1979
est.

186
15
114
14

214
15
108
14

241
15
105
13

585
31
49
18

620
35
36
18

607
32
39
21

330

350

374

683

709

699

REHABILITATION

(Outlays in millions, individuals in thousands)
Individuals served
Program

Outlays
1977
act.

HEW vocational rehabilitation
...
Veterans vocation I rehabilitation
Total

1978
est.

Years of service
1979"
est.

New enrollees

1977
act.

1978
est.

1979
est.

1977
act.

1978
est.

1979
est.

897

944

977

1,065

1,040

1,016

627

661

647

109

120

123

1,006

1,064

1,100

1,078

1,053

1,030

648

680

668

SPECIAL ANALYSIS

237

Work experience.—Estimates for ETA include in-school, out-ofschool, and summer youth activity, as well as nonyouth activity. The
large increases in ETA in 1978 and 1979 are primarily due to the four
new youth programs authorized by the Youth Employment and
Demonstration Projects Act of 1977 and begun in 1978. Because most
activity under this authority was not underway when this analysis
was prepared, the programs were generally categorized as work
experience.
Table K-5. W O R K E X P E R I E N C E (outlays in millions, individuals in thousands)
Individuals served
Program

Outlays

Employment and training
assistance
Temporary employment assistance
_
Older Americans
Federal agency youth programs__ ___
WIN
Other
Total

Years of service

1977
act.

1978
est.

1979
est.

1,317

2,069

2, 853

470

563

647

1,526

1,907

1,904

92
72

140
150

152
198

11
17

16
38

16
48

36
20

111
25

113
7

140
14
159

140
18
98

140
18
61

36
5
60

37
5
38

37
5
8

66
23
47

72
22
44

68
22
45

1,794 2,615

3,422

599

696

761 1,718

2,182

2,158

1977
act.

1978
est.

New enrollees

1979
est.

1977
act.

1978
est.

1979
est.

Public service employment (PSE).—The substantial increases
in public service employment are the result of the stimulus appropriations in 1977 and the continuation of the program levels into 1979.
Table K-6. P U B L I C SERVICE E M P L O Y M E N T
(Outlays in millions, individuals in thousands)
Individuals served
Program

Outlays
1977
act.

1978
est.

Years of service
1979
est.

Employment and training
assistance
131
145
151
Temporary employment assistance
2,738 5,580 6,036
WIN
68
74
74
HUD-community development
5
6
8
Total

2,943

5,806

6,268

1977
act.

1978
est.

New enrollees

1979
est.

1977
act.

324
5

659
5

703
5

681

726

345

1978
est.

1979
est.

838 1,330
12
11

891

1,381

Labor market services.—Job placement assistance.—The Employment Service (ES) provides job placement assistance services to
the general labor force, as well as to the disadvantaged. In cooperation
with welfare agencies, ES also delivers training and placement services
to WIN and food stamp recipients. Other specialized placement
assistance is provided by the Veterans Administration, the Bureau of

238

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

Indian Affairs, and the Department of Housing and Urban
Development.
Labor market information.—Activities are those of the Department
of Labor's Employment and Training Administration and Bureau of
Labor Statistics.
Equal employment opportunity.—Includes the Equal Employment
Opportunity Commission, the Employment Standards Administration of the Department of Labor (including the Office of Federal
Contract Compliance Programs (OFCCP) and the equal pay and age
discrimination programs), and contract compliance activities within
other agencies conducted under OFCCP aegis.
Table K - 7 . J O B P L A C E M E N T A S S I S T A N C E , L A B O R M A R K E T I N F O R M A T I O N
AND EQUAL EMPLOYMENT OPPORTUNITY

(in millions)
Outlays

1977
actual
Job placement assistance:
Employment service.
Work incentive program
Food stamp recipient services .
Other placement assistance
Labor market information
Equal employment opportunity.
Total

1978
estimate

]979
estimate

584
50
28
20
59
85

647
52
27
38
73
91

695
52
27
33
78
119

827

927

1,004

Unit cost8 by approach.—Costs include the various labor market
and supportive services usually provided to supplement the indicated
training or work program, as well as administrative costs. Cost changes
frequently reflect minimum wage increases and other general economic
factors rather than substantive program change. Minimum wage
increases in 1978 and 1979 will, for example, increase total program
costs even if service levels remain stable.
Table K - 8 . U N I T C O S T S B Y A P P R O A C H , 1976 A N D 1977
Average
duration of
enrollment
(years)
1l976
On-the-job training
Institutional training
Vocational rehabilitationWork experience
Public service employment

0.63
.35
1.49
.34
.52

Year of
service
unit cost
(dollars)

Participant
unit cost
(dollars)

1977

1976

1977

1976

11977

0.57
.38
1.49
.32
.53

3,464
4,321
1,021
3,510
8,456

4,004
4,591
1,124
2,899
8,575

2,173
1,520
1,524
1,197
4,421

2,282
1,764
1,676
939
4,524

People served.—Most Federal training and employment programs
focus on low-income individuals and others with severe barriers to
employment because they are least likely to be able to improve their

SPECIAL

ANALYSIS

239

employment opportunities without assistance. Changes over time in
characteristics of participants frequently result from programmatic or
statutory changes rather than shifts within the general population
served.
Table

K-9.

CHARACTERISTICS

POVERTY
GRAM

POPULATION,

AND

UNEMPLOYED

TRAINING

AND

WORKERS,

ADULT

EMPLOYMENT

PRO-

PARTICIPANTS i

Unemployed
workers (age 14
and above)
1976

1977

1976

1977

1976

7.3

6.9

17.3

17.0

Female

Less than high school education. _

4 22

100

Average number (millions)
Percent:
Age 21 or less

Poor

Public assistance recipient
Minority

Training and
employment
program
participants'

Poverty population (age 14 and
above) 2

INA

1977

2.2

2.5

40
(32)
47
(43)
41
(40)
65
(36)
23
(17)
43
(29)

33
(30)
48
(46)
38
(35)
65
(34)
23
(16)
36
(28)

1 Unemployed workers and poverty population reported on a calendar year basis; training and
employment program participants reported on a fiscal year basis.
2 Data collected in March of year shown here; represents income of prior year.
3 Percentages are calculated on the basis of characteristics of new participants, but the average
number figure refers to average enrollment or service years. Percentages not in parentheses reflect
all programs except youth in-school, job placement assistance, and other labor market services.
Percentages in parentheses do include job placement assistance and labor market services.
4 Represents individuals living in poverty areas.
I N A = Information not available.

Table K - 1 0 . C H A R A C T E R I S T I C S
PROGRAMS,

C E T A Title I
C E T A Title I I .
TEA
Job Corps
WIN
H E W vocational rehabilitation. _ .
Veterans O J T .

77
48
44
100
100
67
15

1976
76
75)
44]
100
100
60
15

1977
78
53
100
100
52
15

C E T A Title I
C E T A Title II
TEA
Job Corps
WIN
H E W vocational rehabilitation...
Veterans OJT

54
66
70
75
25
57
99

SELECTED

1976
54
541
65 j
72
27
49
99

Less than high
school education

1975

1976

62
24
21
100
19
27
6

57
561
22]
100
18
22
6

1977

1975

51
20
100
16
18
6

Minority race

Male
1975

21 or younger

Poor
1975

ENROLLEES

1 9 7 5 , 1 9 7 6 , 1 9 7 7 (in percent)

1977
52

62
72
27
40
99

1975
45
43
39
71
46
24
8

1976
45
561
31}
73
45
21
8

61
28
27
89
59
43
15

1976

1977

54
541
26]
92
60
38
15

50
21
92
60
34
15

Welfare recipient

1977
43

2*1
73
53
18
8

1975
27
16
14
35
100
19
INA

1976
26
26]
13J
41
100
17
INA

1977
25
15
41

100
14

240

THE

BUDGET

FOR FISCAL

YEAR

IMPACT OF T R A I N I N G AND E M P L O Y M E N T

19 7 9

PROGRAMS

The primary goal of this wide range of programs is to increase the
long term earnings and employment opportunities of participants.
Training programs in particular attempt to do so by improving the
relative competitive position of these individuals in the labor market,
which may also help reduce inflationary bottlenecks and increase
total employment by increasing the number of skilled workers in
the economy.
Determining the effectiveness of this effort requires measuring long
term benefits to program participants. Determining the efficiency of
this effort requires measuring (1) the degree of targeting of programs
on those most in need, (2) the amount of useful work skills provided
in the training or work experience, and (3) the amount of substitution
of these expenditures for similar expenditures which would have otherwise occurred in the absence of the Federal program.
Evidence on benefits to participants is mixed, but generally suggests
a modest positive impact on earnings. Evaluations of training programs indicate earnings gains over the first 4 or 5 years, tending to
diminish thereafter. A major ongoing survey of CETA participants,
started in 1975, is expected to produce information on longer term
CETA program effects beginning in 1979.
Targeting varies considerably by program. Most programs focus on
low-income individuals and others with chronic unemployment or
severe barriers to employment. The amount or quality of skill development occurring in programs is virtually impossible to measure directly,
and most evaluations regard postprogram earnings gains as a proxy for
such skill improvement. There is no evidence available on substitution
effects for training programs. Recent estimates for employment programs indicate fairly high rates of substitution. For public service
employment not limited to project-type activities, these estimates
suggest substitution approaching 90% within 2 years after a job
is first funded.
F U N D S BY A G E N C Y

The following table shows obligations and outlays by administering
agency and major program or account. Two agencies—the Departments of Labor, and Health, Education, and Welfare—will account
for about 95% of all training and employment outlays in 1979.

SPECIAL ANALYSIS

241

Table K-11. F E D E R A L F U N D S F O R T R A I N I N G A N D E M P L O Y M E N T
P R O G R A M S BY ADMINISTERING AGENCY
(In millions of dollars)
Agency and program

Department of Health, Education, and
Welfare:
Social services manpower
High school work-study
Vocational rehabilitation
CETA support
National occupational information coordinating committee
Subtotal, HEW
Department of Labor:
Employment and training assistance. _
Temporary employment assistance
Work incentive program (WIN)
Employment Service
Older American community service
employment...
Food stamp recipient services
Labor market information
Equal employment opportunity
Program administration.
Employment opportunities program
Subtotal, Labor
Department of Agriculture: Youth Conservation Corps
Department of Commerce: Job opportunities program
Department of the Interior: Indian
programs
Department of Justice: Prisoner training.
Department of Housing and Urban
Development: Community development
Veterans Administration:
On-the-job training
Vocational rehabilitation
Assistance centers
Community Services Administration:
Senior opportunities and services
Equal Employment Opportunity Commission: Equal employment opportunity enforcement
Other Federal agencies:
Federal contract compliance
Summer youth programs
Subtotal, Other agencies
Total

Obligations
1977
actual

667
7
921
2

1978
estimate

669

Outlays
1979
estimate

1977
actual

1978
estimate

667
10
897
2

1979
estimate

953
2

688
UNA
994
2

669
9
944
2

688
UNA
978
2

1,597

1,634

1,688

1,575

1,628

1,672

4,129
5,006
350
599

5,316
1,861
365
670

4,854
5,955
365
720

3,291
2,340
361
604

4,852
4,765
365
670

5,400
5,956
365
720

150
27
28
7
97

220
28
33
7
113

228
28
36
7
115
50

72
29
28
7
98

150
28
33
7
112

198
28
36
7
111
35

10,393

8,613

12,359

6,829

10,982

12,856

49
5

52
6

54
7

49
1

52
2

54
4

175
109
9

141
120
8

123
121
10

175
109
9

141
120
8

124
123
10

110

105

7
140

638

647

668

721

648

643

12,628

10,894

14,715

9,125

13,258

15,171

1 This program will be folded into a larger grant to States in 1979. H E W cannot predict what
funding decisions on this program States will make.

260-700 O - 78 - 16

SPECIAL ANALYSISF242
HEALTH

Overview.—Federal spending for health programs will total $63.4
billion in 1979, an increase of $6.5 billion or 11.4% over 1978. The
share of the Federal budget spent on health will rise to 12.7% in 1979,
as shown on Table L - l .
Table L - l . F E D E R A L H E A L T H S P E N D I N G C O M P A R E D T O T H E T O T A L
F E D E R A L B U D G E T (in billions of dollars)
Actual
1970

Total Federal outlays
Federal health outlays
_ _
Health as percent of total outlays _ _ _

196.6
18.1
9.2

Estimated

1972

1975

1977

1978

1979

231.9
24.5
10.6

324.6
36.8
11.3

401.9
49.6
12.4

462.2
56.8
12.3

500.2
63.4
12.7

Table L-2 summarizes Federal health spending by major category
for 1977, 1978, and 1979. The largest catego^ of expenditures is for
health services, which will amount to $55.2 billion in 1979.
Table L-2. F E D E R A L H E A L T H S P E N D I N G B Y C A T E G O R Y

ACTIVITY

(In millions of dollars)
Outlays
1977
actual

Health services, total
Direct Federal services
Indirect services
Health resources, total
Health research _.
Training and education
Construction
Health planning and statistics
Consumer and occupational health and safety, total
Total, health programs

1978
estimate

1979
estimate

42,389
6,657
35,732
6,321
3,147
1, 696
1,100
378
926

48,935
7,487
41,448
6,810
3,517
1,581
1,318
393
1, 105

55,245
7,809
47,436
6,949
3, 750
1, 553
1,262
384
1, 180

49,636

56,850

63,374

Increased national spending.—Total national expenditures for
health rose from $12 billion in 1950 to $160.6 billion in 1977. Per capita
expenditures grew from $78 to $730 over the same period, nearly a tenfold increase. The percentage of the gross national product (GNP)
spent on health has almost doubled in the last quarter century, from
4.6% in 1950 to 8.8% in 1977. If the rate of increase in recent years
continues, the proportion of the GNP devoted to health will increase to
9.6% in 1982.
242

SPECIAL ANALYSIS F

243

A large proportion of the increase in health spending since 1965
resulted from health cost inflation. The rise of medical prices has outstripped that of most other prices in the economy during the past
decade. From 1967 to 1977, for example, the Consumer Price Index
rose by 85% while medical prices have risen by 108%.
Increased Federal spending.—Federal health spending has grown
at a greater rate since 1965 than spending by State and local governments and the private sector. The following chart indicates that the
Federal share of total health spending has more than doubled between
1965 and 1977, primarily due to the advent of medicare and medicaid.
State and local government shares have increased slight^, while the
private share of health spending has declined by 17%.
Public a n d Private H e a l t h Expenditures
5 Billion,

$ Billons

The Federal Government now spends almost one-third of all health
expenditures in the country. Factors contributing to the growth in
Federal spending—in addition to rapid inflation—are increases in
the population eligible for Federal benefits and increases in the utilization of health services.
HEALTH SERVICES

The largest amount of Federal spending for health is for services for
the poor, the aged, and the disabled. Through medicare and medicaid,
the Federal Government has become a major source of financing for
health services, particularly hospital and nursing home care. The
Federal Government provides about 28% of the funds for health

244

THE BUDGET FOR FISCAL YEAR

19 79

services, including 39% of total hospital expenses, 32% of nursing
home expenses, 19% of expenses for physicians' services, and 5% of
drug expenses, as indicated in the following chart.
S o u r c e s of E x p e n d i t u r e s for H e a l t h Services
$ Billions
-70

$ Billion*

FISCAL YEAR 1977
J Federal
State and Local
Private

The two largest Federal health activities, medicare and medicaid,
will account for 66% of Federal health service outlays in 1979. Other
health services programs administered by the Department of Defense,
the Veterans Administration, and HEW represent most of the remaining Federal health services outlays. Total Federal expenditures
for financing and providing health services, by category, are shown
in Table L-3.

SPECIAL ANALYSIS

245

Table L-3. F E D E R A L F I N A N C I N G A N D P R O V I S I O N O F H E A L T H S E R V I C E S
(In millions of dollars)
Outlays
1977
actual

1978
estimate

1979
estimate

Financing of hospital and medical services:
General hospital inpatient services
Psychiatric hospital inpatient services
Long-term care inpatient services
Outpatient services
Outpatient mental health services
Other services

21,881
550
3,968
4,975
192
4, 166

25,479
607
4,912
5,928
279
4,242

29, 258
646
5,332
6,942
320
4,939

Subtotal,financingof services

35, 732

41,448

47,436

Provision of direct hospital and medical services:
General hospital inpatient services
Psychiatric hospital inpatient services
Long-term care inpatient services
Outpatient services
Outpatient mental health services
Other services

3,520
680
220
1,802
43
393

3,924
742
257
2,035
53
476

4,111
765
283
2,140
64
446

Subtotal, direct provision of services

6, 657

7,487

7,809

42,389

48,935

55,245

Total, financing and provision of services

Medicare.—Medicare is a program to finance health care for the
26.6 million aged and disabled. It is financed and administered b}^
the Federal Government through two trust funds—the Hospital
Insurance (HI) and Supplementary Medical Insurance (SMI) trust
funds. The HI trust fund, financed primarily by the Social Security
payroll tax paid by employers and employees, covers inpatient
hospital care and subsequent skilled nursing home care, as well as
limited home health services. The SMI trust fund, financed by contributions from Federal general revenue funds and by enrollee premiums, covers physician fees, some other health services not covered by
HI, and a variety of other outpatient medical services and supplies.
Until 1973, SMI contributions were paid equally by the Federal
Government and enrollees; since 1973, enrollee premiums have been
allowed to rise only at the same rate as social security benefits.
Beginning in July 1979, the Federal monthly contribution will equal
$21.30 per aged enrollee while enrollee premiums will be $8.70 per
month, 29% of the total.
After a deductible equal to the average cost of a hospital day of care
(estimated at $164 in 1979), medicare pays 100% of the reasonable
costs of hospital care until the 61st day of hospitalization after which
copayment requirements are imposed. Under the SMI program, after
an annual deductible of $60, medicare pays 80% of the "usual, customary, and reasonable" charges of a health care provider; the
beneficiary is responsible for the other 20%. Reasonable charges are
defined as a charge no greater than that levied in 75% of the bills for
the same service in a particular area. In addition, since 1976, the
Secretary of HEW has set a limit on the rate at which reasonable
charges can rise. Tables L-4 and L-5 display basic data concerning
medicare, assuming enactment of the administration's legislative
proposals.

246

THE

BUDGET FOR FISCAL YEAR

19 79

Table L-4. SELECTED M E D I C A R E P R O G R A M

INDICATORS

(In millions)
Program indicators

1977
actual

Hospital Insurance (HI):
Persons with protection
Beneficiaries receiving services._
_ ___ _ __ __.
Benefit payments
____
_ _ _ _ _ _ _
Claims received
_ __
_ _ _ _ _ _ _ _ _ __.
Supplementary Medical Insurance (SMI):
Persons with protection __ __
________
Beneficiaries receiving services.-- __ _ _ _ _ _ ___
Benefit payments
Claims received
_
____
Monthly premiums (dollars)
_ _. _ _ _ _ _ _ _
Administrative expenses-__ _ _ ___ _ __
_

1978
estimate

1979
estimate

25
5.9
$14,906
32

26
6.0
$17,483
35

27
6.1
$19,907
39

25
14
$5,865
107
7.20
$620

26
16
$7,075
121
7.70
$694

26
16
$8,418
137
8.70
$797

Table L-5. D I S T R I B U T I O N O F M E D I C A R E E X P E N D I T U R E S , 1975
Type of service

In millions
of dollars

Inpatient hospital
Outpatient hospital
Physicians services
Skilled nursing facilities
Home health agencies
Other
Total

Percent

9,854
462
3,269
245
204
308

69
3
22
3
1
2

14,342

100

Medicaid.—Medicaid will finance the provision of medical services
to an estimated 21 million low-income persons in fiscal year 1978.
The program is funded by Federal matching of State expenditures
according to a formula based on State per capita income, i.e., the
lower a State's per capita income, the higher the Federal matching rate.
Federal grants to States under medicaid were $9,713 million in 1977 and
averaged $449 per person receiving benefits. In 1979, Federal medicaid grants under current law will amount to $12,065 million, an average
of $564 per beneficiary. State and local spending is expected to amount
to $9,176 million in 1979. Tables L-6 and L-7 display basic data
concerning medicaid.
Table L-6. SELECTED M E D I C A I D P R O G R A M I N D I C A T O R S
(In millions)
Program indicators

Persons receiving benefits
Benefit payments
Federal share
State share
Administrative expenses*
Federal share
State share

1977
actual

1978
estimate

21.6
$16,257
$9,181
$7,076
$846
$533
$313

21.3
$18,145
$10,247
$7,898
$959
$604
$355

"Includes Federal grants and State administrative costs eligible for matching payments.

1979
estimate

21.4
$20,171
$11,391
$8,780
$1,070
$674
$396

SPECIAL ANALYSIS

247

Table L-7. D I S T R I B U T I O N O F M E D I C A I D E X P E N D I T U R E S , 1976
Payments, by type of service

I npatient hospital
Physicians services
Skilled nursing facilities
Intermediate care facility
Drugs
Dental Care
Other
Total

In millions
of dollars

Percent

4,518
1,387
2,599
2,781
960
387
1,615

32
10
18
20
7
3
10

14,245

100

All States except Arizona currently participate in medicaid. Participating States must cover all persons receiving aid to families with
dependent children (AFDC) and most people receiving supplementary security income (SSI) benefits. States may, in addition, provide
coverage for the "medically needy," defined as those who fit into one
of the categorical programs of the Social Security Act (aged, blind,
disabled, and families with dependent children) and have incomes
above the AFDC income level but below 133%% of the AFDC payment level.
States are required to cover certain basic medical services but may
limit their scope, for instance, the number of covered hospital days, or
the extent of copayment requirements. They may, in addition, determine reimbursement levels for non-hospital services.
Federal payments per low-income individual vary widely from
State to State, because of differences in eligibility standards, benefit
packages and State reimbursement levels. In general, although the
Federal matching rate is lower in high income States, Federal medicaid
spending per capita and per low income person is typically higher in
such States because of more liberal program benefits and eligibility.
Other health care services.—The Federal Government finances or
provides medical and other health services for certain special categories
of beneficiaries, specifically Armed Forces personnel, their dependents,
and retirees; veterans; American Indians and Alaska natives; merchant
seamen; and Federal employees.
Health care for active and retired military personnel and
their dependents.—In 1979, DOD will operate 167 hospitals directly
and will finance additional care from community facilities for its 9.1
million beneficiaries. Outlays for DOD health activities will be
$4.1 billion in 1979.
Health care for veterans.—The Veterans Administration (VA)
will operate 172 hospitals, 108 long-term care facilities, and 228
outpatient clinics. VA will provide inpatient care for 1.4 million
veterans and will fund more than 18.2 million outpatient medical and
dental visits to VA and community facilities. Total VA outlays for
health activities, including construction of health care facilities, will be
$5.7 billion in 1979, $338 million more than in 1978.

248

THE

BUDGET FOR FISCAL Y E A R

19 79

Health care for Indians.—A total of $559 million will be spent
on Indian health services and facilities in 1979 to benefit approximately 647,000 American Indians and Alaska natives. These funds
provide comprehensive health care, as well as the construction of
hospitals, clinics, housing for Indian Health Service employees, and
sanitation and potable water facilities, as shown in table L-8.
Table L-8. F E D E R A L F U N D S T O I M P R O V E T H E H E A L T H O F A M E R I C A N
I N D I A N S A N D A L A S K A N A T I V E S (In millions of dollars)
Outlays
1977
actual

Hospital care and other medical services
Construction
(Hospitals and clinics)
(Sanitation projects)
(Indian Health Service employee housing).
Training and education
,
Health planning activities
Medical and health-related research
Total

1978
estimate

1979
estimate

305
70
(23)
(46)
(D
11
4
5

392
115
(37)
(76)
(2)
18
4
5

438
96
(43)
(51)
(2)
16
4
5

395

534

559

Public Health Service and Saint Elizabeths Hospitals.—The
Federal Government also provides care for certain beneficiaries in
nine Public Health Service (PHS) hospitals and 26 PHS clinics, for
which outlays will be $157 million in 1979. Outlays of $75 million
support care at Saint Elizabeths Hospital, a mental hospital serving
primarily the District of Columbia.
Other HEW support for health services.—The Federal Government also assists in the provision of health services through a variety
of grants and contracts programs. HEW, for example, supports 25
health services programs, in addition to medicare and medicaid,
with estimated total 1979 outlays of $2.8 billion, as shown in table
Lr-9.

SPECIAL

ANALYSIS

249

Table L—9. H E W H E A L T H S E R V I C E S

PROGRAMS

(In millions of dollars)

HEW

agency and

program

Health Services Administration:
Community health centers
Home health services
Comprehensive grants to States
Hypertension
Maternal and child health
Genetic services
Family planning
Migrant health
Payment to Hawaii for treatment of Hansen's disease.
Public health service hospital system
Emergency medical services
National health services corps
Indian health service
Health maintenance organizations
Center for Disease Control:
Venereal diseases
Immunizations
Rat control
Lead paint poisoning
Alcohol, Drug Abuse, and Mental Health Administration:
Community mental health services
Drug abuse services
Alcohol abuse services
Saint Elizabeths Hospital. _
Health Resources Administration:
Health planning
Office of Human Development Services: Developmental disabilities.
Social Security Administration: Crippled children's services
Total

Outlays
1977
actual

1978
estimate

1979
estimate

229
3
104
8
371
4
102
30
1
135
30
25
395
16

235
6
94
10
365
5
119
33
1
167
38
36
534
18

259
6
90
11
369
7
132
32
1
157
40
61
559
25

27
13
10
7

32
24
13
10

32
33
13
10

162
200
139
65

243
211
142
72

281
213
142
75

176

167

148

58
8

59
30

64
30

2,303

2,640

2,790

Mental health and substance abuse.—The Federal Government
supports activities related to mental health and mental retardation,
as well as to drug and alcohol abuse. Outlays for these activities,
funded through HEW, the Veterans Administration, the Department
of Defense, and other agencies, but excluding medicare and medicaid
spending related to these purposes, will total $2.0 billion in 1978 and
$2.1 billion in 1979. In addition to funding services in these areas,
support is also provided for research and training, as shown in table
L-10.

250

THE

BUDGET

FOR

FISCAL Y E A R

19 7 9

Table L—10. F E D E R A L O U T L A Y S F O R M E N T A L H E A L T H , M E N T A L R E T A R D A T I O N , AND S U B S T A N C E A B U S E T R E A T M E N T A C T I V I T I E S
(In millions of dollars)
Outlays
1977
actual

_ _

1,331

906
89
85

1,061
94
89

1,136
92
103

48
3
27

48
3
30

46
3
34

_ _ _

288

298

313

______

262
10
16

270
10
18

282
10
21

______

357

368

370

299
14
44

311
15
42

309
15
46

1,803

1,991

2,097

_
_ _ _ _ _ _ _
_____
_
_______
_

Mental retardation, total

___

Services.__ ___ _
Training... _ _ _ _ _
Research

__ _

Alcohol abuse, total _
Services
Training ___
Research

_
___

___
_
___
__
____
______
______

_ _
_ _

__
_

_
_
_ _ _ _ _ _

Drug abuse, total..
Services
Training
Research

1,080

_____
__

_
_
__
__
_
_

__
_

____
_

_ __ __
_

1979
estimate

1,244

Mental health, total..
Services
Training
Research

1978
estimate

_______

Mental health, mental retardation, and substance abuse, total—_

Utilization of health services.—During 1976, there were more
than 1.4 billion physicians' visits, 34.4 million hospital stays, and 1.2
billion prescriptions filled in the United States. The average number of
days Americans are hospitalized per year grew 4.2% between 1965 and
1976, or from 1,186 to 1,236 days per 1,000 population. The average
number of doctor visits per person per year rose almost 8.9% from
1964 to 1976, from 4.5 to 4.9. Since the enactment of medicaid, substantial increases in utilization of health services have occurred among
the poor, who now make 17% more physician visits than the nonpoor
as shown in table L - l l .
Table L - l l . A N N U A L P H Y S I C I A N V I S I T S P E R P E R S O N IN U . S . , 1 9 6 4 A N D 1 9 7 6
1964
Age group

All ages
Under 17 years
17 to 44 years
45 to 64 years
65 years and over

Poor

4.3
2.3
4.1
5.1
6.0

Nonpoor

4.6
2.6
4.7
5.1
7.3

1976
All
persons

4.5
3.7
4.6
5.0
6.7

Poor

5.6
3.8
5.2
6.8
7.1

Nonpoor

4.8
4.2
4.6
5.6
6. 6

All
persons

4.9
4.0
4.7
5.7
6. 9

251

SPECIAL ANALYSIS It

Utilization of health services by the aged has also increased substantially since medicare was enacted. The average number of hospital
days per year for persons over 65 rose more than 20% between 1965
and 1975.
The following chart shows that annual health expenses for the aged
are almost three times higher than for other adults and more than six
times higher than for children, and that the Federal Government pays
a much larger share of the health expenses of persons over 65 than of
other age groups. Despite the increase from 30% to 60% in the public
share of health care costs for the aged between 1966 and 1975, and
the decline from approximately 16% to 11% in the percent of average
per capita income the elderly spend on health, actual per capita out-ofpocket payments by the elderly have increased from $307 to $551—
an increase of about 6 % a year. This is, however, less than the inflation
rate in health costs.
Personal H e a l t h C a r e Expenditures Per C a p i t a
Dalian

Dollars

1600
FISCAL YEAR 1976
Federal
1200*

Slate and Local
Private

800

19-64
Years

65 Year,
and Over

Table L-12 distributes Federal outlays for health services among
three major age groups and between poor and nonpoor persons.
The table shows that most Federal health care spending is for nonpoor persons. When the figures are adjusted to exclude all expenditures for Federal employees, about 34% of Federal health care funds
are spent on the poor.

252

THE

BUDGET

FOR

FISCAL

YEAR

Table L-12. F E D E R A L

HEALTH

CARE OUTLAYS
GROUPS

19 7 9

A G E AND

INCOME

(In millions of dollars)
Outlays
1977
actual

Total, all recipients
Aged (65 and over) _
Other adults (21 to 64)
Children and youth (0 to 20)
Poor persons, total...

Aged (65 and over)
.
_
Other adults (21 to 64)
Children and youth (0 to 20)
Nonpoor persons, total.

__ __

_ _

__ _ _

Aged (65 and over)
Other adults (21 to 64)
Children and youth (0 to 20)

1978
estimate

1979
estimate

42,389

48,935

55,245

23,724
14,524
4,141

27,668
16,660
4,607

31,757
18,272
5,216

13,918

15,876

17,610

4,802
6,981
2,134

5,553
7,949
2,374

6,248
8,581
2,780

28,471

33,059

37,635

18,921
7,543
2,007

22,114
8, 711
2,234

25,509
9,691
2,436

Health insurance for Federal employees.—Health benefits for
3.6 million Federal civilian employees and annuitants and their 6.9
million dependents are financed under the Federal employees health
benefits programs managed by the Civil Service Commission. In
1979, Federal payments to finance these programs will amount to
$2.1 billion.
HEALTH

RESOURCES

Federal programs for the development of health resources encompass
support for health research, for training and education of health
workers, for construction of health care facilities, for health planning,
and for health statistics. The combined outlavs for these programs, as
shown in table L-13; will be $6.9 billion in 1979.
Table L-13. F E D E R A L

OUTLAYS

FOR

THE

DEVELOPMENT

HEALTH

RESOURCES
(In millions of dollars)
Outlays
1977
actual

Health research
Training and education
Construction
Health planning and statistics
Total

1978
estimate

1979
estimate

3,147
1,696
1,100
378

3,517
1,581
1,318
393

3,750
1,553
1,262
384

6,321

6,809

6,949

SPECIAL ANALYSIS It

253

The supply of health resources—which includes physicians and
other health professionals, health researchers, hospitals, nursing
homes, and other health facilities—has increased substantially in the
last 25 years. The number of short-term non-Federal hospital beds
in the country has grown from nearly a half million in 1950 to nearly
1 million in 1975, or from about 3.1 to 4.5 beds per 1,000 population.
The number of active physicians has increased from 220,000 in 1950
to 362,900 in 1977, and the number of active registered nurses has
grown from 401,000 in 1953 to 1,018,000 in 1977. Another estimated
350,000 qualified registered nurses are not active. Since the enactment
of medicare and medicaid, the number of nursing home beds has more
than doubled, from nearly a half million in 1965 to about 1.3 million in
1977.
Presently, more than 4.8 million persons are employed in healthrelated jobs—almost 6 % of the civilian labor force. Based on Labor
Department statistics, health sector employees are the second largest
employee group—after local government employees—in the United
States.
Health research.—The Federal Government currently funds more
than 66% of all health research in this country. Federally supported
biomedical and behavioral research programs attempt to provide
new knowledge for the prevention, diagnosis, understanding, and
treatment of disease. Federal outlays for health research will increase
from $3.5 billion in 1978 to $3.8 billion in 1979. Federal support
emphasizes research on degenerative illnesses, such as cancer, diabetes,
and cardiovascular diseases, and also on environmental and mental
health problems. Basic research being performed will be increased in
1979. Table L-14 indicates the allocation of Federal funds among
research fields and includes funding for construction of research
facilities.
HEW will administer 77% of the total Federal health research
funds in 1979. Other Federal agencies support and conduct health
research in support of program missions. For example, the Department
of Energy, the Department of Defense, and the Veterans Administration together account for 12% of all Federal health research expenditures.

254

THE

BUDGET

FOR

FISCAL

YEAR

19 79

Table L - l 4. F E D E R A L O U T L A Y S F O R H E A L T H

RESEARCH

(In millions of dollars)
Outlays

Cancer
_ _ _ __
Environmental health
__
Cardiovascular
__
Neurological and visual
Metabolic diseases and arthritis
Infectious diseases
___
_ _
Mental health
Child health
Health services research and development
Population and family planning
Pulmonary
__
Nutrition. ___ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Dental
Aging
Research facilities
Other research and development
_

1977
actual

1978
estimate

767
444
306
196
186
190
145
86
83
67
63
50
49
42
26
471

796
493
355
238
226
211
148
99
66
76
72
58
57
54
22
568

830
507
382
263
246
222
169
114
88
87
77
66
63
59
16
578

3,173

3,539

3,766

___
__
______
__
_

Total

1979
estimate

Health training and education.—More than 37% of the revenues
of the Nation's 114 medical schools is derived from Federal grants or
contracts; this does not include medicare and medicaid funds received
by such schools for patient care. Table L - l 5 shows the distribution of
$1.5 billion in 1979 Federal outlays provided to medical schools by
selected agencies.
Table L—15. F E D E R A L F U N D S T O M E D I C A L

SCHOOLS

(In millions of dollars)
Outlays
1978
estimate

1977
actual

Department of Health, Education, and Welfare
Research and development
Education and training
Construction
Department of Defense
Research and development
Education and training
Construction
Veterans Administration
Education and training
National Aeronautics and Space Administration
Research and development
Department of Energy
Research and development
Other Agencies
Research and development
Total
Research and development
Education and training
Construction

1979
estimate

894
299
177

1,046
197
97

1,147
236
55

1
15
22

1
20
21

1
23
7

1,461
923
339
200

1,448
1, 077
254
118

1,538
1,178
299
61

SPECIAL

ANALYSIS

255

The Federal Government will spend a total of $1.3 billion in 1979
for training and education of health workers as table L-16 indicates.
The principal programs of direct support for health professions schools,
which are administered by HEW, include:
• institutional support grants designed to improve the specialty
and geographic distribution of health professionals; and
• student assistance programs, which enable students to finance
their education through guaranteed loans or through scholarships that require payback through service in an area with a
shortage of health professionals.
Table L-16. F E D E R A L O U T L A Y S F O R H E A L T H

STUDENTS

(In millions of dollars)
Outlays
1977
actual

Students in life sciences fields _
_ _
_ _
Medical students
.
- _
Dental students. _
___
__
Nursing students
_ _ __
_ _
Students In mental health fields _ _ _ _
Other students in health fields __
Total.

1978
estimate

1979
estimate

112
645
124
148
30
463

135
679
56
140
31
332

152
539
65
161
29
386

1,522

1,373

1,332

The national health service corps scholarship program will be
funded at a level of $60 million in 1979 and will support approximately
6,000 medical, osteopathic, and dental students, plus other health
professionals, in return for commitments to serve in shortage areas.
This program helps to meet student financial needs as well as Federal
requirements for health professionals to staff programs, such as the
Indian Health Service. It also addresses the problem of geographic
maldistribution of health personnel by placing physicians and dentists
in areas with shortages of health professionals, either as members of
the National Health Service Corps or as private practitioners. The
National Health Service Corps will spend $61 million in 1979 to place
1,875 health professionals in 849 medically underserved areas. This
represents an increase of 450 professionals and 120 areas over 1978
levels.
Construction.—The United States is well supplied in the aggregate with hospitals, Partially as a result of three decades of direct
Federal assistance for hospital construction through the Hill-Burton
program. Most of the new construction and modernization of
hospitals and other health facilities is now supported through taxexempt bonds, private long-term loans, and depreciation funds set up
by health facilities. Medicare, medicaid, and private insurance reimbursements to hospitals and other facilities for patient care include
amounts for depreciation and interest on loans. Medicare, for example,
will pay more than $1 billion in 1978 for depreciation and interest.
In 1979, Federal outlays spent directly for the construction of
health care facilities, including environmental health facilities, are
estimated at $1.3 billion, as shown in table L-17. This figure does
not include medicare and medicaid depreciation and interest payments. Federal assistance for the construction of health facilities will

256

THE

BUDGET

FOR

FISCAL

YEAR

19 79

continue to be provided through grants, direct loans, and loan guarantee programs of the Departments of Housing and Urban Development,
Agriculture, and Commerce, as well as the Small Business Administration and the Appalachian Regional Commission.
Table L-17. H O S P I T A L

AND H E A L T H

FACILITY

CONSTRUCTION

(In millions of dollars)
Outlays
1977
actual

Federally supported construction:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Health professions educational facilities
Other facilities
Total, federally supported

1978
estimate

1979
estimate

21
119
18
26
60
36
168
18

18
135
31
22
64
37
90
105

18
102
27
16
79
33
49
51

466

501

375

78
541
32
55
70
89
23

Federal hospitals and health facilities:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Other facilities

90
348
9
45
49
60
34

Total, Federal facilities

635

817

888

1,101

1,318

1,263

Total, Federal funds for hospital and health facility construction

450
17
88
87

Health planning and statistics.—HEW and other agencies will
spend a total of $272 million in 1979 on health planning activities,
including statistical programs, as shown on Table L-18.
Table L-18 F E D E R A L O U T L A Y S F O R H E A L T H P L A N N I N G A N D S T A T I S T I C S
(In millions of dollars)
Outlays
1977
actual

Financing of health planning, total
State-wide health planning
Substate health planning
Other health planning.
Health statistical activities, total
General purpose statistics
Federal program management statistics
Total, health planning and statistics activities

1978
estimate

1979
estimate

236
22
154
59
46
32
14

229
26
166
37
47
28
18

215
30
158
28
57
37
20

282

276

272

SPECIAL

ANALYSIS

CONSUMER AND OCCUPATIONAL

257

HEALTH

AND

SAFETY

A total of $1.2 million will be spent on consumer and occupational
health and safety in 1979, as shown in Table L-l9.
Table L - l 9 . F E D E R A L

OUTLAYS FOR CONSUMER
H E A L T H AND S A F E T Y

AND

OCCUPATIONAL

(In millions of dollars)
Outlays
1977
actual

Occupational safety and health. _
Consumer safety _
.

_
_

Total, consumer and occupational health __

1978
estimate

1979
estimate

314
612

375
730

412
768

925

1,105

1,180

Consumer safety.—Federal outlays for consumer safety activities
will be $768 million in 1979, spent through the Food and Drug Administration in HEW, the Consumer Product Safety Commission,
and the Department of Transportation.
Occupational safety.—Federal outlays for occupational safety and
health activities of $412 million in 1979 will be spent through the
National Institute for Occupational Safety and Health in HEW and
the Occupational Safety and Health Administration and the Mine
Safety and Health Administration in the Department of Labor.
International health assistance.—In 1979, the United States will
provide $431 million for health activities in other countries and the
U.S. territories, and for health assistance to foreign nationals in the
United States. These funds will support the health activities of various
agencies, including the Agency for International Development, the
Peace Corps, and international agencies to which the United States
contributes financially, such as the World Health Organization and
the Pan American Health Oorganization. The funds are distributed
across all categories of health activities, as illustrated in table L-20.
Excluded from these figures are funds for health programs for U.S.
employees abroad.
Table L-20. F O R E I G N H E A L T H A S S I S T A N C E (in millions of dollars)
Outlays
1977
actual

Health research _
Health training:
Assistance to individuals
_
Assistance to institutions._
Construction of health facilities
Health planning and statistics.
Health services
__
Consumer and occupational health. __
Total

260-700 O - 78 —17

_ _
_
__ _

1978
estimate

1979
estimate

48
5
20
17
89
38

55
5
16
21
106
87

67
3
28
23
123
106

286

372

431

258

THE BUDGET FOR FISCAL YEAR

19 79

Expenditures for health activities by agency.—The following
tables distribute the health-related outlays of Federal agencies by the
categories used in this analysis. Health outlays of HEW, the Consumer Product Safety Commission, and parts of the Civil Service
Commission, and the Departments of Agriculture, Housing and Urban
Development, Interior, and Labor are included under the health
function (550) in Part 5 of the budget document. Health-related outlays of all other agencies are assigned to other functions, reflecting
the major mission of the programs of which they are a part. The following tables, therefore, indicate the predominant budget functional
code for each agency. Other special analyses such as those on research
and development, education, and training and employment also include some of the same outlays in their tabulations.

Table L-21. F E D E R A L O U T L A Y S F O R M E D I C A L A N D H E A L T H - R E L A T E D A C T I V I T I E S B Y A G E N C Y ,

1977

(In millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health_
Health Care Financing Administration
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Department of Energy
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
Other agencies.
Agency contributions to employee health funds
Total outlays for health, 1977

550
551
550
550
553
550
553
550
551
550
051
703
451
352
304
250
270
550
150
251
300
400
750
999

Indirect
Federal
hospital
and
medical
services

Direct
Federal
hospital
and
medical
services

33,056
857
7
486
195

461
393

4
31,253
253
623
290
20
2

6
2,425
3,716

2,374
15
36
167
43
2,062
24
5
9
14
122
104

22
31
2

83
67
52
184
4
2
55
40
6
2
102

13
10
3
62
1,653
35,732

Health
research

6,657

3,147

Training
and
education

1,053
41
672
107
4
150

Construction

Health
planning
activities

3
3
2
28

11
5
20

2
13
21
105
1

1,696

1,100

378

926

49,636

21
6
2

306
42
221
21

41
4
-2

3
301
217
51
20

4
7
22
3
4

224
1

Total

37,939
1,424
1,267
854
245
2,253
246
35
31,262
353
3,815
4,621
92
393
67
57
194
221
46
55
56
57
63
361
1,654

80
303
270

465
77
331
11

Consumer
and
occupational
health
and
safety

2
217
3
34
18
284
5

10
1

196
23

Table L-21. F E D E R A L O U T L A Y S F O R M E D I C A L A N D H E A L T H - R E L A T E D A C T I V I T I E S B Y A G E N C Y , 1977
O

(In millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration.
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Health Care Financing Administration
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Department of Energy
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
Other agencies
Agency contributions of employee health funds
Total outlays for health, 1978.

550
551
550
550
553
550
553
550
551
550
051
703
451
352
304
250
270
550
150
251
300
400
750
999

Indirect
Federal
hospital
and
medical

Direct
Federal
hospital
and
medical

38,439
947

576
500

581
165

36
36,448
262
648
330
26
2

I
73
1,899
41,448

859
48
424
112
8
188

Construction
tion

2,596
4,257

25
36
2

93
82
54
203
4
4
58
43
6
1
56

4
8
3
178

7,487

3,517

1,581

1,318

20
10

Training
and
education

2,677
15
2
173
53
2,362
26
21
9
14
124
112

7
.

Health
research

1
79
321
315

28
9
3

Health
planning
activities

468
120
208
36

314
25
199
17

92
2
10

1
267
288
60
32

6
8
25
3
5

Consumer
and
occupational
health
and
safety

262
1
3
254
3
42
23
336
5

10
2
11
5
20
393

Total

43,596
1,657
833
989
229
2,643
282
145
36,457
361
4,001
5,328
112
468

3
13
19
150
1

60
213
247
72
58
61
65
64
524
1,899

1,105

56,850

215
36

Table L-21. F E D E R A L O U T L A Y S F O R M E D I C A L A N D H E A L T H - R E L A T E D A C T I V I T I E S B Y A G E N C Y , 1977
(In millions o! dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Health Care Financing Administration
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Department of Energy
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1979

550
551
550
550
553
550
553
550
551
550
051
703
451
352
304
250
270
550
150
251
300
400
750
999

Indirect
Federal
hospital
and
medical
services

Direct
Federal
hospital
and
medical
services

Health
research

44,108
1,070

606
527

2,895
15

624
166

199
58
2,532
26
32
18
16
132
113

8
41,973
273
670
362
33
2

20
11
1
86
2,145
47,436

2,697
4,436

1
28
38
I
7,809

97
84
51
199
4
4
63
47
6
1
54
3,750

Training
and
education

Construction

Health
planning
activities

Consumer
and
occupational
health
and
safety

5
16
2
93

9
5
23

3
14
15
168
1

49,370
1,785
682
1,058
235
2,816
298
130
41,991
376
4,152
5,667
126
477
84
59
208
265
72
63
66
78
62
483
2,146

1,553

1,262

384

1,180

63,374

785
45
337
111
8
203
1
80
337
334

397
109
166
36

303
18
179
17

81
5
1

258
394
63
24

7
8
28
1
5

4
266
5
50
29
349
6

2
8
27
9

276
1

Total

233
36

SPECIAL ANALYSIS M
INCOME

SECURITY

Federal income security programs provide essential income protection for millions of Americans. A major, although not exclusive,
objective of these programs is to increase the income of people at the
lower end of the income scale. The programs included in this analysis
are divided into two broad categories:
—Cash benefits, such as social security and other income transfer
programs.
—In-kind benefits, such as health care and food stamps, which
effectively increase real income by providing necessary goods and
services.
In addition, several major tax expenditures contribute to income
security.
OVERVIEW

Total Federal income security benefits are estimated to equal
$215 billion in 1979. This represents a $17 billion increase (or 8.6%)
over the 1978 total of $198 billion. Much of this change can be attributed to cost-of-living increases in benefits. By law, $144 billion of
the 1979 outlays are in programs whose benefits are tied to the cost of
living.
The Social Security Amendments of 1977, enacted on December 20,
1977, made major changes in the financing of this cash benefit system.
The principal changes were to increase the payroll taxes that fund the
system and to stabilize future replacement ratios (the ratio of the initial
benefit amount to recent earnings before retirement, death, or the
onset of disability). The tax increases removed the risk that the system
might have exhausted its reserves in the 1980's and insures the
solvency of the system into the twenty-first century. Stabilization
of the replacement ratio will prevent future benefits from rising faster
than inflation. A number of smaller changes were made in the benefit
structure to eliminate windfalls and improve equity among beneficiaries.
Table M - l . F E D E R A L

INCOME SECURITY

BENEFITS
19 77
actual

Federal outlays for cash benefits:
Social security (OASDI)
__ __ ___
Federal employee benefits
_
Veterans benefits
______
__
Public assistance
Unemployment insurance
Railroad retirement
___ .
Other programs
_-_ Proposed legislation included above
Subtotal, cash benefit outlays
Federal outlays for in-kind benefits:
Food and nutrition. __
Health care _
__
_
____
Housing
_
Proposed legislation included above
Subtotal, in-kind benefits outlays.Total

262

___ ___

82,406
18,426
9,562
10,059
12,928
3,768
1,149

(in millions of dollars)
1978
estimate

91,588
20,963
10,154
11,084
10,739
4,038
1,184
(-39)

138,299

149,750

8,278
30,674
2,405

8,763
36,244
3,014

__ _ _

(18)

1979
estimate

101,490
23,056
10,582
10,548
10,133
4,222
1,187
(-334)
161,218
8,857
41,781
3,540
(-300)

41,357

48,022

54,179

179,656

197,771

215,397

SPECIAL

ANALYSIS

TARGET

263

GROUPS

Federal income security programs maintain or supplement the
income of persons and families whose capacity for self-support is
reduced by old age, disability, illness, unemployment, poverty or
death of the primary wage earner.
In situations where only partial self-support is currently possible or
where self-support may be achieved in the future, income security programs provide supplementary or t e m p o r a l support. Where selfsupport is not possible, income security programs provide basic
support.
The analysis below is organized by target group; that is, the programs are discussed as they provide support to people sharing similar
problems and circumstances—the aged (annuitants and others),
the unemployed, parents with small children and no breadwinner,
and low-income persons with insufficient income to provide for their
basic needs. Needs-tested benefits are included in this analysis by
target group.
Table M - 2 . I N C O M E S E C U R I T Y

BENEFITS BY TARGET

GROUPS

(In millions of dollars)

Annuitants
_ _ _
_
Other aged
__
Disabled _ _ _ _ _
_ __
Mothers and children. _ _
Temporarily unemployed- _ _
Other transitional low income _
Other
Total

1977
actual

1978
estimate

1979
estimate

Change
1977-79

Percent
change
1977-79

52,956
52,339
28,769
8,869
13,352
9,453
9,431

59,046
59,144
32,638
9,666
11,399
10,428
10,404

65,888
65,022
35,604
10,230
10,793
11,242
11,212

12,932
12,683
6,835
1,361
-2,559
1,789
1,781

24. 4
24.2
23.8
15.3
-19.2
19.4
18.9

179,656

197,773

215,396

35,740

19. 9

THE AGED

Income security benefits for the elderly consist of (1) wage replacement for workers retired from full-time gainful employment, (2)
benefits to persons who depended on their spouses' income as their
main source of support, and (3) assistance to those who were needy
before becoming aged.
In-kind program benefits received by the aged include medical
care through medicare and medicaid, as well as food and shelter on
an income-tested basis.
The Social Security Amendments of 1977 will result in increased
benefits to certain groups of the aged by raising the amount of income
beneficiaries aged 65 through 72 may earn without reducing their
social security benefits. Beginning in 1982, those 70 or older will no
longer be subject to any such earnings limitation. Also, the delayed
retirement credit has been increased from 1% to 3 % and made
available to those 62 to 65.

264

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

Several provisions of the Federal personal income tax are designed
to benefit the aged. The largest benefits result from the extra personal
exemptions available to persons 65 or over and from the exclusion of
all social security benefits (not just that portion representing a return
of contributions) from their taxable income. These two tax expenditures are expected to result in a loss of receipts in 1979 of $1.4 billion
and $3.8 billion, respectively. In addition, the tax credit for the elderly
is estimated to be a tax expenditure of $0.2 billion in 1979 while the
exclusion from income tax of railroad retirement benefits is estimated
at $0.2 billion. The combined loss of tax receipts from the retired and
elderly due to these four provisions is an estimated $6.0 billion in
1979. This aggregate is greater than the sum of the individual estimates
because more elderly persons would be pushed into taxpaying levels of
income or into higher tax brackets if all of these items were deleted
from the tax code.
Other tax provisions are directed to the future security of aged
persons by encouraging private provision for retirement years. The
major benefits flow from the exclusion of employer contributions to
and earnings of qualified pension funds from the employee's current
taxable income. After allowing for deferred taxes collected from
present retirees, the net loss in receipts from this tax expenditure is
estimated to be $9.9 billion in 1979. Similar tax provisions for employees not covered by any pension plan other than Social Security or
for the self-employed will result in an estimated tax expenditure of
$1.8 billion in 1979. The tax credit on earned income up to $8 thousand
will provide a tax expenditure of $1.2 billion in 1979 for low-income
workers with dependents.
Table M - 3 . I N C O M E S E C U R I T Y B E N E F I T S F O R T H E A G E D
(in millions of dollars)

1977
actual

Covered employment:
Social security (OASI) members
Federal civilian employees
Railroad employees
Uniformed services members
Coal miners'widows
Supplemental security income
I ncome-tested veterans pension

1978
estimate

1979
estimate

Percent
increase
1977—79

56,613
4,444
5,583
1,775
257
1,734
1,761

63,147
5,039
6,156
1,941
288
1,864
1,845

70,235
5,612
6,646
2,093
323
1,526
1,882

24.1
26.3
19.0
18.0
25.8
-12.0
6.9

72,167

80,280

88,317

22.4

18,281
3,296
1,364

21,474
3,898
1,641

25,112
4,181
1,725

37.4
26.9
26.5

Subtotal, in-kind benefit outlays

22,941

27,013

31,018

35.2

Total

95,108

107,293

119,335

25.5

Subtotal, cash benefit outlays
Medicare
Medicaid
Other-in-kind

_ _.
__ _
_ _

SPECIAL ANALYSIS

F e d e r a l A i d t o the E l d e r l y
$ Billion,

265

— Benefit Payments
$ Billions

Annuitants.—In four major federally administered contributory
retirement systems, the benefit calculations are based upon past earnings, with annual cost-of-living adjustments to social security and railroad retirement benefits and twice a year adjustments to civil service
and foreign service benefits.
Under old-age and survivors insurance (OASI), 15.4 million retired workers receive pensions in 1979. Some recipients in 1979 are
primary beneficiaries under the railroad retirement system, but 41%
of these particular retirees are also beneficiaries under the social
security system. A total of 870,000 persons are primary beneficiaries of
either the civil service retirement system or of the foreign service retirement system in 1979. Approximately 44% of civil service retirees
also receive social security benefits.
The estimated total number of primary beneficiaries of all these
contributory retirement systems is 16.0 million persons in 1977 and
17.2 million in 1979.

266

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

Table M - 4 . A N N U I T I E S T O P R I M A R Y B E N E F I C I A R I E S IN C O N T R I B U T O R Y
R E T I R E M E N T S Y S T E M S : A N N U I T Y B E N E F I T S , B E N E F I C I A R I E S , AND
AVERAGE PAYMENT BY SYSTEM
Benefit outlays
(millions)

Old-age and survivors insurance
Civil Service Commission
Railroad Retirement
Board
Foreign Service retirement
Total

N u m b e r of beneficiaries
(thousands)

Average monthly
payments

1977
actual

1978
est.

1979
est.

1977
actual

1978
est.

1979
est.

44,542

49,633

55,546

14,773

15,383

15,908

241

258

277

6,362

7,228

8,055

799

834

865

664

723

776

1,981

2,099

2,187

423

419

414

363

382

403

100

1,448

1,607

1,719

52,956

59,046

65,888

1977
actual

1978
est.

1979
est.

Other aged.—This category includes income support to the aged
in which the benefits are based upon criteria other than past earnings.
Eligibility for benefits may, for example, be based on the work history
of some person related to the beneficiary, and may not necessarily be
based on any measure of need. Underlying the purpose of these programs is the presumption that persons past a certain age (usually 65)
are generally not self-supporting through their own current earnings.
Surviving aged spouses.—Surviving aged spouses account for $18.4
billion in benefit outlays in 1979, or 28% of all benefits to the aged
outside of annuities to primary beneficiaries. The increase in benefit
outlays to surviving aged spouses between 1977 and 1979 is due to
increased benefit levels under the social security and the railroad retirement systems. Some 5 million surviving aged spouses will receive
benefits from social security in 1979, while 1.6 million surviving aged
spouses will be covered in other programs. A considerable proportion
of the surviving aged spouses covered by social security also receives
benefits from other programs. Tax expenditures again augment the
value of these benefits. The exclusion from taxable income of social
security benefits for dependents and survivors is estimated to result
in a $0.8 billion revenue loss in 1979.
Aged spouses of retirees.—The entitlement of wives under OASI and
railroad retirement is independent of any contribution history of their
own, and requires only that they exceed a particular age. A recent
Supreme Court ruling requires that social security benefits be paid to
husbands on this same basis, without a dependency test. However,
beginning in 1982, social security benefits paid to a dependent will
be reduced by the amount of any public (Federal, State, or local)
pension he or she also receives. Where a spouse has dual entitlement
under social security based upon his or her earnings history as well as
that of his or her spouse, he or she receives only the larger benefit.
About 801,000 spouses (almost all of whom are wives) have dual entitlement under social security in which the spouse's benefit exceeds
the benefit based upon his or her own earnings.

SPECIAL

ANALYSIS

267

Minimum benefits.—These are statutory minimum amounts paid to
retired workers, to the dependents of such retired workers, and to
certain noninsured beneficiaries age 72 and over. More than other
social security benefits, these benefits are "weighted" in order to
provide additional income support for persons with histories of low
covered earnings. Under the Social Security Amendments of 1977,
this weighting will be moderated by freezing the minimum benefit at
about $120 a month (indexed to price increases once a beneficiary is
on the rolls). The "special" minimum benefit based on length of
service will continue to be indexed to the increase in average wages.
Aged retirees of the uniformed services.—The retirement systems for
the uniformed and military services are noncontributory, with benefits
based on time in service and the rank held at retirement rather than
the overall earnings history of the individual. Because military service
is credited for social security coverage, there is substantial overlap of
the military retirement systems beneficiaries and OASI beneficiaries.
Table M - 5 . B E N E F I T S F O R T H E A G E D E X C E P T A N N U I T I E S T O
BENEFICIARIES:

BENEFITS,

BENEFICIARIES,

AND

PRIMARY

AVERAGE

PAY-

MENT
Benefit outlays
(millions)
1977
actual

1978
estimate

1979
estimate

N u m b e r of beneficiaries
(thousands)
1977
actual

1978
estimate

1979
estimate

Civilian covered employment:
Social security
22,863 25,233 27,276 11,903 12,205 12,388
Federal civilian employees
687
772
858
212
220
227
Railroad employees... __________
1,533
1,670
1,759
552
560
559
Coal miners' widows
257
288
323
102
107
114
Medicare
18,281 21,474 25,112 18,300 19,300 20,100
Uniformed services:
Aged widows
590
631
670
237
237
237
Aged retirees
780
877
967
98
102
106
Aged veterans and
widows: income
tested
1,761
1,845
1,882
1,829
1,842
1,836
Supplemental security
income
1,734
1,864
1,526
1,791
1,756
1,687
In-kind benefits to
needy aged:
Medicaid
3,296
3,898
4,181
3,664
3,567
3,470
Food
558
591
468
1,490
1,544
2,494
Housing i
(806) (1,051) (1,257) (2,484) (2,706) (2,993)
Total

52,339

59,144

Average m o n t h l y
payments
1977
actual

1978
estimate

1979
estimate

160

172

183

270

293

315

231

249

262

209
83

224
93

237
104

207
663

222
717

236
763

75
31
28

91
32
32

100
16
35

65,022

1 Housing benefits received b y the elderly are i n c l u d e d , although i n c o m e , and n o t a g e , is the sole
eligibility criterion f o r these benefits.

268

THE

BUDGET FOR FISCAL YEAR

THE

19 79

DISABLED

Disabled.—The disabled constitute the second target group for
whom there is a presumption of permanent inability to achieve selfsupport. Eligibility for an income security benefit for a disabled
individual may be based on membership in a contributory retirement
system (OASDI or civil service), on military service, on occupation
(coal miner), or on indigency (welfare).
Members of the social security system and the railroad retirement
system and their dependents are eligible for retirement benefits based
upon their earnings history to the date of permanent disability, and
are also eligible for medicare benefits. Federal civilian employees
receive a disability benefit based on total disability for their previous
occupation and are paid a minimum benefit of 40% of the average of
their highest 3 years of earnings.
Benefits to the disabled in the uniformed services are scaled to the
degree of physical impairment rather than previous levels of earnings.
Disability retirement from the military and veterans compensation
and indemnities are provided for disabilities which are presumptively
service connected. Veteran's pensions provide benefits for a nonservice-connected but presumptively total disability to persons who
have seen wartime military service and whose financial need can be
demonstrated.
Under the Federal Mine Safety and Health Act, compensation is
paid to black lung victims in amounts related to the workers' compensation law for Federal employees (the Federal Employee Compensation
Act). Eligible persons began registering for benefits in 1970.
Beginning in 1974, 1.3 million needy disabled received assistance
under the new Federal supplemental security income program enacted
in 1972 to replace State administered programs of assistance to the
blind and disabled. By 1979 that number will grow to almost 2.1
million needy blind and disabled.
In 1979, 5.1 million persons will receive benefits from the Disability
insurance trust fund administered by the Department of Health,
Education, and Welfare. Another 371,000 individuals will receive
disability benefits through Federal civilian employee programs. There
is a substantial overlap between these latter two groups and those who
receive disability benefits because of prior military service or employment in coal mines.
It is estimated that in 1979 2.8 million adults and children will be
supported by public assistance based on disability. Nearly all of these
persons are eligible for medicaid benefits.
Disabled persons benefit from the exclusion from taxable income of
(1) social security disability insurance benefits, (2) worker's compensation benefits, and in some cases, (3) payments such as sick pay and
private disability payments. In toto, these exclusions are expected to
reduce tax receipts in 1979 by $1.4 billion. The exclusion from taxable
income of veterans service-connected disability compensation is an
additional tax expenditure of $0.8 billion for the same period.

SPECIAL ANALYSIS

269

Table M - 6 . B E N E F I T O U T L A Y S F O R T H E D I S A B L E D : B E N E F I T S ,
B E N E F I C I A R I E S , AND A V E R A G E P A Y M E N T
Benefit outlays
(millions)

Civilian covered employment:
Disability insurance
Federal civilian employees
Railroad employees
Coal miners
Medicare
_
Uniformed services:
Service-connected
disability
Other:
Incometested.
Public assistance to
the disabled:
A F D C (disabled
male head of
family)
Supplemental
security income..
In-kind benefits to
needy disabled:
Medicaid
Food
Total

N u m b e r of beneficiaries
(thousands)

1977
actual

1978
estimate

1979
estimate

11,135

12,600

14,339

1,938
218
585
2,490

2,186
233
579
3,130

5, 747

1977
actual

Average m o n t h l y
payments

1978
estimate

1979
estimate

1977
actual

1978
estimate

1979
estimate

4,693

4,927

5,174

198

213

231

2,346
240
577
3,842

340
43
331
2,000

356
43
310
2,200

371
42
291
2,400

476
422
147
104

512
452
155
119

527
476
165
133

6,181

6,514

3,204

3,221

149

160

169

583

607

615

513

516

512

100

315

335

332

650

639

2,884

3,441

3,294

1,995

2,032

2,112

120

141

130

2,522
352

2,975
370

3,171
334

3,121
1,094

3,230
1,133

3,346
1,062

67
27

77
27

79
26

28,769

32,638

35,604

Benefits for a parent with dependent children and no
spouse.—Benefit eligibility varies considerably for this last target
group for whom self-support is assumed to be not universally possible.
This group is made up almost entirely of mothers with dependent
children who have no spouse, although in some circumstances fathers
are also eligible for benefits. Eligibility is determined by either the
work history of a deceased spouse or a means test.

270

THE

BUDGET

FOR

FISCAL YEAR

19 7 9

Table M - 7 . B E N E F I T S F O R M O T H E R S W I T H D E P E N D E N T C H I L D R E N A N D
NO H U S B A N D : B E N E F I T S , B E N E F I C I A R I E S , AND A V E R A G E P A Y M E N T
Benefit outlays
(millions)
1977
actual

Benefits to widows of
covered
employees:
Social
security
(OASI) members.
Federal civilian employees
Railroad employees
Uniformed service
members
Coal miners
Public
assistance
(AFDC) mothers
with preschool
children:
Cash payments
Medicaid
Total

N u m b e r of beneficiaries
(thousands)
1977
actual

1978
estimate

1979
estimate

Average m o n t h l y
payments

1978
estimate

1979
estimate

1977
actual

1978
estimate

1979
estimate

3,866

4,122

4,329

1,851

1,813

1,766

174

189

204

173
36

195
36

215
36

49
11

51
10

52
10

293
273

320
300

345
300

489
39

535
42

583
36

568
24

575
24

584
21

72
136

77
146

83
143

2,555
1,711

2,714
2,021

2,690
2,341

5,265
7,532

5,177
7,405

5,180
7,411

40
19

44
23

43
26

8,869

9,666

10,230

Unemployment compensation.—The intent of income security
outlays for able-bodied persons is to tide them over periods in which
they cannot support themselves, until other measures correct the
causes of such inability to provide self-support.
The major system of unemployment insurance, constituting 90%
of unemployment benefits paid in 1979, is State-administered. It
should be noted that the States vary in eligibility requirements,
benefit levels, and duration of benefits.
Special unemployment benefit programs are provided for Federal
employees and ex-servicemen, railroad employees, and unemployed
workers in industries adversely affected by foreign trade. Although
federally financed, they are, except for railroad retirement unemployment insurance, State administered.
The exclusion from taxable income of unemployment insurance
benefits is a tax expenditure expected to decline from $1.5 billion in
1977 to $0.9 billion in 1979. These benefits would be subject to tax
for upper income taxpayers under the administration's tax reform
proposal.
A second set of programs providing income security benefits to ablebodied men and women are means-tested cash and in-kind programs.
A third set of benefits, not based on need, lack of employment, or
age, are provided to uniformed services retirees under the age of 65
because of their length of service.

SPECIAL

Table M - 8 . B E N E F I T S

ANALYSIS

FOR TRANSITIONAL

271

LOW

I N C O M E AND

B E N E F I T S , B E N E F I C I A R I E S , AND A V E R A G E
Benefit outlays
(millions)

Temporary
unemployment:
Unemployment insurance system.
Other
unemployment benefits
Long-term unemployment:
Unemployed
fathers. __
Mothers with all
children
in
school
Other
incometested
In-kind benefits, low
income:
Food__
Housing
Medicaid.
Uniformed
services
retirees under 65. __
Food for nonneedy
children. __
Other

Total

N u m b e r of beneficiaries
(thousands)

1977
actual

1978
estimate

1979
estimate

12,634

10,341

9,757

718

1,058

1977
actual

OTHER:

PAYMENT
Average monthly
payments
1979
estimate

1979
estimate

9,116

7,796

8,072

115

111

101

1,036

660

842

795

105

109

123

121

1,838

1,952

1,934

3,786

3,723

3,725

1,387

1,253

1,458

2,171

2,167

2,170

6,575
2,405
1,652

7,004
3,014
1,951

7,358
3,540
2,259

35,530
7,087
7,268

37,425
7,612
7,146

34,387
8,513
7,151

15
28
19

16
33
23

18
35
26

6,489

7,292

8,038

898

933

967

602

651

693

771
2,193

775
2,361

667
2,537

25,046
5,917

23,677
6,037

15,870
6,451

36,723

37,279

38,652

NEEDS-TESTED

19 77
actual

1978
estimate

BENEFITS

The foregoing tables have provided displays of benefits for various
target groups. Within these target groups, benefits may or may not be
based on a needs or means test. Public assistance, veterans and survivors pensions, medicaid, and food and housing programs are those
which provide benefits to individuals based on a test of need. In
addition to that test, eligibility for cash assistance may be based on
such considerations as prior military service, age, disability, or absence
of a breadwinner in a family. The following table arrays only those
rogram benefits available to each target group on a needs-tested
asis.

272

THE BUDGET FOR FISCAL YEAR

19 79

Table M - 9 . N E E D S - T E S T E D B E N E F I T S B Y T A R G E T G R O U P A N D P R O G R A M
(In millions of dollars)
1977
actual

By target group:
Benefits to the aged:
Public assistance
Veterans and survivors pension
Medicaid
Other

1978
estimate

1979
estimate

1, 734
1,761
3,296
558

1,864
1,845
3,898
591

4,181
468

7,348

8,198

8,057

3,199
583
2,522
352

3,776
607
2,975
370

3,626
615
3,171
334

6,656

7,729

7,747

2,555
1,711
240

2,714

2,021

255

2,690
2,341
265

4,507

4,991

5,296

2,566
1,652
6,575
2,405
719

2,726
1,951
7,004
3,014
758

2,702
2,259
7,358
3,540
758

Subtotal, benefits to the unemployed

13,918

15,452

16,617

Total, needs-tested benefits

32,428

36,369

37,717

10,244
3,114
9,181
7,485
2,405

11,275
3,269
10,846
7,965
3,037

10,718
3,457
11,952
8,161
3,542

32,428

36,392

37,829

Subtotal, benefits to the aged
Benefits to the disabled:
Public assistance
Veterans and survivors pension
Medicaid
Other
Subtotal, benefits to the disabled
Benefits to mothers:
Public assistance
Medicaid
Other
Subtotal, benefits to mothers
Benefits to unemployed and other low income:
Public assistance
Medicaid
Food
Housing
Other

By program:
Public assistance
Veterans and survivors pension
Medicaid
Food
Housing
Total, needs-tested benefits

1,526

1,882

SPECIAL ANALYSIS

273

Table M - 1 0 . F E D E R A L O U T L A Y S F O R I N C O M E S E C U R I T Y B E N E F I T S ,
DEPARTMENT AND P R O G R A M

Department,

agency, and

program

Department of Health, Education, and Welfare:
Social security:
Old-age and survivors insurance
Disability insurance
Hospital insurance.
Supplementary medical insurance
Supplemental security income
Public assistance:
Maintenance payments
Medicaid
_
Special benefits for disabled coal miners
Assistance to refugees
Elderly feeding 1
Public health service officers retirement
Medical care for retired commissioned officers
Proposed legislation included above
Total, Department of Health, Education, and Welfare..
Veterans Administration:
Disability dependency, indemnity compensation
Veterans and survivors pensions
Life insurance (net subsidy)
Other veterans benefits
Proposed legislation included above
Total, Veterans Administration
Department of Labor:
Unemployment insurance (State programs)
Supplementary unemployment insurance
Railroad unemployment
Unemployment compensation for Federal employees and
ex-servicemen
Trade adjustment activities
Employee compensation
Special benefits to disabled coal miners
Total, Labor
Department of Defense—Military:
Military retirement.
Medical care for retirees
Proposed legislation included above
Total, Defense
Department of Agriculture:
Food stamps
Child nutrition
Special milk
Other food programs
Proposed legislation included above
Total Agriculture
See footnote at end of table.

260-700 O - 78 - 18

(in millions of dollars)
Benefit
1977
actual

outlays

1978
estimate

1979
estimate

71,271
11,135
14,906
5,865
4,618

78,988
12,600
17,529
7,075
5,305

87,151
14,339
20,543
8,411
4,820

5,442
9,181
944
134

5,779
10,846
968
137

28
6

31
7
(—45)

5,728
11,952
988
111
37
35
9
(—850)

123,530

139,265

154,124

5, 722
3, 113
535
192

6,122
3,269
545
218
(1)

9,562

10,154

10,582

12,339
295
180

9,991
350
208

9,657
100
186

424
114
277
20

660
190
295
24

660
190
231
29

13,649

11,718

11,053

6,459
3, 346
561
216
(396)

8,216
715

9, 211
787

10,129
866
(7)

8,932

9,998

10,995

5,028
3,013
163
73

5,289
3,236
155
84

5,391
3,343
45
41
( — 188)

8,278

8,763

8,820

274

THE BUDGET FOR FISCAL YEAR

19 79

Table M-1Q. F E D E R A L O U T L A Y S F O R I N C O M E S E C U R I T Y B E N E F I T S ,

D E P A R T M E N T A N D P R O G R A M (In millions of d o l l a r s ) — C o n t i n u e d

D e p a r t m e n t , a g e n c y , and

Benefit outlays

program

1977
actual

1978
estimate

1979
estimate

Civil Service Commission: Civil service retirement. ___

9,257

10,506

11,709

Railroad Retirement Board: Railroad retirement...

3,768

4,038

4,222

Department of Housing and Urban Development:
Public housing.. _
_
_ -__-_
Rent and mortgage interest supplements
Proposed legislation included above

1,271
1,134

1,805
1,209
(23)

2,246
1,294
(2)

2,405

3,014

3,540

140

158

174

Department of State: Foreign Service retirement

100

116

Department of the Interior: General assistance to Indians

179,656

197,771

215,397

_ __ _

Total Housing and Urban Development

Department of Transportation: Coast Guard retirement

Department of Commerce: NOAA officers retirement.
Total Federal outlays
i F u n d e d t h r o u g h U S D A until 1979.

SPECIAL
CIVIL
COVERAGE

ANALYSIS

RIGHTS

AND SCOPE

ACTIVITIES
OF T H E

ANALYSIS

This analysis of Federal civil rights activities comprises more than
the traditional programs and policies related to civil rights enforcement. In addition to Federal activities regarding the protection of
such rights as voting, public accommodations, fair housing, and equal
employment opportunity in the public and private sectors, there are
included Federal programs concerning civil rights research, information dissemination, and the conciliation and prevention of racial
disputes. Outlays for these civil rights activities will increase by 37%—
from $427 million in 1977 to $587 million in 1979.1
N-I

O u t l a y s (or Civil Rights Enforcement

$ Millions

587

600-

-600

514
-500

500427
400-

400

375
346

300 H

. 291

300

200-

200

100-

100

1974
Fiscal Year*

1975

1976

1977

1978

J979
Estimate

1 Civil rights activities of the Postal Service, which by law is off-budget, are shown in the
as memorandum entries.

275

table

276

THE

BUDGET

FOR

FISCAL

YEAR

19 7 9

Programs relating to problems of the economically and socially
disadvantaged, whether in employment and training, community
development, or bilingual education, are not discussed in this analysis,
even though they may benefit a substantial number of minorities.
These programs are considered in other analyses in this document.
Federal service equal employment opportunities.—The head of
each Federal executive department and agency is charged by Executive Order 11478 and the Civil Rights Act of 1964, as amended by the
Equal Employment Opportunity Act of 1972 (Public Law 92-261),
with establishing and maintaining an affirmative program of equal
opportunity within its own employment practices. Enforcement responsibility for the Government-wide program is assigned to the Civil
Service Commission. Special procedures are available to Federal
employees and applicants who believe they have been discriminated
against in any aspect of Federal service. Under these procedures,
40,047 persons contacted equal employment opportunity counselors
during 1977 for advice and assistance, and of this total, 7,018 filed
formal discrimination complaints. If equal employment opportunity
counseling, impartial investigation, and a third-party hearing do not
resolve the matter to an individual's satisfaction, the complainant
may appeal to the Commission's Appeals Review Board or may file a
civil action in U.S. District Court.
Table N - 1 . C I V I L R I G H T S O U T L A Y S B Y P R O G R A M

Full text of Budget of the United States Government, Special Analyses : Fiscal Year 1979

FRASER