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BUDGET BASELINES, HISTORICAL DATA,
AND ALTERNATIVES FOR THE FUTURE

JANUARY 1993

TABLE OF CONTENTS
Page

Part One.

INTRODUCTION

1. The President's Transmittal Message ..........................................................................

2. Agenda for American Renewal.....................................................................................

3. Director's Introduction ...................................................................................................

Part Two.

RECENT PATTERNS AND NEAR-TERM PROJECTIONS

4. Baseline Projections and Alternative Assumptions...................................................

5. High Priority Investments ............................................................................................

A. Enhancing Research and Development and Expanding the Human
Frontier ................................................................................................................

B. Improving the Nation's Infrastructure...............................................................

C. Focusing on Prevention and Children ...............................................................

D. Ending the Scourge of Drugs and Crime ..........................................................

E. Reforming American Education and Investing in Human Capital ..............

F. Protecting the Environment and Providing a More Secure Energy Future

G. Expanding Choice and Opportunity in Housing and the Inner Cities .......

H. Preserving National Security and Advancing America's Interests Abroad

105

6. Regulatory Reform and Program for 1993 .................................................................

109

7. Management Reform and Required Systems Improvements..................................

119

8. Legislative Action and Pending Agenda ....................................................................

137

Part Three.

INTERMEDIATE AND LONGER-TERM PROJECTIONS

9. Intermediate and Longer-Term Deficit Projections .....................................................

151

10. Trust Fund Projections under Alternative Assumptions .........................................

163

11. Hidden Liabilities Requiring Policy Correction.........................................................

171

12. High Risk Areas for Management Improvement ......................................................

193

Part Four.

SPENDING CONTROL OPTIONS

13. Budget Process Reform...................................................................................................

235

14. Reductions in Low-Return Discretionary Programs .................................................

241

15. Options for Implementing the Mandatory Cap.........................................................

251

Part Five. HISTORICAL TABLES
Introduction ......................................................................................................................

269

Historical Tables ..............................................................................................................

278

APPENDICES
Appendix

Appendix

One. Alternative Budget Presentations......................................................................

485

A. Trust Funds and Federal Funds Presentation ..................................................

491

B. General Accounting Office Presentation ...........................................................

501

C. Physical and Other Capital Presentation...........................................................

505

D. State-Type Presentation ........................................................................................

515

E. A Balance Sheet Presentation ..............................................................................

519

F. Generational Accounts Presentation ..................................................................

531

Two. Tax Expenditures .................................................................................................

541

Appendix Three.

List of Charts and Tables ...................................................................................

563

OMB Contributors .................................................................................................

569

GENERAL NOTES

1.
2.

All years referred to are fiscal years, unless otherwise noted.
Detail in the tables, text, and charts of this volume may not add to the totals due to
rounding.

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

1993

For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
ISBN 0-16-038260-2

iii

Part One.
INTRODUCTION

1. The President's Transmittal Message

1. THE PRESIDENT'S TRANSMITTAL MESSAGE
The following is the text of the letter transmitting the
budgetary statement: Budget Baselines, Historical Data,
and Alternatives for the Future.

To the Congress of the United States:

I am pleased to present the budgetary statement: Budget Baselines, Historical Data,
and Alternatives for the Future.

The Budget Enforcement Act of 1990 (BEA) changed the date by which the President
is required to transmit his Budget from the first Monday after January 3rd to the first
Monday in February. It also established January 21, 1993, as the date for the official
presentation and determination of the BEA budget deficit adjustment. Accordingly, the full
1994 Budget must be submitted by the new Administration.
In order to provide a perspective from which to evaluate choices and actions, this
document provides the following:

•

a review of current policies and the implications of their extension into the
future;

•

near-term and long-term budget projections under alternative economic and
technical assumptions;

•

assessments of hidden liabilities with associated policy reforms, and
assessments of high risk management areas with associated recommendations
for systems improvement; and

•

updated options and recommendations for spending control.

It is my hope that this will be useful to the Congress and die new Administration in
the effort to produce both a responsible budget and strong economic growth.

George Bush

The White House

January 6, 1993

2. Agenda for
American Renewal

The following is the text of the President's Agenda for American Renewal as
originally released in September 1992. It provides the essential economic policy
framework for growth—within which the budget is placed, and in support of
which budget priorities have been developed.

2. AGENDA FOR AMERICAN RENEWAL
INTRODUCTION: THE CHALLENGE
America stands at the edge of a new era,
a new century. Here is my bridge to the
other shore: An Agenda for American Re
newal-diagnosing the economic problems we
face, setting forth the principles to guide
our actions, and explaining the approach I
am pursuing.

Over past weeks I have been discussing
some of the elements of my economic agenda.
In coming weeks I will be expanding on
my ideas. This document shows how the
pieces fit together.

It is important to step back for a moment,
to take stock of where we are as a great
nation in the broader sweeA of history.
The American people have just completed
the greatest mission of all, the triumph of
democratic capitalism over imperialistic com
munism. Mission accomplished.

Throughout history, when long wars end,
people have been confronted with the problems
of converting to peace-time and establishing
a new basis for securing peace and prosperity.

In wartime, the costs of Government are
always high. Domestic needs are not fully
met. In times of conflict, a good nation tries
to look after its poor, its sick, its elderly,
its less privileged members, but not as com
pletely as it should or would like to.
Today, this year, for the first time since
December 1941, the United States is not engaged
in a war, hot or cold.
We are a nation at peace.
peace with others and being
ourselves are different things.
have achieved. The other, we

But being at
at peace with
The one we
can and will.

The American people recognize this historical
watershed. They want and deserve a peacetime

freedom from unnecessary intrusion into our
lives, a peacetime commitment to sound money,
a peacetime dedication to unfinished work
and unsolved problems close to home.

At the same time, Americans are aware
of epic changes in the world and the economy.
They sense the disquiet in many of the industri
alized democracies that have been our partners
in the long struggle. Our own economy has
been going through some profound changes.
And I understand how difficult change can
be, particularly for those who feel its effects
most directly. Americans sense we face an
era of great opportunity, but that there are
also great risks if we fail to choose wisely.

We must now demonstrate our unique ability
to transform anxiety into regeneration. Only
in America do we have the people, the re
sources, the economic strength—and especially
the principles and ideals—to pick up the
challenge.

For America to be safe and strong we must
meet the defining challenge of the '90s: to win
the economic competition—to win the peace.
The United States must be a military super
power, an export superpower, and an economic
superpower.

My approach is to look forward—to open
new markets, prepare our people to compete,
to strengthen the American family, to save
and invest—so we can win.
This future depends on economic growth,
but not for the few at the expense of the
many, not for the present at the expense
of the future.
In this country, we have always preferred
an entrepreneurial capitalism that grows from
the bottom up, not the top down, a capitalism
that begins on Main Street and extends to
Wall Street, not the other way around.
9

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Nor have we been taken in by the view
my opponent prefers, that Government should
accumulate capital—by taxing it and borrowing
it from the people, and investing it according
to some industrial policy design.
My agenda is for an inclusive America,
not an exclusive America—and certainly not
a reclusive one. We will challenge the world
with an international economic and trade strat
egy that will promote free trade arrangements
east and west, north and south, to strengthen
our global economic reach and complement
our worldwide security presence. At the same
time, we need to foster the capabilities at
home that will keep us in the lead.
Developed economies need developing minds.
To help prepare all our children for a constantly
changing workplace, I want to make radical
changes in our education system. Each child
should graduate with skills, self-discipline, and
self-confidence.

I will sharpen the competitive edge of our
businesses by encouraging entrepreneurial cap
italism and small business, deploying advances
in R&D and technology, and reforming our
legal system so it no longer puts us at
a global disadvantage.
My agenda promotes economic security for
working men and women through job training
that will ease adjustments and provide people
with new capabilities for work in the face
of competition and change. And I will enable
families to concentrate on building for the
future by giving them the means to protect
themselves against today's cost of health care,
and by making it easier to build tomorrow's
retirement security. I want our efforts to reach
out to all our citizens, leaving no one behind,
because we will need the work, aspiration,
and energy of each and every American.

Finally, since our competitive strength and
entrepreneurial spirit must flow from the private
sector, I will streamline Government to meet
changing needs.

We can empower America to reach a grand
goal: a $10 trillion economy by the first
years of the 21st Century.
When President Reagan and I assumed office
in 1981, the U.S. economy was about $3
trillion. We've almost doubled that over the

past 12 years. So I know we can nearly
double it again through sustainable real growth
over the coming decade.

With a $10 trillion economy, we could
provide the resources, private and public, to
satisfy our most ambitious social and financial
requirements. We could simultaneously renew
America and pay down our national debt.
So now let me turn to how we can meet
the challenge and reach our goal.

THE CONTEXT: FIVE CHANGES
UNDERWAY IN THE ECONOMY
The U.S. economy has been working its
way through five profound changes. They
establish the context for my agenda.
The first great change in our economy
is ironically due to our very success in ending
the Cold War. Since our superpower rival
of the last half century has dropped out
of the race, we are now able to do something
we have all hoped for since the close of
World War II—lighten the load of the defense
burden.

In the short rim, this adjustment has meant
cutbacks and lay-offs in many industries that
have depended on defense spending. We must
ease this transition. But in the medium and
long run, reductions in defense spending will
free up many new resources for our people
and economy.

Second, it seems that almost every time
you open the business pages you can find
a story about a major U.S. corporation that
is restructuring itself. Our industries are in
the process of transforming themselves from
old-style hierarchical organizations to so-called
"flattened pyramids." This new industrial orga
nization emphasizes a skills-based workplace,
"lean production," a "just in time" inventory,
and short product cycles rather than mass
production. Our companies are integrating R&D,
manufacturing, and marketing into a seamless
web of innovation. This is a revolution as
dramatic as the one when Henry Ford led
the country from craft-based production to
mass manufacturing early in this century.

We have to make these adaptations succeed
if America's industries are to keep ahead

AGENDA FOR AMERICAN RENEWAL

of their international competitors. Strong sales
and productivity increases are the prerequisites
for creating more jobs, boosting wages, and
upgrading benefits. In fact, it is partly because
of these changes that our annual growth
in manufacturing productivity over the past
10 years was over 50 percent higher than
in the Carter years. It's why American firms
lead the world in exports.

some 14,000 commercial banks and 4,600 savings
and loans. In comparison, Canada had about
160, and Japan had under 100. The vast
majority of those small U.S. banks and S&Ls
operated in a heavily controlled environment
where their costs of funds were limited by
ceilings on your passbook accounts. Other
regulations restricted competition by imposing
costs and inefficiencies on savers and borrowers.

Nevertheless, these changes also have pro
duced layoffs and relocations among both
blue and white collar workers. Middle-aged
breadwinners are wondering whether their com
pany will be next to make announcements,
and they worry about their jobs, health care,
and pension rights. Some are also troubled
by the prospect that after sacrificing to send
their kids to college—often the first generation
to attend—that these children's diplomas may
not be golden tickets to security.

In the late '70s, this out-of-date system
was buffeted by record interest and inflation
rates; it was challenged by competition from
new financial services. As in any other line
of business, the less efficient institutions could
not survive. But because our banks and S&Ls
held insured deposit accounts for most hard
working Americans, the streamlining process
had to be managed in a way that enabled
the Government to protect your savings. In
effect, the Government picked up these costs
so your savings would be safe.

Third, the 1980s wiped away the dismal
economic performance of the late '70s. We
enjoyed the longest peacetime expansion in
U.S. history, lasting seven and a half years.
We created over 21 million jobs, more than
all new jobs in the other major industrial
countries and the rest of Western Europe
combined. Yet great booms produce excesses,
and this time too many companies, too many
financial institutions, and too many households
took on too much debt.

We have been paying down that debt—
and lower interest rates have helped us do
it. Millions of people have refinanced homes
at lower rates, reducing mortgage payments
by as much as $1,200 to $1,500 a year.
When companies restructured, they paid down
debt, strengthened balance sheets, and posi
tioned themselves to enjoy greater profits when
stronger growth resumes. This process will
leave our economy leaner and more powerful.
Many firms already are. But while that debt
was being paid down, people bought fewer
goods, and companies put less money into
new investments and jobs. The process is
largely over, but it has left consumers and
companies a little cautious.
Fourth, we entered the '80s with a banking
system designed 50 years earlier—an incon
gruous relic in an era when billions of dollars
can be sent around the world in a microsecond.
The United States entered the 1980s with

This process, too, is nearing its end. A
strong economy must have a good banking
and financial system so entrepreneurs can
get capital, businesses and farms can get
loans, and families can buy homes and cars.
We will have a more competitive and efficient
financial system that will serve companies
and families better. Over the next few years,
the Government will actually gain revenues
from the sales of billions of dollars of assets
that it acquired from banks and S&Ls as
it protected savers. But this process has left
lenders cautious. Business borrowing rates and
mortgage rates are way down, but it's still
too hard for small businesses to gain access
to capital and credit. We are still taxing
capital too much.

The final economic change is perhaps the
most far-reaching of all: No nation is an
island today. We are part of a global economy.
To grow is to trade; to expand is to compete.
One manufacturing job out of every six depends
directly on our exports. One acre out of
every three is sowed for sale abroad.
This international economic interdependence
has three implications.
One, when growth slumps abroad, it drags
our economy down with it. Both Western
Europe (especially Germany) and Japan are

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

going through major readjustments—and that
has contributed to our sluggishness.

Two, it means that if America is going
to be strong and growing in the 21st Century,
we must be ready, able, and willing to compete
around the globe. We need to encourage
entrepreneurial capitalism and investment at
home, and at the same time ensure that
our labor force remains the best in the world.

Three, we need to seize opportunities to
develop new markets, particularly in areas
that have potential for significant growth in
the future. One of the other benefits of the
end of the Cold War is the extraordinary
potential to expand trade and sales to hundreds
of millions of potential customers who not
long ago were the captives of our enemies.

START WITH STRENGTHS
In developing an agenda for the future,
we should take a clear-eyed look at our
strengths as well as weaknesses. Not surpris
ingly, the other side has conveniently sniped
over our country's many strengths. Frankly,
they want you to believe America is over
the hill and past its prime. But they have
no more right to convince you the economy
is worse than it is for political advantage
than I have to understate the problems. So
let me just note several key facts.

• The Misery Index—the sum of inflation and
unemployment—is down to 10.8 percent
today, from 19.6 percent in 1980.

• Inflation has fallen to roughly 3 percent, the
lowest in a quarter of a century (except for
1986).
• Interest rates are at a 20 year low. Mortgage
rates are now in the 8 percent range, half
the rate President Reagan encountered in
his first year. Thanks to these low rates,
more people can afford to own a home
today than at any time since 1973.
• While unemployment is still far too high,
the share of the working age population
with jobs during my administration has
averaged 62.2 percent, the highest in U.S.
history.

• The United States has the highest home
ownership rate of all major industrialized

countries: 66 percent of U.S. households
own their own homes, as compared with
59 percent in Japan and 40 percent in Ger
many.

• The U.S. sends more of its students on to
higher education—68 percent—than any
other country, well above the 32 percent
rate in Germany and 30 percent in Japan.
And 52 percent of these U.S.-students are
women, as compared with 26 percent in
Japan and 38 percent in Germany.
• With exports of $622 billion, the U.S. is the
world's largest exporting nation. Exports in
creased by 40 percent during my Adminis
tration.
• We produce 25 percent of the world's total
output with 5 percent of the world's popu
lation.
• The productivity of American workers is
approximately 26 percent above those in
Germany and 30 percent above those in
Japan.
I do not mean to suggest either that every
thing is well or that we do not need to
lead and manage the changes taking place
in the world and at home more actively.
We do.
But you can't chart the stars if you think
the sky is falling. We must know our strengths
before we build on them. Over the past
12 years, we increased the U.S. economy
by about $2.8 trillion—that's like creating the
total size of the German economy twice over.
So I know our goal of a $10 trillion economy
is attainable.
We're also in a strong position internationally.
But we're going to need the national adapt
ability and capability to keep leading our
competitors. And we must have the courage
of our convictions to say "no" to the wrong
sort of changes for the future—false promises
based on false premises—changes we cannot
afford at this key moment in the world
economic competition.

GUIDING PRINCIPLES
Before outlining the specifics of my agenda,
I want to set our four guiding principles.
An effective strategy must be dynamic. As

AGENDA FOR AMERICAN RENEWAL

new problems or opportunities present them
selves, we will need to make adjustments.
Guiding principles will ensure we follow a
consistent path and help shape our policies
into the future.
First, start with the basics: We are a nation
of special individuals, not special interests.
Individuals gain primary strength, protection,
and inspiration from their families and commu
nities, not the legal system or Government
social services. People find their friends and
their enjoyment in voluntary association with
one another, not in some bureaucrat's paintby-numbers dream.
Individuals, families,
where we start.

communities.

That's

Second, we have to keep to the fundamentals
of sound economic growth: lower tax rates,
limits on Government spending, greater com
petition, less economic regulation, sound money,
and more open trade that can free tremendous
private initiative and growth.

a people and succeed as a nation. America
must have appropriate new approaches for
the changes at home—just as we've launched
new policies to lead and manage change
abroad. We must recognize the interrelationship
between domestic and foreign policy—between
economic and security policy. At the same
time, we must execute our agenda more effec
tively with a new Congress, state and local
governments, and the private sector. Our aim
must be to press our policies together, as
a package, to make America secure and strong.

Therefore, my Agenda for American Renewal
mandates action on six interconnected fronts.
Because we face complex problems, no one
solution will suffice. The whole of these ele
ments will be a solution greater than the
sum of its parts:

• Challenging the World: A Strategic Global
Economic and Trade Policy
• Preparing Our Children for the 21st Century
Economy

Experience has shown that these are the
steps we need to take to create jobs, raise
wages, spur entrepreneurs, expand capital and
investment, and build businesses.

• Sharpening Business' Competitive Edge: En
couraging Entrepreneurial Capitalism

Third, in the '90s Government can build
on these fundamentals by offering opportunity
and hope for individuals, families, and commu
nities. There is a conservative agenda for
helping people, for responding to their needs.
And we've seen that these are approaches
that work.

• Leaving No One Behind: Economic Oppor
tunity for Every American

We prefer a hand up to a handout. We
want to empower people to make their own
choices, to break away from dependency. We
want to give individuals and families economic
security by giving them the capital, the capabili
ties, and the confidence to decide for themselves.
We want everyone to have a stake in society,
to own property, so everyone will build some
thing with it for themselves and our country.
Whereas my opponent's approach may place
a premium on redistribution and "leveling,"
our programs will unleash initiative, reward
success, and encourage excellence. Our approach
is to give people the power to work, save,
and be their best
Finally, all our policies must be brought
together effectively if we are to prosper as

• Promoting Economic Security for Working
People

• "Rightsizing" Government

This is how America will create a $10
trillion economy.

CHALLENGING THE WORLD: A
STRATEGIC GLOBAL ECONOMIC
AND TRADE POLICY
During the Cold War, we built a global
security structure to contain and counter the
Soviet Union and communist aggression. We
forged military alliances across the Atlantic
and Pacific that underpinned that structure.
In the post-Cold War era, we need a strategic
global economic and trade policy that will
ensure our position as an economic and export
superpower as well.

We are
goal. We
market in
with other

well positioned to achieve this
enjoy the largest fully integrated
the world; this gives us leverage
countries that want access to our

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

market. Once the Congress enacts the North
American Free Trade Agreement (NAFTA),
our position will be further strengthened.
NAFTA will open an important market, a
Mexican economy whose growth prospects will
quickly transform its expanding industries and
consumers into excellent American customers.
Equally important, the integration of United
States, Mexican, and Canadian capabilities will
improve our global competitiveness by enabling
American firms to purchase inputs at lower
costs. This will help U.S. firms to stay in
the forefront of high wage, high value-added
production.

Our geopolitical position is also advantageous.
The United States is both a Pacific and a
European power; our political and security
ties link us with the largest and most rapidly
growing economies across both oceans. Our
trans-Pacific trade already exceeds our Atlantic
trade; that's one reason why we helped launch
an organization for Asia-Pacific Economic Co
operation that will further strengthen our eco
nomic ties with that region. Our own neigh
bors—from Central America to Chile—want
to build bridges of trade with us so they
can build better economies for their people.
"The ball of liberty," Jefferson once wrote,
"is now so well in motion that it will roll
around the globe." He was right.

Freedom has rolled through Eastern Europe,
the former Soviet Union, and Latin America—
and the ball is now in our court. Free people
and free markets develop hand in hand. People
value American values. People want to buy
what we have to selL English is the language
of freedom and business^

Our political and economic ties are com
plemented by the appeal of American culture
all around the world. This is a new "soft
power" we can employ. Today, our movies,
music, and videos are among our top-selling
exports.
Finally, as the primary founder and the
most significant proponent of the GATT global
trading system, we continue to have a strong
hand as long as we use it to truly open
markets, including our own. The key to Ameri
ca's growth, expansion, and innovation has
always been our openness to trade, investment,
ideas, and people.

Therefore, the next steps in my strategic
trade policy cure to secure Congressional agree
ment to NAFTA and to complete the global
trade negotiations—the so called Uruguay
Round negotiations in GATT. Our NAFTA
agreement will open doors for American busi
nesses, workers, and consumers. It will create
good jobs. Nevertheless, I expect a tough
fight in the Congress in early 1993 because
of those special interests who herd together
with a protectionist purpose. The global trade
negotiations, in turn, could be very close
to a breakthrough if the United States continues
to act as a strong world leader. There is
a proposed draft text that establishes the
outlines of a significant new GATT agreement.
Once we assure cuts in the subsidized agricul
tural trade along the lines of that text—
to enable our farmers to secure their competitive
advantage—I believe we will be able to complete
the Uruguay Round agreement.

An improved global trading system, is, how
ever, only a base for freer trade, for stronger
investment ties, for increased global growth.
We need to start to develop a strategic network
of free trade agreements [FTAs] across the
Atlantic and the Pacific and in our own
hemisphere. This network will stand in sharp
contrast to the backward blocs of economic
isolation. If we are to be a true export
superpower, we cannot be tied down to one
region. Instead, my intent is to use our attractive
domestic markets as the basis of a muscular
free trade policy that will strengthen America's
global economic reach and complement our
worldwide security presence.
By focusing on opening markets, I also
believe we can reduce structural barriers to
competition in North America, Western Europe,
Japan, and elsewhere. Competition will encour
age entrepreneurial capitalism—at the expense
of entrenched interests—spurring even greater
global growth.
More specifically, I will need to secure
from the Congress additional trade negotiating
authority within the first half of 1993. To
overcome the special interests and the protec
tionists, I will need a mandate from the
American people. If America is going to be
an export and economic superpower, the U.S.
President must take a strong stand on the
negotiation of trade and economic agreements.

AGENDA FOR AMERICAN RENEWAL

The Congress will read vacillation and equivo
cation as weakness, and the national interest
will lose out to the logrolling tradeoffs of
Congressional business as usual. That's one
very big issue at stake in this election.
With new negotiating authority, I will pursue
new trading and economic opportunities in
Latin America under my Enterprise for the
Americas Initiative, starting with Chile. I would
also like to work towards FTAs with Poland,
Hungary, and Czechoslovakia by the end of
my second term. And I would explore the
possibility of a connection between NAFTA
and the ASEAN FTA, or AFTA. It will not
take long for other countries to begin to
express their interest in new trade and business
ties with us. For example, leaders in Australia
and Korea have already spoken of their interest
in forging closer economic ties.

Some see new threats, others see old enemies.
I see new markets, new opportunities, new
jobs.
As we develop this economic and trading
network for the 21st Century, I will fight
hard to promote American trading interests.
For example, I am committed to a sizable
Export Enhancement Program [EEP] to ensure
that our farmers can go head-to-head with
the European Community's subsidized agricul
tural exports. We know from our experience
with military security that the key to economic
security must be based on "Peace Through
Strength"—not unilateral disarmament. That's
why I recently announced the largest quantity
of wheat ever available under our EEP pro
gram—almost 30 million metric tons to 28
customers.

I will ensure that our Exlm Bank and
the Overseas Private Investment Corporation
(OPIC) work with teams of our ambassadors
to develop trade and investment opportunities
for U.S. firms. We've already begun this with
the six ASEAN countries—and it's working.
I will particularly stress helping America's
small businesspeople to develop trading oppor
tunities. These companies look small—but they
trade big. I know. I started my own. And
I have visited small factories all across the
United States that first survived and then
prospered by taking on the foreign competition.
I know Americans can do it.

PREPARING OUR CHILDREN FOR
THE 21ST CENTURY ECONOMY
In the 21st Century our greatest national
resource will be our people. Materials, machines,
and methods will come and go, but the
American worker will remain the key to our
economic security. Since the workplace of the
21st Century will be constantly changing, we
need to prepare the American people to adapt
to and direct the process of change. Therefore,
our kids must arrive at school ready to
grow, and they need schools where they
will learn how to keep learning all thenlives.

Our New American Schools will help prepare
our children to become the contributing citizens
of tomorrow. Equally important, we want
to enhance children's sense of self-worth, their
confidence, their sense of participation in a
larger community and society. This is the
conservative philosophy of empowerment, help
ing people to help themselves.
I want to do my best to help all children
come into the world as truly "created equal."
That's why I am more than doubling funding
for a Healthy Start initiative that targets commu
nities with high infant mortality rates. We
are also increasing prenatal care, nutrition
services, and substance abuse treatment for
pregnant women. And I want everyone to
spread the word that every parent must share
the gift of good health with their children.

We need to focus especially on the preschool
years, so that children coming to school are
healthy and curious. Funding for the Women,
Infants and Children Nutrition Assistance pro
gram (WIC) has grown 258 percent between
1980 and 1992; my request for an additional
$240 million for 1993 brings the annual cost
to $2.8 billion.

I have also increased funding for the Head
Start program by 127 percent—for a total
of $2.8 billion in 1993. That includes an
additional $600 million increase for next year—
an unprecedented 27 percent annual jump—
so that a year of Head Start will be available
for every eligible four-year old whose parents
want to participate. (Under my budget, almost
800,000 children will receive a year of Head
Start before entering elementary school.)

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Child immunizations are also vital to safe
guard our kids' health. Every year since 198182, 95 percent or more of the children entering
elementary school have been immunized against
the vaccine-preventable diseases. Now we are
focusing greater attention on preschool children.
My 1993 budget calls for an 18 percent increase
in child immunization grants.

I want the United States to offer opportunity
and encourage excellence; we must be fully
capable of competing in a global economy.
Therefore, it is imperative that our educational
system prepare and point the way for our
children. As in the past, education should
be the ladder that the child of modest means
can climb to better him or her self.
Our current school system is falling short
of these needs—and the poor are hurt most.
Only 19 out of 66 public high schools in
Chicago graduate more than half their students,
and many of the graduates can barely read
or write.
Our educational establishment is caught in
a sort of time warp, a system created for
another age when the needs were not the
same, children grew up differently, and adults
rarely changed jobs.
Money alone is not the answer—the United
States already spends more per pupil than
any other country but Switzerland. And funding
for the Education Department has increased
41 percent over my term.

The answer is a radical overhaul of our
educational system. If we want to change
our country, we've got to change our schools.
That's what my America 2000 program is
all about.

Our kids can't beat world class competition
if they can't meet world-class standards. We
are moving ahead with the development of
these standards in math, science, English, his
tory, geography, arts, and civics.

Second, we need voluntary national achieve
ment tests to measure the progress of our
students. That way we can compare the per
formance of different schools in helping our
children achieve the national standards.

Third, we need to give schools the flexibility
to become educational entrepreneurs—to figure
out the best ways to motivate our children,

use technology, include parents, and involve
new types of teachers. We will create "Edu
cation Enterprise Zones." There is no particular
reason why schools have to end at 3 p.m.
so that students can sit in front of the
TV for five hours a day. We need to free
school administrators and teachers from rules,
regulations, and reports that have become
a poor substitute for student achievement;
we can do away with red tape once we
institute a new testing system that evaluates
schools not on the basis of how many forms
they complete, but of how many minds they
prepare.
Finally, we must take school choice off
the administrator's desk and put it back on
the kitchen table. Choice is critical to the
success of the whole, integrated overhaul of
our educational system. Competition, the under
lying principle for this radical reform, will
not work unless we give consumers the ability
to choose.
Wealthy families already have this choice
for their children. Many of the people that
you saw at the Democratic National Convention
have this choice for their children. Why
shouldn't you have this choice for your chil
dren?

Chicago's public school teachers—46 percent
of them—send their kids to private schools.
But my opponent and his special interest
supporters don't think you should have the
same choice unless you are privileged enough
to afford it.
One of the greatest educational innovations
in this country was the passage of the GI
Bill after World War II. No one told my
generation that a vet couldn't go to Notre
Dame or Brigham Young or Baylor or Howard
or Yeshiva.

So I want a "GI Bill for Children" to
help give lower and middle income families
the means to select any school: public, private,
or religious. I also want scholarships available
to be spent on afterschool, Saturday and
summer academic programs.

For those who argue that my approach
will weaken the public system, I would remind
them that the first GI Bill was a tremendous
boon for public universities. Or listen to Starr
Parker, a small business owner actively promot

AGENDA FOR AMERICAN RENEWAL

ing choice in the Black community, who put
it this way: "The rich have choice now.
When I was on welfare, there was no way
I could put my child in school. It's time
we stop condemning the poor to a monopoly
education system."

We've already made significant progress in
starting this radical reform agenda. Some 44
states, and over 1700 communities, have already
adopted my new national education strategy—
America 2000. Indeed, this progress offers
a good example of my commitment to pursue
my agenda whether or not Congress dawdles.
If Congress balks, I will work with governors,
state legislators, community officials, and the
private sector.
I hope the new Congress will not remain
an apple polisher for the educational establish
ment and special interests that want to resist
this revolution. A new system of education
in this country is probably the most important
ingredient over time in making America the
winning economic and export superpower in
the post-Cold War era.
This must not only be my agenda, but
yours, too. I will fight to give parents in
America the right to choose the school their
children will attend, but you need to help,
too. After you check out of work, check
into your child's homework. Talk to your
child's teacher. Join your local PTA. My ap
proach—America 2000—relies on parental, busi
ness, and community involvement in creating
new schools that break the mold.
I put the family at the center of our
society. Government must try to help families—
not replace them. When it comes to choices
for our children, parents really do know best.
We should increase the range of choices avail
able to parents, and Government assistance
should be targeted to those families most
in need.

The other side may talk about similar prob
lems, but they are approaching them with
a fundamentally different ideology. You can
see the contrast not only in education, but
in health care, or in the debate that took
place over my child care proposal, which
we fought for and managed to enact into
law. The opposition prefers uniformity to variety
and choice. Because they place a higher value

on "leveling" society, they will tend to rely
on Government bureaucracies to offer "standard
service." My approach to education, child
care, health care, and other topics is to rely
on a diverse private sector to supply the
service and to empower families to make
their own choices. I don't want to pull everyone
down to make them equal. I want to give
everyone the tools to climb as high as they
can dream.

SHARPENING BUSINESS'
COMPETITIVE EDGE:
ENCOURAGING
ENTREPRENEURIAL CAPITALISM
Our ultimate success as an economic super
power is dependent on encouraging the entre
preneurial spirit of our private businesses.
I call it entrepreneurial capitalism, and I saw
it work when I started a small business
in Texas. I also call it common sense.
You allow people to keep most of what
they produce, and they will produce more
than they can use, the rest being capital.
You invite people to risk failure by allowing
them to keep the rewards of success, and
they will keep trying until they succeed.

When capital is taxed lightly, it becomes
abundant. When it is taxed heavily, as it
is now, it becomes scarce, available only to
those at the top, who need it least of all.
That's not what I want. Even Jesse Jackson
put it this way: "Subtract capital from capitalism
and all that's left is the "ism"." If capital
were abundant, labor would become scarcer.
And the unemployment lines would shrink.
That's what I want.
So I want to cut the capital gains tax
and index it for inflation. I want to create
enterprise zones in inner city and rural areas.
I want to make the R&D tax credit permanent.
I want to provide an additional first-year
depreciation allowance for purchases of prop
erty.
Those are fundamentals. In addition, there
are three other ways we need to sharpen
the competitive edge of American business:

• strengthen small business;

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

• support civilian R&D linked to a research
extension network; and

SBA in 1992—an increase of more than 50
percent above 1991.

• reform our costly legal system.

SBA's New England Lending and Recovery
Project is a pilot effort that extends credit
to viable small firms when access is limited
because banks are having difficulty. If it works
well and is needed, I'll expand the project
to other regions. We also have worked with
bank regulators to base real estate values
on income earning potential rather than liquida
tion value. We have taken steps to restructure
the small business investment program, the
only venture capital program in the Govern
ment. And we are developing ways to offer
special financing to exporting entrepreneurs.

Strengthen Small Business
Small business is the backbone of a growing
economy. Small businesses create two thirds
of our new jobs; they account for 39 percent
of our GNP.
I am seeking to aid small businesses by
reducing costly tax and regulatory burdens,
increasing access to credit, and removing bar
riers to competition.
I have taken steps designed specifically to
ease the tax burden on small businesses.
For example, the IRS has proposed regulations
to allow small businesses to deposit payroll
taxes on a monthly basis. And it has released
a ruling allowing over 16 million sole propri
etors to deduct tax preparation fees as a
business expense rather than as a limited
itemized deduction.
I want to build on these actions. For example,
we are working on a Single Wage Reporting
System that would permit businesses to report
state and federal wage information through
a single entity, thereby consolidating tax report
ing requirements and reducing the burden.
In coming weeks I will talk more about
ways we can encourage small businesspeople
and the jobs they create.
On the regulatory front, I have extended
for one year the freeze on paperwork and
unnecessary federal regulation that I imposed
last winter; the federal regulatory weight hits
small businesses particularly hard. I have also
instructed federal agencies to look for ways
to modify existing regulations that impose
a special economic burden on small business.
For example, to increase access to capital
for small businesses, the SEC has announced
proposals to reduce and in some cases eliminate
the public disclosure requirement for small
companies issuing stock.

Since small businesses are particularly vulner
able when credit is tight, we have to help
them as our financial system is restructuring.
That's why we have authorized over $6 billion
in general business loan guarantees through

Through its procurement assistance program,
SBA helped small businesses secure federal
contracts worth over $35 billion in FY 90—
almost 20 percent of all prime contracts let
during that year.

To ensure that small businesses can help
their communities overcome disasters, we will
be pressing forward with approximately $1.7
billion in low-interest loans to small businesses
in Flqrida, Louisiana, California, and elsewhere.
Finally, we need to help small business
by removing burdens to competition. My health
care reforms would reduce costs for small
businesses without costly Government mandates
or higher taxes. Enactment of my legislation
to establish uniform federal law on product
liability would relieve a major competitive
handicap that is keeping new products from
the market, boosting insurance costs sky high,
and killing jobs.

Support Civilian R&D
To be the world's economic leader tomorrow,
we clearly have to invest in R&D and new
technologies today. Given the pace of change,
we have to both come up with new inventions
and organize ourselves to deploy new tech
nology without delay.
The changes in industrial organization that
I described earlier have three major implications
for technology development. First, the more
rapid product development cycle places a pre
mium on bringing an idea quickly from the
lab to the marketplace. Second, we need to
put new technologies to work in all applications

AGENDA FOR AMERICAN RENEWAL

in order to reap the full competitive and
economic benefits from our R&D. While Ameri
cans invented VCR technology and the FAX
machine, we did not capitalize on their explo
sive popularity. Third, we need to rely increas
ingly on flexible, agile manufacturing, rather
than old style mass production. We should
have the capability to make a variety of
products quickly and economically—a process
characterized by short product cycles, but also
high quality output.

Taken together, these developments empha
size decentralization-—an approach exactly oppo
site to my opponent's "national industrial
policies" led by Government bureaucrats. We
need to get technology development, produc
tion, and marketing closer to the consumer,
not further away. Moreover, my opponent's
call for a cut in support for university-based
research will hurt the development of cutting
edge technology.
My agenda will increase funding for basic
research and complement that work with a
focus on applied research and development.
Despite cuts by Congress, we have managed
to increase funding for basic research by
26 percent since 1989—to a record level. We
are supporting applied R&D through a series
of new, high pay-off investments in critical
technologies:

• a High Performance Computing and Com
munications Initiative that will enable the
development of a thousand-fold increase in
computing capability by 1996 and one hun
dred-fold increase in communications speed.

• an initiative to improve the manufacturing
and performance of materials—improve
ments that will enable advances in a wide
range of other technologies.
• an expanded program in biotechnology re
search with applications in health, agri
culture, and environmental protection.

• the establishment of the U.S. Advanced Bat
tery consortium, a jointly-funded four-year
effort to develop an advanced battery for
an emissions-free electric car.
• a significant increase in our aeronautics re
search budget, underscoring the importance
we place on the U.S. aeronautics industry

in an increasingly competitive global market
place.
• the establishment of seven regional manu
facturing technology centers for the dis
tribution of modern manufacturing tools,
such as computer-aided design, numeri
cally-controlled machines, and robotics.

These efforts to develop and apply new
technologies need to be complemented by
the identification and removal of barriers to
the private sector's ability to bring new products
and services to the market. That's why my
regulatory reform efforts—including a process
that subjects regulations to a competitiveness
analysis while still protecting health and safety,
and a proposal to "sunset" regulations—are
critical to supporting our enhanced technology
development.
Just take one example: my opponent has
proposed a major new Federal Government
investment in the field of national telecommuni
cations networks at the exact time that our
private sector is seeking to develop such
a network on its own, but has been stopped
from doing so by federal regulations.

Reform Our Legal System
Our competitive edge will be dulled if
businesses are continually handicapped by a
legal system that serves lawyers but frightens
people. Therefore, another component of my
agenda is a reform of the American civil
justice system.
America has suffered a civil litigation explo
sion. Over the past 30 years, federal lawsuits
have almost tripled. Instead of being fast,
fair, and affordable, our civil justice system
is slow, expensive, and putting us at a global
disadvantage.

Long delays in dispute resolution waste
valuable judicial resources, force early settlement
by those who cannot afford to wait, discourage
those who have meritorious suits, and encourage
frivolous suits by those who hope to leverage
unjust settlements. High punitive damage
awards are passed on to consumers through
higher prices, job cuts, higher insurance, and
fewer new products.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

According to a sdon-to-be released study
by the National Association of Manufacturers,
Americans spend up to $200 billion a year
just on direct costs to lawyers. That does
not even count lawyers on payrolls or the
money spent on court settlements.
Our legal system is killing our international
competitiveness. Other nations do not face
high domestic litigation costs. Foreign compa
nies only need 6 percent of the product
liability insurance our firms must carry because
we do not have uniform state standards for
product liability and punitive damages.
The litigation explosion affects everyone. High
liability costs have closed playgrounds and
pools, forcing kids on to the street with
nothing to do. Some companies are afraid
to offer products at home that are available
overseas because they fear the liability.

My product liability reform legislation con
fronts the trial lawyers head on. I want
to stop wide variation among states' product
liability rules; stop important products from
being kept off the market; stop excessive
litigation costs with more money going to
lawyers than to injured consumers; cut excessive
insurance rates; and end excessive consumer
costs.
My "Access to Justice Act of 1992" is
intended to restore fairness and efficiency to
the nation's civil justice system through: alter
natives to federal civil trials such as alternative
dispute resolution; incentives for pre-litigation
settlement, including pre-complaint notification;
and a "loser pays" rule requiring the loser
to pay the winner's legal fees in suits involving
federal diversity jurisdiction.

We also need to continue our work with
the states to encourage fundamental change
at the state and local level.
Lawyers, especially trial lawyers, are a power
ful vested interest in our society. They are
well represented in Congress and high on
the lists of political contributors. My opponent
knows them very well. But this is a problem
too important to leave to the lawyers and
their friends in high places. We must sue
each other less and care for each other more.

PROMOTING ECONOMIC
SECURITY FOR WORKING PEOPLE
The American businesses of the 21st Century
will need workers who will bring them to
life and keep them ahead of our competition.
To be able to contribute and concentrate,
working men and women will want to know
that they can enjoy economic opportunity and
security. We can only achieve true security
by developing people's capability, not depend
ency. And we can best supply security through
the private sector, not Government bureauc
racies.
It will be Government's role to expedite
workers' adjustments in a fast-changing market
place, provide people the means to work
and take care of their families, and arm
people to face the future by empowering
them to make their own choices. In particular,
we can enable families to focus on building
a future by alleviating their fears about one
of the single biggest costs and problems that
can knock them back: health care. And we
can help foster retirement security through
encouraging portable pension savings.

Job Training
Given the rapidity of change in the inter
national and domestic marketplace, we have
to prepare people for the prospect of changing
jobs and learning new skills many times
throughout the course of a productive life.
Therefore, we need a range of job training
and placement services—for young people, fac
tory workers, white collar employees, and
particularly during this period, defense industry
workers.
That's why one important portion of my
recently-announced workforce adjustment initia
tive is designed to shift the Government away
from the old narrowly defined, expensive,
and less effective trade adjustment assistance
that paid people off without giving them
real help to get back the work.

Work means more than income to Americans.
It is also fundamental to people's self-esteem,
their self-confidence, and the respect of others.
These are attitudes, values, that I want to
encourage. I want all Americans to be builders—

AGENDA FOR AMERICAN RENEWAL

for their families, their communities, their coun
try. To encourage the work ethic, we need
to make every effort to match people with
the jobs created by our entrepreneurial capital
ism.
The three key features of my job training
proposal are: (1) universal coverage, so all
dislocated workers will have access to basic
transition assistance and training support; (2)
skill grant vouchers of up to $3,000 to help
meet the costs of adding new skills and
training; and (3) a tripling of the resources
currently devoted to training and worker adjust
ment, an allocation of $10 billion over five
years.

This proposal builds on my January plan
to streamline the federal job training system
through "one-stop shopping" in every commu
nity. Experience has demonstrated that the
most effective training and placement services
are those closely developed with local employers
through private industry councils. That way
the training is designed to develop skills
that employers know they will need.

My expanded job training efforts will also
be specially designed to help those who may
need to change jobs or careers as a result
of NAFTA or other trade agreements and
the downsizing of our defense-related industries.
But we will ensure that we offer training
and placement to all workers.
These dislocated workers would be eligible
to receive three types of assistance: (1) transi
tion-assistance that includes skills assessment,
counseling, job-search assistance, and job refer
ral; (2) training assistance in the form of
skill grants; and (3) transition income support
where necessary for workers completing retrain
ing.

I've also proposed a specially-targeted Youth
Skills Initiative.
A new Youth Training Corps will provide
economically and socially disadvantaged young
people with intensive vocational training
through 55 residential YTC centers nationwide;
these centers will be located primarily in
rural areas and will seek to utilize converted
defense facilities, putting them to good use.
The YTC will draw from the military's high
level of leadership and training expertise by
giving a hiring preference to individuals leaving

our armed forces. The discipline that triumphed
in Desert Strom can win at home, too.
I will also complement the YTC with a
"Treat and Train" program to strengthen exist
ing youth drug training programs.
To help meet the needs of young people
not planning to go on to college, I will
expand the National Youth Apprenticeship Pro
gram that I began in January. This program
offers high school juniors and seniors a combina
tion of classroom instruction and a structured,
paid, work-experience program. I want student
apprentices to receive both a high school
diploma and a widely recognized certificate
of skill competency. Students will also have
the opportunity to continue training at the
post-secondary level.

I started my Apprenticeship Program as
a demonstration program in 6 states; in my
second term, I will expand it to all 50.
Finally, I will more than double the size
of the present JROTC program, a very successful
and popular partnership between the military
and schools. JROTC emphasizes self-discipline,
values, citizenship, personal responsibility, and
staying in school—it's a first class alternative
to drugs and gangs. My goal is to establish
2,900 JROTC units by 1994. Initially, we will
expand this program in inner-city high schools,
but I want to make JROTC available to
every high school across the country that
requests it. This program is another way
in which we can relate the successful experience
of America's veterans to the next generation.

Affordable Health Care for All
Americans
The economic security of men and women
requires a major reform of the U.S. health
care system. The present system provides high
quality, high-tech medicine, but at an unaccept
able price: spending has increased at a rate
two to three times the rest of the economy;
thirty-four million Americans have no health
insurance; and millions more are afraid to
change jobs for fear of losing their health
insurance.

My program will build on the strengths
of the system—consumer choice, innovation,

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

and state of the art medicine—while controlling
costs and expanding access.

I want to guarantee access to health insurance
for all poor families through tax credits (or
vouchers for those who don't pay taxes) suffi
cient to pay for a basic health insurance
plan ($3,750 for a family). Other low and
middle income families would get tax relief
to partially offset the cost of their health
insurance. In total, some 95 million Americans
will benefit.
My program also includes:

• provisions that encourage small businesses
to develop less costly health care insurance
networks for their employees by combining
resources to achieve broader risk sharing,
economies of scale, and purchasing power;
• "job lock" protection for employees and
their families so that they will not lose cov
erage if and when a person changes jobs;

• guaranteed insurability so that people with
"preexisting" illnesses cannot be denied a
job or health coverage on the job;
• 100 percent tax deductibility of health care
premiums paid by self-employed, as com
pared to the present 25 percent deductibil
ity;
• malpractice reforms that will reduce the
number of unnecessary procedures per
formed on patients and thereby reduce the
cost of medical care; and
• reforms to encourage widespread use of
electronic billing to save an estimated $11
billion § year in paper costs.
Taken together, my program would cut health
care costs by $394 billion over five years
through preventive care, malpractice reform,
reducing defensive medicine, encouraging en
rollment in cost-effective health plans, arming
consumers with information about cost and
quality, and eliminating administrative waste
x
and unnecessary paperwork.

I believe we can provide access to affordable
health care for all Americans, while preserving
choice for patients and their families in selecting
doctors, hospitals, health care programs, and
employment. My approach, in contrast with
my opposition, relies on the private sector
to deliver health care services. But I would

make the market work for us by enhancing
competition, which will cut costs. My mal
practice reforms would cut costs further by
removing the fear of lawsuits that leads to
wasteful procedures.
I firmly believe that a move to national
health insurance, as some of my opponents
want, would be a major, irretrievable mistake.
That course would turn over the health care
sector—a full 13 percent of our economy—
to the Government. The result would be more
bureaucracy, rationed care, inefficiency, and,
in the end, even higher costs.
My opponent's "play or pay" approach
winds up in the same place as nationalized,
bureaucratic health insurance—but through a
different route. And it is likely to kill a
lot of jobs along the way, especially in small
businesses. Increasing the costs of labor—the
"play" in his approach—will lead businesses
to hire fewer workers. Offering the alternative
of Government-sponsored health care paid for
with new taxes on payrolls—the "pay"—will
dump the problem in the lap of a Government
bureaucracy with costs paid for by businesses
and workers.

Pension Portability
I have also been concerned about the ability
of workers to preserve their retirement pensions
as they change jobs. This is a growing need
because of the increased likelihood that most
workers will have more than one employer
over the course of their working years.
I proposed an initiative last year to increase
pension portability, expand pension coverage,
and simplify the law governing pension plans.
And I am pleased that I was able to sign
a law this summer that incorporated my
portability proposal. The new law enhances
retirement security by permitting workers to
transfer accrued pension benefits directly to
an IRA or to their new employer's pension
plan.

Despite this improvement, I believe we must
continue to look for ways to make it easier
for workers who change jobs to take pensions
with them. We need to eliminate incentives
to "cash out" benefits and increase incentives
to save for the future.

AGENDA FOR AMERICAN RENEWAL

Job training, affordable health care, retirement
security—when combined with a new system
of education and entrepreneurial, competitive
business, we can offer working men and
women real economic security in the 21st
Century.

LEAVING NO ONE BEHIND:
ECONOMIC OPPORTUNITY FOR
EVERY AMERICAN
For over 200 years, the most exceptional
aspect of American society has been the belief,
the hope, that this is a land where people
can make a better life for themselves and
their children. It's this spirit, the commitment
to the American Dream, that has made our
country and our society the most dynamic
in the world.
If we are going to use that energy to
drive us forward into the 21st Century, we
will need to tap the aspirations of each
and every one of our citizens. No one should
be left behind for want of opportunity.

Many of the programs that I have discussed
above—health care for all Americans, child
care, job training, pension portability, a new
competitive school system based on community
involvement and choice for all American fami
lies—support my plan to empower all Ameri
cans to make their own choices and better
their lives. But I believe we need to do
more for certain citizens who have fallen
too far behind.
My philosophy for enabling all Americans
to share the American Dream is simple: it's
based on property and work. Our urban
and welfare programs must be designed to
enable people to break the cycle of poverty,
get back on their feet, get back to work,
and take responsibility for their own choices
and their own lives.
I disagree with the failed logic of "welfare
rights" and its emphasis on entitlement. I
disagree with "income maintenance" strate
gies—strategies that merely maintain poverty
and contain potential.

Our goal should not be more dependence—
but rather a new Declaration of Independence—
to help people develop the human and financial
capital to share the American Dream. We

23
have taken the first step with our implementa
tion of the welfare-to-work logic of the Family
Support Act of 1988. We have been encouraging
flexible and innovative implementation through
waivers that enable states to develop new
programs to enhance parental and family re
sponsibility and to insist on education and
job training for those on welfare. Welfare
policies won't work unless people do.

In our inner cities, we need to restore
hope by clearing away the handicap of crime,
building a core of property owners, creating
business incentives, restoring infrastructure, and
focusing our programs on work and discipline.
Enterprise zones can create solid economic
foundations in distressed communities. Our
"Weed and Seed" effort can help reclaim
and revitalize impoverished and embattled com
munities by eliminating the fear of drugs
and violence, targeting coordinated human serv
ices programs, and improving the housing
stock and infrastructure.
We also need to extend opportunity by
enabling lower income families to build assets—
for example, by allowing aid recipients to
accumulate higher savings without losing their
eligibility.
And we need to expand homeowner opportu
nities for lower and middle income families.
For example, HOPE grants enable more innercity people to own their own homes. Our
$5,000 tax credit for first-time home buyers
would help; so would permitting voucher
recipients to apply their rental subsidies toward
the purchase of a home.

We can enhance the choice, quality, and
availability of housing through affordable rent
subsidies in the form of housing vouchers,
and through our "Perestroika in Public Hous
ing" program that widens opportunities for
public housing tenants to change the manage
ment of troubled projects.
This property and work-based approach need
not be more expensive than the traditional
welfare bureaucracy. For example, over the
past 12 years, federal spending for low income
assistance doubled even after inflation—from
$9.1 billion in 1980 to $18.3 billion this year
(both in 1992 dollars). This year, HUD is
providing housing assistance to 4.6 million
low-income families, up from 3.1 million in

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

1980. I have tried to rechannel some of this
funding to vouchers because they are more
cost-effective than constructing new public hous
ing units. Furthermore, families wouldn't have
to wait five years for the units to be built,
and the vouchers give families more choice.
For too long, Congress has stubbornly refused
to discard failed programs that perpetuate
welfare dependency. No doubt, many of these
programs were well intentioned. But now we
know better. Give us a chance to try a
different approach that will empower people
to help themselves, to build some capital
for their families, to make choices that develop
self-respect and discipline. That's the real way
to offer economic opportunity for every Amer
ican, to leave no one behind.

"RIGHTSIZING" GOVERNMENT
My blueprint envisages an important Govern
ment role to make a secure and strong America.
But it is also important that Government
not siphon off more private resources than
are absolutely necessary to perform the func
tions that will help us win the economic
competition. Because an overweight Govern
ment—serving itself seconds rather than serving
the people first—will weigh us down in the
race of a new era.

Much of my agenda can be accomplished
simply be redirecting current funding away
from bureaucracies and towards people. My
agenda empowers people with the means to
work, own property, build capital, raise families,
and be effective contributors within our private
market economy. Some of my ideas—legal
and health care reforms, for example—should
even help us save money.
Contrary to the assertions of some politicians
and special interest groups, spending as a
percentage of the nation's GDP has been
going up, not down. In 1991, the Federal
Government spent 23.5 percent of what our
nation produced. That compares with 17.6
percent in 1965, 19.9 percent in 1970, 22.0
percent in 1975, and 22.3 percent in 1980.
So not only has Government grown as the
economy has grown, but Government is taking
a bigger share. The American people are
not taxed too little. The American Government
spends too much.

In my acceptance speech I noted- some
of the efforts I will make to hold down
spending. I have proposed capping the growth
of mandatory spending, other than social secu
rity. That would still permit spending at
present levels plus an adjustment for inflation
and population growth. Yet this cap would
save $294 billion over five years.
To start to implement this cap, I have
proposed over $72 billion in specific spending
cuts for "mandatory" programs (FY93-97). If
you add these proposed cuts to others I
have previously called for but which Congress
has not yet enacted, my specific cuts would
total about $132 billion over five years. I
have also proposed the outright elimination
of 246 specific discretionary programs.

By way of comparison, my opponent has
specifically proposed less than $5 billion in
cuts in mandatory programs. And he has
singled out only one program for elimination—
the honeybee subsidy program, which his
running mate voted four times to retain.

Furthermore, I proposed freezing all other
spending, and I will enforce this freeze by
vetoing any bill Congress sends me that spends
more than I asked for in my budget.

I've asked Congress for the line item veto,
a disciplinary tool used effectively by the
governors of 43 states. This veto authority
is important not only to help cut, but to
increase a President's leverage with a Congress
that seeks to tax more and spend more.

Government should be subject to the dis
cipline of a balanced budget amendment. State
governments operate that way. Businesses oper
ate that way. Families operate that way. And
given the breakdown of Congressional dis
cipline, we need an amendment to ensure
that the Federal Government operates that
way, too. If we had had such an amendment
years ago, we wouldn't be paying almost
$200 billion dollars a year now on interest
for the debt left us by earlier Congresses.
I also believe taxpayers should have the
right to direct 10 percent of their tax payments
to reduce debt and spending through a "check
off" on their tax forms. If all taxpayers took
the full 10 percent, the cut would be about
$50 billion. That's only 3 percent of the
Federal budget of about $1.5 trillion. Since

AGENDA FOR AMERICAN RENEWAL

federal spending has been growing at a rate
of about 8 percent per year, even this proposed
cut would still enable spending to grow;
it would just grow more slowly.

Some editorialists dismiss my checkoff pro
posal, but the American people seem to like
it, and I think I know why. My proposal
traces its roots to an American tradition.
At the turn of this century, many people
were concerned that the Government establish
ment was slipping away from the people
it was supposed to serve. This movement
led to such venerable "gimmicks" as referenda,
the right of recall, and the direct election
of U.S. Senators. The idea of term limits
for Senators and Congressmen, which I fully
support, is another reform of this type. At
the time each was proposed, the conventional
thinkers chuckled at the changes. The same
is true today. Given the complete breakdown
in spending discipline in Congress, it's time
that we insist on compensating reforms that
give the people a bigger say in the direction
of Federal Government spending. I say it's
time to give the people the power to cut
the deficit.
The size and structure of the Government
also needs to be slimmed down and changed.
The organization of the Federal Government
reflects ways of doing business that are now
30 to 50 years old. Companies all across
America have been restructuring, cutting costs,
becoming more efficient—preparing to be more
competitive in a fast-changing marketplace.
I believe the Federal Government can and
should do the same thing. I believe a streamlin
ing of the Federal Government should include
three elements.

First, I will cut the operating budget of
the Executive Office of the President by 33
percent if Congress agrees to subject its oper
ations to a cut of the same size. With fewer
Congressional staffers badgering the Executive
Branch, I know we can cut costs by that
amount. Second, I believe all federal employees
earning above $75,000 a year should be subject
to a 5 percent pay cut; other Americans
have tightened their belts, and so should
the better-paid federal workers. Finally, I believe
we can restructure and reduce the size of
the Executive Branch through a consolidation
of agencies and bureaus that will enable us

to do our job better. Why should the Federal
Government be the only large organization
in America that continually adds size and
offices, and never gets rid of anything? There
fore, I will submit a streamlined reorganization
plan for the Executive Branch to the new
Congress—and I hope they take the hint,
too.

Let me give you an example. In many
respects, the Arms Control and Disarmament
Agency, or ACDA, is a creature of the Cold
War. It needs to adapt to the times. Its
highly trained scientists and engineers are
a valuable resource. Some of them can support
our efforts to stem and reverse the proliferation
of weapons of mass destruction. But others
may be well suited to work at weapons
destruction and defense conversion—transform
ing the genius of modem day swords into
21st Century plowshares.

Multiply this idea by a hundred, or even
a thousand, others. We can get rid of some
tasks, conduct others more efficiently, and
add new ones where appropriate to support
my agenda.
I also am committed to reducing the tax
burden on the American people. I have said
that I will propose to further reduce taxes
across-the-board, provided we pay for those
cuts with specific spending reductions that
I consider appropriate, so that we do not
increase the deficit.

To illustrate the kinds of tax cuts we could
achieve if we discipline spending: just consider
what we could do if Congress acted on
the $132 billion in specific spending reductions
that I have already proposed. These savings
alone could finance an across-the-board rate
cut of 1 percent, a reduction of the small
business tax rate from 15 percent to 10 percent,
an increase in small business expensing of
investment in equipment, and a reduction
of the capital gains tax.
In sum, my direction is clear—I want to
spend less and tax less. My opponent wants
to spend more and tax more.

I believe the Federal Government can reallo
cate its almost $1.5 trillion in spending more
effectively if we implement my agenda. The
reductions in defense spending that we have
already begun will provide some of these

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

funds, and I don't want them wasted in
a torrent of new spending programs designed
by a horde of special interests.
I honestly believe that this is the only
way to get the size and spending of Government
under control. I know that serious-minded
people believe we need to increase revenues
to close the deficit. But it won't work. I
have seen too many times that efforts to
close the deficit by increasing taxes have
only turned out to give Congress a license
to spend more money. There's a reason for
this. Spending is power for Congressmen. That's
how they show influence, and placate their
friends, the interest groups. If you give Con
gressmen more tax money, they will spend
it.

A STRATEGY FOR
IMPLEMENTATION
This year is an important turning point
for the United States. We are entering a
new era, and for the first time in many
years, it appears that Congress will have
150 new faces for the President to work
with. That's why I'm asking for a mandate
for my program. That's way I have promised
that I will meet with all new members—
all 150 or more—before they are besieged
by the special interests and permanent staffs.

I also believe we need to take another
step to ensure that the new Congress does
not become like the old one. The root of
the present problem is political contributions
from organized special interests through political
action committees, or PACS. In the run up
to the 1980 elections, PACs raised and contrib
uted $55 million to political candidates. In
the same time period before the '90 elections,
PACs spent about $160 million. The other
party doesn't want to do anything about
it, because they are the biggest recipients.
I want to put them to the test. I want
a new Congress to stay clean. So an important
part of my new legislative agenda will be
a simple bill to abolish PACs subsidized by
corporations, unions, and trade associations.
I am committed to making
work with Congress. Between
and the convening of a new
will lay out an implementation

my program
the election
Congress, I
plan for my

agenda. I intend to be ready to present
the new Congress a first-year plan to carry
out the legislative proposals described in this
agenda:

• A radical overhaul of American education
to emphasize excellence, standards, competi
tion, entrepreneurial schools, and a "G.I. Bill
for Kids" that will give parents a choice
of schools
• My job training programs
• My health care reforms

• A package to cut sending, including a cap
on the growth of mandatory spending, a
taxpayers' "checkoff" to reduce the debt, a
line-item veto, and a balanced budget
amendment
• Tax cuts paid for through spending reduc
tions and growth, including reductions to
spur entrepreneurial capitalism and small
business

• NAFTA
• New trade negotiating authority so we can
conclude new Free Trade Agreements across
the Atlantic, the Pacific, and in our own
hemisphere
• A Government reorganization plan to
streamline the structure, ensure functions fit
new needs, and cut salaries at higher levels

• Reform of our legal system
• A package to clear away crime, build busi
ness, and put people to work in our inner
cities

• An expansion of Civilian R&D linked to
new applications
• Ban on PAC contributions
• Limits on Congressional terms

Now I know I may not be able to get
everything I want in the exact way I want
it. But your support for a mandate to get
it done would give me momentum. I intend
to fight for this agenda, fight as hard as
I can to get as much as I can, and then
come back again to get more.
If Congress hesitates on some fronts, I
intend to keep moving forward. You have
seen that we can implement back-to-work

AGENDA FOR AMERICAN RENEWAL

welfare reform by granting waivers that enable
the states to do the job more effectively.
Similarly, 44 states and more than 1700 commu
nities have started to implement my educational
reforms while Congress has stalled. We can
get a great deal done at the state and local
levels.

I will work with governors, state legislatures,
local governments, and the private sector to
pursue my agenda. While I want a Congress
that can help me do the job, I'm committed
to getting the job done one way or the
other.

This is my Agenda for American Renewal.
With the end of the long Cold War, we
can target peace, prosperity, and promise at
home. The American people want that. The
American people deserve that.

At the same time, Americans recognize that
the great events of recent years have shaken
the world, and it will never be the same.
If we are to succeed as a nation and as
a people, if we are to hold true to all
that has made America "the last, best hope
of earth," then our renewal at home must
at the same time enable us to make the
21st Century another American Century.
My Agenda draws together our people and
our Government to take on this challenge.

We will create a $10 trillion economy. We
will renew America. We will win the peace.

My approach to this challenge is fundamen
tally different from my opponent's. I want
to stimulate entrepreneurial capitalism. I want
to help people by enabling them to make
their own decisions about health, education,
job training, and child care from a variety
of competing alternatives. I want to supply
services through the private sector. I believe
people should sue each other less and care
for each other more. I want Government
to spend less and tax less. I will fight without
hesitation for a free and fair flow of trade,
capital, and ideas around the world. I believe
America should compete, not retreat.

I know times have been difficult for too
many Americans. I have sought to explain
the causes of these problems and what I
will do about them. Of course you will
have change. The question is what kind of
change. You face a serious choice. And I
ask, when you step into that voting booth,
please consider carefully which candidate's
agenda for change fits best with your beliefs,
America's experience, and our hopes for lasting
peace and prosperity.

Director's Introduction

3. DIRECTOR'S INTRODUCTION
This year's Introduction is presented in a con
text of political and economic transition. The
Presidency will change hands on January 20th.
The changes ahead for the budget and the econ
omy are less precisely known. They will depend
on decisions to be made by the new Administra
tion, and events that involve an element of un
certainty.

In this context, it seems useful to try to help
frame a perspective on the future. That is what
this document is intended to do. It shows:

• recent budgetary trends;

• the future implications of current policies;
• the effects of alternative economic and tech
nical assumptions;

• the future implications of built-in financial
liabilities and management risks; and

• selected options for deficit reduction and re
form.
It is, thus, a forward-looking "baseline". With
this baseline clearly in view, future actions may
be better planned and evaluated.
The table of contents provides a guide to this
presentation of Budget Baselines, Historical Data,
and Alternatives for the Future. This brief intro
duction offers only a bit of additional perspec
tive with regard to three topics: investing in
the future; reducing the deficit (emphasizing the
importance of both increased economic growth
and reduced mandatory spending growth); and
forecasting.

• Annual Federal investment in research and
development has reached a record level of
$73 billion—less than President Bush re
quested, but still up 13 percent.
• Annual Federal investment in infrastructure
has reached a record level of $36 billion—
up 34 percent.

• Annual Federal investment in prevention
has reached a record level of $28 billionup 86 percent.
• Annual Federal investment in children has
reached a record level of $98 billion—up
67 percent.

The budgetary implications of continued em
phasis on these (and other) areas of priority in
vestment are outlined in Chapter 5.
But while it is important to continue to ex
pand investment in these areas, it is important
also to note the following additional points with
respect to "investment":

(1) Increasing spending for discretionary pro
grams such as the foregoing is, in a sense,
the easy part. It is generally popular. The
harder parts of the "investment" issue are
reflected in points (2) through (6).

In recent months, the phrase "investing in the
future" has become fashionable. In some re
spects, this is welcome.

(2) It is often not enough to increase spending
in popular program areas. To gain a satis
factory return on investment, many pro
grams or program areas require fundamental
reform. This is most clearly the case in areas
such as education and housing. For these,
increased funding alone will not solve the
basic problems. Major conceptual changes
are required in the underlying policies if
returns on investment are to improve. (The
Bush Administration's approaches to policy
reform in these areas are summarized in
Chapter 5.)

"Investing In America's Future" happens to
have been a principal theme of President Bush's
first budget submission, and of every subse
quent Budget. Indeed, several of the areas of
investment that have been the focus of recent
attention have received increased emphasis
throughout the Bush term.

(3) To fund increased investment, and to in
crease the rate of return on investment, pro
grams with low return must be cut or elimi
nated. That is why the Bush Administration
introduced the concept of program life cy
cles; and why the Administration published
specific recommendations for program and

INVESTING IN THE FUTURE

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

project reduction. (An updated selection of
recommended cuts and terminations is pro
vided in Chapter 14.)
(4) Beyond discretionary program areas (such
as those mentioned above), there is a more
basic budgetary issue involving investment.
The issue involves non-discretionary ("man
datory") programs. Excluding interest, these
are almost 50 percent of the Federal budget.
(That is double the percentage in President
Kennedy's day.) Yet mandatory programs
go overwhelmingly to support income
transfers for current consumption. A serious
budgetary concern with investment would
have to slow the growth of the consumption
portion of the Federal budget—that is, limit
the growth of mandatory spending. This is
definitely not popular. As a result, efforts
to control the growth of mandatory spend
ing have been generally less successful than
is necessary. The only significant success in
slowing the growth of mandatory spending
came with the 1990 Budget Agreement. It
reformed several existing mandatory pro
grams and established a "pay-as-you-go"
system for new ones. Still, additional reform
of the old mandatory programs continues
to require attention. (For an updated list
of options to control the growth of manda
tory spending, see Chapter 15.)

(5) There is a tendency among those interested
in public investment to wish to examine ac
counts of public assets. This is entirely rea
sonable. However, it often leads to argu
ments for additional expenditures based on
"unmet needs." At this point the issue of
comparative returns on investment (and
how these are calculated) must be joined.
If this additional analysis is undertaken re
sponsibly—it often is not—the process can
be healthy. But in the same context, it is
also important to examine and attend to fu
ture liabilities. This is especially true of hid
den liabilities, masked beneath seemingly
attractive loan programs, insurance pro
grams, and other implied-but-unfunded
future commitments. A concern for invest
ment in assets without commensurate atten
tion to the need to limit future liabilities
would be a misguided focus on only one
side of the balance sheet. Yet that, of course,
is what the political system naturally tends
toward. (For an updated analysis of "Hid

den Liabilities Requiring Policy Correction,"
see Chapter 11. For a display and discussion
of alternative budget presentations—to com
plement the present cash-budgeting system
with systems that better attend to issues of
investment—-see Appendix One.)

(6) Last but definitely not least, a constructive
interest in investment for a market-oriented
economy must attend to the importance of
private investment. This, in turn, must lead
to strengthened tax incentives for long-term
private investment (as, for example, through
a capital gains preference, an R&D tax cred
it, and an investment tax allowance). It also
requires that a reasonable limit be set on
the share of GDP that goes to total public
expenditure (the ultimate determinant of
taxation and public borrowing).
There should be little doubt that America's
long-term economic growth requires serious at
tention to the important issues of "investment."
But there should be equally little doubt about
this: If attention were confined to the easy part
(increased spending on popular programs)—
without corresponding attention to the more dif
ficult issues noted above—America's long-term
budgetary and economic problems could not be
addressed satisfactorily.

REDUCING THE DEFICIT

One of those problems is the persistently high
Federal budget deficit. It is, of course, not the
only problem. And it is arguable just how im
portant the deficit is relative to some other prob
lems. But it is clearly a problem important
enough to require continued serious attention.
It is both a cause and an effect of undesirably
slow growth. And it is increasing the burden
of debt service, while financing current con
sumption at the expense of the future.
The deficit for fiscal year 1992 (the last full
Bush Administration budget year) has turned
out to be less than was feared and forecast,
$290 billion. That is 4.9 percent of GDP—sub
stantially less than the 6.3 percent level reached
in the aftermath of the 1981-2 recession. But
it is still too high. It is part of a pattern that
has been regrettably consistent. (See Chart 3-1.)

Under current law, the old Gramm-RudmanHollings sequester system becomes enforceable
again in fiscal year 1994. If it is fully enforced,

DIRECTOR'S INTRODUCTION

Chart 3-1. DEFICITS, SPENDING & REVENUES AS A PERCENT OF GDP:
1980-1992
PERCENT

and the current Maximum Deficit Amounts are
in effect, the deficit will decline as in Chart 3-2.
If, however, the maximum deficit constraints are
relaxed and no other changes are made in cur
rent law, the baseline deficits will improve mod
estly with economic growth, but will still remain
near current levels. (See Chart 3-2.)
The President-elect has stated his intention to
cut the deficit in half by 1996. Depending upon
one's interpretation of this commitment, that
would mean a 1996 deficit target of from 130
to 160 billion dollars.

It has also been suggested that this target
might be achieved through the favorable growth
effects of a self-financing near-term stimulus
program. One might ask: what level of real GDP
growth would be necessary to bring the uncon
strained baseline down to the stated deficit tar
get? The answer should give pause. It would
require four consecutive years of real growth
averaging 4.4 to 4.8 percent per year. Not a
single one of the fifty-one Blue Chip economists
forecasts such growth. Post-World War II Amer
ica has never had four consecutive years of such

growth (although the four-year average was
achieved twice, in the early fifties and the mid
sixties). So, consistent real growth of over 4.4
percent would seem to be a rather heroic as
sumption.

Some have suggested two further policy con
straints: that taxes will not be increased for those
earning less than $200,000; and that comprehen
sive health care coverage will be provided uni
versally, financed entirely by savings from re
duced health cost growth. This last constraint
means that health cost savings would not be
available for deficit reduction. And the combina
tion of these constraints creates a circle that can
not be squared. The math does not work.

As a matter of practical fact, if middle class
taxes are not to be raised, serious deficit reduc
tion will require both of the following:

• a strong and effective program for economic
growth (See Chapter 2); and
• a cap on the growth of mandatory spend
ing—with most of the savings allocated to
deficit reduction (See Chapters 13 and 15).

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Chart 3-2. DEFICIT PROJECTIONS UNDER CURRENT LAW
ASSUMING ENFORCEMENT OF MAXIMUM DEFICIT AMOUNT (MDA)
$ BILLIONS

For those who may be tempted to think that
deficit reduction can be achieved without limit
ing mandatory spending, Chart 3-3 may be in
structive. It shows savings relative to the base
line from two different approaches: (a) freezing
total discretionary spending at current levels
plus CPI (inflation) vs. (b) limiting mandatory
growth to growth in the eligible population plus
CPI (inflation). The limit on discretionary spend
ing actually would increase the deficit (because
the current-law baseline grows at less than the
inflation rate). By sharp contrast, the limit on
mandatory spending growth would save hun
dreds of billions—-and eventually trillions—of
dollars.
It is for this reason that the President has
consistently recommended the combination of
both an agenda for economic growth and a cap
on mandatory spending growth. Unfortunately,
Congress has enacted neither of these (even as
it has talked of balancing the budget). It none
theless remains clear—as Chart 3-4 suggests—
that both are required to balance the budget
within the decade.

FORECASTING
At this writing (December 1992), the economy
shows clear signs of recovery from the negative
growth experienced in the last two quarters of
1990 and the first quarter of 1991. Growth has
not been as strong as one would have wished,
and longer-term growth issues continue to re
quire serious attention. But it is important to
be clear: the problem is slow growth, not no
growth, and not recession (in the conventional
sense).

Indeed, as 1992 comes to a close, the economy
has experienced seven straight quarters of posi
tive real GDP growth. In the last quarter for
which an official estimate is available (the third
quarter of 1992), real GDP grew at an annual
rate of 3.4 percent. Unemployment has declined
for five straight months. Recent data for payroll
employment, retail sales, industrial production,
personal income, consumer confidence, and the
purchasing managers' index are all up. Further,
die basis for continued growth in the near term
is generally viewed with confidence. The index
of leading indicators is up. The broad-based

DIRECTOR'S INTRODUCTION

Chart 3-3. SAVINGS RELATIVE TO BASELINE IF:
$ BILLIONS

(A) HOLD DISCRETIONARY TO CPI GROWTH vs.
(») HOLD MANDATORY GROWTH TO POP. + CPI GROWTH

2500

10-YEAR COSTS/SAVINGS
DISCRETIONARY

MANDATORY

2000
1500

1000

500

0
-500
-1000
-1500
NOTE: Savings are relative to OMB Baseline.

stock market indices are at record highs. And
fifty-one out of fifty-one private "Blue Chip"
economic forecasters project real GDP growth
of at least 2 percent for 1993 (with an average
growth estimate of 2.8 percent).
Only a few months ago, in the midst of the
election campaign, some politicians saw the
economy as "mired in a deep recession" or in
a "slow-motion depression." Clearly they were
wrong. But they were not the only ones wrong.

Throughout the 1980's and early '90's, eco
nomic and budgetary forecasting has been con
sistently fallible and understandably frustrating.
When forecasts are unreliable, it is difficult to
plan and make policy intelligently. So it is en
couraging to think that, with partisan conflict
having temporarily subsided, it may be possible
to gain a more clear perspective on forecasts
and forecasting.

bias within the Administration. There was some
validity to this suggestion in the '80s. (Among
other things, the old Gramm-Rudman sequester
system created an incentive in this direction.)
But it is neither an accurate nor a constructive
diagnosis for the 1990's.
Since 1989, the Administration's estimates
have been remarkably close to those of the
"non-partisan" Congressional Budget Office
(CBO):
• In 1990, 1991, and 1992, the revenue esti
mates of the Administration and CBO dif
fered by less than $7 billion per year—about
one-tenth of one percent of a multi-trillion
, dollar economy.

It is important to be clear about what are
and what are not the problems with forecasting.

• In 1990, 1991, and 1992, the outlay estimates
of the Administration and CBO (excluding
deposit insurance) differed by 0.1, 8.2, and
5.6 billion dollars respectively. Again, the
differences average about one-tenth of one
percent of a multi-trillion dollar economy.

In the past decade, it became fashionable to
suggest that one of the problems was a "rosy"

• And most significantly: in both 1991 and
1992, the Administration's forecasts for real

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Chart 3-4. DEFICIT PROJECTIONS TO 2004 WITH AND WITHOUT MANDATORY
SPENDING CAP

economic growth were more pessimistic
(not more optimistic) than those of CBO.
If one were to continue to assert that recent
forecasts were off because of an allegedly rosy
bias, one would be historically inaccurate. But
further, one's mistaken diagnosis might lead to
a perpetuation of error.

Notwithstanding the fact that the unbiased es
timates of the Administration and CBO have
been very close to each other, both have been
off the mark. The reasons are of three kinds.
One kind has to do with the state of macroeconomic forecasting generally. It is again ap
propriate to note, as previous Introductions have
noted: "Macroeconomics is a highly fallible
'science'; macroeconomists are often closer to
each other than to reality." The weakness of
the "science" is not likely to change soon.
But this criticism of macroeconomics is espe
cially apt when there are shocks to the system.
In the early '80s, such shocks included the 1981
budget and tax acts and the sharp shifts in mon
etary policy. In the early '90s, they included the

Iraqi invasion of Kuwait, the persistence of both
a credit crunch and slow money growth, and
the extended work-out of the S&L and banking
sector's restructuring. There is reason to believe
that these shocks are now largely past. And if
the future is relatively shock-free, the macroeconomic herd may be closer to correct.

However, for those who have less confidence
in a shock-free environment, the prudent thing
to do is to examine the effects of alternative
macro-economic assumptions. These are dis
cussed below and in Chapter 4.
A second reason for forecasting errors in
volves technical misjudgments about the as
sumptions or dynamics affecting particular
spending programs or revenue estimates (inde
pendent of macro-economic assumptions). The
largest of these misjudgments in recent years
has involved assumptions regarding deposit in
surance; and the second-largest has involved
revenue estimates. With both of these, the Ad
ministration and CBO have been closer to each
other than to actual results.

DIRECTOR'S INTRODUCTION

Fortunately, much (not all) of the deposit in
surance problem has been resolved. The room
for continued estimating difficulty has been re
duced—although important issues of timing re
main. To help assess and address the problems
that inhere in these and other such technical
assumptions, this document includes an explicit
display and discussion of a wide range of rel
evant technical assumptions. These are pre
sented in Chapter 4, "Baseline Projections and
Alternative Assumptions."

A third reason for forecasting error is argu
ably the most important. Administration fore
casts have frequently been misunderstood to be
unconditional predictions. In fact, they are high
ly conditional. By law, the Administration is
obliged to produce a set of projections which
assume that the President's policies will be fully
adopted, that his legislative program will be
fully and promptly enacted. With a partisan split
between the Executive and Congressional
branches, such an assumption is risky at best.
And in recent years, extremely important ele
ments of the President's agenda have not, in
fact, been enacted. This has had a significant
adverse effect on forecast accuracy. (The record
with respect to enactment and non-enactment
of legislative proposals is summarized in Chap
ter 8.)
With a single party about to control both the
Legislative and Executive branches, the forecast
ing risk associated with the assumed enactment
of a President's program should be substantially
reduced.

A WORD OF ACKNOWLEDGEMENT
This is the last Introduction to the Budget
by the current OMB Director. In the context of

transition, a word of special acknowledgement
is in order.

The Office of Management and Budget is
staffed principally by career officials. They are
dedicated, non-partisan, and thoroughly profes
sional. In the past two decades, their burden
has grown as OMB's role and responsibilities
have increased enormously. This has resulted
from a combination of the following three devel
opments. There has been a substantial increase
in OMB's statutory responsibilities—in manage
ment oversight, regulatory analysis, financial
control, Budget Act enforcement, etc. There has
been a general increase in awareness of the fact
that problem-solving in a complex society in
volves the interaction of many agencies, and the
need for OMB's coordinative role is correspond
ingly higher. And, with higher deficits, attention
to resource constraints and trade-offs has be
come inescapably relevant. Throughout this pe
riod of growing responsibility, OMB has re
mained relatively small. And an overworked
staff has preformed admirably, unfailingly, with
out complaint.

In managing transition, the burden on OMB
staff is increased the more. So it seems an espe
cially appropriate point at which to note: The
outgoing Director of OMB has the deepest ap
preciation and respect for the OMB career staff;
and the incoming Director will soon have the
same sense of appreciation and respect. Not
withstanding the common and understandable
criticism of government, Americans should be
pleased to know that a cadre of dedicated and
capable public servants remains here to serve.
Richard Darman

Director

Part Two.
RECENT PATTERNS AND
NEAR-TERM PROJECTIONS

Baseline Projections and
Alternative Assumptions

4. BASELINE PROJECTIONS AND ALTERNATIVE
ASSUMPTIONS
Baseline projections are designed to show
what receipts, outlays, deficits, and budget au
thority will be if no changes are made to laws
already enacted. The baseline is not a prediction
of the final outcome of the annual budget proc
ess, nor is it a proposed budget. Instead it is
largely a mechanical application of estimating
models to existing laws. The baseline commits
no one to any particular policy, and by itself
it does not constrain the policy choices available.
The commitments or constraints reflected in the
baseline are inherent in the tax and spending
policies contained in current law.
Baseline information can be useful for several
reasons:

• It warns of future problems, either for Gov
ernment fiscal policy as a whole or for indi
vidual tax and spending programs.
• It provides a starting point for formulating
the annual budget.
• It is a "policy-neutral" benchmark against
which the President's budget and other
budget proposals can be compared to see
the magnitude of the proposed changes.
• It is the basis, under the Budget Enforce
ment Act (BEA), for determining the
amount that would be sequestered from
each mandatory account and the level of
funding that would be available after se
questration.
Table 4-1 shows baseline estimates of receipts,
outlays, and deficits for 1992 through 1998. They
are based on the Blue Chip economic assump
tions described later in this chapter. The esti
mates are shown on a consolidated budget basis.
The off-budget receipts and outlays of the Social
Security trust funds and the Postal Service Fund
are added to the on-budget receipts and outlays
to calculate the consolidated budget totals.
Baseline estimates are influenced greatly by
assumptions about the course of the economy
and the technical operations of Federal pro
grams. For example, faster economic growth will
generate additional tax receipts and, thus, lower

deficits. The bottom of Table 4-1 displays base
line estimates of the deficit for different sets of
economic assumptions. It also displays estimates
of what se 4-4the deficits would be if the cap
on mandatory programs proposed by the Ad
ministration were implemented. The various
economic paths and the mandatory cap proposal
are discussed in detail in Chapter 9.

Conceptual Basis for Estimates
Receipts and outlays are divided into two cat
egories that are important for calculating the
baseline estimates: those controlled by authoriz
ing legislation (direct spending and receipts) and
those controlled through the annual appropria
tions process (discretionary spending). Different
estimating rules apply to each category.

Direct spending and receipts.—The rules for
calculating the baseline for direct spending and
receipts are specified in the BEA. Direct spend
ing includes the major entitlement programs,
such as social security, medicare, medicaid,
Federal employee retirement, unemployment
compensation, and food stamps and other
means-tested entitlements. It also includes such
programs as deposit insurance and farm price
supports, where the Government is legally obli
gated under certain conditions to make pay
ments. Receipts and direct spending programs
are alike in that they involve ongoing activities
that generally operate under permanent author
ity (they do not require annual authorization),
and the underlying statutes generally specify the
level of receipts or benefits that must be col
lected or paid, and who must pay or who is
eligible to receive benefits.
The baseline assumes that receipts and direct
spending programs continue in the future as
specified by current law. This is exactly what
will occur without enactment of new legislation.
Provisions of law providing spending authority
and the authority to collect taxes or other re
ceipts that expire under current law are usually
assumed to expire as currently scheduled. How
ever, the baseline assumes extension of two
types of authority that, in fact, normally are ex43

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-1.

BASELINE ESTIMATES UNDER ALTERNATIVE ASSUMPTIONS,
1992-1998
(In billions of dollars)
1992
Actual

Estimate
1993

1994

1995

1996

1997

1998

Receipts ....................................................................
Outlays:
Discretionary .......................................................
Mandatory:
Deposit insurance...........................................
Medicaid ..........................................................
Federal retirement..........................................
Means—tested entitlements .........................
Medicare ..........................................................
Social security .................................................
Unemployment compensation.....................
Undistributed offsetting receipts.................
Other.................................................................

1,091.6

1,147.6

1,230.3

1,305.6

1,378.5

1,439.7

1,523.4

534.3

548.1

537.4

539.1

2.6
67.8
74.9
75.0
116.2
285.1
37.0
-39.3
28.7

15.5
80.5
77.4
83.4
129.9
302.2
32.7
-37.2
39.6

16.2
92.9
81.5
89.8
147.8
318.7
24.7
-39.0
32.7

-7.1
107.8
83.9
95.6
166.3
336.2
24.4
-40.3
27.9

-14.9
122.7
88.6
98.5
188.5
355.1
25.5
-41.5
20.7

-11.3
138.8
94.1
106.2
211.4
374.8
26.3
-43.5
22.9

-6.9
156.4
98.2
112.4
235.8
395.6
27.4
-46.0
22.9

Subtotal, mandatory ..........................................
Net interest..........................................................

648.0
199.4

724.1
202.8

765.2
220.1

794.9
244.1

843.2
262.5

919.6
286.0

995.7
308.4

Total outlays....................................................

1,381.8

1,474.9

1,522.7

1,578.0

1,644.8

1,744.7

1,843.2

Deficit (-) excluding MDA sequester.............
MDA sequester savings (includes PAYGO
and debt service savings of $1.7 billion
in 1994 and $1.8 billion in 1995)..............

-290.2

-327.3

-292.4

-272.4

-266.4

-305.0

-319.8

22.4

42.8

Deficit (-) including MDA sequester .............

-290.2

-327.3

-269.9

-229.6

-266.4

-305.0

-319.8

Memorandum
Surplus or deficit (-) (excluding MDA seques
ter savings):
On-budget........................................................
Off-budget .......................................................

-340.3
50.1

-379.9
52.6

-354.8
62.5

-342.6
70.3

-348.5
82.1

-395.6
90.7

-422.9
103.1

Note: The following estimates exclude an MDA sequester. If existing MDAs are not adjusted, the
1994 deficit would be lower by between $23.2 billion and $50.0 billion, and the 1995 deficit
would be lower by between $21.8 billion and $71.4 billion,

Deficit assuming Blue Chip economics:
Without deposit insurance ...........................
With mandatory cap......................................
Without mandatory cap................................
Deficit assuming Mid-Growth economics:
With mandatory cap......................................
Without mandatory cap ................................
Deficit assuming High-Growth economics:
With mandatory cap......................................
Without mandatory cap................................
Deficit assuming Low-Growth economics:
With mandatory cap......................................
Without mandatory cap................................

-287.6
-290.2
-290.2

-311.9
-327.3
-327.3

-276.2
-277.7
-292.4

-279.5
-234.3
-272.4

-281.2
-196.1
-266.4

-316.3
-205.8
-305.0

-326.7
-184.2
-319.8

-290.2
-290.2

-331.8
-331.8

-282.7
-297.3

-227.5
-265.2

-175.2
-241.4

-168.4
-265.6

-132.3
-264.5

-290.2
-290.2

-328.5
-328.5

-271.8
-286.5

-202.1
-240.3

-133.5
-201.1

-106.9
-207.4

-54.8*
-193.8

-290.2
-290.2

-340.4
-340.4

-307.5
-322.0

-269.6
-307.1

-233.9
-299.5

-241.7
-337.5

-214.0
-343.8

* NOTE: With high growth and cap, surplus is achieved in 1999.

tended in some form by Congress. Expiring pro
visions affecting excise taxes dedicated to a trust
fund, such as airport and airway taxes, are as
sumed to be extended at current rates. In addi

tion, direct spending programs that will expire
under current law are assumed to be extended
if their 1993 outlays exceed $50 million. The
budgetary impact of anticipated regulations and

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

administrative actions that are permissible under
current law are also reflected in the estimates.

to assumed increases in incomes resulting from
both real economic growth and inflation.

Discretionary spending. —Discretionary pro
grams differ in one important aspect from direct
spending programs—Congress usually provides
spending authority for discretionary programs
one year at a time. The spending authority is
normally provided in the form of annual appro
priations. Absent appropriations of additional
funds in the future, discretionary programs
would cease to exist after existing balances were
spent. For this reason, any baseline for discre
tionary programs is somewhat arbitrary.

Individual income taxes are estimated to in
crease by $39.7 billion from 1993 to 1994 under
current law. This growth of 7.8 percent is pri
marily the effect of increased collections result
ing from rising personal incomes. Individual in
come taxes are projected to grow at an annual
rate of 6.1 percent between 1994 and 1998. These
estimates reflect expiration of the current law
limitations on itemized deductions and personal
exemptions on December 31, 1995 and December
31, 1996, respectively. The estimates also reflect
the expiration of the accelerated estimated tax
payment rules, which were enacted under the
Emergency Unemployment Compensation Act of
1991, and are scheduled to expire on December
31,1996.

For 1993 the baseline estimates for discre
tionary programs are equal to the enacted 1993
appropriations. For 1994 and 1995, the baseline
estimates, in total, equal the adjusted discre
tionary spending limits set by the BEA. Each
year these limits are adjusted by OMB as re
quired by the BEA. The discretionary caps as
sumed in the baseline estimates used for this
presentation are the ones published in OMB's
final sequestration report for 1993, updated for
changes in inflation, credit reestimates, and
changes in concepts and definitions. In subse
quent years, the discretionary baseline assumes
a constant level of outlays at the 1995 levels.

Baseline Receipts and Outlays
Receipts.—Table 4-2 shows baseline receipts
by major source. Total receipts are projected to
increase by $82.7 billion from 1993 to 1994 and
by $293.0 billion from 1994 to 1998, largely due

Table 4-2.

Corporation income taxes under current law
are estimated to grow by $5.8 billion or 5.5 per
cent from 1993 to 1994, in large part due to
higher corporate profits. Corporation income
taxes are projected to increase at an annual rate
of 4.6 percent from 1994 to 1998. These estimates
reflect expiration of the accelerated tax payment
rules for large corporations, which were modi
fied under the Tax Extension Act of 1991 and
the Unemployment Compensation Amendments
of 1992, and are scheduled to expire on Decem
ber 31, 1996. The environmental tax on corporate
taxable income, which is deposited in the Haz
ardous Substance Response Superfund, is as
sumed to expire on its scheduled expiration date
of December 31,1995.

BASELINE RECEIPTS BY SOURCE
(In billions of dollars)
Estimate

Actual

1993

1994

1995

1996

1997

1998

Individual income taxes..............
Corporation income taxes...........
Social insurance taxes and con
tributions ....................................
On-budget..................................
Off-budget .................................
Excise taxes....................................
Other...............................................

476.5
100.3

510.4
105.5

550.1
111.3

586.7
118.6

625.6
124.1

656.4
125.2

696.1
133.3

413.7
(111.3)
(302.4)
45.6
55.6

435.8
(116.4)
(319.4)
47.5
48.3

467.6
(125.7)
(341.9)
48.7
52.6

493.6
(132.3)
(361.3)
49.8
57.0

523.0
(138.7)
(384.3)
46.3
59.4

549.1
(143.6)
(405.5)
47.0
62.0

581.0
(150.4)
(430.6)
48.1
64.8

Total ...........................................
On-budget..............................
Off-budget .............................

1,091.6
(789.2)
(302.4)

1,147.6
(828.2)
(319.4)

1,230.3
(888.4)
(341.9)

1,305.6
(944.3)
(361.3)

1,378.5
(994.2)
(384.3)

1,439.7
(1,034.2)
(405.5)

1,523.4
(1,092.7)
(430.6)

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Social insurance taxes and contributions are
estimated to increase by $31.8 billion between
1993 and 1994, and by an additional $113.4 bil
lion between 1994 and 1998. The estimates re
flect assumed increases in total wages and sala
ries paid, scheduled increases in the social secu
rity taxable earnings base from $57,600 in 1993
to $72,600 in 1998, and increases in the medicare
taxable earnings base from $135,000 in 1993 to
$170,400 in 1998. The estimates also reflect expi
ration of the temporary unemployment surtax
of 0.2 percent imposed on employers, which ex
pires on December 31,1996.
Excise taxes are estimated to increase by $1.2
billion from 1993 to 1994, in large part due to
increased economic activity. They are estimated
to decrease by $0.6 billion from 1994 to 1998,
however, in large part due to the expiration of
the taxes on vaccines used to prevent certain
diseases that expired on December 31, 1992, the
5 cents per barrel tax on domestic and imported
crude oil during the summer of 1993, and the
2.5 cents per gallon tax on gasoline and special
motor boat fuels that is deposited in the General
Fund of the Treasury on September 30, 1995.
Excise taxes deposited in the Airport and Air
way Trust Fund, the Hazardous Substance Re
sponse Superfund, and the Leaking Under
ground Storage Tank Trust Fund, which are all
scheduled to expire on December 31, 1995, are
assumed to be extended.
Other baseline receipts (estate and gift taxes,
customs duties, and miscellaneous receipts) are
projected to increase by $16.5 billion from 1993
to 1998. The estimates of estate and gift taxes
reflect the decline in the top estate and gift tax
rate from 55 percent to 50 percent, effective for
transfers occurring after December 31,1992.
Outlays.—Baseline outlays are estimated to be
$1,474.9 billion in 1993 and $1,522.7 billion in
1994, a 3.2 percent increase. Between 1994 and

1998, they are projected to increase at an average
annual rate of 4.9 percent. These increases occur
mainly in entitlement and other mandatory pro
grams, such as social security, medicare and
medicaid, Federal employee retirement, and de
posit insurance. Most of the changes in spending
for these programs are due to changes in the
number of beneficiaries, to automatic cost-of-liv
ing adjustments and other adjustments for infla
tion, and to the assumed pattern of spending
to resolve insolvent commercial banks and sav
ings and loan associations. Net interest pay
ments to the public also increase substantially,
mainly as a result of the increased borrowing
by the Government that is estimated to occur
over this period.

Table 4-3 shows the baseline estimates of out
lays for direct spending (mandatory) and related
programs. Social security is by far the largest
program, and it is expected to increase by a
large amount over the projection period. From
1992 to 1998, social security outlays are expected
to grow by $110 billion, or 40 percent. However,
this increase is eclipsed by the growth in ex
penditures for medicare, medicaid, and other
Federal health programs. These are expected to
increase by a combined $211 billion from 1992
to 1998, a 112 percent increase. In fact, the
increase in mandatory health care spending ac
counts for 61 percent of the total change in di
rect spending over the period. Outlays for net
interest also grow substantially. Between 1992
and 1998 they are expected to grow by $109
billion, a 55 percent increase.
Deposit insurance is the only major category
that is expected to decline. Initially, these out
lays are large as the Government continues to
resolve insolvent thrifts and banks. Eventually
this spending turns negative as the number of
insolvent institutions requiring assistance de
clines and assets accumulated by earlier resolu
tions are sold.

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Table 4-3. OUTLAYS FOR DIRECT SPENDING
AND RELATED PROGRAMS
(In billions of dollars)
Estimate

Actual

Human resources programs:
Social Security...................................................................
Medicare:
Hospital insurance .......................................................
Supplementary medical insurance............................
Medicare premiums and collections.........................

1993

1994

1995

1996

1997

1998

285.1

302.2

318.7

336.2

355.1

374.8

395.6

80.8
48.6
-13.2

90.4
54.6
-15.1

102.4
62.7
-17.4

114.6
71.5
-19.8

128.3
81.4
-21.2

141.2
92.5
-22.3

154.3
104.9
-23.4

Subtotal, medicare....................................................
Health:
Medicaid ........................................................................
FEHB and other............................................................

116.2

129.9

147.8

166.3

188.5

211.4

235.8

67.8
3.8

80.5
4.7

92.9
5.0

107.8
5.2

122.7
5.2

138.8
6.1

156.4
6.7

Subtotal, health.........................................................
Income security:
General retirement and disability:
Railroad retirement.................... .............................
Other...........................................................................

71.6

85.2

97.9

113.1

127.9

144.8

163.1

4.1
0.9

4.1
0.8

4.1
0.9

4.2
0.9

Subtotal, general retirement and disability .....
Federal employee retirement and disability:
Civilian retirement and disability .........................
Military retirement...................................................
Other...........................................................................

5.0

4.9

5.0

5.1

33.9
24.5
-0.9

34.9
25.6
-0.8

36.4
26.8
-0.8

38.0
28.1
-0.7

41.9
29.5
-0.7

44.6
30.9
-0.6

46.9
32.3
-0.6

57.5
37.0

59.7
32.7

62.5
24.7

65.5
24.4

70.7
25.5

74.9
26.3

78.6
27.4

21.8
6.1
1.6

24.0
6.8
1.6

25.0
7.5
1.6

25.6
8.2
1.6

26.4
8.9
1.6

27.2
9.7
1.6

28.1
10.6
1.6

Subtotal, food and nutrition assistance............
Other:
Supplemental security income...............................
Family support payments.......................................
Earned income tax credit........................................
Other...........................................................................

29.5

32.4

34.1

35.4

36.9

38.5

40.2

17.9
15.1
7.8
0.1

21.9
15.9
8.4
0.1

25.4
16.0
9.3
0.1

26.3
16.5
12.6
0.1

26.6
17.1
13.2
0.1

31.2
17.7
13.9
0.1

33.7
18.4
14.7
0.1

Subtotal, income security....................................
Veterans benefits and services:
Compensation ...............................................................
Pensions ......................................... .................. ............
Other.................... ................................................... .......

169.9

276.0

177.1

185.6

195.1

207.5

218.1

12.6
3.7
2.2

13.1
3.5
2.3

14.5
3.6
2.4

14.1
3.3
2.5

13.6
3.0
2.5

14.9
3.2
2.7

15.4
3.6
2.8

Subtotal, veterans benefits and services ..............
Education, training, employment, and social serv
ices:
Foster care and adoption assistance .........................
Guaranteed student loans...........................................
Rehabilitation services.................................................
Social services block grant..........................................
Other...............................................................................

18.5

18.9

20.5

19.9

19.2

20.8

21.8

2.5
3.2
2.0
2.7
1.1

2.9
4.9
2.2
2.8
1.3

3.0
4.0
2.2
2.8
1.5

3.3
3.3
2.3
2.8
1.2

3.7
-1.6
2.3
2.8
1.0

4.1
1.8
2.4
2.8
1.1

4.5
1.9
2.5
2.8
1.1

Subtotal, education, training, employment, and
social services........................................................

11.5

14.2

13.6

12.8

8.3

12.2

12.8

Subtotal, human resources programs...............

672.8

726.5

775.5

834.0

894.0

971.6

1,047.2

Subtotal, Federal employee retirement and
disability ............................................................
Unemployment compensation...................................
Food and nutrition assistance:
Food stamps ..............................................................
Child nutrition ..........................................................
Other...........................................................................

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-3. OUTLAYS FOR DIRECT SPENDING
AND RELATED PROGRAMS—Continued
(In billions of dollars)
Estimate
Actual

Other mandatory programs:
Agriculture:
Farm price supports (CCC) ........................................
Other................................................................................

1993

1994

1995

1996

1997

1998

9.7
1.3

17.1
0.3

12.3
-0.1

10.7
-0.6

10.6
-1.0

10.0
-1.0

10.3
-0.8

Subtotal, agriculture ................................................
Commerce and housing credit:
Deposit insurance.........................................................
Other................................................................................

11.0

17.4

12.2

10.1

9.6

9.1

9.6

2.6
4.3

15.5
3.2

16.2
3.1

-7.1
1.1

-14.9
-1.4

-11.3
-2.7

-6.9
-3.7

Subtotal, commerce and housing credit ..............
Other functions.................................................................

6.9
-3.5

18.7
-1.3

19.3
-2.8

-5.9
-3.0

-16.2
-2.5

-14.0
-3.5

-10.6
-4.4

Subtotal, other mandatory programs .......................

14.5

34.8

28.7

1.1

-9.2

-8.5

-5.5

Undistributed offsetting receipts:
Employer share, employee retirement .....................
Rents and royalties on the Outer Continental Shelf

-36.8
-2.5

-35.1
-2.1

-36.4
-2.7

-38.0
-2.2

-39.3
-2.3

-41.2
-2.3

-43.7
-2.4

Subtotal, undistributed offsetting receipts ..........

-39.3

-37.2

-39.0

-40.3

-41.5

-43.5

-46.0

Subtotal, mandatory programs..........................
Net interest:
Interest on the public debt .............................................
Interest received by trust funds ....................................
Other interest ....................................................................

648.0

724.1

765.2

794.9

843.2

919.6

995.7

292.3
-77.8
-15.1

296.5
-82.0
-11.7

320.6
-87.7
-12.8

350.2
-94.3
-11.7

374.0
-101.4
-10.1

403.1
-108.3
-8.8

431.9
-115.9
-7.6

Subtotal, net interest....................................................

199.4

202.8

220.1

244.1

262.5

286.0

308.4

Total, outlays for direct spending and related programs...............................................................................

847.4

926.8

985.9

1,039.0

1,105.7

1,209.6

1304.1

Table 4-4 shows baseline estimates of discre
tionary budget authority and outlays through
1994. The display is intended to provide the
incoming Administration and Congress with a
starting point for consideration of the 1994 ap
propriations requests. Total discretionary budget
authority and outlays are allocated to the appro
priations subcommittee of jurisdiction in 1993,
the most recent year for which appropriations
have been provided. For 1994, only outlays re
sulting from budget authority provided in 1993
and prior years are allocated by subcommittee.
No attempt has been made to distribute the new
1994 spending permitted under the discretionary
caps. That allocation will be determined in the
1994 appropriations process.

Spending totalling $496 million in 1993 for the
Department of Education impact aid program
was classified as defense to reflect temporary
conditions related to the extraordinary disloca
tion of military dependents resulting from troop
reductions in Europe. For the purpose of the
baseline data, all of the funding for this program
has been classified as domestic. In addition, $26
million for the Department of Energy Office of
Nuclear Safety is reclassified from domestic to
defense. A careful review of the purposes for
which the funds will be spent makes it clear
that the Office of Nuclear Safety has increasingly
filled defense purposes. OMB's scoring of 1993
appropriations for Budget Enforcement Act pur
poses is not affected by these reclassifications.

Discretionary budget authority and outlays
are distributed among three categories: defense,
international, and domestic spending categories.
The baseline estimates are consistent with
OMB's categorization of 1993 appropriations for
BEA purposes for all programs except two.

Several other category changes totalling $2.3
billion were considered but not made because
the distinction between defense and nondefense
purposes was less clear. Of that amount, OMB
originally scored $0.2 billion as domestic spend
ing. The remainder were scored as defense

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Table 4-4. 1994 DISCRETIONARY "OUTLAYS PRIOR"
(Carry-Forward From Previous Years' Obligations)
(In billions of dollars)
1994

1993

Appropriations Subcommittee

Budget
authority

Outlays

"Outlays
prior 1

Agriculture, Rural Development........................................................................
Commerce, Justice, State, and the Judiciary ....................................................
Defense....................................................................................................................
District of Columbia .............................................................................................
Energy and Water Development........................................................................
Foreign Operations ...............................................................................................
Interior.....................................................................................................................
Labor, HHS, Education ........................................................................................
Legislative Branch.................................................................................................
Military Construction ...........................................................................................
Transportation .......................................................................................................
Treasury, Postal Service, and General Government.......................................
Veterans Affairs, HUD, Independent Agencies ..............................................

14.1
22.6
252.7
0.7
22.2
25.8
12.7
63.6
2.3
8.4
12.6
11.4
67.0

13.9
23.6
269.2
0.7
21.6
14.2
13.1
65.4
2.4
8.8
34.5
12.2
68.5

3.7
6.6
93.8
—
8.1
8.5
4.9
36.8
0.2
6.3
23.3
2.9
40.3

Total, discretionary ...........................................................................................

516.1

548.1

235.3

1 Includes only outlays from budget authority provided in prior years.

spending. These include funding for economic
conversion as the Department of Defense
downsizes, university medical research projects,
and the Coast Guard. They are arguably domes
tic activities.
Economic Assumptions
The economic assumptions used to develop
the detailed baseline estimates discussed in this
chapter are based on the Blue Chip consensus,
an average of about 50 private sector forecasts.
This forecast anticipates real growth of 3.0 per
cent in 1993 (fourth quarter-to-fourth quarter)
and 2.9 percent in 1994, followed by annual
growth of 2.5 percent during 1995-1998 (see
Table 4-5). Inflation, as measured by the GDP
deflator, is expected to be 2.9 percent in 1993
and 3.3 percent for 1994 and subsequent years.
The unemployment rate is projected to decline
from its current level of about 7.2 percent to
5.7 percent by 1998. Long-term interest rates are
projected to remain near their current levels,
while short-term rates are projected to increase
by about two percentage points over the next
few years.

Major Programmatic Assumptions
A number of programmatic assumptions must
be made in order to calculate the baseline esti
mates. These include assumptions about the

number of beneficiaries who will receive pay
ments from the major benefit programs and an
nual cost-of-living adjustments in the indexed
programs. Table 4-6 shows caseload projections
for the major benefit programs and other se
lected programmatic assumptions.

Many other important assumptions must be
made in order to calculate the baseline estimates.
These include assumptions about the timing and
substance of regulations that will be issued over
the projection period, which programs that ex
pire under current law are extended and which
are allowed to expire, the use of administrative
discretion provided under current law, and
other assumptions about the way programs op
erate.
Table 4-7 lists many of these assumptions and
their impact on the baseline estimates. It is not
intended to be an exhaustive listing; the variety
and complexity of Government programs are too
great to provide a complete list. Instead, some
of the more important assumptions are shown.
Options
In many cases, the baseline could incorporate
other assumptions. Many plausible alternative
assumptions and their potential impact on the
baseline are shown in table 4-8. Some are dis
cussed following the table.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-5.

ECONOMIC PROJECTIONS—BLUE CHIP CONSENSUS1
(Calendar years; dollar amounts in billions)
Projections
Actual

1992

1993

1994

1995

1996

1997

1998

5,678
4,821

5,936
4,910

6,254
5,037

6,647
5,189

7,050
5,324

7,467
5,457

7,911
5,594

8,380
5,734

117.8

120.9

124.2

128.1

132.4

136.8

141.4

146.2

3.5
0.1
3.3

4.9
2.3
2.6

6.0
3.0
2.9

6.3
2.9
3.3

6.0
2.5
3.4

5.9
2.5
3.3

6.0
2.5
3.4

5.9
2.5
3.3

2.8
-1.2
4.0

4.6
1.8
2.7

5.4
2.6
2.7

6.3
3.0
3.2

6.1
2.6
3.4

5.9
2.5
3.3

5.9
2.5
3.4

5.9
2.5
3.3

Incomes, billions of current dollars:
Personal income......................... ...................
Wages and salaries........................................
Corporate profits before tax ........................

4,828
2,812
335

5,056
2,920
367

5,369
3,101
403

5,693
3,297
449

6,012
3,497
485

6,359
3,704
516

6,730
3,924
548

7,126
4,156
582

Consumer Price Index (all urban):2
Level (1982-84 = 100), annual average .......
Percent change, Q4/ Q4 ................................
Percent change, year/year...........................

136.2
3.0
4.2

140.3
3.0
3.0

144.7
3.3
3.2

149.8
3.6
3.5

155.3
3.7
3.7

160.9
3.6
3.6

166.7
3.6
3.6

172.6
3.5
3.5

Unemployment rate, civilian, percent:3
Fourth quarter level ......................................
Annual average...................................... ;......
Federal pay raises, January, percent..................

6.9
6.7
4.1

7.6
7.5
4.2

7.0
7.2
3.7

6.1
6.4
2.2

6.0
6.1
2.5

5.8
5.9
2.9

5.8
5.8
3.2

5.7
5.7
3.2

Interest rates, percent:
91-day Treasury bills4 ..................................
10-year Treasury notes .................................

5.4
7.9

3.4
7.0

4.6
7.2

5.0
7.3

5.1
7.3

5.2
7.3

5.1
7.2

1 Based on the Blue Chip Consensus of 51 private sector forecasters; data are for the months of October and November. These
assumptions were used to prepare the detailed budget baseline estimates.
2 CPI for all urban consumers. Two versions of the CPI are now published. The index shown here is that currently used, as required
by law, in calculating automatic adjustments to individual income tax brackets.
3 Percent of civilian labor force, excluding armed forces residing in the U.S.
4 Average rate (bank discount basis) on new issues within period.

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Table 4-6.

PROGRAMMATIC ASSUMPTIONS, 1993-1998

Beneficiaries (annual average, in thousands):
Social security (OASDI):.
Old age and survivors insurance.........................
Disability insurance ................................................
Railroad retirement.....................................................
Federal civil service retirement ................................
Military retirement .....................................................
Veterans compensation..............................................
Veterans pensions .......................................................
Supplemental security income .................................
Maintenance assistance (AFDC)1 ............................
Food stamps.................................................................
Medicaid .......................................................................
Medicare:
Hospital insurance..................................................
Supplementary medical insurance.......................
Automatic benefit increases (percent):
Social security and veterans pensions (January) ....
Federal employee retirement (January) ..................
Food stamps (October)...............................................
Unemployment rate (percent, annual average):
Total (civilian and military) ..............................
Insured2................................................................

1993

1994

1995

1996

1997

1998

36,635
4,963
845
2,212
1,739
2,500
917
5,865
13,974
27,948
32,765

37,034
5,237
826
2,249
1,766
2,503
871
6,310
13,981
27,774
34,064

37,376
5,478
806
2,272
1,789
2,502
831
6,630
14,074
27,393
35,107

37,678
5,696
784
2,296
1,809
2,495
796
6,920
14,203
26,974
36,356

37,965
5,920
762
2,322
1,828
2,482
766
7,180
14,401
26,615
37,639

38,238
6,153
739
2,351
1,845
2,469
747
7,415
14,903
26,355
38,989

35,322
34,175

36,008
34,762

36,645
35,296

37,214
35,772

37,725
36,185

38,177
36,655

3.0
3.0
3.4

3.2
3.2
3.5

3.6
3.6
3.7

3.7
3.7
3.6

3.6
3.6
3.7

3.6
3.6
3.5

7.2
3.0

6.5
2.8

6.0
2.6

5.9
2.6

5.7
2.5

1 Average number of monthly cases.
2 This measures unemployment under State regular unemployment insurance as a percentage of covered employment under that
program. It does not include recipients of extended benefits under that program.

Table 4-7.

OUTLAY IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS,
AND OTHER ASSUMPTIONS IN THE BASELINE
(In millions of dollars)
1993

1994

1995

1996

1997

1998

Regulations

Medicare, HI:
Changes to the 1993 inpatient hospital payment system (e.g., re
finements to DRG, etc.)......................................................................
Require uniform payment mechanism for paying hospitals under
Part A of Medicare .............................................................................

—

-50

-7

-10

Medicare, SMI:
Implement OBRA 1990 changes to the DME fee schedule1...........
Implement OBRA 1990 limits on clinical laboratory payments.....
Set payments for EPO............................................................................
Revise Medicare economic index.........................................................

-440
-270
-17
110

-500
-330
-81
—

-560
-370
-98
-25

-620
-420
-98
—

_
—
-104
—

-30
_*

-150
_★

-180
_★

-220

-270

-320

Child Support Enforcement: Fees for use of Parent Locator Service .

-1

Federal Disability Insurance (DI)/Supplemental Security Income
(SSI):
Refine medical criteria for disability:
DI ...........................................................................................................

-20

-60

-100

-140

-190

Medicaid: Issue disproportionate share hospital regulation ..............

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-7. OUTLAY IMPACT OF REGULATIONS, EXPIRING AUTHORIZA
TIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued
(In millions of dollars)
1994

1993

1995

1997

1996

SSI ...........................................................................................................
Report SSI entrance into nursing facilities.........................................

-10
-10

-25
-10

-45
-10

Commodity programs: Public Law 102-552 Temporary assistance ...

—

Railroad Retirement: Income tax diversion ...........................................

—

1998

-85
-10

-65
-10

-85
-10

—

Medicare, HI: Case management demonstration2 ...............................

Medicare, SMI:
Demonstrations:2
Alzheimer's (OBRA 86)......................................................................
Home dialysis (OBRA 90) .................................................................
Municipal health (OBRA 89) ............................................................

13
1
42

1
1
12

—

—
—

Medicare, HI and SMI: Community nursing demonstration
(OBRA 87)2 ...........................................................................................

—

Medicaid:
Home and community care 2 ................................................................
Community supported living arrangements2...................................
Minnesota voucher demonstration (OBRA 90)2 ...............................
Uninsured low income demonstration (OBRA 90)2 ........................

130
20
81
12

160
30
89
4

180
35
97
—

—
80
—

—
—
—

1
101

Medicare ................................................................................................

116

134

1
154

—

Food stamps: Nutrition assistance for Puerto Rico ..............................

1,051

1,091

1,133

Environmental Protection Agency:
Radon Proficiency Certification: a user fee for an EPA certifi
cation program of Radon testing devices and research nec
essary for the program ......................................................................
Water Discharge Permits: a user fee for EPA-issued permits for
hazardous waste treatment, storage and disposal facilities........
Hazardous Waste Permits: a user fee for EPA-issued permits for
hazardous waste treatment, storage and disposal facilities........

Expiring Authorizations

Medicaid and Medicare:
Social HMO demonstration (OBRA 90):2
Medicaid .............................................................................................................

Federal Disability Insurance (DI)/Supplemental Security Income
(SSI):
Research and demonstration projects .................................................

Railroad Retirement: Maintain the repayment tax, authorization.....

-107

-54

—

Treasury:
U.S. Customs Service-User Fees:
Passenger Processing Fee ..................................................................
Merchandise Processing Fee .............................................................

—

226
564

243
579

261
597

-38

-255

-274

-280

-295

213

214

212

209

215

Veterans: Veterans Medical Care Cost Recovery: authority to collect
from health insurers of service-connected veterans for care of
non-service-connected conditions expires 8/94 ................................
Labor:
Federal Unemployment Benefits and Allowances: Trade Adjust
ment Assistance expires Sept. 30,1993; TAA training and bene
fits included in the baseline..............................................................

Education: Rehabilitation Services Account—Technology Related
Assistance: Program is scheduled to expire in 1993 under current
law, but is subject to a one year automatic extension through
1994 .............................................................................................................

179

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Table 4-7. OUTLAY IMPACT OF REGULATIONS, EXPIRING AUTHORIZA
TIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued
(In millions of dollars)
1995

1994

1993

1997

1996

1998

Other Important Program Assumptions
Medicare, HI:
New authorization of regional payment floor ..................................
Medicare dependent small rural hospitals.........................................
Extend MSP for disabled.......................................... ............................
Extend MSP requirements for ESRD...................................................
Ventilators demonstration (Public Law 100-360)2 ...........................
Highland Hospital demonstration2.....................................................
Heart Bypass (CABG) demonstration2...............................................
Cataract demonstration2 .......................................................................
Texas nursing facility case-mix demonstration2...............................
Montana rural health (MAF) demonstration2...................................
Monroe county LTC demonstration2..................................................

60
9
1
1
1

-80
-80
—
—
5
—
76
12
*
*
*

-100
-85
—
—
—
—
78
12
—
—
—

-110
-90
-600
-15
—
—
79
3
—
—
—

-120
-95
-780
-21
—
—
—
—
—
—
—

-130
-100
-900
-29
—
—
—
—
—
—
—

139
1
134

230
—
—

274
—
—

319
—
—

197
—
—

—
—
—

-1
-12
-9

—
—
—

-200
-3
-33
-8
-18
-5,700
-600
90

-200
—
—
-12
—
-6,000
-500
125

-200
—
-14
—
-6,400
-400
150

-200
—
—
—
—
-6,600
-415
175

-200
—
—
—
—
-6,700
-538
175

-200
—
—
—
—
-6,800
-671
200

-282
—

-310
—

-341
1,190

-375
1,355

-413
1,540

-455
1,760

927
2
—
6

1,070
4
*

1,241
4
*

1,412
4
*

1,598
1
*

—

1,800
—
—
—

60
—

120
1

138
3

160
5

182
6

—
—

100
200

142
283

150
350

200
400

—
200

—
—

5
4

6
4

6
5

7
6

9
6

10
7

18
22

25
31

33
39

18
22

—
—

AFDC:
QC recoveries ..........................................................................................
Recoveries expected to be collected ....................................................

—
-46

-69
-48

-58
-49

-43
-50

Child Support Enforcement: Audit recoveries ......................................

-5

Medicare, SMI:
Home health prospective payment demonstration (OBRA 87)2 ....
Renal disease demonstration2..............................................................
United mine workers capitation demonstration ...............................

Medicare, HI and SMI:
Recover Health Care Services Corp, administration costs..............
Review Florida MSP activities..............................................................
Review Aetna MSP compliance ............... ...........................................
Department of Justice, Provident, Qui Tam and other recoveries
for MSP ...................................... ..........................................................
Credit Medicare for its Share of intermediary excess assets ..........
Recover erroneous FEHB payments....................................................
Recoveries, uniform services treatment facilities..............................
Recover erroneous pension assets .......................................................
Payments by first payer rather than Medicare .................................
IRS/SSA/HCFA Data match for MSP (OBRA 90) ...........................
Medicare insured groups demonstration (OBRA 87)2 ....................

Medicaid:
Financial management recoveries........................................................
Personal care as a mandatory service.................................................
Arizona AHCCCS demonstration (waiver is scheduled to end in
1993)2 ....................................................................................................
Drug utilization review demonstration2............................................
Florida low birth weight infants demonstration2 ............................
Pregnant substance abusers demonstration2.....................................
Welfare reform demonstrations:2
Michigan...............................................................................................
New Jersey ...........................................................................................
Medicaid and Medicare:
Nursing facility case-mix payment demonstration:2
Medicaid ...............................................................................................
Medicare ...............................................................................................
On Lok demonstration (COBRA):2
Medicaid ...............................................................................................
Medicare ...............................................................................................
PACE demonstration (OBRA 86):2
Medicaid ...............................................................................................
Medicare ...............................................................................................

—
-70
—
—
9
*

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-7. OUTLAY IMPACT OF REGULATIONS, EXPIRING AUTHORIZA
TIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued
(In millions of dollars)
1994

1993

1995

1996

1998

1997

Foster care/adoption assistance: Disallowances...................................

-146

-116

-122

-129

-137

-144

Section 32: sunflower seed and cottonseed............................................

—

Food Stamps:
Food Stamp QC.......................................................................................
Food Stamp recovery—general ............................................................
Food Stamp recovery—tax offset.........................................................
State repayments.....................................................................................
Automobile exclusion demonstration .................................................

—
-52
-7
-30
*

-1
-52
-15
—
*

—
-52
-22
—
*

-19
-52
-27
—
—

-38
-52
-28
—
—

-48
-52
-26
—
—

-25
-5
83

-75
-15
-330

-150
-25
308

-210
-35
-297

-270
-45
6

-330
-55
648

-781
-138

-798
-152

-825
-164

-867
-176

-889
-190

-911
-204

75
85

78
93

81
101

85
108

87
117

89
126

3,605
-3,605

4,090
-4,090

3,930
-3,930

3,830
-3,830

4,330
-4,330

4,515
-4,515

110

117

Federal Old Age Survivors and Disability Insurance/Supplemental
Security Income/Medicare Hospital Insurance:
Performing continuing disability reviews: under current work
load policy:
DI/Medicare .........................................................................................
SSI ...........................................................................................................
Deferred employer deposit of OASDHI payroll taxes.....................
Collections:
OASI.......................................................................................................
DI ............................................................................................................
Debts written off:
OASI.......................................................................................................
DI ............................................................................................................
SSI benefits:
Payments for state supplemental benefits......................................
Payments from states for state supplemental benefits ................
Interest paid to General Fund from DI trust fund for advance
tax transfers......................................................................................

Health and Human Services:
Timely grant awards and recoveries...................................................
IG and other recoveries .........................................................................

—
-170

39
-170

45
-170

48
-170

43
-170

Railroad Retirement: Debt waived ..........................................................

Veterans: Home Loan Guaranty: Revision of costs related to foreclosed properties3...................................................................................

1,095

845

768

714

695

687

Bureau of Land Management
Hardrock Mining Holding Fee: $100 per claim fee (less small
miner exemption) per Public Law 102-381 for 1993 and 1994
only collected by 8/31/93.................................................................
Abandoned Mine Land (AML) Fund Transfer: Beginning in 1996,
the AML Fund will transfer up to $70 million annually to a
Combined Benefit Fund for retired coal miners...........................

Federal Employees Group Life Insurance (FEGLI): Reduced FEGLI
premiums (administrative discretion under current law)...............

Federal Employees Health Benefits Program (FEHBP): Statutory ex
piration of "phantom big 6" government premium contribution
formula.......................................................................................................

-80

-105

-140

-688

-1,007

-1,138

-1,286

-1,453

*$500,000 or less.
1 Estimate reflects effects of "savings" portion of the regulation only.
2 Estimate reflects gross benefit costs.
3 Amounts reflect total program funding which includes resale losses as well as changes in economic and technical assumptions.
NOTES:
OBRA refers to the Omnibus Budget Reconciliation Act enacted in the year indicated.
The listing of expiring authorizations does not include demonstrations that ended in 1992 (e.g., Medicare influenza and therapeutic shoes).

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Other Factors.—Many other factors are im
plicitly taken into account when developing
baseline estimates. Projections based on prior
year spending reflect resources used net of re
coveries, the effects of one-time demonstration
projects and waivers, and the testing of new
procedures. Some of these other factors that
might be implemented during the period 1993
to 1998 follow.

Medicare:

• Update payment of MRI and other equip
ment to reflect advanced technology.

• Implement monitored anesthesia care cov
erage instructions by carriers.
Medicare, HI and SMI:

• Discontinue separate RRB claims processing.
• Prioritize MSP data collections, including
spousal information.

• Set coverage criteria and payment meth
odology for partial hospitalization services
in community mental health centers.

Medicaid:

• Define criteria and procedures for medical
service coverage decisions.

• Issue payment standards.

• Refine separately billable drugs under ESRD
program.

• Focus EPSDT on medical services.

Table 4-8.

• Define "new drugs" for Medicaid.

OUTLAY IMPACT OF SIGNIFICANT OPTIONS FOR BASELINE
ASSUMPTIONS
(In millions of dollars)
1993

1994

1995

1996

1997

1998

Regulations

Medicare, HI:
Review admissions for 1 to 3 day hospital stays for specific DRGs
(OIG)..........................................................................................................
Expand DRG window to include preadmission services....................
Uniform payment levels for home health agencies (GAO) ................
Refine payment methodology for medical education..........................
Improve medical resident indentification and bed counts between
Medicare, DOD, and VA (GAO)..........................................................
Clarify accrual accounting for certain hospital post-retirement ex
penses (OIG draft) ..................................................................................

Medicare, SMI:
Expand mandatory prepayment screens (OIG) ....................................
Ensure appropriate coding of procedure services by physicians
(OIG)........................................................................................... ..............
Adjust payments for laboratory tests......................................................
Adjust ASC Update....................................................................................
Modify intraocular lens payments (CBO) ..............................................
Improve PRO review of upper GI endoscopies and colonoscopies
(OIG)..........................................................................................................
Reduce unnecessary and poor quality cataract surgeries (OIG)........
Adjust DME home blood glucose monitor payments (OIG draft)....
Update DME by -1 percent as required in OBRA 90..... ....................
Pay for medically necessary ambulance services (OIG) ......................

Medicare, HI and SMI:
Deny Medicare reimbursement for patients who receive sub
standard medical care (OIG) ................................................................
Extend the time limit on MSP recoveries (OIG) ...................................
Enhance Medicare contractor coordination (OIG)................................

-30
-25
-20
-70

-121
-110
-20
-77

-121
-120
-20
-85

-121
-130
-20
-93

-121
-140
-20
-102

-121
-150
-20
-113

-9

-10

-11

-12

-13

-2

-7

-2

-9

-2
-23
—
-80

-8
-200
-15
-125

-8
-340
-20
-132

-8
-390
-25
-132

-8
-580
-30
-132

-8
-815
-35
-132

-36
-46
-2
—
-8

-36
-46
-7
-160
-8

-36
-46
-7
-165
-8

-36
-46
-10
-170
-8

-36
-46
-10
-175
-8

-36
-46
-10
-180
-8

-18
-33
-4

-73
-132
-17

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-8.

OUTLAY IMPACT OF SIGNIFICANT OPTIONS FOR BASELINE
ASSUMPTIONS—Continued
(In millions of dollars)
1994

1993

Medicaid:
Strengthen drug rebate reporting and collection..................................
Prohibit manipulation of procedure codes by physicians to maximize reimbursements (OIG) .................................................................
AFDC: Revise welfare hotel regulations to comply with statute
(GAO).............................................................................................................

1996

1995

1998

1997

-39

-175

-200

-225

-255

-290

—*

_★

—*

-27

—

Foster care/adoption assistance:
independent living program (new authorization)................................
States to file IV-E Foster Care claims within 1 year (OIG) .................
Modify definition of allowable "replacement'' IV-E foster care administrative costs (OIG).........................................................................

—
-9

70
-14

-67

-100

Child Support Enforcement:
Obtain health insurance for children of absent parents (GAO).........
W-4 reporting of child support orders ...................................................

-33
-44

-67
-44

Federal Disability Insurance/Supplemental Security Income: Improve
disability determination accuracy and processes—DI and SSI ..........

Railroad Retirement: Retroactive payments for women with children
ages 18 and under ......................................................................................

—

Vaccine Compensation Trust Fund: Post-1988 Claims Payment Lim
ited to Injuries/Death from vaccine administered before 10/1/92 ...

—

Health Education Assistance Loans: Authorization expires in 1995 .....

—

Food and Drug Administration: Fully fund the FDA through user
fees..................................................................................................................

—

-816

-851

-886

-924

-964

Indian Health Service: Recovery of third-party reimbursements..........

-65

-70

-75

-82

-88

-95

Earned
Income
Credit:
Improved
program
coordination
(adminstrative action) ................................................................................

-30

-50

Crosscutting Agency Option: More equitable cost allocation between
ACF, HCFA and FNS for MIS systems ..................................................

-5

-3

-1

Food Stamps: Food Stamp QC.....................................................................

-301

-55

-56

-37

-18

-8

Federal Disability Insurance/Supplemental Security Income/Medicare Hospital Insurance:
Performing continuing disability reviews at scheduled diary rates:
DI/Medicare .............................................................................................
SSI ...............................................................................................................

-20
-5

-95
-15

-125
-25

-200
-35

-275
-45

-325
-65

HHS, other benefit paying agencies: State death data exchange...........

Railroad Retirement:
Remove 95 percent safe haven rule.........................................................
Improved debt collection...........................................................................
Reclassified debt...........................................................................................
Audit recoveries...........................................................................................
Financial interchange correction (RRB OIG)1 .......................................

_★

—*

-55
_*

-53
_*

-49

-38

-37
_♦

-37
-*

-1
-61

-2
-6

International Credit Subsidies: Paris Club.................................................

—

100

Farm Price Supports (CCC): Increased commodity exports...................

-300

Expiring Authorizations

Program Assumptions

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

Table 4-8.

OUTLAY IMPACT OF SIGNIFICANT OPTIONS FOR BASELINE
ASSUMPTIONS—Continued
(In millions of dollars)
1994

1995

5,700
-21,600

-8,300
23,200

1,300
400

-100
-200

400
200

-100
400

3,900
-6,000

4,300
-20,200

11,000
-3,400

10,300
900

200
900

-1,200
-1,100

2,400
-1,400

4,400
-1,800

3,000
-2,400

1,900
-1,700

1,700
-1,600

1,100
-1,100

1993

Deposit Insurance:
Timing of RTC funding:2
Early March 1993 ................................................. ........ a..........................
October 1993 ......................................................... ..................................
Volume of failed assets:
Higher volume ..................................................... ..................................
Lower volume .........................................................................................
Loss rates:
Higher loss rates ....................................................................................
Lower loss rates ......................................................................................

1996

1997

1998

*$500,000 or less
1 Includes one-time savings in 1993.
2 Baseline assumes late Spring funding.
NOTE: CBO refers to the Congressional Budget Office as the source of the option. GAO refers to the General Accounting Office as the
source of the option. OIG refers to the HHS Office of the Inspector General as the source of the option.

Deposit insurance alternatives.—Estimating
deposit insurance outlays is an imprecise art.
They are highly volatile. They depend on the
number and cost of bank and thrift failures and
on when funds are made available to the Reso
lution Trust Corporation (RTC) to resolve such
failures. The forecast is likely to be off the mark
in any particular year, because a single large
failure or sudden change in the course of the
economy that affects many banks can cause a
large swing in costs. At best, the projections
can capture the overall trend and magnitude
of Federal spending over a multiyear planning
period.

The current forecast for 1993 through 1998 dif
fers sharply from the forecast made for the
Midsession Review that was published in July
1992. The current forecast assumes that:
• Congress will provide the RTC by late
spring with the additional funding needed
to resolve failed savings and loans;
• the currently favorable interest rate environ
ment and substantially improved earnings

Table 4-9.

by banks and thrifts have reduced the total
number and size of institutions that will fail
and require their losses to be covered by
the RTC and the Federal Deposit Insurance
Corporation (FDIC); and

• the amount of losses per dollar of loans
and other assets acquired from failed insti
tutions will be slightly lower than in recent
experience.

As shown in Table 4-9, these assumptions re
sult in lower projections of deposit insurance
spending for the next two years.
The RTC has been without funding to pay
for thrift resolutions since April 1992. Additional
funding is urgently needed. The baseline fore
cast assumes such funding will be available by
late Spring 1993, allowing the RTC to resolve
cases involving $34 billion in assets. If funding
is provided by early March—soon after Con
gress returns—the RTC might be able to handle
about 50 percent more in assets. As shown in
Table 4-10 this would increase outlays relative
to the baseline by $6 billion in 1993 and decrease

DEPOSIT INSURANCE OUTLAYS, 1993-1998
(In billions of dollars)

1993 Midsession Review (July 1992) ...
Current Baseline.....................................

1993

1994

1995

1996

1997

1998

59.4
15.5

26.7
16.2

-28.1
-7.1

-22.6
-14.9

-21.9
-11.3

-6.9

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

1994 outlays by $8 billion. On the other hand,
if no new resources are made available until
October 1993, RTC will not be able to spend
any significant amount of loss funds in 1993
to resolve cases. Relative to the baseline esti
mates, outlays would decline by $22 billion in
1993 (producing net receipts), but they would
soar by $23 billion in 1994.
Another important assumption is the number
of failed institutions that will need to be re
solved in the next few years and the size
(amount of assets) of those institutions. Among
the key factors which determine the volume of
failed assets in the thrift and banking industries
are economic conditions in various regions of
the country, the condition of the real estate in
dustry in those regions, and the impact of
changing Federal bank regulation and bank clo
sure policies.
The baseline assumes that, in aggregate, banks
with assets of about $300 billion will fail in the
1993-98 time period. This projection is not based
on the forecast failure of any specific bank. Some
forecasters have argued recently that weaker
earnings prospects than now forecast could
cause a much larger number of failures to occur.
As shown in Table 4-10, a larger number of
thrift and bank failures could increase outlays
by $4 billion in 1993 and another $4 billion in
1994. On the other hand, if the current favorable
interest rate environment and resulting earnings
continue at their present level, Federal outlays
for deposit insurance would fall sharply. The
impact of new capital requirements, which took

Table 4-10.

effect December 19, 1992, is unclear, but they
could cause more bank and thrift assets to be
taken over by Federal regulators in the next 6
to 12 months. This should reduce the Federal
government's costs in the long run.

One final assumption is the estimated cost of
failure cases. Given the current economic and
real estate market downturns, the baseline as
sumes slightly higher bank loss rates than those
experienced by the FDIC in the past. If loss
rates on thrift failures increase to the rates expe
rienced in 1988 by the previous thrift deposit
insurance fund, the FSLIC, and if bank loss rates
increase by a similar percentage, then outlays
would increase by over $2 billion in 1993 and
by $4 billion in 1994. Alternatively, if loss rates
for thrift cases fall to those experienced in recent
bank failures, and if the bank loss rate were
to drop to the FDIC's historical level, outlays
could be $l-$2 billion lower per year over the
forecast period.

International credit subsidies.— The methodol
ogy used to develop estimates for the 1993
budget and the 1994 baseline is responsible.
However, actions in other countries and in nego
tiations among countries are particularly hard
to predict reliably. If the baseline estimate is
off, it is likely off on the low side. It may under
state the subsidy costs for short-term loans to
risky countires, Paris Club agreements, and re
ceipts for old loans subject to rescheduling. De
pending on the countries involved, the fre
quency of rescheduling, and other variables,

ALTERNATIVE ESTIMATES OF DEPOSIT INSURANCE OUTLAYS,
1993-1998
(In billions of dollars)
1993

Current Baseline.................................... .............
Timing of RTC funding:1
Early March 1993 ............................... .............
October 1993 ...................................... .............
Volume of failed assets:
Higher volume .................................. .............
Lower volume ................................... ..............
Loss rates:
Higher loss rates ............................... .............
Lower loss rates ................................ .............
1 Current baseline assumes late spring funding.

1994

1995

1996

1997

1998

15.5

16.2

-7.1

-14.9

-11.3

-6.9

21.2
-6.1

7.9
39.4

-5.8
-6.7

-15.0
-15.1

-10.9
-11.1

-7.0
-6.5

19.4
9.5

20.5
-4.0

3.9
-10.5

-4.6
-14.0

-11.1
-10.4

-8.1
-8.0

17.9
14.1

20.6
14.4

-4.1
-9.5

-13.0
-16.6

-9.6
-12.9

-5.8
-8.0

BASELINE PROJECTIONS AND ALTERNATIVE ASSUMPTIONS

subsidy budget authority could increase by as
much as $300 to $400 million.

Pell Grants.—Pell grants assist students with
the costs of post-secondary education. The Pell
grant baseline budget authority is the 1993 en
acted level, adjusted for inflation. Under current
law, $1.4 billion of the 1994 budget authority
would be required to fund awards for 1993 and
prior years, for which enacted budget authority
was not sufficient. The remaining 1994 baseline
budget authority would be insufficient to fund
1994 awards.
Maximum Deficit Amounts
The Budget Enforcement Act includes a deficit
control mechanism that requires sequestration
(across-the-board spending reductions) in the
event the deficit exceeds a maximum deficit
amount (MDA). The deficit subject to control
is defined as the on-budget deficit plus the ad
ministrative expenses of the off-budget social se
curity trust funds.

This enforcement mechanism had no practical
consequence in 1992 and 1993 because the

Table 4-11.

MDAs were automatically adjusted for changes
in receipts and outlays due to economic and
technical reestimates. On January 21, 1993, the
incoming Administration can decide to put teeth
into this enforcement mechanism. On that date,
the incoming Administration must decide
whether to adjust the MDAs for economic and
technical reestimates since the 1993 budget was
transmitted. If the MDAs are revised, the deficit
enforcement mechanism continues to have no
operational impact. If, instead, the MDAs are
not adjusted, they would remain at the levels
published in OMB's final sequestration report
for 1993, adjusted for subsequent reestimates to
the discretionary limits and to deposit insurance.
The adjusted MDA for 1994 exceeds the
unadjusted MDA by $24.1 billion (see Table
4-11). The BEA provides a $15 billion cushion
when determining the need for a sequester.
Means of Financing

Table 4-12 summarizes the baseline estimates
of Federal borrowing and debt from 1992
through 1998.

MAXIMUM DEFICIT AMOUNTS
(In billions of dollars)

Maximum deficit amount as of October 23, 1992 ............................................................................
Adjustments:
Discretionary caps and related debt service.....................................................................
Deposit insurance reestimates and related interest costs since February 1992 ..........

1994

1995

307.8

302.5

-2.6
29.7

-3.5
3.6

Current maximum deficit amount............................................................................................................
Other economic and technical assumptions .............................................................................

334.9
24.1

302.6
44.5

Potential maximum deficit amounts ........................................................................................................

359.0

347.1

Memorandum: Potential maximum deficit on a consolidated budget basis (includes manda
tory off-budget receipts and outlays)...................................................................................................

294.1

274.1

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 4-12.

FEDERAL GOVERNMENT FINANCING AND DEBT1
(In billions of dollars)
1992
actual

Estimate

1993

1994

1995

1996

1997

1998

-290.2
(-340.3)
(50-1)

-327.3
(-379.9)
(52.6)

-292.4
(-354.8)
(62.5)

-272.4
(-342.6)
(70.3)

-266.4
(-348.5)
(82.1)

-305.0
(-395.6)
(90.7)

-319.8
(-422.9)
(103.1)

-17.3

18.8

-1.7
-0.4
0.3

-0.2
*

-2.9
1.6

FINANCING

Surplus or deficit (-) .............................................................
(On-budget).........................................................................
(Off-budget) ............................ ...........................................

Means of financing other than borrowing from the pub
lic:
Decrease or increase (-) in Treasury operating cash
balance ............................................ .................................
Increase or decrease (-) in:
Checks outstanding, etc.2 ............................................
Deposit fund balances...................................................
Seigniorage on coins..........................................................
Deduct (-): Net financing disbursements:
Direct loan financing accounts ....................................
Guaranteed loan financing accounts ..........................

0.3

-2.3
-1.3
0.5

—
0.5

-5.7
4.3

-6.1
4.1

-5.9
2.9

-5.5
2.4

-5.4
2.1

-5.4
1.6

Total, means of financing other than borrowing
from the public.......................................................

-20.5

17.5

-5.1

-2.5

-2.6

-2.8

-3.4

Total, requirement for borrowing from the public
Reclassification of debt3 ...........................................

-310.7
—

-309.8
-1.3

-297.4
—

-274.9
—

-269.0
—

-307.8
—

-323.2
—

Change in debt held by the public ..............................

310.7

311.1

297.4

274.9

269.0

307.8

323.2

3,984.6
18.1

4,390.0
20.4

4,792.0
21.4

5,176.2
21.4

5,553.3
22.5

5,970.3
23.3

6,408.2
24.2

4,002.7

4,410.5

4,813.5

5,197.6

5,575.8

5,993.6

6,432.4

1,004.0
2,998.6
(296.4)
(2,702.2)

1,100.8
3,309.7
—
—

1,206.3
3,607.2
—
—

1,315.5
3,882.1
—
—

1,424.7
4,151.1
—
—

1,534.7
4,458.9
—
—

1,650.3
4,782.1
—
—

Debt issued by Treasury.......................................................
Deduct (-): Treasury debt not subject to limitation4 .....
Agency debt subject to limitation.......................................
Unamortized discount (less premium) on Treasury
notes and bonds other than zero-coupon bonds .........

3,984.6
-15.6
0.3

4,390.0
-15.6
0.3

4,792.0
-15.6
0.3

5,176.2
-15.6
0.3

5,553.3
-15.6
0.3

5,970.3
-15.6
0.3

6,408.2
-15.6
0.3

3.3

Total, debt subject to statutoiy limitation5 ................

3,972.6

4,378.0

4,780.0

5,164.2

5,541.3

5,958.3

6,396.2

DEBT, END OF YEAR

Gross Federal debt:
Debt issued by Treasury...................................................
Debt issued by other agencies.........................................
Total, gross Federal debt ..........................................
Held by:
Government accounts .......................................................
The public............................................................................
(Federal Reserve Banks) ...............................................
(Other).................. ................... .'........................................

DEBT SUBJECT TO STATUTORY LIMITATION, END
OF YEAR

*$0.05 billion or less.
1 Treasury securities held by the public are almost entirely measured at sales price plus amortized discount or less amortized premium. Agency debt and
Treasury securities held by Government accounts are almost entirely measured at face value.
2 Besides checks outstanding, includes accrued interest payable on Treasuiy debt, miscellaneous liability accounts, allocations of special drawing rights, and,
as an offset, cash and monetary assets other than the Treasury operating casn balance, miscellaneous asset accounts, and profit on sale of gold.
3 The Farm Credit System Financial Assistance Corporation was reclassified from a Government-sponsored enterprise to a Federal agency as of October 1,
1992, and its debt has accordingly been reclassified as Federal agency debt as of that date.
4 Consists primarily of Federal Financing Bank debt.
5 The statutory debt limit is $4,145 billion.

High Priority Investments

5. HIGH PRIORITY INVESTMENTS
INTRODUCTION
Chapters 5A through 5H discuss various in
vestments in the future which have been rec
ommended by the Bush Administration and
which would require increases in 1994 if the
policies guiding these increases were to be con
tinued. These recommended investments are
unified by a single characteristic: making them
will contribute to the improvement of U.S. pro
ductivity, and thereby to the enhancement of
long-term U.S. economic performance.

Since passage of the Budget Enforcement Act
(BEA) in 1990, the Administration has proposed
to accommodate these recommended increases
in investment within the constraints of caps on
discretionary spending imposed by the Act.

Thus, the Administration has introduced the no
tion of a "program life cycle", and has rec
ommended substantial reductions in and, in
some cases, termination of, various programs
that provide low returns to the taxpayers. As
a result of this policy, discretionary spending
has grown in 1992 and 1993 by less than the
inflation rate.

The Administration would again recommend
making the investments described in the pages
which follow within the context of the overall
discretionary cap imposed for 1994 by the BEA.
Therefore, the following chapter should be read
in conjunction with Chapter 14, "Reductions in
Low-Return Discretionary Programs."

5A. ENHANCING RESEARCH AND
DEVELOPMENT AND EXPANDING THE HUMAN
FRONTIER
The Bush Administration's strong support for
increased investments in research and develop
ment (R&D) has resulted in a record investment
of $73 billion in 1993, a 13 percent increase over
1989. The Administration had proposed $76 bil
lion in 1993, an 18 percent increase over the
1989 level, but the Congress cut nearly $3 billion
out of civilian basic and applied R&D. The
growth in Federal R&D spending over this pe
riod of budgetary constraint reflects aggressive
investment in both basic and applied R&D.
These investments have generated new scientific
knowledge, helped train the future U.S.
workforce, contributed to the nation's security,
improved the transfer of technology to the pri
vate sector, and laid the groundwork for long
term economic growth.

Administration Policy

Five activities have highlighted the Adminis
tration's R&D policy:

• Basic Research.— Promoting the creation of
new knowledge and training that will lead
to a better understanding of the world
around us and become the foundation for
future technological advances. Investment in
civilian basic research has increased 29 per
cent since 1989.

• Applied Research and Development.—Main
taining investments in activities that will
satisfy Federal technological needs and help
spur innovation and the movement of new
products and processes from the laboratory
to the marketplace. Investment in applied
civilian R&D has increased 33 percent since
1989.

• National Security.—Maintaining a strong
defense R&D program as a key element of
the nation's security strategy.
• Technology Transfer.—Expanding the pace
of technology transfer activities through di
rect Federal technology transfer invest
ments, increased private-public partner

ships, and stimulating private sector R&D
investments.
• Expanding the Geographical Frontier.
Space.—Continuing to improve the access
to and exploration of space and to conduct
important research in the space environ
ment.

Accomplishments

Basic Research.—The Administration's 1993
investment of $14 billion in basic research rep
resents a 30 percent increase over the 1989 level.
The lion's share of this investment has been in
civilian basic research, which increased 29 per
cent since 1989. This increase would have been
36 percent had the Congress enacted the Admin
istration's request in 1993. The products of this
research create the foundation for technological
advances and support a broad range of policy
decisions. For example, the interagency U.S.
Global Change Research Program (climate re
search) has been a central ingredient in the de
velopment of America's National Climate
Change Strategy. Funds have also been in
creased for large projects, like the Super
conducting Super Collidor, as well as for indi
vidual and small groups of researchers, pri
marily at academic institutions. The Administra
tion's continued commitment to double the Na
tional Science Foundation budget, the Human
Genome Project, and the Department of Agri
culture's National Research Initiative have sig
nificantly increased support for these research
ers. Overall, support for individual investigators
has been increased by 28 percent since 1989.
Applied Research and Development.—The Ad
ministration's 1993 investment of $55 billion in
these activities represents an eight percent in
crease over 1989—but its investment in applied
civilian R&D has increased 33 percent in the
last four years. These increases would have been
14 and 49 percent, respectively, had the Con
gress enacted the Administration's request in
1993. Defense applied R&D has remained rel
65

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

atively flat. Where these activities led to tech
nologies that may have commercial application,
the Administration has supported technology
development at the generic or pre-competitive
stage. This approach has been demonstrated
through the Administration's investments in bio
medical research (Protecting the Public Health)
and applied research initiatives in High Per
formance Computing and Communications
(HPCC), Advanced Materials and Processing,
Advanced Manufacturing, and Biotechnology
Research. Conducted with advice from industry,
these programs are developing fundamental
computational, materials, and biotechnology
tools to support both industry and Federal gov
ernment needs. The HPCC's National Research
and Education Network computer network has
been likened to the "highways of tomorrow"
by linking researchers, students, and others
without them ever leaving their offices, labora
tories, or even their homes.

Maintaining National Security.—The Federal
Government has a fundamental requirement for
advanced technology to meet our national secu
rity needs. This was demonstrated in Operation
Desert Storm when the deployment of advanced
weapons and technology both saved lives and
led to a decisive victory. DOD and DOE defense
R&D programs have also led to many civilian
or "dual use" applications.

Improving Technology Transfer and Stimulat
ing Private Sector R&D Investments.—The Ad

ministration has also initiated a broad range of
public-private partnerships, accelerated tech
nology transfer from government laboratories,
and proposed tax credits and joint venture in
centives to encourage greater private sector R&D
investments. The 1992 National Technology Ini
tiative, in particular, reflected the President's de
sire to "get the great ideas generated by public
funds out into the private sector, off the drawing
board and onto the store shelves."

Expanding the Geographical Frontier.—The
Administration's investment in these activities
has increased 29 percent since 1989 and includes
support for the Space Shuttle, Space Station
Freedom, and investments in the next generation
of launch vehicles.

Funding and Actions Required to Continue
Policy

A 1994 R&D budget of approximately $80 bil
lion, a 10 percent increase over 1993, would be
required to continue the Administration's cur
rent research and technology activities. Federal
R&D efforts must continue to focus on improv
ing our domestic economy and international
competitiveness. This requires coordination
within the Federal government and with the pri
vate sector. The Administration's recommenda
tion for a strong program of investment in civil
ian R&D has another vitally important benefit.
It can help utilize the important technological
and human resource assets of the declining de
fense/aerospace industry.
New Balance Between Defense and Civilian
R&D.—In the post-Cold War era, changing na
tional security requirements have allowed the
Administration to make significant reductions in
defense spending. In response to these changes,
the Administration has emphasized civilian
needs as a major driver for Federally-supported
technology development. As a result, spending
on non-defense R&D increased from 34 to 40
percent of total Federal R&D between 1989 and
1993, while the share spent on defense declined
correspondingly from 66 to 60 percent. The
share of non-defense R&D would have been 42
percent had the Congress enacted the Adminis
tration's 1993 request.
Improving the Coordination of Federal R&D
Activities.—The Administration has improved
the coordination and effective use of Federal
R&D resources through the Federal Coordinat
ing Council for Science, Engineering, and Tech
nology (FCCSET). Interagency research and edu
cation efforts brought together under the
FCCSET umbrella include High Performance
Computing and Communications, Advanced
Materials and Processing, Biotechnology Re
search, Advanced Manufacturing R&D, the U.S.
Global Change Research Program, and the Math
and Science Education Initiative. While FCCSET
was successful within the Executive Branch, its
effectiveness is limited by the lack of a com
parable integrated R&D review process in the
Congress.

5A.

ENHANCING RESEARCH AND DEVELOPMENT AND EXPANDING THE HUMAN FRONTIER

Stimulating Economic Growth through Part
nerships and More Relevant R&D.—Industry
continues to be both the largest supporter (50
percent) and performer (70 percent) of R&D
within the total national R&D effort. Largely as
a result of Federal funding, U.S. academic insti
tutions are the primary performers of basic re
search and have achieved world preeminence
in research and training. Federal laboratories
provide a third element of this strong national
R&D effort.
In the post-Cold War era, all three groups
of R&D performers will have to forgo stronger
partnerships to support the ability of America
to compete successfully in a global economy.
The Administration has put a major emphasis
on establishing such partnerships. Currently,
roughly $32 billion or 43 percent of the R&D
spending is for collaborative research. One form
of partnership, the Cooperative Research and
Development Agreement (CRADA), has proven
to be particularly successful. The number of
CRADAs throughout the Federal government
has grown from fewer than 100 at the beginning
of the Bush Administration to roughly 1,400
today. It is estimated that the dollar value of
active CRADAs is over $300 million and is ex
pected to grow significantly over the next sev
eral years. Cost-sharing, a primary criterion of
these partnerships, increases the likelihood of
relevant and useful R&D that can contribute to

our Nation's productivity and competitive edge.
The 1992 Council on Competitiveness report en
titled Industry as a Customer of the Federal Labora
tories outlines many recommendations to make
sure that the national investments in the Federal
laboratories continue to yield benefits to the na
tion. A key recommendation was to set aside
significant percentages of laboratory budgets for
joint civilian technology programs with industry.
The Administration has made significant strides
to support joint technology efforts. For example,
currently, roughly 11 percent of DOE defense
R&D funds are for joint activities.

In addition to integrating Federal R&D efforts
more closely with the private sector, the Admin
istration recently established under the Presi
dent's Science Advisor a committee that includes
Federal R&D representatives and a council that
includes State, regional, and local representatives
involved in science, engineering, and tech
nology. The primary purpose of these two
groups is to improve the synergism between
their respective R&D efforts. One of the first
"products" from these groups will be a direc
tory of Federally funded R&D efforts that might
be responsive to State, regional, and local needs.
The Future of the R&D Enterprise.—Reducing
the size or "downsizing" of the Federal, indus
trial, and academic R&D enterprise is being pro
moted by some. In the current post-Cold War
era, some adjustments in our defense investment

Table A-l. HIGH PRIORITY INVESTMENTS—RESEARCH AND DEVELOPMENT
(Budget authority; dollar amounts in billions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Basic Research.............................................................................................................. ........
Civilian...................................................................................................................... ........
Defense...................................................................................................................... ........
Applied Reseach and Development......................................................................... ........
Civilian...................................................................................................................... ........
Defense...................................................................................................................... ........

11
10
1
51
12
40

14
13
1
58
17
41

14
12
1
55
15
40

+33%
-1%

15
14
1
61
17
44

Subtotal, Conduct of R&D................................................................................. ........
R&D Facilities .............................................................................................................. ........

62
2

73
3

69
3

+12%
+44%

76
4

Total, Conduct of R&D and Facilities ............................................................. ........

+13%

21
41
34%
66%

30
42
42%
58%

28
41
40%
60%

+31%
+2%
+17%
-9%

31
45
41%
59%

Civilian.......................................................................................................................... ........
Defense.......................................................................................................................... ........
Civilian Percent of Total ............................................................................................ ........
Defense Percent of Total............................................................................................ ........

+30%
+29%
+45%
+8%

68______________________________ BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

will undoubtedly be necessary. However, it
must be recognized that America's R&D enter
prise has demonstrated that it is a valuable na
tional economic and national security asset. It

Table A-2.

has been nurtured over many decades. Care
should be taken to ensure that defense assets
be converted wisely and that civilian R&D assets
not be allowed to atrophy.

RESEARCH AND DEVELOPMENT HIGHLIGHTS1
(Budget authority; dollar amounts in billions)

Total Civilian R&D ...................................................................................................

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

21.3

30.4

27.9

+31%

30.8

Applied Research:
High Performance Computing and Communications 2 ................................. ......
Advanced Materials and Processing2 ............................................................... .......
Biotechnology Research2 ..................................................................................... ......
Energy R&D ...........................................................................................................
Moving Fusion Energy from Science to Engineering.....................................
Advanced Manufacturing R&D 2 ....................................................................... ......
Transportation R&D/Space Technology...........................................................
Protecting the Public Health ...............................................................................
Expanding R&D at the National Institute of Standards Technology..........

N/A
N/A
N/A
3.5
0.3
N/A
1.1
3.5
0.2

0.8
2.0
4.0
5.3
0.4
1.2
1.7
4.8
0.3

0.8
1.9
4.1
4.7
0.3
1.2
1.7
4.6
0.4

N/A
N/A
N/A
+33%
-3%
N/A
+64%
+32%
+142%

1.0
2.1
4.2
6.4
0.4
1.3
1.9
4.8
0.5

Basic Research:
Doubling the NSF Budget by 1994 ....................................................................
Support for Individual Investigators (HHS, NSF, DOE) ...............................
Human Genome Project....................................................................................... .......
Superconducting Super Collider ........................................................................
U.S. Global Change Research Program2........................................................... ......
Astronomy and Astrophysics .............................................................................
National Research Initiative (USDA)................................................................. ......

1.9
5.9
N/A
0.1
N/A
0.6
N/A

3.0
7.9
0.2
0.7
1.4
0.9
0.2

2.7
7.5
0.2
0.5
1.3
0.9
0.1

+42%
+28%
N/A
+428%
N/A
+39%
N/A

3.3
N/A
0.2
0.7
1.6
N/A
0.2

Maintaining National Security: Defense R&D
Defense....................................................................................................................
Energy .....................................................................................................................

38.0
2.6

39.7
2.7

38.8
2.6

+2%
-1%

42.5
2.7

Expanding the Geographic Frontier
Improving Access to Space .................................................................................
Space Exploration........................................................... ......................................

4.4
1.4

5.4
2.8

4.9
2.6

+12%
+82%

5.4
3.0

N/A-Not Available.
1 Due to overlap among these activities, these numbers cannot be summed to match the R&D totals in Table A-l.
2 Federal Coordinating Council for Science, Engineering, and .Technology Interagency Research Effort.

5B.

IMPROVING THE NATION'S
INFRASTRUCTURE

Federal outlays for domestic physical capital
infrastructure activities will total $54.6 billion in
1993. This is an increase of $15.5 billion or 40
percent over the 1989 level. These outlays reflect
Federal support for infrastructure activities pro
vided directly by the Federal government and
through Federal grants to States and local gov
ernments. (For details, see Table B-2, "Federal
Outlays for Major Domestic Public Physical Cap
ital". Also see Appendix One, Section C, "Phys
ical and Other Capital Presentation".)
The Administration's infrastructure invest
ments reflect the following principles:

• Building for Tomorrow by maintaining and
improving the Nation's transportation and
environmental infrastructure to establish a
foundation to meet the needs of a growing
population and economy.
• Stimulating Economic Growth by putting
Americans to work and providing the basis
for long-term economic growth. It is esti
mated that more than 2.5 million jobs will
be supported through this investment in
1993 alone.

Table B-l.

• Renewing the Infrastructure Partnership
by building strong ties among the Federal
government, State and local governments,
and the private sector. These ties foster pri
vate investment, encourage innovation, and
promote more efficient, environmentally
sound infrastructure development.

Extending policies pursued by the Bush Ad
ministration would require $40.3 billion in 1994
spending authority for key infrastructure invest
ments, an increase of $4.5 billion or 13 percent
over 1993 enacted levels. Highlights of this in
vestment are discussed below (see Table B-l,
"High Priority Investments—Infrastructure").
For these programs, spending increased by $9
billion or 34 percent from 1989 to 1993.
ENHANCING THE NATION'S SURFACE
TRANSPORTATION
Extension of Bush Administration policies into
1994 would require approximately $20.5 billion
for highways, an increase of $2.8 billion or 16
percent over the 1993 level. This would fund
fully the 1994 authorizations contained in the
1991 Intermodal Surface Transportation Effi
ciency Act (ISTEA).

HIGH PRIORITY INVESTMENTS—INFRASTRUCTURE
(Budget authority; dollar amounts in billions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Federal Aid Highways (Obligations) ................... ...............
FAA Modernization................................................................
Airport Grants .........................................................................
Environmental Infrastructure ...............................................
Indian Reservation Facilities.................................................
Weather Service Modernization...........................................
NASA Space Transportation.................................................
Energy and Science Infrastructure.......................................

13.5
1.4
1.4
3.6
0.1
0.4
4.4
2.0

19.2
2.7
1.9
4.8
0.1
0.5
5.2
3.8

17.7
2.4
1.8
4.8
0.2
0.5
4.9
3.7

+31%
+70%
+29%
+32%
+131%
+15%
+11%
+85%

20.5
2.6
1.9
4.9
0.2
0.7
5.4
4.3

Total......................................................................... ..............

26.8

38.3

35.8

+34%

40.3

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Under this Administration, Federal-aid high
way funding increased from $13.5 billion in 1989
to $17.7 billion in 1993. This is an increase of
$4.2 billion or 31 percent. If the Administration's
1993 budget request had been approved, the in
crease would have been 42 percent.
The 1994 highway funding level would con
tinue bridge rehabilitation, pavement condition
improvement, and additional road construction.

Achieving Landmark Surface Transportation
Legislation
ISTEA, which authorized over $150 billion in
spending over 6 years, includes innovative pro
visions that:
• concentrate Federal resources on the soonto-be designated 155,000-mile National
Highway System, the roads most critical to
interstate commerce and travel;

• permit State and local officials to apply Fed
eral funds flexibly to solve local transpor
tation problems, including support for tradi
tional highway construction or other forms
of surface transportation; and

• allow the use of Federal funds for the con
struction of toll roads, giving States access
to an entirely new funding source. Ohio,
New York, and Florida already have used
this authority.
ISTEA's increased spending levels and lowerthan-anticipated receipts will pose future prob
lems for the highway program. A statutory pro
vision, referred to as the Byrd headroom test,
signals when new spending authority can not
be supported by projected receipts. Specifically,
it reduces new contract authority if the total
outstanding highway funding commitments dur
ing the budget year exceed the sum of the avail
able cash balance and the following two years'
projected receipts.

The Highway Account will fail the Byrd headroom test beginning in 1995 under current reve
nue and spending projections. In addition to
warning that the trust fund may be headed to
ward insolvency, the test also would reduce the
$21 billion in annual spending authority pro
vided to the States by ISTEA by approximately
$4 billion in both 1995 and 1996.

Improving the Nation's Highways
Between 1989 and 1993, $80 billion in Federal
highway funding supported the rehabilitation of
over 10,000 bridges and a dramatic improvement
in highway conditions. For example, the percent
of urban interstate highway miles rated in poor
condition in 1991 was less than half the 1983
level. (See Chart B-l.)

Federal highway expenditures can stimulate
economic growth and support jobs when they
are part of an integrated national transportation
system. For example, the Interstate Highway
System led to the development of an inter-re
gional economy and raised the standard of liv
ing of all Americans. However, congressionally
earmarked "demonstration" projects do not nec
essarily provide these benefits. They distort
transportation priorities if they do not fit into
the national system, and they delay needed
highway improvements if they are not ready
for construction.

Strengthening Rail Transportation

As a companion and complement to needed
highway investment, the Administration has
pursued high-speed rail and magnetically levi
tated ("maglev") train research and develop
ment. Resolving the research and development
issues associated with maglev could lead to a
public/private partnership to construct an ex
perimental system. Also, over $200 million in
improvements are underway to reduce travel
time in the Northeast corridor. Amtrak has
received $579 million since 1989 for capital im
provements to assist in its efforts toward becom
ing a self-sufficient operation. The Administra
tion has provided grants to States to improve
safety along five high-speed rail corridors by
eliminating highway-rail crossings.

MODERNIZING THE AVIATION SYSTEM
Extension of Bush Administration policies into
1994 would require approximately $4.5 billion
to continue the Federal Aviation Administra
tion's (FAA's) modernization effort and increase
capacity enhancing construction at airports. This
would be a $300 million or 8 percent increase
over 1993 enacted levels. This would add new
radars, expand computer capacity, improve tele
communications, and increase airport capacity
construction.

5B.

IMPROVING THE NATION'S INFRASTRUCTURE

Chart B-l. THE PERCENTAGE OF HIGHWAY MILEAGE WITH PAVEMENT
RATED AS POOR" CONTINUES TO DECLINE

■ URBAN INTERSTATE H RURAL INTERSTATE □ URBAN ARTERIALS g RURAL ARTERIALS

The Administration has met the demands aris
ing from recent and projected increases in air
travel through substantial funding for airport
capacity expansion, innovative local airport fi
nancing, and a comprehensive aviation system
modernization program.

Between 1989 and 1993, Federal airport grants,
together with State and local government match
ing funds, helped construct the following capac
ity enhancement projects: 272 new runways, 982
runway extensions and related projects, and 233
terminals. Construction has begun on 21 new
airports, including the new Denver airport, the
first major airport to be built in this country
since 1974. Also, airports can now increase their
operating capacity, mitigate noise, and enhance
safety with revenues collected from passenger
facility charges (PFC). Enacted in 1990, a PFC
is a charge levied on departing passengers for
use of aviation facilities. When fully imple
mented, PFCs will provide an estimated $1 bil
lion per year for airports to improve facilities
and speed air travel.

The aviation system modernization program
will address the system's immediate needs and
result in greater future operating efficiency and
safety. It is estimated the program will generate
more than $200 billion in benefits through the
year 2025. As part of the effort, approximately
100 advanced radars were installed, 110 airports
received windshear hazard sensors, and 160 air
ports received advanced, automated weather
sensors. Also, to prepare for the future aviation
system, the Administration has been researching
satellite-based aircraft navigation systems. These
may someday replace land-based navigation
aids and thereby greatly expand flexibility in
aircraft routing.

EXPANDING ENVIRONMENTAL
INFRASTRUCTURE
Extension of Bush Administration policies into
1994 would require approximately $4.9 billion
to continue to fund wastewater treatment facility
construction, cleanup of Superfund sites and
leaking underground storage tanks, and other
environmental facility construction. This is an

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

increase of $0.1 billion or 3 percent over the
1993 level. The wastewater construction program
would include capitalization grants to permit
States to make low interest loans to communities
for treatment plant construction; expedited
cleanup of coastal waterways, and cleanup of
the severely polluted waters along the Mexican
border in support of the North American Free
Trade Agreement. As treatment plant funding
needs decrease, clean water funding would shift
to non-point source programs in the Department
of Agriculture and other agencies. The Super
fund program would maintain this Administra
tion's current emphasis to require polluters to
clean up problems they created and to continue
to redirect resources from support activities to
actual site clean-up work.
The Administration's support for expanding
environmental facilities and cleanup benefited
Americans through a cleaner environment and
increased employment generated by facility con
struction and new business creation permitted
by increased treatment capacity.

By 1994, the Administration will have sup
ported funding in excess of the $18 billion Con
gress authorized to help clean up the Nation's
waters through construction of wastewater treat
ment facilities. This funding helped achieve a
rate of 90 percent compliance with municipal
treatment requirements. The Administration con
sistently proposed significant funding increases
for cleanup of abandoned hazardous waste sites
and leaking underground storage tanks. Under
the Federal Superfund program, more site clean
ups were completed in 1992 than in the previous
11 years of the program.
IMPROVING INDIAN RESERVATIONS
Many Indian reservations are located in eco
nomically depressed areas that have little or no
infrastructure. To improve conditions, the Ad
ministration supported increased funding (from
$65 million in 1989 to $150 million in 1993) for
construction and rehabilitation of schools, dams,
irrigation projects, and housing. In addition, an
nual funding for road construction and road re
habilitation on Indian reservations more than
doubled between 1989 and 1993, from about $80
million to $191 million. These investments im
proved health and safety and generated employ
ment opportunities for Indians living on or near
reservations. Continuing these efforts would re

quire approximately $166 million in 1994, an in
crease of $16 million or 11 percent over 1993
enacted levels.

MODERNIZING WEATHER FORECASTING
CAPABILITIES
Extension of Bush Administration policies into
1994 would require approximately $700 million,
a $200 million or 48 percent increase over 1993
enacted levels, to continue the Administration's
weather forecasting system modernization effort.
Since 1989, over $2 billion was provided to
modernize the Nation's weather forecasting ca
pabilities. This effort will replace obsolete equip
ment, reduce gaps in weather data observations,
and improve the detection and prediction of se
vere weather events, thereby improving safety
for the general public. For example, a new
weather radar installed in south Florida was in
strumental in providing accurate and timely
warnings during passage of Hurricane Andrew.

IMPROVING ACCESS TO SPACE
Extension of Bush Administration policies into
1994 would require approximately $5.4 billion
for NASA space transportation, an increase of
$0.1 billion or 9 percent over 1993 enacted levels.
This would support Space Shuttle operations
and several programs to improve Shuttle oper
ations. NASA would purchase more expendable
launch vehicle services for unmanned missions
and continue developing new technology for fu
ture launch systems.

The Nation's space transportation capabilities
must continue to meet both near-term and long
term national needs. The Administration's poli
cies to meet these needs are to: (1) enhance the
Space Shuttle's efficiency, schedule reliability,
and lifespan; (2) develop an operationally im
proved launch system that also will reduce the
long-term burden on the Space Shuttle; and (3)
encourage the commercial sector to provide
goods and services to increase access to space.

EXPANDING ENERGY AND SCIENCE
INVESTMENTS
Extension of Bush Administration policies into
1994 would require nearly $4.3 billion, an in
crease of $0.6 billion or 15 percent over 1993
enacted levels, for investments in energy and

5B.

IMPROVING THE NATION'S INFRASTRUCTURE

scientific research facilities. Included would be
major facilities to investigate the basic properties
of matter such as the Superconducting Super
Collider, the Fermi Main Injector, and the Stan
ford Linear Accelerator zzB-factory". Funding
also is recommended for major research facilities
for the Human Genome program, the Relativistic
Heavy Ion Collider in New York and the Con
tinuous Electron Beam Facility in Virginia.

This Administration increased spending for in
vestments in energy and science related infra
structure by 48 percent since 1989. One primary
energy infrastructure investment is the Super
conducting Super Collider (SSC), a 54-mile cir
cular tunnel which will support research to
expand fundamental knowledge of matter and
energy. The SSC will employ 2,500 scientists,
engineers and technicians; and host an addi
tional 500 visiting scientists. Other energy infra
structure investments include the electric power
facilities, transmission lines, and dams of the

Power Marketing Administrations and the Ten
nessee Valley Authority.

ENHANCING THE PUBLIQPRIVATE
PARTNERSHIP
The Administration has built a strong public/
private partnership to meet shared needs and
goals. In addition to enabling airports to collect
local revenue to improve facilities and States to
build toll roads with the private sector, States
and localities now can more easily sell or lease
infrastructure obtained with Federal financial
assistance, including, for example, wastewater
treatment systems. The President signed an Ex
ecutive Order in April 1992 to facilitate such
sales or leases, thereby providing States and lo
calities with access to new infrastructure financ
ing for the future. The existing infrastructure
must be retained for its original purpose and
the proceeds used for additional infrastructure
development, debt reduction, or tax relief.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table B-2.

FEDERAL OUTLAYS FOR MAJOR DOMESTIC PUBLIC PHYSICAL
CAPITAL
(Dollar amounts in billions)
Percent
Change:
1989 to 1993

1989
Actual

1993
Estimate

Grants:
Surface transportation .....................................................................................................
Air transportation ............................ ,................ .............................................................
Pollution control and abatement...................................................................................
Other natural resources and environment ..................................................................
Community and regional development......................................................................
Housing assistance.......................................................................................................... .
Other construction ..........................................................................................................
Other physical assets ......................................................................................................

15.9
1.1
2.5
0.1
3.9
0.7
0.5
0.5

19.8
2.1
2.6
0.3
4.0
3.1
0.5
0.7

+24%
+83%
+5%
+95%
+2%
+346%
+9%
+38%

Subtotal, grants.............................................................................................................

25.3

33.1

+31%

Direct Federal Programs:
Science, space, and technology.....................................................................................
Water resource projects..................................................................................................
Other natural resources and environment .................................................................
Energy ...............................................................................................................................
Transportation .................................................................................................................
Veteran hospitals and other health facilities..............................................................
Postal Service ...................................................................................................................
Federal Prison System....................................................................................................
Federal Buildings Fund..................................................................................................
Other construction ..........................................................................................................
Major equipment.............................................................................................................

0.3
2.5
1.3
1.9
0.3
1.0
0.7
0.2
0.1
0.5
5.2

1.3
2.5
2.3
3.4
0.5
1.2
0.9
0.6
1.1
1.0
6.8

+372%
+2%
+70%
+77%
+90%
+16%
+39%
+295%
+1,089%
+95%
+31%

Subtotal, direct Federal programs............................................................................

13.9

21.6

+55%

Total...........................................................................................................................

39.2

54.6

+40%

NOTE: Table includes minor amounts for defense grants and international direct Federal program activities.

5C.

FOCUSING ON PREVENTION AND
CHILDREN

President Bush's 1989 through 1993 Budgets
focused heavily on investments in preventive
health for the Nation and in programs serving
children. Since 1989, the Federal Government
has spent over $400 billion on programs serving
children (See Table C-l), and in 1993 alone,
spending on children will top $97 billion. This

Table C-l.

section identifies accomplishments in these areas
and the funding needed to sustain these pro
grams under current policies. (See also Chapter
5D, "Ending the Scourge of Drugs and Crime,"
for information regarding drug abuse prevention
activities.)

SPENDING ON SELECTED CHILDREN'S PROGRAMS
(Obligations; dollar amounts in millions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Nutrition:
WIC ..........................................................................................
Child Nutrition ......................................................................
Other Nutrition2....................................................................

1,929
4,673
6,863

2,840
6,490
11,874

2,860
6,827
12,831

+48%
+46%
+87%

3,146
17330
13,054

Health:
Maternal/Child Health.........................................................
Medicaid..................................................................................
Community/Migrant Health...............................................
Immunizations .......................................................................
Healthy Start...........................................................................
Other Health...........................................................................

554
7,020
180
141
—
193

674
17,780
265
349
143
298

665
17,100
213
342
79
300

+20%
+144%
+18%
+143%
—
+56%

698
19,700
223
410
98
360

1,235
1,961
4,580
—
137
1,080
—
1,543
11,262

2,802
2,943
6,828
768
316
1372
850
2,835
13376

2,776
2,966
6,710
—
275
1,285
893
2,844
14,135

+125%
+51%
+47%
—
+101%
+19%
—
+84%
+26%

3,474
3,346
7,490
768
344
1,346
918
3,005
14,796

11,166

15,472

15,865

+42%

16,041

Refundable Tax Credits3..........................................................

4,002

8304

8,909

+123%

9,864

Total Children's Funding ...................................................

58,519

97,279

97,878

+67%

106,411

Education and Social Services:
HeadStart ...............................................................................
Handicapped Education.......................................................
Compensatory Education....... .............................................
Educational Excellence Act..................................................
Eisenhower Math and Science Education Programs ......
Other School Improvement .................................................
Child Care Block Grant ........................................................
Foster Care and Adoption Assistance ...............................
Social Security ........................................................................
Aid to Families with Dependent Children and Child
Support................................................................................

1 Presumes that President Bush would propose the same reimbursement increases and decreases proposed in the 1993 Budget.
2 Includes a portion of Food Stamps. Pursuant to the Agricultural, Rural Development, Food and Drug Administration and Related
Agencies Appropriations Act of 1993 (Public Law 102-341), the Administration requests the additional $2300,000,000 in budget
authority for 1993.
3 Outlays only (Earned income tax credit and health earned income tax credit).

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

There are several important reasons for invest
ing in activities to prevent disease and illness
and in activities to improve the health and well
being of children:

• Careful investment in prevention as sound
health care policy. By investing carefully in
prevention, the Nation can continue to
make progress in averting premature
deaths, further extending the average life
expectancy of Americans.
• Prevention to avert acute conditions. The cost
of some preventive health activities is often
much less than the cost of treating the con
dition or disease prevented.

• Preparing children for a healthy and productive
future. Many of the important risk factors
for chronic disease in adults have their roots
in behaviors acquired during childhood.
Proper diet and exercise habits learned early
in life may reduce health problems in the
future.
Over the last four years, increasing support
for preventive health activities and children's
programs has yielded measurable results, in
cluding increased numbers of immunizations,
diagnostic screenings, and broader access to
health services.

SOURCES OF INVESTMENT IN
PREVENTION

The current generation of Americans can ex
pect to live over 75 years, longer than any other
generation in the country's history. Many of the
most dreaded diseases that plagued the U.S.
during the 19th and early 20th centuries, such
as cholera, typhoid fever, smallpox, and polio,
have virtually been eradicated through advances
in medical knowledge and technology, public
health, and sanitation.
Despite these advances, Americans still face
disease, death and disability from preventable
illnesses. An estimated half of the 2.2 million
deaths which occur annually in the U.S. are po
tentially preventable, as are many of the ill
nesses and injuries that affect millions of Ameri
cans.

While the Federal contribution to preventive
health is sizable, it is only one component of
the Nation's overall investment in prevention.
States, local governments, employers, and health

insurers also invest in prevention and have im
portant roles to play as Well.

States spend billions of their own funds on
public health activities (an estimated $5.1 billion
in 1989), and for the Federal-State financed Med
icaid program (an estimated $64 billion in State
funds in 1993, up from an estimated $24 billion
in 1989).
Local governments also spend billions on pre
vention activities ($2.3 billion in 1989), and play
an essential role in directing resources towards
individual problems which may vary by com
munity.
In addition, employers paid an estimated $188
billion for private health insurance premiums in
1991, a portion of which goes toward preventive
services. According to the Health Insurance As
sociation of America (HIAA), some screening
procedures are already widely available in
group policies; 68 percent of employees with
job-based health insurance are covered for mam
mography, and 67 percent are covered for pap
smears.

THE FEDERAL INVESTMENT
The Federal Government has made substantial
investments in both preventive health activities
and in programs serving children (see Table
C-2).
More specifically, the Bush Administration has
expanded the following programs to improve
the health of the Nation:

Childhood Immunizations.—The Centers for
Disease Control (CDC) will award $342 million
to states through immunization assistance grants
in 1993, a 15 percent increase over the 1992 en
acted level. Overall, CDC immunization activi
ties have grown a total of $201 million (143
percent) since 1989. In addition to the CDC
grants, States and localities also receive Federal
assistance through Medicaid/EPSDT, Commu
nity and Migrant Health Center Grants, Mater
nal and Child Health Grants, and the Preventive
Health Block Grant, which can be used to fi
nance immunization services.
Healthy Starl/Infant Mortality Prevention.—
In 1993, the Federal Government will devote
over $10 billion for activities to reduce infant
mortality, 10 percent above 1992 levels and $4.4
billion more than in 1989 (a 78 percent increase).

5C.

FOCUSING ON PREVENTION AND CHILDREN

Table C-2.

INCREASES IN SUPPORT OF PROGRAMS FOCUSED ON
PREVENTION
(Obligations; dollar amounts in millions)

1989
Actual

141
5,681

CDC Childhood Immunization .............................
Infant Mortality Reduction ......................................
(Healthy Start—non-add)....................................
Access to Primary Health Care Services.............
(Community/Migrant Health Centers—non
add) ................................................................. ......
(National Health Service Corps—-non-add) ....
Breast and Cervical Cancer Screening.................
Family Planning..........................................................
CDC Lead Poisoning Prevention...........................
CDC Tuberculosis Control.......................................

1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

(-)
4,184

349
9,365
(143)
7,643

342
10,104
(79)
7,914

+143%
+78%
—
+89%

410
11,292
(95)
9,039

(482)
(48)
—
333
—
12

(684)
(120)
200
498
40
40

(616)
(H9)
163
664
30
79

+28%
+148%
—
+99%
—
+558%

(739)

Healthy Start, which targets Federal resources
to 15 areas with exceptionally high infant mor
tality rates will be funded at $79 million in 1993,
a $15 million increase (23 percent) over 1992.

Women, Infants, and Children Nutrition As
sistance (WIC).—The Department of Agri
culture's WIC program increased by $260 mil
lion (10 percent) in 1993, to a total of $2.9 billion.
This level of support represents a 48 percent
increase in WIC since 1989 and provides suffi
cient funds for full participation by all eligible
pregnant women and infants (See Table C-3).

Table C-3.

1993
Requested

Percent
Change:
1989 to
1993
Enacted

(142)
183
793
33
87

Head Start.—In 1993, Head Start will be fund
ed at $2.8 billion, a $574 million (26 percent)
increase over 1992 (See Table C-4). With this
level of funding, Head Start will serve an esti
mated 100,000 more children in 1993, for a total
of 721,400 children served. Funding for Head
Start has increased about $1.5 billion (125 per
cent) from $1.2 billion in 1989.

Child Care.—The child care and development
block grant will award $893 million in grants
in 1993, a $68 million (8 percent) increase over
1992 levels (See Table C-4). This program cou
pled with a substantial increase in the Earned
Income Tax Credit (EITC), is an example of

NUTRITION ASSISTANCE FOR WOMEN, INFANTS, AND
CHILDREN (WIC)
(Obligations; dollar amounts in millions)

Women, Infants, and Children's Nutrition
Assistance (WIC) ............................................

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1,929

2,840

2,860

+48%

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

3,146

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

HIV/AIDS Funding.—Total HIV/AIDS funding
will increase by 14 percent in 1993 to $5 billion.
This represents an increase of 122 percent in
total HIV/AIDS funding since 1989 (See Table
C-6). The Bush Administration has consistently
demonstrated a determination to address this
disease with additional funding for research,
prevention, and treatment.

President Bush's strong commitment to better
child care, particularly for low income families.
These two programs are not only providing bil
lions of dollars a year in new aid to families,
they give the aid directly to parents—letting
them choose the best place to care for their chil
dren.
Breast and Cervical Cancer.—The Federal
Government will spend approximately $163 mil
lion in 1993 for breast and cervical screening
through the Medicare, Medicaid, and the Public
Health Service, a $35 million (27 percent in
crease) over 1992. Of these funds, CDC will
award $72 million in breast and cervical cancer
screening grants, a 40 percent increase over 1992
levels, and a 14-fold increase since 1990. (See
Table C-5).

Table C-4.

Lead Poisoning Prevention.—In 1993, the Fed
eral Government will award $30 million, a 40
percent increase, through CDC Lead Poisoning
Prevention Grants. These grants will finance
about 1.5 million lead poisoning screenings for
children in 1993. Overall, this grant has in
creased $26 million (650 percent) since 1990, the
first year of the program.

HEAD START/CHILD CARE

(Budget authority; dollar amounts in millions)
Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

1989
Actual

1993
Requested

1993
Enacted

Head Start ............................. ...............................
Child Care Block Grant ....

1,235

2,802
850

2,776
893

+125%

3,474
918

Total Federal ...................................................

1,235

3,652

3,669

+197%

4,392

Table C-5.

BREAST AND CERVICAL CANCER SCREENING
(Obligations; dollar amounts in millions)

1990
Actual1

HCFA—Medicare/ Medicaid:
Mammograms............................ .......................
Pap Smears.........................................................
Centers for Disease Control Screening
Grants ....................................... ...........................

Total Federal .....................................................
1 Activity not funded prior to 1990.

1993
Requested

1993
Enacted

Percent
Change:
1990 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

—
—

60
31

—
—

70
34

+1,340%

161

163

+3,160%

183

5C.

FOCUSING ON PREVENTION AND CHILDREN

Table C-6.

HIV/AIDS FUNDING

(Obligations; dollar amounts in millions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

HIV/AIDS:
Research........................................ ...................
Treatment ..................................... ...................
Prevention .................................... ...................
Income Support.......................... ...................

892
737
483
153

1,238
2,507
621
579

1,215
2,544
625
647

+38%
+245%
+29%
+323%

1,256
2,877
644
722

Total Federal .............................. ...................

2,265

4,945

5,031

+122%

5,499

Family Planning.—Federal support for Family
Planning will total $664 million in 1993, an in
crease of $104 million (19 percent) for HHS fam
ily planning grants and Federal Medicaid pay
ments over 1992 levels. Federal support for Fam
ily Planning activities has increased $331 million
(99 percent) since 1989.

Tuberculosis Control.—The Federal Govern
ment has responded to outbreaks of Tuber
culosis by increasing funding for CDC grants
to $79 million in 1993, a $58 million increase
(280 percent) over 1992. Tuberculosis Control
grants have increased $67 million (558 percent)
since 1989.

FURTHER SUPPORT FOR CHILDREN
In addition to Federal spending on children,
in 1992, the Bush Administration also an
nounced Project KIDS (Keep Irresponsible Dads
Supportive) to improve the child support en
forcement system. Project KIDS will require
medical support in all child support orders; re
quire all States to recognize other States child
support orders; deny benefits, federal privileges
and licenses to delinquent dads; make interstate
non-payment of child support a federal crime;
track absent parents better and make the Federal
government a model employer.

Significant strides in Child Support Enforce
ment have been made over the past several
years, but the entire system needs major im
provement. Only half of all absent parents are

under court or administrative order to pay child
support. Of those required to pay, only half pay
on time, in full. Only one in five absent parents
cover their childrens health needs. Over $5 bil
lion in court ordered support and $20 billion
in back payments fail to reach custodial parents.

By 1996, Project KIDS aims to require 75 per
cent of absent parents to pay child support; col
lect in full, on time 75 percent of all orders;
have half of all absent parents provide health
insurance to their children; and establish the
identity of absent parents for 2 of every 3 chil
dren born to single mothers. Better child support
enforcement will ensure that both parents, and
not the government, will be responsible for the
health and well being of their children.
CONTINUING INVESTMENT IN
PREVENTION AND CHILDREN
If the Bush Administrations policies for pre
vention and children were continued in 1994,
funding for childrens programs would be over
$106 billion. Funding for preventive health ac
tivities would include $410 million for childhood
immunizations, $11.2 billion for infant mortality
reduction, $183 million for breast and cervical
cancer screenings, and $87 million for tuber
culosis control. Along with continued improve
ments in healthy behaviors, additional Federal
support should help to maintain the declining
trends in morbidity and mortality.

5D.

ENDING THE SCOURGE OF DRUGS AND
CRIME

ENDING THE SCOURGE OF DRUGS

age, sex, or economic circumstance. Today's
casual users are the hard-core addicts of to
morrow.

The Administration will spend $11.9 billion
for the War On Drugs in 1993, a 79 percent
increase in Federal drug control expenditures
since 1989. The Administration's drug budget
and policies have been governed by four prin
ciples:

• Building Partnerships with State and local
law enforcement, community-based organi
zations, and public sector businesses. No
matter how much money the government
commits, government alone cannot solve the
problem of illicit drugs. In the end, it is
our families, neighborhoods, and commu
nities that must nurture critical values like
self-discipline, personal responsibility, and
service to others.
• Attacking Drug Trafficking Organizations,
Networks, and Assets with effective domes
tic law enforcement, international programs,
and border control. Strong local and na
tional law enforcement seeks to cripple traf
ficking organizations, reduce the availability
of illicit drugs, and keep the price of drugs
high and its purity low.

• Deterring New and Casual Users through
drug-free policies in schools and at the
workplace and ensuring that the prevention
message gets out to everyone regardless of

Table D-l.

• Getting Current Users Off Drugs through
expanded and improved treatment and
targeting of hard-to-reach populations.
Hard-core drug addiction destroys lives,
spreads disease, and undermines the viabil
ity of our health care system.

To support these principles, Bush Administra
tion policy projections for 1994 (shown in Table
D-l) would require a total of about $13.2 billion
for drug control programs, an increase of $1.3
billion or 11 percent over 1993.

Successes In The War On Drugs
Drug Law Enforcement Helps Demand Reduc
tion Work. Through the use of joint Federal,
State, and local task forces, improved drug intel
ligence, and expanded Department of Defense
interdiction support, drug law enforcement has
extracted a high price from traffickers, seizing
over 300 metric tons of cocaine in 1991, and
arresting more than 1.4 million traffickers be
tween 1989 and 1991. By raising the costs of
producing and transporting drugs, increasing
the risks to street vendors and thugs, and seiz
ing large quantities of drugs, drug law enforce
ment reduces availability and helps keep the
price of drugs as high as possible. Higher drug

FIGHTING THE WAR ON DRUGS

(Budget authority; dollar amounts in billions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Drug Law Enforcement ............................. ......................
Prevention .................................................... .... .................
Treatment ..................................................... ......................

4.6
0.8
1.3

8.6
1.8
2.5

7.8
1.7
2.4

+70%
+110%
+92%

8.6
1.8
2.8

Total War On Drugs .............................. ......................

6.7

12.9

11.9

+79%

13.2

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

prices and reduced purity mean fewer new
users and a reduction in medical emergencies
related to hard-core addiction.
To continue strong support for drug law en
forcement and keep the pressure on drug traf
ficking organizations, Bush Administration pol
icy projections for 1994 would require approxi
mately $8.6 billion for drug law enforcement,
an increase of about $800 million or 10 percent
above 1993. These resources would provide in
creases for domestic enforcement, continued
international anti-drug operations, and enhance
ments to our border control operations.

Overall Drug Use Is Down. The War on
Drugs is a two-front war. One front is the fight
against casual and first-time use—the gateway
to hard-core addiction. The second is the fight
against hard-core addiction and the crime, vio
lence, and health consequences associated with
it. The battle against casual use has been a suc
cess. Chart D-l illustrates that since the enact
ment of the Anti-Drug Abuse Act of 1988, drug
use has declined as follows:

• Current overall drug use is down 12 per
cent, and current overall adolescent drug
use has dropped 27 percent.
• Current cocaine use is down 35 percent and
current adolescent cocaine use has dropped
63 percent. Cocaine use, however, did in
crease between 1990 and 1991 (from 1.6 to
1.9 million users).

• Current marijuana use has dropped 16 per
cent.

Success in deterring casual use means far
fewer lives are disrupted and far fewer users
move on to more serious addictions.
To keep drug use down and maintain a strong
anti-drug message in 1994, Bush Administration
policy projections for 1994 would provide $1.8
billion for drug prevention, about $100 million
or 6 percent over 1993. Many of these programs
would continue to target populations at risk for
drug use and its attendant costs, including pro
grams for youth and pregnant women. By sig
nificantly increasing the resources dedicated to
preventing gateway drug use, future costs asso
ciated with drug use would be reduced, includ
ing the costs of health care, lost productivity,
and crime.

Continuing Challenges In The War On Drugs

An Aging User Population Taxes The Treat
ment System. The legacy of flagrant casual drug
use in the late sixties and early seventies is a
significant drug-using population with a history
of long term addiction. These aging, hard-core
addicts frequently have serious health problems
exacerbated by their drug use, resist opportuni
ties for treatment, and consequently place a
heavy burden on our health care system. To
treat hard-core use, comprehensive care must be
available to address not only drug use, but other
associated debilitating disorders such as AIDS,
diabetes, mental illness, and alcoholism. Chart
D-2 shows recently released Drug Abuse Warn
ing Network (DAWN) data that measures drugrelated health emergencies.
Drug Availability Affects Demand. Continued
pressure from drug law enforcement reduces the
availability of cheap drugs. As illustrated in
Chart D-2, there tends to be an inverse relation
ship between the street price of drugs and the
incidence of drug-related health emergencies. By
keeping illicit drug prices up and drug purity
down. Federal law enforcement helps hold the
line on drug use.

Quality Treatment Programs Are Expensive
And In Short Supply. In 1993, Federal efforts
to free current users through drug treatment
programs will cost over $2.4 billion. These pro
grams provide treatment services to over 300,000
addicts and will address a wide variety of
needs, from out-patient care for a few months,
to long-term in-patient care for addicts and .their
families. An additional 1.5 million drug users
will receive treatment through State, local, and
private care.
Programs Must Target At-Risk Groups and
Hard-Core Users. The Bush Administration has
created and expanded a large number of special
programs that provide treatment and prevention
services to specific categories of drug users.
Over $1.2 billion is being spent for treatment
and prevention services tailored to meet special
needs. Specialized programs, such as those for
pregnant and post-partum women, not only pro
vide care for young mothers, but also have more
than paid for themselves with significant savings
in costly post-natal infant care.

To meet the challenges of hard-core addiction,
the Administration has proposed to expand and
/

5D.

ENDING THE SCOURGE OF DRUGS AND CRIME

Chart D-l. SUCCESS IN THE WAR ON DRUGS
OVERALL DRUG USE IS DOWN

THREE INDICATORS OF ADOLESCENT
COCAINE USE ARE DOWN

SOURCE: NTOA, 1988,1991 Household Survey;
Gordon S. Black Corp. 1991 Partnership Survey.

improve efforts to free current drug users. Con
tinuing Bush Administration policies into 1994
would require approximately $2.8 billion for
drug treatment, about $400 million or 17 percent
above 1993. These Federal dollars support a
wide range of treatment programs, providing a
variety of care formats which address the mul
tiple health issues associated with at-risk popu
lations. The explosion of AIDS-related health
problems associated with IV drug use continues
to require new approaches to treatment. By sig
nificantly increasing treatment resources, up to
185,000 more addicts will be able to obtain treat
ment. This investment in treatment will more
than pay for itself by reducing the social and
health costs associated with drug use. AIDS-related drug treatment initiatives will exceed $27
million in 1994.

FIGHTING CRIME

Between 1989 and 1993, the Bush Administra
tion directed one of the toughest law enforce
ment efforts our Nation has seen. During those
four years, the funding for Federal law enforce

ment grew 50 percent, from $10.0 billion to $14.9
billion. The Administration's approach to fight
ing crime is governed by five principles:

• Seeking the greatest possible impact
through cooperative efforts by Federal,
State, and local enforcement aimed at orga
nized crime, gangs, felons who use firearms,
and other criminals;
• Strengthening local law enforcement;
• Jailing the criminal and helping the victims;
• Integrating law enforcement with social and
economic revitalization in targeted neigh
borhoods; and

• Reforming Federal and state criminal justice
systems.
Extending Bush Administration policies into
1994 would require a total of $16.9 billion to
fight crime, an increase of about $2 billion.
Budget increases needed are shown on Table
D-2.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Chart D-2. HARD-CORE ADDICTION CONTINUES
(COCAINE RELATED EMERGENCIES COMPARED WITH THE PRICE OF COCAINE)

Table D-2.

FIGHTING CRIME

(Budget authority; dollar amounts in billions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Law Enforcement.......................................... ....................
Litigative and Judicial.......................................................
Corrections ..................................................... ....................
State find Local Assistance.......................... ....................

4.7
3.3
1.6
0.4

7.1
5.7
2.2
0.8

7.0
5.0
2.0
0.9

+49%
+51%
+30%
+121%

7.7
5.9
2.3
1.0

Total Fighting Crime................................ ....................

10.0

15.8

14.9

+50%

16.9

Seeking Greatest Possible Impact
Crime Remains a Significant Problem. While
overall crime has declined, major problems still
exist in some areas. For example, violent crimes
and motor vehicle theft have increased in recent
years. Moreover, the victims of crimes, particu
larly violent crimes, tend to be disproportion
ately young, poor, and minority. In 1993, the

Federal Government will continue the Adminis
tration's efforts to reduce violent crime. For ex
ample, the number of FBI and Drug Enforce
ment Administration agents and Federal pros
ecutors working on crime will have grown by
more than 3,600 from 1989 to 1993, an increase
of 24 percent.

5D.

ENDING THE SCOURGE OF DRUGS AND CRIME

Other crimes, such as fraud in the savings
and loan and health care industries, also remain
a substantial problem. Between October 1988
arid October 1992, savings and loan investiga
tions have resulted in almost 1,000 convictions
with fines, recoveries, and restitution of more
than $550 million. In the last two years alone,
FBI investigations into all types of white collar
crime have led to more than 9,000 conviction
and fines, recoveries, and restitutions totaling
approximately $5,000,000.
Launching New Law and Order Initiatives.
The Administration has used a variety of ap
proaches to fight violent crime. In 43 cities, joint
local-Federal task forces augment the approxi
mately 2,000 Federal agents assigned to fight
violent crime. Since their inception in 1991, these
task forces have removed thousands of violent
criminals from our streets. Project Achilles,
which targets armed career criminals, resulted
in 3,019 convictions, with average sentences of
nine years, between 1989 and 1992. Project
Triggerlock, which is also designed to put armed
career criminals behind bars, resulted in Federal
charges against 7,200 defendants in its first 14
months of operation. Another Federal initiative,
Operation Gunsmoke and Gunsmoke II, led to
the arrest of more than 3,300 violent fugitives
and 1,100 fugitives wanted for violent sex
crimes.
To continue the Bush Administration's con
certed attack on all forms of crime, an increase
of $700 million, or approximately 10 percent
over 1993, is needed for 1994. This increase
would maintain growth in the budgets of se
lected Federal law enforcement programs and
augment law enforcement infrastructure (sup
port staff, laboratories, and fingerprint identifica
tion) of Federal, State, and local law enforcement
agencies.

Strengthening Local Law Enforcement
Between 1989 and 1993, Federal funding for
State and local law enforcement increased about
120 percent, from $424 million to $938 million.
In the last four years, a total of $3.4 billion
has been provided to State and local law en
forcement agencies.
The Bush Administration has provided sub
stantial training, technical assistance, and inves
tigative support to local law enforcement. The
Administration has begun a revitalization of

FBI's fingerprint identification program. Since
1989, the Administration has allocated $308 mil
lion to the construction of a new facility and
the development of a state-of-the-art automated
fingerprint identification system. Once oper
ational in 1998, the system will enable law en
forcement agencies to identify fugitive mur
derers, rapists, and other violent criminals more
quickly and get them off the streets. The total
cost of this effort will exceed $700 million.
Extending Bush Administration policies into
1994 for Federal support for State and local law
enforcement efforts would require $1 billion, an
increase of $100 million, or approximately 11
percent over 1993. This level of funding would
continue support for the Byrne Anti-Drug Abuse
Grant Program and provide additional resources
for innovative State and local enforcement initia
tives.

Jailing The Criminal and Helping The Victim
Since 1989, Federal corrections spending has
increased by 20 percent, from $1.6 billion to $2.0
billion. Thirty-six new Federal prisons and de
tention centers have been opened and, compared
with 1989, an additional 21,000 criminals can
be incarcerated. Twenty-nine prisons have been
funded that will accommodate an additional
37,000 prisoners. By 1997, capacity will be al
most 99,000 beds, ensuring that criminals will
not be returned to the streets prematurely. In
addition, many prisoners will be paying the
first-year costs for their incarceration under a
new program proposed by the Bush Administra
tion. This program will save taxpayers an esti
mated $48 million a year.

Jailing the criminals is but one aspect of deal
ing with the consequences of crime. The trau
matic effects of the assaults upon innocent, law
abiding citizen must also be addressed. Nearly
6 million persons annually are the victims of
violent crimes. Each year, criminal fines are used
to help victims overcome the traumas they expe
rience at the hands of criminals. In 1993, $150
million will be used to assist such victims.
To open and staff recently constructed prisons,
$2.3 billion would be required in 1994. This is
an increase of $300 million, or about 15 percent.
This funding would provide the increased ca
pacity that is needed to reduce prison over
crowding and meet the space requirement of
an expanded prison population.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Integrating Law Enforcement With
Neighborhood Revitalization
The Administration's Weed and Seed program
coordinates law enforcement and social services
to provide a comprehensive neighborhood level
revitalization program. By combining social
service programs with community policing, a
bond of trust and mutual commitment can be
developed between police and local citizens. In
20 cities across the United States, Weed and
Seed revitalization is underway, and the quality
of life for neighborhood residents is steadily im
proving.

Reforming Federal and State Criminal Justice
Systems
The fifth principle of the Administration's
strategy has been to press for stronger criminal
laws and sanctions to apply in the fight against
crime. In June 1989, the Administration submit

ted a comprehensive legislative proposal that
would have significantly strengthened the hand
of law enforcement officials in the fight against
crime. The bill included: habeas corpus reform;
a "good faith" exception to the exclusionary
rule; stiff mandatory sentences for the use of
firearms in the commission of a crime; an en
forceable Federal death penalty; and other provi
sions designed to protect the victims of crime
rather than the criminal.

This comprehensive legislation, however, was
not enacted. Despite this failure, some tough
new crime fighting laws were enacted. For ex
ample, in October 1992, the President signed the
Anti Car Theft Act of 1992, which makes armed
carjacking a Federal offense. In 1993, a renewed
effort is needed to provide our Nation's law
enforcement officers with the authorities and
powers they need to combat crime effectively.

5E.

REFORMING AMERICAN EDUCATION AND
INVESTING IN HUMAN CAPITAL

America's ability to maintain its economic
competitiveness and quality of life is linked di
rectly to the knowledge and skills of the Amer
ican people. This relationship has been brought
into sharp focus in recent years. It is the basis
for Administration initiatives to raise educa
tional achievement by stimulating change in
State and local education practice and reforming
Federal education and training programs.
Education Department and Head Start Fund
ing. Federal funding for the Education Depart
ment increased $7.6 billion, or 33 percent, from
1989 to 1993. It would have increased by an
additional $1 billion, to 41 percent over 1989,

Table E-l.

had Congress passed the President's proposed
budget. Funding for Head Start has increased
125 percent since 1989, rising from $1.2 billion
to $2.8 billion, to fund services for over 721,000
children.

Ready to Learn. The first National Education
Goal—all children should start school "ready to
learn"—has received special attention in the past
four years, with new programs, better program
strategies, and increased funding. Federal spend
ing on major programs for early childhood de
velopment increased $10.3 billion, or 58 percent,
from 1989 to 1993.

EDUCATION DEPARTMENT AND HEAD START FUNDING GREW
38 PERCENT, 1989 TO 1993
(Budget authority; dollar amounts in millions)

1989
Actual

1994
Projected
Assuming
Continuation
of President
Bush's
Policies1

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

768
6,828
6,641
6,046
2,943

6,709
6,001
5,125
2,966

+47%
+34%
+20%
+51%

768
7,489
6,509
4,965
3,346

2,138

2,183

+16%

2,253

1,151
1,052
654
532
417
304
316
243
122
2,184

1,177
1,458
598
750
392
305
275
152
112
2,311

+28%
+10%
+68%
+2%
+73%
+88%
+101%
+95%
+33%
+33%

1,260
1,493
700
754
463
372
344
188
121
2,503

1993
Requested

Education Department:
Educational excellence .....................................................
Compensatory education.................................................
Federal Pell grants ............................................................
Guaranteed student loans (mandatory) ........................
Education for the disabled ..............................................
Vocational rehabilitation (mandatory) ..........................
Vocational education ........................................................
State and campus-based student aid.............................
Drug-free schools and communities..............................
Impact aid................................... ........................................
Disadvantaged student support services......................
Adult education.... .............................................................
Eisenhower math and science education......................
Research, statistics and assessment ...............................
Historically Black colleges...............................................
Other programs and activities........................................

4,579
4,484
4,285
1,961
1,889
918
1,330
355
733
227
162
137
78
84
1,734

Total, Education Department............................ ..........

22,956

32,338

30,512

+33%

33,530

Head Start...............................................................................

1,235

- 2,802

2,776

+125%

3,474

Total, Education Department and Head Start.......

24,191

35,141

33,288

+38%

37,004

1 Average annual increase, 1989-1993, applied to 1993 enacted, except for: Educational excellence, which is the same as the 1993
request; mandatory programs, which equal current services; and Head Start which is a 25 percent increase over 1993.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Chart E-l. HEAD START FUNDING MORE THAN DOUBLED SINCE 1989

SELECTED AMERICA 2000 ACCOMPLISHMENTS THROUGH 1992
•
•
•
•
•

•
•

44 States made AMERICA 2000 commitments.
Over 2,700 communities made AMERICA 2000 commitments.
Satellite TV town meetings were held regularly, linking the 2,700 communities in discus
sions of education reform issues.
The AMERICA 2000 newsletter shares ideas and experiences among reformers.
Private industry created the New American Schools Development Corporation, which has
raised its first $50 million and funded 11 design teams—selected from nearly 700 bid
ders—to create "break the mold" schools.
Consensus on the need for, and projects to devise world-class standards for student
achievement and national assessments to measure progress.
Rising State and local interest in programs of parental choice of schools.

Elementary and secondary education. Improv
ing the educational performance of all students
at the elementary and secondary level is a basic
task of domestic policy.

• In September 1989, President Bush con
vened the first National Education Summit
with the Governors. The President and the
Governors agreed to work together on: na
tional education goals; Federal, State and

local strategies to achieve them; and ways
to measure progress toward them.

• Six National Education Goals were promul
gated in 1990; a National Education Goals
Panel is monitoring progress.
• In 1991, the Administration set out an edu
cation reform strategy, America 2000, for
Federal, State, local, private sector and fam
ily actions necessary to achieve the National

5E.

REFORMING AMERICAN EDUCATION AND INVESTING IN HUMAN CAPITAL

Table E-2.

MAJOR PROGRAMS FOR EARLY CHILDHOOD DEVELOPMENT
INCREASED 58 PERCENT, 1989 TO 1993
(Budget authority except where noted; dollar amounts in millions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies2

Head Start...................................................................................
WIC................................................................................ ..............
Earned Income Tax Credit: Refunded Credits (outlays)
(mandatory)........ ...................................................................
Dependent Care Tax Credit: Outlay equivalent..................
Child Care and Development Block Grants ........................
Child Nutrition (mandatory) ..................................................
Disabled Infants and Pre-School ............................................
Maternal and Child Health.....................................................
AFDC JOBS day care (mandatory) ........................................
AFDC at-risk day care (mandatory)......................................
AFDC transitional day care (mandatory) .............................
Health Earned Income credit (outlays) (mandatory) .........
Healthy Start ..............................................................................
Community and Migrant Health Center..............................
Even Start ...................................................................................

1,235
1,929

2,802
2,840

2,776
2,860

+125%
+48%

3,474
3,146

4,002
4,875
—
4,591
317
554
17
—
—
—
—
180
15

7,894
3,805
850
6,480
501
674
371
300
75
610
143
265
90

8,396
3,385
893
6,827
539
665
1371
^00
J75
513
79
197
89

+110%
-31%
N/A
+49%
+70%
+20%
+2,082%
N/A
N/A
N/A
N/A
+9%
+493%

9,274
3,585
918
7,330
633
698
420
300
85
590
98
233
199

Total ....................................................................................

17,715

27,700

27,965

+58%

30,983

N/A = Not Applicable.
1 Mid-Session Review estimate.
2 Estimates are average 1989-1993 increase applied to 1993, except: current services for most mandatory programs; Child Care and
Development Block grant, same increase as proposed for 1993; Child Nutrition includes savings proposals; WIC, 10 percent increase;
Head Start, 25 percent increase.

Education Goals. AMERICA 2000 challenges
every State and community to commit pub
licly to: create a plan for achieving the Na
tional Goals; measure and report progress;
and design "New American Schools" tail
ored to respond to local education needs.

• In April 1989, the Administration proposed
"Excellence in Education" legislation, which
was expanded in 1991, to further support
AMERICA 2000. It would have financed:
programs to demonstrate ways of allowing
parents more choice in deciding where their
children are educated; a first round of New
American Schools; rewards to schools that
show continued improvement in edu
cational achievement of all students; flexibil
ity in Federal program administration in re
turn for accountability for increased student
performance; incentives for mathematics
and science students; and new approaches
to teacher and administrator training. Sev
eral smaller elements of the proposal were

enacted in other bills, but no major edu
cation reform legislation was passed.

• Consistent with the fourth National Edu
cation Goal, special efforts have been made
to raise performance in mathematics and
science education. An interagency committee
has brought policy and program planning
at the Education Department, the National
Science Foundation and other agencies into
a coordinated system. Funding has in
creased $936 million, or 76 percent, from
1989 to 1993, to a total of $2.2 billion.
Transition from School to Work. As employ
ers expressed rising concern over the education
and skills of the entry level work force, new
studies, legislation and demonstrations were car
ried out.

• The Secretary of Labor's Commission on
Achieving Necessary Skills (SCANS) outlined
the competencies and basic skills that un
derpin success in the workplace.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table E-3. FEDERAL PROGRAM RESOURCES IN SUPPORT OF THE
NATIONAL EDUCATION GOALS INCREASED 42 PERCENT, 1989 TO 1993
(dollar amounts in billions)
1989
Actual

By Age Category:
Preschool years ......................................... ....... ........................
School years............................................... ...............................
Post-high school........................................ ...............................
Not age specific ........................................ ...............................

1993
Proposed

1993
Enacted

Percent
Change: 1989
to 1993
Enacted

9.3
15.8
30.1
1.2

20.3
22.0
37.5
1.5

21.0
21.0
36.7
1.6

+127%
+33%
+22%
+31%

56.4

81.3

80.3

+42%

By Department/Agency:
Education ................................................... ...............................
Health and Human Services .................. ...............................
Defense....................................................... ...............................
Agriculture................................................. ...............................
Labor ........................................................... ...............................
Veterans...................................................... ...............................
Other........................................................... ...............................

22.4
8.0
12.8
7.4
3.8
0.9
1.2

31.8
17.8
13.8
10.6
4.2
1.2
2.0

30.8
18.4
13.2
10.2
4.4
1.1
2.0

+38%
+132%
+3%
+39%
+17%
+29%
+68%

Total .................................................... ...............................

56.4

81.3

80.3

+42%

Total ....................................................

• The Administration proposed a "National
Youth Apprenticeship Act" to help students,
through a program that links families,
schools, and employers.
• The Departments of Education and Labor
jointly funded business, labor and education
groups to develop voluntary education and
skill standards for the workplace, as called
for in the America 2000 strategy.
Postsecondary education. Reauthorization of
the Higher Education Act was completed in July
1992. The Bush Administration proposed sub
stantial increases in funding for Pell grants, es
pecially for the lowest income students; more
aid for the middle-class; tough measures to re
duce loan defaults; barring schools that abuse
the system; restoration of financial integrity to
the guaranteed loan system; State monitoring of
schools, lenders and loan guarantors; rewards
for low income students (Pell recipients) with
high academic achievement; and restructure of
pre-college assistance to ensure equity and ac
cess.
The bill finally enacted made progress on a
few of these goals, but authorized spending far
in excess of what Congress then appropriated.
The new law established a five-year test of a

direct student loan program—use of Federal
capital and schools as loan originators, in place
of leveraging private capital through banks.
Appropriations for 1993 for discretionary stu
dent aid were $7.5 billion, an increase of $1.7
billion or 29 percent over 1989. Outlays for 1993
for the loan programs are estimated to be $5.1
billion, $.8 billion over 1989.

Skill Training. Changes in the economy and
the decline in low-skill jobs make several needs
imperative: improving the quality and organiza
tion of Federal training programs, especially for
the disadvantaged and at-risk youth; helping fi
nance education and retraining of workers; re
training displaced workers and easing their ad
justment to re-employment; and training those
returning to the labor force. The Federal govern
ment spends $18 billion a year on these efforts,
of which over $11 billion supports more than
a dozen programs with overlapping eligible
populations, delivery systems, and goals.

• The Administration proposed the "Job Train
ing 2000 Act" to coordinate the major pro
grams, improve access to services, and in
crease accountability for results. It would
have given new authority to councils of
business, labor and education to provide

5E.

REFORMING AMERICAN EDUCATION AND INVESTING IN HUMAN CAPITAL

Table E-4. ADMINISTRATION PELL GRANT PROPOSALS CALLED FOR
22 PERCENT INCREASE IN FUNDING OVER 1992,. A 48 PERCENT
INCREASE OVER 1989
1992 Enacted1

1993 Proposed

Percent
Change: 1992
to 1993

Pell grants in total:
Budget authority (in millions of dollars)...........
Maximum award (in dollars)...............................
Average award per student (in dollars) ............

5,463
2,400
1,452

2 6,641
3,700
1,846

+22%
+54%
+27%

Funding by family income category (in millions of dollars):
Under $10,000 ..........................................................
$10,000 to $20,000 ....................................................
$20,000 to $30,000 ....................................................
$30,000 to $40,000 ....................................................
$40,000 to $50,000 ....................................................
$50,000 and above...................................................

3,398
1,355
616
165
38
10

3,697
1,601
712
221
47
10

+9%
+18%
+15%
+34%
+24%
—

Average Award by Income Category (in dollars):
Under $10,000 ..........................................................
$10,000 to $20,000 ....................................................
$20,000 to $30,000 ....................................................
$30,000 to $40,000 ....................................................
$40,000 to $50,000 ....................................................
$50,000 and above...................................................

1,635
1,466
1,100
809
649
552

2,137
1,921
1,305
999
764
752

+31%
+31%
+19%
+23%
+18%
+36%

Presidential Achievement Scholarships:
Budget authority (in millions of dollars)...........
Scholarship awards per recipient (in dollars)....

—
—

170
500

—
—

1 Enacted level as shown in the 1993 Budget.
2 Includes shortfall funding.

"one-stop shopping" for training services—
assuring that Federal funds provide quality
services.

• Important features of the Administration's
proposals for Labor's job training programs
were enacted, including those which will
improve training quality, target the most
disadvantaged, and strengthen fiscal con
trols.
• Administration initiatives for improvement
of vocational rehabilitation for individuals
with disabilities were incorporated into the
1992 reauthorization.

Prospects for the Future. Federal funds and
policies are significant elements in the nation's
education and training systems, but they are not
the central elements. The States and the private
sector, and students and their families are the
more important participants. They look to the
Federal government for leadership.

Funding has grown substantially, but funding
growth alone is not a sufficient condition for
improved educational quality. Increases in edu
cation spending in the 1980s by all levels of
government did not result in educational per
formance equal to the nation's needs.

New money does enable some new strategies
and improved practices to be implemented and,
perhaps as importantly, signals to the nation the
commitment of the Federal government's com
mitment to reform. The Bush Administration ad
vocated increased spending on education, de
spite the bi-partisan budget agreement's strict
overall caps on domestic spending. Education
was clearly a major funding priority. Continued
spending growth is called for, but must be ac
companied, as it was in the Bush Administra
tion, by the other policy changes (e.g., standards,
assessments, choice) that are even more impor
tant to raising educational achievement.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

The most important changes must be made
in local communities—restructuring schools and
"re-inventing" the way we teach our children.
That is why the Administration concentrated ef
forts on private and public school choice for
low and middle income families, most notably
in its proposed State and Local "GI Bills" for
Children Act. The goal of this and other choice
initiatives is not to harm or diminish the role
of public education. On the contrary, it is to
stimulate change and improvement in the edu
cation of all children by stimulating competition.
By allowing the constituency of our public
schools—parents and children—to have options
for better education, i.e., the power to select
schools, we can drive energy back into what
are often lethargic and overly bureaucratic local
school systems. It is important that the nation
maintain a strong public school system—but it
is more important that children of families at

all income levels receive the best education pos
sible, public or private.
Working with families at all income levels to
strengthen and support their commitment to
their children's educational achievement is vital.
Parents are demanding a stronger voice in the
choice of where their children are educated. Par
ents should be supported in making that choice
with public funds.

The Federal Government should continue to
provide national leadership and a visible com
mitment to all six of the National Education
Goals. It should continue close cooperation with
States and localities on education reform. It
should continue to work with Congress to make
Federal activities that support school to work
transition, skill training and lifelong learning
more effective and more closely intergrated with
State, local and private sector strategies.

5F. PROTECTING THE ENVIRONMENT AND
PROVIDING A MORE SECURE ENERGY FUTURE
Over the last four years, President Bush has
increased spending for high-priority environ
mental investments by $10.7 billion (145 percent)

and high-priority energy research and develop
ment investments by $1.2 billion (33 percent)
(see Tables F-l and F-2).

Table F-l. CONTINUING PRESIDENT BUSH'S POLICIES WOULD REQUIRE
A $4.4 BILLION (+24%) 1994 INCREASE FOR ENVIRONMENTAL PROTEC
TION INITIATIVES
(Budget authority; dollar amounts in millions)

1993
Requested

1993
Enacted

863
12

1,653
139

1,531
69

+77%
+475%

1,770
140

17
—

60
—

28
—

+65%
—

60
150

1,762
1,155
102

5,729
4,020
290

5,758
3,885
257

+227%
+236%
+152%

7,170
5,130
315

241

221

+550%

330

25
—
—
—
—
—
1,752
1,410
295
—

100
70
40
55
40
35
2,698
1,750
616
161

100
70
40
55
45
35
2,694
1,574
576
—

+300%
—
—
—
—
—
+54%
+12%
+95%
—

100
70
40
55
45
35
2,825

196
—
—

413
1,372
—

396
1,327
—

+102%
—
—

430
1,580
(200)

7,388

18,815

18,092

+145%

22,445

1989
Actual

America the Beautiful ............................................................
Reforestation ........................................................................
State LWCF: Partnership with States for Parks and
Outdoor Recreation ........................................................
Forests for the Future Initiative (USFS/EPA)....................
Federal Facility Cleanup:
Department of Energy1 .....................................................
Department of Defense2....................................................
Other Agencies ....................................................................
Border Pollution: Pollution Control Along the U.S.-Mexico Border in Support of NAFTA ....................................
Providing Clean Waters for America's Cities:
Boston....................................................................................
New York .............................................................................
Baltimore...............................................................................
Los Angeles..........................................................................
San Diego..............................................................................
Seattle ....................................................................................
EPA Operating Budget ..........................................................
Superfund.................................................................................
Protecting America's Wetlands ............................................
Wetlands Reserve Program ...............................................
Army Corps of Engineers: Protection and Restoration of
Environmental Resources ..................................................
Global Change Research........................................................
OCS Lease Buy-Back (FL)3 ...................................................

Net Total4 ........................................................................

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

Percent
Change:
1989 to
1993
Enacted

1,750

690
375

*1994 Projected Level includes $261 million for Waste Management activities at Hanford, WA. These monies would be used for
accelerated construction of the Hanford Waste Vitrification Project and for grout disposal facilities.
21993 President's Request reflects an increase of $300 million for the February 1992 submission to Congress for environmental
compliance work to be accomplished in the revolving funds.
31994 funding could be offset by projected receipts from environmentally sound leasing of the Arctic National Wildlife Refuge.
4 Total has been adjusted to eliminate double counting, including federal facility cleanup and DOI wetlands already included in
America the Beautiful; and border pollution, wetlands activities, and global change research included in EPA's operating budget and
the Army Corps of Engineers.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table F-2.

DEPARTMENT OF ENERGY: BUDGET POLICY HIGHLIGHTS
(Budget authority; dollar amounts in millions)

Defense: Weapons and Materials............................ ............
Energy Research and Development ....................... ............
Basic Energy Research........................................... ............
Solar and Renewable Energy............................... ............
Energy Conservation............................................. ............
Fossil Energy R&D and Clean Coal ................... ............
Superconducting Supercollider ........................... ............
Other General Science (accelerators) .................. ............
Nuclear Energy....................................................... ............
Environment, Safety, and Health........................ ............
Environmental Clean-up (net) ................................. ............
Defense sites............................................................ ............
Civilian sites............................................................ ............
Uranium Enrichment Clean-up ........................... ............

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

6,651
3,507
1,271
149
159
565
0
914
357
91
1,762
1,447
255
60

7,863
5,311
1,718
247
366
811
650
1,003
349
167
5,729
4,805
707
217

7,823
4,656
1,666
257
349
431
517
931
345
160
5,758
4,831
710
217

+18%
+33%
+31%
+73%
+120%
-23%
N/A
+2%
-2%
+75%
+227%
+234%
+179%
+262%

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

7,194
6,394
2,297
353
560
615
859
1,086
455
170
7,169
6,231
786
152

1 This account showed small negative BA (-$2 million) in 1989.

Administration Policy
Energy policy and environmental policy are
inextricably linked, and this linkage has been
recognized and respected in the development
of Administration policies and budget priorities.
Policies the Administration has pursued include:

• Protecting and expanding America's na
tional parks, forests, wildlife refuges and
other public lands through additional fund
ing for high-priority land protection, natural
resource conservation, and visitor use.
• Improving the quality of the Nation's coast
al waters, accelerating the cleanup of Super
fund hazardous waste sites, and upgrading
pollution control and resource protection
along the U.S.-Mexico Border.
• Working to improve air quality in America
by passing a new Clean Air Act and by
giving EPA the resources to implement it
fully.

• Promoting environmental protection, while
encouraging economic growth and develop
ment, through the use of innovative marketbased approaches.
• Forming partnerships with State and local
governments and the private sector to cost

share environmental protection and recre
ation investments.
• Cleaning up Federal facilities, both nuclear
and non-nuclear, to ensure that the Federal
government meets the requirements of var
ious signed agreements, court decrees, stat
utes, and regulations.

• Fully implementing the President's strategy
to protect and enhance the Nation's wet
lands and taking a leadership role in the
preservation of the Nation's and the
World's forests.
• Bringing more efficiency and competition to
the energy sector through the implementa
tion of a National Energy Strategy (NES)
that will expand fuel and technology
choices available to the Nation, thereby cre
ating a more secure and environmentally
sustainable energy future.

• Encouraging the private sector and univer
sities to be partners in carrying out the re
search and development activities associated
with the protection of the environment and
the improvement of our energy security.

5F.

PROTECTING THE ENVIRONMENT AND PROVIDING A MORE SECURE ENERGY FUTURE

Accomplishments
Protecting The Environment

America the Beautiful (ATB) is a major, multi
year natural resource conservation and recre
ation initiative launched by President Bush to
protect and enhance America's national treasury
of parks, forests, wildlife refuges, and other pub
lic lands. This initiative has already secured over
a billion dollars to expand national parks, for
ests, refuges, wetlands, campgrounds, and scenic
rivers. It has also secured an additional billion
dollars for improved maintenance of these spe
cial areas.

The Administration's reforestation initiative,
part of the ATB program, was proposed in Janu
ary 1990 in the President's 1991 budget and was
highlighted at the 1992 United Nations Rio Con
ference on Environment and Development
(UNCED). The goal of this program is to achieve
the planting or improvement of one billion trees
a year in America. Additional funding, included
under ATB in 1994, would expand tree planting
and care on privately-owned rural lands (includ
ing Indian trust lands), and in over 40,000 cities
and towns across the Nation. Complementing
this effort is the Administration's policy to end
clear-cutting as a standard practice on Federal
lands.
The President's commitment to ensure that
Federal facilities meet the same environmental
standards that apply to private facilities is well
underway and supported by previous budgets.
Funding for these activities has grown 225 per
cent from 1989 to 1993.
President Bush's policies have been designed
to protect America's oceans and coastal areas
by ending ocean dumping of sewage sludge,
proposing and signing a tough oil spill preven
tion bill, and imposing a 10-year moratorium
on oil and gas leasing over major areas of eco
logically sensitive coast. Further, the President
has targeted sewage treatment grants to six of
the Nation's cities with the largest unmet sec
ondary treatment needs. Boston and the other
targeted cities are located in coastal areas with
significant recreational and ecological resources
where expedited construction can have a signifi
cant impact on water quality. In addition, the
President has dramatically increased funding
over the last four years for the Great Lakes,
Chesapeake Bay, and the Gulf of Mexico.

Significant increases in EPA's operating pro
gram since 1989 have been made in order to
fulfill EPA's statutory mandates and improve
the environment. In implementing the 1990
Clean Air Act Amendments, which the President
pushed through Congress after 10 years of con
gressional gridlock, EPA has already proposed
or finalized rules that will achieve 85 percent
of the pollution reduction required by the law.
Further, the Act's acid rain emissions trading
system is the most sophisticated application yet
of market-based approaches to environmental
protection. On the enforcement front, the Ad
ministration has broken new ground and old
records, filing more cases, collecting more pen
alties, and putting more polluters behind bars
than every previous Administration in history
combined. In total, EPA's enforcement resources
have been increased by 37 percent since 1989.

The U.S. Global Change Research Program
(USGCRP) is designed to understand more fully
the Earth's climate system, in order to support
national and international policy-making activi
ties associated with global and regional environ
mental issues, such as ozone depletion and glob
al warming. The USGCRP has made the U.S.
the world's leader in this area, providing over
one-half of worldwide support for climate
change research.
Providing a More Secure Energy Future

In July 1989, the President called for a bal
anced approach to energy policy that encour
aged both energy conservation and energy pro
duction whenever either could be shown to be
effective and efficient in the marketplace. The
development of the National Energy Strategy
continued over a 20 month period under the
leadership of the Department of Energy (DOE)
and the resulting National Energy Strategy was
released on February 20, 1991. The Energy Pol
icy Act of 1992, signed into law in Octobr 1992
by President Bush, embodies virtually all of the
Administration's initiatives. More specifically:
• The Act changes incentives in the Nation's
electricity markets, removing impediments
to competition and increasing the rewards
for innovative ways of generating electric
power. This can enhance U.S. international
competitiveness, reduce consumer costs and,
over time, result in important technological
advances.

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

• The Act contains licensing reforms that will
help preserve the option of using nuclear
power—which now accounts for twenty
percent of our electricity supply—in the
future.
• The Act reforms the alternative minimum
tax and will enable the Nation's independ
ent oil and gas producers to retain more
of their income for reinvestment in domestic
oil and gas production.

• The Act also includes provisions for increas
ing research and development on a wide
range of promising new technologies.

Energy Conservation.—President Bush also
has significantly increased budget requests for
key research programs in Conservation and Re
newable Energy. Funding for Energy Conserva
tion R&D has been increased by 120 percent
during the Bush Administration, and investment
in Solar and Renewables has been increased by
73 percent. On April 17, 1991, the President
issued Executive Order No. 12759 on Federal
Energy Management. This Order directs all Fed
eral agencies to reduce overall energy consump

tion in Federal buildings and facilities by 20
percent by the year 2000 and fuel consumption
in Federal vehicles by 10 percent by 1995. The
Order also directs Federal agencies to procure
the maximum number of alternative fueled vehi
cles by the end of 1995. It will save American
taxpayers as much as $800 million annually by
the year 2000 and cut Federal energy consump
tion by the equivalent of 100,000 barrels of oil
per day.
In September 1991, the Solar Energy Research
Institute (SERI) was elevated to National Labora
tory status as the National Renewable Energy
Laboratory. This redesignation, along with the
increased support for the laboratory, will pro
vide a permanent focus and assure technical
leadership in conservation and renewable energy
technologies.

This technical leadership is beginning to pay
off. Solar energy is increasingly economically
competitive. The cost of producing biofuels has
been reduced by 50 percent since the mid-1980's.
Energy Production.—In energy production, the
Administration undertook a series of administra-

Chart F-l. INCREASED INVESTMENT DURING THE PAST FOUR YEARS IN
CONSERVATION AND SOLARZRENEWABLES R&D
$ MILLIONS
700 __—--------------------------------------------------------------------------------------------------------------------

1989

1990

1991

1992

1993

5F.

PROTECTING THE ENVIRONMENT AND PROVIDING A MORE SECURE ENERGY FUTURE

tive and budget actions aimed at getting the
U.S. to produce more of the energy that it uses.
These actions included:

• regulatory reforms for oil pipelines and nat
ural gas transportation systems;
• allowing the export of California heavy oil;
• proposing and getting enacted in Congress
over 2 billion dollars in targeted tax credits
aimed at revitalizing oil and gas producing
sectors;
• launching a major new Government-indus
try cooperative R&D program focused on
increasing production from domestic oil
fields;
• reducing Federal royalty rates on stripper
wells in order to delay abandonment of do
mestic oil fields; and
• providing substantial financial assistance to
alcohol and other alternative fuels in order
to hasten their commercial introduction.

Perhaps the most important change in the op
eration of our energy research is the successful
introduction of policies aimed at increasing pri
vate sector involvement and cooperation with
the Government in developing new technologies.
In signing the Energy Policy Act into law, Presi
dent Bush pointed out that "in all of these im
portant endeavors, the government will serve
as a partner of private enterprise, not as its mas
ter." For example, the President's 1990 budget
proposed a four year, $260 million U.S. Ad
vanced Battery development program, costshared 50-50 with a consortium formed by the
Nation's three largest automobile manufacturers
and the electric utility industry. The President's
proposal was accepted and today the U.S. Ad
vanced Battery Consortium, which represents a
new approach to government-industry coopera
tion, is a reality. The goal of this partnership
is to develop battery technologies that will allow
electric vehicles to become commercially com
petitive. This effort is only one small piece of
tiie President's National Technology Initiative,
which is discussed more fully in Chapter 5A,
"Enhancing Research and Development and Ex
panding the Human Frontier."

Funding and Actions Required to Continue
Policy

Within the context of the Budget Enforcement
Act's cap on discretionary spending, a continu
ation of the Bush Administration's environ
mental investment policy would increase the
1994 environmental budget by $4.4 billion (see
Table F-l). In order to continue the energy in
vestment strategy of the Bush Administration
and to implement the provisions of the Energy
Policy Act, the 1994 energy budget should in
crease by $1.8 billion (see Table F-2).
Protecting The Environment

President Bush's America the Beautiful initia
tive would require $2 billion in 1994. One ATB
component, Land and Water Conservation Fund
(LWCF) grants to the States, provides continued
matching funding for the acquisition of non-Federal parks and open spaces, and for the devel
opment of outdoor recreation resources. $60
million is recommended for LWCF grants.
The President's reforestation goal to plant,
maintain, and conduct timber stand improve
ments affecting one billion trees per year will
require $140 million in 1994. The U.S. proposed
at the "Earth Summit" in Rio de Janeiro to dou
ble international forest assistance from $1.35 bil
lion to $2.7 billion, to help conserve the Earth's
forests. The President's Forests for the Future
Initiative would provide $150 million in new
U.S. bilateral forest aid in 1994, doubling the
1993 level, to begin this initiative.
Significant resources will be required in 1994
to ensure that the Departments of Energy and
Defense and other Federal agencies meet mile
stones for environmental cleanup and compli
ance established in agreements, consent orders,
and other commitments. Funding of $12.6 billion
is required for Federal facilities cleanup in all
Federal agencies.

The North American Free Trade Agreement
(NAFTA) is unprecedented in its sensitivity to
environmental issues. In support of NAFTA,
substantial increases in resources are rec
ommended in 1994 to carry out commitments
under the U.S.-Mexico Environmental Border
Plan for the protection of human health and

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

natural ecosystems along the border between the
two countries.
The 1994 budget for Superfund should main
tain the Administration's enforcement emphasis
on requiring polluters to clean up the problems
they created, and on redirecting resources from
support activities to actual site cleanup work.
Extension of current policy would require $1.75
billion.

A special priority on wetlands protection
should be continued to ensure Wetlands Reserve
Program funding for enrollment of an additional
450,000 acres in 1994, towards meeting the target
of 1 million acres by the end of 1995.

A key component of the U.S. Global Change
Research Program that warrants increased fund
ing is NASA's Earth Observing System satellite
platforms, which will contribute to long-term
monitoring and modeling of the Earth's complex
processes.
In an October 1992 letter to the Governor of
Florida, the President stated that a "down pay
ment" for a buy-back of certain OCS leases off
southwestern Florida near the Everglades would
be proposed in the 1994 budget. The Admini
stration also has proposed since 1989 envi
ronmentally sound oil and gas leasing and
exploration in a portion of the Arctic National
Wildlife Refuge (ANWR). Part of the expected
Federal share of revenues from ANWR leasing
could be used to reimburse the Treasury for
projected costs of any OCS lease buy-backs.

Providing a More Secure Energy Future
For the future, the Administration believes
that implementation of the NES must continue
and that the Energy Policy Act of 1992 must
be implemented in a balanced way in order to
avoid imposing unnecessary costs on the econ
omy. Implementation of the NES for 1994 will
require $1.2 billion with over $500 million for
the implementation of the activities of the
Energy Policy Act of 1992.

The recommended increase for Energy R&D
in 1994 is $1.7 billion, or 37 percent, as shown
in Table F-2. Within this total, basic energy
research increases by over $550 million. The
increase is driven by two factors: 1) FCCSET
national research initiatives in materials, bio

technology, and high-performance computing;
and 2) construction of research facilities and
purchase of instrumentation, including new
instrumention for academic institutions. These
programs include for example, Advanced Light
Source, Advanced Photon Source, Computa
tional Biology, the Human Genome Project, and
the Mammalian Genetic Center.
Funding increases are also recommended for
the Superconducting Super Collider (up 66 per
cent), and for other accelerator facilities (up 17
percent), including construction of the B-Factory
at the Stanford Linear Accelerator Center, the
main injector at Fermilab, and restoration of the
original construction schedule for the Relativistic
Heavy Ion Collider. The recommended increase
in 1994 for Nuclear Energy is largely for reactor
safety projects in the former Soviet Union.

The use of clean burning natural gas should
increase through the continuation and adoption
of critical Administration policy initiatives,
which include:
• introducing more competition into the gas
market through implementation of Federal
Energy Regulatory Commission Order 636;

• increasing supply and demand for natural
gas through expanded cooperative R&D
programs;
• increasing availability of non-sensitive Fed
eral lands for exploration and production
of natural gas; and

• reducing regulatory disincentives to ex
panded gas use.
Over the next two decades the U.S. must con
tinue its successful efforts to develop new en
ergy technologies and to become more energy
efficient while producing more of its energy
needs domestically. It must balance production
and conservation to enhance U.S. world com
petitiveness without resorting to heavy-handed
regulations, punitive energy taxes and import
fees that harm consumers and cost Americans
jobs. The result will be the utilization of more
environmentally acceptable technologies and
forms of energy that do not conflict with the
long term goal of building an internationally
competitive economy.

5G. EXPANDING CHOICE AND OPPORTUNITY
IN HOUSING AND THE INNER CITIES
providing housing vouchers and other
choice-based subsidies to low- and very
low-income families paying more than 30
percent of income for rent or living in inad
equate housing;

INTRODUCTION

The Administration considers the most critical
problems affecting housing and the inner cities
to be:
• the affordability of safe and decent housing,
which most severely impacts very low-income families (i.e.z families earning less than
half the median income);

• would expand homeownership opportuni
ties through tax incentives, such as a $5,000
tax credit for first-time home buyers, and
direct grants, such as the HOPE program
for low-income renters who aspire to be
come homeowners;

• the difficulties faced by low-income families
(i.e., families earning less than 80 percent
of the median income) and other first-time
home buyers in trying to buy a home;

• have helped families and individuals over
come problems that perpetuate homeless
ness by combining supportive services with
long-term housing, as in the Department of
Housing and Urban Development's Shelter
Plus Care program; and

• the continuing tragedy of homelessness>
particularly of chronic homelessness; and
• the dearth of private-sector investment in
the nation's most blighted and crime-ridden
urban areas.

• would encourage private investment in the
inner cities through Enterprise Zones offer
ing tax incentives to workers, investors and
entrepreneurs for new job creation, and the
new Weed and Seed initiative.

To address these problems, the Administration
has adopted policies that:

• have increased the number of families re
ceiving housing assistance from 5.6 million
in 1989 to 5.8 million in 1993, primarily by

TABLE G-l.

HIGH PRIORITY INVESTMENTS—HOUSING AND THE INNER
CITIES
(Dollar amounts in millions)

1989
Actual

1993
Requested

1993
Enacted

Percent
Change:
1989 to
1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bush's
Policies

HUD Agency Total:
Budget authority.................................. .................
Outlays ................................................... .................

14,347
19,705

24,323
28,116

25,921
28,213

+81%
+43%

24,097
28,678

FmHA Housing Programs:
Budget authority.................................. .................
Outlays ................................................... .................

782
725

864
923

1,082
997

+38%
+38%

1,015
968

5,598,467

5,858,314

5,833,195

+4%

5,971,340

Total Subsidized Units ........................... ...............

100

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

CHOICE IN AFFORDABLE HOUSING
For many years, the Federal Government met
the housing needs of low- and very low-income
renters by financing the construction or rehabili
tation of public and other forms of assisted
housing. This policy is widely acknowledged to
have failed because it often compelled assisted
families to live in densely populated and poorly
maintained housing projects, and in neighbor
hoods with high concentrations of poverty and
few chances for betterment.

Very low-income renters (those at or below
50 percent of median income), like all renters
generally, are better able than the Federal Gov
ernment to determine the housing and neighbor
hoods in which they want to live. The Bush
Administration has emphasized the principle of
choice through housing vouchers and other tenant-based subsidies. As Chart G-l indicates,
about 235 thousand net additional households
have received rental or other housing subsidies
from the Department of Housing and Urban De
velopment (HUD) and the Farmer's Home Ad
ministration (FmHA) between 1989 and 1993.
Almost all of these additional subsidies have

provided families or individuals with the ability
to choose where they live. Since 1980, the num
ber of assisted housing units has grown from
4.2 million to 5.8 million.

By funding housing vouchers, rather than the
construction of additional housing, the Adminis
tration's housing policy has focused on the most
critical housing problem facing very low-income
families—excessive rent burden, or paying more
than 50 percent of income for rent. The number
of very low-income families with priority hous
ing problems (experiencing excessive rent bur
den and/or occupying severely inadequate or
overcrowded housing) has grown from 2.5 mil
lion in 1974 (the first year such data are avail
able) to 3.8 million in 1983, but has declined
slightly since then to 3.6 million in 1989.
This decline in housing problems has occurred
mainly because the quality of housing has im
proved. As a result, the number of very lowincome renters living in severely inadequate or
overcrowded housing has been cut by one-half,
from 0.8 million in 1974 to 0.4 million in 1989.

In contrast, excessive rent-burden problems
for very low-income renters have continued to

5G.

EXPANDING CHOICE AND OPPORTUNITY IN HOUSING AND THE INNER CITIES

101

increase. The percent of all very low-income
families paying more than 50 percent of their
income for rent as their only housing problem
increased from 19 percent to 26 percent between
1974 and 1989. The number of very low-income
families with excessive rent burden alone has
risen from 1.4 million in 1974 to 2.7 million in
1989, a 90-percent increase. Vouchers are the
most effective approach to addressing the largest
and growing housing problem facing very lowincome families—excessive rent burden.

The policy implication is clear: with limited
resources, additional rental housing subsidies
should be choice-based, like vouchers, and tar
geted at meeting the worst housing need, the
excessive rent burdens of very low-income fami
lies.

Choice-based subsidies, like vouchers, offer
another advantage—they enable the Government
to assist more needy families with each tax dol
lar. By funding mostly vouchers rather than new
construction, as the Administration has pro
posed, the Federal Government would meet the
housing needs of almost 500 thousand addi
tional tenants over the next six years, about 25
percent more than under Congress' current pol
icy mix, which favors the construction of new
housing units built with Federal funds over
vouchers for use in any rental unit. Chart G-2
illustrates this potential gain in the number of
tenants assisted by HUD at current (1993)
spending levels from 1993 to 1998.

In addition to expanding opportunity and
choice in housing for very low-income tenants,
the Administration has sought to broaden homeownership opportunities for low-income and
first-time home buyers. Homeownership gives
people a stake in their own future and in the
future of their neighborhoods. This opportunity
to grow and prosper is just as critical, if not
more critical, for low-income than for upperincome families and neighborhoods.

HOMEOWNERSHIP OPPORTUNITIES FOR
LOW-INCOME AND FIRST-TIME HOME
BUYERS

This fundamental premise underlies the HOPE
(Homeownership Opportunities for People Ev
erywhere) initiative advanced by the Adminis
tration and enacted in the National Affordable
Housing Act (NAHA) of 1990. Table G-2 dis

Chart G-2. NEW HUD ASSISTED HOUSING UNITS
(PRESIDENT’S PROGRAM VS. CURRENT PROGRAM)

102

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

plays the Administration's requested investment
in homeownership for low-income families
through HOPE grants and the actual levels en
acted by Congress. (HOPE grants includes
HOPE I, II, and III, and HOPE for Elderly Inde
pendence.)
By fighting inflation, the Administration's eco
nomic policies have achieved the lowest mort
gage rates in over 20 years. These low rates
have played a significant role in making homeownership opportunities available for many
home buyers.

TABLE G-2.

As shown in Chart G-3, the rate of homeownership among all Americans has held rel
atively constant, varying between 64 and 66 per
cent since the early 1970s. However, the rate
has declined among young families. By 1991,
only 32.8 percent of 25-29 year-olds and 51.3
percent of 30-34 year-olds were homeowners,
down from 43.3 percent and 61.1 percent, re
spectively, in 1980.

To expand homeownership opportunities for
relatively under-served groups, like low-income

HIGH PRIORITY INVESTMENTS—HOPE GRANTS FOR
HOMEOWNERSHIP
(Budget authority; dollar amounts in millions)

Fiscal Year

President
Requested

1991 ........................................................................
1992 ........................................................................
1993 ........................................................................

165
865
1,010

Congress
Enacted

Difference: Enacted to Requested

361
361

Dollars

-165
-504
-649

Chart G-3. HOMEOWNERSHIP RATES
(TOTAL AND FOR YOUNG HOUSEHOLDS)

CALENDAR YEAR

■ TOTAL ■ AGES 30-34 ■ AGES 25-29
SOURCE: ’The State of The Nation’s Housing, 1992.’’ Joint Center for Housing Studies.

Percent

-100%
-58%
-64%

5G.

103

EXPANDING CHOICE AND OPPORTUNITY IN HOUSING AND THE INNER CITIES

families and first-time home buyers, the Admin
istration has, in addition to HOPE, proposed:

and the 1992 Housing and Community De
velopment Act.

• a $5,000 tax credit and penalty-free with
drawal from IRAs (Individual Retirement
Accounts) for first-time home buyers;

If the Nation is to achieve the full benefits
of homeownership, the Federal Government
must focus greater efforts on increasing homeownership opportunities for low-income families
and first-time home buyers.

• the use of housing vouchers by low-income
families for homeownership; and
• reforms to restore the financial soundness
of the Federal Housing Administration's
(FHA's) single-family mortgage insurance
program and assure that FHA mortgage in
surance remains available primarily for lowincome families and first-time home buyers.

LONG-TERM SUPPORT FOR THE
HOMELESS

In its commitment to end the tragedy of
homelessness, the Administration has signifi
cantly increased Federal support for programs
that serve the homeless. As Table G-3 indicates,
Federal spending on homeless programs in
creased by 95 percent between 1989 and 1993,
from $603 million to $1,179 million.

Congressional support for these Administra
tion efforts to increase homeownership has been
mixed. On the one hand, Congress:

• in 1990, created HOPE and instituted critical
FHA reforms similar to those proposed by
the Administration; and

• not acted on or undermined the tax credit
and IRA proposals for first-time home buy
ers; and

The Administration has concentrated funding
on programs, like HUD's Shelter Plus Care, that
meet the needs of the chronically homeless.
Many of the chronically homeless suffer from
drug or alcohol abuse, or mental illness. To
overcome the special problems of these hardto-reach individuals, the Administration has
supported programs that combine longer-term
housing with supportive services for substance
abusers and the mentally ill. As Table G-3 indi
cates, spending on homeless programs that ad
dress these longer-term problems has almost tri
pled, increasing from $295 million in 1989 to
$845 million in 1993.

• partially rolled back the 1990 FHA reforms
in the 1993 HUD-VA Appropriations Act

Future Federal funding for homeless assist
ance should continue to emphasize programs di

• in 1992, authorized the use of vouchers for
homeownership.

On the other hand, Congress has:
• consistently funded HOPE grants at less
than half the requested level (see Table
G-2);

TABLE G-3.

HIGH PRIORITY INVESTMENTS—HOMELESS ASSISTANCE
(Dollar amounts in millions)
1989 Actual

Funding Categories

Emergency Food and Shelter Pro
grams .................................................
Longer-Term Housing and Sup
portive Services Programs ...........
Total Homeless Assistance Pro
grams .............................................
Note: Totals may not add due to rounding.

1992 Actual

Outlays

1993 Enacted

Outlays

Percent
Change
in BA:
1989 to
1993

308

314

357

360

334

355

+8%

295

151

685

338

845

405

+187%

603

465

1,043

698

1,179

761

+95%

104

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

rected at solving the problems of the chronically
homeless.
ENCOURAGING ENTERPRISE IN THE
INNER CITIES

Parts of America's inner cities are caught in
a downward spiral of decay and decline. In the
most distressed communities, prolonged jobless
ness is breeding poverty and contributing to
crime and other forms of social disorder, which
deter investment and lead back to increasing
joblessness.

To help the Nation's inner cities break out
of this vicious circle, the Administration has pro
posed:
• creating Enterprise Zones to stimulate busi
ness growth in these distressed commu
nities; and
• launching a frontal assault on crime and
other social problems through an inter
agency initiative known as Weed and Seed.
Enterprise Zones would attack the roots of
poverty—the lack of entrepreneurship and pri
vate investment to produce economic oppor
tunity—-by:

• lowering to zero the capital gains tax rate
on long-term investments in the zones;

• offering wage tax credits for each job filled
by a low-income worker who is not covered
by the Earned Income Tax Credit—mainly
young workers looking for their first job;
and
• deferring income taxes for small investors
who invest in businesses in the zones.

The Weed and Seed proposal, which is cur
rently being implemented on a pilot basis, will
help embattled cities cope with the worst mani
festations of poverty and hopelessness—violent
crime and social breakdown—by:
• combining increased Federal initiatives with
State and local law enforcement efforts to
weed out crime; and

• coordinating the provision of comprehen
sive social services to sow the seeds of re
growth.
Only through a comprehensive strategy meld
ing Federal assistance with private investment
will these economically distressed inner-city
neighborhoods be able to reverse their long-term
decline.

5H. PRESERVING NATIONAL SECURITY AND
ADVANCING AMERICA'S INTERESTS ABROAD
The purpose of national defense and inter
national affairs programs is to increase the na
tion's security and economic prosperity and to
advance the causes of democracy, human rights,
international cooperation and the rule of law
through political, diplomatic, economic and mili
tary means.

The end of the Cold War and the break-up
of the Soviet Union have led to a change in
defense strategy. The focus of this strategy has
shifted from global war to regional conflicts.
This has permitted a reduction and restructuring
of U.S. military forces and programs and pro
vides the opportunity to realize significant sav
ings in defense.
The focus of international affairs programs
also has changed with the ending of the Cold
War. Assistance to Eastern Europe and the new
states of the former Soviet Union to help them
establish democratic governments and marketoriented economies has become a pressing objec
tive. Support to the Middle East peace process
and UN peacekeeping activities in other parts
of the world have also become of highest prior
ity. This Administration has also promoted free
and fair trade throughout the world and open
markets, particularly in the Western Hemi
sphere. Assistance to developing countries has
emphasized economic partnership and mutual
prosperity—as reflected in such programs as the
Enterprise for the Americas Initiative.
NATIONAL DEFENSE

Administration Policy
The Administration's defense policies are to:

• Maintain well-equipped and highly-trained
military forces that can ensure strategic de
terrence, exercise forward presence in key
areas and respond effectively in regional cri
ses, and retain the capacity to reconstitute
larger forces should they be required.
• Stem the spread of weapons of mass de
struction and missiles to deliver them.

• Restructure U.S. military forces by 1995 to
a base force oriented toward regional
threats. This restructuring will result in a
force about 25 percent smaller than the 1989
force. Forces in Europe by 1995 will be re
duced to 150,000, a 50-percent reduction.
Total active duty military personnel by 1995
would be reduced to 1.6 million compared
to 2.1 million at the end of 1989. Guard
and Reserve forces, military bases and civil
ian personnel would also be reduced.
• Ensure that a technological edge is main
tained by emphasizing research and devel
opment.
• Develop and deploy strategic and theater
defenses against ballistic missile attack in
order to protect against limited strikes from
accidental or unauthorized launches or the
threat posed by increased ballistic missile
proliferation. Improved theater defenses
should be available for deployment in the
mid-1990s and strategic defenses by the late
1990s.
• Continue improvements in defense manage
ment to eliminate unnecessary duplication
and reduce overhead.

Accomplishments
In the 1980's, our military capabilities were
significantly improved. The hollow forces of the
1970's were transformed into well-equipped,
highly-trained and combat-ready forces. This re
newed capability was essential to the winning
of the Cold War. It was also essential to our
decisive victory, with minimal American casual
ties, in Operation Desert Storm and to the re
sponsiveness of our armed forces to a number
of contingencies around the world.

The end of the Cold War provides the oppor
tunity to realize significant savings in defense.
At the same time, it offers the challenges of
how to make these savings in an orderly manner
that preserves essential military capabilities and
eases temporary adverse effects of defense re
ductions.
105

106

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

TABLE H-l.

FUNDING SUMMARY FOR NATIONAL DEFENSE AND
INTERNATIONAL AFFAIRS
Discretionary Funding (In billions of dollars)
(excludes Operation Desert Shield/Desert Storm)

1989
Actual

1993
Requested

1993
Enacted

1994
Projected
Assuming
Continuation
of President
Bushs
Policies

Department of Defense Military (051):
Outlays .....................................................................................
Budget Authority...................................................................

295.6
291.5

273.6
268.4

270.6
260.5

265.9
266.8

Atomic Energy Defense Activities (053):
Outlays .....................................................................................
Budget Authority........................................ ...........................

8.1
8.1

11.9
12.1

11.7
12.1

12.4
12.6

Other Defense Related Activities (054):
Outlays .....................................................................................
Budget Authority...... ,...........................................................

0.4
0.5

1.0
1.0

1.5
1.6

1.4
1.1

Total National Defense (050):
Outlays .....................................................................................
Budget Authority...................................................................

304.1
300.1

286.5
281.6

283.8
274.2

279.7
280.5

International Affairs (150):1
Outlays .....................................................................................
Budget Authority.............. .-....................................................

16.6
18.5

20.6
22.1

21.6
21.1

21.8
21.8

Total National Defense and International Affairs:
Outlays .............................. ......................................................
Budget Authority...................................................................

320.7
318.6

307.1
303.7

305.4
295.3

301.5
302.3

—

5.5

7.2
0.6

2.8

MEMORANDUM

Operation Desert Shield/Desert Storm:
Outlays .....................................................................................
Budget Authority............................. .....................................
1 Not including the 1993 appropriation for the IMF.

Our planned restructuring of defense meets
both this opportunity and these challenges.

Essential capabilities have been protected:
• Combat readiness has been
through emphasis on training.

protected

• Critical modernization programs have been
continued, including the F-22 fighter, and
the C-17 transport aircraft New sealift ships
will also be procured.
• Important technical advances in the Strate
gic Defense Initiative have been achieved,
making near-term deployment of theater
and strategic missile defenses technically
feasible.

• Investment in high priority technology pro
grams has been emphasized. The level of
technology programs has increased from
$5.7 billion in 1989 to $8.4 billion in 1993
for the Department of Defense and from
$0.4 billion in 1989 to $0.9 billion in 1993
for the Department of Energy. These in
creases have been made, notwithstanding
reductions in the overall defense level.
• Intelligence programs have been restruc
tured to focus on weapons proliferation,
narcotics trafficking, support to the military,
and regional problems.

5H.

PRESERVING NATIONAL SECURITY AND ADVANCING AMERICA'S INTERESTS ABROAD

Individuals and communities affected by
defense reductions have been helped:
• The 1992 and 1993 budgets included more
than $7 billion for programs to assist in a
smooth transition to the civilian economy
for individuals leaving military employ
ment, supporting contractors and affected
communities.
• A broad series of initiatives to promote ci
vilian investment in technology have been
proposed that would also use the talent of
defense personnel.

• Environmental Restoration and Waste Man
agement Activities of Department of Energy
Defense programs have been increased from
$1.4 billion in 1989 to $4.8 billion in 1993.
Savings in defense have been large:

• By the end of 1993, military forces will have
been reduced from 1989 levels as follows:
active Army divisions from 18 to 14, active
Air force tactical fighter wings from 25 to
15, Navy ships from 566 to 447 and active
duty military personnel from 2.1 million to
1.7 million. Personnel in Europe will be
171,000, compared to 322,000 at the end of
1989.
• The United States is no longer producing
any nuclear weapons. The START Treaty
was completed and agreement was reached
for further reductions in strategic weapons,
reducing the need for several acquisition
programs. Compared to 1980 levels, these
agreements will result in 75 percent fewer
warheads shortly after the year 2000. The
United States and Russia are eliminating
ground-launched theater nuclear weapons
and ending deployment of sea-based theater
nuclear weapons.

• Over 100 weapons systems (e g., Peace
keeper missiles, Trident submarines, A-12
and F-14 aircraft, and a new production re
actor) have been canceled and others, such
as the B-2 Bomber, have been scaled back.
• Substantial management
improvements
have been made, including reduced over
head, elimination of duplication, consolida
tion of support activities, and procurement
reforms that cut red tape. Civilian personnel
will have declined from 1,117,000 at end

107

1989 to about 957,000 in 1993. Hundreds
of installations worldwide have been des
ignated for closure or returned to host
nations.

• The Defense budget is down in real terms
by 29 percent in 1993 from the 1985 level;
down as percent of GDP from 6.3 percent
in 1985 to 4.6 percent in 1993; down as per
cent of Federal spending from 26.7 percent
in 1985 to 19.2 percent in 1993.
Despite these accomplishments, problems
remain:

• Congressional cuts in 1993 of requested pro
grams and the addition by Congress of
unrequested funding for weapons systems
and Guard and Reserve programs put at
risk the preservation of needed military
capabilities.
Funding Required to Continue Policy

• Continuing current policies will require
budget authority estimated at $280.5 billion
in 1994.

• The 1994 level assumes continuation of
planned military force reductions and re
ductions of base structure and overhead. It
would maintain high combat-readiness lev
els and continue key modernization pro
grams. It also assumes continued strong
support of the defense technology base and
the Strategic Defense Initiative.
INTERNATIONAL AFFAIRS
Administration Policy

The Administration's foreign policy has fo
cused on five major objectives:
• Promoting and consolidating democratic
values in light of worldwide rejection of to
talitarianism.

• Promoting market economies and free trade
in order to promote prosperity in both the
United States and the rest of the world and
reinforce the spread of democratic values.
• Promoting peace by placing primary reli
ance on collective action such as in the Per
sian Gulf and other United Nations peace
keeping operations.

108

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

• Protecting against transnational threats such
as terrorism, the proliferation of weapons
of mass destruction, ballistic missiles, illegal
drugs and environmental degradation.
• Meeting urgent humanitarian needs, reflect
ing the longstanding concern of the Amer
ican people for people of other nations, par
ticularly for the victims of man-made and
natural disasters.
Accomplishments

• The United States helped achieve the dra
matic changes in Eastern Europe and the
former Soviet Union by maintaining its own
military strength, exercising patient and cre
ative diplomacy, and by providing critical
economic support to countries in transition.

• The United States successfully arranged for
peace negotiations between Israel and the
Palestinians and between Israel and other
Middle Eastern countries. U.S. diplomacy
was facilitated both by defeat of Iraq and
by our steadfast support of the governments
of Egypt and Israel.
• The United States is playing a key role in
the support of UN peacekeeping operations,
including operations in Cambodia, Central
America and Africa. We are leading the
peacemaking Operation Restore Hope to
provide humanitarian aid to Somalia.
• The United States provided the initiative
and leadership in the multinational negotia
tions that have resulted in a treaty to ban
chemical weapons entirely.
• The United States has concluded a number
of market opening agreements, such as
those with Japan and Korea. In addition,
the United States played a primary role in
undertaking the Asia Pacific Economic Co
operation initiative.

• The multinational trade negotiations under
the Uruguay Round have been brought

close to fruition, and an historic North
American Free Trade Agreement was con
cluded with Mexico and Canada. Funds to
talling $405 million are provided in 1993
for environmental, labor and other activities
in support of the latter agreement. The An
dean Trade Preference Initiative has been
concluded as well.

• Along with other member nations, the Unit
ed States increased its quota resources in
the International Monetary Fund by 50 per
cent ($12.0 billion), enhancing the Fund's
capacity to support economic reform, par
ticularly in former communist countries.
• The Enterprise for the Americas Initiative,
announced in 1990, will encourage eco
nomic reform and strengthen democracy
throughout the hemisphere. This initiative
will have a significant positive effect on U.S.
exports and employment.

• American hostages in Lebanon were re
leased without a shot being fired.
Funding Required to Continue Policy

• Continuing current policies will require
budget authority estimated at $21.8 billion
in 1994.

• Within total 1994 budget authority, it is as
sumed that strong support for the United
Nations will be provided, including ex
panded funding for peacekeeping, an emer
gency reserve fund, and continued payment
of arrears. In addition, it is assumed that
the United States will provide $1.25 billion
as the first of three equal payments to the
tenth replenishment of the resources of the
World Bank's International Development
Association affiliate, which makes develop
ment loans to the world's poorest countries.

Regulatoiy Reform and
Program for 1993

109

6. REGULATORY REFORM AND PROGRAM FOR
1993
Except for government spending programs
and taxation, regulation directs a greater amount
of the nation's resources toward public purposes
than any other policy instrument.1 Regulation
provides a wide range of societal benefits such
as a cleaner and safer environment, access for
the disabled to public buildings and businesses,
and the protection of dolphins from fishermen's
nets. However these public benefits do not come
free of charge. The aggregate costs of existing
Federal regulation has been recently estimated
to be $542 billion per year for 1991, increasing
to $662 billion per year by the year 2000.2

The added annualized private sector costs of
the major final regulations reviewed by the Of
fice of Management and Budget (OMB) over the
last four years is about $24 billion (See Table
6-1). Put another way, the aggregate costs of
major final regulations have added only 5 per
cent to the estimated total cost of regulations
in 1988. This estimate and the $44 billion esti
mate of additional costs of proposed regulations
does not include costs of regulations issued by
independent agencies. The estimates also do not
include the costs of regulations whose estimated
annual costs were under $100 million. There are
no similar estimates of the benefits of Federal
regulation.3 Persuasive estimates of benefits are
generally harder to figure than cost estimates.
Nevertheless, benefits like costs, are large and
growing.

1 Regulation is used in this chapter to refer to Federal requirements
imposed on non-Federal parties such as consumers, businesses and
state and local governments. Regulations that impose requirements
on the Federal government such as setting program eligibility re
quirements have fiscal budget impacts and are not included in this
chapter.
2 These estimates (in 1991 dollars) are from a new study by Thomas
Hopkins of the Rochester Institute of Technology entitled "Cost of
Regulation: Filling the Gaps," Report prepared for the Regulatory In
formation Service Center (August 1992). The estimates include the
costs of social, economic and process regulation. Almost 75 percent

Table 6-1.

of the increase to the year 2000 is expected to be additional social reg
ulation (health, safety, and environmental regulation).
3 Agencies have devoted fewer resources to estimating benefits than
costs. Similarly, in the budget, the emphasis is on outlays rather than
the benefits expected to result from government expenditures.

INCREMENTAL REGULATORY COSTS OF MAJOR RULES—1987
TO 1992
(Annual Cost1; In millions of dollars)
1987

EPA:
Final ....^.................................... .......... .
Proposed ................................. ................
DOT:
Final ......................................... ................
Proposed .................................
DOL:
Final ......................................... ................
Proposed ......... *.......................
Other Agencies:2
Final ......................................... ................
Proposed ................................. ................
Total:
Final .......................... ..........: ................
Proposed ............................. ................

1989

1988

1990

1991

1992

Total

2,000
7,200

8,400
2,100

970
1,500

1,748
6,918

4,340
9,267

9350
3,239

26308
30,224

None

50
85

550
400

920
849

1,042
878

350
120

2,912
2332

270
280

30
1,200

1,270
1,080

80
1320

821
131

1,078
163

3,549
4,174

104
None

78
None

147
None

41
6,092

1300
1,695

2,205
100

3375
7387

2374
7,480

8,558
3,385

2,937
2,980

2,789
15,179

7303
11,971

12,983
3,622

37,144
44,617

1 Cost estimates are based upon Regulatory Impact Analyses prepared by the agencies. The total costs of regulation are understated
because not all major rules have quantified cost estimates and the costs of non-major rules are not included.
2 Other agencies with major rules include HHS, HUD, DOJ and Agriculture.

Ill

112

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

A major problem with the statutory and regu
latory process that directs non-Federal resources
to public purposes is that, unlike the budget
process, there is no formal budgeting process.
Regulations are issued as a perceived need
arises, one at a time, without the limits imposed
by a budget or the forcing of tradeoffs with
other regulations being developed at the same
time. Regulations that provide social benefits are
also often issued without consumers fully realiz
ing that they must collectively pay for them—
as customers, workers, or stakeholders. On the
other hand, most people know that when gov
ernment spending increases, they or their chil
dren will eventually have to pay through higher
taxes, either now or in the future. The result
is greater potential than in the budgetary proc
ess for waste and misallocation of resources and
many regulations with costs greater than bene
fits or greater than necessary.

As regulation of American life has grown, par
ticularly since 1970, each successive administra
tion has taken steps to improve Presidential
oversight of the regulatory process. In 1971
President Nixon established by OMB Memoran
dum a "Quality of Life" review to coordinate
the promulgation of health, safety, and environ
mental regulations among Federal agencies.4 Be
ginning in 1974, Presidents Ford, Carter, and
Reagan each issued Executive Orders that re
quired agencies to prepare regulatory analyses
of major proposed rules and OMB to review
them.5

REGULATORY REFORM 1989 TO 1992
President Bush continued in his term Admin
istration support for Executive Order Nos. 12291
and 12498, which were issued on February 17,
1981 and January 4, 1985, respectively. These
orders established the Presidential regulatory re
view and coordination process managed by the
4 October 5,1971 memorandum for the Heads of Departments and
agencies entitled " Agency regulations, standards, and guidelines per
taining to environmental quality, consumer protection, and occupa
tional and public health and safety/' from OMB Director George P.
Schultz.
’The Executive Order were, respectively, Executive Order No.
11821 (November 29, 1974) extended by Executive Order No. 11949
(January 5, 1977); Executive Order No. 12044 (March 24, 1978); and
Executive Order No. 12298 (February 17,1981). The Executive Orders
changed the name of the required analyses as follows: Inflation Im
pact Statement Economic Impact Statement, Regulatory Analysis, and
Regulatory Impact Analysis. On January 4, 1985, President Reagan
signed Executive Order No. 12498, which established the regulatory
planning and coordination process managed by OMB.

Office of Information and Regulatory Affairs
(OIRA) in OMB. On February 9, 1989, he asked
the Vice President to chair a cabinet-level group,
designated the Council on Competitiveness, with
tiie responsibility of reviewing regulatory issues
bearing on competitiveness. The Council was
also to serve as an appeal board for agencies
that had disagreements among themselves or
with OMB over regulatory policies.
The Moratorium

Because of the slow growth of the economy,
President Bush in his 1992 State of the Union
Address initiated a 90-day moratorium (subse
quently extended until January 20,1993) on new
regulations. The purpose was to give tiie agen
cies time to review the appropriateness and effi
cacy of existing regulations and modify them
as needed. New growth-promoting regulations
were also to be expedited. Agency heads were
directed to review existing regulations to ensure
that their benefits to society outweighed their
costs and that they were fashioned to maximize
net benefits to society. Additional guidance em
phasized tiie importance of performance stand
ards and market mechanisms, and directed that
regulations be designed to provide clarity and
certainty to the regulated community, and to
avoid needless litigation. The President asked
independent agencies not subject to Executive
Order Nos. 12291 and 12498 to participate in
this comprehensive review.
The Council of Economic Advisers estimated
that tiie total annual savings to the economy
from actions taken during tiie review would
range from $20 billion to $30 billion. The most
important reforms completed or initiated during
the moratorium include:

• The President's Council on Competitiveness
assisted agencies in developing new policies
whereby oversight of tiie development of
biotechnology products would only take
place when it posed unreasonable risks.
• The Securities and Exchange Commission
streamlined securities registration proce
dures, making it easier for small firms to
raise capital.
• The Interstate Commerce Commission initi
ated a proceeding to eliminate unnecessary
regulation of small trucking companies.

REGULATORY REFORM AND PROGRAM FOR 1993

• The Federal Communications Commission
took steps to allow greater competition
among international communication satellite
systems, leading to lower prices for consum
ers.
Improving the Cost-effectiveness of Health and
Safety Regulation
Chapter IX.C. of the President's Fiscal Year
1992 Budget, "Reforming Regulation and Manag
ing Risk-Reduction Sensibly", showed that many
regulations aimed at reducing health and safety
risks over the previous two decades had not
been very cost-effective.6 Regulations that re
duced disease and prolonged lives at very high
costs had been issued instead of regulations that
would have provided the same or a greater level
of benefits at much lower costs. The chapter
also described an initiative to improve risk anal
ysis techniques and use cost-effectiveness analy
sis in allocating resources to reduce health and
safety risks.
Objective Risk Assessment.—A necessary con
dition of cost-effective regulations that reduce
health and safety risks is objective risk assess
ment analysis consistently performed across
agencies. OIRA has pointed out to agencies
some of the problems in risk assessment meth
odologies—both in general forums and in spe
cific regulatory proceedings. For example, a
chapter in the Regulatory Program of the United
States Government (April 1, 1990-March 31, 1991)
was devoted to identifying current problems
with risk assessment methods and suggesting
improvements. The chapter sparked considerable
debate and reassessment of the ways risk assess
ment was being carried out.

The Center for Risk Analysis of the Harvard
School of Public Health sponsored a workshop
to discuss the Regulatory Program chapter. The
Harvard conference report generally concurred
with the chapter's basic findings:
• Scientific uncertainties in risk assessment
used to justify regulatory decisions are not
adequately communicated.
• Risk assessments frequently contain hidden
and non-uniform margins of safety.
6 See Table C-2, Part Two, page 370 of the FY1992 Budget.

113

• Deficiencies in risk assessments may distort
regulatory priorities.7
OIRA has also sought to improve risk assess
ment practices by placing specific suggestions
for improvement in the public record of selected
regulatory proceedings.
A Focus on Key Costly Regulations.—OIRA
has in recent years focused analytical resources
on a set of identified regulatory initiatives under
development that pose substantial resource re
quirements as well as potential for improving
health and safety. Two successes in this area
include the regulations implementing the Clini
cal Laboratory Improvement Act of 1988 and
the Occupational Safety and Health Administra
tion's cadmium standards. By allowing greater
flexibility in attaining the standards, the costeffectiveness of both regulations was substan
tially improved between the proposal and final
stage.

Regulatory Impact Analysis Guidance.—OIRA
has attempted to improve the cost-effectiveness
of regulation by providing guidance on how to
perform regulatory impact analyses. Each edi
tion of the Regulatory Program of the United States
Government published since 1989 includes up
dates of the Regulatory Impact Analysis Guid
ance under Executive Order No. 12291. The Reg
ulatory Programs also suggest ways to improve
regulatory analyses and ask for suggestions
about how to improve OMB's Guidance Docu
ment. The goal is to assist agencies in using
up-to-date analytical techniques in the assess
ment of regulatory priorities and options. For
example, the 1990 Regulatory Program discussed
agency comments on the Guidance Document
and clarified concepts such as market failure,
the valuation of nonmarket goods, distributional
effects, and discounting.
The 1991 Regulatory Program presented evi
dence that concentrating greater effort on safety
regulations would on average be more cost-ef
fective than the present emphasis on reducing
low level exposures to suspected carcinogens.
The 1992 Regulatory Program proposes a new
analytical method for reviewing health and safe
ty regulations that attempts to determine wheth
er specific regulations actually produce the in
tended net reduction in mortality and morbidity.
7 See OMB vs. the Agencies; The Future of Cancer Risk Assessment,
Center for Risk Analysis, Harvard School of Public Health (June
1991).

114

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

The chapter compares this approach (called
health-health analysis) to benefit-cost analysis
and asks for comments.

Promoting the Use of Market Incentives

Just as markets are the most efficient way of
providing consumers with conventional goods
and services, markets and market-like incentives
are also generally thought to be the most costeffective way of providing goods and services
that give rise to externalities. Externalities, such
as pollution or basic scientific discoveries, are
"spillovers" from market transactions that affect
third parties. A key difference between conven
tional goods and goods that give rise to
externalities is that the former can normally be
supplied efficiently by private markets without
government intervention, while the latter nor
mally requires government intervention.8
However, once the government has inter
vened, whether efficiently or not, the use of
market mechanisms to administer the interven
tion will generally be the most cost effective
alternative. Market mechanisms have the further
advantage of being able to adapt to changing
conditions more rapidly than government com
mands and controls. The last three Administra
tions have advocated that regulations make use
of market mechanisms to the maximum extent
possible.9 President Bush most recently reiter
ated this principle when he announced the 90day Moratorium.
The 1992 Regulatory Program contains a sec
tion on the market-incentive approach to regula
tion. It describes the advantages of this approach
compared to the traditional command-and-control method and discusses the most significant
uses of market incentives implemented by the
Bush Administration.10

A particularly good example is the acid rain
trading allowance program for sulfur dioxide
emissions. The Clean Air Act Amendments of
1990 set a cap of 8.95 tons of sulfur dioxide
emissions per year that the Nation's power
8 Since poorly defined property rights and transactions costs may
be viewed as giving rise to the externality, defining property rights
and reducing transaction costs may eliminate the externality and the
need for further government intervention.
9 For example see, Regulatory Reform: President Carter's Program, The
White House, August 1980, pp. 8-10 and Regulatory Program of the
United States Government, April 1,1986-March 31,1987, pp. xxvi-xxxi.
10 See Regulatory Program of the United States Government, April 1,
1992-March 31, 1993.

plants must meet by the year 2010, with inter
mediate caps at earlier dates. The Environmental
Protection Agency will allocate annual allow
ances to emissions sources for use in meeting
individual source caps that are based on reduc
tions from historical averages. These allowances
may be banked for use in future years or sold
to other emission sources that have higher com
pliance costs. This system will save an estimated
$660 million to $950 million per year over the
conventional system (not permitting allowance
trading) in which each facility would have to
reduce sulfur dioxide emissions by the same
amount. The conventional system would have
cost about $4 billion per year. Cost savings arise
because the market in allowances provides eco
nomic incentives for the least-cost emission
sources to reduce emissions first.
Implementing the Regulatory Budget Concept

The possibility of a regulatory budget—i.e.,
limiting regulation so that compliance costs do
not exceed a specified amount—was first dis
cussed in the Carter Administration by econo
mists at OMB, the Council of Economic Advisers
and the Commerce Department. In 1979, Senator
Lloyd Bentsen and Congressman Clarence
Brown of the Joint Economic Committee intro
duced legislation to establish a regulatory
budget.11
The Reagan Administration decided to study
the concept while it implemented the formal
regulatory review program required by Execu
tive Order No. 12291. The Executive Order regu
latory review program examines each regulation
as it is developed for compliance with the
principles listed in the Order. The Bush Admin
istration viewed the regulatory budget as a po
tentially useful complement to the existing regu
latory review program. It should be noted that
program evaluation is to the fiscal budget what
regulatory review is to the regulatory budget.
The difference is that the fiscal budget is well
established and program evaluation weak,
whereas in the regulatory area, regulatory re
view is established and there is currently no
regulatory budget. The Administration has taken
several steps to test the regulatory budget con
cept and develop the data and methodology nec
essary for its implementation.
11 For an early history of the regulatory budget see Chris DeMuth,
"The Regulatory Budget," Regulation, March/April, 1980.

115

REGULATORY REFORM AND PROGRAM FOR 1993

The justification for a regulatory budget is that
Federally mandated expenditures for public pur
poses—whether by private parties for environ
mental cleanup or state and local governments
for access for the disabled—should be subject
to Federal management and control. The reasons
are similar to those underlying the fiscal budget
process. The output, employment, and price ef
fects of diverting resources from the private sec
tor to the public sector are similar whether the
diversion is accomplished through taxing or bor
rowing and spending or by requiring private
parties to spend their own resources for specific
purposes. Both types of government intervention
must be managed effectively if the goals of satis
factory economic growth, full employment, and
price stability are to be met.

There are, however, two major differences be
tween mandating regulatory spending and au
thorizing fiscal program spending. First, regu
latory spending does not increase the Federal
deficit while fiscal spending does. Private parties
must finance their own spending. There is thus
a tendency for greater reliance on regulations
to fulfill public needs when worries about the
size of the deficit increase. Second, it is more
difficult to estimate what private parties plan
to spend to comply with regulations than it is
to estimate what government agencies plan to
spend to meet program obligations. Both budg
ets are planning documents, however, and they
both have utility even if their estimates are not
always accurate.
The usefulness of both documents can be im
proved with better spending estimates. The Bush
Administration has undertaken several initia
tives to improve the quality of the estimates
needed to implement a regulatory budget.12
Starting with the 1991 Regulatory Program,
agencies were required to provide better cost
and benefit estimates of proposed regulations
and to provide them for all significant regula
tions, not just for "major" regulations as re
quired by Executive Order No. 12291. On April
29, 1992, President Bush directed agencies to es
timate and to provide to OMB the likely benefits
and costs of legislative proposals under active
consideration by Congress or to be proposed
by the agency. OMB, in consultation with the
Council of Economic Advisers, has developed
12 Improving the quality of cost and benefit estimates of proposed
regulations and legislation is of course an important goal in its own
right independent of implementing a regulatory budget.

technical guidance to implement this directive
and to integrate it with OMB's legislative coordi
nation and clearance process.13

Finally, the regulatory budget concept has
been tested informally by the Administration
and Congress in connection with negotiations
over the passage of the Clean Air Act Amend
ments of 1990. The provisions of the legislation
were debated and negotiated by the various par
ties with a target ceiling for costs in mind. EPA,
CEA, and OMB are now working in the imple
menting stage to establish regulatory budget
procedures and a budget cap for a set of tech
nology-based standards for certain industrial
categories. Experience with this effort has led
to calls for further development of this
approach.
Examples of Specific Regulatory Reforms
Between 1989 and 1992, almost 9,000 regula
tions were reviewed by OMB under Executive
Order No. 12291 and issued by the agencies.
The Executive Order review process improved
the overall quality of these rules in several ways,
even though in almost three fourths of the cases,
review was concluded by OMB without change.

• The review process stimulated and encour
aged agencies to improve their analytic ca
pabilities in developing rules.

• Interagency coordination helped the devel
opment of rules that take into account the
complexity and overlapping authorities of
federal activity.
• The review process has ensured that dif
ficult issues were decided at appropriate
levels of authority within the Executive
Branch.

Since the discussions between the agencies
and OMB are often candid, complex, and a
learning experience for both, it is impossible and
even inappropriate to attribute improvements to
one agency or the other. The law is clear that
the agency head named by the authorizing stat
ute is the one legally responsible for issuing
agency regulations. Any suggestions adopted by
the issuing agency that may have been made
by OMB or any other agency are the decisions
13 On October 29, 1992 OMB also issued a revised Circular No.
A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of
Federal Programs. The guidelines apply to legislative proposals, regu
latory impact analysis, and program and policy evaluation.

116

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

of the agency officials legally responsible for the
regulation.

The following is a sampling of significant reg
ulations that have been improved by the regu
latory review process.

• The Department of Housing and Urban De
velopment issued regulations pursuant to
the Real Estate Settlement Practices Act that
opened up competition between providers
of settlement services. More time-saving
computerized loan originations and efficient
"one-stop shopping" are also likely to
result.
• The Department of Labor issued regulations
that will protect health care and other work
ers exposed to bloodbome pathogens from
contracting AIDS and Hepatitis B. One par
ticularly cost-effective provision that will
likely save hundreds of lives and that was
added to the final rule is a requirement that
employers have their at risk employees
either accept free hepatitis B vaccine or sign
a declination stating that they refuse it.

• The Environmental Protection Agency has
proposed that States be allowed to use an
innovative "cash for clunkers" program as
a method of pollution abatement. This pro
gram would allow industrial emission
sources to pay owners of pre-1980 auto
mobiles to get them off the streets and re
duce hydrocarbon emissions—an important
component of smog—in return for not hav
ing to reduce their own emissions. Unocal,
which has implemented a pilot program in
the Los Angeles area, recently reported that
the program is far less expensive than tradi
tional emission control efforts for the same
amount of emission reductions.
• The Environmental Protection Agency re
cently proposed the first of the standards
for controlling hazardous air pollutants, as
required by the Clean Air Act Amendments
of 1990. This proposal for the synthetic or
ganic chemicals industry includes innova

tive provisions which could permit facility
wide averaging and banking of pollutant
emissions, thereby enabling firms to achieve
statutory objectives ahead of schedule and
at substantially less total cost.

• The National Marine Fisheries Service has
recently implemented individual transfer
able quotas (ITQs) in several fisheries. In
the past, catches had been limited by such
methods as restricting the number of fishing
days, the number of boats, or net sizes. This
has often had little effect on the size of
the total catch because of other inputs to
the fish catching process. Larger and more
efficient boats, for example, allowed the
Alaskan halibut fishing fleet to catch as
many fish in two days as used to be caught
in four months. The result was higher cost
for lower quality fish (because they had to
be frozen) with the same danger to the fish
ing stock. The use of ITQs allows fish to
be caught in the most efficient manner with
more precise specification of the sustainable
yield, and has the added advantage that it
is usually easier to enforce than restrictions
on inputs. This approach is being tried for
New England and Mid-Atlantic quahogs
and surf clams and has been suggested for
Alaskan halibut
• The Food and Drug Administration has an
nounced a series of regulatory reforms that
should reduce the time it takes to develop
new breakthrough drugs by as much as
four years, saving millions of lives and pos
sibly billions of dollars.
THE REGULATORY PROGRAM FOR 1993

Table 6-2 lists the major regulations that are
required by statute or judicial deadline to be
issued in final form during 1993. As such, it
represents only a minimum regulatory program
for 1993. The Regulatory Program for 1992 has
descriptions of 383 significant rules that 25 agen
cies were working on.

117

REGULATORY REFORM AND PROGRAM FOR 1993

Table 6-2. MAJOR REGULATIONS WITH STATUTORY OR JUDICIAL
DEADLINES EXPECTED TO BECOME FINAL IN 1993
Regulation

Description

Proposal Date

Statutory or
Judicial Deadline

DOC:
Implementation of Fastener Quality
Act.

HHS:
Mammography Accreditation Rules.

Requires inspection, testing, certification,
traceability and marking of certain fas
teners sold in commerce; provides for
laboratory accreditation.

8/17/92
(57 FR 37032)

Statutory
5/15/91

Rules implementing the Mammography
Quality Standards Act of 1992. The
rules for recognition of accrediting
bodies subsume the rules setting out
quality standards.

N.A.

Statutory
irniw>

Establishes standards regarding alcohol
testing of 6 million transportation
workers.

11/02/89
(54 FR 46326)

Statutory
11/03/92

Defines acceptable technologies for off
shore oil and gas extraction point
sources.
Sets technology standards for synthetic
organic chemical manufacturers.

3/13/91
(56 FR 10664)

Judicial
1/15/93

N.A.

Statutory
11/92

Implements CAA requirement to adopt
new gasoline formulas for fuel sold in
nine worst ozone nonattainment areas.
Implements CAA amendments requiring
areas that fail carbon monoxide (CO)
standards to require wintertime fuel
reformulation to at least 2.7% oxygen.
Requires on-board pollution monitoring
devices for all light-duty trucks and
vehicles after 1994.
Regulates emissions of volatile organic
compounds and particulates from haz
ardous waste tanks and impound
ments.
Specifies measures States must imple
ment to control non-point source pollu
tion of coastal waters, from farms, for
ests, and urban areas.
Regulates volatile organic compound
emissions from vehicles during their
operation.
Establishes acid gas, particulate matter,
NOx, and toxics emissions standards
for MWCs larger than 35 Mg/ day.
Establishes NOx emissions limits for elec
tric utility boilers in order to reduce
NOx by 2 million tons per year from
1980 levels.
Requires use of approved equipment and
procedures for recovery, recycling and
reclamation of ozone depleting sub
stances from refrigeration and air con
ditioning appliances and commercial
equipment.

7/9/91
(56 FR 31176)

Statutory
11/15/91

7/9/91
(56 FR 31148)

Statutory
11/15/91

9/24/91
(56 FR 48272)

Statutory
5/15/92

7/22/91
(56 FR 33490)

Statutory
5/87

6/14/91

Statutory

(56 FR 27618)

5/92

8/19/87
(52 FR 31162)

Statutory
11/15/91

N.A.

Judicial
11/15/91

N.A.

Statutory
5/15/92
(Group I Boilers)

12/10/92
(57 FR 58644)

Statutory
1/1/92

DOT:
Alcohol Testing
Workers.

for

Transportation

EPA:
Effluent Guidelines and Standards for
Offshore Extraction.

Hazardous Organic National Emissions
Standards for Hazardous Air Pollut
ants.
Reformulated Gasoline.

Oxygenated Fuels.

On-Board Diagnostics.

Standards for Hazardous Waste Treat
ment, Storage, and Disposal Facili
ties.
Coastal Non-Point Source Water Pollu
tion Program.

Vehicle Evaporative Emission.

Municipal Waste Combustors (MWCs).

Nitrogen Oxide (NOx) Limits for Elec
tric Utilities.

Stratospheric Ozone Protection: Na
tional Recycling and Emissions Re
duction Program—(Excluding Vent
ing Prohibition.).

118

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 6-2. MAJOR REGULATIONS WITH STATUTORY OR JUDICIAL
DEADLINES EXPECTED TO BECOME FINAL IN 1993—Continued
Regulation

Description

Proposal Date

Municipal Waste Combustion n/m Sets standards for new and existing com N.A.
Emissions Guidelines and N5PS.
bustors for emissions of acid gases
metals and NOx.
Treatment Standards for Toxicity Char Establishes treatment standards for N.A.
acteristic Wastes.
wastes identified as hazardous under
RCRA by the Toxicity Characteristic.

Statutoiy or
Judicial Deadline

Statutory
11/91 and 11/92

Judicial
4/30/93

7. Management Reform and
Required Systems Improvements

119

7. MANAGEMENT REFORM AND REQUIRED
SYSTEMS IMPROVEMENTS
In February 1989, President Bush made im
proved Federal management one of four broad
Administration objectives. The Administration
has made substantial progress. Highlights in
clude:
• Defense management reform. The Administra
tion's Defense Management Reform initia
tive saved $17.9 billion in 1991 through 1993
and will save $53 billion more in the period
1993-1997,
• Savings and loan reform. The Administration
has closed approximately three-quarters of
the savings and loans now expected to fail,
and protected 22 million accounts owned
by America's citizens and corporations. It
has also charged and convicted 976 individ
uals of S&L related crimes (as of July 1992).

• Nuclear weapons facility compliance with envi
ronmental and safety regulations. Since 1989,
the Administration has almost tripled the
annual budget for environmental restoration
and waste management at these facilities.
In addition, it has begun the process of
bringing the facilities into compliance with
Federal and State environmental and safety
regulations.
• Air traffic control system modernization. The
Administration has obtained $10 billion in
appropriations to improve efficiency and
safety. Airline delays are already less than
5 years ago, despite increased takeoffs and
landings.
• Reform of the Department of Housing and
Urban Development. The Administration has
established new ethical standards and re
formed management practices at HUD.
These efforts include strict limits on the use
of discretionary funds and new penalties for
abuses by HUD personnel.

• Disclosure for the first time, and reform, of the
Executive Branch's hidden liabilities and high
risk areas.

—$6.3 trillion (face value) in 1992 for Fed
eral credit and insurance programs. The

Administration proposed and Congress
enacted Federal credit reform in 1990, re
quiring appropriations for the subsidies
in both guaranty and direct loan pro
grams.
—104 high risk areas. Of the 135 high risk
areas identified since 1989, the Adminis
tration has resolved 33 and made signifi
cant progress with respect to 20 more.
The President's 1993 Budget requested
over $2 billion to address High Risk areas.
The progress, as well as the challenges that
remain, are discussed in the remainder of this
chapter, which is organized into nine topic
areas:
• Using SWAT and Review Teams
• Emphasizing Results
• Streamlining Government
• Maintaining a Quality Workforce

• Improving Financial Management

• Ensuring Integrity and Efficiency
• Improving Information Management

• Strengthening Federal Statistics
• Reforming Federal Procurement

USING SWAT AND REVIEW TEAMS

The Bush Administration has initiated 35 joint
agency-OMB SWAT and review teams since
1989. The purpose of these teams is to "fix"
specific Federal management problems. SWAT
teams are short term efforts which normally
complete action in 2-3 months. Review teams
work on a longer term basis.

Twenty of these teams have completed their
work and the resulting recommendations are in
various stages of implementation. Fifteen teams
are still underway.
Descriptions of the results and next steps of
the 30 SWAT and review teams that had signifi
cant activity follow.
121

122

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

SWAT TEAM RESULTS
Agency and Topic
Agency for International Development
(AID): Management Control Defi
ciencies.

Problem

Team Results

Serious deficiencies in management con
trol systems and evaluation of foreign
aid programs.

AID-OMB report in July 1992 rec
ommends improvements in personnel
accountability, management systems,
and program evaluation. AID imple
mentation plan transmitted to OMB
in August 1992.

AID implementation, depending on any
overall prospective organizational
changes, will move forward, in part
in the context of 1994 budget process.

Department of Agriculture (USDA): Field
Office Structure.

USDA field office administration frag
mented and inefficient.
Central information and control systems
inadequate.

In May 1992, Secretary Madigan and Di
rector Darman announced formation
of SWAT team.
The "County-based" and "All Other
Agencies" teams have ranked each of
the program delivery offices within
each agency by measures of effi
ciency. The Forest Service team com
pleted its analysis and presented var
ious consolidation options. Policy and
implementation decisions will be
made in the 1994 budget process.

Department of Education: Guaranteed
Student Loan (GSL) Guarantor Insol
vency.

Higher Education Assistance Founda
tion (HEAF), largest GSL guarantor,
faced insolvency due to large number
of defaults (1990).

Following review, the Department of
Education ended HEAF's authority to
guarantee new loans and reached
agreement with the Student Loan
Marketing Association (Sallie Mae) to
assume management responsibility
for HEAF's portfolio (1990).

Department of Education: Student Finan
cial Aid Program Management ($66 bil
lion in loans outstanding).

Escalating student loan defaults ($2.8
billion expected for 1992) dispropor
tionately involving students attending
proprietary schools of dubious qual
ity.

14 point plan announced by Director
Darman and Secretary Alexander in
April 1991. (It proposed improved
oversight over guarantee agencies and
lenders, consolidation of student aid
operations under a single official, and
improved information management.)

Inadequate expertise in Office of Post
secondary Education in running cred
it programs.

Federal Emergency Management Agency
(FEMA): Management of $650 million/
year disaster assistance program inad
equate.

$800 million budget shortfall resulting
from lack of FEMA central system for
identifying and estimating costs.
Congressional shortfunding of disaster
relief led to routine emergency
supplementals (circumventing caps).

Reauthorization of the Higher Education
Act (July 1992) included Administra
tion proposals to reduce the default
rates and eliminate eligibility for
schools abusing the system.
FEMA's budget and accounting meth
odology and procedures for determin
ing disaster assistance eligibility and
managing declared disasters have
been improved.
Appropriations language signed by the
President in December 1991 required
Congress to fund FEMA's disaster as
sistance program at a historical aver
age obligation level before any
amounts are designated as "emer
gency requirements."

123

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

SWAT TEAM RESULTS—Continued
Agency and Topic

Problem

Team Results

Department of Health and Human Serv
ices (HHS), Health Care Financing Ad
ministration (HCFA): Management of
$83 billion Federal-State Medicaid Pro
gram.

Medicaid estimates (for 1992) escalated,
on average, $1 billion each month
from January 1990 to January 1992.

Joint HHS-OMB management initiative
to strengthen the Federal system that
collects, analyzes and uses State-based
Medicaid program spending estimates
and forecasts Federal program spend
ing.

Departments of Health and Human Serv
ices (HHS) and Justice (DOJ): Health
Care Fraud and Waste (estimate $25-80
billion at risk nationally).

HCFA's budget forecasting system
lacked a formal structure for tracking
State-level factors affecting Medicaid
growth. This resulted in substantial
unforeseen growth in Federal Medic
aid spending.

Health care costs in the United States
continue to grow at a rate far in ex
cess of inflation and are expected to
exceed $800 billion this year. Of this
amount, between 3 and 10 percent is
estimated to represent fraud and
abuse.

Specific improvements included provid
ing Medicaid Bureau with full ac
countability and responsibility for
managing the Medicaid program, im
proved Federal and State Medicaid
information and estimates, a new
Medicaid management partnership
with the States, and an enhanced
Medicaid budget forecasting system.
An HHS-DOJ-OMB team was formed
to build on Federal health care en
forcement efforts and work with
States and private sector insurers to
find improved ways to reduce the na
tional problem of health care fraud
and abuse.

The Attorney General, the Secretary of
HHS and the OMB Director an
nounced the team's report. The report
recommended legislation (to prevent
kickbacks and inappropriate self-re
ferrals and improve the exchange of
fraud related information). These rec
ommendations should be considered
as part of the 1994 budget/legislative
process.

Department of Housing and Urban De
velopment (HUD): Section-8 Housing
Subsidy Budget Estimates.

Department of the Interior, Bureau of In
dian Affairs (BIA): Accounting Sys
tems.

$1.25 billion in unanticipated additional
requirements was identified due to
lack of central system for identifying
and estimating in a timely fashion
Section-8 contract renewals.

Revised estimate of 1992 requirements
provided to Congress in October
1991.

Two Inspector General audits of pos
sible BIA Anti-Deficiency Act viola
tions in three years ($95 million in ac
counting discrepancies in 1990).

New accounting system (with stringent
accounting controls over obligations
and disbursements) installed in Octo
ber 1991. Uncontrolled adjustments to
accounting system limited to appro
priate accounting personnel.

BIA accounting system accessible to
over 12,000 individuals allowing an
average 10 adjustments for each trans
action (500,000 adjustments in 1990).

New automated system expected to be
come operational during 1993.

$425 million in cash disbursements as
signed and entered into the system
for the first time.
Thousands of previously undiscovered
deposit tickets brought under ac
counting control.

124

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

SWAT TEAM RESULTS—Continued
Agency and Topic

Department of the Interior, Bureau of In
dian Affairs (BLA): Trust Fund Ac
counting.

Problem
Inability to account and report on $2
billion in Indian trust funds.

Team Results

Agreement reached among Executive
Branch, representatives of Indian
communities and Senate Select Com
mittee on Indian Affairs regarding
initial plan of action (November
1992). ‘
Reconciliation of tribal accounts (valued
at $1.2 billion) restarted in October
1992 for completion in mid-1994.
BIA/tribal working groups established
to address problems in (1) land
records management and (2) individ
ual Indian money accounts and
fractionated heirship.

BIA draft Indian Trust Funds Strategic
Plan prepared in August 1992.
Department of Justice (DOJ): Debt Collec
tion.

Departmental debt collection systems
inadequate to support management of
litigation and collection activity on an
estimated $13 billion inventory.

Litigation Information Action Team rec
ommended development of a central
ized Justice financial litigation infor
mation system (July 1992). The re
quest for proposals (RFP) for the sys
tems development work was issued
in August 1992. Congressional action,
however, poses 1993 budget prob
lems.

Railroad Retirement Board (RRB): Man
agement Weaknesses.

Major claims backlogs (80,000 cases),
significant error rates, widespread
beneficiary fraud, underpayment by
railroads of employment taxes, and
inadequate systems.

Agreement (1991) on a five-year plan to
correct 104 deficiencies identified by
the SWAT team.

Unanticipated surge in disaster assist
ance costs would have exhausted dis
aster loan program four months be
fore the end of the fiscal year.

Supplemental appropriations enacted in
1992 ensure continued funding for
this program.

Small Business Administration (SBA):
Disaster Loan Program.

Congress has supported (1992 and 1993)
the Administration's proposed $13.9
million 5-year investment to assist
RRB in achieving its improvement
plan. All of the quantitative improve
ment goals (to be achieved by fund
ing the improvement plan) are being
met or exceeded.

Contingency fund enacted to meet loan
demand in years with abnormally
high disaster levels.

Improved system adopted for reporting
and tracking loan obligations and
funding needed in any one fiscal year.
Twelve Major Civilian Agencies: Con
tracting Procedures.

Abuses and inadequacies surrounding
the identification and payment of con
tract costs have resulted in payment
of unallowable costs cis a result of in
adequate procurement procedures.

SWAT team formed (June 1992) to re
view Federal regulations and prac
tices governing $54 billion in con
tracts, involving 12 civilian depart
ments and agencies.

The final report (December 1992) in
cludes over 200 recommendations for
improvements in legislation, Govern
ment-wide regulations and agencyspecific procedures. Implementing ac
tions are underway.

125

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

REVIEW TEAM RESULTS
Agency and Topic

Department of Agriculture (USDA),
Farmers Home Administration
(FmHA) and Rural Development Ad
ministration (RDA): Loan Delin
quencies.

Problem
High total delinquencies ($10.1 billion)
and delinquency rates (18.3 percent)
in 1992.

Team Results
Enhanced internal controls (i) incor
porating a second level review during
new loan underwriting, (ii) expanding
use of contract appraisals, and (iii)
studying use of centralized servicing
of single family housing loans.

Strategic business plan completed (June
1992), and comprehensive financial
analysis and accounting training pro
gram developed and implemented.
Department of Agriculture (USDA): Food
Stamp Program.

Alaska Natural Gas Transportation Sys
tem: Unnecessary Office of the Federal
Inspector.

Excessive illegal food stamp coupon
trafficking—benefits worth over $100
million per year being exchanged for
cash and drugs.

Final recommendations for reducing
food stamp fraud issued (July 1991).

Alaskan portion of Alaska Natural Gas
Transportation System pipeline never
built, but Office of the Federal Inspec
tor to facilitate construction remains
in existence since 1979.

Federal Inspector and staff resigned
(April 1992) and the President signed
associated rescission legislation (June
1992).

Final Federal regulations to enable
States to use electronic benefit trans
fers approved (April 1992).

The President signed the Energy Policy
Act which permanently eliminated
the Office of the Federal Inspector
(October 1992).

Department of Defense (DoD): Use of
Contracted Advisory and Assistance
Services (CAAS).

Inadequate management controls over
the use of Contracted Advisory and
Assistance Services (CAAS), including
tracking and reporting deficiencies.

Draft OFPP policy letter, mandating
greater management control over
service contracts, was published in
the Federal Register for comment (De
cember 1991).

DoD Inspector General report indicates
that, under some definitions, CAAS
may be underreported by severed bil
lion dollars.
Department of Defense (DoD): Utilization
of Resolution Trust Corporation (RTC)
Properties.

Inadequate information for screening
existing RTC properties as substitutes
for new DoD construction.

System completed in June 1992 for DoD
to receive and screen RTC properties
as potential substitutes for new con
struction.

Environmental Protection Agency (EPA):
Spatial Data Sharing.

21 Federal bureaus were not sharing
cartographic and remote sensing data
with EPA to support environmental
remediation programs.

Federal Geographic Data Committee has
announced policies for data sharing
among Federal agencies. This will fa
cilitate data exchange between EPA
and source agencies.

Memorandum of understanding signed
by EPA and NASA (October 1992)
and EPA and DOI (December 1992).
Department of Energy (DOE): Environ
mental Cleanup.

DOE's $5.5 billion annual cleanup ac
tivities were not prioritized based on
risk to public health, safety and the
environment, and cost-effectiveness.
DOE unable to measure cleanup
progress versus expenditures through
time.

Progress Tracking System has been de
veloped to report on the progress of
DOE installations in meeting sched
uled milestones. Efforts to improve
reporting continue.

126

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

REVIEW TEAM RESULTS—Continued
Agency and Topic

Problem

Team Results

Department of Health and Human Serv
ices (HHS), Administration for Chil
dren and Families (ACF): Oversight of
States' Spending on Information Sys
tems.

ACF has had difficulty controlling pay
outs and accounting for benefits to
States for child support and welfare
information systems ($1.3 billion in
projected payments, 1993-98). Outlays
have increased from $76 million in
1990 to an estimated $262 million in
1993.

An HHS/ OMB team was formed in
May 1992 to review these spending
increases. Recommendations are being
prepared to minimize the risk of pro
viding 90% Federal matching funds
for unreasonable or unnecessary sys
tems development activities.

Department of Health and Human Serv
ices (HHS), Health Care Financing Ad
ministration (HCFA): Medicare Dura
ble Medical Equipment (DME) Costs
($2.6 billion estimated in 1993).

Existing law and previous regulation
enabled suppliers to receive excessive
Medicare reimbursement for DME
purchases.

Secretary Sullivan announced an Action
Plan expected to save $1 billion over
next five years.
Regulations were issued to consolidate
oversight and claims' payments and
close reimbursement loopholes ex
ploited by Medicare providers.

Legislation was submitted to establish
stricter eligibility requirements for
suppliers, update pricing schedules,
initiate competitive bidding, and in
crease pricing discretion to reflect
market forces.
Departments of Health and Human Serv
ices (HHS), Veterans Affairs (VA) and
Defense (DOD), and the Office of Per
sonnel Management (OPM): Third
Party Liability (TPL).

Federal and State taxpayers are making
payments of $1-3 billion annually for
health care that should be paid by
others.

Uniform policy for Federal coordination
of benefits (which policy pays first,
second, etc.) agreed by HHS, VA,
DOD and OPM. A single Federal con
tract to use private firms to conduct
TPL activities is being prepared. Pol
icy for expanded interchange of Fed
eral health coverage data developed.
Quality control policies and guide
lines for Federal TPL in development.

Department of Labor: Job Training Part
nership Act (JTPA) Controls.

Inadequate controls over some contrac
tors participating in this former block
grant program ($1.9 billion in pro
curements) led to administrative cost
overruns, unallowable costs, and in
appropriate program activities.

Legislation to enhance States' respon
sibility to establish and monitor im
proved accounting and procurement
practices was signed by the President
in September 1992. The Job Training
Reform Amendments incorporated
many of the Administration's propos
als.

National Aeronautics and Space Admin
istration (NASA): Contractor Over
sight.

Administrative oversight of contractors
and subcontractors inadequate (total
contract expenditures are projected at
$13.5 billion in 1993).

NASA reassigned 45 FTEs for contractor
oversight functions and developed
training program to alert key procure
ment personnel and program man
agers to contract management issues.

NASA's acquisition regulations and di
rectives revised to include priorities
for contractor oversight.
OFPP guidance on contract manage
ment issued.
National Labor Relations Board (NLRB):
Accounting System and Inventory.

Conversion to a new accounting system
in 1990 failed due to poor testing pro
cedures and inappropriate controls
over data conversion.

NLRB's new accounting system imple
mented (August 1991).
OMB-led review team examined
NLRB's accounting system and con
cluded that it was adequate to meet
NLRB's financial management needs
subject to certain OMB recommenda
tions.

127

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

REVIEW TEAM RESULTS—Continued
Agency and Topic

Pension Benefit Guaranty Corporation
(PBGC): Financial Systems and State
ments.

Problem

Team Results

Financial systems in disarray and finan
cial statements unauditable.

Request for proposal (RFP) issued to
procure an accounting and billing sys
tem for premiums. In the interim, bil
lings are being issued manually to
plan sponsors with large balances
due.

Improvements in insurance system
database will provide audit trails for
actuarial information included in fi
nancial statements.
Department of the Treasury, Internal
Revenue Service (IRS): Accounts Re
ceivable and Tax Systems Moderniza
tion.

Strategy and systems for collecting ac
counts receivable ($70 billion, 1991)
and setting allowance for doubtful
debt is inadequate.
Outmoded computer and telecommuni
cations systems undermine the effec
tiveness of tax administration.

Performance targets were set to limit
the growth in accounts receivables
and boost collections.
Allowance for doubtful accounts devel
oped to determine the collectibility of
accounts receivable.
Design Master Plan (DMP) for IRS sys
tems modernization activities re
viewed by OMB ($8 billion,
1990-2000).

Department of Veterans Affairs (VA):
Home Loan Guaranty Program.

Inadequate risk exposure and default
trend data for $158 billion in guaran
teed loans.

EMPHASIZING RESULTS
The Federal Government has limited capacity
to assess what works and why, and to compare
actual results with goals and objectives. Most
Federal programs are planned and executed on
an annual basis, rather than based on a long
term strategy and evaluation of results. Policy
analysis is virtually always a prerequisite for
new initiatives but rarely is used to strengthen,
change, or eliminate base programs (which con
stitute the overwhelming majority of Federal ex
penditures). Budget constraints require targeting
of scarce resources; this targeting should be
based on analysis.

Accomplishments (1989-92)
• Over two-thirds of Federal installations sur
veyed by the General Accounting Office
(GAO) now have Total Quality Management
(TQM) programs; half of these were initi
ated in the last two years. A Federal Quality
Institute has been established in the Office
of Personnel Management that annually
educates, trains, and assists Federal agen

New methodology for predicting de
faults and calculating the implicit
credit subsidy in new housing loan
guarantees has been in use since May
1991. Subsequently, this problem area
was removed from the high risk list.

cies, and tens of thousands of officials, in
the principles and implementation of TQM.

• The President's 1993 budget initiated a
dozen quality improvement demonstration
projects at the Internal Revenue Service, the
Social Security Administration, and the De
partment of Veterans Affairs. These agencies
are currently measuring baseline perform
ance, and will do so again at the end of
the demonstrations in 18 to 36 months.
• Using provisions of the Chief Financial Offi
cers Act of 1990, OMB is requiring agencies
to measure and report on program perform
ance in their annual financial statements.
Inter-agency agreement has been achieved
on common performance measures for 14
functions. Agencies are identifying the
measures they will include in their 1992 fi
nancial statements.

• OMB worked with the Congress on drafting
S. 20 (the Government Performance and Re
sults Act of 1992) which passed the Senate
last session but was not voted on by the
House. If appropriately amended, S. 20

128

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

would substantially enhance the amount
and type of performance measurement done
by the Federal Government.

• A renewed emphasis has been placed on
using program evaluation as a necessary
analytic tool. Sections on program evalua
tion were included in the President's 1992
and 1993 budgets.
• Pursuant to a 1993 budget initiative, nine
states have received waivers to undertake
multi-year welfare reform demonstrations.
Evaluations will test the effect of these re
forms, which include use of control groups
for comparison purposes in six of the States.
Improvements Needed in the Future

• Much work is needed to improve the num
ber and significance of program perform
ance measures and to tie more of the meas
ures to agency mission statements. The
development of satisfactory measures is an
evolutionary process, although severed agen
cies—such as the Environmental Protection
Agency, the Social Security Administration,
and the Nuclear Regulatory Commissionare nearing the point where their linkage
of measures to mission statements might be
used as a model.

• The GAO report on quality management
indicated that installations whose quality ef
fort had existed for four or more years re
ported improvements in performance and
internal operating conditions, as well as re
duced barriers to their quality efforts. This
growing commitment to quality needs to be
sustained. Pilot projects testing the exchange
of greater flexibility for more accountability
should be considered. OMB will evaluate
changes in performance resulting from a
dozen quality improvement demonstration
projects at the Internal Revenue Service,
Social Security Administration, and Depart
ment of Veterans Affairs.
• Utilizing program evaluation and cost-bene
fit analysis as integral parts of policy-mak
ing remains more the exception than the
rule. The Departments of Defense, Edu
cation, and Health and Human Services
have substantial evaluation staffs. Else
where, evaluation capability remains weak
and the linkage between evaluation and de

cision-making is uneven across the Federal
Government.

Options for assuring rigorous program eval
uation include: (i) encouraging agencies to
utilize and evaluate materials in developing
programmatic recommendations for legisla
tive reauthorization and budget proposals;
and (ii) requiring agencies to develop multi
year evaluation plans.

STREAMLINING GOVERNMENT
Americans are demanding more performance
for less money. Tax revenues are no longer ris
ing as they did in the past. The public has little
confidence in Government programs. Part of the
solution lies in streamlining Government organi
zation and management—to achieve effective
ness as well as efficiency.
Many Federal agencies fail to reflect current
needs, demographics, and technology (particu
larly communications technology) in their staff
ing/ organization and service to clients. Others
are laden with unnecessary management layers,
making them top-heavy and inefficient.

More rational policy-making and service de
livery would make Government more effective
over the longer term. Organizational improve
ments also can reduce costs, although they are
likely to increase costs in the short term. While
each agency's situation is different, there are sig
nificant opportunities to streamline Federal orga
nizations.

Two recent initiatives illustrate some of the
opportunities available.
Department of Agriculture (USDA)

• USDA has the most extensive field organi
zation in the civilian Government. It has:
—Offices in 2,977 (or 94 percent) of the
3,158 counties in the U.S.
—Nearly 100,000 staff in 14,000 field offices
(costing $4 billion annually).
Despite this profusion of resources, farmers
must in many instances travel to different
USDA offices to get service.

• A joint USDA-OMB review in 1992 exam
ined USDA county-based agencies, the For
est Service, and other USDA agencies.

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

—County-based agencies (Agricultural Sta
bilization and Conservation Service, Exten
sion Service, Farmers Home Administration,
Federal Crop Insurance Corporation, and Soil
Conservation Service). USDA plans to pro
pose reductions in the number of county
offices, which predominantly serve farm
ers directly. These plans are based on
analysis of six criteria (including work
loads, clients served and delivery cost).
County offices of different agencies could
also be co-located, share overhead and
support functions, and provide one-stop
shopping, to provide better service to
farm clientele.
A more fundamental change would be to
create one farm service agency for all
USDA programs directly serving farmers.
This would reduce time and paperwork,
but more importantly, improve policy and
program coordination with a view to
maximizing the effectiveness of Federal
resources and client services.
—Forest Service. The Forest Service employs
more individuals than any other USDA
agency. Its field structure involves offices
at the regional, forest, and ranger district
levels. Streamlining options include: (i)
consolidating the current 9 regional of
fices into 5-7 offices; and (ii) consolidat
ing 20-25 percent of Forest Service offices
at the National Forest level, and up to
10 percent at the ranger district level.
—Other USDA Agencies. The remaining
USDA agencies represent very different
missions, field structures and clienteleranging from meat and plant inspection
to agricultural research. Streamlining op
tions include: (i) consolidating inefficient
field offices and low-priority research fa
cilities; (ii) consolidating regional offices,
both within and across agencies, to
produce savings in overhead and support
costs; and (iii) creating a single inspection
agency (which could also include food in
spection functions of the Food and Drug
Administration).
• USDA consolidations should make its pro
grams more effective in helping American
farmers and farm communities and reduc
ing the perception in many farm and urban
communities of a bloated, ineffective Fed
eral bureaucracy.

129

Army Corps of Engineers (Corps)
• On November 19, 1992, the Army an
nounced a plan to reduce Corps division
offices from 11 to 6; modify headquarters
and division operations; and restructure
district offices. The purpose is to improve
service to the Corps' diverse military and
domestic clientele, and to reduce costs to
taxpayers and local water resource project
sponsors.

• The plan would add a new district office
to the 39 existing district offices. Districts
would continue to be responsible for regu
latory functions and project operations,
management, and construction.
• Planning, design, real estate, and project re
view capability would be concentrated in
new technical centers associated with 15 ex
isting civil works districts.
• Administrative services would be consoli
dated in five locations and all Corps mili
tary construction responsibility in the
continental U.S. would be consolidated into
ten districts.
• Corps headquarters personnel would be re
duced by five percent and reorganized.
• Net annual savings from this reorganization
are estimated at $115 million by 1995, due
to reductions of about 2,600 positions and
reduced overhead expenses.
MAINTAINING A QUALITY WORKFORCE
To provide efficient and effective delivery of
services, the Federal Government must attract
and retain high-quality, motivated employees.
This requires a competitive pay and benefits
package and sound management of human re
sources. Attention must be paid to total com
pensation, to assure that the balance between
active employee compensation and retirement
benefits is optimal

Accomplishments (1989-92)
• A competitive pay system is now in place.
The Ethics Reform Act of 1989 raised Con
gressional and senior executive pay by up
to 25 percent. The Federal Employees Pay
Comparability Act of 1990 provided addi
tional flexibility and a locality-based pay

130

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

system, to achieve comparability with the
non-Federal sector.

• The Federal Employees Health Benefits Pro
gram continued to provide a wide choice
of comprehensive coverage for nine million
beneficiaries. Premium increases were held
below those for private sector plans, partly
through increased use of managed care and
changes enacted in the Omnibus Budget
and Reconciliation Act (OBRA) of 1990. Pre
ventive care benefits were also enhanced.
• The U.S. Postal Service assumed a greater
responsibility for retiree pension and health
costs under OBRA 1990.

• A database was established to measure and
track the quality of the Federal workforce.
Improvements Needed in the Future

• Continued reform of the Federal pay system
is needed. This includes greater attention
to over-grading, pay-for-performance, re
vised blue collar pay, and separate pay sys
tems for selected occupations.
• While growing less than private sector
plans, the Federal Employees Health Bene
fits (FEHB) program's cost growth remains
unacceptably high, in part because of richer
coverage for retirees than that which pre
vails in the private sector. Options for con
trolling FEHB costs include: (1) improving
cost containment incentives within the cur
rent program; (2) moving to competitive se
lection of regional managed care plans offer
ing standard benefits; and (3) providing the
same dollar amount of Government con
tribution for each plan combined with a
health risk pooling system. Consideration
should also be given to increasing the re
sponsibility of retirees for their health care
costs, particularly Medicare-eligible and
early retirees.
• The Civil Service Retirement and Disability
System continues to be underfunded. This
problem could be addressed by conforming
Federal civilian retirement benefits more to
those of the private sector. For example, the
retirement age could be raised for new retir
ees to be more consistent with the social
security system and cost-of-living adjust
ments modified for early and new retirees.

• A unique opportunity to inject "new blood"
from outside the Government and to in
crease representation of minorities and
women in the Senior Executive Service, and
perhaps to reduce its size, will occur in the
1993-1994 period when large numbers of
senior executives are expected to retire.
Agencies need to think through the manage
ment qualities required by different pro
grams as they evolve to meet 21st century
needs. They also need to initiate vigorous
efforts to locate highly qualified individuals
for the most critical senior jobs.

IMPROVING FINANCIAL MANAGEMENT
Federal financial management has for decades
been inadequate to manage what is now a $2.6
trillion cash flow. Few agencywide automated
financial management systems are reliable. Au
dited financial statements are rare. Insufficient
attention is paid to managing the Government's
receivables and other assets. Appreciation of the
magnitude of the Government's liabilities is in
adequate. Over a third of the Government's
High Risk areas are associated with poor finan
cial management.

Accomplishments (1989-92)

• The Chief Financial Officers (CFOs) Act of
1990 established a Government-wide chief
financial management official, a Controller,
and CFOs in 23 departments and agencies.
The Federal Credit Reform Act of 1990 re
quired budget and appropriation processes
to recognize the full cost of loans and loan
guarantees each year. The Federal Debt Col
lection Procedures Act of 1990 established
uniform procedures for recovering judg
ments and obtaining pre-judgement rem
edies on debts owed the Government. The
Cash Management Improvement Act of 1990
provided incentives for the efficient dis
tribution of cash to State Governments. The
expired accounts provisions in the National
Defense Authorization Act of 1990 ended
the practice of using expired accounts for
indefinite periods. The Cash Management
Improvement Act Amendments of 1992 en
hanced the Government's program for off
setting tax refunds of those delinquent on
Federal debts.

7. MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

• New financial management organizational
structures have been established in OMB
and the 23 agencies. CFOs and Deputy
CFOs have been appointed and a CFO
Council and Council Operations Group
established.
• OMB prepared and submitted to Congress
the first Government-wide report on the sta
tus of Federal financial management and a
five-year plan for its improvement The plan
identified initiatives in eight areas: organiza
tion, personnel, accounting standards, finan
cial systems, internal controls, asset manage
ment communications with State and local
Governments and private contractors, and
audited financial statements.
• OMB issued a directive defining the form
and content for financial statements. The
traditional financial statement format has
been expanded to include an overview of
the reporting entity, funded and unfunded
liabilities, funds required to finance un
funded liabilities, and a comparison of ac
tual expenses for each program with the
budget authority for the program.
• A Federal Accounting Standards Advisory
Board has been established, with the former
Comptroller General as Chairman, to rec
ommend accounting standards for Federal
agencies. This settled a five-year impasse on
who sets accounting standards for the Fed
eral Government
• Financial systems functional standards have

131

• The Federal Credit Policy Working Group
has:

—Instituted quarterly "Early Warning Re
ports" to show significant trends in the
performance of the portfolios of die five
major credit agencies.
—Established a Credit Training Institute for
agency credit staff.
—Developed standard lender agreements
that define the terms and conditions for
lenders participating in the Government's
loan guarantee programs.
—Initiated an automated credit screening
process to improve the loan origination
process.
—Initiated an automated capability to track
delinquent debts referred to the Depart
ment of Justice for litigation and collec
tion.
• The Internal Revenue Service has estab
lished targets for the collection of delin
quent taxes and initiated quarterly reviews
of collection performance.
• The Departments of Agriculture and Health
and Human Services and the State of Mary
land have initiated a State-wide program to
test electronic payment mechanisms for ben
efit transfers.
• OMB has organized 14 inter-agency teams
to develop and agree upon common pro
gram performance measures in areas such
as loans and loan guarantees, health care,
regulation and enforcement, and insurance
programs.

been updated for core financial systems,

• OMB has issued directives involving the

and established for the payroll/personnel,
travel and seized assets systems. The U.S.
Standard General Ledger has been estab
lished as a minimum standard for capturing
financial information within agencies.

audit of agency financial statements to re
quire a significant expansion of audit effort
- (beyond tiie traditional audit process) in
order to assess the quality of agencies' inter
nal controls. OMB worked closely with the
President's Council on Integrity and Effi
ciency, the General Accounting Office, and
the American Institute of Certified Public
Accountants to develop this guidance and
initiate training in financial statement audit
ing for Inspectors General and other audi
tors.

• The OMB budget execution data base has
been automated by providing for monthly
electronic reporting.
• $604 million was provided in 1992 and $625
million in 1993 for improved agency finan, dal systems, and a data base was estab
lished containing essential information
about die status of Government financial
systems. OMB and Treasury have reviewed
detailed agency financial systems plans.

• Sixty-seven Government entities and 24
Government corporations have completed
audited financial statements containing pro
gram performance information for 1991 ac-

132

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

tivities. Approximately 120 Government en
tities (plus 24 Government corporations) are
preparing in 1993 financial statements,
which will be subject to audit, for 1992 ac
tivities.
• OMB has issued new indirect cost regula
tions for colleges and universities, to elimi
nate abuses in the charging of indirect costs
and to assure a more equitable sharing of
the costs of overhead between the academic
community and the Federal Government.
Improvements Needed in the Future

• Coordinated efforts are needed to define fi
nancial management personnel needs and
target critical areas for recruitment and re
tention.

• Additional functional and information re
quirements need to be standardized. Use of
the off-the-shelf software program and
cross-servicing arrangements need to be ex
panded, to reduce costs and improve the
efficiency of processing and quality of man
agement information.
• Financial managers need to assure that the
information in financial statements is useful
and used. This can be done through the
use of performance measures and accelerat
ing the preparation and audit of financial
statements, in order that they might be
available for the appropriations process.
• Since debt collection is often not a high pri
ority at individual agencies and consoli
dated collection activities have evidenced
improved performance at lower cost, further
consolidation of debt collection activities
and the feasibility of establishing a central
debt collection agency should be explored.
Also, policy officials need to be made more
aware of their ability, under credit reform,
to reduce credit subsidies and increase
funds available for lending, through im
proved debt collection (including contract
ing out for private collection services).
ENSURING INTEGRITY AND EFFICIENCY

Since the days of the first Inspector General
for the Continental Army in 1789, public con
fidence in the integrity and efficiency of the Fed
eral Government has waxed and waned. Scan
dals have come and gone; progress has been

made; problems have continued; and new prob
lems have emerged.
The Bush Administration committed itself
early on to (i) force early disclosure of major
problem^; (ii) identify their root causes; and (iii)
deal with the root causes.

Accomplishments (1989-92)

• OMB initiated substantive review of the re
ports under the Federal Managers' Financial
Integrity Act (FMFIA). OMB required Dep
uty Secretaries (and their equivalents) per
sonally Jto review the reports in 1989, and
established a High Risk List in 1990 to dis
close the Government's most significant
vulnerabilities to fraud, waste, and mis
management.

• Publication of the High Risk List in the
President's 1992 and 1993 budgets—together
with specific proposed funding for correc
tive actions and OMB's assessment of
progress to date—has proved effective in
assuring political level attention (Congress
as well as the Executive Branch) to bringing
these vulnerabilities under control. Of the
135 high risk areas identified since 1989, the
Administration has resolved 33 and made
significant progress with another 20.

• The Administration has aggressively sup
ported the statutory Inspectors General
(IGs)—requesting $888 million for IGs in 25
departments and agencies in 1993, 29 per
cent more than the $629 million requested
in 1990. The payback has been enormous.
In 1990 and 1991, the work of these IGs
yielded $3.8 billion in management deci
sions to disallow costs based on IG findings
and $31.2 billion in management decisions
to implement IG recommendations for bet
ter use of funds.
• When the HUD scandal broke, the Adminis
tration proposed, and Congress enacted,
new ethical standards and reformed man
agement practices. These include putting
strict limits on the use of discretionary
funds and establishing new penalties for
abuses by HUD personnel.

• The President's Defense Management Re
form package (1989) targeted major savings
through such initiatives as supply system
efficiencies, consolidation of finance and ac

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

counting operations, and corporate informa
tion management. Reported savings of $17.9
billion were achieved through 1993; addi
tional savings of $53 billion are expected
for the period 1994-97.

• Federal expenditures ($5.8 billion in 1993)
for the Department of Energy's Environ
mental Restoration and Waste Management
program have more than tripled since 1989,
to bring nuclear weapons facilities into com
pliance with Federal and State environ
mental regulations. A joint OMB/DOE task
force implemented a management system
that provides monthly reports on a projectby-project basis and allows DOE to set pri
orities and relate cleanup progress to ex
penditures over time.

• The Administration initiated 35 joint OMB/
agency SWAT and review teams to achieve
specific "fixes." See Using SWAT and Re
view Teams (above).
Improvements Needed in the Future

The Government needs to concentrate on three
important vehicles for improving its integrity
and efficiency: audit follow-up, FMFIA, and the
High Risk List.
• Agency audit follow-up systems need to
provide policy level attention to ensuring
that audit recommendations result in real
and substantive improvements. Studies in
1992 by OMB, General Accounting Office,
and Senate Governmental Affairs staff have
revealed major problems in this area.
• FMFIA implementation needs to be made
into a useful process for identifying and cor
recting all significant management defi
ciencies throughout Government. Intended
to force accountability for the adequacy of
agency management controls, in some agen
cies, FMFIA has become a huge paperwork
process.

• OMB needs to obtain sufficient resources to
fix vulnerabilities listed on the High Risk
List. Corrective action implementation plans
need to be agreed upon, needed resources
provided, monthly-quarterly tracking under
taken, and progress or lack of progress
raised to the head of agency/OMB Director
level. Presidentially appointed program
heads need to understand, as a condition

133

of their appointment and confirmation, that
they will be held personally accountable for
resolving these High Risk areas.
IMPROVING INFORMATION
MANAGEMENT
Information technology management is critical
to the Government's knowing what it is doing
and to doing it well. The Federal Government
spends $1.5 trillion a year in 900 million pay
ment transactions. It works through 50 States
and thousands of local Governments and private
entities. It deals regularly with 42 million social
security beneficiaries and 125 million taxpayers,
and provides the system which permits safe air
travel by 500 million passengers a year.
Accomplishments (1989-92)

• The Federal Government invested over
$17.8 billion to improve automated systems
during the period 1989-92. These invest
ments have improved the way the Govern
ment issues checks, processes claims, con
trols air traffic, and performs its many other
missions.

• Through the Program for Priority Systems,
the Bush Administration has brought the
higher cost, more complex, and sensitive
systems initiatives to the close attention of
senior policy officials at OMB and the agen
cies. This has resulted in:

—DOD's use of its Corporate Information
Management (CIM) concept to review
military functions, redesign areas for in
creased efficiency, and eliminate unneces
sary redundancy.
—Increased interagency sharing of informa
tion and telecommunications services
through the General Services Administra
tion's FTS 2000 system. FTS 2000 has
reduced overall Government costs and
provided managers with detailed billing
information (increasing their ability to
control costs).
• Federal agencies have improved the security
of their automated information systems by
implementing the Computer Security Act of
1987.
• In over 100 locations across the country, the
Government is beginning to do business
electronically. Paper tax returns, regulatory

134

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 7-1.

PROGRAM FOR PRIORITY SYSTEMS
(Dollar amounts in millions)

System

1989
Actual

1993
Requested

1993
Enacted

SSA ............................................................................................................. .........
IRS Tax System Modernization .....................................................................
FAA Advanced Automation System/VSCS....................................... .........
SEC EDGAR .......................................................... .................................. .........
FDA SMART ............................................................................................ .........
FBI Fingerprint Identification (IAFIS) ..........................................................
Customs/INS Border Computer System .»...................................................
Government-wide Financial Management Service (FMS) .............. ..........
FTS 2000 Telecommunications .............................................................. .........
DOD Corporate Information Management (CIM) ........................... ..........

260
86
263
10
—
—
10
—
—
—

260
612
806
11
3
100
14
659
10
199

260
565
646
11
3
75
14
625
10
199

reports, customs declarations, purchase or
ders, and Government checks are being
eliminated, cutting transaction costs and
errors in half. The Commerce and Justice
Departments made this progress possible by
issuing (i) a Government-wide standard for
electronic transactions and (ii) guidance af
firming the legal admissability of electronic
documents.
• OMB has issued guidelines which allow
agencies to implement the Computer Match
ing and Privacy Protection Amendments of
1988. This Act protects the privacy and due
process rights of applicants for, and partici
pants in, Federal benefit programs, while
allowing agencies to use computerized eligi
bility checks to reduce fraud and abuse.
Agencies conducted over 100 matching pro
grams in 1992 under the Act's procedures.

Improvements Needed in the Future
• 1994 spending for the PPS (assuming a con
tinuation of the Administration's policies)
for the should be $2.7-3.0 billion.

• The information technology management
portion of OMB Circular No. A-130, "Man
agement of Federal Information Resources,"
needs to be updated (i) to emphasize the
crucial role of effective planning to the suc
cess of information technology initiatives
and (ii) to provide Federal agencies with
better guidance on the components of effec
tive information technology planning.

Percent
Change:
1989 to
1993
Enacted

+560%
+145%
+10%
—
—
+40%
—
—
—

• Seamless communications "backbones" are
needed to facilitate data transfer and ex
change, while optimizing systems effi
ciencies. For example, the Interagency
Interim National Research and Education
Network, part of the President's High Per
formance Computing and Communications
Initiative, is increasing the productivity of
both scientific researchers and Federal spon
sors.

• Increased and more systematic dissemina
tion of lessons learned among Federal agen
cies is needed to ensure the widest use of
sound information technology management
processes and planning principles.
• Technical and management attention is
needed to provide for the confidentiality,
availability and integrity of Government in
formation (particularly as use of electronic
information increases).
• Federal agencies need to take advantage of
increasing competition for providing local
telephone services. In some cases, providers
other than the local telephone company
offer business customers lower rates.
STRENGTHENING FEDERAL STATISTICS
Federal statistics provide the flow of unbiased
and timely information about the state of the
economy, environment, health, and society that
is essential for a democracy. The Administration
continues to support improvements to provide
accurate, relevant, and timely information. In

MANAGEMENT REFORM AND REQUIRED SYSTEMS IMPROVEMENTS

particular, high quality economic indicators are
essential to policy makers that wish to under
stand and respond to changes occurring in the
economy and population of the United States.

Accomplishments (1989-92)
• The Administration launched a major effort
in 1989 to improve the quality of the Na
tion's most vital measures of domestic and
international economic performance. The
Administration's Economic Statistics Initia
tive has (i) begun modernizing the National
Income and Product Accounts to improve
their accuracy, breadth, and international
comparability; (ii) improved the coverage
and detail of international flows of funds;
(iii) begun separating quality and inflation
changes in price data; and (iv) expanded
coverage of the service sector.

• The establishment of a Center for Survey
Methods will upgrade the Government's
statistical work force by providing special
ized graduate-level programs to develop the
skills needed in the conduct of Federal sta
tistical surveys.

• The Administration has increased coordi
nation with international statistical offices
(including those of Canada, Mexico, the Eu
ropean Community, the International Mone
tary Fund, the United Nations, and the
World Bank). The results have been greater
international data comparability, more accu
rate export statistics, and more focused sta
tistical training for the emerging market
economies of Eastern Europe and the former
Soviet Union.
Improvements Needed in the Future

• The statistical data sharing legislative pro
posal, which provides a standardized mech
anism for limited sharing of confidential sta
tistical information solely for statistical pur
poses between statistical agencies, needs to
be finalized and transmitted to Congress.
• Parts of the Economic Statistics Initiative
were not funded by Congress in the appro
priations process, and some regular statis
tical activities had to absorb reductions. Fur
ther improvement of statistics will require
more resources. Congress needs to be con
vinced of the importance of this vital Fed
eral service.

135

• Better use of private sector survey expertise
is needed. In part because it collects con
fidential decennial census data, the Bureau
of the Census conducts most major house
hold surveys for itself and other agencies.
While Federal statistical agencies continue
to maintain high quality standards, addi
tional reliance on competitive private sector
expertise could provide better service to
agencies with survey requirements.

REFORMING FEDERAL PROCUREMENT

Federal procurement expenditures amounted
to $210 billion in 1991. They involve over 70,000
contract actions each working day, approxi
mately 150,000 Federal employees, 2,500 buying
offices and some 250,000 firms. Much has been
done during the past several years to refine and
simplify the process, to make it more efficient
and responsive, and to protect it from fraud
and abuse.
Accomplishments (1989-92)
• The Office of Federal Procurement Policy
(OFPP) tightened controls over service con
tracting, and improved contracting methods
in this area, the fastest growing area of Gov
ernment contracting ($103 billion). What
cannot be performed by contractors (the
"inherently Governmental") has been clear
ly defined, and specific guidance has been
issued to ensure that contracts are properly
structured, awarded and administered.

• OFPP issued a new comprehensive policy
to foster environmentally sound, energy
conserving procurements, and helped spon
sor the 1992 "Buy Recycled Products" Trade
Fair.
• Two new OFPP policies help small busi
nesses make sales to the Government by
(i) allowing them to provide letters of credit
in lieu of surety bonds when performing
construction work, and (ii) expanding the
use of electronic commerce techniques and
capabilities.
• OFPP has (i) issued new consultant conflict
of interest policies and lobbying restrictions,
(ii) issued regulations to clarify procurement
ethics laws, (iii) established a new Govern
ment-wide system for identifying defective
parts, and (iv) established a new Govern-

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BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

ment-wide list that identifies contractors or
grantees that have been suspended or
debarred from performing Government
work.
• OFPP worked with other agencies and the
Organization for Economic Cooperation and
Development to foster Western style pro
curement systems in Central and Eastern
Europe, opening these markets to U.S.
firms.
• The percentage of Federal contract dollars
awarded competitively has increased from
60 percent in 1988 to 68 percent in 1991,
continuing a trend beginning in 1983 when
the competition rate was only 40 percent.
Competitively awarded contracts generally
save 20-25 percent over noncompetitive
awards.
• The Administration now classifies contract
ing officers as "professional" rather than
"administrative" employees in order to re
cruit and retain the best people. In addition,
OFPP has established Government-wide
standards and policies for training contract
ing and purchasing personnel.
• The Administration has re-established the
Cost Accounting Standards Board (CASB)
which has re-issued all existing cost

accounting standards and applied these
standards for the first time to civilian agen
cy contractors.
Improvements Needed in the Future

• Procurement processes must be further
streamlined and simplified. It takes too long
to acquire items (several years for large
computer systems, for example) and fre
quently the items bought do not represent
"best value" or incorporate the latest tech
nologies.
• Greater emphasis needs to be placed—espe
cially in the civilian agencies—on the ad
ministration and oversight of contracts.
Contracting officials must be held account
able for the effectiveness of their post-award
activities.
• Confusing statutory requirements need to
be resolved with respect to procurement in
tegrity. A unified look at how these require
ments—and those affecting small businesses
and consultants—collectively affect Govern
ment missions and the private sector is
needed.

• Continuing improvements in the procure
ment workforce are needed.

8. Legislative Action and
Pending Agenda

137

8. LEGISLATIVE ACTION AND PENDING
AGENDA
Although hundreds of bills have been enacted
over the past four years, dozens of the
President's legislative initiatives still await con
gressional action. This chapter lists some of the
major legislation signed into law by President
Bush since 1989. It also lists some of the most
prominent Presidential initiatives which Con
gress failed to enact.
I. ENHANCING AMERICA'S GLOBAL
ECONOMIC COMPETITIVENESS
The Bush Administration has supported ef
forts to enhance U.S. economic competitiveness
by increasing investments in infrastructure im
provements and civilian research and develop
ment, reforming the civil justice system, using
market-based incentives to influence investment
and production decisions, and opening foreign
markets to U.S. products.

Enacted Legislation

duction, and promoting the use of renewable
resources and alternative fuels. By promoting
the diversification of energy sources through
market-based incentives, the Act effectively re
duces the economic consequences of disruptions
in world energy markets. It will also provide
energy consumers with the most economical, en
vironmentally acceptable alternatives for their
needs. This increased competition will help
lower prices while ensuring adequate supplies
(see also subsection VII—Energy and the Envi
ronment).

The 1990 Farm Bill authorized a variety of
agricultural programs, including commodities,
food stamps, resource conservation, rural devel
opment, and agricultural research and extension
activities. The Act emphasized a market-oriented
approach to farm policy rather than reliance on
the government for making production decisions
(see also subsection VH—Energy and the Envi
ronment).

The Intermodal Surface Transportation Efficiency
Act of 1991 authorized over $150 billion in
spending for federally assisted highway and
transit programs through 1997. It established the
surface transportation framework for the postinterstate era by creating a new National High
way System. The Act encouraged private-sector
financing of transportation projects (e.g., through
toll roads). The Act also provided unprece
dented flexibility for State and local govern
ments to use funding to best meet local needs,
and recognized the needs of—and the relation
ship among—all modes of transportation.

As part of the effort to open foreign markets
to U.S. products, the President supported and
won extension of fast track trade agreement author
ity. Subsequently, the President signed the North
American Free Trade Agreement (NAFTA) in
December 1992. The extension of fast track au
thority will ensure an up or down vote on the
implementing legislation for NAFTA within 90
legislative days of its submission to Congress.

The Aviation Safety and Capacity Expansion Act
of 1990 authorized airports to impose user fees
on departing passengers. The revenues from
these fees (roughly $1 billion per year) are to
be used to expand airport capacity, enhance
safety, and mitigate noise, in addition to creating
jobs. The law requires U.S. airlines to make a
transition to quieter aircraft by the year 2000.

The Administration supported permanent ex
tension of the research and experimentation tax
credit. The tax credit expired on June 30, 1992
(see also subsection II—Economic Growth Incen
tives).

The Energy Policy Act of 1992 enhanced the
Nation's energy security by increasing energy
efficiency, removing regulatory barriers to pro

Presidential Initiatives Congress Failed to
Enact

The President's Capital Gains proposal would
have helped reduce the cost of capital in the
United States to levels more competitive with
our major trading partners. Canada, France, Ger
many, Japan, the Netherlands, and the United
Kingdom, among others, all treat capital gains
139

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BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

preferentially (see also subsection II—Economic
Growth Incentives).
The Access to Justice Act of 1992 would have
reformed the civil justice system to encourage
voluntary dispute resolution and improve the
use of litigation resources. The bill would allow
certain prevailing parties, including those in
some cases involving the United States, to re
cover attorney's fees. In most cases, prior notice
would be a prerequisite to bringing suit in
Federal court. Uniform Federal standards for
product liability lawsuits would be set by the
Product Liability Fairness Act.
The Cooperative Production Acts, proposed in
1990 and 1991, would have provided incentives
for joint production ventures.

The Emerging Telecommunications Technologies
Acts of 1991 and 1992 would have transferred
radio spectrum currently reserved for the Fed
eral Government to the Federal Communications
Commission (FCC) and allowed the FCC to as
sign vacated spectrum to private users through
competitive bidding. In addition to making more
spectrum available and generating more than
$2.5 billion per year, the Act would clear the
way for the introduction of new technologies
currently sidetracked by the scarcity of unused
spectrum under the FCC's control.
The Interstate Commerce Commission (ICC) Sun
set Act of 1992 would have deregulated the in
terstate trucking industry and other ground
transportation industries, terminated the ICC,
and transferred certain ICC functions to the Fed
eral Trade Commission and the Departments of
Justice and Transportation. Enactment of this
proposal would have saved consumers an esti
mated $3 billion annually.
The Credit Availability and Regulatory Relief Act
of 1992 would have helped ease the flow of
credit. The Act would eliminate the requirement
that banking agencies develop regulations in cer
tain areas unrelated to the safety and soundness
of the industry; and would require uniformity
among the regulations issued by the various
Federal banking agencies.
The Maritime Reform Act of 1992 would have
created a new program to revitalize the U.S.
merchant marine and enhance national security.
Over a seven-year period, it would have sub
sidized the operation of up to 74 militarily use
ful, U.S.-flag, commercial vessels.

II. ECONOMIC GROWTH INCENTIVES
Over the past four years, the Bush Adminis
tration proposed a series of initiatives to
strengthen
small
business,
promote
entrepreneurial capitalism and job creation, and
provide incentives for homeownership.

Enacted Legislation
The Small Business Credit and Business
Opportunity Enhancement Act of 1992 increased
Small Business Administration lending by $2 bil
lion to a total of $6 billion in loans and loan
guarantees in 1992. It also authorized an in
crease in credit availability to small businesses
by creating a new program to finance Small
Business Investment Companies.
The Small Business Research and Development
Enhancement Act of 1992 doubled the percentage
of research budgets which certain Federal agen
cies must set aside for small businesses.
Research funds to small businesses are expected
to increase from $0.5 billion in 1992 to approxi
mately $1.2 billion in 1997.

Presidential Initiatives Congress Failed to
Enact

The Economic Growth Act of 1992 contained
most of the Administration's major unenacted
tax proposals. Its most salient provisions would
(1) provide preferential tax treatment for long
term capital gains (detailed below); (2) provide
an investment tax allowance; (3) extend first
time homebuyers a $5,000 tax credit; (4) increase
the personal exemption by $500 for children
under age 18; (5) exempt from tax the interest
on earnings kept in Individual Retirement
Accounts (IRAs) for seven years; (6) allow pen
alty-free withdrawals from IRAs for first-time
homebuyers and for medical care and education;
(7) make permanent the research and experi
mentation tax credit; and (8) extend various
other expiring tax credits (see also subsection
I—Enhancing America's Global Economic Com
petitiveness). Congress failed to produce growth
legislation in a form acceptable to the President.
The President's Capital Gains proposal would
have excluded up to 45 percent of the capital
gain realized upon the disposition of a qualified
asset. The proposal linked the amount of the
exclusion to the length of time the asset was
held. Providing preferential tax treatment for
long-term capital gains would free up capital

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LEGISLATIVE ACTION AND PENDING AGENDA

for new ventures and encourage business invest
ment patterns that favor both innovation and
future growth potential over short-term profit
ability (see also subsection I—Enhancing Amer
ica's Global Economic Competitiveness). The
Enterprise Zone proposal discussed below is
linked to this proposal.
The President's Enterprise Zone proposal
would have allowed all communities meeting
objectively defined criteria to qualify for certain
targeted Federal income tax employment and
investment incentives. These would include: (1)
a zero capital gains tax rate on tangible and
intangible property and investments used for the
last two years in job-creating enterprise zone
businesses; (2) deferral of certain personal in
come taxes for small investors who purchase
stock in businesses located in enterprise zones;
and (3) a five percent refundable credit on per
sonal income taxes for the first $10,500 of wages
of enterprise zone employees earning less than
$20,000. Congress failed to produce Enterprise
Zone legislation in a form acceptable to the
President (see also subsection V—Hope for Dis
tressed Communities).

and authorizing compensatory and punitive
damages for intentional discrimination.
The Immigration Act of 1990 increased the
number of authorized permanent immigrants
from 510,000 in 1990 to 700,000 in each of
1992-1994. Within these levels, the number of
visas granted on the basis of occupational skills
increased from 54,000 to 140,000 per year.

Presidential Initiatives Congress Failed to
Enact
Under the Administration's Perestroika for
Troubled Public Housing proposal, residents with
in the jurisdiction of troubled public housing
agencies would have been given the option of
choosing alternative management or ownership
of their project (see also subsection V—Hope
for Distressed Communities).
The Administration's Lifelong Learning Act of
1992 would have extended Federal grant and
loan programs to part-time students, older
workers reentering the work force, and those
needing retraining or skill upgrading (see also
subsection IV—Investing in Education and Job
Training).

III. IMPROVED ACCESS TO ECONOMIC
OPPORTUNITY

IV. INVESTING IN EDUCATION AND JOB
TRAINING

The Bush Administration has endorsed the
following proposals to remove barriers to eco
nomic opportunity:

President Bush offered the following propos
als to reinvigorate America's educational system
to better prepare students and workers for the
challenge of the 21st century:

Enacted Legislation

The Americans with Disabilities Act of 1990 ex
tended the framework of Federal civil rights
laws that applied to women and minorities to
Americans with disabilities. It prohibited
discrimination in employment, public services,
public accommodations, and transportation, and
provided for telecommunications relay services.
The Administration's Working Family Child
Care Assistance Act of 1989 provided tax credits
for families and established a voucher program
to provide parents greater choice in the selection
of child care. This legislation will increase the
income of low-income families by $31 billion
in payments and lower taxes.

The Civil Rights Act of 1991 increased protec
tions against employment discrimination by
overturning certain Supreme Court decisions

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of St. Louis

Enacted Legislation

The Excellence in Mathematics, Science, and
Engineering Education Act of 1990 established new
scholarships and traineeships to promote excel
lence in mathematics, science, and engineering
education. Improving science and math achieve
ment is a National Education Goal and crucial
to developing a more competitive work force.
In addition, the Higher Education Act Amendments
of 1992 reauthorized postsecondary education
student aid grant and loan programs. It changed
award amounts and eligibility, established new
loan programs, and enhanced program integrity.

Presidential Initiatives Congress Failed to
Enact

The Administration also proposed a number
of job training initiatives. For example, the Job

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BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Training 2000 Act would have established (1)
local skill centers to serve as one-stop entry
points to Federal vocational training programs;
(2) a certification system to ensure that only high
quality vocational training programs receive
Federal funds; and (3) a voucher system for vo
cational training. In addition, the National Youth
Apprenticeship Act would have created a national
framework for comprehensive youth apprentice
ship programs. States would have been able to
use the framework to structure youth appren
ticeship programs of academic instruction, job
training, and work experience.
The Educational Excellence Act of 1989 would
have promoted
excellence in American
education by recognizing and rewarding
schools, teachers, and students for outstanding
achievements and enhancing parental choice of
schools. The AMERICA 2000 Excellence in
Education Act of 1991, an expanded version of
the prior bill, would have provided a more com
prehensive set of legislative initiatives, sup
ported the National Education Goals through ac
tivities to promote education reform, and im
proved educational achievement. A key element
in the Administration's excellence in education
proposals was the Federal Grants for State and
Local "GI Bills" for Children. This legislation
would have authorized a demonstration pro
gram of Federal assistance for States and com
munities to provide scholarships to middle- and
low-income children to use at schools of their
choice-public, private, or religious.

The Administration's Lifelong Learning Act of
1992 would have extended Federal grant and
loan programs to part-time students, older
workers reentering the work force, and those
needing retraining or skill upgrading. A "Life
long Learning Line of Credit" would have been
extended to all Americans who wished to
borrow and repay student loans and have their
repayment level tied to income (see also sub
section III—Improved Access to Economic
Opportunity).
V. HOPE FOR DISTRESSED
COMMUNITIES

The Bush Administration has supported ef
forts to encourage private investment in dis
tressed areas to create jobs and opportunity,
strengthen law enforcement, control drug use,

provide targeted assistance to the needy, and
break the cycle of welfare dependency.

Enacted Legislation
Legislation implementing the President's anti
drug abuse proposals (1) required States to assess
their efforts to reduce drug and alcohol abuse
and to prepare State-wide treatment and preven
tion plans; (2) required educational institutions
receiving Federal assistance to certify that they
have adopted and implemented drug-free cam
pus plans; and (3) provided waivers necessary
to implement the Andean Initiative to assist cer
tain Latin American nations in combatting drug
trafficking.

The National Affordable Housing Act of 1990
provided greater housing opportunities for lowincome families. It included the Homeownership
and Opportunity for People Everywhere (HOPE)
Act, which empowered low-income renters, in
cluding public housing tenants, to become
homeowners and property managers. Broaden
ing ownership of private property will improve
maintenance and upkeep of housing, increase
pride of ownership, and provide a stronger in
centive for low-income families to save, invest,
and plan for the future. The Act restored the
financial soundness of the Federal Housing Ad
ministration fund and assured its ability to meet
the mortgage finance needs of low- and mod
erate-income homebuyers (see also subsection
X—Improving Government Management and
Accountability). The Housing and Community De
velopment Act of 1992 further expanded homeownership by permitting the use of housing
vouchers toward the purchase of a home. In
addition, families will receive assistance to relo
cate away from areas with high concentrations
of poverty under the Moving to Opportunity
program.
Presidential Initiatives Congress Failed to
Enact
The President's Enterprise Zone proposal (see
subsection II—Economic Growth Incentives)
would help attract private capital to America's
distressed inner cities. These investments would
create jobs and help revitalize local economies.
The Weed and Seed proposal described below
is linked to this proposal. Congress failed to
produce Enterprise Zone legislation in a form
acceptable to the President.

143

LEGISLATIVE ACTION AND PENDING AGENDA

The Administration's Weed and Seed Implemen
tation Act of 1992 linked stronger law enforce
ment to improvements in job training, education,
health care, day care, and drug treatment. The
proposal would authorize $500 million in 1993
Federal spending to be coordinated with State,
local, and private resources for these purposes.
These funds were to be used principally in pro
posed Enterprise Zones (discussed above). The
program was designed to "weed out" criminals
and drug dealers from the streets and "seed"
designated urban areas with coordinated social
programs and assistance. Congress failed to
produce Weed and Seed legislation in a form
acceptable to the President.

Comprehensive Violent Crime Control Acts pro
posed by the President in 1989, 1991, and 1992
would have made Federal law tougher on crimi
nals. The legislation would establish an enforce
able Federal death penalty, provide procedures
to limit appeals of death sentences, establish an
exception to the exclusionary rule to allow evi
dence obtained in good faith to be used in
courts, and increase penalties for crimes against
women and children and for the criminal use
of firearms. In addition, the Drug Supply Reduc
tion Act of 1991 would have strengthened certain
Coast Guard and Customs Service enforcement
authorities.

The Administration's Welfare Reform Initiative
would have provided States with the flexibility
to try innovative approaches in administering
public assistance payments, the food stamp
program, and public housing programs. The
proposal would establish a pilot program au
thorizing a limited number of communities to
integrate Federal resources from many programs
into a locally designed effort to assist low-in
come individuals.
VI. COMPREHENSIVE HEALTH CARE
REFORM

The Bush Administration supported proposals
that would build on the strengths of the U.S.
health care system—consumer choice and high
quality care—while controlling costs and im
proving access to care. Congress failed to enact
any of the Bush Administration's health care re
form initiatives.

Presidential Initiatives Congress Failed to
Enact
The President's Comprehensive Health Reform
Program would have expanded access to health
care through health insurance credits and tax
deductions for moderate and low-income fami
lies. The Program would reform the health in
surance market by (1) requiring health insurers
to insure all groups that want to buy* health
insurance, (2) creating Health Insurance Net
works that would enable small firms to purchase
low cost, high quality health insurance, and (3)
allowing States to develop basic health insurance
benefit packages that would be affordable for
low-income families to purchase. Self-employed
individuals would be able to deduct the full
cost of their health insurance premiums.
The Program would contain health care costs
by (1) creating incentives to reduce malpractice
litigation and "defensive" medical practices un
dertaken principally to avoid such litigation, (2)
improving consumer information about the aver
age cost of services and the quality of care pro
vided by physicians, hospitals, and other health
care providers, (3) reducing administrative costs
through electronic billing and standardizing
claims procedures, and (4) expanding the use
of coordinated care.
VII. ENERGY AND THE ENVIRONMENT
President Bush has supported innovative,
market-oriented incentives to encourage environ
mentally sensitive development and utilization
of America's domestic natural resources.

Enacted Legislation
The Energy Policy Act of 1992 enhanced the
Nation's energy security by increasing energy
efficiency, removing regulatory barriers to pro
duction, and promoting the use of conservation,
renewable resources and alternative fuels. The
Act promotes the use of clean burning natural
gas, the development of technologies for more
environmentally acceptable use of coal and tax
incentives for domestic oil and natural gas pro
duction by independent producers. It improved
the system of licensing nuclear power plants and
provides industry and State and local govern
ments greater opportunities for participation in
its implementation (see also subsection I—En
hancing America's Global Economic Competi
tiveness).

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BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

The Clean Air Act Amendments (CAAA) of 1990
provided significant air quality improvements
and ensured cleaner and healthier air for all
Americans. The President's innovative, marketbased approaches to environmental protection
broke a 10-year legislative deadlock on clean
air amendments. The CAAA will remove an esti
mated 56 billion pounds of pollution from the
air each, year. It will cut air toxic emissions by
75 percent, reduce sulfur dioxide emissions—
an acid rain causing pollutant—by 10 million
tons, and bring all cities into attainment with
air quality health standards by the year 2010.

The Oil Pollution Act of 1990 created a com
prehensive regime to prevent, respond to, and
pay for the cost of oil spills. The Act required
increased environmental safeguards for oil trans
portation, improved contingency planning,
enhanced Federal and industry response capa
bilities, and provided stronger enforcement au
thority and penalties. It also authorized the Oil
Spill Liability Trust Fund to cover cleanup costs
and damages not compensated by the spiller.
The 1990 Farm Bill authorized a variety of
agricultural programs, including commodities,
food stamps, resource conservation, rural devel
opment, and agricultural research and extension
activities. The Act established incentives for
farmers to preserve wetlands and retire fragile
land from commercial production. The America
the Beautiful provisions established a private
nonprofit Foundation to provide grants to com
munities for tree planting (see also subsection
I—Enhancing America's Global Economic Com
petitiveness).

The President signed a number of bills that
promoted effective land management and the
conservation of natural resources. The ArkansasIdaho Land Exchange Act, which added nearly
41,000 acres of internationally significant wet
lands to National Wildlife Refuges in Arkansas;
the Rocky Mountain Arsenal National Wildlife Ref
uge Act, which directed the Fish and Wildlife
Service to begin actively managing uncontam
inated areas of the Arsenal as fish and wildlife
habitat, and once contamination is removed
from other acreage, to designate most of the
Arsenal as a new National Wildlife Refuge near
Denver, CO; and the Everglades National Park
Protection and Expansion Act, which added some

100,000 acres to the Park; are prominent exam
ples.
The Natural Gas Wellhead Decontrol Act of 1989
provided for the complete elimination of price
controls on natural gas wellhead contracts by
January 1, 1993. By ending 35 years of price
regulation, the Act will allow this clean burning
domestic energy source to reach its full potential
as a competitive alternative to imported oil.

Several statutes have added more than 500,000
acres along 35 rivers covering 1,595 miles in
11 States to the National Wild and Scenic Rivers
System since January 1989.
The Federal Facility Compliance Act of 1992
helps ensure that all Federal facilities achieve
compliance with applicable Federal, State, and
local hazardous waste laws.
The Great Lakes Critical Program Act of 1990
required the Federal Government to undertake
prescribed actions to improve water quality in
the Great Lakes, the Long Island Sound, Lake
Champlain, and Onondaga Lake.
The National Environmental Education Act pro
motes and recognizes excellence in environ
mental education.
The conservation of wild birds was promoted
by an Act that limited the importation of certain
exotic birds and authorized assistance to other
countries for wildlife conservation programs.
The Reclamation Projects Authorization and Ad
justment Act authorized appropriations of more
than $2 billion for the construction of Federal
reclamation projects. The Act will provide sig
nificant environmental and economic benefits
throughout the western United States. In addi
tion, it established a system of voluntary trans
fers of Central Valley Project water in California
that represents an important innovation in the
development of market-orientated water policy.

The Water Resources Development Acts (WRDA)
of 1990 and 1992 contained the biennial water
resources project authorizations for the Army
Corps of Engineers Civil Works program. The
two Acts authorized the construction of 49 major
water resources projects and the modification of
64 previously authorized projects, with increased
emphasis on environmental protection.

145

LEGISLATIVE ACTION AND PENDING AGENDA

Presidential Initiatives Congress Failed to
Enact

ters" to reduce discretionary programs if the
caps are exceeded.

The Department of the Environment Act of 1991
would have elevated the Environmental Protec
tion Agency (EPA) to Cabinet status.

Initiatives Congress Failed to Enact

The Arctic Coastal Plain Competitive Oil and Gas
Leasing Act would have allowed environmentally
sound leasing of the Arctic National Wildlife
Refuge (ANWR). In addition, this proposal pro
vided that ANWR leasing receipts be shared
with the State of Alaska 50-50. It also resolved
technical and regulatory barriers to greater Alas
ka North Slope oil development.

The Hazardous and Additional Waste Export and
Import Act of 1991 would have implemented the
first major international agreement addressing
the import and export of hazardous waste. The
legislative proposal prohibited exports or im
ports of wastes covered under the agreement
unless there was a bilateral or regional agree
ment between the United States and the receiv
ing or exporting country.
The Department of Energy Laboratory Technology
Partnership Act of 1992 would have accelerated
technology transfer from the Department of En
ergy's (DOE) National Laboratories to commer
cial use. The proposed legislation accomplished
this objective by providing broad authorities for
DOE to enter into research and development
partnerships with industry, academia, and other
Federal agencies.
VIII. CONTROLLING THE DEFICIT AND
REFORMING THE BUDGET PROCESS
The Bush Administration has supported the
following efforts to control Federal spending, re
duce the deficit, and reform the Federal budget
process:

Enacted Legislation

The Omnibus Budget Reconciliation Act of 1990
authorized the largest deficit-reduction program
in history—nearly a half-trillion dollars in five
annual installments: 1991-1995. It provided for
the first comprehensive $100 billion reform and
restructuring of "entitlement" and "mandatory"
programs. The Act also capped discretionary
spending for each fiscal year through 1995; and
created an enforcement system consisting of
"pay-as-you-go" procedures to control manda
tory spending and receipts and "mini-seques

Once adopted by Congress and ratified by the
States, the Balanced Budget Constitutional Amend
ment would have required a balanced Federal
budget with safeguards against achieving the
balance through higher revenues.
Once adopted by Congress and ratified by the
States, the Line-Item Veto Constitutional Amend
ment would have allowed the President to veto
line-items in appropriations bills, in authorizing
legislation that creates entitlement or other man
datory spending, and in revenue measures.
The 1993 Budget proposed an annual, enforce
able cap on the growth of "mandatory" Federal
spending except Social Security. The President's
proposed cap would have allowed for increases
resulting from inflation, program-by-program
growth in beneficiary populations, and an extra
allowance during the first two years to provide
for an orderly transition. The cap would have
been enforced through a reconciliation process
and, if necessary, a sequester of mandatory
spending programs except Social Security (see
also Chapter 13, Budget Process Reform).

The Legislative Line-Item Veto Act of 1992
would have required the Congress to vote upor-down on Presidential rescission proposals.
IX. GLOBAL LEADERSHIP FOR THE 21ST
CENTURY
The Bush Administration has supported
efforts to preserve our national security and ad
vance America's interests abroad by deploying
and protecting necessary military capabilities,
pursuing arms reduction, and supporting the es
tablishment of democratic governments and
market-oriented economies around the world.
Over the past four years, Congress has enacted
virtually all of the President's major legislative
initiatives in this area.

Enacted Legislation
The Resolution on Authorization for Use of Mili
tary Force Against Iraq (enacted in January 1991)
forged congressional solidarity with the Presi
dent in opposition to Iraq's armed invasion and
occupation of Kuwait. Operation Desert Storm,
which closely followed this authorization, liber

146

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

ated Kuwait and sharply reduced Iraq's ability
to threaten vital U.S. interests in the Persian
Gulf region.

The Missile Defense Act of 1991 (enacted as
part of the 1992 Defense Authorization Act)
marked the formation of a national consensus
on the need to protect the United States, our
allies and our deployed forces against ballistic
missile attacks. Following Operation Desert
Storm, Congress reacted strongly to the perform
ance of the Patriot missile and made a
commitment, long sought by the President, to
deployment of missile defenses. Work under the
Strategic Defense Initiative will make deploy
ment possible.
Voluntary separation incentives, defense manage
ment reforms, and an extension of the base closure
and realignment process were enacted in various
defense authorizing statutes. These initiatives
provided important authorities for the efficient
and orderly downsizing of our armed forces (see
also subsection X—Improving Government Man
agement and Accountability).

The Treaty on the Reduction and Limitation of
Strategic Offensive Arms of 1992, ratified by the
Senate in October 1992, will—for the first time—
reduce the number of strategic weapons main
tained by the United States and the four nuclear
armed states of the former Soviet Union. The
signing of this treaty in July 1991 capped nine
years of negotiations between the United States
and the Soviet Union.
The Treaty on Conventional Armed Forces in Eu
rope of 1991, which entered into force during
the summer of 1992, will lead to a dramatic
reduction in the level of conventional armed
forces in Europe. The Treaty sets ceilings on
key armaments essential for conducting surprise
attacks and large-scale offensive operations. It
will result in the destruction of thousands of
weapons. This Treaty is the culmination of the
work of more than a decade to achieve meaning
ful conventional arms control over forces in
Europe.

The FREEDOM Support Act of 1992 authorized
$460 million in assistance to the newly inde
pendent states (NIS) of the former Soviet Union
and a $12 billion increase in the U.S. contribu
tion to the International Monetary Fund. This
Act authorized a range of programs for the NIS
including support for democratic and economic

reform, trade and investment, humanitarian as
sistance, and nonproliferation and disarmament
activities. It also amended the SEED Act to ex
tend that assistance to other countries of Eastern
Europe.
The Support for East European Democracy Act
(SEED) authorized various programs to help
promote democratic and economic reform in Po
land and Hungary. These programs included
economic stabilization, trade liberalization, En
terprise Funds to encourage private sector devel
opment, and technical assistance to encourage
market-oriented reform in a number of sectors.
The Enterprise for the Americas Initiative, en
acted in several statutes, encourages market-ori
ented trade and investment in Latin America
by providing debt reduction for participating
countries. Latin countries must agree to support
environmental projects. Funds were also author
ized for a Multilateral Investment Fund.

X. IMPROVING GOVERNMENT
MANAGEMENT AND ACCOUNTABILITY
The Administration has supported efforts to
improve Government efficiency, accountability
and integrity, and to identify and strengthen the
fiscal soundness of Federal programs.

Enacted Legislation
The Ethics Reform Act of 1989 imposed new
one-year post-employment restrictions on activi
ties of certain employees, revised rules on finan
cial disclosure, and prescribed restrictions on
employees' receipt of travel reimbursement,
gifts, honoraria, and outside earned income dur
ing employment.
The Federal Employees Pay Comparability Act of
1990 provided a locality-based system to achieve
pay comparability with the non-Federal sector.
It also gave managers new flexibility through
recruitment, retention, and relocation bonuses.
The Chief Financial Officers (CFOs) Act of 1990
established CFOs in 23 major Federal agencies
and a Deputy Director for Management at the
Office of Management and Budget. The CFOs
oversee financial management and the inte
gration of agency accounting and financial man
agement systems. The Act also required the
agencies to prepare audited financial statements.

LEGISLATIVE ACTION AND PENDING AGENDA

The Department of Housing and Urban Develop
ment (HUD) Reform Act of 1989 made sweeping
changes in the operation of HUD's programs.
These ethical, financial, and management re
forms regulate HUD's programs to make them
less susceptible to waste, fraud, abuse, and polit
ical influence. An open process for allocating
funds as well as public notification of funding
decisions help assure fair competition for re
sources by all eligible recipients.
The National Affordable Housing Act of 1990
improved the fiscal soundness of the Federal
Housing Administration's loan programs by in
creasing the amount of required homeowners'
equity (see also subsection V—Hope for Dis
tressed Communities).

The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 strengthened regulatory
requirements to ensure a healthy financial serv
ices industry and established a more stringent
capital-based supervisory system. It provided
funding to enable the Government to meet its
deposit insurance commitments, and established
a separate entity, the Resolution Trust Corpora
tion (RTC), to manage the thrift clean-up. Since
its latest funding expired on April 1, 1992, the
RTC has lacked sufficient financing to resolve
new cases.
The FDIC Improvement Act of 1991 ensured that
the FDIC has the necessary resources to meet
Federal deposit insurance commitments by au
thorizing the FDIC to borrow up to $30 billion
from the Treasury to supplement bank premium
income. It also required the FDIC to use the
least costly method of resolving failed banks,
restricted use of "too big to fail" resolutions,
and imposed a more stringent capital-based su
pervisory system.

147

operations, and corporate information manage
ment (see also subsection IX—Global Leadership
for the 21st Century). The National Defense
Authorization Act of 1990 contained provisions
to control the use of expired appropriations.
Lack of control over the use of expired appro
priations had been cited as a governmentwide
problem. The National Defense Authorization Act
of 1992 provided authority for the Secretary of
Defense to pay an incentive to encourage mili
tary personnel to leave the armed forces volun
tarily. This action provided an orderly reduction
in the number of active military personnel.
The Federal Credit Reform Act of 1990 required
budgeting for the long-term costs inherent in
Federal credit programs due to expected defaults
and favorable terms and conditions.

The Cash Management Improvement Act of 1990
established, for the first time, systematic and fair
rules for annual transfers of $150 billion in cash
between the Federal Government and State gov
ernments. The Cash Management Improvement Act
Amendments of 1992 required Federal agencies
to use the Treasury Department's Tax Refund
Offset program to recover delinquent debts. It
also extended and expanded a pilot program
permitting the use of private attorneys to collect
debts owed to the Federal Government.
The Federal Debt Collection Procedures Act of
1990 provided standard Federal civil procedures
for recovering judgments on debts owed the
Federal Government and obtaining pre-judge
ment remedies (including attachment, receiver
ship, and garnishment) on these debts.

The Federal Housing Enterprises Financial Safety
and Soundness Act of 1992 provided increased
Federal oversight of the Federal National Mort
gage Association and Federal Home Loan Mort
gage Corporation to assure the financial safety
and soundness of national secondary mortgage
markets.

The President endorsed the Whistleblower
Protection Act of 1989, which provided added
protection and procedural rights to Federal em
ployee "whistleblowers" who disclose fraud,
waste, or abuse in Government activities. Whis
tleblowers are encouraged to make disclosures
of wrongdoing and mismanagement without
fear of reprisals through punitive personnel ac
tions.

The past several National Defense Authorization
Acts helped implement the President's Defense
Management Reform package. This initiative is
providing savings through supply systems effi
ciencies, consolidation of finance and accounting

The Fire Protection Act of 1992 required that
Federal agencies provide proper fire protection
in office buildings occupied by Federal agencies,
HUD subsidized housing, and DOD military
housing.

148

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Presidential Initiatives Congress Failed to
Enact
The Comprehensive Campaign Finance Reform
Act of 1989 would have (1) eliminated political
action committees supported by corporations,
unions, or trade associations; (2) banned the roll
over of campaign funds from one election cycle
to the next; (3) reduced congressional franked
mailings; (4) increased the amounts that political
parties could spend on behalf of congressional
candidates; (5) required full disclosure of all
"soft money" spent by political parties, labor
unions, corporations, and trade associations to
influence Federal elections; and (6) implemented
the Supreme Court's Beck decision (relating to
the use of union dues for political activities).

The Accountability in Government Act of 1992
would have applied to Congress certain laws
from which it is currently exempt, such as those
relating to labor practices and civil rights.
The Pension Security Act of 1992 would have
ensured a more secure retirement for today's
workers. In addition to changing benefit guaran
tees under certain circumstances, the proposal
would have improved both the funding of
chronically underfunded benefit pension plans
and the treatment of pension plans in bank
ruptcy proceedings.

Part Three.

INTERMEDIATE AND
LONGER-TERM PROJECTIONS

149

9. Intermediate and
Longer-Term Deficit Projections

151

9. INTERMEDIATE AND LONGER-TERM
DEFICIT PROJECTIONS
This chapter reviews the intermediate and
long-term budget projections. Such projections
are needed to assess the implications of current
policies. They show that both economic growth
and budget discipline are needed to bring down
the deficit. They also highlight the long-term
risks to the budget resulting from rising health
care costs, an aging population, and the retire
ment of the baby-boom generation starting early
in the next century.

INTERMEDIATE PROJECTIONS

Economic Assumptions1
The economy appears poised for a sustained,
moderate recovery following several quarters of
lackluster growth in the aftermath of the
1990-1991 recession. The recession (as conven
tionally defined by the National Bureau of Eco
nomic Research) ended in March 1991. But the
economy has yet to experience the vigorous re
covery that has usually followed postwar reces
sions. Real gross domestic product (GDP) has
increased at only a 1.7 percent rate over the
past year and a half. For much of this period,
unemployment continued to rise and employ
ment gains were minimal—until the recent turn
in these statistics.

The economy's growth has been hurt by a
series of painful structural adjustments in fi
nance, real estate, computers, and defense-relat
ed industries. More recently, however, the econ
omy has shown signs of a more robust revival.
Real economic growth was 3.4 percent at annual
rate in the third quarter of 1992. The unemploy
ment rate has been declining in small steps since
June, and initial claims for unemployment insur
ance are at a three-year low. Industrial produc
tion and consumer confidence rose strongly in
1 Detailed account-level budget estimates prepared for this submis
sion used economic assumptions based on the Blue Chip forecaset for
November extended with the Blue Chip's long-run October forecast.
The Blue Chip is a consensus forecast of over 50 private forecasters.
These economic assumptions provide the incoming administration
with an independent basis for the baseline budget projections.-The
outgoing administration's own views on the likely course of eco
nomic developments differ in some ways from the Blue Chip
concensus, as explained in this section.

November. Consumer confidence has rebounded
in November and December. The stock market
is basically healthy despite shocks to the values
of some major blue chip companies. The broader
market indexes have set new records recently.
The prospect for stronger growth is better
now than in several quarters; nonetheless, there
is a wide range of growth possibilities. This
chapter reflects the budgetary implications of
some of these possibilities. Other economic vari
ables are also subject to uncertainty, and a range
of possible outcomes is considered for them as
well.

• The Blue Chip forecast (based on 51 private
forecasts) anticipates real growth of 3.0 per
cent in 1993 (fourth quarter-to-fourth quar
ter) and 2.9 percent in 1994, followed by
an average annual growth of 2.5 percent
during 1995-1998. Inflation, as measured by
the GDP deflator, is expected to be 2.9 per
cent in 1993 and 3.3 percent for 1994 and
subsequently. The unemployment rate is
projected to decline from about 7.2 percent
in 1993 to 5.7 percent by 1998. Long-term
interest rates are projected to remain near
their current levels, while short-term rates
are projected to increase by about two per
centage points over the next few years.
Three other sets of economic projections have
also been developed for this budgetary presen-,
tation. Their estimated budgetary implications
are presented later in this chapter. They encom
pass a high, middle, and low range of possible
economic paths. The middle path, which reflects
the most likely outcome in the judgment of this
administration, assumes somewhat faster real
growth and somewhat lower inflation than in
the Blue Chip projections. Unemployment also
declines more and interest rates are lower.

• The middle path envisages real GDP growth
of 2.9 percent in 1993, 3.1 percent in 1994,
and tapering down by 0.1 percentage point
each year thereafter, to 2.7 percent in 1998.
The GDP deflator rises by 2.6 percent dur
ing 1993, 2.7 percent during 1994, and 2.8
153

154

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

stantially higher than for the middle path
or the Blue Chip by 1998.

percent each year thereafter. The unemploy
ment rate is projected to decline to 5.3 per
cent in 1998. Short-term interest rates are
projected to rise by a little over a percentage
point, while long-term interest rates decline
by nearly a percentage point.

• The low path assumes real growth of 2.0
percent in 1993, 2.2 percent in 1994, 2.4 per
cent in 1995, and 2.5 percent each year
thereafter; growth averages 0.3 percentage
point a year less than the Blue Chip and
one-half percentage point less than the mid
dle path over the 1993-1998 period. In this
path, the unemployment rate declines only
to 6.5 percent in 1998, and the rate of infla
tion and interest rates remain extremely low
though 1998.

• The high path assumes real growth of 3.5
percent in 1993, 4.0 percent in 1994, 3.7 per
cent in 1995, 3.4 percent in 1996, 3.2 percent
in 1997, and 3.0 percent in 1998. The unem
ployment rate declines to 5.0 percent by
1998. However, both inflation and interest
rates increase steadily throughout the
1993-1998 time span, to rates that are sub

Table 9-1.

ECONOMIC PROJECTIONS MIDDLE PATH
(Calendar years; dollar amounts in billions)
Actual
1991

__________________________ Projections____________________________
1992

1993

1994

1995

1996

1997

1998

5,678
4,821

5,944
4,917

6,258
5,052

6,624
5,208

7,014
5,366

7,422
5,523

7,846
5,680

8,287
5,836

117.8

120.9

123.9

127.2

130.7

134.4

138.1

142.0

3.5
0.1
3.3

5.2
2.6
2.5

5.6
2.9
2.6

5.9
3.1
2.7

5.9
3.0
2.8

5.8
2.9
2.8

5.7
2.8
2.8

5.6
2.7
2.8

2.8
-1.2
4.0

4.7
2.0
2.6

5.3
2.7
2.5

5.9
3.1
2.7

5.9
3.0
2.8

5.8
2.9
2.8

5.7
2.8
2.8

5.6
2.7
2.8

4,828
2,812
335

5,057
2,918
368

5,336
3,076
399

5,652
3,265
434

5,972
3,467
469

6,319
3,682
497

6,691
3,899
528

7,072
4,115
575

136.2
3.0
4.2

140.3
2.9
3.0

144.2
2.8
2.8

148.3
2.9
2.9

152.7
3.0
3.0

157.3
3.0
3.0

162.0
3.0
3.0

166.8
3.0
3.0

Unemployment rate, civilian, percent:2
Fourth quarter level ......................................
Annual average..............................................
Federal pay raises, January, percent..................

6.9
6.7
4.1

7.4
7.4
4.2

6.6
6.9
3.7

6.0
6.2
2.2

5.5
5.7
2.5

5.4
5.4
2.9

5.3
5.3
3.2

Interest rates, percent:
91-day Treasury bills 3 ..................................
10-year Treasury notes .................................

5.4
7.9

3.4
7.0

3.5
6.4

4.2
6.1

4.4
6.0

Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars...............................................
Constant (1987) dollars.................................
Implicit price deflator (1987 • 100), annual
average ........................................................
Percent change, fourth quarter over fourth
quarter:
Current dollars...............................................
Constant (1987) dollars.................................
Implicit price deflator (1987 = 100) .............
Percent change, year over year:
Current dollars...............................................
Constant (1987) dollars.................................
Implicit price deflator (1987 = 100) .............
Incomes, billions of current dollars:
Personal income.............................................
Wages and salaries........................................
Corporate profits before tax ........................
Consumer Price Index (all urban):1
Level (1982-84 = 100), annual average .......
Percent change, Q4/Q4 ................................
Percent change, year/year...........................

1 CPI for all urban consumers. Two versions of the CPI are now published. The index shown here is that currently used, as required
by law, in calculating automatic adjustments to individual income tax brackets.
2 Percent of civilian labor force, excluding armed forces residing in the U.S.
3 Average rate on new issues within period.

155

INTERMEDIATE AND LONGER-TERM DEFICIT PROJECTIONS

Table 9-2.

COMPARISON OF ECONOMIC ASSUMPTIONS
(Calendar years)
1992

Nominal GDP:
Level (in billions of dollars):
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
Percent Change, 4th/4th:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
Real GDP, Percent change, 4th/4th:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
GDP deflator, percent change, 4th/4th:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
Unemployment Rate:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
Interest Rates:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................
10-Year Treasury Notes:
High-Growth...........................................
Mid-Growth ............................................
Low-Growth............................................
Blue Chip .................................................

1995

1997

1996

1998

5,944
5,944
5,944
5,936

6,290
6,258
6,207
6,254

6,743
6,624
6,466
6,647

7,252
7,014
6,753
7,050

7,817
7,422
7,064
7,467

8,430
7,846
7,393
7,911

9,097
8,287
7,737
8,380

5.2
5.2
5.2
4.9

6.5
5.6
4.1
6.0

7.4
5.9
4.2
6.3

7.6
5.9
4.5
6.0

7.8
5.8
4.6
5.9

7.8
5.7
4.7
6.0

7.9
5.6
4.6
5.9

2.6
2.6
2.6
2.3

3.5
2.9
2.0
3.0

4.0
3.1
2.2
2.9

3.7
3.0
2.4
2.5

3.4
2.9
2.5
2.5

3.2
2.8
2.5
2.5

3.0
2.7
.2.5
2.5

2.5
2.5
2.5
2.6

2.9
2.6
2.1
2.9

3.3
2.7
2.0
3.3

3.8
2.8
2.1
3.4

4.3
2.8
2.1
3.3

4.5
2.8
2.1
3.4

4.8
2.8
2.1
3.3

7.4
7.4
7.4
7.5.

6.7
6.9
7.6
7.2

6.0
6.2
7.6
6.4

5.6
5.7
7.4
6.1

5.3
5.4
7.0
5.9

5.1
5.3
6.7
5.8

5.0
5.3
6.5
5.7

3.4
3.4
3.4
3.4

4.0
3.5
2.7
3.4

5.0
4.2
2.7
4.6

5.6
4.4
2.8
5.0

6.3
4.4
2.8
5.1

7.0
4.4
2.9
5.2

7.5
4.4
3.0
5.1

7.0
7.0
7.0
7.0

7.0
6.4
6.2
7.0

7.3
6.1
5.9
7.2

7.5
6.0
5.7
7.3

7.8
6.0
5.6
7.3

8.0
6.0
5.5
7.3

8.2
6.0
5.5
7.2

Budget Projections without Mandatory Cap

Table 9-3 shows alternative deficit paths
under various economic assumptions discussed
above. They clearly show that, in the absence
of policies to restrain spending, little progress
on the deficit is likely.
The persistent deficit, even with an improving
economic performance, reflects the rising costs
of mandatory programs, primarily health care,
and the increasing interest burden associated
with past and prospective deficits. Discretionary
spending is projected to be nearly constant for
the five-year period in nominal terms and to
fall in real terms.

1994

1993

• The deficit in the Blue Chip baseline is
$327.3 billion in 1993; it falls in each of
the next three years, but rises thereafter. By
1998, the deficit is nearly as high as in 1993.

• Under the mid-growth, most likely baseline
projection scenario, the deficit declines from
$331.8 billion in 1993 to $264.5 billion in
1998.

The declines in the intermediate-term deficit
are mainly the result of lower deposit insurance
outlays, as the costs of cleaning up failed sav
ings and loans and banks are followed by sales
of assets acquired from the failed institutions.

156

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 9-3.

ALTERNATIVE DEFICIT ESTIMATES—WITH AND WITHOUT
MANDATORY CAP
(In billions of dollars)
1994

Economic Projection

High-Growth......
Mid-Growth .......
Low-Growth.......
Blue Chip............

1992
1993
Actual Enacted

290.2
290.2
290.2
290.2

328.3
331.8
340.4
327.3

1995

Without
With
Mandatory Mandatory
Cap
Cap

286.5
297.3
322.0
292.4

1996

1997

1998

Without
With
Without
With
Without
With
Without
With
Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory
Cap
Cap
Cap
Cap
Cap
Cap
Cap
Cap

271.8
282.7
307.5
277.7

240.3
265.2
307.1
272.4

202.1
227.5
269.9
234.3

201.1
241.4
299.5
266.4

133.5
175.2
233.9
196.1

207.4
265.6
337.5
305.0

106.9
168.4
241.7
205.8

193.8
264.5
343.8
319.8

54.8*
132.3
214.0
184.2

*Note: With high growth and cap, surplus is achieved in 1999.

Higher rates of economic growth can have
a significant effect on the budget outlook, al
though no reasonable set of economic assump
tions shows any quick elimination of the deficit.
With higher growth, the deficit declines by 40
percent between 1993 and 1998. Lower economic
growth would raise the deficit about 1 percent
between 1993 and 1998.

Budget Projections with Mandatory Cap

Spending for mandatory programs is not sub
ject to annual appropriations or review. Bene
ficiaries qualify for benefits that are determined
by statutory formulas. In many instances, there
are few direct controls on the benefits received
per beneficiary. Although controls on the spend
ing for the medical programs have increased in
recent years, the changes have not prevented
substantial increases in the average benefit cost.
A mandatory cap would limit growth in man
datory programs to a reasonable and sustainable
rate. Under the mandatory cap, growth of pro
grams other than social security would be lim
ited so that they would be allowed to keep pace
with inflation and increases in the number of
qualified beneficiaries, but growth in excess of
inflation and growth in beneficiaries would be
capped. In the first transitional year, excess
growth of two percent would be allowed; in
the second year one percent would be allowed.
Thereafter, the cap would be fully effective. The
difference between outlays under the cap and
uncapped outlays represents a savings target.
A combination of mandatory program cuts
would be needed to achieve the target savings.

The cap is a potent disciplining device. As
table 9-3 indicates, the mandatory cap reduces
the 1998 deficit by half under the mid-growth

scenario, from $264.5 billion to $132.3 billion.
As Chart 9-1 indicates, with high growth the
deficit would fall from $328.3 billion in 1993
to $54.8 billion in 1998 and would reach a sur
plus of $12.1 billion in 1999.
Long-Term Projections
All economic projections are uncertain, espe
cially those that extend well into the future.
They are heavily influenced by unforeseen eco
nomic, demographic and international develop
ments that determine the final outcome. Despite
this, however, it is prudent from a policy point
of view to assess prospective economic and fis
cal policy trends, based on alternative growth
determining assumptions. Such projections:

• Provide a context for current decisions by
indicating the probable long-term con
sequences of decisions made now. Some
policies have delayed effects that will only
show up over the long term. Other choices
have small initial effects that cumulate into
large effects over time.

• Can be used to define the range of uncer
tainty in budget projections under different
economic and demographic assumptions.
• Show the impacts of demographic change
which are normally too gradual to have sig
nificant near-term consequences. By study
ing the budgetary effects of such changes,
it may be easier to develop policy responses
at an early stage.
Each of the four alternative baselines dis
played in Table 9-3 has been extended through
the year 2030. The demographic changes have
serious budgetary implications. Beginning about
2010, the baby-boom generation will begin to

157

INTERMEDIATE AND LONGER-TERM DEFICIT PROJECTIONS

retire in large numbers. This will inevitably lead
to stresses on the social security and health sys
tems.

growth scenario. The GDP deflator grows
at 3.4 percent per year.

Economic Assumptions to 2030

Deficit projections to 2030

Real economic growth is determined by as
sumed changes in productivity (output per
hour) and total hours worked. The change in
hours worked, in turn, depends on population
growth, labor force participation rates, and the
change in the average work week. Demographic
assumptions are taken from the projections of
the Social Security Trustees. They envision a
slowing population growth rate, an aging popu
lation, and a decline in the rate of labor force
participation. These demographic assumptions
lead to slower rates of real GDP growth in the
future for the various projection scenarios.

For discretionary programs, budget authority
was held constant in real terms for the period
after 2000. Discretionary outlays increase with
inflation and the spendout of prior year budget
authority.

The major source of difference among the
long-run economic alternatives is productivity
growth, although the unemployment rate also
differs among the projections.
• Along the mid-growth alternative, declining
labor force growth and a constant produc
tivity growth rate of 1.3 percent result in
a slowing rate of real GDP growth. The
growth rate declines from 2.3 percent in
1990-2000, to 2.2 percent in 2000-2010, to
1.5 percent in 2010-2020, and 1.4 percent
in 2020 through 2030. Inflation, interest
rates, and the unemployment rate remain
at their 1998 values.
• Under the high-growth scenario, productiv
ity grows at 1.6 percent, and real GDP
grows about 0.3 percent above the baseline.
Unemployment is 5.0 percent compared
with 5.3 percent in the baseline.
• In the low-growth scenario, productivity
grows at 0.8 percent per year, 0.5 percentage
points below the baseline; real GDP growth
is also about 0.5 percentage points below
the baseline in each year. The unemploy
ment rate is constant at 6.6 percent.
• The Blue Chip panel does not forecast be
yond 2002, and it was necessary to make
assumptions through 2030 consistent with
the earlier forecast. The long-term produc
tivity trend grows at 1.1 per year, and the
demographic assumptions are the same as
for the other scenarios. Real GDP growth
is 0.2 percentage points less than in the mid

Spending in the mandatory programs was
modelled from three components: the projected
number of beneficiaries, general price inflation,
and special technical factors for each major pro
gram. For social security, medicare, medicaid,
and the major Federal retirement and disability
programs, actuarial projections were used to de
velop the technical assumptions. In other in
stances, these factors were based on long-term
trends or informed judgment.
The mid-growth projection: Under the mid
growth scenario, the deficit begins to rise early
in the next century and continues to increase
through the end of the forecast period in 2030.
The social security system comes under increas
ing strain. The rising cost of Federal medical
programs is the major underlying reason for the
unstable budget outcome.

• Receipts increase slightly as a share of GDP,
from 18.7 percent in 1995 to 19.1 percent
in 2030. Expected increases in per capita real
income raise the average marginal tax rate
slightly as an increasing percentage of tax
payers enters the higher individual income
tax bracket.
• Outlays increase as a share of GDP from
22.5 percent in 1995 to 31.2 percent in 2030.
Social security outlays increase from 4.8 per
cent to 7.4 percent, and medicare rises from
2.4 percent to 6.8 percent over the same
period. These large increases in mandatory
spending open up a large deficit and lead
to budgetary instability.

• The fastest growing outlay category is net
interest, growing from 3.3 percent of GDP
in 1995 to 7.3 percent in 2030, as the deficit
increases from 3.8 percent of GDP to 12.1
percent, and the Federal debt held by the
public increases from 56.1 percent to 134.1
percent of GDP. In this projection, the budg-

158

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Chart 9-1. DEFICIT PROJECTIONS TO 2004 WITH AND WITHOUT MANDATORY
SPENDING CAP

et is on an unsustainable course that will
have to be corrected.

to higher inflation and interest rates under Blue
Chip.

High-growth scenario: Under this scenario, re
ceipts grow as a share of GDP from 18.8 percent
in 1995 to 19.5 percent in 2030 as a result of
additional increases in real per capita income.
Strong growth leads to budget balance by 2010,
followed by modest surpluses through 2027. In
2028, deficits return as high medical costs out
pace receipt growth.

Sensitivity of the Budget to Economic
Assumptions

Low-growth scenario: In this scenario, the def
icit equals more than one-fourth of GDP by
2030, and the Federal debt held by the public
is more than three times GDP. Net interest ex
ceeds social security and all discretionary spend
ing combined by 2030. The budgetary instability
evident in the mid-growth alternative is even
more evident here.

Many of the budgetary effects of changes in
economic assumptions are fairly predictable, and
a set of rules of thumb embodying these rela
tionships can aid in estimating how various
changes in the economic assumptions would
alter outlays, receipts and the deficit. The follow
ing table summarizes these rules of thumb.
These rules are available only through 1998, but
the underlying economic relationships are re
flected in the long-term projections, as well.

Blue Chip scenario: The nominal deficit from
the Blue Chip scenario exceeds that of the lowgrowth scenario, although the growth assump
tions are closer to the mid-path. This is due

Both receipts and outlays are affected by
changes in economic conditions. This sensitivity
seriously complicates budget planning because
errors in economic assumptions lead to errors
in the budget projections: hence, the usefulness
of studying multiple alternatives.

Economic variables that affect the budget do
not usually change independently of one an
other. Output and employment tend to move

INTERMEDIATE AND LONGER-TERM DEFICIT PROJECTIONS

159

Chart 9-2. DEFICIT PROJECTIONS TO 2030 IF NO CHANGE IN CURRENT LAW
AND NO MANDATORY CAP

together in the short run: a higher rate of real
GDP growth is associated with declining unem
ployment, while weak or negative growth is ac
companied by rising unemployment. In the long
run, however, changes in the average rate of
growth of real GDP are mainly due to changes
in the rate of growth of productivity and labor
force, and are not necessarily associated with
changes in the average rate of unemployment.
Inflation and interest rates are also closely
linked: a higher expected rate of inflation in
creases interest rates, while lower expected infla
tion reduces rates. Changes in real GDP growth
or inflation have a much greater cumulative ef
fect on the budget over time if they are sus
tained for several years than if they occur for
only one year.

The table shows that if real GDP growth is
lower by one percentage point in calendar 1993
only and the unemployment rate rises by onehalf percentage point, the FY 1993 deficit will
be increased by $7.1 billion. Receipts will be
lower by $5.8 billion, and 1993 outlays will be
higher by $1.3 billion, primarily for unemploy

ment-sensitive programs. In 1994, receipts would
decline further, by $13.0 billion, and outlays
would increase by $3.5 billion, raising the 1994
deficit by $16.5 billion compared with the base.
The budget effects grow slightly in future years
as well. The larger deficit is due to the level
of real (and nominal) GDP being permanently
lower and unemployment higher, even though
the rate of real growth in calendar year 1994
and beyond is the same as in the budget.
The budget effects are much larger if the real
growth rate is assumed to be one percentage
point less in each year 1993-1998, and the unem
ployment rate correspondingly rises by one-half
percentage point more in each year. The levels
of real and nominal GDP, then, are below the
base case by a cumulatively growing percentage,
and the unemployment rate steadily rises com
pared with the base case. The deficit is $124
billion higher than under the base case by 1998.

The effects of slower productivity growth are
shown in a third example where real growth
is one percentage point lower per year, while
the unemployment rate is unchanged. In this

160

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

case, the estimated budget effects mount steadily
over the years, but more slowly. The effect on
the deficit reaches $112 billion by 1998.
Joint changes in interest rates and inflation
have a smaller effect on the deficit than equal
percentage point changes in real GDP growth
because their effects on receipts and outlays are
substantially offsetting. An example is the effect
of a one percentage point higher rate of inflation
and one percentage point higher interest rates
during calendar year 1993 only. In subsequent
years, the price level and nominal GDP are one
percent higher than in the base case, but interest
rates return to their base levels. Outlays for 1993
rise by $5.1 billion and receipts by $6.5 billion,
for a decrease of $1.4 billion in the 1993 deficit.
In 1994, outlays increase further above the base
by $13.2 billion, due in part to lagged cost-ofliving adjustments; receipts rise $13.7 billion
above the base, however, resulting in a $0.6 bil
lion decrease in the deficit. In subsequent years,
the amounts added to receipts are slightly larger
than the additions to outlays. The annual add
on to receipts rises gradually over time, while
the add-on to outlays gradually declines.
If the rate of inflation and the level of interest
rates are higher by one percentage point in all

years, the price level and nominal GDP rise by
a cumulatively growing percentage above their
base levels. In this case, the effects on receipts
and outlays mount steadily in successive years,
adding $74.4 billion to outlays and $88.2 billion
to receipts in 1998, reducing the 1998 deficit by
$13.8 billion.

The table also shows the interest rate and the
inflation effects separately, and rules of thumb
for the added interest cost associated with high
er or lower deficits (increased or reduced bor
rowing).
The effects of changes in economic assump
tions in the opposite direction are approximately
symmetric to those shown in the table. The im
pact of a one percentage point lower rate of
inflation or higher real growth would be of
about the same magnitude, but with the oppo
site sign.
These rules of thumb hold the income share
composition of GDP constant. Because different
income components are subject to different taxes
and tax rates, estimates of total receipts can be
affected significantly by changing income shares.
These relationships are too complex, however,
to reduce to simple rules.

161

INTERMEDIATE AND LONGER-TERM DEFICIT PROJECTIONS

Table 9-4.

SENSITIVITY OF THE BUDGET TO ECONOMIC ASSUMPTIONS
(In billions of dollars)
Budget effect

1993

1994

1995

1996

1997

1998

Real Growth and Employment

Effects of 1 percent lower real GDP growth in calendar
year 1993 only, including higher unemployment:1
Receipts.....................................................................................
Outlays......................................................................................

Deficit increase (+)..............................................................
Effects of a sustained 1 percent lower annual real GDP
growth rate during 1993-1998, including higher unem
ployment: 1
Receipts.....................................................................................
Outlays......................................................................................

-5.8
1.3

-13.0
3.5

-15.3
4.5

-15.5
6.0

-15.9
7.6

-16.5
8.7

7.1

16.5

19.8

21.5

23.5

25.2

-5.8
1.3

-19.1
4.8

-35.3
9.7

-52.4
16.4

-70.8
24.8

-90.9
33.2

Deficit increase (+)..............................................................
Effects of a sustained 1 percent lower annual real GDP
growth rate during 1993-1998, with no change in unem
ployment:
Receipts.....................................................................................
Outlays......................................................................................

7.1

24.0

45.0

68.8

95.6

124.1

-5.8
0.2

-19.2
1.0

-36.0
3.0

-54.3
6.3

-74.2
11.0

-96.1
15.7

Deficit increase (+)..............................................................

6.0

20.2

38.9

60.5

85.3

111.9

6.5
5.1

13.7
13.2

14.3
10.8

13.7
9.5

14.3
8.9

15.0
8.9

Deficit increase (+)..............................................................
Effects of a sustained 1 percentage point higher rate of in
flation and interest rates during 1993-1998:
Receipts.....................................................................................
Outlays......................................................................................

-1.4

-0.6

-3.5

-4.1

-5.4

-6.1

6.5
5.1

20.8
18.7

36.3
31.2

51.9
43.2

69.2
55.7

88.2
74.4

Deficit increase (+)..............................................................
Effects of a sustained 1 percentage point higher interest
rate during 1993-1998 (no inflation change):
Receipts.....................................................................................
Outlays......................................................................................

-1.4

-2.1

-5.0

-8.8

-13.4

-13.8

0.7
4.7

1.9
15.1

2.4
23.1

2.7
29.9

3.0
37.6

3.2
48.8

Deficit increase (+) ..............................................................
Effects of a sustained 1 percentage point higher rate of in
flation during 1993-1998 (no interest rate change):
Receipts.....................................................................................
Outlays......................................................................................

4.0

13.2

20.7

27.2

34.6

45.6

5.8
0.4

18.9
3.6

33.9
8.1

49.2
13.3

66.2
18.1

85.0
25.6

Deficit increase (+) ..............................................................

-5.4

-15.3

-25.7

-35.9

-48.1

-59.4

3.0

6.2

6.9

7.5

8.1

8.8

Inflation and Interest Rates
Effects of 1 percentage point higher rate of inflation and
interest rates during calendar year 1993 only:
Receipts.....................................................................................
Outlays......................................................................................

Interest Cost of Higher Federal Borrowing

Effect of $100 billion additional borrowing during 1993 .

1 The unemployment rate is assumed to be 0.5 percentage point higher per 1.0 percent shortfall in the level of real GDP.

10. Trust Fund Projections
Under Alternative Assumptions

163

10. TRUST FUND PROJECTIONS UNDER
ALTERNATIVE ASSUMPTIONS
INTRODUCTION

This chapter presents projections of future re
ceipts and outlays for the Federal trust funds
as a group and individually for four trust funds:
the Social Security Old Age Survivors Insurance
and Disability Insurance (OASDI) trust funds,
and the Medicare Hospital Insurance (HI) and
Supplementary Medical Insurance (SMI) trust
funds.

Trust funds are usually financed by ear
marked receipts. The larger trust funds finance
social insurance and other payments for individ
uals, such as social security, medicare, Federal
employees retirement, and unemployment com
pensation. Other major trust funds finance high
way construction and airport and airway devel
opment.

Table 10-1 shows the balance of trust funds
as a group at the start of each year, income
and outgo dining the year, and the end of year
balance. Income is derived mostly from payroll
taxes, but it also includes proprietary receipts,
payments from other Federal programs, general
revenues and interest on trust fund balances.
Outgo includes all payments to the public and
to other Federal programs. Additional detail can
be found in Appendix One, Section A.
Although several trust funds are operated on
a cash-in-cash-out basis, others are intentially ac

Table 10-1.

cruing positive balances to finance future claims.
As a result, trust funds as a group have experi
enced large and growing surpluses in the past
decade. These surpluses (principally in Social Se
curity) are expected to continue to grow in the
intermediate term. As a consequence, the 1992
trust funds balances of $973 billion are expected
to grow to $1.6 trillion by the end of 1998. As
the baby boom generation reaches retirement,
however (and earlier in the case of Medicare),
this pattern of trust fund accumulation will be
reversed.

These estimates are sensitive to assumptions
about the economy and demographics. Rel
atively small changes in the assumptions can
cause large changes in the estimates. This is par
ticularly true for the longer-term estimates and
for the social security and medicare trust funds.
The impact of alternative assumptions on these
trust funds is discussed below.
The remainder of this chapter presents projec
tions of future receipts and outlays for the Gov
ernment's various trust funds, particularly the
trust funds established for Social Security Old
Age Survivors and Disability Insurance
(OASDI), Medicare Hospital Insurance (HI) and
Supplementary Medical Insurance (SMI). The in
tent in establishing these funds was to provide
long term economic and health security financed
by specific revenue sources (except SMI which

INCOME, OUTGO, AND BALANCES OF TRUST FUNDS
(In billions of dollars)
Estimate
Actual

1993

1994

1995

1996

1997

1998

Balance, start of year ............
Income.................................
Outgo...................................

876.1
663.4
567.4

973.2
703.6
603.9

1,072.9
742.6
635.8

1,179.7
787.1
677.8

1,289.0
836.8
727.6

1398.1
888.0
778.0

1,508.1
945.8
830.3

Surplus ................................
Adjustments .......................

96.0
1.1

99.7
_*

106.8
—

109.2
—

110.0
—

115.6
—

Balance, end of year .............

973.2

1,072.9

1,179.7

1,289.0

1,398.1

1,508.1

1,623.7

*Less than $50 million.

165

166

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

has a 25 percent beneficiary/75 percent general
revenue taxpayer split).
Major reforms in 1983 attempted to extend
the solvency of the Social Security trust funds
out 75 years based on estimates at that time.
Actual experience and revised assumptions since
then have reduced the funds solvency to less
than 45 years. Several rounds of legislative re
forms in the last decade have only been able
to maintain the solvency of HI for 10 years.
The aging of the population, diminished birth
rates and wage growth, and specifically for
Medicare, rapidly increasing payments to health
care providers could force the funds into insol
vency much sooner than presently predicted. So
cial Security could go insolvent as early as 2019
under some assumptions, Medicare Hospital
Insurance by 2000, and Supplementary Medical
Insurance is staying sound only by increasing
general fund tax subsidies at an alarming rate.

The projections in this chapter are based on
the three sets of economic and technical assump
tions of the 1992 Trustees' Report. These as

sumptions may vary from the assumptions used
in other parts of the budget statement.
THE SOCIAL SECURITY TRUST FUNDS
The future income and expenditures of the
Social Security Trust Funds over the next 75
years will depend on a number of demographic
and economic factors: the size of the recipient
population, future benefit amounts, and the size
and level of earnings of the work force covered
under the program. Because it is not possible
to know precisely the future condition of the
trust funds, the Social Security Trustee's provide
actuarial estimates prepared under three alter
native sets of assumptions. These assumptions
use high, low and mid-growth economic as
sumptions, and optimistic, pessimistic and mid
growth or "best guess" demographic assump
tions. These assumptions vary from year to year
during the first 5 to 25 years, before reaching
their ultimate value (or rate of change) for the
remainder of the 75-year estimation period.

Chart 10-1. SOCIAL SECURITY TRUST FUND BALANCE

1992-2042

10.

167

TRUST FUND PROJECTIONS UNDER ALTERNATIVE ASSUMPTIONS

Table 10-2 summarizes the long range demo
graphic and economic factors assumed under
the different alternatives, and compares them
with post-1970 experience.
Economic assumptions: Three variables—real
wage differential, inflation, and interest rates—
have the greatest impact on the fund's actuarial
balance. The wage differential especially influ
ences the trust fund since it reflects the growth
in wages covered by the OASDI payroll tax,
above price inflation. Table 10-2 illustrates that
since 1970, actual experience in the real wage
differential and inflation have been near the
Trustee's low growth assumptions. Only real in
terest rates have been in the mid to high growth
range (note that higher interest rates generate
higher growth from the trust funds' perspective,
but may be less desirable for the economy as
a whole).
Demographic assumptions: Mortality and fertility
also significantly affect trust fund projections.
Table 10-2 shows that the average rate of fertil
ity since 1970 is identical to the mid-growth as
sumption, but that annual reductions in mortal
ity of individuals over age 64 well surpassed
the high longevity projection. Such improve
ments in the occurrence of mortality are obvi
ously not pessimistic from an individual or na
tional value perspective, but are a concern from
the perspective of the trust funds' liabilities.
Mortality has declined significantly for all age
groups throughout this century, including
among the elderly. Interestingly, mortality de
clined significantly among the elderly between
1968 and 1982, but since then has leveled off
among men and slightly increased among

Table 10-2.

women. Some analysts project that mortality will
decline dramatically among the elderly in the
future due to healthier lifestyles and improve
ments in health care. If mortality experience
since 1968 is factored into the mid-growth "best
guess" assumptions, the Social Security trust
funds would become insolvent in 2032 instead
of 2036. If mortality improves at the accelerated
pace of the 1970's, the funds could become insol
vent in just over 30 years, somewhere between
2022 and 2025.

Table 10-3 illustrates the long term effect the
different assumptions have on the trust funds'
long term balance, measured by different indica
tors.

The Disability Fund's Projected Insolvency by
1996. Recent experience has led to substantial
deterioration in the short and long-term financial
condition of the Disability Trust Fund. The fund
is projected to be exhausted in 1996, under as
sumptions used for this budget statement.
Workers and employers each pay 0.6 percent
of taxable payroll for Disability Insurance cov
erage. The unfavorable outlook for the DI trust
fund is primarily attributable to increases in the
proportion of workers who file for and are
awarded disability benefits, and a decrease in
the proportion of recipients whose eligibility for
disability benefits ceases due to medical recov
ery, attainment of age 65 or death. The solvency
of the fund has also declined because of lower
tax revenues attributable to the recession. In the
long-term under mid-growth assumptions, the
number of disabled beneficiaries is expected to
double by 2040. The Trustees are expected to

ECONOMIC AND DEMOGRAPHIC ASSUMPTIONS: 1990-2065
Projections for 2010 and After

Real wage growth in employment covered by OASDI ...........................
Unemployment rate ........................................................................................
Real interest rates (for special obligations issued to the trust funds) ....
Annual percent reduction in mortality:
Females 65 and over...................................................................................
Males 65 and over.......................................................................................
Fertility rate (children per woman over a lifetime) ..................................

Actual
1970-1990

High
Growth
with Low
Longevity

MidGrowth
with
Average
Longevity

Low
Growth
with High
Longevity

0.5
6.7
2.7

1.7
5.0
3.0

1.1
6.0
2.3

0.6
7.0
1.5

1.3
1.1
1.9

0.2
0.3
2.2

0.6
0.6
1.9

1.0
1.0
1.6

168

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 10-3.

ALTERNATIVE INDICATORS OF SOLVENCY FOR THE SOCIAL
SECURITY TRUST FUNDS
Trustees' Assumptions

HiehGrowth
witn Optimis
tic Demo
graphics

Beneficiaries per 100 covered workers in:
1990 .............................................................................................................................
2015.............................................................................................................................
2040 ............................................................................................................................
2065 ............................................................................................................................
Income rate minus cost rate as a percent of taxable payroll in:
2015.............................................................................................................................
2040 ............................................................................................................................
2065 ............................................................................................................................
Actuarial deficiency (-) as a percent of taxable payroll:
25 years .....................................................................................................................
50 years .....................................................................................................................
75 years .....................................................................................................................
Present value of actuarial deficiency (-) in billions of dollars:
25 years .....................................................................................................................
50 years .....................................................................................................................
75 years .....................................................................................................................

consider alternatives in the near future to ad
dress the imbalance in the trust fund.

How the trust funds will fare in the future
will depend on both improvements in wage
growth in comparison with recent experience
and on attitudes concerning disability and retire
ment. Under all three assumptions, future gen
erations are assumed to retire at about the same
ages that people do today. They are expected
to live much longer, but they are not expected
to work significantly longer, even though the
age for full retirement benefits rises to 67 by
2027.
THE MEDICARE HOSPITAL INSURANCE
TRUST FUND: THE FUNDING CHASM
NOW LESS THAN 10 YEARS AWAY

The Hospital Insurance Trust Fund was cre
ated in 1965 to be a stable long-term financing
mechanism for health care for the elderly and
disabled. Seventy-five-year projections made
then showed no financing difficulty. Twenty
seven years, eight HI tax increases, and hun
dreds of billions of claimed savings later, this
trust fund now faces insolvency in the early
part of the next century. The most recent actuar
ial projections indicate that the trust fund will

Mid-Growth
Economics
and Demo
graphics

Low Growth
with Pessi
mistic Demo
graphics

30
34
42
41

30
37
51
56

30
42
62
78

1.89
-0.05
0.46

0.16
-3.71
-4.91

-1.91
-8.56
-13.57

2.40
1.32
1.09

1.12
-0.59
-1.46

-0.33
-2.93
-4.89

$1,598
$1,576
$1,718

$865
-$313
-$1,665

$132
-$2,408
-$5,736

need an additional $545 billion in 1991 dollars
just to remain solvent to 2016. That is still about
five years before most of the baby boomer gen
eration start to be eligible for Medicare. Every
year after 2016 requires an additional $60 billion
or more in 1991 dollars; the trust fund needs
a total of $4.8 trillion in 1991 dollars to remain
solvent until 2066. The 1992 HI Trustees Report
predicts that the trust fund will require addi
tional funds every year after 2002 under the
intermediate, or "most likely," assumptions.
This estimate is three years sooner than the 1991
Report.

The Trustees' awareness of the fund's condi
tion is hardly recent. Trustees' Reports in the
early 1980s predicted insolvency as early as
1993. Fortunately, the introduction of the hos
pital inpatient prospective payment system
(PPS) and several rounds of legislated savings
managed to slow the Medicare hospital payment
growth enough to extend the trust fund's life
by 10 years. Despite these achievements, recent
admissions and utilization trends indicate a re
turn to 10 percent per year or faster growth
for inpatient hospital payments and very large
(30 percent and more) jumps in skilled nursing
facility and home health utilization. Future long

10.

169

TRUST FUND PROJECTIONS UNDER ALTERNATIVE ASSUMPTIONS

term projections will reflect these shifts; insol
vency might well happen sooner than 2002.

The recent health care reform debate has ad
dressed the financial condition of the trust fund
in only a passing fashion. An underlying pre
sumption of many proposals appears to be
major health care reform will slow Medicare
spending growth to shift, if not eliminate, the
looming trust fund insolvency. This is highly
unlikely because the actuarial assumptions al
ready factor in a gradual drop of the HI outlay
growth rate through 2020 in the most likely eco
nomic scenario. This drop would occur despite
a sharp growth in beneficiary enrollment. As
Table 10-4 indicates, growth rates for all three
scenarios reflect this slowing growth rate.
Implementation of effective cost control meas
ures through health care reform may defer Hl's
insolvency for a few years. Nevertheless, unless
the implemented plan substantially alters the
provision of medical services so that utilization
and payments per case drop sharply, HI tax
revenues increase, or provider payments are
dramatically reduced, the trust fund will still
be bankrupt before most of the baby boomers
enroll. The 1992 Trustees' Report states that,
under the most likely economic scenario, sol
vency of the fund for the next 25 years would
require:

• a cumulative 32 percent decrease in outlays;
or,
• a cumulative 47 percent increase in reve
nues; or,

The economic and demographic assumptions
used for the three scenarios are identical to those
in the Social Security Trustees' Reports, with the
exception of the higher HI taxable payroll. The
current HI maximum payroll amount is $135,000
per year, increasing annually by inflation. By
using the Social Security Trustees' Report as
sumptions, the HI Trustees project real wage
growth at higher than the most recent 25-years'
average, increasing revenues and decreasing the
HI deficit. Some experts in health care spending
argue that the projected deficits are understated
because:

• the historical real wage growth has been
lower than forecasted; and
• the interest income derived from investing
fund balances in Treasury securities may
not materialize.
The HI trust fund will not need taxpayer as
sistance for at least the next five years under
current law. Every year of delay in changing
either the revenues or outlays, however, will fur
ther increase the already dramatic measures
probably necessary to maintain 25-year solvency.
The total HI tax rates (50 percent employer and
50 percent employee) would need to be in
creased immediately by 2.6 percentage points
under pessimistic assumptions, 1.35 points
under the most likely assumptions, and 0.4
points under truly optimistic assumptions to
keep the fund solvent to 2016. The total tax
rate would have to be increased by 9.5, 4.2,
or 1.3 points, respectively, to help the trust fund
remain solvent to 2066.

• some combination of the two.

Table 10-4.

THE HOSPITAL INSURANCE TRUST FUND CONDITION UNDER
DIFFERENT SCENARIOS
(Dollar amounts in trillions)
Scenario

High economic growth, unchanged longevity, sharply lower
medical inflation...........................................................................
Moderate economic growth, slightly increased longevity,
lower medical inflation ...............................................................
Low economic growth, increased longevity, medical inflation
at or above current levels ...........................................................
Source: 1991 and 1992 OASDI and HI Trustees' Reports.

1992 Trustees
Projected
Insolvency

75-year
Cumulative
Deficit

Compound Annual Growth
25-Year

75-Year

2005

-39

2002

-147

2000

-398

12%

170

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

SUPPLEMENTARY MEDICAL TRUST FUND
(SMI)

Medicare Part B, otherwise known as SMI,
pays for physician services, outpatient hospital
services, clinical laboratory services, and other
nonhospital medical expenses for people 65 and
over and for the disabled of any age. SMI cov
ered 33 million individuals in calendar year
1991. According to the 1992 Annual Trustees Re
port, general revenue contributions during 1991
amounted to $37.6 billion, accounting for 73.4
percent of all SMI income. About 23.3 percent
of all income resulted from the premiums paid
by the enrollees. Interest payments accounted
for the remaining 3.3 percent.

SMI is equivalent to yearly renewable term
insurance financed in part by premium income
paid by the enrollees, and in part by taxpayers.
SMI's financial structure is on an actuarial basis

with a contingency margin. This financing struc
ture of the SMI Trust Fund excludes it from
the same bleak scenario as the Social Security
and HI Trust Funds. Thus, the balance in the
SMI Trust Fund does not vary much between
relatively optimistic or pessimistic assumptions.
The SMI program is currently actuarially
sound because it has, essentially, unlimited ac
cess to general revenues. Nevertheless, there is
concern regarding the recent and projected rapid
growth in the cost of the program and the re
sulting tax burden that it entails because roughly
75 percent is financed from general revenues.
Program outlays increased 80 percent in aggre
gate and 66 percent per enrollee in the last five
years. During the same period, the program
grew 36 percent faster than the economy despite
continuing efforts to control program costs.

11. Hidden Liabilities
Requiring Policy Correction

171

11. HIDDEN LIABILITIES REQUIRING POLICY
CORRECTION
The Federal Government is committed to
make substantial payments extending far into
the future as a result of activities undertaken
in the past. These activities differ widely in na
ture, but they give rise to Federal liabilities or
to promises on which people rely in planning
for their retirement.

This chapter analyzes these diverse commit
ments and the size of the expected future pay
ments. It is divided into three sections: Federal
credit and insurance programs, long-term retire
ment obligations, and hazardous waste cleanup
costs.
• Federal credit and insurance programs.—
The Federal Government has extended di
rect loans and loan guarantees with esti
mated future losses and payments of
$99-138 billion. Beginning last year, the Fed
eral Credit Reform Act of 1990 provided
explicit control of most Federal credit pro
grams by requiring the expected costs to
be appropriated in advance of any new
credit program commitments. Another
$80-127 billion in future payments is ex
pected to result from Federal insurance. Un
like credit, the cost of these programs is
not budgeted when the insurance is ex
tended. Government-sponsored enterprises
(GSEs) are not estimated to result in signifi
cant future payments. However, their rapid
growth and importance in the financial sys
tem have led to new oversight legislation.

• Long-term retirement obligations.—Social
Security and Medicare are on-going Federal
programs for retirees. Actuarial estimates
for the solvency of these programs, net of
future payroll tax payments, have deterio
rated since the 1983 Social Security reforms.
The Social Security programs together run
out of funds in 2036 under intermediate as
sumptions, and the disability fund alone
may be depleted by 1997. The Medicare
hospital insurance fund is deteriorating rap
idly; the estimated insolvency moved up
from 2005 to 2002 in the 1992 Trustees' re
port. For Federal employees, accumulated
retirement plan benefits totaled $1.2 trillion
at the end of 1991. Reforms during the
1980s have slowed the growth of civilian
and military pensions. Actuarial liabilities
for retiree health insurance are another $335
billion.

• Radioactive/hazardous waste cleanup.— The
Department of Energy is currently cleaning
up about 100 sites contaminated with radio
active and/or hazardous wastes. Since 1950,
Department of Defense activities have con
taminated many additional properties.
Cleanup costs are unknown, but could be
hundreds of billions of dollars, with most
of those costs for DOE cleanups. They de
pend on the cleanup standards, the success
of cleanup contractors, the development of
new technology to do the job, and the rate
at which cleanup is scheduled by regulatory
authorities.

173

174

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 11-1.

FACE VALUE AND ESTIMATED COST OF FEDERAL CREDIT
AND INSURANCE PROGRAMS
(In billions of dollars)

Face Value 1991

1993 Estimates
Present Value of
Future Costs1

Face Value 1992

Current
Estimates
Present Value of
Future Costs1

Direct Loans:2
Farmers Home.........................
REA and RTB ..........................
Export-Import..........................
AID............................................
Public Law 480 ........................
Foreign Military Financing ....
Small Business.........................
Other Direct.............................
Inactive .....................................

52
39
9
13
12
9
7
4
21

11-15
4-5
4-6
6-7
7-9
1-2
1-2
1-3
1-2

50
40
9
16
12
9
6
32
19

12-16
4-5
5-7
7-8
7-9
2-3
2-3
2-3
1-2

5-6
0-2
0-1
0-1
2-3
0-1
1-2
1-2
0

Total Direct Loans .............

166

36-51

193

42-56

9-17

Guaranteed Loans:
FHA Single-Family .................
VA Mortgage...........................
FHA Multi-Family ..................
Guaranteed Student ...............
Small Business.........................
Farmers Home.........................
Export-Import..........................
CCC Export Credits ...............
Other Guaranteed...................
Inactive .....................................

378
158
77
57
14
6
6
4
7
19

(5)-0
3-6
2-3
38-42
1-3
1-3
4-6
2-3
0-1
0-1

301
171
77
60
13
6
8
9
10
16

(9)-0
5-7
2-3
48-52
2-4
1-3
6-8
2-3
0-1
0-1

0
2-3
0-1
17-19
1-2
0-1
3-4
1-2
0-1
0

Program.

Subsidy Outlays
1993-1998

Total Guaranteed Loans ....

726

46-68

671

57-82

24-33

Federal Insurance:
Banks.........................................
Thrifts........................................
Credit Unions ..........................

1,942
654
197

34-51
55-60
0

1,927
618
218

15-27
25-37
0

15-27
27-37
0

Total Deposit Insurance ....

2,793

89-111

2,763

40-64

42-64

PBGC.........................................
Other Insurance3 ....................

900
1094

30-60
2-3

950
1076

25-45
15-18

12-18
12-15

Total Federal Insurance....

4,787

121-174

4,789

80-127

66-97

369
439
107
—
51

—
—
—
0-1

427
543
85
—
50

—
—
—
—
0-1

GSEs:4
Freddie Mac.............................
Fannie Mae ..............................
FHL Banks ...............................
Sallie Mae5................................ ......
FCS .............................................
Total GSEs...........................

966

0-1

1,105

0-1

Total..................................

6,645

203-294

6,758

179-266

99-148

1 Direct loan future costs are the program account (1993-1998) plus the embedded loss from outstanding loans. For guarantees, these
are liquidating plus program account outlays projected into the future. Future insurance costs are program plus liquidating costs
through 1998, plus the accrued liability remaining at the end of 1998. 1993 estimates of costs are as displayed in the 1993 Budget,
, uncorrected for errors. Estimates of face value have been updated.
2 Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform, such as CCC farm
supports. Defaulted guarantees which become direct loans receivable are acounted for in guarantee volume and costs.
3 Current estimates of other insurance costs include the National Servicemen's Group Life Insurance program, omitted in the 1993
Budget.
4 Net of borrowing from Federal sources, other GSEs, and federally guaranteed loans.
5 The face value and Federal costs of Guaranteed Student loans in Sallie Mae's portfolio are included in the Guaranteed Student loan
account above.

11.

175

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

FEDERAL UNDERWRITING RISK
The Federal Government continues to be the
Nation's largest source of credit and underwriter
of risk with $6.8 trillion in face amount of Fed
eral and federally assisted credit and insurance
outstanding. Two-fifths of all non-Federal credit
outstanding has been assisted by Federal guar
antees, Government-sponsored enterprises, or
deposit insurance. This is down from nearly
three-fifths in the late 1970s, with a particularly
sharp decline in the last five years, due to the
contraction in the thrift industry over this pe
riod. Outstanding bank loans have also fallen
over the past year and a half, but the contraction
in banks and thrifts has been partially offset
by the fast growth of assistance from Govern
ment-sponsored enterprises.

CONTROLLING CREDIT COSTS

Increasing attention has been paid in recent
years to measuring and controlling the cost of
credit programs. Prior to the Federal Credit Re
form Act of 1990, credit programs were recorded
in the budget each year on the basis of that
single year's cash flows. This mixed the effects
of current lending with previous lending, and
failed to show the long-term effects of current
decisions. Direct loan disbursements counted as
an outlay in full, although offsetting interest and
repayments would be received in the future;
guarantees were not counted as an outlay until
interest subsidies or default claims were paid.
New credit assistance was controlled, if at all,
on the basis of the principal amount of loans
obligated or guarantees committed. When these
"credit budget limits" were reached for any pro
gram, Congress generally could increase them
without reducing any other spending.
Dissatisfaction with this approach was wide
spread. The focus of budgeting is the allocation
of resources among alternative uses. For this
purpose, the cost should be controlled at the
time of decision. Federal credit programs often
deliberately extend direct loans or loan guaran
tees on which they expect to take a loss in order
to encourage particular activities or to provide
benefits to particular borrowers. It is the cost
of these credit programs, not their volume,
which channels resources toward the favored
uses.

The Federal Credit Reform Act of 1990
resolved this problem by requiring all credit
programs to obtain budget authority for the esti
mated subsidy cost of new direct loans or loan
guarantees before credit is extended. The sub
sidy cost is defined as the present value of the
expected cash outflows from the Government
minus the present value of the expected cash
inflows. Because the costs of future cash flows
are assessed, subsidies are not based on judg
ments about individual loans, but on statistical
analysis of the probable cost of default in a
group of loans. Annual reestimates are required
to be sure that these costs ultimately are accu
rate.

Credit reform was enacted in November 1990,
with 1992 the first year of implementation. The
President's 1992 Budget contained the first
request for credit subsidy budget authority. Fed
eral agencies are currently obligating appro
priated credit subsidies, making reestimates, and
reporting loans and guarantees outstanding in
credit reform terms on statements of financial
condition. Meanwhile, subsidy appropriations
for 1993 have been enacted, starting the second
year of implementation. Tables 11-2 and 11-3
show the subsidy rates, budget authority, and
loan levels for direct loans and loan guarantees.

It will be some time before a full assessment
can be made of the effects of credit reform budg
eting on cost estimates, budgetary control, pro
gram management, and credit policy. Initial
experience, however, has been positive.
• Cost Measurement.—Credit reform is im

proving cost measurement of credit pro
grams by requiring agencies to quantify the
relationships between program cost—with
defaults usually the largest cost compo
nent—and the characteristics of borrowers
and loans that are known when the loans
are made. Default models have been devel
oped for the largest programs guaranteeing
mortgages and other loans. Additional data
is being collected to improve analysis of
farm and small business loans. A common
method of assessing sovereign debt was cre
ated by a cross-agency committee, and a
common method for assessing the risk of
non-sovereign international debt is under
development.

176

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 11-2.

ESTIMATED 1993 SUBSIDY RATES, BUDGET AUTHORITY, AND
LOAN LEVELS FOR DIRECT LOANS
In millions of dollars
1993 Weightedaverage
subsidy as a
percent of
disbursements

1993 Subsidy
Budget
Authority

1993 Estimated
Loan Levels

Agriculture:
Agricultural credit insurance fund .......................................................... .
Public Law 480 direct loans ............................................................................
Rural development insurance fund ...............................................................
Rural development loan fund.... ....................................................................
Rural housing insurance fund ........................................................................
Self-help housing................................................................................... ............

17.4
67.1
13.8
56.1
31.2
1.7

191
342
96
18
652
*

1,103
510
695
33
2,088
*

Rural Electrification Administration:
Rural economic development loans...........................................................
Rural electric and telephone .......................................................... ............
Rural electric and telephone FFB rate loans ............................................
Rural telephone bank ...................................................................................

27.0
19.0
4.0
0.0

3
161
35
*

12
864
894
177

Education:
College housing and academic facilities...................................................... .

10.1

Interior:
Bureau of Indian Affairs....... ................................................................... ......
Bureau of Reclamation loan program ...........................................................

19.8
61.7

2
4

11
8

State Department:'Repatriation Loans ................... ..........................................

80.0

Transportation:
AMTRAK corridor improvement program...... ............................................
Minority business resource center program ................................................
Orange county toll road demonstration project1........................................

24.1
4.0
8.0

1
*
10

4
8
120

Veterans Affairs:
Direct loan revolving fund ...............................................................................
Education loan fund .........................................................................................
Guaranty and indemnity fund ......................................................... .............
Loan guaranty fund........................................................................................ .
Native american veteran housing loans .......................................................
Transitional housing loans ....... .......................................................................
Vocational rehabilitation............................................ .....................................

7.1
12.4
8.5
9.1
7.7
10.0
2.9

*
*

1
*

16
119
*
*
*

191
1,311
6
*

Other Executive Agencies:
Environmental Protection Agency:
Abatement, control, and compliance.........................................................

41.6

Export-Import Bank...................................................................... ....................

4.6

130

2,800

Federal Emergency Management Agency:
Disaster assistance........ .................................................................................

0.0

Funds Appropriated to the President:
AID Private sector investment program...................................................
Foreign military financing...... ............... ;....................................................
Overseas Private Investment Corporation ................................. .....

7.7
16.3
13.9

149
4

Small Business Administration:
Business Loans............... ................................................................. *.............
Disaster loans2 ..............................................................................................

20.6
20.6

125
1,760

Total, direct loans3 .............. ........................................................................

15.1

2,074

13,754

Agency and Program

*$500 thousand or less.
1 Authorized loan level is $120 million, although no loans are expected to be disbursed in 1993.
2 Includes loan obligations made from BA provided in 1992.
3 Weighted average subsidy rate.

40
*

5
855
30

11.

177

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

Table 11-3.

ESTIMATED 1993 SUBSIDY RATES, BUDGET AUTHORITY, AND
LOAN LEVELS FOR LOAN GUARANTEES
(In millions of dollars)

Agency and Program

Agriculture:
Agricultural credit insurance fund ...................................................... .........
Agricultural resource conservation demonstration .......................... .........
Alcohol fuels credit guarantees............................................................ .........
Commodity Credit Corporation: Export credits ............................... .........
Rural development insurance fund..................................................... .........
Rural housing insurance fund .............................................................. .........
Commerce:
NOAA fishing vessels............................................................................ .........
Education:
Guaranteed student loans, PLUS......................................................... .........
Guaranteed student loans, SLS............................................................. .........
Guaranteed student loans, Stafford..................................................... .........
Guaranteed student loans, Unsubsidized Stafford ........................... .........
Health and Human Services:
Health professions graduate student loan program......................... .........

Housing and Urban Development:
Community development (Sec. 108).................................................... .........
Federal Housing Administration general and special risk1 ........... .........
Federal Housing Administration mutual mortgage......................... .........
GNMA secondary mortgage guarantees ............................................ .........
Interior: Indian loan guaranty and insurance fund.............................. .........
Transportation:
Military useful vessel obligation guarantees ..................................... .........

1993 Weightedaverage
subsidy as a
percent of
disbursements

1993 Subsidy
Budget
Authority

1993 Estimated
Loan Levels

2.5
53.6
48.1
6.8
2.3
1.7

54
4
9
388
5
6

2,143
10
19
5,700
235
330

1.0

2.4
5.0
17.2
0.8

34
137
2,118
22

1,419
2,726
12,326
2,944

6.8

340

0.0
1.2
-2.6
0.0

—
135
-1364
-7

2,000
11,292
57,146
77,700

12.9

10.2

471

Veterans Affairs:
Guaranty and indemnity fund ............................................................. .........
Loan guaranty fund................................................................................ .........

2.5
7.6

530
*

21,123
4

Other Executive Agencies:
Export-Import Bank................................................................................ .........

5.0

624

12,550

14.7
4.7
4.5
1.5

22
4
(3)
6

150
76
2,000'
375

5.2

234

4338

1.4

3,042

217,733

Funds Appropriated to the President:
AID housing and other credit guarantees 2................................... .........
AID private sector loans.................................................................... .........
Loan guarantee to Israel ................................................................. .........
Overseas Private Investment Corporation ..................................... .........
Small Business Administration:
Business Loans..................................................................................... .........

Total, loan guarantees4...................................................................... .........

*$500 thousand or less.
1 Includes $30.4 million in subsidy BA and $2,428 million in loan limitation enacted in late 1992 as an Emergency Supplemental (P.L.
102-366) that carries over into 1993 or was released as a contingency in 1993.
2 Includes $6 million in subsidy BA carried forward from 1992 appropriation.
3 By statue the subsidy BA must be covered by the fee payment by Israel.
4 Weighted-average subsidy rate.

• Cost Control.—Unlike the past when credit
was often extended ad hoc in response to
disasters or economic hardship of certain
groups, now the cost of credit assistance
must be estimated and an appropriation re

quested. For disaster programs this appro
priation is not difficult to obtain. For other
programs, however, the increased scrutiny
focuses attention on controlling the substan
tial costs highlighted in Table 11-1, and also

178

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

on ways of achieving program goals more
effectively for each dollar of cost.

• Improving Management.—Credit reform has
helped bring together agency budgeting, ac
counting, and program staffs. Accounting
for administrative expenses is now explicit.
Loan tracking and servicing are being im
proved, and at least one agency has begun
to base staff performance evaluations on the
results of loans made. The Federal Govern
ment is in the lead on accounting for credit;
accounting standards for impaired loans in
the private sector are moving in a similar
direction.
• Program Structure.—By requiring an up
front recognition of costs, credit reform has
put emphasis on structuring programs so
as to deliver the maximum benefits using
the least costly delivery system. While credit
reform forces the Federal Government to as
sess program costs, it does not preclude the
choice of more expensive program options.

Although budgeting the subsidy amount has
begun to record a more accurate picture of the
obligations the Government has incurred when
credit is extended, continuing efforts are needed
to improve implementation of the new budg
etary system. In addition, if restraining the size
of Federal credit is a goal, policymakers may
wish to consider combining credit reform with
caps on the face value of loans or loan guaran
tees in any given program. If restraining credit
risk in relation to benefits received is a goal,
credit program management reforms and
changes in program design would be needed.

CONTROLLING INSURANCE COSTS
The enormous cost of closing insolvent thrifts
over the past decade and the rising cost of bank
failures have focused an even brighter spotlight
on deposit insurance and other Federal insur
ance programs. As was previously the case for
credit programs, cash budgeting does not reflect
the cost when insurance is extended. Instead,
the budget records insurance costs months,
years, or in the case of pension guarantees, even
decades later when the cash payments are made
to protect insured depositors or pay pension
benefits. By that time, there is little the Federal
Government can do but pay the bill.

Over the past two years, the Administration
and the Congress have been seeking ways to
apply credit reform principles to deposit and
other insurance programs. The Federal Credit
Reform Act itself required the Office of Manage
ment and Budget and the Congressional Budget
Office each to report to Congress on the appro
priate budgetary treatment for deposit insur
ance. Both agencies reported that the budgetary
treatment should be similar to that for credit
programs.

The Administration proposed in the 1993
Budget that the budgetary treatment for insur
ance programs be changed first for deposit
insurance and pension guarantees and the fol
lowing year for other insurance programs. Such
a change presents difficult conceptual and meas
urement issues and has not yet been adopted
in the budget. However, it has the potential for
improving prospective management and control
of these costs.

Concepts
There are two types of private insurance, each
with an analog in Federal insurance programs.

• Term insurance covers a specific period of
time. During that time, losses from the oc
currence of an insured event are made good
up to specified limits. At the end of the
period, the insurer can renew, cancel, or
modify the insurance. Federal deposit, crop,
flood, war-risk, and OPIC insurance have
this character.

• Open-ended insurance covers losses until
the insured event occurs or until it can no
longer occur. Among Federal programs,
pension guarantees, vaccine compensation,
and veterans whole life insurance are in this
category.

The annual cost to the Government—which
the proposal would use for budgeting—is the
cost of the insurance commitments made or ex
tended in a given year.
• For term insurance, the commitment occurs
when the insurance is extended for another
fixed term. For budgeting, deposit insurance
is treated as renewable one-year term insur
ance. The cost is the present value of the
cash outflows, net of recoveries, expected
to be required to settle all losses incurred

11.

179

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

during that term. The year's premiums are
an offsetting collection.

• For open-ended insurance, the commitment
occurs when the coverage base is expanded
(e.g., to larger amounts of pension benefits
or to the lives of more veterans). For budg
eting, pension guarantees are measured in
terms of the increase in vested benefit obli
gations (VBO) during the year. The cost is
the present value of the cash outflows, net
of recoveries, expected to be required to set
tle all losses inherent in the increase of cov
ered benefits during the year. (This revision
in the measurement of PBGC costs is dis
cussed in detail in the section below on
"Methods for Measuring Insurance Costs").

Table 11-4.

The year's premiums are an offsetting col
lection.

Deposit Insurance

Better measures of cost and budgetary incen
tives would have been more successful in pro
moting a quick response to the rising Federal
deposit insurance obligations arising from the
restructuring in the financial services sector over
the past decade. The major financial intermedi
aries relying on deposit insurance—thrifts,
banks, and credit unions—faced major techno
logical changes and increased competition from
Government-sponsored enterprises and other
less regulated intermediaries. Volatile interest
rates and asset markets left hundreds of thrift

PROJECTED ACCRUAL AND CASH OUTLAYS
(In billions of dollars)
Bank Insurance Fund
1993

1994

1995

1996

1997

1998

Accrual Basis:
Recognition of Accrued Cost ..........................................
plus: Accrual Cost................ ........................................
less: Premium Income......... ........................................

7.8
9.0
6.6

3.1
11.9
6.9

0.6
7.7
7.3

0.4
7.3
7.6

0.3
6.0
7.9

0.1
5.5
8.2

Outlays: Accrual Basis ............ ........................................
Outlays: Cash Basis ................. ........................................

10.2
12.6

8.1
11.2

1.0
-3.1

0.1
-5.6

-1.6
-4.7

-2.6
-4.1

Resolution Trust CorporatioiySavings Associations Insurance Fund
1993

1994

1995

1996

1997

1998

Accrual Basis:
Recognition of Accrued Cost ..........................................
plus: Accrual Cost................ ........................................
less: Premium Income.........

7.3
4.0
1.2

11.2
3.0
1.5

4.0
1.8
1.6

0.0
1.6
1.6

0.0
1.6
1.7

0.0
1.6
1.8

Outlays: Accrual Basis ............ ........................................
Outlays: Cash Basis ................. ........................................

10.1
-0.9

12.7
3.7

4.2
-5.1

0.0
-9.2

-0.1
-6.2

-0.2
-2.7

Pension Benefit Guaranty Corporation
1993

1994

1995

1996

1997

1998

Accrual Basis:
Recognition of Accrued Cost .. .......................................
plus: Accrual Cost................ .......................................
less: Premium Income......... .......................................

2.3
4.4
0.9

2.4
3.1
0.9

1.7
0.7
0.9

1.5
1.7
0.9

1.8
1.6
0.9

1.3
1.5
1.0

Outlays: Accrual Basis ............ .......................................
Outlays: Cash Basis ................. .......................................

5.8
-0.8

4.6
-0.6

1.5
-0.6

2.3
-0.6

2.5
-0.5

1.8
-0.5

1 Accrued costs for banks and thrifts represent the costs associated with closing currently insolvent institutions as estimated at the
beginning of 1993. Accrued costs are recognized according to the time profile of bank and thrift closure.
2 Accrued costs, estimated at $32 billion, represent PBGC's long-term exposure to pension claims at the beginning of 1993. Accrued
costs are based on currently vested and guaranteed pension benefits calculated using current years of service and current wages—
vested benefit obligations (VBO)—and are recognized according to the time profile of expected pension terminations. Accrued costs are
measured net of the recoveries expected on terminated plans. The recognition of accrued costs does not include the costs associated
with the current deficit in PBGC trust funds, which would increase the first year's recognition of accrued cost by approximately $2.4
billion. Accrual costs, at approximately $8 billion in present value, represent the costs associated with future insurance activity.

180

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

institutions insolvent and unprofitable by the
early 1980s. Regional and sectoral problems
damaged many banks whose assets were con
centrated in a particular State or industry. Under
pressure to maintain profits, many institutions
entered new, riskier lines of business. This was
particularly true of some insolvent thrifts gam
bling for resurrection. The net result of all these
pressures has been a massive increase in budget
expenditures since 1989 to pay for these once
"hidden" Federal insurance liabilities.

Thrifts.— Until the 1980s, the Federal Savings
and Loan Insurance Corporation (FSLIC) pro
vided Federal deposit insurance for savings and
loans, and financed losses on failed S&Ls with
deposit insurance premiums. From 1982 through
early 1989, however, the FSLIC incurred major
expenditures from the closure of 450 thrifts, with
a combined $158 billion in assets. These expend
itures quickly exhausted the FSLIC's ability to
cover losses with insurance premiums. A final
GAO audit of FSLIC in 1989 found it to have
a negative net worth of $75 billion.
The Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA) created
the Resolution Trust Corporation (RTC) to man
age the task of closing the huge backlog of insol
vent thrifts and disposing of their assets. In its
first three years, the RTC closed 652 thrifts with
a combined $216 billion in assets at an estimated
cost of $84 billion. At the end of September
1992, an additional 69 thrifts with $34 billion
in assets were being managed under RTC
conservatorship, and another $36 billion of as
sets were in receivership.

Banks.—During the 1980s, an increase in bank
failures put pressure on the Federal Deposit In
surance Corporation (FDIC) bank insurance
fund. From 1982 through 1991, over 1,300 banks
with a combined $188 billion in assets were
closed by the FDIC because of financial difficul
ties. The FDIC, however, was in a stronger fi
nancial position, and the failure problems for
banks were on a smaller scale than for thrifts.
Actual FDIC losses did not exceed premium in
come until 1985. From 1985 to the end of 1992,
the net worth of the FDIC's insurance fund for
banks (known since 1989 as the Bank Insurance
Fund, or BIF) fell from $18 billion to $11 billion
(excluding any reserves for failures expected in
the coming year or two).

In 1991, the Administration proposed a recapi
talization of the FDIC and comprehensive re
forms to modernize the financial system and
make banks and other depositories both
healthier and safer. The Administration's legisla
tion would have strengthened the banking sec
tor, balancing tighter controls over failing or
mismanaged banks with reforms that would
allow banks to remain competitive. Enacted in
December 1991, the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA),
recapitalized the FDIC and tightened regulatory
controls. Some of these safety and soundness
reforms were requested by the Administration,
but numerous additional regulatory burdens
were.added by Congress. Moreover, the provi
sions that would have broadened banks' role
in the financial system and eliminated barriers
to diversification and consolidation were re
jected.
FDICIA created a new, more stringent regu
latory regime for banks and thrifts. The process
of adjustment to higher capital requirements,
new policies governing the treatment of unin
sured creditors of failed depositories, and a new
system of rewards and penalties tied to capital
ization will take time. The Administration pro
posed, and the Congress enacted in the 1992
banking and housing bill, reforms to reduce or
eliminate some of the overly restrictive FDICIA
regulatory requirements.

1992 Deposit Insurance Outlays.—Deposit in
surance outlays were much lower in 1992 than
projected a year ago for two critical reasons.
First, the Congress did not provide the re
quested additional funding for the RTC. Sec
ondly, banks and thrifts recorded unexpectedly
strong earnings during the first half of calendar
1992. Many depositories benefitted from the
sharp differential between short- and long-term
interest rates. This enabled them to maintain or
increase profits while reducing their risk of
losses from loan defaults by investing in Treas
ury securities and other Government-backed
paper. Lower market interest rates also allowed
depositories to record profits by selling assets
carrying above-market nominal interest rates. A
number of institutions also took advantage of
these unusual circumstances to raise new capital
and pay down liabilities, increasing their cush
ion against unexpected losses.

11.

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

Expected budgetary costs and outlays for the
largest deposit insurance accounts are discussed
below. These annual estimates are subject to a
wide range of uncertainty. A single large failure
could upset loss projections in a particular year.

Resolution Trust Corporatioq/Savings Asso
ciation Insurance Fund.—Several issues are rel
evant in assessing future costs. The first issue
is that the short-term budget projection for
thrifts is clouded by RTC funding uncertainty.
Delays have added to costs by postponing reso
lution and disposition. Resolution activity has
virtually ceased in recent months because the
Congress has not responded to Administration
requests to fund additional losses.
A second issue is how many institutions will
be transferred to the RTC by the time its man
date to take in more insolvent institutions ex
pires in September 1993. This will depend on
determinations made by the Office of Thrift Su
pervision (OTS) and the FDIC on whether insti
tutions that are not in compliance with capital
standards are viable or not.

A third issue concerns the number of thrifts
that will fail once the RTC resolves the backlog
of problems inherited from the FSLIC. This de
pends on the relative economic health of the
thrift industry and future economic conditions.
The thrift industry remains sensitive to changes
in interest rates and vulnerable to strong com
petition from the highly efficient secondary mar
kets.

181

Costs for thrifts that fail after September 30,
1993 are to be paid from the new Savings Asso
ciation Insurance Fund (SAIF). This new fund
will have an initial cash reserve of about $1.4
billion, and an annual premium revenue of
about $1.5 billion. These revenues appear suffi
cient to cover expected losses after 1995. Under
more pessimistic economic assumptions, how
ever, failure costs for savings and loans could
accrue at rates significantly greater than the pro
jected SAIF premium revenues.
FSLIC Resolution Fund,— Many purchasers of
insolvent thrifts in late 1988 and early 1989 re
ceived Federal commitments of long-term assist
ance to cover future losses on assets acquired
from failed thrifts. The cost of these "1988
deals" remains uncertain, although many have
been subsequently "restructured" to remove
long-term contingencies. These "1988 deal" costs
are now being liquidated by the FSLIC Resolu
tion Fund (FRF) with $38 billion having been
paid as of December 31, 1991. The General Ac
counting Office has estimated that this figure
will rise to $56 billion when all of these trans
actions are paid off. Treasury appropriations au
thorized in 1989 (in addition to the thrift insur
ance premiums) help fund these FRF obligations.
Through 1992, the FRF had received $41 billion
in appropriations. It is estimated that an addi
tional $6 billion in appropriations will be needed
for FRF through 1998, with cash outlays pro
jected to total $7 billion over the same period.

A fourth unknown is the pace and efficiency
with which the RTC can dispose of the assets
it has acquired and will acquire when the re
maining failed thrifts are resolved. As readily
marketable assets are sold, the remaining assets
will increasingly be nonperforming loans and
troubled collateral that will be hard to sell. A
final accounting of the cost of this thrift clean
up cannot be made until the Federal Govern
ment has disposed of all these assets—a task
likely to take years to complete.

Bank Insurance Fund.— Despite the recent fa
vorable interest rate environment and record
earnings by many banks, segments of the indus
try remain troubled. As of September 30, 1992,
993 commercial and savings banks with a com
bined $558 billion in assets (15 percent of the
industry total) were on the FDIC's "problem
list." Many problem banks will not fail. How
ever, continuing weakness in the real estate sec
tor, rising loan losses on the West Coast, and
increased bank interest rate sensitivity could
weaken other banks.

Projected Losses and Outlays.—Additional
losses from thrift failures are expected to total
$34 billion through 1998. If funding is provided
in the current fiscal year, the RTC can be ex
pected to resolve $41 billion in assets this year
and another $106 billion in 1994 and 1995. Cash
outlays are estimated to be about -$21 billion
over the 1993-1998 period.

Payments to cover the losses of failed banks
are projected to total $45 billion over the next
six years, but premium collections will total only
$44 billion if the current premium schedule re
mains in effect. As a result, the insurance fund's
net worth will fall to $1 billion in 1994 before
starting to recover. More adverse economic con
ditions could increase loss payments to $57 bil

182

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

lion and reduce the insurance fund net worth
to -$6 billion by 1996.

Projected Losses and Outlays.—Over the
1993-1998 period, outlays on an accrual basis
are estimated to be $15 billion, including over
$10 billion in payments to liquidate costs that
had accrued for banks that became insolvent be
fore 1993. On a cash basis, outlays will total
$6 billion. Cash outlays reflect not only pay
ments to cover losses and premium income but
also the temporary flows as cash is disbursed
to acquire the assets of failed institutions and
later recovered as the assets are sold.
Discount Window Borrowing

Borrowing from the Federal Reserve's dis
count window—whether by a banking or non
banking firm—is a potential source of losses to
the Federal Reserve banks, especially if such
lending became widespread in a future financial
crisis. Such borrowings are not insured liabilities
of the Federal Government, and even from the
Federal Reserve's viewpoint, the risk of loss is
small because of strong collateral requirements.
The scale of this risk is impossible to estimate.
Any such loss would reduce the system's annual
payments to the Treasury and thereby increase
the Federal deficit.
Pension Insurance
Since the passage of the Employees Retire
ment and Income Security Act (ERISA) and the
establishment of the Pension Benefit Guaranty
Corporation (PBGC) in 1974, the Federal Gov
ernment has played an active role in the private
pension market—insuring benefits in single-em
ployer and multi-employer defined benefit
plans. The PBGC insures pension plan partici
pants against losses resulting from the joint inci
dence of a failure in the sponsoring firm and
a shortfall in the pension assets that were set
aside by that firm to pay for promised pension
benefits.

ised benefits, many large firms continue to
underfund promised pension obligations. This
leaves the PBGC facing a huge exposure to fu
ture pension termination claims. At the end of
1991, the total underfunding in PBGC-insured
pension plans, as measured by vested benefit
obligations, exceeded $37 billion. (Underfunding
as measured by accumulated benefit obligations
exceeded $59 billion.) Almost two-thirds of this
underfunding ($24 billion) is concentrated in the
firms identified on PBGC's "Top 50 List of Un
derfunded Plans".
Not all of this underfunding will translate into
a claim on the PBGC, however, because that
will only occur if a sponsoring firm becomes
insolvent. Nevertheless, even if firms increase
pension funding over the next few years to meet
the funding requirements of the Pension Pro
tection Act of 1987, PBGC's present value of
expected claims over the next 30 years is ap
proximately $35-40 billion (as of 1993). (For
measurement issues see the next section on
"Methods of Measuring Insurance Costs").
PBGC's expected present value of future pre
mium income over the same period is only
$10-18 billion. Thus, the PBGC currently faces
an uncovered exposure in the neighborhood of
$24 billion.
Exposure Concentration.— Most of the underfunding is concentrated within a few industries.
Based on 1990 data, 75 percent of PBGC's expo
sure was attributable to six industries: the auto
mobile industry (32 percent), the petroleum in
dustry (16 percent), the industrial machinery
and chemical industries (10 percent each), and
the airline industry (7 percent). In large part,
the propensity for underfunding in these indus
tries reflects the popularity of flat benefit plans,
as opposed to final salary plans, in union con
tracts.

At the end of 1992, the PBGC was insuring
about 85,000 plans with total assets of over $1
trillion and total vested pension benefits of $860
billion. About $775 billion of these guaranteed
benefits were in single-employer plans, with the
remaining $85 billion in a small group of multi
employer plans.

Flat benefit plans, common in unionized firms,
calculate benefit liabilities based on a fixed dol
lar amount per year of service, which is usually
specified in the labor contract. Since current pen
sion law for flat benefit plans does not require
(and actually discourages) funding to be based
on wage growth projections, pension funding
continually lags behind the real growth in prom
ised pension benefits. As a result, 95 percent
of flat benefit plans are chronically underfunded.

Unfortunately, while the pension system as
a whole holds more pension assets than prom

Final salary plans, in contrast, are required
to base benefit calculations and funding levels

11.

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

on both the number of years of service and pro
jected final salaries. Thus, final salary plans are
predominantly overfunded. As a result, while
flat benefit plans account for only 20 percent
of PBGC's outstanding guaranteed benefits, they
represent over two-thirds of the agency's loss
exposure.

Administration
Reforms. — Acknowledging
this large hidden liability, the 1993 budget pro
posed switching the PBGC's budgetary treat
ment from a cash basis to an accrual basis. It
also included proposed funding, bankruptcy,
and guarantee reforms designed to reduce the
agency's exposure from future claims. If enacted,
these reforms are estimated to reduce PBGC's
expected future claims by as much as $17 billion
to approximately $0-5 billion, net of premiums.
• Funding Reform: Increase minimum fund
ing requirements under a new solvency
maintenance rule and a revised underfunding reduction rule for underfunded
plans.
• Guarantee Freeze: Limit the increase in
PBGC's exposure from plan amendments
that increase insured benefits in chronically
underfunded plans.
• Bankruptcy Reform: Clarify and improve
the status of PBGC's claims in bankruptcy
court, and grant the PBGC the right to par
ticipate on creditors' committees during
bankruptcy court proceedings.

While none of these measures was enacted,
they focused attention on a large and growing
liability of the Federal Government.
The current cash budgeting for PBGC grossly
understates the agency's exposure to future
claims by not recognizing the cost of claims as
coverage is extended. Under the budgetary treat
ment shown in Table 11-4, the costs associated
with claims from currently insured pension ben
efits, based on current wages and service of
vested participants, would be recognized when
those plans terminate. A second budget line
would recognize the annual changes in PBGC's
exposure, including new plans and participants,
higher wages and additional service, and the
changes in the financial condition of pension
funds and sponsors. By showing costs up front,
accrual budgeting would provide the informa

tion on current and future claims needed by

183

the PBGC, Congress, and the Administration to
manage the cost of Federal pension insurance.
Other Insurance

Of the other Federal insurance programs,
flood and crop insurance are subsidized. Flood
insurance subsidizes the first $35,000 of coverage
on structures that were constructed before com
munity measures to mitigate flood damage.
Crop insurance subsidizes premiums on multi
peril crop damage insurance, reinsures private
company losses above premium payments, and
pays administrative expenses. Its losses average
$1.40 for each $1 of income. Both, however, are
short-term insurance. Maritime and aviation war
risk insurance, which could be costly in unpre
dictable amounts, are also short-term.
Five of the seven VA life insurance programs
are actuarially sound. The other two are sub
sidized to provide disabled veterans with poli
cies at rates that would apply to healthy people.
Congress recently increased the coverage avail
able under both of these subsidized programs.
VA is actuarially assessing the long-term cost
of these changes. Federal subsidies are also
being provided through the HHS program that
compensates for injuries resulting from vaccines
produced both before and after 1989. The
present value of this cost is estimated to be $172
million.

The Overseas Private Investment Corporation
insures against political risk, inconvertibility,
and expropriation for U.S. companies interested
in investing in developing countries. Its overall
limitation on outstanding contingent liability
was just raised from $7.5 to $9 billion. OPIC
has internal geographic exposure limits and re
serve requirements; its risk assessment is essen
tially the same as for its credit programs. High
demand for large oil and gas contracts in the
former Soviet Union may raise its volume of
business in 1993 and 1994. Further study of
OPIC's insurance liability is planned next year.
Methods of Measuring Insurance Costs
A contingent claims approach has been taken
by the Office of Management and Budget to
measure the prospective costs of deposit insur
ance and pension guarantees. This approach has
a substantial academic history and is widely
used by participants in financial markets. How

184

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

ever, its use for budgeting has required consid
erable innovation.
Banks and thrifts.—Both costs as they accrue
and the subsequent cash payments can be esti
mated for deposit insurance using information
provided quarterly to regulators by every insti
tution. The current financial condition of each
depository is estimated by capitalizing its re
ported income, adjusted for anticipated loan
losses and temporary fluctuations. The resulting
estimate of asset value, less the face value of
the institution's deposits and other liabilities,
provides a measure of the economic value of
its capital. This measure of capital is correlated
with economic values estimated from the stock
prices of bank holding companies and, for failed
institutions, with the regulators' subsequent esti
mates of insurance fund losses.

The estimated future accruals of deposit insur
ance costs depend not only on the current condi
tion of each bank or thrift but also on the antici
pated trend and volatility of earnings. Even if
average earnings do not change, normal fluctua
tions in the profitability of individual firms will
generate, a stream of new insolvencies each year.
Some of these institutions will lose so much
money that they will exhaust their capital and
be closed.
For both banks and thrifts, costs are projected
using computer simulations. The simulations
begin with the current distribution of institu
tions' financial condition, which is recreated as
a statistically equivalent set of several thousand
equal-sized "banks"; thus, the future paths
taken by individual banks are not projected. Pro
jections are made by applying random annual
changes to the net worth of each "bank", to
reflect anticipated earnings volatility, and by
"closing" deeply insolvent banks. For the base
line projection, recent averages are used to
estimate expected earnings volatility and the
"closure rule" that the regulation will follow.
Alternative estimates can be generated by vary
ing the assumed trend and volatility of industry
earnings and the assumed point at which regu
lators will intervene to close an insolvent deposi
tory.

In the coming year, further work; is planned
to refine the estimates of institutions' current
condition and the methods used to project accru
ing costs. Areas of inquiry include the relation
ship of bank and thrift industry performance

to broader economic trends, including changes
in interest rates, and possible cost savings from
further reform of deposit insurance and financial
regulation.

Pension guarantees.—A similar approach is
used to estimate the expected net present value
of future pension claims. The joint probability
of firm failure and pension underfunding is esti
mated given the expected trends and volatility
that characterize pension funds and sponsoring
corporations. The measure shown in this year's
budget allocates the cost of future claims over
time as the vested benefit obligations increase.
Compared with last year, the estimated vola
tility of pension assets has been reduced to re
flect more accurately the diversification of most
pension portfolios, while the variance in pension
and firm liabilities has been adjusted upward
to incorporate interest rate volatility. Recoveries
have been reduced to reflect both the continuing
deterioration in the amounts obtained from
bankrupt firms and the ciirrertt practice of pay
ing a portion of these amounts to nonvested
or uninsured pension beneficiaries.
The measurement of pension liabilities at
bankruptcy also has been improved. Early retire
ments, golden handshakes, and layoffs at firms
nearing insolvency often raise reported pension
liabilities by as much as 20 percent between the
last reporting date of the firm and bankruptcy.
Most of this cost increase is attributable to the
decrease in the retirement age assumptions used
when valuing a firm's pension plan on a "date
of pension termination (DOPT)" basis rather
than a "going concern" basis. For the present
estimates of PBGC's expected cost, pension li
abilities are valued on a DOPT basis for firms
with funding below 110 percent of pension
liabilities.

Finally, the recognition of PBGC costs has
been improved to more accurately match the
extension of insurance. In the 1993 Budget, the
accrual costs reported for the PBGC were based
on the expected changes in current and future
insured benefits. While the inclusion of future
benefits is important in assessing the agency's
long-run financial position, the incorporation of
future benefits in budgeting can lead to a pre
mature recognition of costs. In response to this
problem, this year's Budget adopts a stricter def
inition of liability in allocating PBGC's costs:
vested benefit obligations currently insured by

11.

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

the agency. Using this definition of liability, ac
crual costs represent the increase in insured
vested benefits during the year, due to addi
tional years of service, an additional year's wage
growth, new plans, new benefits, etc. The rec
ognition of accrued costs associated with bene
fits insured at the time of conversion to an
accrual measure are recorded as plans with
these costs are projected to terminate.
Research to improve the Government's ability
to assess future costs is continuing, both at OMB
and at PBGC. OMB is working on an improved
formulation of the value of the pension insur
ance option, including more advanced modeling
of firm behavior and pension funding near insol
vency, specifying the value of insurance from
the perspective of firm equity and debt holders,
and analyzing the impact of reform proposals.
Other Insurance.—In budgeting for other in
surance programs, the best measure of cost is
the actuarial estimates of the long-term average
annual loss for comparable exposure. While the
actual loss in any one year may differ substan
tially from this average, balances should net
over time. Actuarial estimates of losses for these
programs have been improved. For example, the
Federal Government has mapped flood insur
ance risk across the nation. For OPIC, which
utilizes risk ratings and geographic exposure
limits in issuing both insurance and credit, work
has begun to assess whether additional forms
of analysis improve on these measures.

OVERSEEING GSEs
Government-sponsored enterprises (GSEs) are
privately owned corporations that were created
by the Federal Government to provide credit
or package loans into securities for specified
purposes. Because of their public policy objec
tives and their close ties to the Government—
and because of their massive role in credit mar
kets—it is widely assumed that the Government
would come to the aid of any GSE that got
into financial trouble. Indeed, when the Farm
Credit System was jeopardized by the sharp
decline of agricultural income and land values
in the mid-1980s, Congress provided financial
assistance.

Concern about GSEs stems not from their cur
rent risk or financial condition, but from their
scale and potential to take future risks. In part

185

because of their special status, GSEs tend to be
profitable and stable. Their perceived Federal
guarantee, geographic diversity and economies
of scale arising from their nationwide oper
ations, and the flexibility to respond to market
changes due to their private ownership all com
bine to reduce their borrowing cost relative to
competitors. Risk assessments and stress tests
carried out by OMB, Treasury, HUD, GAO, and
CBO have found GSEs generally able to with
stand adverse interest rate and credit conditions.

Nevertheless, the growth and importance of
GSEs, together with past problems and some
risks on the horizon, stimulated the Administra
tion to conduct two studies on the GSEs and
to propose legislation designed to protect the
taxpayer. Congress enacted several versions of
the Administration's legislation last year that
provided or strengthened Federal oversight and
reduced Federal risks from several enterprises.

• Under the Housing and Community Devel
opment Act of 1992, an independent office
within HUD was established to oversee the
safety and soundness of the Federal Na
tional Mortgage Association (Fannie Mae)
and the Federal Home Loan Mortgage Cor
poration (Freddie Mac). The legislation es
tablished a risk-based capital standard that
assesses credit and interest rate risks by a
"stress test" under which a GSE must main
tain positive capital over a 10-year period
that incorporates the most severe recent re
gional housing recession. The legislation
also creates new enforcement powers for the
financial regulator to use if the GSEs fail
to meet or maintain these capital standards.
As of June 30, 1992, both GSEs met the
minimum capital standards imposed by this
legislation.

• Last year's Higher Education Act reauthor
ization brought some oversight to the Stu
dent Loan Marketing Association (Sallie
Mae). It set minimum standards and pro
vided the Secretary of Treasury with some
enforcement authorities when these stand
ards are not met. Risk assessments of Sallie
Mae have recognized that Federal policy
changes continue to be the biggest threat.
By setting up a five-year pilot test of direct
loans to students, the Higher Education Act
also raised the possibility of future legisla
tion converting the entire guaranteed stu-

186

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

dent loan program into a direct loan pro
gram. If this were to happen, Sallie Mae's
role as a secondary market for guaranteed
loans would eventually be eliminated. This
specter damaged Sallie Mae's standing in
financial markets. Until the issue is re
solved, its future will continue to be sus
pect.
• The Farm Credit Banks and Association
Safety and Soundness Act of 1992 required
the Farm Credit System (FCS) to accelerate
repayment of a portion of its debt to the
Financial Assistance Corporation (FAC) and
the Treasury. FAC authority to issue debt
expired at the end of 1992, with only $1.3
billion issued out of the $4 billion author
ized. This indicates a significant improve
ment in the System's financial condition,
due to the successful efforts of the Farm
Credit Banks to strengthen their risk-based
capital, as required by the 1987 bailout leg
islation. The risk of default on FCS debt,
and of another Federal bailout, is also being
reduced by the growing balance of the FCS
insurance fund, created in 1987 as a reserve.
Fund balances are currently around $600
million and could reach the $1 billion re
quired level by 1997.
• The Federal Agricultural Mortgage Corpora
tion Safety and Soundness Act of 1991 re
quires risk-based capital standards to cover
both credit and interest rate risk and man
agement and operations risk for the Federal
Agricultural Mortgage Corporation (Farmer
Mac). The Act sets requirements for "core"
and "critical" capital. Regulation, including
capital standards, is provided through the
Farm Credit Administration's Office of Sec
ondary Market Oversight.

• The Federal Home Loan Bank System
(FHLBS), although still sound with adequate
capital, has come under increased pressure
due in part to the shrinkage of the thrift
industry. The System has reached a critical
juncture calling into question its continued
1 profitability in pursuing its current mission.
Its net income fell by a third from late 1990
to late 1992, creating pressure for change.
In response, the Federal Housing Finance
Board, the System's regulator, has allowed
the Banks to expand its investments and

take on more risk in an effort to earn a
higher return. The future mission of the
FHLBs remains uncertain pending the re
sults from several studies mandated by
Congress for 1993.

District of Columbia Borrowing
The Federal Government has a unique rela
tionship with the District of Columbia govern
ment. The President recommends certain specific
Federal appropriations for the District that
account for roughly 24 percent of the District's
total budget. In accordance with the Home Rule
Act of 1979, the President transmits (without
endorsing) the District's total budget to Con
gress. The Congress then subjects that budget
to detailed appropriation of local District funds.

Since the mid-1980s, the District of Columbia
has borrowed in the private credit market to
meet both its long-term capital financing and
short-term cash flow needs. The District govern
ment has also retained a unique ability to bor
row from the Federal Government if private
market financing is not available or if its re
quired financing needs exceed the statutory caps
for the District's short-term private market bor
rowing. The statutory requirements that the Dis
trict submit a balanced budget effectively limits
this short-term borrowing. Such financing will
not solve a structural deficit problem.
Currently, the District is projecting a $1 billion
deficit for the two-year period 1993-1994. Most
of the structural problems that have recently
been identified by independent analysts remain
to be addressed. Some of the problems the Dis
trict continues to face include:
• a seriously underfunded pension liability
that has steadily increased from $2 billion
in 1979 to an estimated $4.9 billion in 1992
(reflecting principally accrued unpaid inter
est);

• high levels of staffing and services com
pared with other cities; and
• rising local Medicaid costs relative to other
cities due to a liberal benefits program.
In order to solve its structural budget prob
lems, the District will have to implement
changes that would raise revenues and/or re
duce spending.

11.

187

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

IDENTIFYING LONG-TERM RETIREMENT OBLIGATIONS
The Government plans to spend $532 billion
in 1994 for Social Security, Medicare, railroad
retirement, and Federal employee disability and
pensions. This is 35 percent of total outlays, up
sharply from 31 percent in 1980 and 22 percent
in 1970. In addition, a significant share of grow
ing civilian and military health expenditures are
for retirees. The increase in Federal outlays re
flects higher real benefits, rapidly rising medical
costs, and the aging of the population. Ameri
cans have been living longer after age 65, and
more of the elderly have been retiring early.
The following section analyzes a variety of
actuarial estimates of the long-term costs of
these programs and liabilities. In particular, it
compares the trends over time, contrasting
health programs with annuities, and the trends
for Social Security with those for Federal em
ployee pensions. Social Security and Medicare
are discussed further in Chapter 10. Federal em
ployee retirement benefits are discussed in the
succeeding section of this Chapter.

ACTUARIAL STATUS OF ANNUITY AND
HEALTH PROGRAMS

Table 11-5 provides alternative measures of
the actuarial status of Social Security, Medicare,
and Federal employee pension and retiree health

Table 11-5.

programs. Column 1 shows accumulated plan
benefits based on service-to-date for current em
ployees, without regard to future service and
pay increases. These are not net of plan assets
because, in the case of Federal retirement sys
tems, plan assets are Treasury securities. When
the pensions must be paid, Treasury will have
to tax or borrow to redeem these securities.
Column 2 shows the actuarial status on a
closed-system basis. This measure of unfunded
accrued liability incorporates future service and
pay increases for current employees, as well as
the future normal cost contributions to cover
benefits. It, however, excludes the service and
contributions of new entrants to the retirement
systems. The estimate for the Civil Service Re
tirement System (CSRS) on this basis understates
the Government's unfunded liability by about
$90 billion, since actual agency and employee
contributions are only about one-half of the ac
cruing normal costs assumed in this calculation.

Because Social Security and Medicare are on
going programs, the Trustees generally report
their actuarial status on an open-system basis
(Column 3). These measures include the service
and contributions of current and future partici
pants of these programs over a 75-year horizon.
Because new workers will pay earmarked taxes
without receiving commensurate benefits during

ACTUARIAL STATUS OF RETIREMENT ANNUITY AND HEALTH
PROGRAMS
(In billions of dollars, as of September 30, 19911)
Accumulated
Plan Benefits

Social Security..................................................................................................
Civil Service Retirement System ............................................... ..................
Military.................. ........................................................................ ...................
Federal Employees Retirement System.......................................................
Railroad Retirement..................................................................... ..................
Other Annuities............................................................................ ..................
Medicar HI ....................................................................................
Federal Employees Health Benefits Plan................................. ..................
Military Treatment Facilities and CHAMFUS........................ ..................

NA
679
497
16
NA
24
NA
122
NA

Unfunded
Accrued
LiabilityClosed System

7,272
594
511
6
33
24
NA
NA
213

Unfunded
Accrued
Liability—Open
System

1,665
NA
NA
NA
56
NA
4,799
NA
NA

1 December 31, 1989, for the Railroad Retirement Board; September 30, 1990, for several small systems included in the "Other"
category. The estimate for MTFs/CHAMPUS is for the beginning of 1994.
2 These retirement programs include Coast Guard Military, Public Health Service Commissioned Corps, State Department Foreign
Service, Tennessee Valley Authority, National Oceanic and Atmospheric Administration, and the Central Intelligence Agency Retirement
and Disability System.

188

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

this period, they are in effect subsidizing the
previous generation of retirees. Open-system es
timates are not formally made for Federal em
ployee pension plans. However, since the major
plans have converted to an accrual basis for new
employees, the open-system liabilities are close
to those for the closed-system.
In the last two years, preliminary estimates
have been made of the liabilities for retiree
health benefits for Federal employees. DoD has
recently estimated the unfunded accrued liability
for retiree health care, including the future serv
ice of existing members of the armed forces.
OPM has started to calculate actuarial liabilities
of civil service retiree health programs on a basis
similar to that required of private employers.

Trends.—Actuarial deficiencies for health care
show the sharpest deterioration over time. The
estimates for Medicare hospital insurance have
been increased by higher-than-projected health
care costs and utilization, a higher incidence of
disability, and a lower payroll lax base. The cur
rent estimates of the fund's condition may un
derstate the problem, since there has been a
trend of increasingly pessimistic actuarial esti
mates. Medical costs have been rising particu
larly rapidly for the SMI part of Medicare.
Actuarial estimates of the solvency of the So
cial Security programs have deteriorated since
the major reforms of 1983. Revised economic
and demographic assumptions have significantly
worsened the trust funds' condition. The com
bined OASDI balance is now projected to be
exhausted 27 years earlier than envisaged in
1983. The projection is particularly gloomy for
the disability insurance trust fund. Receipts have
been constrained by slower-than-expected eco
nomic growth, an increasing trend in the pro
portion of workers who file for and are awarded
disability benefits, and a decreasing trend in the
proportion of recipients whose disability benefits
cease. Under the assumptions used in this budg
et statement, its balances would be exhausted
by 1996.

Federal employee pension programs are pro
jected to show slower growth in future liabil
ities, partly reflecting reforms in the mid-1980s
that provide less generous defined-benefit pack
ages for new entrants into the armed services
and the civil service. Stability in the number
of civilian employees and the downsizing of the
military should limit the growth in pensions.

Health costs for Federal employees have esca
lated, however, generating a growing hidden
liability for the Government.
FEDERAL EMPLOYEE PENSION AND
RETIREE HEALTH BENEFITS
The Federal Government is the biggest em
ployer in the country and operates several sys
tems of retirement, disability, and medical care
for its employees. The largest are the civilian
and military retirement and disability funds.
Next largest are health benefits for civilian annu
itants and the Defense Department medical care
program for retired military personnel and their
dependents.

Reforms in the 1980s put the military and
major civilian pension plans on a sounder finan
cial footing by allowing them to charge agencies
the costs as they accrued. Current contributions
and statutory funding related to unfunded liabil
ities are sufficient to maintain solvency of both
the Military Retirement and Disability Fund
(MRDF) and the Civil Service Retirement and
Disability Trust Fund (CSRDF) over a 75-year
horizon. However, substantial unfunded liabil
ities remain for earlier service.
The Government is studying the possibility
of charging agencies the accruing costs for re
tiree health care. Private sector standards now
require firms to convert to accrual accounting
in 1993 (or 1995 for small firms). Estimates have
been made of the accumulated benefit obligation
for civilian employees and the unfunded liability
and accruing costs for military personnel.

Civilian Pensions.—Civilian pensions were re
formed in the 1980s. Most employees hired prior
to 1984 are covered by CSRS, which provides
a defined benefit at retirement. The estimated
accruing cost for this program is about 28 per
cent of pay. Matching employer/employee con
tributions of 7 percent each cover about onehalf of this cost. General fund contributions are
also made through a complex formula involving
the unfunded liability, benefit changes, and pay
increases.
Employees hired after 1983 are enrolled in the
Federal Employees Retirement System (FERS).
This program is three-tiered. Enrollees are under
Social Security, with employing agencies and
employees making the same contributions as
private sector participants. They may contribute

11.

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

189

Chart 11-1. SOCIAL SECURITY TRUST FUND BALANCE

to a thrift plan and receive matching Govern
ment contributions related to their degree of
participation. Finally, they are eligible for a de
fined benefit. This defined benefit has an accru
ing cost of about 14 percent of pay, financed
mostly through agency contributions.

between military personnel and other types of
expenditures. The accrual system's incentives
also induced Congress to reform military pen
sions in 1986, since immediate budgetary sav
ings result from benefit reductions.

The growth rate of the Government's accruing
obligations for civilian pensions will slow as
more employees are covered under FERS. There
will be an increase in future Social Security obli
gations, however, as more Federal employees
become eligible for benefits.

The average retirement accrual charge is pro
jected to decline gradually over time, as a great
er percentage of military personnel come under
the reduced benefit formulas for those who
began service in later years. Military downsizing
may decrease accrual charges and unfunded li
abilities if a smaller percentage of the force
reaches retirement than is currently projected.

Military pensions.—Military service pensions
were financed before 1985 through general fund
appropriations. The MRDF was created in 1985.
This fund receives general fund appropriations
to amortize the unfunded liability related to
military service prior to 1985. DoD pays the ac
cruing costs of the program for all subsequent
service.

The Board of Actuaries recently raised the
projected interest earned on MRDF assets from
7.0 to 7.5 percent, and reduced the assumed
growth rate of basic pay from 5.75 to 5.5 per
cent. These changes, which reduce accrual
charges and the unfunded liabilities, are re
flected in budget estimates for 1993.

Charging DoD for current accruals rather than
current cash pension benefits improves the cost
accounting and makes trade-offs more accurate

Retiree Health Care Benefits
Civilians.—Federal Employees Health Benefit
Plan (FEHBP) retiree health coverage is operated

190

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

on a pay-as-you-go basis. The Government costs
are paid directly by the general fund. Except
for the Postal Service, the agencies that pre
viously employed the retirees pay nothing for
their post-retirement coverage.

Federal costs for FEHBP annuitant coverage
have increased from $1.7 billion in 1987 to $4.3
billion in 1993. Over 40 percent of FEHBP en
rollees are annuitants, and this percentage is
increasing. FEHBP retiree coverage is more com
prehensive than offered by most private employ
ers. While a 1990 GAO report found that only
one-third of private sector employees are offered
any retiree health coverage at all by their em
ployers, virtually all Federal employees are eligi
ble for FEHBP retiree coverage.
Most FEHBP plans waive normal deductibles
and coinsurance for retired enrollees with Medi
care. This 100 percent insurance may encourage
excess utilization of health care services and
increase costs in both FEHBP and Medicare. Pri
vate employers are moving away from this cost
ly "coordination of benefits" method of integrat
ing their coverage with Medicare to less costly
"carve-out" approaches. They are making
changes in retiree health coverage to constrain
skyrocketing health care costs and reduce FASBmandated liabilities.
A preliminary estimate of the present value
of future FEHBP retiree benefits as of September
30, 1992 is $122 billion. This is based on calcula
tions analogous to those required of private em

ployers under FASB (Financial Accounting
Standards Board) guidelines. It is highly sen
sitive to assumptions about health care costs and
usage. Varying the assumed health care expendi
ture rate by one percentage point in each direc
tion yields present value estimates of future
retiree health benefits ranging from $107 billion
to $142 billion.

Military.—Military retirees are entitled to
health care in military medical facilities essen
tially without charge if the facility can provide
it. Until they reach the age of 65, military retir
ees are also entitled to health care financed by
the Civilian Health and Medical Program of the
Uniformed Services (CHAMPUS). After 65, mili
tary retirees are entitled to Medicare.
Unlike Medicare, care provided in military
medical facilities is free. No premium is charged
for care financed by CHAMPUS, although retir
ees pay a deductible and a 25 percent co-payment. Department of Defense costs for retiree
health care are funded annually by direct appro
priations in the year the services are rendered
or billed.

The accruing costs for future health care are
not recorded in the budget. A recent DOD study
estimated the unfunded accrued liability for
these costs at $213 billion and an annual accrual
cost of $6.2 billion. The study assumed that the
growth in health care costs would gradually
drop from 9 percent annually to 6 percent annu
ally after the year 2010.

HAZARDOUS WASTE CLEANUP
The Department of Energy (DOE) is faced
with the largest and most complex cleanup task
in the country. It must manage and dispose of
a wide variety of radioactive and hazardous
wastes resulting from past operations, including
nuclear weapons production. The cost to accom
plish these tasks is in the hundreds of billions
of dollars, but the amount is highly uncertain.
Cleaning up toxic waste sites is also a major
challenge for the Department of Defense (DOD).

Costs will vary widely for a given site de
pending on what future standard is selected.
Technology does not exist to clean up certain
wastes, so the time and cost are very hard to
predict. Partly for this reason, a rapid cleanup
schedule is likely to cost more than one which

allows time to develop and assess alternative
approaches.
Department of Energy Sites
DOE's cleanup program currently covers
about 100 sites located in 34 States and terri
tories. Most sites are heavily contaminated with
radioactive waste. Cleanup measures required
will vary considerably at each site according to
such factors as location, hydrologic conditions,
geology, types of contaminants, and cleanup
standards. The sites are subject to a large num
ber of often overlapping Federal and state envi
ronmental laws and regulations. From 1989
through 1993, about $18 billion is being spent
on managing the waste, identifying its nature,

11.

191

HIDDEN LIABILITIES REQUIRING POLICY CORRECTION

and assessing the characteristics of contaminated
areas and facilities. Not much cleanup is being
achieved because of the cumbersome regulatory
requirements that must be met before actual
cleanup can proceed.

To clean up wastes and limit prospective Fed
eral liabilities, it would be prudent to consider
reforms in the following areas.
• Cleanup costs vary widely depending on
what future site use standard is selected.
If the "residential future use" standard is
selected, cleanup costs could be many times
greater than if future access to the site were
restricted by continued Federal Government
ownership and institutional controls. For
both cases, health risk may be the same.
Cleanup standards will be set at each site
by the involved agencies and should be on
the basis of health risk reduction, taking
into account site-wide cleanup cost.

• DOE's traditional contracting approach is
costly for cleanup. Most sites rely on the
management and operations (M&O) method
of contracting used since the 1950s to oper
ate nuclear weapons production facilities. A
detailed study of the DOE cleanup program
conducted by OMB, the Army Corps of En
gineers, and the DOE's own Independent
Cost Estimation (ICE) team in late 1991
found excessive levels of program manage
ment, overhead, and contingency funds—
which could be reduced without impacting
DOE's ability to meet legal requirements.

• Technology does not exist to clean up cer
tain wastes. For certain wastes such as
mixed, hazardous, and radioactive waste,
technology needs to be developed for safe,
cost-effective, long-term management. If un
realistic and tight deadlines are imposed
where effective technology is not available,
substantial costs will be incurred and safe,
long-term cleanup may still not be achieved.

• A large number of defense program weap
ons production facilities are being phased
out and will require cleanup. There are hun
dreds of facilities that will require billions
of dollars to clean up. The amount of con
tamination at many such facilities is not
known nor is the cost and schedule to
achieve cleanup. Such facilities include reac
tors, chemical processing plants, weapons
fabrication facilities, related structures, and
service areas. Such facilities need to be safe
ly shut down and secured, but pressures
to begin cleanup could overburden the ex
isting program.
Department of Defense Sites

The Department of Defense has made a com
prehensive effort to identify all potentially con
taminated sites. Consistent with the Depart
ment's worst-site-first-cleanup policy, emphasis
was initially placed on contamination affecting
public health, but now efforts have expanded
to address smaller installations with lower haz
ard potential. By the end of 1991, 17,660 po
tential sites at 1,877 installations had been identi
fied. These sites also are subject to many over
lapping laws and regulations. Currently, only
101 of these installations are on EPA's National
Priorities List (NPL). These NPL sites represent
DOD's most serious cleanup challenges. From
1989 through 1993, a total of $5 billion is being
spent for environmental restoration. The most
recent DOD estimate for cleaning up all of the
sites is $25 billion, beginning with expenditures
in 1991. This number may be understated for
the outyears because the extent of the contami
nation, cleanup methods, and standards are not
yet known in most cases. DOD estimates that
it will take ten to fifteen more years to complete
the cleanup effort.

12. High Risk Areas for
Management Improvement

193

12. HIGH RISK AREAS FOR MANAGEMENT
IMPROVEMENT
The Bush Administration initiated the High
Risk Program in 1989 to focus attention and re
sources on eliminating major risks confronting
Federal agencies and programs. High risk areas
are those weaknesses that warrant the personal
attention of the agency head and the Congress
to ensure correction. OMB compiled the List and
published it in the President's budget in order
to assure attention to these matters and seek
any needed resources for corrective action. The
List provides a tool for public accountability.

Since establishment of the High Risk List in
the fall of 1989, a total of 33 areas have been
removed from the List as a result of agency
corrective actions. During the same period, 29
areas have been added. Inclusion on the High
Risk List reflects agency and OMB agreement
on the most serious and pressing deficiencies
in agency operations.
At the beginning of 1992, there were 99 high
risk areas requiring priority attention. During
this year, 10 new areas were added and 5 areas
were sufficiently corrected to warrant deletion
from the List. Due to problem re-definition, one
area has been merged with a new high risk
area, and one area has been split into two. At
the beginning of 1993, the List includes 104 high
risk areas.

In August 1992, the General Accounting Office
(GAO) reported on its audit of the High Risk
Program ("OMB's High Risk Program—Benefits
Found But Greater Oversight Needed"
AFMD-92-63). GAO found:
• The High Risk Program provides a much
needed emphasis by top level officials on
strengthening the operations of Federal pro
grams.
• Reporting the List in the President's Budget
is a positive step toward ensuring continued
high level attention to correcting the Gov
ernment's major management problems.
• Although the majority of the information
presented in the budget is reasonable and
accurate, GAO audits show that progress

reported in several areas is misleading or
overly optimistic (16 of 68 areas audited by
GAO).

In response to GAO recommendations, OMB
now (i) requires better documentation from the
agencies supporting their progress; (ii) inde
pendently confirms agency-reported progress by
consulting extensively with the Inspectors Gen
eral and GAO; and (iii) clearly indicates in the
budget presentation of the High Risk List those
areas that are deleted (but will continue to be
tracked by an agency as material weaknesses
until all corrective actions have been completed).
OMB has also changed its standard for "sig
nificant progress" to require implementation of
corrective action plans to the point where con
crete, measurable results are being achieved.
This more stringent standard accounts for the
smaller number of "significant progress" assess
ments in this presentation. Also, this year's table
reflects an OMB decision not to delete items
from the High Risk List until the corrective ac
tion has taken hold (to the point where it is
considered virtually not derailable).

In assessing agency progress in the 93 high
risk areas that have been on the High Risk List
throughout 1992, OMB found that:
• In 20 of the high risk areas, agencies have
made significant progress in correcting the
deficiencies (Assessment 1).

• In 61 of the high risk areas, agencies have
active efforts underway to improve progress
in correcting the deficiencies (Assessment 2).
• In 12 of the high risk areas, OMB has res
ervations about the adequacy of agency
plans and/or progress (Assessment 3).

• In one area, agency progress is dependent
on the results of government-wide studies.

OMB's commitment is to ensure that reason
able resources are provided in the budget to
assist agencies in taking appropriate and timely
corrective actions. The 1993 President's Budget
requested over $2 billion for management in
195

196

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

vestments to reduce the risk in high risk areas.
Since transmittal of the President's budget in
February 1992, adjustments in the amounts re
quired to reconfigure DOE's nuclear weapons
complex reduced the request to $1.9 billion.
Congress appropriated $1.8 billion. Agencies are,
however, in several instances, reallocating funds
from other projects in order to supplement need
ed funding for these critical management im
provements.
The level of funding required to correct high
risk areas is expected to remain relatively con
stant (in the $2 billion range) in 1994. Some
high risk areas will be corrected; other new

areas will emerge. Except in a few areas (DOD
information technology, DOE nuclear energy,
HHS Medicare secondary payer, DOJ prison
overcrowding, and State foreign building reha
bilitation), the funding requirements are modest
in relation to agency budgets.
Resources are, however, only a small part of
what is required. Most important will be man
agement commitment, resolve, and tenacity. The
quality and capacity of the Government's prin
cipal managers (program managers and manage
ment assistant secretaries and equivalent) and
Inspectors General will be critical.

12.

197

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

PROGRESS REPORT
CORRECTION OF HIGH RISK AREAS
The following is a progress report on agency
efforts to correct high risk areas. OMB's assess
ment of agency progress is presented in column
3, "Assessment" The assessment codes are: (1)
Significant progress; (2) Active efforts underway
to improve progress; (3) Reservations about ade
quacy of progress and/or plans; (A) Added to
High Risk List; and (D) Deleted from High Risk
List.

Information on 1993 management investments
to correct high risk areas is displayed in col
umns 4 and 5. Management investments are the
critical, marginal amounts of funding needed to
ensure that the corresponding program funding
is spent efficiently and effectively. Column 4
(1993 Request) represents the management in
vestment as requested in the 1993 President's
Budget. Column 5 (1993 Enacted) represents the
management investment following Congres
sional action.

DEPARTMENT OF AGRICULTURE

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Farmer's Home Administration (FmHA)
and Rural Development Administra
tion (RDA) Loan Programs: High
total delinquencies ($10.1B) and
high delinquency rates (18.3%) in
1992.

There are $55B in outstanding
FmHA and RDA loans. At risk: up
to $10.1B in delinquent loans.

Food and Nutrition Service (FNS):
Food Stamp Coupon illegal traf
ficking for cash, drugs and weap
ons.

FmHA has taken the following steps to improve credit management:
(i) improving underwriting through a second level review of new
loans; (ii) expanding the use of contract appraisals; and (iii) contract
ing for a study of centralized servicing of its single family housing
portfolio. FmHA developed an agency-wide Strategic Business Plan
in June 1992 that provides guidance on improving credit quality and
management of its loan portfolio.

1993
Enacted

8,764

5,750

Next steps: FmHA will in 1993 (i) determine a course of action for im
plementing centralized servicing of its single family housing port
folio; (ii) review and implement State Plans for improved underwrit
ing and appraisals; and (iii) initiate an Information Systems Plan
(ISP) to guide FmHA automation efforts. Modest resources will be
needed to implement single family housing centralized servicing.

In 1992, FNS (i) initiated an update of information on authorized re
tailers (completion in December 1993) and a test case under the Pro
gram Fraud Civil Remedies Act (PFCRA) to allow USDA to levy
civil damages against retailers (completion in mid-1993); (ii) contin
ued evaluation of the use of electronic benefit transfer (EBT) sys

1993 Budget includes $23B for Food
Stamp Program. At risk: est.
$100M in benefits diverted annu
ally.

tems; (iii) implemented program integrity modifications enacted by
Congress in the 1990 Food Stamp legislation; and (iv) began hiring
and training 12 new staff investigators and 5 new EBT analysts.
Next steps: FNS will (i) procure equipment to enhance trafficking in
vestigations; (ii) continue the PFCRA pilot process to determine fea
sibility of full program implementation; and (iii) update the Retailer
Policy handbook. Enforcement action improvements require contin
ued increased funding for investigative and program staff.

Federal Crop Insurance: overpayment
of claims.
Federal Crop Insurance has a $1B
annual operating level. At risk:
$100M in losses paid to reinsur
ance companies.

FCIC has implemented a new strategy to strengthen management
oversight and monitoring of reinsured companies. This includes: (i)
on-site review and reporting of financial activity of reinsurance com
panies; (ii) systematic operational reviews of policy premiums and
indemnities, as well as compliance with Standard Reinsurance
Agreement requirements; and (iii) expansion of computer capabili
ties to perform review of claims data. FCIC reports a reduction in
claims overpayments from 26 percent in 1988 to 8 percent in 1991.

198

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF AGRICULTURE—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

Next steps: Continue monitoring reinsurance companies. USDA OIG is
conducting an audit of program improvements; report scheduled for
issuance by April 1993. No additional resources needed.
FmHA, Rural Rental Housing Pro
gram (Multi-family loans and
Rental Assistance): Multi-family
housing (MFH) program lacks
adequate oversight and internal
controls.
Outstanding MFH loans total $10.3B,
with $22M delinquent in 92. At
risk: annual losses of approxi
mately $35M (fraudulent construc
tion and maintenance) and $79M
(interest credit and rental assist
ance payments).

FmHA plans to reduce vulnerability in the MFH program through a
combination of specialized financial analysis training, centralization
of the MFH program in the State offices, amended regulations, and
new legislation. In 1992, FmHA (i) conducted financial analysis
training for its National Office Staff and 800 field employees; and (ii)
proposed regulations to (a) strengthen loan underwriting and audit
ing procedures; (b) require project reserve accounts be deposited in
supervised bank accounts; and (c) limit profit layering, subsidy
layering and other activities associated with Identities of Interest
problems. Two Bush Administration legislative initiatives were en
acted in 1992: rural housing vouchers, and increased equity con
tributions.

Next steps: In 1993, FmHA will (i) continue specialized training pro
gram; (ii) finalize the proposed rules; (iii) propose legislation to per
mit tenant wage matching; and (iv) continue centralization of the
MFH program into the State offices. No additional resources need
ed.

DEPARTMENT OF COMMERCE

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (in
thousands of
dollars)
1993
Request

DOC computer site security weak.
1993 budget provides $514M for
ADP. At risk: assurance that this
investment and DOC data are pro
tected from loss.

DOC has developed a methodology for preparing ADP security plans
for all sensitive and classified systems. Operating units identified
1,100 sensitive and classified systems, and submitted over 700 secu
rity plans. Implementation of each plan is monitored by DOC using
a PC-based system and on-site verifications. DOC has an active
computer security awareness program. As a result, operating units
now routinely scan foreign diskettes for malicious software before
use, avoiding the loss of data and time to recover damaged systems
and files. Also, incidents of computer hacking have been detected
and promptly reported and investigated by the Secret Service.

1993
Enacted

1,500

5,200

1,000

Next steps: (i) Continue to monitor security plan implementation (in
cluding on-site verification), (ii) Initiate, beginning in January 1993,
an annual assessment of each bureau's security program. Failure to
receive funding in 1993 required DOC to reallocate funds from other
programs.

DOC financial systems are seriously
outdated,
fragmented,
inad
equately controlled, and costly
and difficult to maintain.
DOC financial systems process $3B
annually. At risk: assurance that
these funds are being accounted
for in an accurate and timely fash
ion.

In 1992, (i) two DOC bureaus implemented cross-servicing arrange
ments for accounting support from other agencies; (ii) accounting
services contract awarded to provide assistance to DOC financial or
ganizations in improving data quality; and (iii) two bureaus pre
pared 1991 financial statements in accordance with OMB guidance.
However, milestone dates for the Department-wide financial system
implementation have been slipping due to cuts in the President's
1993 budget request and changes in strategy resulting from them.
Next steps: (i) Complete the evaluation of use of the U.S. Army Corps
of Engineers core accounting system as DOC-wide system, (ii) De
fine requirements for travel, procurement, and real and personal
property, (iii) Produce 1992 financial statements for all DOC CFOs
Act reporting entities. Department-wide financial system improve
ments in 1994 require funding.

12.

199

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF COMMERCE—Continued

High Risk Area

National Weather Service's (NWS) Na
tional Oceanographic and Atmos
pheric
Administration
(NOAA):
Major systems acquisition prob
lems delaying NWS moderniza
tion.

1993 budget provides $128.6 M for
procurement of NWS systems. At
risk: $50-60M in additional annual
operating expenses if acquisition
costs are not controlled.

Progress to Date and Next Steps

NOAA has experienced contract cost overruns, missed deadlines, and
contract disputes in its efforts to replace technically obsolete and
costly-to-maintain weather systems with those that can analyze and
predict destructive weather patterns. In„ 1992, contract disputes were
settled and deadlines are now being met. Contract management
problems have been mitigated by the establishment, in 1991, of the
Systems Program Office which has consolidated the design, procure
ment end acceptance of new systems. This Office's effectiveness is
measured by the fact that NOAA installed 14 tri-agency Next Gen
eration Weather Radar (NEXRAD) systems, and activated 131 tri
agency Automated Field Operations and Services (ASOS) units. All
are performing well.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

2,230

(1)

Next steps: In 1993, (i) award Advance Weather Interactive Processing
System (AWIPS) development contract; (ii) acquire supercomputer
for National Meteorological Center; and (iii) operate prototype
Weather Forecast Office in 1993. Funds will be required in 1994 to
continue contract management improvements.
NOAA: Geostationary Operational
Environmental Satellite (GOES)
technical development problems.

1993 budget provides $118M for
GOES. At risk: the loss of weather
estimating capability.

NOAA must overcome the technical development problems affecting
GOES-NEXT satellites (under contract to NASA), which have caused
increased costs, schedule slippage, and the potential for reduced sat
ellite capacity. Contractor delays resulted in rescheduling launch
from 1990 to 1994. In 1992, NOAA closely monitored NASA and
GOES contractors to ensure satellite performance and definitive
launch date; only limited performance compromises necessary to
minimize schedule delay and cost increases were accepted. By pro
viding Government financed exjtertise to contractors, the Depart
ment was able to minimize the effects of poor planning and overall
poor effort by the manufacturers of the GOES instruments. GOES-I
spacecraft proceeding through testing process without major prob
lems; the program is on schedule to launch in 1994.
Next steps: Full use of Meteostat 3 will be implemented by January
1993 (Meteostat 3 is the first step toward a long-term U.S.-European
relationship for backup capabilities.) NASA will complete qualifica
tion testing of GOES-I spacecraft and the qualification testing of
flight instruments by March 1993. Funds will be required in 1994 to
continue to monitor systems qualifications and launch of the sat
ellite.

(1) Included above.

DEPARTMENT OF DEFENSE

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request
DOD and Services: Supply operations
inadequate, weakening effective
management of inventories.
DOD supply inventory almost $80B
in 1992. At risk: $100M in poten
tial loss or theft.

DOEXs actions in 1992 to implement its first Inventoiy Reduction Plan
(IRP), issued in May 1990, include: (i) 57 directives integrated into a
single directive that resolves policy conflicts and reduces redun
dancy; (ii) new provisioning standards to control entry of new items
into the inventory; (iii) issuance of contract modifications/termi
nations when "buy" requirements are changed (22% of active con
tracts canceled in 1992); and (iv) direct vendor delivery to reduce in
ventory investment and distribution costs at DOD storage depots.
Depot consolidations (now under the Defense Logistics Agency)
have been slowed because final actions are needed on repositioning
of stocks and on development of a migratory accounting system.

39,100

1993
Enacted

39,100

200

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF DEFENSE—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request

1993
Enacted

Until reforms are fully operational (expected in 1997), components
continue to be affected by (i) excess retail inventories; (ii) unneeded
purchases not being canceled; (iii) earlier than needed purchases;
and (iv) excessive lead times resulting in unnecessary procurements.
Next steps: Implementation of the DOD IRP is scheduled to continue
through 1997. DOD projects end of year inventory levels (in con
stant 1990 dollars) of $74B (1993), $62B (1995) and $55B (1997).
Funds will be required in 1994 to support depot consolidations and
related activities.

DOD and Service information tech
nology development and ADP se
curity deficient

The $9.5B DOD Information Tech
nology budget for 1993 includes
$2.5B for development and mod
ernization. At risk: use of old and
inefficient processes, and unau
thorized access or misuse of sen
sitive Defense data.

Corporate Information Management (CIM) system designed to im
prove die business process and eliminate redundant information
systems. Accomplishments in 1992 include: (i) planning for stand
ardization of 7 functional area systems (finance, medical, human re
sources, reserve affairs, procurement, material, and intelligence); (ii)
selection of 7 financial migration systems; (iii) identification of 5 lo
gistics migration systems; (iv) establishment of Center for Software
Reuse; (v) start-up of Center for Data Administration; (vi) definition
of Technical Reference model in support of open systems; and (vii)
implementation of a pilot project for purchase of information tech
nology commodities. Use of the Major Automated Information Sys
tem Review Council (MAISRC) process, to vet new program re
quirements will identify potential duplication and lead to consolida
tion of efforts or expansion of CIM into new business areas.

594400

N/A

DOD has developed a comprehensive strategy to address weaknesses.
This strategy includes (i) development of more specific implementa
tion plans; (ii) upgraded ADP security; and (iii) development of ade
quate ADP equipment and property accountability records. Security
measures are being implemented in compliance with PL 100-235,
and OMB and National Institute of Standards and Technology guid
ance.

Next steps: Ongoing Defense Management Report initiatives involving
CIM should produce $36B in savings and efficiencies by 1997. To
meet these budget goals, CIM must be institutionalized in DOD, ef
fective funding controls put in place, and the role of the Office of
Secretary of Defense and the military services clearly defined. The
CIM initiatives, including improved ADP security, will continue to
be monitored under the Program for Priority Systems (PPS) by the
Office of Management and Budget. Resources will be needed in 1994
to continue the development of necessary information systems.

DOD and Service contract administra
tion controls over DOD property
in private contractor possession in
adequate.
$77.1B in property and facilities in
possession of DOD contractors. At
risk: $17M in potential loss or
theft.

DOD and Service controls over con
tracted advisory and assistance
services (CAAS) inadequate or
non-existent.

CAAS contracts estimated at $1.5B
annually. At risk: $15M in poten
tial fraud or waste.

DOD has implemented procedural changes and an automated valida
tion process that controls contractor access to DOD Activity Address
Codes to correct previously reported problems associated with un
authorized contractor access to the DOD supply system. DOD is im
plementing an electronic plant clearance system for disposing of sur
plus contractor inventory. Systems testing is underway.
Next steps: Install Plant Clearance Automated Reutilization Screening
System (PCARSS) on the following schedule: test plant clearance
and re-test reprogrammed system (February 1993); and begin de
ployment of system (June 1993). No additional resources are re
quired.

In February 1992, DOD implemented new procedures that (i) strength
en management controls and procedures for the use of CAAS re
sources; (ii) better define CAAS for identification and reporting pur
poses; (iii) require an annual assessment of component internal man
agement controls; (iv) require component sponsored CAAS training;
and (v) require an annual assessment to the Under Secretary of De
fense (Acquisitions) of component implementation of CAAS policy
and procedures. In April 1992, DOD distributed a "Guide to Con
tracted Advisory and Assistance Services," to help users of contrac
tor support services better understand the procedures for acquiring
and using CAAS. DOD funding for CAAS has been reduced from
$1.6 billion in 1989 to $1 billion in 1993.

12.

201

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF DEFENSE—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (in
thousands of
dollars)
1993
Request

1993
Enacted

Next steps: (i) DOD will monitor component execution of the manage
ment improvements, (ii) DOD is also working closely with OMB's
Office of Federal Procurement Policy to implement a new Govern
ment-wide policy letter on management oversight of all nonpersonal
services contracting (including CAAS). No additional resources are
required in 1994.
DOD and Service financial account
ability for real and personal prop
erty is inadequate.

DOD inventory estimated at $706B.
At risk: $800M in potential lost or
stolen property.

The Department must develop a single departmental accounting sys
tem to control, track, and value all real and personal property for fi
nancial reporting purposes, and then reconcile accounting data with
supporting logistics systems. In 1992, DOD centralized finance and
accounting functions in the Defense Finance and Accounting Service
(DFAS). To improve the quality of real and personal property data,
DOD has made systems and procedural changes to facilitate prepa
ration of financial information statements required by the Chief Fi
nancial Officers Act; and established an office to coordinate accurate
valuation and accounting among procurement, logistics, and ac
counting functions. Through the CIM initiative, DOD has completed
data and process models, but has not selected a migratory account
ing system. GAO and Inspector General audits continue to illustrate
serious weaknesses in DOD's financial systems. Due to the severity
of systems problems, DOD must implement near term actions in ad
dition to moving toward long term improvements.

28,000

Next steps: DFAS to (i) select migratory accounting system in April
1993; (ii) develop standards and reporting procedures for valuing
assets (March 1993); (iii) implement migratory accounting system
(1996); and (iv) finalize requirements and systems design for the
CIM financial management module (1997). There is a continuing
need to provide funds in 1994 to fund system upgrades.

DEPARTMENT OF EDUCATION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request
ED student financial aid program man
agement: Guaranteed Student Loan
(GSL) and other SFA program
abuses, fraud, and significant
management weaknesses.

1993 appropriation includes $12.9B
for student aid programs. At risk:
Capacity to reduce projected an
nual $2.9B in defaults to an accept
able level.

Higher Education Act (HEA) reauthorized with new program integrity
provisions; 179 schools with default rates of 35% or higher .identi
fied, 139 closed or rendered ineligible; guaranty agency data used to
prevent defaulters from getting new loans; guaranty agency oper
ations under review; Office of Postsecondary Education reorganized.
Default costs went down from $3.6B in 1991 to $2.8B in 1992 for rea
sons not related to default rates, which have not declined.
Next steps: (i) Issue HEA regulations; (ii) continue default initiative,
including legislative proposal to correct statutory language related
to appeals; (iii) implement legislative authority to garnish wages;
(iv) continue intensive monitoring of guaranty agencies and lenders;
and (v) award National Student Loan Data System (NSLDS) contract
to improve information systems. Resources required in 1994 for
monitoring, oversight, NSLDS, and default initiative.

38,800

1993
Enacted

21,529

202

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF EDUCATION—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

ED inability to produce reliable fi
nancial reports due to inadequate
financial systems.
$31B in loan subsidies, grants and
administrative costs supported by
these systems. At risk: whether (i)
information for reporting and ef
fective management of these pro
grams is reliable, and (ii) invest
ments in new systems are worth
while.

ED is redesigning its financial systems to address two major weak
nesses: (i) die inability of the core accounting system to produce re
liable financial statements due to incorrect information in sub
systems which provide data to the core system; and (ii) obsolete and
incompatible ADP platforms in support of major elements of core fi
nancial systems. In 1992, the Department continued correction of
prior year data in the accounting and payment systems, and ex
panded the project to a broader examination of functional and data
requirements, as well as a review of the required ADP platform, for
upgrading or replacing core financial systems. The redesign effort
wifi address reconciling both platform and coordination issues in
the management of ED'S financial systems.

1993
Enacted

8,100

1,248

3,600

3,500

14,200

8,090

Congress reduced the President's 1993 S&E Tequest. ED allocated the
cuts and decided that programmatic issues were more important
than management reform.
Next steps: (i) Complete analysis of functional and data requirements
during 1993 as a basis for detailed work plan for core financial sys
tems redesign, (ii) Continue cleanup of data in both core and major
subsystems, (iii) Develop modules to summarize subsystem data to
feed core accounting system. Design progress requires funding in
1994 and future years.
ED-Wide Audit Follow-Up and Internal
Controls: Audit follow-up improve
ments needed. Internal control
process not identifying material
weaknesses.

Internal Controls: 1993 budget is
over $31B. At risk: assurance that
these funds are effectively mon
itored.

Audit Follow-Up: ED receives audit
reports with monetary findings of
$500M annually. At risk: up to
20% if audit follow-up is not time
ly and effective.

Internal control problems have been sufficiently corrected to warrant
removal from the High Risk List; audit follow-up will remain on the
List.
Internal Controls: ED internal control process is now identifying mate
rial weaknesses. In 1992, (i) Management Audit Committee created
to increase program office accountability; (ii) inter-office committee
of top managers established to monitor progress and lead improve
ments in internal controls; and (iii) annual training provided to sen
ior and mid-level managers.

Audit Follow-up: ED is developing a validation strategy for follow-up
on audits of ED grantees. In 1992, audit follow-up training was pro
vided; and audit tracking was improved by issuing regular reports
from the automated Common Audit Resolution System (CARS).
However, new audit follow-up problems have emerged, including
an increase in the number of audits overdue for resolution.
Next steps: (i) Incorporate grantee audit validation procedures in
Audit Resolution Systems handbook, (ii) Increase accountability
through inter-office monitoring committees, (iii) Improve tracking
by expanding CARS, (iv) Develop policies on prioritizing audits and
on documentation needed to close out audits. ED will also need to
develop plans to expand the capacity of their audit resolution sys
tem due to the increased number of grantee audits mandated by re
cent statutory and OMB policy changes. Resources will be required
for this purpose in 1994.

ED-Wide Program Monitoring: compli
ance and performance monitoring
inadequate.
1993 Department budget is over
$31B. At risk: assurance that these
funds are being spent effectively.

The Department-wide Monitoring and Performance Measures Team
(MPMT) is charged with developing a comprehensive monitoring
strategy and performance measurement system. The MPMT reflects
ED'S plan to expand program monitoring beyond compliance issues
to measure program performance. In 1992, the Department, with the
assistance of the National Academy of Public Administration, devel
oped draft performance measures for a pilot ED program. The draft
measures are now being reviewed by the MPMT. ED also issued a
draft discretionary grant monitoring directive. The MPMT is now
working to resolve comments on the draft.

12.

203

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF EDUCATION—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

Congress' cut of President's 1993 request allowed ED to increase over
all FTE only by 100. Due to the need to put substantial resources
into improving the GSL Program, ED did not fully fund this re
quirement.
Next steps: (i) Develop performance measures for up to 5 pilot pro
grams. (ii) Issue final discretionary grant monitoring directive, (iii)
Develop directive on formula grants monitoring. ED will require re
sources for on-site monitoring in 1994.
ED-Wide Computer Security: security
of computer systems inadequately
reviewed.

ED uses computer systems to award
and disburse over $30B in finan
cial assistance annually. At risk:
integrity and confidentiality of
some data maintained in computer
systems, and assurance of the se
curity of funds processed and
monitored through ED systems.

15 of 17 planned security reviews of major financial computer systems
were completed by December 1992 (however, one review did not
meet OMB Circular A-130 requirements). To date, none of these re
views have identified material weaknesses or nonconformances in
ED computer systems. Some non-material weaknesses have been
identified, and ED has initiated corrective action. Other steps being
taken by ED include: (i) an ADP Security Manual update; and (ii)
development of an ADP technical controls handbook detailing secu
rity procedures for local and wide area networks.

396

400

Next steps: (i) Complete reviews of remaining major financial com
puter systems. This requires continued budgetary support in 1994.
(ii) Continue correction of non-material weaknesses identified in re
views.

DEPARTMENT OF ENERGY

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Reconfiguration of DOE Nuclear Weap
ons Complex: Weapons complex
must be reconfigured as policy de
cisions are made on reducing the
nuclear weapons arsenal.
The 1993 budget includes $6.5 billion

for nuclear weapons-related pro
grams. At risk: nuclear deterrence
capabilities.

The DOE nuclear weapons production complex contains aging facili
ties that will require increased maintenance and upgrades if oper
ations are to continue. In FY 1992, DOE (i) completed its Non-nu
clear Consolidation Plan; (ii) conducted a power ascension test of
the K reactor at Savannah River; (iii) completed the implementation
plan for the Programmatic Environmental Impact Statement (PEIS)
for the reconfigured complex; (iv) indefinitely deferred construction
of a new production reactor; (v) resumed plutonium operations at
Building 559 at Rocky Flats; (vi) completed operational readiness re
view for Building 707 at Rocky Flats; (vii) completed a Nuclear
Weapons Complex Reconfiguration Study that was submitted to
Congress and released to the public; and (viii) began an environ
mental assessment for consolidating non-nuclear manufacturing fa
cilities on an accelerated schedule.

Next steps: (i) Prepare and complete environmental assessments for
consolidation of non-nuclear facilities and reconfiguration of the nu
clear weapons complex, (ii) Publish in a Record of Decision DOE's
final decision regarding course of action, degree of consolidation,
and sites for accomplishing the mission of the nuclear weapons
complex referred to as “Complex-21". Increased resources will be
required in FY 1994 (within a decreasing total for all nuclear weap
ons-related activities).

175,360

1993
Enacted
175,360

204

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF ENERGY—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Environmental compliance: DOE faces
large and complex environmental
cleanup problems at many of its
facilities.
The 1993 budget includes $5.5B for
clean-up activities. At risk: poten
tial long-term adverse impacts to
workers, the public or the environ
ment; and failure to comply with
external environmental regulations
and/or agreements.

Progress has been made in ascertaining levels of compliance and alter
ing DOE's culture to meet changing objectives. However, resolving
this issue will be a long-term and costly effort. In 1992, DOE (i)
completed nine additional tiger team reviews, bringing the total to
35; (ii) developed a risk-based priority system to help ensure that
funding decisions reflect a national strategy and are technically de
fensible; (iii) conducted environmental training workshops at Head
quarters and most field sites; (iv) implemented a self-assessment
program continually to evaluate the performance of DOE and con
tractor line management; and (v) developed a detailed action plan to
address cost control, cost estimating and overhead cost allocation
recommendations made in the 1992 Interagency Review Group
report.

1993
Enacted

50,800

13,375

Next steps: (i) Continue implementing the Environmental Restoration
and Waste Management (ERWM) Five-Year Plan, (ii) Implement rec
ommendations of the Interagency Review Group, (iii) Issue Pro
grammatic Environmental Impact Statement for the ERWM pro
gram. (iv) Reduce risk of accidental release of radioactivity from un
derground tanks at Hanford site, (v) Expand environmental training
to all levels of DOE. (vi) Continue resolution of mixed waste and
materials issues with the EPA. (vii) Continue to work with regu
lators to negotiate, and where necessary, renegotiate realistic sched
ules and commitments that reflect risk-based priorities. Continued
substantial resources will be needed in 1994.
Nuclear safety. Safety deficiencies
exist at some DOE nuclear facili
ties.

The 1993 budget includes $1.3B to
address health and safety risks
(both nuclear and non-nuclear). At
risk: protection of DOE workers,
the public and the environment.

A new safety culture must be implemented through all levels of the
Department and with the contractors that operate DOE facilities.
Tiger team reviews have been completed at DOE's 20 nuclear pro
duction and processing facilities and corrective actions are under
way for problems identified. In 1992, DOE (i) continued the imple
mentation of a self assessment program to evaluate the performance
of DOE and contractor line management; (ii) initiated a comprehen
sive plan to establish a new baseline for nuclear safety; and (iii)
published safety enforcement procedures and the first set of rules
establishing nuclear safety requirements for DOE contractors in the
Federal Register.

Next steps: (i) Development of a safety and health five-year plan
which identifies nuclear safety milestones and resource require
ments. (ii) Study of the feasibility of improving accounting controls
through establishing a budget coding system for nuclear safety ac
tivities across all program areas, (iii) Compilation of a comprehen
sive epidemiological database better to define the magnitude of
health and safety problems, estimate costs of corrective action, and
establish a new baseline for nuclear safety, (iv) Completion of the
nuclear safety standards upgrade project, (v) Implementation of ap
proved plans to correct safety deficiencies. Resources will continue
to be required in 1994.

12.

205

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF ENERGY—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Nuclear Waste Storage & Disposal: Nu
clear waste storage and disposal
capability is inadequate.

The 1993 budget includes $577.6M
for this program area. At risk:
timely availability of storage and
disposal of nuclear waste at a Fed
eral facility.

Recent legislation allows DOE to begin the experimental program at
the Waste Isolation Pilot Plant (WIPP) in New Mexico to dem
onstrate compliance with disposal requirements for radioactive
transuranic wastes. These tests will be initiated following the adop
tion of rules governing the permanent storage of radioactive waste
by the EPA. DOE has renewed in earnest the site characterization of
the candidate repository site for spent fuel and high level radio
active waste at Yucca Mountain, Nevada, and the State of Nevada
recently provided DOE with the requisite permits to proceed with
this characterization effort. Cost estimates for the characterization of
Yucca Mountain have increased. DOE must address concerns re
garding the significant budgetary growth proposed for the M&O
contractor at the Office of Civilian Radioactive Waste Management
(OCRWM). Despite progress at Yucca Mountain, important manage
ment issues remain. These are: (i) NRC regulations and policy are
not sufficiently specific to enable DOE management to draw conclu
sions about the licensability of the repository, thus limiting manage
ment effectiveness; and (ii) receipts are not permanently appro
priated, so management cannot properly budget for multi-year
projects. Additionally, decisions on building a Monitored Retriev
able Storage (MRS) facility remain open.

1993
Enacted

18300

18,300

286

3300

Next steps: (i) Address Yucca Mountain management issues described
above and describe progress in the mid-year report to OMB. (ii)
Continue negotiations among nuclear waste negotiator, State, local,
and tribal governments to identify a volunteer candidate site for
Monitored Retrievable Storage (MRS) for spent nuclear fuel or de
velop an alternative for interim storage of civilian radioactive waste.
Increased resources will likely be required in 1994.

Reimbursable work: DOE reimbursable
work controls need improvement.
The 1993 budget includes $3.2B in
apportionment authority for this
function. At risk: work accepted
fulfills competitive contracting
standards and meets DOE's mis
sion.

DOE has implemented pricing procedures to address concerns that de
partmental pricing practices do not recover all allocable costs. How
ever, DOE needs to ensure that DOE reimbursable work programs
do not represent attempts by other Federal agencies to avoid the
Competition in Contracting Act. In 1992, DOE (i) established a Work
for Others (WFO) steering committee; (ii) established minimum re
quirements for information to be provided by sponsoring organiza
tions and DOE contractors prior to acceptance of reimbursable work;
and (iii) completed reimbursable work reviews at major DOE sites
(no significant problems identified.)

Next steps: Complete departmentwide review of the reimbursable
work program and implement resulting corrective actions. Limited
resources required in 1994.

Contract/Project Management: Weak
nesses exist in contract and project
management for contractor oper
ated DOE facilities.
The 1993 budget includes $17B for
DOE contracting. At risk: assur
ance that contract funds are being
spent efficiently and effectively.

DOE has (i) established an Office of Contractor Management and Ad
ministration and designated a Contracts Management Officer and a
Property Management Officer at each field office; (ii) developed a
program for conducting on-site reviews of contractor business man
agement systems; (iii) implemented a work authorization control
system at selected sites; and (iv) re-established its Energy Systems
Acquisition Board to improve line management communication and
ensure that projects are managed on schedule and within budget.
Most field offices and M&O contractors have conducted business
management self-assessments and developed corrective action plans.
DOE has begun a program to recruit top public and private sector
project managers and increase training on managing large and com
plex projects.
Next steps: (i) Implement project managers certification program, (ii)
Implement formal change control process for major construction
projects and major systems acquisitions, (iii) Negotiate improved ac
countability requirements to be included in management contracts
for DOE labs. Resources will continue to be required in 1994.

206

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF HEALTH AND HUMAN SERVICES

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

Health Care Financing Administration
(HCFA): Medicare program data
systems inadequate to track costs
and usage.

In 1992, HCFA prepared, on a timely basis, the required monthly
management report which tracks Medicare costs and usage through
beneficiary entitlement, utilization, and claims history data drawn
from the Common Working File. HCFA and OMB used the reported
information for Medicare program management; future refinements
will be made as necessary. DELETED FROM HIGH RISK LIST.

HCFA: Medicaid management sys
tems inadequate to predict Medic
aid costs.

HCFA has made important progress in developing systems to produce
better information for Medicaid budget estimates. HCFA has devel
oped an automated system for tracking changes to State Medicaid
plans. HCFA is programming the Budget Pressures Reporting Sys
tem (BPRS), which will monitor issues effecting Medicaid budgets,
such as court cases and proposed State legislation. HCFA actuaries
are developing a Medicaid Budget Forecasting System (MBFS) to
provide State level Medicaid budget estimates for key States. In May
1992, States were requested to submit documentation and financial
data to implement the Medicaid Voluntary Contribution and Pro
vider Specific Tax Amendments of 1991.

410

82,000

91,700

9,011

2,255

1993 projected cost of Medicaid pro
gram is $82.6B. At risk: ability to
estimate Medicaid costs accurately.
Misestimates have been as high as
10 percent of outlays.

Next steps: (i) Make BPRS and MBFS fully operational, (ii) Publish
volume two of first annual State Medicaid plan system report, (iii)
Incorporate information from BPRS into mid-session review projec
tions for the 1994 Medicaid Budget. Some resources will be required
to maintain these systems in 1994.
HCFA: Medicare making payments
which should be made by other
insurers.

1993 projected cost of Medicare pro
gram is $132B. At risk: $6OOM-1B
annually in payments by Medicare
that should have been covered by
other insurers.

HCFA has been attempting to identify Medicare beneficiaries who
have other health insurance through a data match with SSA and IRS
records. Where the data match for tax years 1987-1989 identified
Medicare beneficiaries with other insurance, HCFA has: (i) updated
beneficiary files to prevent further inappropriate payments; and (ii)
sent mistaken payments reports to contractors instructing them to
begin the recovery process. HCFA has completed a plan for an ini
tial enrollment questionnaire and has begun contracting process. De
spite HCFA action, there have been delays in contracting for the ini
tial enrollment questionnaire and recovering mistaken payments
identified through the data match.
Next steps: HCFA will (i) continue data match for 1990-1994 tax years;
(ii) continue recovery and prevention activities based on data match;
(iii) evaluate effectiveness of recovery procedures; and (iv) imple
ment initial enrollment questionnaire. These activities, particularly
the data match and recovery efforts, require 1994 funding.

Indian Health Service (IHS): insuffi
cient financial controls and inat
tention to management led to
weaknesses in IHS programs: IHS
was paying higher than Medicare
rates for contract health services,
had not established effective meth
ods to identify and bill third party
payers, and the IHS scholarship
program had high default rates.
1993 cost of IHS programs is $1.65B.
At particular risk: $318M funding
for contract health services.

IHS strategy has been fully to involve the Director and senior staff;
build management's ability to detect weaknesses and monitor per
formance; and charge Total Quality Management teams with author
ity to make corrections. In 1992, IHS tested a rate quote concept in
pilot sites, and completed a first draft of a rate quote manual. Pric
ing data are now routinely available to IHS physicians. Seventy-two
percent of high volume providers now offer IHS services at rates
lower than or equal to Medicare. IHS has established business of
fices in all 76 IHS operated service units and begun using auto
mated billing software. IHS has eliminated the backlog of default
cases in the scholarships program and brought the default rate
down to 1.2%. New material weaknesses continue to be identified.
Next steps: IHS will focus on (i) correcting weaknesses in contract
health program by expanding the rate quote pilot and implementing
new software systems; and (ii) developing effective corrective ac
tions and performance measures for newly identified material weak
nesses in cash advances, the Alcoholism program, and procurement.
Increases in funds and FTE for the IHS program operations account
are required in 1994.

12.

207

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct Hieh
Risk Area (In
thousands of
dollars)
1993
Request

Section 8 Financial Systems: HUD's
existing systems inadequate to
verify tenant information in Sec
tion 8 subsidy programs and accu
rately forecast funding needs for
expired Section 8 contracts that are
renewed.
The 1993 budget includes $14B for
low-income housing assistance. At
risk: assurance that funds are used
for eligible recipients, and that
there is adequate fund control for
over $100B in long-term contrac
tual funding commitments, serv
ing 3 million families.

HUD Departmental Financial Systems:
HUD lacks an integrated financial
management system and existing
systems suffer from inefficiencies,
incompatibilities, and internal con
trol problems.
1993 Budget includes $16.7M for im
plementation of the HUD Finan
cial Systems Integration Plan.At
risk: assurance that financial sys
tems will provide accurate, timely,
and useful financial information to
manage $160B in HUD insurance,
guarantees, subsidies, loans and
grants.

FHA: Single Family Property Dis
position controls and oversight of
extensive contracted support serv
ices with area management bro
kers (AMBs) are inadequate.

1992 property disposition sales pro
ceeds were $3.2B. At risk: assur
ance that HUD recovers all net
sales proceeds from AMBs.

Section 8: Moderate Rehabilitation
program overpaid developers,
lenders, and Public Housing Au
thorities.

Program terminated. At risk: $70
million in overpayments and $30
million in excess subsidies.

HUD is developing a new financial management system, CFS/TRACS,
Phase I, to control tenant certification, payment processing, program
budgeting and funds control. The system will eventually be re-engi
neered to function as the "Subsidies System" outlined in HUD's
Five Year Financial Systems Integration Plan. (See high risk area
"Departmental Financial Systems.") HUD is: (i) making progress
with systems development; (ii) testing the first TRACS software re
lease; and (iii) is beginning to collect tenant data with selected vol
unteer owners/Public Housing Authorities (PHAs). While CFS/
TRACS verification of contract data has been delayed, the HUD
CFO Office indicates the delay will not negatively affect HUD's
overall progress.

1993
Enacted

3,472

16,728

Next steps: (i) Complete Discrepancy Resolution Plan, (ii) Develop De
partment-wide standards/policies to resolve contract discrepancies
identified during data collection, (iii) Implement software releases of
CFS/TRACS scheduled for 1993. Continued funding will be re
quired in 1994.
In November 1991, HUD adopted a financial management systems in
tegration plan that recommended replacing approximately 100 exist
ing financial and mixed systems with nine integrated financial sys
tems. Efforts are underway on three of the integrated financial sys
tems: subsidies (see Section 8 high risk area), core accounting, and
mortgage insurance. In 1992 the Core Accounting Project Team was
formed and a plan was developed. Also, HUD organized a Manage
ment Oversight Committee to begin planning for a Mortgage Insur
ance System, and a contractor is in place to develop a strategic plan.
Historically, HUD schedules for the development and implementation
of financial systems have slipped. Recent progress is at best modest,
but in keeping with the current schedule.

Next steps: HUD will (i) complete core accounting functional require
ments; (ii) purchase an off-the-shelf core accounting software pack
age; and (iii) by October 1993 convert Community Planning and De
velopment to the new core accounting system. Continued funding
will be required in 1994.
This high risk area consists of 5 material weaknesses related to auto
mated systems support and the procurement and administration of
extensive contract support services ranging from property manage
ment to sales closings. Program management has reported comple
tion of corrective actions on all weaknesses pending verification re
views. In the case of systems support and controls over closing
agent activities, the OIG verified that the SAMS system and other
corrective actions provided were adequate.
Next steps: Perform verification review of three remaining material
weaknesses in 1993 and determine the proper allocation of field re
sources needed effectively to monitor contractor activities. Verifica
tion reviews may indicate that additional resources are needed in
1994.

Due to inadequate controls and oversight, Public Housing Authorities
(PHAs), developers, and lenders obtained excessive subsidy pay
ments. Department has terminated program and is recalculating
rents to determine excess subsidies paid. HUD has collected ap
proximately $300 million of the estimated $400M in overpayments.
For inventory of non-coinsured projects, over $30 million in excess
subsidies has been identified; collection, in the form of repayment
agreements between owners and PHAs, is underway. During 1992,
HUD conducted verification review of the collection process with
satisfactory results. DELETED FROM HIGH RISK LIST.

Next steps: Department of Justice is litigating based on HUD's author
ity to recover estimated,$70 billion in excess subsidies for coinsured
Moderate Rehabilitation projects. HUD will continue to track until
cases are settled and/or funds are repaid.

208

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT—Continued

High Risk Area

Progress to Date and Next Steps

FHA: Single Family Mutual Mort
gage Insurance (MMI) fund equity
may not be sufficient to cover
losses resulting from adverse eco
nomic conditions. Capital ratio
was only 0.28% versus 1.25% re
quired.

While the MMI Fund is required to be actuarially sound by statute,
auditors report that its economic net worth may be a negative $2.7
billion. The 1993 HUD/VA appropriations bill repealed HUD re
forms designed to strengthen the MMI fund. Under the National Af
fordable Housing Act, these reforms would have implemented a
risk-related premium structure and reduced financing of closing
costs.

$300B in insurance in-force in 1992.
At risk: $1.4B in estimated losses
in 1993.

Next steps: In 1993, HUD will review options to ensure actuarial
soundness and determine next steps. Additional funding may be
necessary in 1994 to implement strategies to strengthen the MMI
fund to meet the required ratio.

GNMA: Title I Manufactured Hous
ing and Home Improvement loans
made by FHA have excessive
claims against GNMA's mortgagebacked securities program. GNMA
has suffered losses due to poor
underwriting practices, collateral
depreciation, and limited (10%)
FHA indemnification.

The Title I loan portfolio real estate underwriting procedures should
be strengthened. In 1992, HUD implemented regulations (i) estab
lishing higher qualification standards for dealers and lenders; (ii) re
quiring greater lender oversight of dealers; (iii) strengthening loan
collateral positions; (iv) increasing down payments; (v) requiring site
inspections; and (vi) encouraging more efficient foreclosure proce
dures. Also in 1992, HUD'S verification review of the claims process
ing improvements had satisfactory results. However, many port
folios have defaulted to GNMA and approximately $100M in addi
tional defaults are anticipated due to poor underwriting procedures
in effect prior to implementation of new regulations.

$3B in manufactured home loans
outstanding; $2B in Improvement
loans outstanding. At risk: esti
mated 1.5% of outstanding guar
anteed loans in GNMA portfolio.

Public and Indian Housing (PIH): Pub
lic Housing Modernization project
grants inadequately administered
by Public Housing Authorities.
$3.1B in new budget authority in
1993. At risk: $6.9B backlog of
funds not yet obligated by grant
ees (including 1992).

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

100

350

Next steps: In 1993, HUD will evaluate existing underwriting and
servicing guidelines for GNMA issuers/servicers and review options
for enhanced monitoring and enforcement procedures. GNMA will
perform actuarial analysis of the portfolio, including premium struc
ture. Additional funding in 1994 may be necessary for enhanced
monitoring of GNMA contractors.
HUD is revising policy directives, training field staff in new proce
dures, and developing automated systems to address Public Hous
ing Authority (PHA) grant management problems. In 1992, the Pub
lic Housing Management Assessment Program (PHMAP) was devel
oped; PHMAP is an automated system that monitors PHA perform
ance. Through PHMAP, troubled PHAs will be identified, and HUD
will be able to target corrective actions and provide technical assist
ance. Ultimately, unused modernization funds can be deobligated
and reallocated. This high risk area is being merged with new high
risk area described below, "Public Housing Authority (PHA) Man
agement." MERGED WITH NEW HIGH RISK AREA.

12.

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

209

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

FHA: Multifamily Loan Servicing is
inadequate, resulting in excessive
growth in acquired properties and
assigned notes, and noncompli
ance with housing quality stand
ards.

$44B of insurance in force. $7.4B in
inventory as of 1992. At risk: $4.8B
reserve for claim losses, and hous
ing quality for low- and moderateincome beneficiaries.

Inadequate multifamily loan servicing has resulted in high levels of
foreclosures and note assignments. Since 1987, the number of units
in multifamily property inventory has grown from 160,000 to
392,000 in 1992 (145 percent). In 1992, HUD issued revised policies
and instructions on loan servicing and workout, and a new Multi
family Property Disposition Management Handbook to program
staff. In spite of these efforts, the multifamily inventory continues to
rise. HUD has asked for statutory relief from subsidy requirements
which impede the sale of acquired property. Congress has neither
granted the statutory relief, nor appropriated the subsidies needed
to sell acquired property.

1993
Enacted

Next steps: In 1993, HUD will initiate interim integration of multiple
multifamily note processing systems into one system and provide
OMB a plan to improve loan servicing and property management
and disposition. This plan will help determine 1994 funding require
ments.
Public Housing Authority (PHA) Man
agement PHAs are mismanaged;
43 PHAs have been identified as
"troubled", accounting for 20% of
PHA units.

PHAs administer 70-80% of HUD
appropriations. At risk: assurance
that funds are used for intended
purposes.

Recent Inspector General reports have stated that many PHAs are not
effectively managed. This results in: (i) vacant units while low-income housing waiting lists continue to grow; (ii) units that do not
pass inspection guidelines for safety and sanitation, and (iii) uncol
lected rents. HUD has developed the Public Housing Manage-ment
Assessment Program (PHMAP), a database for measuring perform
ance and assessing risk of each PHA so that HUD can intervene ap
propriately. In 1992, HUD began implementation of PHMAP.
ADDED TO HIGH RISK LIST.

Next steps: In 1993, HUD will continue to implement PHMAP, iden
tify troubled PHAs, and institute corrective actions. Also in 1993,
part of the modernization set-aside of $5.5 million will be provided
specifically to troubled PHAs for technical assistance contracts. Con
tinued funding may be necessary for PHMAP implementation and
technical assistance in 1994.

DEPARTMENT OF THE INTERIOR

High Risk Area

Bureau of Land Management (BLM):
inadequate oil and gas inspection
to verify on-shore production and
usage.
$500M in revenues are received an
nually. At risk: $50-70M in losses
due to improper production ver
ification.

Progress to Date and Next Steps

BLM is implementing a nationwide inspection and enforcement (I&E)
strategy. In 1992, BLM: (i) held I&E training courses for managers,
and nation-wide workshops; (ii) conducted alternative management
control reviews; and (iii) revised and distributed an updated I&E
strategy. Concerns remain regarding the effectiveness of the revised
I&E strategy on field office performance; slippage of self-imposed
program targets; and lack of senior management oversight to ensure
effective implementation at the Bureau level.

The congressional cut of the President's 1993 request means that BLM
will be able to hire only an additional 20 oil and gas inspectors rath
er than tiie 47 FTE requested.

Next steps: During 1993, BLM needs to (i) demonstrate substantial
progress at field office level in implementing its revised I&E strate
gies; (ii) meet self-imposed program targets; (iii) achieve senior man
agement support of revised I&E strategy; and (iv) refine and sup
port DOI's budget request for increased I&E staff in 1994.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request

1993
Enacted

3,500

1,348

210

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF THE INTERIOR—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Office of Territorial and International
Affairs (OTIA): lack of financial
management controls and grant
oversight, weak technical assist
ance program for insular areas.

OTIA 1993 budget is $340M. At risk:
$30M due to improper use of
grant funds.

OTIA grant oversight is insufficient; insular governments lack ade
quate local management controls. In 1992, DOI (i) prepared a report,
Improving Financial Management in the Territories, the result of a
joint DOI/OMB review team; (ii) added one staff person with finan
cial management and grants administration expertise; (iii) issued
guidelines and reporting formats to field staff to improve grant and
financial monitoring; and (iv) signed a Memorandum-of-Understanding with the Army Corps of Engineers to provide on-site tech
nical assistance in support of infrastructure grants management in
the territories. OTIA has made good progress in strengthening its
own operations and procedures regarding this high risk area; but
until overall policy issues (including the status of the territories) are
determined, systemic changes cannot be accomplished.

1993
Enacted

1300

1,785

1310

9300

6,700

Next steps: (i) Provide grants administration training for OTIA field
and Headquarters staff and insular areas staff, (ii) Complete agree
ments with each insular area regarding completion of audit resolu
tion agreements, (iii) Complete baseline evaluations of financial
management control systems for insular governments, (iv) Form
joint working group with American Samoa to address recent GAO
report recommendations on financial management, (v) Reach policy
decisions on future status of the territories. Continued funding re
quired in 1994.
Bureau of Indian Affairs (BIA): seri
ously deficient financial systems
and controls.

The program level in BIA is over
$2B in 1992 budget authority. At
risk: loan programs of $15 million
annually, guarantee subsidies of
$8 million annually and $60 mil
lion in irrigation and power reve
nues.

A special improvement team, along with BIA accountants, successfully
installed a new core accounting system, reconciled cash with Treas
ury, and produced accurate external reports. Significant progress
was made on the core system in 1991 and 1992. Now, more work is
needed on subsidiary systems, e.g., irrigation, power, and loan col
lections. BIA is experiencing problems with program managers re
acting late to reports showing over-expenditure of internal budget
limits. Concerns also exist regarding inadequate documentation of
processes supporting the new system. The Department's Inspector
General has serious concerns about the ability of BIA to maintain
the system after the improvement team withdraws.
Next steps: BIA and improvement team to develop desk procedures
immediately, and finalize plan to transfer systems support back to
BIA by the end of 1993. Further work to design subsystems to sup
port irrigation, power, and loan collections also needs to be under
taken during 1993. OMB will monitor readiness of BIA to operate
systems. Completion of the design and installation of new sub
systems is dependent upon the level of 1994 funding. DOI OIG to
audit Anti-Deficiency review conducted by improvement team.

BIA: inability to account for and rec
oncile Indian Trust Funds.
There are $2B in Indian Trust Funds.
At risk: $6.3M in potential losses
due to mismanagement.

During 1992, BIA's effort to reconcile and audit Indian trust funds be
came questionable and an OMB-Interior SWAT team increased over
sight and management of the project. In June 1992, BIA was directed
to restart the reconciliation project for tribal trust funds and to es
tablish Federal-tribal representative working groups to address
problems in (i) land records management, (ii) fractionated heirship
on reservation land, and (iii) individual Indian monies reconcili
ation. DOI-BIA prepared draft Indian Trust Funds Strategic Flan.
Concerns remain about BIA's ability to implement the corrective ac
tions contained in the strategic plan and to maintain senior manage
ment commitment to the improvement program.
The congressional cut of the President's 1993 budget request means
that BIA will be able to hire only an additional 20 FTE rather than
the 40 FTE requested. There will be resulting delays in BIA's Office
of Trust Funds Management reorganization and systems develop
ment.

12.

211

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF THE INTERIOR—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

Next steps: During 1993, DOI and BIA will: (i) complete reconciliation
of tribal judgment accounts; (ii) begin reconciliation of tribal non*
judgment accounts; (iii) perform special purpose procedures reviews
on 5 tribes' accounts; (iv) begin reconciliation of trust fund finance
and investment systems; (v) develop and advertise a contract for an
independent entity to certify reconciliation work; and (vi) publish
the Indian Trust Funds Strategic Plan. Additional resources will be
required in 1994.

BIA: longstanding deficiencies in the
management of BIA School Facili
ties and BIA Dam Safety.

1993 Budget includes $92M for these
programs. At risk: health and safe
ty of the affected Indian commu
nities.

During 1992, BIA took action on both dam safety and school facilities.
For dam safety, BIA (i) revised operation and maintenance proce
dures manual, (ii) contracted with the Bureau of Reclamation for
pre-construction safety evaluations of dams, and (iii) assigned re
sponsibility to program managers for maintaining each dam. For
school facilities, BIA (i) prepared facilities remedial action plan, (ii)
established a "hot line" to report safety violations, and (iii) received
additional funding in 1993 for major buildings repair. Concerns re
main about BIA's ability to implement the actions in the dam safety
and school facilities plans. Additional 1993 funding provided by
Congress will support new BIA school construction.

24,200

35,505

Next steps: Dam safety: (i) Complete safety evaluations of dams; (ii)
establish periodic maintenance of dams in program operations, and
(iii) assess improvements in dam operations and maintenance.
School facilities: (i) complete implementation of all items in facilities
remedial action plan; (ii) DOI/BIA review of facilities and oper
ations; and (iii) begin systematic replacement and repair program
(1994 funding required).

DEPARTMENT OF JUSTICE

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request

Departmental debt collection informa
tion systems inadequate to sup

In 1992, the Department participated with OMB in a multi-agency Liti
gation Information Action Team that recommended steps to produce

port management of litigation and

meaningful, accurate management information on DOJ financial liti

collection activity on an estimated
$13 billion inventory.

gation and collection activity. DOJ has committed to developing the
central system capability to monitor and track litigation and collec
tion of financial litigation claims in all DOJ components and
produce periodic reports on the status of claims by agency, pro
gram, and type of claim. DOJ issued a request for proposals for a
systems development contract on August 31, 1992. The projected
contract award date is June 10, 1993. Congressional cuts, however,
make it difficult for DOJ to award the contract in 1993.

There could be more than $13 billion
(1991 estimate) in pending civil
debts or claims in Justice inven
tory, including approximately $6
billion in receivables referred to
DOJ by other agencies. At risk:
non-collection of up to 5% of total
(representing potential additional
collections from improved man
agement information).

Next steps: (i) Resolve .1993 budget shortfall (OMB is requesting user
agencies to provide some portion of needed funds), (ii) Award the
systems development contract in June 1993. (iii) Provide funding for
system development and maintenance in 1994 and beyond.

5307

1993
Enacted
2,977

212

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR TOE FUTURE

DEPARTMENT OF JUSTICE—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request
Departmental asset forfeiture informa
tion systems inadequate to ensure
program integrity or achieve full
revenue-generating potential of
the asset forfeiture program.

Seized asset forfeiture inventory val
ued at $1.8 billion at end of 1992.
At risk: $25-30 million annually in
increased revenues and cost sav
ings (made possible through im
proved management information).

The Executive Office for Asset Forfeiture (EOAF) has lead responsibil
ity for the development and implementation of a centralized Con
solidated Asset Tracking System (CATS). CATS is a multi-agency
system that will integrate asset seizure and forfeiture information of
all Federal agencies participating in the Justice Asset Forfeiture Pro
gram. In 1992, detailed systems design was completed, and system
testing and equipment acquisition were begun.

1993
Enacted

28,970

20,500

70,916

57,221

295,858

Congressional cuts to 1993 funding will have minimal effect on imple
mentation, due to (i) changes in die Asset Forfeiture Fund statute
providing permanent indefinite authority to use Fund monies for
ADP systems, and (ii) the availability of $3 million in prior year
funding.

Next steps: CATS will be implemented nationwide in 1993. Key steps
in 1993 include telecommunications network analysis, software de
velopment, data base conversion, and equipment acquisition. The
system should be in place in the first sites by April 1993. Implemen
tation costs in 1994 may be covered by permanent indefinite author
ity to use Fund monies for ADP systems.
Executive Office of the US Trustees
(EOUST): Need to increase over
sight to prevent fraud, misappro
priation, and breach of fiduciary
standards by private trustees.

Estimated amount in bankruptcy ac
counts is $26B. No risk to Federal
funds, but private funds are sub
ject to potential loss or fraud.

The EOUST must increase staff, upgrade financial analysis training,
and increase audit coverage to address demands of a bankruptcy
caseload that has increased 82% since expansion of the program in
1986. EOUST has: (i) improved its regulatory framework for super
vising private trustees; (ii) acquired additional resources (200 FI E)
provided for in the 1993 budget; (iii) issued tougher oversight poli
cies issued for private trustees; and (iv) reamped EOUST training
programs to provide financial analysis capability of staff. Overall ef
fectiveness of the program could be strengthened by the develop
ment of a performance measurement system for assessing program
accomplishments against short and long term goals and objectives.
Congressional cuts in 1993 will result in less oversight of private
trustees than planned. However, new fees have been authorized that
will mitigate the effects of reduced funding.
Next steps: (i) Hire new staff provided by the 1993 budget, (ii) In
crease criminal enforcement activities, (iii) Increase the number of
audits, (iv) Contract for risk analysis to ensure that vulnerabilities
are assessed and adequate safeguards are provided in the Auto
mated Case Management System. Additional funding will be re
quired in 1994.

Bureau of Prisons (BOP) overcrowd
ing affects safety and security.
The 1993 budget provides over $2B
for BOP. At risk: the safety and se
curity of prison staff, inmates, and
surrounding communities.

The BOP must reduce prison overcrowding to ensure safe and secure
conditions for community, staff, and inmates through new construc
tion and modernization of prisons. Inmate population in the Federal
Prison System is 46% over rated capacity as of November 12,1992, a
reduction from the 70% originally reported. Since 1989, the capacity
of BOP has increased by 18,000 beds. BOP plans to spend nearly $3B
to add approximately 43,000 beds in the next four years. The plan
must be monitored because inmate population may increase faster
than capacity due to increased level of criminal litigation in the judi
cial system.

Funding for new construction in 1993 will increase capacity by 3,672
beds; plan projects achieving design capacity of 88,800 by end of
1995.
Next steps: Resolution of this high risk area is predicated on effec
tively using the $1.8B in unobligated balances made available in
1993 and previous budgets. Delays in obligating these funds were
caused by community opposition and/or environmental impact
studies.

12.

213

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF JUSTICE—Continued

High Risk Area

BOP: Not all prisons comply with
fire and/or hazardous waste dis
posal codes.
The 1993 budget provides $20M over
3 years for corrective actions need
ed. At risk: possible environmental
damage, personal injury, fines, or
court action if compliance is not
achieved.

BOP: Inadequate staff to operate and
manage prisons.
The 1993 budget provides $1.8B in
total operating expenses for BOP.
At risk: the safety and security of
prison staff, inmates, and sur
rounding communities.

Progress to Date and Next Steps

All immediate life and health-safety risks due to hazardous waste
have been corrected. BOP has now completed Life Safety Surveys of
fire code violations for all 48 institutions previously cited. Sixty per
cent of the 120 fire code violations were corrected. As a precaution,
BOP will survey the remaining 20 institutions. Training of safety
personnel in hazardous waste management is underway.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

19,544

15,222

4,053

3,380

500

Next step: Completion of all fire safety corrective actions by Septem
ber 1994. Additional funds required for 1994.
The ability to recruit, develop, and retain sufficient staff was con
strained by inadequate pay scales, lack of career development po
tential, and inconsistent planning and recruiting efforts. Special sal
ary rates implemented for correctional officers and psychologists. 83
special salary rates tables established affecting 3000 positions. Reten
tion and hiring of staff increased in 1992 because of the pay reforms
instituted in January 1991. The ratio of correctional officers to pris
oners has been reduced from 1:3.9 in 1990 to 1:3.2 in 1992 (Goal is
1:3). However, high cost areas continue to show high vacancy rates.

Next steps: (i) Assess recruitment techniques (September 1993). (ii) Re
organize staff training and development, (iii) Increase local recruit
ment advertising over next several years. Resources will be required
in 1994.

Immigration and Naturalization Service
(INS): Poor management controls
and inadequate financial system.
Accounting system processes $972M
annually. At risk: assurance that
funds are accounted for in an ac
curate and timely fashion.

In 1992, INS (i) implemented a new internal control planning process
involving top management; (ii) developed an Automated Informa
tion Systems Tactical Plan; and (iii) developed a Strategic Financial
Management Improvement Plan. INS is using the Department's Dis
tributed Budget Module (DBM) in HQ and 3 field offices. Concerns
remain over system implementation issues, and some milestone
dates have slipped. Data integrity is improving on a gradual basis.
A new fee analysis branch was established to institutionalize the re
view of costs, revenues, fees, and the rate-making process for the
Immigration Fees accounts on an ongoing basis.
Congressional cuts in 1993, which would have resulted in delays, have
been offset by reprogramming funds from other areas.

Next steps: (i) Complete reconciliation of prior year accounts, (ii) Im
plement DBM in remaining offices, (iii) Implement an Acquisition
Control and Tracking System and Debt Collection System, (iv) Com
plete requirements analysis for financial management system. 1994
funding will be required.

U.S. Marshals Service (USMS): Inad
equate financial management sys
tem; nonconformances in fund
control and asset value reporting.
Accounting system processes $1B an
nually. At risk: assurance that
funds are accounted for in an ac
curate and timely fashion.

In 1992, USMS (i) implemented the Department's Distributed Budget
Module; (ii) developed a plan that addresses financial system re
quirements and business practices; and (iii) converted to the Na
tional Finance Center payroll/personnel system. Congressional cuts
in 1993 will slow implementation of the financial system improve
ments.
Next steps: (i) Conversion to the Department's Financial Management
Information System (FMIS) is targeted for completion by the end of
1994; this requires 1994 funding, (ii) Continued development of De
partmental FMIS modules for general ledger, collections and receiv
ables, obligations, travel, and drafts/payments is necessary to meet
specific USMS requirements.

214

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF JUSTICE—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

USMS and INS: Shortage of deten
tion facilities.
The 1993 budget provides $7.4M for
construction. At risk: ability to
meet demands of increasing pris
oner population.

The facilities available to house prisoners in the custody of U.S. Mar
shals and INS are overcrowded or unavailable. Detention resources
are continually outdistanced by the dramatic growth in the prisoner
population. Since 1990, the resolution of the problem is being ad
dressed through a multi-year Federal detention strategy involving
USMS, INS, and BOP for the 280 Federal court cities throughout the
country. As of June 1992, 6,917 detention spaces have been acquired
at 117 Federal court cities through the cooperative agreement pro
gram (CAP) with states. USMS's 11 CAP projects will acquire 302
more detention bed spaces in 1992; BOP detention construction
projects funded through 1992 will provide 7,300 more detention bed
spaces in 17 Federal court cities. The pace at which the plan is im
plemented will depend on the availability of budget resources.

1993
Enacted

7,417

N/A

Next steps: USMS will continue to pursue agreements with State and
local governments. The Federal Detention Plan is updated annually
on the basis of anticipated long term needs of the participating
agencies. At the end of July 1992, daily population exceeded 19,711
and is currently growing at a rate of 23% over the previous year. At
this rate, population will exceed the rate at which additional bed
spaces can be acquired. Additional funds required in 1994.
Departmental: Inadequate security
over Departmental ADP sites and
systems.

At risk: effectiveness of litigation ac
tion and law enforcement pro
grams as a result of loss or unau
thorized access to sensitive infor
mation, as well as control of finan
cial assets.

DOJ now has a program of sustained oversight to reduce the risk from
loss, misuse or unauthorized access to the Department's sensitive in
formation in its computer systems. DOJ has initiated a broad spec
trum of corrective actions: computer security training, audits and se
curity compliance reviews, risk assessments and contingency plan
ning, and damage assessments from unauthorized release of infor
mation stored or processed on computers.
Next steps: (i) DOJ will complete reviews of component security plans
by July 1993. (ii) DOJ will work with Drug Enforcement Agency to
implement an agency-wide computer security program that address
es deficiencies identified by GAO and IG audits, (iii) USMS will
complete risk analysis on its ADP systems by June 1993. (iv) U.S.
Attorney Offices will be equipped with a secure communications
system by October 1993. Resources will be required in 1994 for
training and compliance reviews.

DEPARTMENT OF LABOR

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Employment and Training Administra
tion (ETA): Federal equity in real
property held by State Employ
ment Security Agencies (SESAs) at
risk due to inadequate Federal
oversight and guidance on acquisi
tion, use, and disposition of real
property.
Fair market value (FMV) is $1B. At
risk: up to 10% of FMV.

In November 1992, DOL published a draft General Administrative Let
ter (GAL) to State grantees which outlines real property require
ments. The GAL emphasizes the withdrawal of delegations of prior
approval authority, and establishes accounting standards for rent vs.
depreciation vs. acquisition costs.

Next steps: (i) Publish final GAL after consideration of public com
ments. (ii) Publish directive to regional offices outlining system re
sponsibilities and tracking requirements, (iii) Evaluate State compli
ance with requirements on acquisition, use, and disposition of SESA
real property, (iv) Reconcile initial real property inventory data base
with SESA records, (v) Request States formally to certify DOL's eq
uity in SESA real property.

413

1993
Enacted
346

12.

215

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF LABOR—Continued

High Risk Area

DOL financial systems and oper
ations inadequate.
DOL systems processed over $7B in
grant expenses during 1992. At
risk: accurate and timely account
ing and cash management for
these funds.

Progress to Date and Next Steps

DOL implemented a new core accounting system in 1990. Significant
progress was reported in the 1993 budget because the core account
ing system produced external financial statements for 1991. How
ever, significant year-end adjustments had to be made due to inad
equate controls over accounting and reporting of grant information.
In 1992, two major subsystems—grants management and assets
management—were designed, tested and put in operation within
most of the Department.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

1,200

1,546

9352

9,352

3,178

2,178

Next steps: DOL needs to (i) complete implementation of the grants
management system in the Employment and Training Administra
tion; and (ii) design interface requirements between that system, the
HHS-Payment Management system (used to advance funds to grant
ees), and the departmental core accounting system. During 1993, ad
ditional funds were reallocated internally by DOL to support these
projects. Resources will be required in 1994 to maintain these im
provements. The non-automated processes and controls which un
derlie the financial management of the grant programs throughout
the Department also need careful review and revision.
Job Training Partnership Act (JTPA):
Single Audit Act (SAA) not effec
tive in safeguarding JTPA Federal
funds.

At risk: assurance that $1.9B in JTPA
grants is effectively audited.

JTPA: Inconsistent monitoring and
implementation of JTPA grantee
systems and financial controls.

1993 budget includes $1.9B for JTPA
grantee operations. At risk: assur
ance that these funds are spent ap
propriately.
This is an expansion of the 1993
Budget high risk area on JTPA
Service Delivery Area procure
ment practices.

1991 DOL IG review recommended government-wide approach to
SAA issues. Unilateral action by DOL in this area is not feasible.

N/A

The President's Council on Integrity and Efficiency (PCIE) is conduct
ing a study of SAA govemmentwide. The PCIE expects to publish a
draft report in February 1993. The General Accounting Office (GAO)
is conducting a SAA review that will address accounting for funds
passed through grant recipients to subrecipients (a central issue in
SAA coverage of JTPA funds). The GAO anticipates issuing a draft
report in late 1993. This item will be re-evaluated on a govemment
wide basis after PCIE and GAO findings are available.

Congress has passed the Job Training Reform Amendments of 1992.
These amendments, which were based on a DOL legislative pro
posal, address JTPA cost classification, procurement policy, and onthe-job training processes. The amendments significantly strengthen
JTPA monitoring requirements and program accountability. Imple
menting regulations were published in late December. DOL pub
lished a technical assistance guide on program monitoring, and
model monitoring instruments were provided to JTPA grantees.
This high risk area has been expanded to include all JTPA grantee
operations, and not just JTPA procurement.
Next step: Monitor grantee compliance with new regulations. DOL
will need appropriate funding to work with JTPA grantees to imple

ment changes and assure compliance.

Pension and Welfare Benefits Adminis
tration (PWBA): Oversight of pen
sion plans inadequate.

PWBA oversees private pension
plans with assets of $2.2 trillion.
At risk: pensions guaranteed by
the Federal Government valued in
billions of dollars.

DOL submitted a legislative proposal to (i) repeal the limited scope
exemption for certain pension plan audits, and.(ii) establish triennial
peer reviews of Independent Public Accountants (IPAs) who audit
pension plans.

PWBA (i) implemented a "grace period" for submission of late annual
reports—4,000 late reports were filed; (ii) issued 620 letters rejecting
inadequate annual pension plan reports (Form 5500); (iii) assessed
$32.2M in fines for submission of inadequate audit reports; (iv) con
ducted 1,700 in-house reviews of accountant's reports and 39 on-site
reviews of IPA audit work papers; and (v) made 60 referrals to the
American Institute of Certified Public Accountants (AICPA) and
State boards of accountancy. PWBA also worked closely with the
AICPA in developing additional technical guidance for pension plan
auditors.

216

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF LABOR—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area tin
thousands of
dollars)
1993
Request

1993
Enacted

Congress' cut of $1 million from the Presidents 1993 request will slow
development and maintenance of the information system used to
aid monitoring of pension programs.
Next steps: Review audits received to analyze the impact of the re
vised AICPA audit guide on pension plan audits. Based on this re
view, PWBA may recommend further changes to the audit guide.
1993 levels will fund 20 additional field investigatory staff. Appro
priate 1994 funding will be requested.

DEPARTMENT OF STATE

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Foreign Buildings Office: Rehabilita
tion and maintenance of real prop
erty overseas is inadequate.

1993 budget for FBO is $570M. At
risk: the health, safety, and secu
rity of employees at overseas posts
due to building deterioration.

Department is continuing to implement initiatives consistent with its
5-year plan for rehabilitation and maintenance. In 1992, (i) a survey
to determine worldwide maintenance staffing needs was completed;
(ii) a 5-year maintenance plan and guidelines were provided to all
posts; and (iii) a reinspection program was initiated to keep facilities
data current. Maintenance assistance centers in Washington and Eu
rope have done work at over 80 posts. Eight facilities rehabilitation
projects are under construction; four more are in the survey/design
stage. State's plan includes development of a computerized database
on facilities.

1993
Enacted

125,758

6,800

11,900

12,768

13,173

Next steps: Continue to implement 5-year plan initiatives. Continued
budgetary support is needed in 1994.

Consular Affairs: Inadequate controls
over visa processing increase vul
nerability to illegal immigration
and diminish the integrity of the
U.S. visa.
1993 budget for visa processing is
$134M. At risk: potential for visa
fraud.

Departmental management of the
overseas security program, includ
ing ADP security, is inadequate.
1993 budget for the overseas security
program is $150M. At risk: assur
ance that this investment is ade
quately protecting U.S. personnel,
information and property abroad.

The Department is designing and implementing control systems, and
improving visa issuance processes, to make it more difficult for
fraud to occur. Progress has been made through: (i) management
and automation improvements (machine readable visas—MRVs—
now installed at 37 posts); (ii) improvements to name check systems;
(iii) distribution of anti-fraud materials; and (iv) training. An IG
audit of the MRV program is to be issued in early 1993.

Next steps: (i) Develop procedures for anti-fraud unit at new immi
grant visa central facility in early 1993. (ii) Install MRV at 15 posts
in 1993. Funding will be required in 1994 for MRV installations.

Thirty-seven interagency security standards have been developed for
overseas posts to counter the threat from terrorism, human intel
ligence, technical intelligence, and crime. As standards are imple
mented, funding priority for security improvements goes to posts
facing the highest threat levels. All standards have been imple
mented to address the terrorism/crime threat; and necessary im
provements are being made through physical security projects.
Counterintelligence standards have been implemented; and posts
will be reassessed every two years. Implementation of technical in
telligence standards is to be achieved by end of 1993. Concerns re
main that serious ADP security vulnerabilities at unclassified
mainframes have not been systematically addressed.

Next steps: (i) Continue physical security projects, (ii) On ADP secu
rity, implement standards at highest threat posts by September 1993,
and address domestic security standards. 1994 funding will be re
quired to support physical security projects.

12.

217

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF STATE—Continued

High Risk Area

Departmental long-standing ADP
operational deficiencies are not
being systematically addressed.
1993 budget for worldwide ADP op
erations is $17.9M. At risk: assur
ance that this investment provides
efficient and continuous ADP op
erations.

Progress to Date and Next Steps

Department lacks long-term strategy for addressing ADP
vulnerabilities. Backup mainframe computer center activated June
1992, but is being used to meet operational requirements because
the capacity at the Departmental mainframe has been exceeded. Ac
quisition of new mainframe is one year behind schedule (thus mak
ing it impossible to use the full amount of the President's 1993 re
quest). Issuance of policy on information systems is two years be
hind schedule. Department has failed to address adequacy of
backup capabilities for overseas regional administrative centers, and
lacks a strategy to test contingency plans. IG audit of mainframe
procurement to be issued in early 1993.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

3,871

150

10,640

6,910

Next steps: Award contract for new mainframe by June 1993; funding
for mainframe acquisition would be required. Department must de
velop long-term plan to resolve operational problems.

Departmental accounting and finan
cial systems have many weak
nesses and do not meet standard
requirements.
A
substantial
amount of information essential to
financial statement production is
unrecorded, and a number of sub
sidiary accounting systems are not
interfaced with the core system.
Total 1993 appropriations for De
partment are $5.21B. At risk: as
surance that these funds are being
accounted for in an accurate, time
ly, and useful fashion.

State has (i) implemented enhancements to improve its Central Finan
cial Management System's stability, integrity, and response time,
and (ii) completed a study of the Overseas Financial Management
System so as to develop a detailed improvement plan. Reorganiza
tion of the CFO's Office has focused more attention on financial
management and strengthened efforts to improve financial systems
and operations, but the problems are serious and long-standing.
Some progress is being made. The financial systems planning proc
ess is underway, but it requires coordination with other Depart
mental information systems initiatives.
Congress' cuts of the Presidents 1993 request will result in fewer
short-term improvements to financial systems.

Next steps: During 1993, (i) reduce the number of accounting and dis
bursing systems from six to three and the number of payroll sys
tems from three to two; (ii) complete an Information Strategy Plan
for integration and standardization of financial systems; and (iii) re
fine future funding requirements for systems improvements based
on this plan.

Overall strategy is to improve disbursing through stronger manage
ment from Washington of overseas financial operations, centraliza
tion of disbursing operations, and strengthened controls over cash
iering. Good progress made on disbursing problems; disbursing
Over $5B disbursed annually by De
functions for 6 of 22 officers have been centralized, with remainder
on track; reconciliation of foreign currency bank accounts at RAMC
partment
disbursing
officers
worldwide. At risk: $50M, rep
Mexico and RAMC Bangkok nearing completion. New cashiering
resenting funds unreconciled with
policies issued, but implementation must be aggressively pursued.
Treasuiy.
Next steps: (i) Prepare detailed plan for creation of Office of Cash
Management under CFO by June 1993. (ii) Establish system to in
crease accountability of cashiers and disbursing officers.

Departmental vulnerabilities exist in
current hardware and software
technology for selected informa
tion systems.

Departmental controls over world
wide disbursing and cashiering
are inadequate.

$300M of hardware and associated
software is becoming vulnerable to
failure in the next few years. At
risk: worldwide systems could suf
fer from significant downtime and
even failure, due to inadequate
vendor support.

State is heavily dependent on proprietary computer systems and soft
ware for financial, consular, personnel, and administrative functions.
A significant portion of these proprietary computer systems are vul
nerable to failure in the next few years. The Department intends to
develop and implement a strategy to migrate to an information sys
tems environment that meets government standards for open sys
tems. Significant concerns exist over the adequacy and scope of the
plans, and the ability of the Department to implement them effec
tively. ADDED TO HIGH RISK LIST.
Next steps: Develop in 1993 a master plan for migration, with support
ing detail (including standards, priorities, and resource implica
tions).

159

218

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF TRANSPORTATION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request
Departmental financial systems are
numerous, fragmented, and non
standard.
DOT financial systems process over
$30B in outlays annually. At risk:
assurance that funds are being ac
counted for in an accurate, timely,
and useful fashion.

DOT is (i) correcting immediate problems in accounting, personnel,
payroll, and procurement systems; (ii) establishing standards and
developing a strategic systems plan for future modernization; and
(iii) fully implementing an integrated systems environment. In 1992,
DOT implemented its DAFIS core accounting system at the Mari
time Administration—DAFIS is now installed in 7 out of 10 offices
and administrations; and completed the conceptual design plan for
an Integrated Personnel/Payroll1 System (IPPS). Significant progress
was reported in the 1993 budget because the DAFIS implementa
tions were accomplishing significant consolidation of core account
ing system support. However, some accounting weaknesses in
DAFIS remain, and significant work on longer-term strategies and
plans for integrating subsidiary systems and providing more useful
cost information has been delayed due to Congress' cuts in the
President's 1993 request.

1993
Enacted

6,213

3,668

24,977

28,368

5,500

Next steps: Complete (i) installation of DAFIS for remaining three of
fices by July 1993, and (ii) detailed design for IPPS during 1993. Im
plementation of IPPS and other systems enhancements will require
resources in 1994.

Federal Transit Administration (FTA):
Inadequate grants management
oversight.
At risk: FTA has over $35B in active
grants. At risk: $300-500M.

FTA must improve oversight of grantees' adherence to Federal re
quirements. In 1992, FTA: (i) received additional staff support (31
FTEs); and (ii) implemented recommendations of the Administra
tor's Task Force Report on program management oversight. These
recommendations included (i) a risk assessment for early identifica
tion of problem grantees needing assistance and closer monitoring,
(ii) a more comprehensive Triennial Review process, and (iii)
targeting of contractor support funds for oversight activities. FTA is
also working to revise audit guidance to comply with Federal re
quirements. FTA has already taken short term steps to separate
project oversight from program management activities. Additional
resources provided by Congress in 1993 will be used to fund new
contractor support activities.

Next steps: During 1993, FTA will (i) continue organizational and
functional changes to focus on and improve program oversight (ii)
increase the use of funds to hire contractors to perform procure
ment, management, financial, and safety reviews and audits; (iii)
work with OMB to improve audit guidance; and (iv) recruit appro
priate oversight staff. Funds will be required in 1994 to provide
staffing and contractor support in the discretionary and formula
grant programs.
Federal Aviation Administration: major
systems acquisition procedures in
adequate.

FAA procurement plans are esti
mated at $8.2B over the next 15
years. At risk: increased costs be
cause of poor contract administra
tion.

FAA has developed an internal management control plan to identify
and focus on major acquisition weaknesses, and an acquisition plan
policy which includes provisions for contract award, administration,
modification, and approval by senior management. Program offices
must now justify and validate requirement needs at four successive
phases from concept to production. FAA has also organizationally
separated acquisition review and oversight from acquisition oper
ations.
Next steps: DOT will conduct a Procurement Management Review of
FAA contract administration activities and contract modifications.
Mission needs statements will be improved to include appropriate
quantitative, analytical support by implementing a structured mis
sion analysis process which will be closely tied to the budget proc
ess. Mission needs will be revalidated throughout the life cycle, op
erations requirements will be developed, and improvements in per
formance resulting from acquisitions will be measured. Acquisition
policies will be revised and updated. Requirements determination,
specification development, and pre-production testing processes will
be improved through formation of Quality Action Teams. Addi
tional training will be implemented, including a 20-week course for
some project managers. Existing funds will be used to finance cor
rective actions.

12.

219

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF TRANSPORTATION—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (in
thousands of
dollars)
1993
Request

U.S. Coast Guard: major systems ac
quisition procedures inadequate.
USCG procurement plans are esti
mated at $1.5B over the next 5
years. At risk: increased costs be
cause of poor contract administra
tion.

In 1992, USCG conducted internal management control reviews on
major systems acquisitions. These found that improvements are
needed to protect source selection information and improve invoice
processing. Mission justification now includes detailed cost estimates
that are adequately supported and include all costs. Hands-on train
ing in procurement management reviews and accountability is being
improved.

Next steps: In 1993, continue to improve the mission analysis and mis
sion needs process (closely tied to the budget process), both at
USCG and DOT. Mission needs will be revalidated through acquisi
tion life cycle, and improvements in performance resulting from ac
quisitions will be measured through a structured process every year.
Policy will be updated and revised as needed, and a system for cor
recting procurement errors will be developed. Program managers
will continue to be trained at the Defense System Management Col
lege, and Warrant Officers assigned to field units with oversight re
sponsibilities. A followup system to track procurement deficiency
corrective actions will be developed.
Federal Aviation Administration: Inad
equate management of spare parts
at field activities.

At risk: $130.7M of spare parts at
field facilities.

The FAA must (i) improve management of spare parts at field activi
ties; (ii) reduce inventory holding costs; (iii) take timely disposition
action on excess and inactive materials; and (iv) centralize inventory
management. FAA has issued revised guidelines to improve inven
tory management and has developed a supply site management
plan.

Next steps: Planned actions are to complete a phased inventory of
field stock exceeding the threshold cost. Funds will be required in
1994 to complete implementation of the new inventory system and
to conduct inspections of field facilities. ADDED TO THE HIGH
RISK LIST.

U.S. Coast Guard: Inadequate logisti
cal support for spare parts at field
activities.
At risk: $93.6 M of a $346.7 M onhand inventory representing ex
cess inventory.

The Coast Guard needs to implement internal control objectives and
techniques sufficient to minimize its inventory cost for spare parts.
Necessary corrective actions include implementation of the new
Aeronautical Maintenance Management Information System
(AMMIS). AMMIS is intended to improve planning, tracking and ac
counting capability. ADDED TO THE HIGH RISK LIST.

Next steps: Introduction of the AMMIS system is scheduled for 1993
with full implementation in 1995. Funds will be required in 1994 to
(i) provide advanced logistics management training, (ii) finance
AMMIS, and (iii) complete the reorganization of the warehouse.
Department: Inadequate Department
Information Systems Security (ISS)
Annual investment of nearly $3B for
information technology.

Security efforts have not kept pace with improved technology to safe
guard information systems. Security improvements are needed to
safeguard information systems for grant management, funds control,
and management and safety of the of the Department's operational
systems (e.g., Air Traffic Control Systems). DOT must develop a
comprehensive security plan, and revise existing policy, issue proce
dural guidance, and perform security oversight reviews. ADDED
TO THE HIGH RISK LIST.

Next steps: (i) Complete security plan and revisions to existing policy
statements (March 1993); (ii) complete four oversight reviews (Sep
tember 1993); and (iii) issue guidance in support of ISS policy (Sep
tember 1995). Funds will be required in 1994 for staffing and train
ing.

1993
Enacted
15

220

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF TREASURY

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Internal Revenue Service (IRS): strat
egy for collecting and resolving
Accounts Receivable (AR) is inad
equate.

Since IRS collections have not kept pace with the growth in unpaid tax
debt, significant Federal revenues may be lost. In 1992, the IRS: (i)
set targets for AR and other functions and began quarterly perform
ance reviews with OMB and Treasury; (ii) eliminated duplicate pen
alties from AR and initiated a pilot to eliminate erroneous accounts;
IRS Accounts Receivable $71B (cur
(iii) began a feasibility study of the use of private collection agencies
rent estimated collectible value is
to resolve unworked, lower priority accounts; (iv) undertook a series
$28B). Collections totaled $24B in
of efforts to accelerate contact with delinquent taxpayers, including
1992. At risk: at least $28B in cob
an accelerated notice pilot; and (v) modified its installment agree
lectible receivables; $43B estimated
ment and offer-in-compromise policies to permit more flexibility
allowance for doubtful accounts
and increased collections. During the year, installment agreements
have increased 47%; collections from installment agreements have
needs to be reconciled and closed
out.
increased 24%; and offers-in-compromise submitted by taxpayers
have increased twofold.

1993
Enacted

16,217

15,641

1,668

170

Next steps: Accounts receivable will be elevated to be an integral part
of the Servicewide Compliance 2000 Strategy and related plan. In
1993, the IRS will conduct a private collection agency pilot and ex
pand nationwide its pilot to eliminate erroneous accounts from AR.
For 1994, if the private collection agency pilot proves feasible, legis
lation is needed to fund referral of unworked, low-priority cases to
private collection agencies out of a portion of the proceeds. Contin
ued funding of AR improvements will be needed in 1994.
A new core accounting system, Asset Information Management Sys
tem (AIMS), was implemented to provide general ledger, funds con
trol, and budget execution capabilities. Interfaces between AIMS and
Customs administrative and revenue subsystems will provide im
proved data accuracy. Customs still needs to improve accounting for
$20 billion collected annually. At
protested amounts and revenue collection—through the Automated
risk: control of revenues, including
Commercial System (ACS) and its interfaces with AIMS. A system
tracking of $880M in posted re
for mail entry of collections was implemented in 1992 to enhance
ceivables.
control over receivables. Congress' cut of the President's 1993 re
quest will delay improvements to ACS, and interfaces between Cus
toms subsystems and AIMS.

Customs Service: Inadequate collect
ing/accounting systems for reve
nues on imports.

Next steps: Customs reallocated $4.5M from other activities to (i) con
tinue the redesign of the protest module in ACS; (ii) continue work
on ACS and its interfaces with AIMS (needed to support account
ability of revenues); (iii) begin work on the cost accumulation capa
bilities in phase II of AIMS; and (iv) improve data integrity through
efforts to develop interfaces between Customs subsystems and
AIMS. Additional resources will be needed for this effort in 1994.

Treasury has improved system oversight by establishing the Office of
Financial Systems and Reports, and issuing Treasury Directive 32-02,
"Approval of Financial Management System," which requires de
Treasury is investing $81 million in
partmental review and approval for systems. Efforts are underway
to implement the recommendations of the department-wide studies
financial systems development in
on integration of financial systems and financial report filing proce
1993. At risk: systems developed
dures. The Financial Management Systems Advisory Committee was
by bureaus may not support de
estab-lished to ensure consistency in the design and enhancement of
partmental financial management
financial management systems. This committee will initiate efforts to
initiatives.
determine department-wide financial management system require
ments. The first three priorities will be travel, procurement, and rev
enue systems. Treasury continues to make progress in further reduc
ing the variety and number of financial management systems by im
plementing the Federal Financial System (FFS) software at three ad
ditional bureaus (IRS, USCS, and FLETC). Current efforts will result
in half of the bureaus using FFS by 1993 (accounting for 83% of
Treasury's total budget authority).

Departmental: Financial system co
ordination is inadequate.

12.

221

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

DEPARTMENT OF TREASURY—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

Next steps: Treasury (i) is allocating additional funds ($320,000) to this
project in 1993, (ii) will oversee installation of FFS software at ATF,
and (iii) will develop plans for establishing a departmentwide finan
cial management system. Additional resources will be required in
1994 to improve systems oversight.

Customs, Operations and Mainte
nance Account, Air and Marine
Interdiction Programs lack ade
quate internal controls.
Interdiction Operations and Mainte
nance accounts in 1993 totalled
$138M. At risk: $26-50M dollars in
unobligated balances.

Customs identified problems accounting for prior year unobligated
balances in this program. Corrective actions to address these prob
lems are underway. Last summer, Customs hired the accounting
firm of KPMG Peat Marwick to review the account balances of the
air/marine program, and they are now completing their work. Rec
ommendations of Treasury's own study team will be implemented
to improve the account's internal controls. Finally, the Inspector
General will review results of both efforts. ADDED TO HIGH RISK
LIST.

DEPARTMENT OF VETERANS AFFAIRS

High Risk Area

Veterans
Benefits
Administration
(VBA): Compensation and pension
benefit overpayments.
1993 budget includes $16.5B for com
pensation and pension benefits. At
risk: $185M in overpayments to
beneficiaries annually.

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

8,357

All corrective actions and milestone dates for improvement of audit
followup system deficiencies completed as planned. Independent as
sessment (December 1991) of revised system conducted by Com
merce Department peer review group, which found that VA met all
existing OMB and IG Act requirements. DELETED FROM HIGH
RISK LIST.

372

VA has expanded this High Risk area to address the larger issue of
overall medical inventory controls (1991 GAO report had indicated
that security and accountability for controlled substances at some
medical centers were insufficient to detect and deter the diversion of
lower scheduled controlled substances). VA decision to convert to a
unit dose (rather than ward stock system) has resulted in the con
version by the end of 1992 of 25 of 46 medical centers (85% of all
beds). Field facilities have been surveyed to assess compliance with
new requirements for the control over addictive drugs.

6,962

The integrity of claimants' income reporting for compensation and
pension benefit entitlement purposes requires validation of claim
ants' income reports. OIG sampling of wage matches and audits
have disclosed over $53 million in overpayments and over 6,000
cases referred for further investigation. Following passage of author
izing legislation, VA obtained income data to perform income ver
ification matches, and undertook matches with IRS and SSA. System
now fully operational. With 43,000 cases completed thus far, 7,600
(18%) resulted in termination or reduction of benefits, and 35,400 re
quired no adjustment.

Next steps: Continue case-by-case validation of overpayments in re
maining cases, which are the most difficult; and complete post-im
plementation evaluation.

Departmental audit followup systems
inadequate.

Audit reports received with mone
tary findings of $350M annually.
At risk: up to 15% if audit follow
up is not pursued aggressively.

Veterans Health Administration (VHA):
Drug inventory controls inad
equate. Medical centers and nurs
ing homes dispense large quan
tities of drugs. Scattered local sys
tems provide poor controls.

Drugs and medical supply inven
tories in VA hospitals replenished
at rate of $450M a year. At risk:
$68M in potential loss of drugs in
inventory due to waste, theft or
loss.

Next steps: (i) Implement VA task force recommendations to improve
employee accountability for pharmaceutical security, (ii) Procure
and install bar code readers at all facilities to implement the mainte
nance of a perpetual medical supply inventory system (requires ad
ditional 1994 funding), (iii) In 1995, conduct post-implementation
evaluation of new system's effectiveness.

222

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

DEPARTMENT OF VETERANS AFFAIRS—Continued

High Risk Area

Progress to Date and Next Steps

VHA: Health care facilities construc
tion planning process lacks design
and performance standards.
1993 budget provides $493M for fa
cility construction. At risk: $50M
in additional unnecessary costs,
cost overruns, or facilities exceed
ing actual needs.
Departmental internal management
controls program weak.
VA budget exceeds $33.5B. At risk:
assurance that funds and oper
ations are adequately protected
against fraud, waste and abuse.

VHA: Physician
equate.

screening

inad

1993 budget included $14.6B for Vet
erans Health Services. At risk: in
adequate assurance that VA pa
tients are treated by qualified phy
sicians.

Facilities Program is developing an overall systemic approach to con
struction planning to improve efficiency and effectiveness, based on
facility planning standards. Construction planning models have
been developed and tested, and are now in use in all field facilities.
IG has concerns about the effect of a recent reorganization and the
absence of eligibility data by service area as an analytical element in
the construction planning model.

Assessment

Investment to
Correct High
Risk Area (m
thousands of
dollars)
1993
Request

1993
Enacted

290

Next step: Conduct post-implementation evaluation. No 1994 funding
required.

CFO has assumed responsibility for program and put in place key ele
ments for a potentially effective program. Implementation of auto
mated management control system to monitor and manage informa
tion on corrective actions, required reviews, etc., is scheduled in
1993.
Next steps: (i) Implement action plans to effect improvements in the
Department's programs and promote integrity of operations; and (ii)
ensure effectiveness of automated system. Continued funding re
quired in 1994.
Policies and procedures have been developed and implemented in
cluding cross-checks of key data, certifications of State medical
boards, and a template folder for securing and filing standard ref
erence data on physicians by VA centers. All milestones, and valida
tion of corrective actions through on-site reviews in regional offices,
have been completed. Other internal controls have been established
to ensure long-term viability of corrective actions. OIG audit report
(September 1992), surveying 20 medical centers, Headquarters and 4
regional offices, found substantive compliance with new procedures
and concluded that physician screening was no longer a material
weakness. DELETED FROM HIGH RISK LIST-

ENVIRONMENTAL PROTECTION AGENCY

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Agency financial system does not
provide reliable data or support
accounting for receivables.
Accounts receivable, as of September
1992, were $238M. At risk: assur
ance that these funds are ac
counted for in an accurate and
timely fashion.

Enhancements to the core financial accounting system have been im
plemented to improve accountability, general ledger control, and ac
counts receivable accounting. Efforts are now underway to imple
ment general ledger reconciliation. Modifications to the accounts re
ceivable module are in progress. These will provide needed capabili
ties to record receivables, interest due, and collections. Additional
improvements are needed to improve the accuracy of accounts re
ceivable.

Next steps: Complete general ledger data reconciliation, and revise
policy and procedures for recording financial transactions in the sys
tem in 1993. EPA will reallocate an additional $94,000 in 1993 for
system enhancements to provide better support for determining and
collecting accounts receivable. No additional funding is required for
1994.

1993
Enacted
20

12. HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

223

ENVIRONMENTAL PROTECTION AGENCY—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Superfund: Program lacks adequate
controls to ensure timely cleanup
of National Priorities List (NPL)
sites and consistent management
of the Alternative Remedial Con
tracting Strategy (ARCS) contracts.

1993 Budget includes $1.574B for
Superfund. At risk: environmental
safety, and assurance that contract
funds are being spent efficiently
and effectively.

EPA reports correction of the over fifty problem areas identified in the
1989 Management Review of the Superfund Program. Regarding ac
celerating cleanup of NPL sites, in 1992, EPA: (i) implemented pilot
projects for standardizing the remedial planning process; (ii) estab
lished policy allowing remedial design to begin prior to entry of the
consent decree involving potentially responsible parties; and (iii) es
tablished aggressive cleanup targets through the year 2000. For
ARCS contract management, EPA: (i) established regional manage
ment teams to review the ARCS award fee process; (ii) established
policy for the distribution of work between the Army Corps of Engi
neers and ARCS; (iii) completed an ARCS level of effort capacity
projection model; (iv) established requirements for independent gov
ernment cost estimates; and (v) created an on-line database to track
ARCS obligations and expenditures.

5,450

1993
Enacted

5,450

Next steps: In 1993, action items to accelerate cleanup include (i) de
veloping guidance to standardize the remedial planning process; (ii)
developing procedures to expand the flexibility of design contracts;
and (iii) implementing policy to permit remedial design to begin
prior to entry of the consent decree and improve accounting. For
ARCS contract management, action items include (i) developing
guidance for establishing independent cost estimates; (ii) issuing
final design scoping guidance and revised cost estimating tools; (iii)
streamlining the award fee process; and (iv) conducting an evalua
tion of quality of program management and remedial work. No ad
ditional resources will be required in 1994.
Agency Contract Management: persist
ent, widespread problems in con
tract management.

1993 budget includes $1.2B for con
tracting. At risk: environmental
safety, and assurance that contract
funds are being spent efficiently
and effectively.

EPA has established a task force to review and determine the scope of
its management problems, and published a report, "Contract Man
agement at EPA: Managing Our Mission," (June 1992). The report
delineates problems and recommends actions. As part of its reexam
ination of contract management practices, EPA (i) has established
Senior Procurement Officials within each office and region; (ii) has
required contract training for all SES employees; and (iii) is reexam
ining resource allocations for contract management.

Next steps: Implement corrective actions in the following areas: (i) or
ganizational standing of agency procurement functions; (ii) agency
oversight of contractor cost and performance; (iii) management and
program accountability, (iv) resource allocation, and (v) procure
ment training. Additional resources may be required in 1994.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request
NASA financial accounting systems
are outdated, labor intensive, and
not integrated agencywide; weak
funds control over contractors.
NASA systems process $15B annu
ally. At risk: assurance that these
funds are being properly ac
counted for in an accurate and
timely fashion.

NASA's financial accounting systems do not comply with the require
ments of OMB Circular A-127 for a single, standard, integrated
agency system. Decision to meet the jieed for strong financial con
trols made by top management. Development of a standard, inte
grated NASA Accounting and Financial Information System
(NAFIS) to replace nine installation and six agencywide systems
now underway. Functioned requirements documents and system/
software specifications completed. Preliminary design review com
pleted October 1992.
Next steps: (i) Design work to be completed by July 1993. (ii) Coding
and testing to be completed by October 1994. (iii) Installation at
NASA Centers to begin in September 1995 (requires continued
budgetary support).

13,679

1993
Enacted

13,679

224

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION—Continued

High Risk Area

Progress to Date and Next Steps

NASA contract and subcontract ad
ministration and oversight inad
equate.
92 percent of NASA's annual budget
spent on contractors ($13.5B in
1993). At risk: $200-500M, rep
resenting potential overpayments
to contractors through erroneous
or fraudulent billings.

Assessment

Inadequate oversight over prime contractors has resulted in overpriced
subcontracts with excessive profits. Insufficient review of mission
support contractors and subcontractors has caused vulnerability to
mission failure and financial loss. Aggressive corrective action plan
developed following OMB/NASA review team report. NASA has
taken key actions to (i) improve training and staffing, and step-up
contract audit requests to the Defense Contract Audit Agency; (ii)
establish a new contract management division to monitor corrective
actions; (iii) implement the first phase of a new Defense Logistics
Agency billing system to ensure accountability for contract audits;
and (iv) install an improved system of oversight and controls to
identify contract management problems earlier and more effectively.
Authorized ceilings for NASA procurement offices have been in
creased by 45 FTE to date (despite an agencywide hiring freeze).

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

8,171

Next steps: (i) Continue expansion of contract management training
program, (ii) Complete implementation of new procedures for vali
dating DoD billings at NASA centers, (iii) Complete staffing aug
mentation plans at all NASA centers by the end of 1993. (iv) Vali
date effectiveness of final corrective actions through a full cycle of
Procurement Management Surveys at all NASA centers by 1994. Ad
ditional funding is required in 1994.
NASA environmental management
and pollution cleanup need prior
ity attention.
Since 1988, over $100M has been
spent on environmental cleanup.
At risk: health and safety of
NASA employees and the public.

The lack of a cohesive agencywide plan and approach has resulted in
non-uniform programs at NASA Centers. These have in many cases
not fully addressed all components of the environmental program.
NASA has developed an environmental remediation program and
has made progress in the identification of hazardous waste sites,
and the implementation of a multi-year program for site character
ization and cleanup. ADDED TO HIGH RISK LIST.

Next steps: NASA now needs to (i) identify potential hazardous waste
sites; (ii) implement an agencywide environmental strategy; (iii) es
tablish a NASA Environmental Management Council; and (iv) com
plete environmental self-assessments at major facilities. Funding will
be required in 1994 to implement NASA's environmental strategy.

AGENCY FOR INTERNATIONAL DEVELOPMENT

High Risk Area

AID financial management systems
and operations are inadequate.
Total obligations processed by AID/
Washington operations are over
$4B annually. At risk: assurance
that these funds are being ac
counted for in an accurate, timely,
and useful fashion.

Progress to Date and Next Steps

AID's strategy includes developing a new primary accounting system
and instituting management improvements in payments operations.
In the systems area, AID completed analyses of 5 of 8 business areas
identified in the Financial Management Strategic Information Sys
tems Plan (FMSISP), and completed a cost/benefit analysis for sys
tem design alternatives. To improve payments operations, AID re
duced centrally-managed advances, and implemented electronic cer
tification.
*
Next steps: In systems development, (i) analyze the remaining three
business areas in the FMSISP, and (ii) evaluate specific system alter
natives. Future funding needs will be based on this evaluation. In
payments operations, (i) introduce additional desk procedures, (ii)
conduct project officer training, and (iii) perform management con
trol reviews.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

3,830

3,791

12.

225

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

AGENCY FOR INTERNATIONAL DEVELOPMENT—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

AID audit coverage of contractors
and grantees is inadequate.
AID has not obtained adequate audit
coverage of overseas projects
amounting to hundreds of millions
of dollars. At risk: potential mis
use of funds by contractors and
grantees.

AID automated systems which con
tain sensitive information are not
adequately protected against dis1asters.

AID's new Audit Management and Resolution Program (AMRP),
when fully implemented, will ensure appropriate audit coverage of
recipients of AID funds. Specific responsibilities have been assigned
to missions, the Office of Procurement, AID bureaus, and the IG.
Guidance on implementing AMRP was finalized in April 1992. The
joint OMB/AID SWAT Team report made additional recommenda
tions relating to contracting and audit.

1993
Enacted

800

840

AID is implementing both technical and procedural improvements to
protect its ADP systems. In 1992, AID: (i) implemented and tested
long-term disaster recovery service for all mainframe functions, in
cluding payroll and personnel processing; (ii) opened an off-site
tape storage facility; (iii) installed anti-viral software; (iv) published
new policies on password management and classified processing;
and (v) conducted risk analyses for three basic systems platforms.

889

456

Several recent reviews of AID operations have helped AID better de
fine its management improvement objectives, including improved
program monitoring and oversight. In July 1992, an AID/OMB
SWAT Team issued 30 recommendations to strengthen AID's man
agement of staff, projects and programs. AID developed an action
plan to carry out these recommendations.

7,000

7,877

Next steps: Implement SWAT Team recommendations: (i) revised pol
icy guidance on project assistance; (ii) strengthened internal control
process as it relates to grant and contract audits; (iii) maintenance of
a comprehensive inventory of required audits; and (iv) a shift of pri
mary responsibility for scheduling audit coverage from the IG to the
Office of Procurement. Plans call for the IG to assess the effective
ness of AMRP one year after the program is implemented. Appro
priate 1994 funding is required to implement SWAT Team rec
ommendations.

1993 budget for information re
sources management is approxi
mately $20M. At risk: assurance
that this investment and AID data ; Next steps: (i) Evaluate whether adequate action is being taken to im
are adequately protected from loss
plement recommendations made in risk analysis reports, (ii) Revise
due to disasters.
AID Handbook to include new security policies, (iii) Implement nec
essary changes to recovery service as regular testing continues. 1994
funding is required to improve network security.

AID cannot provide assurance that
its programs are being properly
monitored, and that it is meeting
appropriate standards for account
ability.
Total 1993 AID budget is approxi
mately $7.3B. At risk: assurance
that these funds are being spent
efficiently and effectively.

Next steps: Continue to (i) implement SWAT Team recommendations
relating to personnel, contracting, audit and evaluation; (ii) con
centrate programs in fewer countries; and (iii) focus country pro
grams on fewer objectives. Implementation of SWAT Team rec
ommendations will require appropriate staff and contractual fund
ing in 1994.

FARM CREDIT ADMINISTRATION

High Risk Area

Inadequate financial systems and
property controls.

FCA processed over $136M in collec
tions for themselves and the Farm
Credit System Insurance Corpora
tion during 1992. At risk: lack of
adequate controls places all of
these resources at risk.

Progress to Date and Next Steps

FCA financial systems are not integrated, lack fundamental controls,
and do not conform with OMB core requirements. Progress reported
in 1992 was inadequate. Progress previously reported in 1991 was
overstated by FCA. Further in-house development is doubtful, and
FCA is exploring external options for buying accounting services.
Project managers were replaced during 1992. OMB assessment is
that 1993 management plans are unrealistic.

Next steps: OMB and Treasury team will perform an on-site review to
determine most appropriate strategy and provide technical assist
ance to develop strategic plan. 1994 funding requirements unknown.

Assessment

Investment to
Correct High
Risk Area (in
thousands of
dollars)
1993
Request

1993
Enacted

310

BUDGET BASELINES HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

226

FEDERAL EMERGENCY MANAGEMENT AGENCY

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request

Internal control program is not fully
developed and implemented.
1993 new budget authority for
FEMA is $827M, including flood
and crime programs. At risk: as
surance that these funds are ade
quately protected against fraud,
waste and abuse.

FEMA is currently revamping its entire Management Control Program
to address significant weaknesses identified by the FEMA Inspector
General, OMB and FEMA's Office of Financial Management (OFI).
This will be a long term effort (as reflected in FEMA's 5-Year Finan
cial Management Plan).

1993
Enacted

350

300

900

300

In 1992, FEMA (i) centralized activity by delegating to the newly ap
pointed CFO responsibility for day-to-day administration and oper
ation of . the Management Control Program; (ii) defined principles
and responsibilities for management controls; (iii) issued Part I of an
agency Handbook in draft (for use in 1993); (iv) conducted compli
ance testing in Headquarters and the ten regions in six financial
areas; (v) documented specific weaknesses related to the Financial
Management Program; and (vi) prepared reviews of individual as
surance letters and supporting documentation. Although FEMA has
made progress in 1992, agencywide implementation of the Manage
ment Control Program has not occurred. The 1993 Management
Control Plan has not yet been developed.
Next steps: (i) The 1992 FMFIA report will document specific material
weaknesses related to the Financial Management Program, (ii) In
1993, the CFO plans to prepare and implement an agencywide Man
agement Control Plan, (iii) OFI is working on Part II of the Manage
ment Control Handbook, and training is planned for agency staff in
1993. Funding continues to be required in 1994.

Financial Management Systems: FEMA
financial/accounting systems are
not integrated. They are a collec
tion of independently designed
systems held together through a
series of manual and automated
interfaces.
At risk: assurance that FEMA's in
vestment in financial systems re
sults in an integrated system that
meets all CORE requirements, and
provides accurate and useful fi
nancial information.

FEMA is currently addressing short term financial systems fixes (e.g.,
implementation of the U.S. Department of Education general ledger
package). The necessary customizing of this package to bridge with
other FEMA systems is almost complete; full implementation is
planned for 1993. However, FEMA's maintenance of its financial
management system and Education's general ledger package will be
on an obsolete ADP platform. FEMA needs to address a longer term
perspective for overcoming financial system deficiencies.

Next steps: FEMA plans to fully convert to the new General Ledger
System in February 1993, and produce agency year end financial re
ports using the new system in September 1993. This requires contin
ued budgetary support in 1994. FEMA also plans to address the
longer term through (i) performing a data requirements analysis; (ii)
evaluating available integrated financial management system soft
ware packages designed to meet Federal systems standards; and (iii)
deciding on an ADP platform to allow the Financial Management
System to be fully integrated into the FEMA Wide Area Network.

12. HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

227

GENERAL SERVICES ADMINISTRATION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Information Resources Management
Service (IRMS): Oversight of GSA
major information systems. This
encompasses policies and proc
esses established by GSA's IRM
oversight organization to enforce
good systems life cycle manage
ment practices.

IRMS budget: $99M. At risk: sub
stantial investments in systems
which may not perform as in
tended.

Federal Supply Service (FSS) and Infor
mation Resources Management Serv
ice (IRMS): Multiple Award Sched
ule (MAS) susceptible to excessive
prices and inadequate central
management of agency ordering
practices by GSA.

MAS program valued at $5B annu
ally. At risk MAS prices higher
than those commercially available
and higher goverment costs.

GSA has taken numerous actions to strengthen its quality assurance
program. For example, GSA has incorporated, into the life cycle
management of all major systems development efforts, key require
ments and principles: top management involvement, experienced
project managers, modularly designed and implemented systems,
reliance on standards, and use of conventional technology. GSA
must now address specific improvements in security, project man
agement, and oversight controls and implementation. This approach
will be demonstrated in specific applications, such as the Public
Building Service Information Service (PBS/IS), to be completed in
1994.

1993
Enacted
800

800

Next steps: GSA IRMS needs to: (i) establish standards for technology
throughout the agency, such as communications protocols and user
interfaces; (ii) provide experienced project management assistance;
and (iii) deliver common use cross-cutting applications to GSA orga
nizations. Continued funding is required in 1994.
Under the MAS program, GSA provides Federal agencies with a sim
plified process for obtaining needed equipment, supplies and serv
ices at prices associated with volume buying. Evidence suggests,
however, that the government may be paying excessive prices due
to (i) problems with contractor data, (ii) agencies improperly using
the schedule program, and (iii) lack of latitude given to agencies to
choose the most cost-effective option. To ensure that the government
receives price discounts resulting from both volume purchasing and
ongoing competition, changes are needed in the overall policy gov
erning the program and to the regulatory base upon which it is
founded. ADDED TO HIGH RISK LIST.

NATIONAL LABOR RELATIONS BOARD

High Risk Area

NLRB: poor accounting system.

Accounting system processes $162M
annually. At risk: assurance that
funds are being accounted for in
an accurate and timely fashion.

Progress to Date and Next Steps

OMB and the OIG performed a joint review of the new accounting
system, determining that the software installation was successful,
but additional work on data, procedures, and documentation was
needed. NLRB has completed actions on all recommendations made,
except for two which are still in process.

Assessment

Next steps: Complete updates to system documentation and complete
reconciliation of other advances. No additional resources will be
needed in 1994.
NLRB inventory system not reconcil
able.
Capitalized property valued at
$618,000. At risk: assurance that
these assets are adequately pro
tected against loss and theft.

In 1991, NLRB prepared an inventory of capitalized property, rec
onciled with accounting system records, and implemented verifica
tion procedures between procurement and finance. In 1992, the OIG
validated corrective actions made by NLRB in this area. DELETED
FROM HIGH RISK LIST.

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

228

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

OFFICE OF PERSONNEL MANAGEMENT

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Federal Employees Health Benefits Pro
gram (FEHBP): Inadequate internal
control standards and oversight of
insurance carrier operations.
FEHBP totalled $17B in 1993. At risk:
higher premium costs to employ
ees and agencies as a result of ex
cessive payments to carriers and
providers.

FEHBP management control standards and oversight of insurance car
riers' performance require strengthening. Five key problem areas
identified: insurance contract administration, enrollment and pre
mium reconciliation, administrative sanctions, audit resolution, and
pricing of community rated plans. In 1992, (i) on-site reviews were
intensified; (ii) new regulations were issued; (iii) a pilot project was
undertaken to share data on enrollees between agencies and carriers;
(iv) an administrative sanctions program was established; and (v)
audit resolution problems were mostly solved. The insurance audit
cycle was identified as a new problem area and key component for
improving insurance contract administration.

1993
Enacted

Next steps: (i) Target those operations most vulnerable to fraud and
abuse and increase audit coverage, (ii) Initiate the on-site contract
officer pilot, (iii) Implement cost accounting standards, (iv) Issue
carrier internal control standards. Actions to be completed in all
areas by 1994. Additional funding will be required in 1994.

PEACE CORPS

High Risk Area

PC lacks an effective internal con
trols program at overseas posts.

1993 budget for overseas operations
is $146M. At risk: assurance that
these expenditures are adequately
protected against fraud, waste and
abuse.

Headquarters financial management
system is antiquated.
Accounting system expected to proc
ess $218M in 1993. At risk: assur
ance that funds are being ac
counted for in an accurate and
timely fashion; inefficiencies may
be as high as 5% of outlays.

Progress to Date and Next Steps

PC (i) has implemented a program to review internal controls at over
seas posts and ensure that problems are corrected; (ii) has improved
management of overseas imprest funds; and (iii) is using additional
1993 funds to develop and implement new personal property man
agement system.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

125

324

300

660

Next steps: (i) Acquire equipment for new property management sys
tem by June 1993. (ii) Biegin training users and implementing system
by September 1993. No additional funding is required in 1994.

PC (i) implemented a new headquarters financial management system,
using an "off-the-shelf" software system, with no major problems;
and (ii) identified desirable enhancements to the new system to
make it more user-friendly and reduce the number of input errors.

Next steps: (i) Complete conversion of historical data from old to new
system by the end of 1993. (ii) Evaluate options for improving the
integration of overseas accounting with the headquarters system,
(iii) Implement enhancements identified by users. OIG will review
new system implementation. 1994 funds are needed to provide sys
tem support, enhancements and training.

12.

229

HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

PENSION BENEFIT GUARANTY CORPORATION

High Risk Area

PBGC: weaknesses exist in all major
financial systems.

Poor controls exercised over $790M
premium income during 1992. At
risk: proper billing of billions of
dollars in insurance premiums.

Progress to Date and Next Steps

Serious weaknesses have included: (i) premium subsystems unable to
issue bills since 1988; (ii) inaccurate reporting of the actuarial liabil
ity included in financial reports (due to lack of proper supporting
data systems); and (iii) an antiquated core accounting system which
does not efficiently produce reports. In 1992, manual billings were
issued for old overdue premiums and an RFP issued to purchase a
modem billing and collection system. Consultants have assisted
PBGC analysts in implementing major improvements in computing
and documenting actuarial liabilities. Substantial work remains to be
done, particularly in current premium and core accounting systems
which still are not functioning properly.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)

1993
Request

1993
Enacted

4,874

Next steps: (i) A new premium system must be selected and cus
tomized. (ii) Requirements for PBGC's core financial system must be
completed as the basis for addressing system weaknesses. Sustained
progress is dependent upon hiring permanent and competent
project leaders, as well as continuing management commitment.
Continued improvements in the core accounting system and the
new premium system require resources in 1994.

RAILROAD RETIREMENT BOARD

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Inadequate management controls
and inability to certify the ade
quacy of controls for the Board's
biggest benefit program.

$7.3B in benefits, 950,000 bene
ficiaries in 1990. At risk: 59,500
backlogged cases of inaccurate in
surance benefit payments; 22,500
inaccurate tax statements; unre
covered debt owed RRB.

In 1990 OMB led a management review of RRB resulting in 42 find
ings and 104 recommendations. RRB and OMB negotiated a $13.9
million 5-year "contract" to correct past problems. The plan linked
specific reductions in backlogs and other problems with specific re
source commitments. Through June 1992, RRB was ahead of sched
ule for reducing backlogs in 7 of the 8 identified categories, and on
schedule for the eighth. Combined record correction and tax state
ment backlog reduced from 54,088 to 22,543 cases. RRB surpassed its
1992 goals in collections of past due monies through income tax re
fund offset and private collection agencies. RRB is also 6 months
ahead of schedule in completing RRB/IRS reconciliations.

Next steps: Continue OMB and RRB implementation of the 5-year con
tract and funding commitments in 1994.

3,758

1993
Enacted

3,690

230

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

SECURITIES AND EXCHANGE COMMISSION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

SEC management of ADP systems
development projects needs im
provement.

1993 Budget includes $23.5M for
SEC computer systems develop
ment projects. At risk: assurance
that this expenditure will result in
systems that produce accurate,
timely, and useful information.
SEC lacks a long term disaster recov
ery plan for computer operations.

At risk: assurance that SEC data are
adequately protected, and agency
can perform its mission in the
event of a disaster.

SEC is taking steps to strengthen the management of systems develop
ment projects. In 1992, (i) SEC's Office of Information Technology
was reorganized to integrate the Electronic Data Gathering, Analy
sis, and Retrieval (EDGAR) system with other systems within the
SEC; (ii) a new Chief Information Officer was appointed; and (iii)
ADP Contract Guidelines were issued and distributed to staff. How
ever, work on a Strategic IRM Plan is just starting.

1993
Enacted

200

3,700

1,900

Next step: Complete draft IRM Plan by May 1993. No additional re
sources are required for 1994.

SEC is developing and implementing a comprehensive computer dis
aster recovery plain. In 1992, a plan was approved which consists of
a single facility with multiple sites. The agency leased a data oper
ations center and installed a surplus EPA computer as their main
computer (freeing an existing computer for use as backup). Con
gress' cut of the President's 1993 request resulted in OMB appor
tioning $1.7M from excess fee collections to restore this activity to
an appropriate level.
Next steps: Complete the conceptual design and system architecture
for disaster recovery; and bring the second computer site on-line
and test it. No additional development funding will be necessary in
1994.

SMALL BUSINESS ADMINISTRATION

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Small Business Investment Company
(SBIC)
management/liquidation
activities inadequately supervised.
1993 appropriation supports nearly
$200M in SBIC guarantees; out
standing preferred stock and guar
anteed debentures total $1.5B. At
risk: $518M, representing the size
of the current liquidation portfolio.

A variety of corrective measures have been instituted. These include
(i) staffing realignments and increased hiring (from 34 to 68 posi
tions); (ii) improved internal control systems; (iii) regulation and
policy issuances; and (iv) proposed organizational changes. New
staff have been trained and casework backlogs are being worked off
(currently 9 cases pending liquidation decision compared to 50 in
1989). Computerized case control management information system
developed and in place. Special financial, analytic, and review proc
esses developed. A broad-based Advisory Council comprised of in
dustry personnel has been established to provide advice. Recoveries
in 1992 were over $67M, more than double the amount recovered in
any single prior year. 1993 appropriations bill transferred $2M and
30 staff from OIG to SBIC program office for examinations in addi
tion to other management investment funds appropriated.

Next steps: Program oversight and review and validation of Standard
Operating Procedures (SOP) implementation planned for 1993. Con
tinued S&E funding in 1994 will be required to maintain new posi
tions and transferred examiners.

750

1993
Enacted

750

12. HIGH RISK AREAS FOR MANAGEMENT IMPROVEMENT

231

SMALL BUSINESS ADMINISTRATION—Continued

High Risk Area

Progress to Date and Next Steps

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

Small Business Development Centers
(SBDCs) lack control over program
income.

1993 appropriation is $67M for
SBDCs. At risk: assurance that ap
propriated monies are protected
from fraud, waste and misuse by
grantees.

Due to restrictive language in its Congressional appropriations (19881992), SBA has been prohibited from publishing regulations and op
erating procedures with respect to SBDCs, and accordingly pre
cluded from conducting adequate program oversight. SBA has,
within its administrative discretion, corrected 4 of 5 related material
weaknesses in the SBDC program. Newly enacted legislation (the
Small Business Credit and Business Opportunity Enhancement Act
of 1992) now requires SBA to submit proposed regulations for the
SBDC program to Congressional committees by March 3, 1993. Reg
ulations have been written which will define program income and
set internal control and accounting guidelines.

1993
Enacted

230

Next steps: Congressional review of proposed regulations and lifting
of restriction to enable SBA to publish the regulations. No additional
resources required in 1994.

Surety Bond Guaranty Program (SBGP)
has weaknesses in its system of
management control.

1993 level is $1.5B for SBGP; out
standing share of bonds issued to
tals $896M. At risk: $24.4M in po
tential claims.

SBA's strategy is to strengthen operating procedures, automated man
agement information systems, and audit followup processes. A new
claims tracking system has been designed and is now operational.
On-site reviews are being conducted and some SOPs revised. Pro
gram staff has been reorganized and regional office workload as
sessed and analyzed. According to SBA, budgetary constraints have
limited to some degree SBGP staff increases, program reviews and
systems work.
Next steps: SBA to (i) complete redesign of mainframe; (ii) continue
on-site reviews; and (iii) complete revision and publication of re
maining SOPs. Resources will be required in 1994 to address these
needs.

U.S. INFORMATION AGENCY

High Risk Area

USIA financial management systems
and operations are inadequate.

The USIA domestic core accounting
system processes approximately
$960M of the $1.2B appropriations
total; the rest is processed through
the Department of State's overseas
accounting system. At risk: assur
ance that funds are being ac
counted for in an accurate and
timely fashion.

Progress to Date and Next Steps

In 1992, USIA (i) completed a Strategic 5-year Financial Management
System Plan; (ii) implemented systems to account for personal prop
erty and real property; (iii) installed a commercial software package
to support small purchasing and contracting activities; and (iv) im
plemented a new on-line, front-end, obligations system within the
core accounting system.

Next steps: (i) Integrate accounts payable, accounts receivable and
travel advance systems within the core accounting system, (ii) De
velop an information systems architecture, (iii) Perform an analysis
to determine whether to replace or upgrade the existing accounting
system and identify future funding requirements.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

1,500

232

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

UNITED STATES SOLDIERS' AND AIRMEN'S HOME

High Risk Area

Financial management controls weak
and inaccurate financial data.

Over $150M in funds managed. At
risk: assurance that financial trans
actions are accounted for in an ac
curate and timely fashion.

Progress to Date and Next Steps

Despite being a small agency, USSAH manages nearly $150 million in
funds, some of which are the small personal accounts of resident
veterans. To ensure a strong, accurate and timely financial manage
ment system, USSAH currently receives accounting cross-servicing
from Treasury, Financial Management Service (FMS), for general
ledger accounting and trust fund accounting using the accounts re
ceivable subsystem. Congress' cut of the 1993 funding request has
resulted in delay of the remaining corrective actions.

Next steps: Although most corrective actions have been taken, imple
mentation of the inventory, procurement and member billing inter
faces must be completed. Continued budgetary support is required
in 1994. Independent validation of the new system is also required.

Assessment

Investment to
Correct High
Risk Area (In
thousands of
dollars)
1993
Request

1993
Enacted

693

Part Four.
SPENDING CONTROL OPTIONS

233

13.

Budget Process Reform

235

13. BUDGET PROCESS REFORM
Significant improvements in the budget proc
ess have been made in the last few years. They
result primarily from the changes made by the
Budget Enforcement Act of 1990 (BEA). Discre
tionary spending has been held to the spending
limits imposed in the BEA (as adjusted for emer
gency spending and other permitted items). The
"pay-as-you-go" rules ensured that any legis
lated increases in mandatory spending or
decreases in receipts were offset. In fact, the esti
mated net effect of pay-as-you-go legislation en
acted through the end of the 102nd Congress
is a reduction in the deficit for 1993. Federal
credit programs are now budgeted and con
trolled on a basis that permits meaningful com
parisons with the cost of other programs.
However, many of the improvements in the
budget process are temporary. The BEA will ex
pire after 1995 unless it is renewed. The separate
caps on defense, international, and domestic dis
cretionary spending categories will expire after
1993. For 1994 and 1995, there will be a cap
only on discretionary spending as a whole, and
the new President will have the option of impos
ing binding maximum deficit caps for those
years. Retention and extension of all of the BEA
improvements to the budget process are critical
for effective control of the Federal budget.
Merely extending the BEA, however, will
leave major budgetary issues unresolved. There
is a need for further reform, and some specific
proposals are summarized below. Most of them
have been made before. Some of them were in
cluded in legislation proposed by the Adminis
tration or introduced by members of Congress.
Unfortunately, many of the proposals never
received serious consideration in Congress.
Meanwhile, the problems they were intended to
address worsen.

Capping the growth of "mandatory” spend
ing.—The growth of mandatory spending pro
grams should be subject to regular review as
part of the budget process. The BEA requires
that legislation creating new entitlements and
other mandatory spending programs, or legis
lated changes to existing programs, be paid for
by reducing other mandatory spending or in

creasing receipts. However, there is no mecha
nism for controlling the growth in spending for
these programs that occurs automatically under
existing law. The Administration has proposed
to cap the growth in mandatory spending except
Social Security. The cap would allow for:

• inflation, and

• program-by-program growth in beneficiary
populations, and
• an extra allowance during the first two
years to allow an orderly transition.
Projected growth above the cap would trigger
a reconciliation process in which savings could
be achieved by program reforms. Failure of the
reconciliation process to achieve the necessary
savings would trigger a sequester of mandatory
spending programs in the amount necessary to
hold mandatory spending growth to the capped
level. Under the Administration's proposal, So
cial Security would be exempt from any such
sequester. Related detail is presented in Part
Four, Chapter 15, "Options for Implementing
the Mandatory Cap."

Mandatory spending reauthorization.—In
addition to limiting their growth, periodic reau
thorization should be required for most manda
tory spending programs.

Balanced budget amendment.— Stemming the
steady build-up of the national debt is especially
important for the generations to come. Those
citizens, who will bear the burden of this mount
ing debt, are not adequately protected. The cur
rent budget system seems incapable of balancing
the budget. Worse, it uses debt to finance exces
sive current consumption rather than investment
in the future. A constitutional amendment is
needed to protect the rights of future citizens.
A balanced budget amendment must include
safeguards against tax increases that are counter
productive to economic growth. In addition, a
budget amendment must be reinforced by a
comprehensive agenda for renewal and the
means to bring the growth of "mandatory"
spending under control.
237

238

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Line-item veto.— The current system promotes
special interest spending and affords die Presi
dent little opportunity to control it. The Presi
dent, as representative of the general interest,
should have the power to strike from legislation
provisions that reflect only narrow interests. As
with any other veto, a veto by the President
of an item in a spending or revenue bill would
be subject to override by a two-thirds vote in
each house of Congress. This essential tool is
available to most State Governors, who have
used it successfully without unduly shifting the
balance of power between the executive and the
legislature.

Enhanced rescission authority.—The rescission
mechanism in current law is ineffective. If the
President determines that all or some of the
amount provided in an appropriations item
should not be spent, the President must ask
Congress to "rescind" it, in accordance with the
rules of the Impoundment Control Act of 1974.
Proposed rescissions do not become effective un
less approved by both Houses of Congress with
in 45 days. If the rescission is not approved,
the funds must be spent. This means that the
Congress can defeat the President's rescission
proposals by simply ignoring them.
In practice, most of the rescissions proposed
by Presidents are defeated by inaction. During
this Administration, the President transmitted
169 rescission proposals that would have re
duced spending by $13 billion. Of those, 25 re
scissions were approved, reducing spending by
$2 billion, or 15 percent of the amount that was
proposed.

A line-item veto amendment to the Constitu
tion is needed for the reasons discussed above,
and it would be the most effective solution to
the inadequacy of the current rescission proce
dures. However, absent such an amendment, the
President has supported legislation to enhance
the existing rescission procedures by requiring
an up-or-down vote in Congress on Presidential
rescission proposals.

Taxpayer check-off.—The Administration has
supported an amendment to the Internal Reve
nue Code to allow taxpayers to designate up
to 10 percent of their tax liability for debt retire
ment. The BEA would be amended to ensure
that the total of the amounts designated by tax
payers would be reflected in reduced budget
spending limits.

Discretionary spending reauthorization.—The
Administration supports an amendment to Con
gressional procedures that would ensure that
every discretionary program is reauthorized at
least once every five years.

Joint budget resolution.—Under current law,
the annual congressional resolution on the budg
et is a concurrent resolution, which does not
require the President's signature. The budget
resolution sets the limits for all subsequent legis
lation related to the budget—appropriations
bills, revenue measures, and reforms of manda
tory programs in reconciliation bills. Formal
Presidential involvement in negotiations on the
budget resolution should reduce the potential
for conflict between the Administration and the
Congress on individual bills, which typically
pass in the later stages of each session of Con
gress.

Instituting a regulatory budget.—The private
expenditures required by regulation have many
of the same economic effects as Federal budget
outlays. Most fundamentally, both regulation
and budget outlays divert private resources to
public purposes. In many cases, expenditures re
quired by regulation may be an alternative
means of achieving the same public policy objec
tives as budget outlays. For example, firms can
be required by regulation to treat their effluent
before dumping or, alternatively, public waste
water treatment facilities can be constructed by
direct expenditures of the Government. A fullydeveloped regulatory budget process would in
volve the President and Congress in setting
overall goals, ceilings, and allocations for the
costs of regulation to the private sector, just as
the present fiscal budget now allocates direct
Government spending. OMB has worked closely
with agencies to improve regulatory cost esti
mates, and some variants of regulatory budgets
have had small-scale applications or pilot tests.
As more experience is gained, they may be
applied more broadly and evolve toward one
integrated budget that includes regulatory cost
estimates along with the expenditure and deficit
calculations. This topic is discussed in more de
tail in Part Two, Chapter 6, "Regulatory Reform
and Program for 1993."
Budgeting for deposit, pension, and other
insurance.—The Government operates many in
surance programs, the largest being deposit in
surance and pension guarantees. Other major

13.

BUDGET PROCESS REFORM

programs insure crops, overseas private invest
ments, and veterans' lives. For most Federal
spending, cash-based budget authority and out
lays are good measures of the costs that the
Government incurs when it undertakes an activ
ity or makes a commitment. For insurance pro
grams, however, cash-based measures do not
provide a clear, timely measure of costs to the
Government. The Administration has proposed
to shift the accounting for insurance programs
from a cash basis to an accrual basis in an ac
counting framework similar to that used for
credit programs. The improved budget account
ing would better disclose the costs of continuing
existing programs unchanged and the additional
cost or savings of policy changes that are pro
posed. This proposal is discussed in more detail
in Part Three, Chapter 11, "Hidden Liabilities
Requiring Policy Correction."

239

Technical improvements in the Budget En
forcement Act.—As noted above, the original re
quirements of the BEA should be extended in
order to preserve the discipline it has brought
to the budget process. In addition, there are
many technical changes that should be made
in order to strengthen the process further and
close loopholes. Some examples are:
• Enact limits on total Federal direct loans,
loan guarantees, and on the cumulative total
of related subsidies.
• Make the definition of budget authority
consistent from program to program.
• Eliminate or limit most exemptions from se
questrations (while preserving the exemp
tion for Social Security).

14. Reductions in Low-Return
Discretionary Programs

241

14. REDUCTIONS IN LOW-RETURN
DISCRETIONARY PROGRAMS
In the 1993 budget, the President proposed
that over 4,500 projects be terminated or re
duced. These proposals were made to terminate
or reduce funding for programs that provide
very low returns on the dollars that taxpayers
are called upon to invest in them. Terminations
and reductions were also proposed to help make
possible funding increases, within the discre
tionary caps of the Budget Enforcement Act of
1990 (BEA), for programs with a much higher
priority.
Congress rejected almost all of these propos
als. For 1993, Congress rejected the proposed
termination of more than 3,300 projects worth
$3.3 billion and then provided funding for an
additional 351 projects worth $650 million. Con
gress also rejected proposed reductions in more
than 300 projects worth $6.2 billion. Despite
Congress' inaction on these proposed 1993 ter
minations and reductions, the Administration
continues to believe that, for the reasons dis
cussed below, these programs should be termi
nated or substantially reduced in 1994.
The programs and projects that the Adminis
tration proposes to be terminated in 1994 are
listed in Table 14-1. Examples of major reduc
tions proposed by the Administration are listed
in Table 14-2.

TERMINATIONS OF SUBSTANDARD
PROJECTS

Many projects that Congress directs Executive
Branch agencies to fund do not meet pro
grammatic standards established by Congress in
authorizing statutes or by published agency reg
ulations. These substandard projects are com
monly referred to as "pork" or "pork-barrel"
projects. Standards most commonly violated are:
• Requirements to use competitive procedures
in making grants and awarding contracts
are waived in order to fund legislatively
designated projects.
• Requirements to fund only projects of na
tional or regional importance are dis
regarded in order to fund projects of purely
local interest.

• Requirements that design work for construc
tion projects be significantly underway
(35-50 percent completed) to ensure that
funded projects can be executed on time
and within authorized funding levels are
disregarded.
The first part of Table 14-1 identifies examples
of such substandard projects, for which $431
million in budget authority was provided in
1992. The President's 1993 budget request pro
posed to eliminate new funding for such projects
in 1993. The Congress provided $121 million to
continue funding for existing projects in 1993.
The Congress also provided an additional $346
million for new starts of substandard projects.
For 1994, the adoption of a policy of not funding
projects that do not meet established pro
grammatic standards would produce $466 mil
lion in discretionary savings.

OTHER DOMESTIC DISCRETIONARY
PROGRAM TERMINATIONS

In addition to the proposed termination of
substandard projects, the President's 1993 budg
et request proposed terminating almost 4,000
other projects. Projects were proposed for termi
nation for a variety of reasons. Some can be
more effectively managed by either State and
local governments or the private sector. Others
have fulfilled their original missions and are no
longer needed. Still others duplicate more effec
tive Federal programs, cannot be afforded with
in available Federal resources, or are contrary
to established cost-sharing policies.
The second part of Table 14-1 provides a sum
mary listing of these projects. Of the $3.9 billion
proposed for termination, Congress provided
$3.2 billion in funding for these existing projects.
In addition, the Congress provided $0.3 billion
for congressional new starts of low-return
projects that were not recommended by Federal
agencies. For 1994, termination of these low-re
turn projects would yield $3.5 billion in discre
tionary savings.
243

244

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 14-1.

PROPOSED TERMINATIONS

(Budget authority; dollar amounts in millions)
1992 Enacted

1993 Request

1994 Proposed
Terminations

1993 Enacted

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Agriculture:
Earmarked Buildings and Facilities.......................
Extension Service: Special Grants ..........................

51
23

75
12

0
0

43
21

52
12

43
21

52
12

Subtotal, Agriculture ............................................

SUBSTANDARD PROJECTS

Energy: Earmarked Research Projects.......................

Housing and Urban Development: Special Project
Grants.............................. ...........................................

133

150

214

260

214

260

Transportation:
Federal Highway Administration..........................
Conrail Commuter Transition Assistance ............
Amtrak Corridor Improvement Loans..................

27
N/A
N/A

73
14
4

0
N/A
N/A

0
0
0

9
N/A
N/A

20
7
1

9
N/A
N/A

20
7
1

Subtotal, Transportation ......................................

Small Business Administration: Miscellaneous
Grants...........................................................................

Total, Substandard Projects.................................

261

431

321

466

321

466

842

229

740

217

740

217

107
42
30
12
4
3
3

37
20
11
6
4
2
14

0
0
0
0
0
0
0

105
37
29
15
6
2
7

30
17
10
7
19
1
16

105
37
29
15
6
2
7

30
17
10
7
19
1
16

115
4
15

20
2
2

0
0
0

120
4
0

21
1
0

120
4
0

21
1
0

Subtotal, Commerce..............................................

1,177

349

1,065

340

1,065

340

Education:
Student Financial Assistance...................................
Impact Aid ..................................................................
Other.............................................................................

N/A
N/A
N/A

228
139
196

N/A
N/A
N/A

0
0
0

N/A
N/A
N/A

241
125
188

N/A
N/A
N/A

241
125
188

Subtotal, Education...............................................

N/A

563

N/A

554

N/A

554

285
1,488
56

437
187
20

0
0
0

5
0
0

285
1,199
56

441
172
21

285
1,199
56

441
172
21

56
123
74
10

13
11
10
5

0
0
0
0

55
33
0
9

13
3
0
4

55
33
0
9

13
3
0
4A

OTHER DISCRETIONARY PROGRAMS/
PROJECTS

Commerce:
Economic Development Administration ..............
National Oceanic and Atmospheric Administra
tion:
Oceanic and Atmospheric Research ..................
Fisheries Assistance and Research.....................
Weather Service Local Assistance......................
National Ocean Survey Local Assistance .........
Facilities Construction..........................................
Program Support—Facilities ...............................
International Trade Administration.......................
National Telecommunications and Information
Agency:
Public Telecommunications Facilities Grants ...
Children's Television Endowment Fund..........
Tourism Disaster Grants..........................................

Health and Human Services:
Community Services Block Grant..........................
Untargeted Health Professions Assistance Grants
Mental Health Protection and Advocacy .............
State Formula Planning Grants for Dependent
care............................................................................
Mental Health Clinical Training ............................
Community Youth Activity Formula Grants.......
Trauma Care Demonstration Grants.....................

245

14. REDUCTIONS IN LOW-RETURN DISCRETIONARY PROGRAMS

Table 14-1.

PROPOSED TERMINATIONS—Continued

(Budget authority; dollar amounts in millions)
1993 Request

1992 Enacted

1994 Proposed
Terminations

1993 Enacted

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Demonstration Emergency Medical Services.......
Other............................................................................

14
49

5
29

0
0

14
49

5
40

14
49

5
40

Subtotal, Health and Human Services..............

2,155

716

1,700

698

1,700

698

N/A
N/A
N/A

574
227
50

N/A
N/A
N/A

0
0
-88

N/A
N/A
N/A

400
257
-24

N/A
N/A
N/A

400
257
-24

N/A
N/A
N/A

105
11
18

N/A
N/A
N/A

0
0
0

N/A
N/A
N/A

105
0
21

N/A
N/A
N/A

105
0
21

N/A

985

N/A

-88

N/A

759

N/A

759

N/A

N/A
N/A
N/A
N/A
N/A

7
6
5
4
3

N/A
N/A
N/A
N/A
N/A

0
0
0
0
0

N/A
N/A
N/A
N/A
N/A

5
12
0
4
2

N/A
N/A
N/A
N/A
N/A

5
12
0
4
2

Subtotal, Interior ...................................................

N/A

Justice: Mariel Cuban Grant Program.......................

N/A
50
0

8
6
0

N/A
0
0

0
0
0

N/A
0
N/A

8
0
1

N/A
0
N/A

8
0
1

N/A

1
1

5
2

0
0

1
1

1
3

1
1

1
3

Housing and Urban Development:
Public Housing New Construction........................
Indian Housing New Construction .......................
Flexible Subsidy Fund..............................................
Section 8 Moderate Rehabilitation Single Room
Occupancy..............................................................
Supplemental Assistance for Facilities..................
Congregate Services..................................................
Subtotal, Housing and Urban Develop.............

Interior:
Rural Abandoned Mine Program ..........................
Bureau of Indian Affairs: Business Development
Grant........................................................................
Bureau of Mines: Mineral Institutes......................
National Park Service: Urban Parks Grants.........
Navajo Rehabilitation Trust Fund .........................
Bureau of Indian Affairs: Direct Loans.................

Labor:
Job Training Partnership Act (JTPA) Set-asides ...
Bureau of Labor Statistics: Mass Layoff ...............
Training and Employment Services ......................
Mine Safety and Health Administration: State
Grants......................................................................
National Occupational Information Coordinating
Committtee.............................................................
Bureau of Labor Management: Relations Cooper
ative Program ........................................................
National Veterans Training Institute.....................
Bureau of Labor Statistics: Foreign Direct Invest
ment .........................................................................

Subtotal, Labor ......................................................

100

Transportation:
Federal Highway Administration..........................
Local Rail Freight Assistance Grants.....................

103
40

528
12

0
0

63
40

322
8

63
40

322
8

Subtotal, Transportation ......................................

143

539

103

330

103

330

Army Corps of Engineers: Water Projects and
Studies.........................................................................

168

228

Environmental Protection Agency:
Miscellaneous Low-Priority Projects .....................
Non-Competitively Selected Water Projects ........

31
21

36
16

0
0

42
33

53
52

42
33

53
52

Subtotal, Environmental Protection Agency....

105

National Aeronautics and Space Administration:
Advanced Solid Rocket Motor ...............................
Comet Rendezvous/Asteroid Flyby......................

1
1

315
11

0
0

1
0

195
0

1
0

195
0

246

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 14-1.

PROPOSED TERMINATIONS—Continued

(Budget authority; dollar amounts in millions)
1992 Enacted

1993 Request

1994 Proposed
Terminations

1993 Enacted

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Number
of
Projects

Budget
Author
ity

Space Test of Relativity Experiment......................
Miscellaneous University Research Projects ........

1
0

27
0

0
0

1
12

27
96

1
12

27
96

Subtotal, National Aeronautics and Space Administration ........................................................

353

777

222

Small Business Administration:
Small Business Development Centers ...................
Tree Planting..............................................................

56
N/A

61
16

0
N/A

0
0

56
N/A

67
16

56
N/A

67
16

Subtotal, Small Business Administration..........

1
5
185

41
17
14

0
0
0

16
0
0

1
1
185

44
5
14

1
1
185

44
5
14

187

Other Independent Agencies:
Interstate Commerce Commission.........................
District of Columbia Special Projects ....................
State Justice Institute ................................................
Commission on the Bicentennial of the U.S. Con
stitution ...................................................................
Subtotal, Other Independent Agencies .............

192

Total, Other Domestic Programs ..............................

3,990

3,949

-67

3,355

3,541

3,355

3,541

Total ................................................................................

4,251

4,381

-67

3,676

4,007

3,676

4,007

N/A indicates funding reduction not applied on a project basis.

MAJOR REDUCTIONS IN DOMESTIC
PROGRAMS

The President's 1993 budget proposed that
numerous programs be funded below the level
enacted for 1992. Programs were proposed for
reduction if they were either (1) of lower prior
ity and needed to be restrained in order to fund
higher priority programs; or (2) could be re
formed at a significant cost savings to the Fed
eral Government while still fulfilling their pur
pose.

Table 14-2 provides a summary listing of the
major reductions in domestic discretionary pro

grams proposed in the President's 1993 budget.
Reductions from the 1992 enacted level totaling
$11.5 billion were proposed; however, Congress
rejected $6.2 billion of these proposed reduc
tions. For 1994, the Administration again rec
ommends reducing these programs by the $6.2
billion previously rejected. Such reductions
would make possible increased investment in
productivity-enhancing programs within the
constraint of the caps on discretionary spending
established under the BEA.

14.

247

REDUCTIONS IN LOW-RETURN DISCRETIONARY PROGRAMS

Table 14-2.

PROPOSED MAJOR REDUCTIONS IN DOMESTIC PROGRAMS
(Budget authority; dollar amounts in millions)
Budget Authority

Agency/Bureau

Number of
Projects

1992
Enacted

1993
Request

1993
Enacted

1994
Proposed
Reductions

Agriculture: Cooperative State Research Service Special Research
Grants ...................................................................................................

133

Commerce:
National Oceanic and Atmospheric Administration...................
Decennial Census ...............................................................................

77
1

133
73

66
59

121
49

55
-10

Subtotal, Commerce.......................................................................

206

125

170

Education:
Work Study and Supplemental Education Opportunity Grants
Impact Aid...........................................................................................
Other.....................................................................................................

N/A
N/A
N/A

1,192
617
287

812
516
210

1,202
579
259

390
63
49

Subtotal, Education........................................................................

N/A

2,095

1,538

2,040

502

Energy:
Fossil Research and Development ..................................................
Conservation Grants ..........................................................................

1
1

444
240

311
155

418
230

107
75

Subtotal, Energy .............................................................................

684

466

648

182

Health and Human Services:
Low-income Home Energy Assistance...........................................
Refugee and Entrant Assistance......................................................

1
5

1,500
411

1,065
227

1,346
382

281
155

Subtotal, Health and Human Services .......................................

1,911

1,292

1,728

436

Housing and Urban Development:
Housing for the Elderly and Disabled ...........................................
Home Grants.......................................................................................
Public Housing Modernization........................................................
Community Development Block Grants........................................
Public Housing Operating Subsidies..............................................
Subsidized Housing Amendments .................................................
Renewal of Expiring Section 8 Contracts ......................................

N/A
N/A
N/A
N/A
N/A
N/A
N/A

1,193
1,500
2,801
3,400
2,450
2,300
7,585

321
700
2,292
2,900
2,282
1,919
7,262

1,326
1,060
3,200
4,000
2,282
1350
6,926

1,005
360
908
1,100
—
-569
-336

Subtotal, Housing and Urban Development.............................

N/A

21,229

17,676

20,144

2,468

Interior:
Bureau of Reclamation Construction..............................................
Miscellaneous Payments to Indians................................................
Bureau of Indian Affairs Construction...........................................

N/A
N/A
N/A

564
123
203

461
32
130

501
39
150

40
7
20

Subtotal, Interior.............................................................................

N/A

890

623

690

Justice:
Prison Construction ...........................................................................
Juvenile Justice Grants ......................................................................
Cooperative Agreement Program ...................................................
Regional Information Sharing System............................................

5
56
12
7

452
72
15
15

339
8
7
10

339
77
7
14

—
69
—
4

Subtotal, Justice ..............................................................................

554

364

437

Labor:
Older Americans Employment........................................................
Various Job Training Partnership Programs.................................

N/A
N/A

395
160

343
132

390
156

47
24

Subtotal, Labor................................................................................

N/A

555

475

546

Transportation:
Federal Transit Administration—Operating Subsidies ...............
Amtrak .................................................................................................
Federal Transit Administration—New Starts1 .............................

N/A
N/A
N/A

802
651
537

217
343
400

802
642
722

585
299
322

248

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 14-2.

PROPOSED MAJOR REDUCTIONS IN DOMESTIC PROGRAMS—Continued
(Budget authority; dollar amounts in millions)
Budget Authority

Agency/Bureau

Number of
Projects

1992
Enacted

1993
Request

1993
Enacted

1994
Proposed
Reductions

Federal Transit Administration—Interstate Transfer Grants .....

N/A

160

-7

Subtotal, Transportation................................................................

N/A

1,613

642

2,241

1,599

Treasury: Operations and Maintenance, Air and Marine Program

176

139

138

-1

Veterans Affairs: Major Projects Construction..................................

414

382

493

111

Environmental Protection Agency: Non-Point Source Grants.......

National Aeronautic and Space Administration (NASA): Con
struction of Facilities (includes Advanced Solid Rocket Motor
construction)........................................................................................

525

319

525

206

Small Business Administration:
Disaster Loan Subsidies ................................................... -................
Guaranteed Business Loan Subsidies.............................................
Direct Business Loan Subsidies .......................................................

N/A
N/A
N/A

122
246
27

24
155
1

81
214
20

57
59
19

, Subtotal, Small Business Administration...................................

N/A

395

180

315

135

Other Independent Agencies:
Federal Emergency Management Agency:
Disaster Relief.................................................................................
Emergency Food.............................................................................
Postal Service: Revenue Foregone...................................................
Appalachian Regional Commission................................................
Tennessee Valley Authority .............................................................
Office of National Drug Control Policy.........................................

N/A
1
1
13
N/A
N/A

4,126
134
470
190
135
124

292
100
122
100
79
77

292
129
122
190
135
118

29
—
90
56
41

Subtotal, Other Independent Agencies ......................................

5,179

770

986

216

341

36,554

25,047

31,225

6,178

Total .........................................................................................................

N/A indicates proposed funding reduction not applied on a project bases.
1 The budget authority shown for this program is not counted under the discretionary cap and is not included in the totals for this table.

In addition to proposals to terminate or sub
stantially reduce the specific projects discussed
above, there are other projects that could be pro
posed. For example, where new evidence exists
that a program is not effective or where funding
provided by the Congress for 1993 exceeds the
amount needed and requested by the agency,
the program should be terminated or reduced.

Reconsidering proposals rejected by the Con
gress that would result in additional collections
should also be considered. For example, the Ad
ministration proposed for 1993 that the Elk Hills,
California, oil field be leased to private industry.
This proposal is supported for the following
reasons:
• Operating an oil field is a commercial, not
a governmental activity. Leasing to the pri
vate sector would likely result in increased
efficiency of operation.

• Leasing has been used consistently and ef
fectively elsewhere in the United States to
ensure the sound development of Federally
owned oil and gas resources.
• It is estimated that leasing the Elk Hills oil
field to private industry would generate
roughly $0.8 billion in revenue for the Fed
eral government in 1994. In addition, pri
vate industry would invest hundreds of
millions of dollars in needed production
equipment at the oil field.
POTENTIAL CANDIDATES FOR LINE-ITEM
VETO
The current system of authorizing and appro
priating Federal budgetary resources allows for
special interest spending and affords the
President little opportunity to control it. The
President should have the power to strike from

14.

REDUCTIONS IN LOW-RETURN DISCRETIONARY PROGRAMS

legislation provisions that reflect only narrow
interests. As with any other veto, a veto by the
President of an item in a spending or revenue
bill, or line-item veto, would be subject to over
ride by a two-thirds vote in each house of Con
gress. This essential tool is available to 43 Gov
ernors, who have used it successfully without
unduly shifting the balance of power between
the executive and the legislature.
In the appropriations process, the absence of
Presidential authority to exercise the line-item
veto has resulted in excessive and inappropriate
congressional earmarking of funds. Earmarking
often provides substantial benefits to a local
community but makes no contribution to the
broader national interest. Considered indi
vidually, many projects funded through con
gressional earmarking are worthwhile; in the
aggregate, however, they wastefully divert
scarce Federal tax dollars.

The tight budget caps mandated by the Omni
bus Budget and Reconciliation Act of 1990 mean
that for every dollar that goes into funding local
projects, there is one less dollar to invest in
areas of pressing national concern. For example,
it is estimated that Congress earmarked over
$1.7 billion in 1993 for unrequested research and
development projects, an increase of $0.7 billion
over 1992.
Many projects of questionable merit that re
ceived 1993 funding through congressional
earmarking might have been eliminated if the
President had had line-item veto authority in
acting on the 1993 appropriations bills. Illus
trative examples of such projects include:
• $52.0 million for grants to fund construction
or modernization of buildings and facilities
for agricultural research. These grants were
not competitively awarded and include
projects such as $3.7 million to expand the
library and herbarium at the New York City
Botanical Garden and $194,000 for a vidalia
onion storage facility in Georgia.
• $43.0 million in unrequested special agricul
tural research grants, including earmarked
funding for asparagus yield decline (Michi
gan); dried bean research (North Dakota);
dairy goat research (Texas); and potato utili
zation (North Dakota). A $240,000 grant for
soil and water research in Ohio was not
included in either the House- or Senate

249

passed versions of the appropriations bill
yet appeared in the Conference version of
the bill.

• $85.0 million in Environmental Protection
Agency (EPA) funds for construction of a
research and training center and dock facil
ity mandated to be located in Bay City,
Michigan. These facilities are unnecessary
for the accomplishment of EPA's mission
and duplicate existing facilities and activi
ties. EPA did not request resources for the
facilities and to date has not developed spe
cific plans for their use.
• $260.0 million for unrequested, unauthor
ized "Special Purpose Grants," to be made
by the Department of Housing and Urban
Development. Examples include the follow
ing projects, many of which were not in
cluded in either the House- or Senatepassed version of the appropriations bill:
——$1.0 million for restoration of the Liberty
Theater in Columbus, Georgia, in conjunc
tion with the City's 5th and 6th Avenue
Redevelopment Plan.
—$1.0 million for restoration of the Lucas
Theater in the historic district of Savan
nah, Georgia, as part of the City's urban
revitalization plan.
—$5.9 million to the Bay County Building
Authority in Bay County, Michigan, for
a conference center and for other munici
pal purposes.
—$1.5 million for restoration and renovation
of the Lamar and Pickens County, Ala
bama, courthouses.
—$2.5 million for infrastructure demolition
and repair at Richardson Bay in the Marin
County, California, area (removing docks
along a high-cost residential coastline
area).
—$1.5 million to Cibola County, New Mex
ico, for a multi-agency visitor center.
—$1.9 million to the City of Mackinac Is
land, Michigan, to restore historic build
ings and for other municipal purposes.
—$1.5 million to Enterprise Development,
Inc. of Columbia, South Carolina, for a
video conference and training facility.
—$125,000 for restoration of a well under
the jurisdiction of the Potomac Heights
Home Owners Association in Western
Charles County, Maryland.

250

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

—$1.0 million for the construction of a re
gional fire training center and related
equipment in Clinton, Tennessee.
• $15.0 million that the Department of De
fense is directed to allocate for experiments
on a vertical transport levitation device.
Congress directed that funds be made avail
able to a sole source for this project. Defense
scientists believe that the concept is of ques
tionable technical merit. No funding beyond
that provided for 1993 is budgeted for fur
ther development of this concept, although
substantial additional funding would be
needed to construct a prototype aircraft.
• $7.0 million for Conrail commuter transition
assistance. This program was originally de
signed to help defray the one-time start
up costs of commuter service and other
transition expenses connected with the
transfer of rail commuter services from Conrail to other operators (Public Law 97-35
and Public Law 97-468). Between 1986 and
1993, an additional $45 million has been
appropriated through this program to be
available to the Southeastern Pennsylvania
Transportation Authority (SEPTA) to fi
nance local rail and bridge improvements.
These projects should be financed through
SEPTA's own funds.
• $30.0 million for the Federal Aviation Ad
ministration's Airway Science Program.

Although the Department of Transportation
(DOT) did not request funds in 1993, Con
gress included this funding in report lan
guage, earmarking funds for specific grants
without the benefit of competition. This
funding includes $4.5 million to build a na
tional aviation and transportation center for
Dowling College at MacArthur Airport in
Islip, New York, and $11.5 million to
Embry-Riddle University to construct an en
gineering and technology center. The trans
portation benefits to be gained from this
program will be minimal.

• $1.2 million for a "Northern Forest Lands
Council," a private, non-profit organization
formed to develop strategies to protect large
tracts of private forest land threatened by
development in the Northeast. Federal fund
ing, which now totals nearly $3.5 million,
has been used for start-up and operational
costs, as well as for funding of staff posi
tions.

• $250,000 for a Rural Development Adminis
tration grant to continue implementation of
a local strategy to encourage rural revital
ization in Maui, Hawaii. The grant is to
be administered by the non-Federal Maui
Economic Development Board, Inc.

15.

Options for Implementing
the Mandatory Cap

251

15. OPTIONS FOR IMPLEMENTING THE
MANDATORY CAP
NOTE: Specific options included are illustrative of a broad range of proposals advanced by
diverse parties. Inclusion of a particular option here does not necessarily imply support for
such an option—and should not be construed to imply support—by the Administration or other
reform advocates.

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP
(Outlays, in millions of dollars)
1994

1993

1995

1997

1996

1998

5-Year
Savings

BENEFIT PROGRAMS
Agriculture:
Child nutrition:
Baseline (average annual growth at 8.6%) ..................
Savings at population (average 3.1%) plus:
-CPI plus WWO ......................................................
Options:
1993 Budget Proposals:
-More equitable distribution of school lunch sub
sidies ............................................................................
Additional items identified by:
Congressional Budget Office:
-Increase targeting of child nutrition®1 (Perot) ..

Food stamps:
Baseline (average annual growth at 3.2%) ..................
Savings at population (average —1.2%) plus:
—cpi plus yi/wo......................................................
Options:
Additional items identified by:
Congressional Budget Office:
-Eliminate small food stamp benefit®..................
Heritage Foundation:
-Require reimbursement for all food stamps
overpayment...........................................................
-Require workfare or job search to receive food
stamps......................................................................

7,145

7,773

8,457

9,200

9,974

10,807

-1

-37

-152

-302

-469

-961

-3

-9

-11

-14

-15

-52

-340

-830

-960

-1,050

-1,100

-4,280

24,027

25,000

25,637

26,436

27,210

28,065

-257

-450

-639

—1,345

-80

-400

-1,000

-1,600

-5,600

-80

-200

-500

25,591

26,811

28,120

29,481

30,860

32,269

-32

0
0

-310
-180

-800
-430

-1,300
-700

-1,900
-1,000

-2,500
-1,350

-6,810
-3,660

Defense—Civil:
Military retirement:
Baseline (average annual growth at 4.7%) ..................
Savings at population (average 1.2%) plus:
-CPI plus wwo ......................................................

Options:
Additional items identified by:
Congressional Budget Office:
-Defer COLAS for retirees under 62®2................
-Limit some COLAs below inflation®2 ...............

253

254

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1993

-Add 1-year to salary average used to set pen
sions®2 ....................................................................
Panetta:
Change eligibility to recieve retirement checks:
-Minimum age of 55 (20 years of service)........
-Minimum age of 60 (20 years of service)........
Perot:
-Limit COLA options (see Civil Service Retire
ment)
Other:
-Apply CPI-1 COLA for life to all military retir
ees with recomputation of the annuity to the
full COLA amount at age 62...............................

1994

1996

1995

1997

^5“

1998

-30

“60

-100

-140

-190

-520

NA
NA

*-22,000
*-40,000

-208

-479

-773

-1,091

-1,430

-3,981

2,316

2,231

2,322

2,499

2,635

2,748

-23

-600

-890

-910

-930

-4,260

-60

-95

-440

-210

-330

-340

-360

-1,600

-160

-270

-310

-330

-340

-1,410

-150

-160

-790

-190

-200

-190

-180

-960

0
0
0
0

-310
-140
-330
-900

-310
-190
-490
-1,350

-310
-180
-500
-1,400

-310
-170
-510
-1,450

-310
-140
-510
-1,500

-1,550
-820
-2,340
-6,600

0
0
0
0

-210
-109
-19
-345

-330
-172
-17
-430

-348
-182
-19
-433

-366
-193
-19
-472

-383
-193
-21
-494

-1,637
-849
-95
-2,174

Aid to Families with Dependent Children (AFDC):
Baseline (average annual growth at 2.8%) ..................
Savings at population (average 1.3%) plus:

15,103

15,160

15,499

16,091

16,669

17,299

-cpi plus yi/wo...........................................

Options:
1993 Budget Proposals:
-Improve the child support enforcement system® .

-134

-149

-169

-211

-219

-882

Education:
Guaranteed student loans:
Baseline (average annual growth at 3.5%) ..................
Savings at population (average 1.9%) plus:
—CPI plus WW ......................................................
Options:
Additional items identified by:
Congressional Budget Office:
Reduce interest subsidies:
-Require students to pay in-school interest®3
-Raise students' interest rates after they leave
school ...................................................................
-Raise students' interest rates and accrue inter
est during after-school grace period®3 ........
-Reduce lenders' subsidies by 1 percentage
point® .................................................................
Require schools to share default risk:
-Define allowable risk as a one-year rate.........
-Lower the allowable default rate to 20% over
three years...........................................................
-Lower allowable default rate to 1-year rate of
20%@ ...................................................................
-Require schools to pay a loan default fee.......
-Require schools to pay co-origination fee® ....
-Replace with direct loans ...................................
Other:
-Tighten the need analysis for student financial
aid®3.......................................................................
-Assess a state default fee®3..................................
-Eliminate "unsubsidized" Stafford loans®3......
-Assess a borrower default fee®3 .........................

-95/

Health and Human Services:

255

15. OPTIONS FOR IMPLEMENTING THE MANDATORY CAP

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1993

-Raise the asset limit to $10,000 for families al
ready on AFDC and allow families on AFDC to
exclude some income and resources needed to
meet the objectives of a "self-support" plan at
State option (includes Medicaid effect) .................
-Limit AFDC emergency assistance to statutory
limit provided in one 30-day period every 12
months© .....................................................................
Additional items identified by:
Congressional Budget Office:
-Combine funding for administering welfare
programs into a single indexed grant (includes
Medicaid/food stamps) @ (Perot).......................
-End $50 child support payment to AFDC fami
lies®4 .......................................................................
-Reduce matching rate for child support enforce
ment® ......................................................................
-Charge fees for child support enforcement........
Heritage Foundation:
-Limit housing allowance for AFDC families liv
ing in public housing............................................
Foster care and adoption assistance:
Baseline (average annual growth at 8.9%) ..................
Savings at population (average 6.0%) plus:
-CPI plus wwo......................................................

Options:
Additional items identified by:
Congressional Budget Office:
-Limit foster care administrative costs® ..............

Medicaid:
Baseline (average annual growth at 14.2%) ................
Savings at population (average 3.5%) plus:
-CPI plus WW .......................................................
Options:
1993 Budget Proposals:
-Enhance medical support for children®.................
-Increase payments to Puerto Rico ............................
Additional items identified by:
Congressional Budget Office:
-Tighten estate-recovery processes and rules for
long-term care®.....................................................
Perot:
-Cost containment (half of 93 Budget cap) ..........
Various Plans to Reform Health Costs..................

Medicare hospital insurance:
Baseline (average annual growth at 11.3%)................
Savings at population (average 1.6%) plus:
-CPI plus WW ......................................................
Options:
1993 Budget Proposals:
-Place hospital update on calendar year basis®5 ...
Additional items identified by:
Congressional Budget Office:
-Immediately end disproportionate share adjust
ment .........................................................................

1994

1997

1996

1995

5-Year
Savings

1998

249

-39

-40

-41

-42

-203

-500

-830

-1,200

-1,600

-2,050

-6,180

-170

-180

-190

-200

-920

0
0

-520
-55

-560
-65

-1,080
-120

-500

-800

-3,000

2,946

3,007

3,331

3,698

4,090

4321

-31

-82

-176

-289

-65

-150

-240

-350

-480

-1,285

80311

92,929

107324

122,731

138,785

156,421

-4,649 -12,623 -20,495 -29,131 -38359 -105,758

0
0

-5
25

-10
25

-15
25

-55
125

-75

-150

-250

-400

-450

-1,325

0
NA

-2,900
NA

-6,900
NA

-11,300
NA

-16300
NA

-21,400
NA

-58,800
NA

90384

102,439

114,616

128,282

141305

154,296

-5,261 -11,134 -19305 -26,755 -34,421

-96377

-630

-1,050

-1,160

-1,210

-1,330

-5380

-1,900

-2,400

-2,600

-2,800

-3,000

-12,700

256

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1994

1993
-Gradually eliminate disproportionate share ad
justment ...................................................................
-Reduce indirect teaching adjustment to 6 per
cent ...........................................................................
-Reduce indirect teaching adjustment to 3 per
cent® .......................................................................
-Reduce direct medical education payments®5 ..
-Eliminate additional payments to sole commu
nity hospitals and medicare dependent hos
pitals®5 ...................................................................
-Eliminate return on equity for proprietary
SNFs® .....................................................................
-Freeze PPS rates for one year®5..........................
Perot:
-Cost containment (half of 93 Budget cap, in
cludes SMI portion)...............................................

Medicare supplementary medical insurance:
Baseline (average annual growth at 13.9%) ................
Savings at population (average 1.4%) plus:
-CPI plus WW ......................................................
Options:
1993 Budget Proposals:
-Limit Federal subsidy to 25% of SMI program
costs for high income persons ($100K single/
$125Kcouple)® .........................................................
-Establish single fee for supervisory anesthesia
services®.....................................................................
-Authorize HHS Secretary to adjust DME reim
bursements to reflect market factors®..................
-Reform payment of laboratory services by lower
ing cap from 88% to 76% of the median and up
date, as needed to reflect market factors®...........
Additional items identified by:
Congressional Budget Office:
-Continue transition to prospective rates for out
patient departments® ...........................................
-Charge fee for claims not billed electronically @
(Perot) ......................................................................
-Reduce payments for intraocular lenses @..........
-Freeze reimbursements rates for one year®6....
-Collect 20% coinsurance on home health®6......
-Collect 20% coinsurance on SNFs®6...................
-Increase premiums to 30% of program costs®6
-Increase deductibles for physician services®6 ...
-Collect 20% coinsurance on clinical lab serv
ices®6 ......................................................................
-Increase coinsurance rate to 25 percent®6.........
Heritage Foundation:
-Increase safeguard funding ...................................
-Index deductibles.....................................................
Roth:
-Secondary payor reform® ...................... ..............
Perot:
-Raise premiums to 35% ..........................................
-Cost containment (see Medicare hospital insur
ance).

1995

1996

1997

1998

5-Year
Savings

-250

-760

-1,400

-2,100

-2,950

-7,460

-550

-680

-740

-800

-860

-3,630

0
0

-1,550
-160

-1,900
-180

-2,100
-190

-2,350
-200

-2,450
-200

-10,350
-930

-180

-220

-240

-260

-280

-1,180

0
0

-55
-1,600

-60
-2,150

-65
-2,400

-70
-2,600

-75
-2,850

-325
-11,600

-3,800

-9,000

-15,200

-23,100

-31,300

-82,400

54,648

62,685

71,450

81,379

92307

104,892

-4,059

-313

-427

-580

-757

-963

-3,040

-100

-140

-200

-230

-250

-920

-20

-80

-110

-130

-140

-480

-310

-560

-770

-1,020

-1320

-3,980

-180

-580

-780

-930

-1,100

-3370

0
0
0
0
0
0
0

-230
-120
-350
-1,850
220
-1,360
-900

-260
-190
-580
-2,450
280
-1,950
-1,700

-220
-200
-640
-2,700
300
-2,920
-2,260

-170
-200
-790
-3,000
320
-4,920
-3,000

-100
-200
-920
-3300
350
-7,170
-3,980

-980
-910
-3,280
-13,300
1,470
-18,320
-11,840

0
0

-600
-2,010

-1,020
-2,910

-1,170
-3,030

-1340
-3300

-1,540
-4,000

-5,670
-15,450

0
0

-1,100
-200

NA
NA

-1,200
-1,400

-5,400
-3300

-400

-650

-3,000

-2,800

-4,000

-6,000

-10,100

-14,800

-37,700

-9,164 -15,917 -23,905 —32,967

-86,012

257

15. OPTIONS FOR IMPLEMENTING THE MANDATORY CAP

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1994

1993

Supplemental security income:
Baseline (average annual growth at 9.0%) ..................
Savings at population (average 4.8%) plus:
—cpi plus yi/wo......................................................

1995

1996

1997

1998

5-Year
Savings

21,880

23,672

26,076

28,652

31,174

33,699

-50

-483

-894

-1,334

-2,762

-34

-25

-24

-23

-129

-150

-160

-170

-180

-830

Unemployment insurance:
Baseline (average annual growth at -3.6%) ..............
Savings at population (average —1.5%) plus:

33,463

25,331

24,964

26,011

26,782

27,876

plus yi/o/c/o..............................................

-219

Earned income tax credit:
Baseline (average annual growth at 11.7%) ................
Savings at population (average 2.5%) plus:

8,909

9364

13,218

13,934

14,681

15,466

plus yi/o/o/o..............................................

-777

-2,835

-2,842

-2,948

-3,072

13,127

13,614

14,078

14,524

14,945

15,391

-4

0
0

-1,700
-1,450

-2,100
-1,750

-2,100
-1,700

-2,050
-1,650

-2,350
-1,850

-10,300
-8,400

-220

-260

-250

-240

-260

-1,230

-20

-85

-150

-200

-320

-775

NA
NA

*-9,000
*-16,000

Veterans pensions:
Baseline (average annual growth at 0.6%) ..................
Savings at population (average -4.2%) plus:

3,517

3,363

3,297

3,263

3,238

3,619

plus yi/o/o/o..............................................

-377

34,564

36,054

37,623

41,416

44,147

46,322

-1,989

-2,838

-3,033

Options:
1993 Budget Proposals:
-Recover overpayments by withholding other So
cial Security payments® ..........................................
Additional items identified by:
Congressional Budget Office:
-Reduce $20 exclusion from income®4 ................

Labor:

-cpi

-219

Treasury:

-cpi

-11,920

Veterans Affairs:
Veterans compensation:
Baseline (average annual growth at 3.2%) ..................
Savings at population (average —0.2%) plus:
—CPI plus WW» ......................................................
Options:
Additional items identified by:
Congressional Budget Office:
-End compensation payments for low-rated dis
abilities and those unrelated to military du
ties® .........................................................................
-End disability benefits for low-rated disabilities
-End dependents allowance for vets with low
rated disabilities.....................................................
-End disability and death compensation awards
in future cases when a disability is unrelated
to military duties ...................................................
Panetta:
-Eliminate those with 10% disability or below ....
-Eliminate those with 20% disability or below ....

-cpi

-377

Office of Personnel Management:
Civil service retirement:
Baseline (average annual growth at 6.0%) ..................
Savings at population (average 1.2%) plus:
-CPI plus yi/o/a/Q ......................................................

-7,860

258

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)

Options:
1993 Budget Proposals:
-Permanently extend elimination of lump-sum op
tion® ............................................................................
Additional items identified by:
Congressional Budget Office:
-Defer COLAS for retirees under 62® 7................
-Limit some COLAs below inflation .....................
-Add 1-year to salary average used to set pen
sions® ......................................................................
Panetta:
Increase age of retirement:
-Minimum age of 60.............................................
-Minimum age of 65.............................................
Perot:
-Limit COLAs (includes military retirement) ......
Other:
-Apply FERS COLA (CPI-1) to CSRS annu
itants®7 ...................................................................

1995

1994

1993

1997

1996

5-Year
Savings

1998

-2,165

-3,237

-3,590

-8,992

0
0

-80
-100

-160
-230

-230
-370

-280
-520

-310
-680

-1,060
-1,900

-10

-50

-100

-150

-220

-530

NA
NA

-25,000
-55,000

-600

-1,500

-2,600

-3,600

-4,700

-13,000

-327

-779

-1,257

-1,773

-2316

-6,452

3,580

3,701

3372

3,869

4,702

5393

-670

-1,195

-1365

-50

-75

-90

-100

-115

-430

-120

-300

-560

-710

-1,690

-50

-70

-85

-95

-110

-410

-55

-80

-95

-110

-125

-465

4,687

4,732

4,752

4,743

4,720

4,740

SUBTOTAL:
Savings at population plus:
-CPI plus 2/1/0/0/0......................................................

-14,192

-35,844

-61,496

-87,975 -116,796

-316303

SUBTOTAL, selected options9..............................................

0 —21,225 —31,669 -39,793 -49,242 -58,179 -200,108

Federal employee health benefits:
Baseline (average annual growth at 8.5%)..................
Savings at population (average 0.5%) plus:
-CPI plus 2/1/0/0/0..................................................

Options:
1993 Budget Proposals:
-Apply Medicare Part B payment limits to all
FEHBP enrollees age 65 and older® .....................
Additional items identified by:
Congressional Budget Office:
-Modify hospital reimbursements®8....................
Other:
-Equalize enrollee coinsurance on prescription
drugs for annuitants and active employees .....
-Limit FEHB payment for physicians' services
covered under Medicare Part B to the Medi
care allowed charge...............................................

Railroad Retirement Board:
Railroad retirement:
Baseline (average annual growth at —0.2%)..............
Savings at population (average -2.6%) plus:
-CPI plus WW ......................................................

OTHER MANDATORY PROGRAMS

Agriculture:
Commodity Credit Corporation:
Baseline................................................................................

Options:
1993 Budget Proposals:.

17390

12355

10,697

10,590

10/136

10333

259

15. OPTIONS FOR IMPLEMENTING THE MANDATORY CAP

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1993

-Reduce subsidies to those with off-farm income
over $100,000 ..............................................................
Additional items identified by:
Congressional Budget Office:
Reduce deficiency payments:
-Lower target prices®10......................................
-Eliminate 0/92 and 50/92 programs®10........
-Decrease direct payments ..................................
-Raise ineligible base acreage®10......................
Restrict eligibility for benefits and reduce pay
ment limitations:
-Limit payments to $50,000 per person ............
-Limit payments to $40,000 per person®11.....
-Disqualify people with AGI > $100,000 ..........
-Disqualify people whose gross revenue from
commodity sales > $500,000 ............................
Eliminate:
-Export enhancement program®12 ...................
-Market promotion program®...........................
-Wool and mohair subsidies @ ...........................
-Honey subsidy® (Clinton plan) .......................
-Require producer contributions in dairy pro
gram® .....................................................................
-Reduce loan guarantees under export pro
grams® ....................................................................
Panetta Plan:
Overall reductions in subsidies:
--30% effective in 1993 (assumes GATT in 92)
--15% effective in 1993 (assumes GATT in 92)
--30% effective with 1995 Farm bill ..................
--15% effective with 1995 Farm bill ..................
Heritage Foundation:
Eliminate:
-Dairy subsidy .......................................................
-Phase out all crop price and income support .
Perot:
-Reduce supports (not specific) ..............................

Other:

-Expand triple base (CBO variant) @.....................
-CCC price insurance (CBO variant) @ .................
-Increase CCC loan and other fees (CBO vari
ant)® ........................................................................

Other Agriculture:
Options:
1993 Budget Proposals:
-Agriculture marketing service user fees @..............
-End Cooperative State Research Service MorrillNelson funds @...........................................................
-Food Safety and Inspection Service: 50% reim
bursement of overtime costs (proposed as discre
tionary)® .....................................................................
Heritage Foundation:
-Eliminate conservation reserve program (includ
ing not honoring existing contracts) ......................
Other:
-Terminate the Federal Crop Insurance program
(CBO varient, 1991 Budget) @ .................................

1994

1997

1996

1995

5-Year
Savings

1998

-100

-200

-900

0
0
0
0

-440
-190
-110
-410

-1,550
-490
-280
-960

-2,150
-400
-240
-910

-3,200
-270
-260
-810

-5,950
-370
-250
-890

-13,290
-1,720
-1,140
-3,980

0
0
0

-70
-130
-30

-170
-320
-80

-150
-270
-70

-160
-300
-80

-160
-290
-70

-710
-1,310
-330

-70

-180

-150

-170

-160

-730

0
0
0
0

-310
-100
0
-20

-740
-200
-190
-20

-670
-200
-190
0

-640
-200
-200
0

-610
-200
-200
0

-2,970
-900
-780
-40

-140

-230

-250

-270

-280

-1,170

-410

-420

-450

-400

-1,635

NA
NA
NA
NA

*-16,000
*-7,500
*-10,400
*-4,900

NA
NA

-1,000
-2,300

NA
NA

-1,000
-8,000

-5,000
-26,000

-800

-2,400

-2,900

-4,200

-6,800

-17,100

0
0

-250
-250

-500
-500

-2,250
-2,250

-250

-400

-1,850

-7

-10

-47

-3

-15

-50

-250

-1,600

-2,000

-9,200

-356

-783

-874

-902

-932

-3,847

260

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1993

1996

1995

1994

1998

1997

c5‘Year

Commerce:
Various fees:
Options:
2993 Budget Proposals:
-Extend PTO user fee surcharges® ...........................
Additional items identified by:
Heritage Foundation:
-Weather service user fees.......................................

-107

-321

-50

-250

-20

-100

-350

-360

-380

-390

-410

-1,890

-399

-432

-453

-458

-454

-2,196

-20

-40

-60

-80

-100

-300

Social services block grant:
Baseline...............................................................................

2,845

2,803

2,800

Additional items identified by:
Heritage Foundation:
-Reduce social services block grant by 50%.........

-1,400

-7,000

-2,561

-1

-1,531

-1

-4,094

1,280

765

2,045

127

0
0

-10
-15

-15
-15

-30
-15

-30
-20

-115
-85

-120

-NA

-160

-700

400

Corps of Engineers:
Fees:
Options:
1993 Budget Proposals:
-Expand fees for day use of developed recreational
sites®...........................................................................
Additional items identified by:
Congressional Budget Office:
-Inland waterway user fees @ (Perot)....................

Energy:
Electric utility programs:
Options:
2993 Budget Proposals:
-Recover the Federal government's financing costs
by changing PMA debt repayment practices®
(Perot) ..........................................................................
-Alaska Power Administration asset sale (paygo ef
fect) ...............................................................................
Additional items identified by:
Congressional Budget Office:
-Index nuclear waste disposal fees @ ....................

Health and Human Services:

Interior:
Natural resources receipts:
Options:
2993 Budget Proposals:
-Arctic National Wildlife Refuge (ANWR): oil and
gas exploration rights @............................................
-State of Alaska's share of ANWR oil and gas ex
ploration rights @.......................................................
-Coastal communities impact assistance: Outer
Continental Shelf (OCS) revenue sharing .............
Additional items identified by:
Congressional Budget Office:
-Raise grazing fees® (Perot) ...................................
-Raise charges for Federal water @ (Perot)...........
Heritage Foundation:
-Sell national helium reserves.................................
Other:
-Use ANWR receipts to pay for OCS lease
buybacks off South Florida..................................

15.

261

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1993

1995

1994

1996

1997

1998

5-Year
Savings

Labor:
Trade adjustment assistance:
Baseline ...............................................................................

179

213

214

212

209

215

Options:
1993 Budget Proposals:
-Replace with EDWAA @ ............................................

-116

-160

-193

-190

-187

-846

0
0

-300
-700

-300
-1,450

-300
-1,550

-300
-1,650

-300
-1,700

-1,500
-7,050

0
0

-700
-50

NA
NA

-800
-50

-3,900
-250

Home loans:
Baseline ...............................................................................

965

708

624

564

538

523

Options:
1993 Budget Proposals:
-Extend, beyond 1993, counting government losses
on resale when deciding whether to purchase
foreclosed property or pay lenders the guaranty
claim, and require veterans who are second and
subsequent users to pay a 2.5% fee and 10%
downpayment @.........................................................

-46

-70

-71

-72

-73

Medical care cost recovery:
Baseline ...............................................................................

—540

-589

-421

-497

-516

-495

Options:
1993 Budget Proposals:
-Extend sunset on authority to recover costs from
health insurers of service-connected veterans for
treatment of non-service connected conditions @ .

-46

-326

-391

-407

-425

Readjustment benefits:
Baseline ...............................................................................

891

1,123

1,222

1,288

1,394

1,478

Options:
1993 Budget Proposals:.
-Provide eligibility for vocational rehabilitation to
veterans rated 30% disabled or greater, and re
store 9:1 service members' benefit/contribution
ratio for contributions to GI bill @..........................

-89

-104

-98

-103

-109

-503

-1,253

-1,665

-833

-3,751

-1,500

-1,600

-1,800

-1,900

-2,000

-8,800

Transportation:
Various programs:
Options:
Additional items identified by:
Congressional Budget Office:
-Charge for airport slots @ (Perot) .........................
-Fees for air traffic control services @ (Perot) ......
Heritage Foundation:
-Increase Coast Guard fees......................................
-Eliminate ocean freight differential......................

Veterans Affairs:

-403

-1,595

Other agencies:
Federal Communications Commission:
Options:
1993 Budget Proposals:
-Spectrum auction @ .....................................................
Additional items identified by:
Congressional Budget Office:
-Royalty payment on communications users @
(Perot) ......................................................................

262

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Table 15-1.

OPTIONS FOR IMPLEMENTING THE MANDATORY CAP—
Continued
(Outlays, in millions of dollars)
1994

1993
Farm Credit System Financial Assistance Corporation:
Options:
1993 Budget Proposals:
-Accelerate system repayments of FAC (bailout)
debt®...........................................................................

SUBTOTAL, selected options13 ............................................

-46

-212

1997

1996

1995

1998

garin^s

-212

-6,708 -13,530 -14,519 -16,863 -18,354

-70,020

SUMMARY
Targets for benefits programs that grow more rapidly
than inflation and beneficiary population:
Savings at population plus:
-CPI plus 2/1/0/0/0......................................................

-14,192

-35,844

-61,496

-87,975 -116,796

-316,303

Selected options (excluding comprehensive health care):
Benefit programs....................................................................
Other mandatory programs.................................................

0
-46

-21,225
-6,708

-31,669
-13,530

-39,793
-14,519

-49,242
-16,863

-58,179
-18,354

-200,108
-70,020

Total, selected options (excluding comprehensive health
care)14 ......................................................................................

-46

-27,933

-45,199

-54,312

-66,105

-76,533

-270,128

-6,700

-15,900

-26,500

-39,400

-52,700

-141,200

-46

-34,633

-61,099

-80,812 -105,505 -129,233

-411,328

MEMORANDUM

Unspecific Perot health options ..............................................
Total, selected options including unspecific Perot health
options .....................................................................................

©Options selected represent maximum savings for each program. Excludes Heritage and Panetta since all estimates are not available.
NOTE: Many options were priced during the 1993 Budget cycle. Savings have been shifted one year to reflect a later implementation.
*Panetta estimates are for 10 years.
1 Part of this proposal was included as discretionary in the President7s 1993 Budget.
2 Two proposals are interactive. Savings would be roughly $2.0 billion lower than the sum of the two over the five year period.
3 Proposals are interactive. Savings would be less than the sum of the individual proposals. Amount of savings loss can not be determined.
4 Proposal would also increase food stamp spending.
5 Proposals interact. The combination of freeze PPS rates for one year and place hospital update on a calendar year basis would be $1.3
billion less in savings than the sum of the two individual proposals.
6 Proposals interact. Increasing premiums to 30% of program costs reduces savings for limiting subsidy for upper income persons (by
roughly $0.3 billion over five years). Changing coinsurance interacts with the lab update proposals (total savings reduced by roughly $0.8
billion over 5 years). Postponing the reimbursement rate update interacts with the DME and lab proposals (savings reduced by roughly $0.4
billion over 5 years). Premium interactions with all other proposals would reduce savings by $3.1 billion over 5 years. There are also small
interaction effects for a few other proposals. In addition, reductions in SMI are offset by increases in Medicaid. If all selected options were
adopted, Medicaid costs would go up $4.9 billion over the five year period. In total, the savings from SMI would be approximately $9.5 billion
less than the sum of the individual proposals.
7 Two proposals are interactive.
8 Includes both mandatory and discretionary savings.
9 In total, interaction effects would reduce total savings by approximately $12.8 billion over 5 years.
10 Proposals are interactive. Savings could be as much as $300 million less than the sum of the three proposals over the five year period.
11 Proposal interacts with reduction in deficiency payments.
12 A reduced export program could lead to higher deficiency payments and thus greater savings from reducing them under certain market
conditions.
13 Interaction effects could reduce savings by as much as $300 million over five years.
14 In total, interaction effects would reduce estimates of savings by roughly $13.1 billion over five years.

NOTE: Specific options included are illustrative of a broad range of proposals advanced by
diverse parties. Inclusion of a particular option here does not necessarily imply support for
such an option—and should not be construed to imply support—by the Administration or other
reform advocates.

Part Five.
HISTORICAL TABLES

263

Historical Tables

265

Contents of the Historical Tables
Page
Introduction .....................................................................................................................................................................................................

269

Section Notes ...................................................................................................................................................................................................

271

Section 1—Overview of Federal Government Finances ....................................................................................................................
Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789-1993 .......................................................
Table 1.2—Summary of Receipts, Outlays, and Surpluses or Deficits (-) as Percentages of GDP: 1934-1993 ..........
Table 1.3—Summary of Receipts, Outlays, and Surpluses or Deficits (-) in Current Dollars, Constant (FY 1987)
Dollars, and as Percentages of GDP: 1940-1993 ......................................................................................................................
Table 1.4—Receipts, Outlays, and Surpluses or Deficits (-) by Fund Group: 1934-1993 ................................................

278
278
280

Section 2—Composition of Federal Government Receipts ................................................................................................................
Table 2.1—Receipts by Source: 1934-1993 ......................................................................................................................................
Table 2.2—Percentage Composition of Receipts by Source: 1934-1993 .................................................................................
Table 2.3—Receipts by Source as Percentages of GDP: 1934-1993 .........................................................................................
Table 2.4—Composition of Social Insurance Taxes and Contributions and of Excise Taxes: 1940-1993 ....................
Table 2.5—Composition of "Other Receipts": 1940-1993 ..........................................................................................................

285
285
287
289
291
297

Section 3—Federal Government Outlays by Function........................................................................................................................
Table 3.1—Outlays by Superfunction and Function: 1940-1993 ..............................................................................................
Table 3.2—Outlays by Function and Subfunction: 1962-1993 ..................................................................................................

298
298
305

Section 4—Federal Government Outlays by Agency...........................................................................................................................
Table 4.1—Outlays by Agency: 1962-1993 .....................................................................................................................................
Table 4.2—Percentage Distribution of Outlays by Agency: 1962-1993 .................................................................................

317
317
321

Section 5—Budget Authority (On-and Off-Budget) .............................................................................................................................
Table 5.1—Budget Authority by Function and Subfunction: 1976-1993 ...............................................................................
Table 5.2—Budget Authority by Agency: 1976-1993 ..................................................................................................................
Table 5.3—Percentage Distribution of Budget Authority by Agency: 1976-1993 ...............................................................

325
325
334
337

Section 6—Composition of Federal Government Outlays .............................................................................................................
Table 6.1—Composition of Outlays: 1940-1993 (In Current Dollars, as Percentages of Total Outlays, as Percent
ages of GDP, and in Constant (FY 1987) Dollars) ...................................................................................................................

340

Section 7—Federal Debt................................................................................................................................................................................
Table 7.1-Federal Debt at the End of Year: 1940-1993 .............................................................................................................
Table 7.2—Debt Subject to Statutory Limit: 1940-1993 ..............................................................................................................
Table 7.3—Statutory Limits on Federal Debt: 1940-Current ....................................................................................................

346
346
347
348

Section 8—Outlays by Budget Enforcement Act Categories .............................................................................................................
Table 8.1—Outlays by Budget Enforcement Act Categories: 1962-1993 ...............................................................................
Table 8.2—Outlays by Budget Enforcement Act Categories in Constant (FY 1987) Dollars: 1962-1993 .....................
Table 8.3—Percentage Distribution of Outlays by Budget Enforcement Act Categories: 1962-1993 ............................
Table 8.4—Outlays by Budget Enforcement Act Categories as Percentages of GDP: 1962-1993 ..................................
Table 8.5—Outlays for Mandatory and Related Programs: 1962-1993 ..................................................................................
Table 8.6—Outlays for Mandatory and Related Programs in Constant (FY 1987) Dollars: 1962-1993 ........................
Table 8.7—Outlays for Discretionary Programs: 1962-1993 ......................................................................................................
Table 8.8—Outlays for Discretionary Programs in Constant (FY 1987) Dollars: 1962-1993 ............................................
Table 8.9—Budget Authority for Discretionary Programs: 1976-1993 ..................................................................................

352
352
353
354
355
356
360
364
368
372

Section 9—Federal Government Outlays for Major Physical Capital Investment.......................................................................
Table 9.1—Outlays for Major Physical Capital Investment in Current and Constant (FY 1987) Dollars: 1940-1993
Table 9.2—Outlays for Major Public Physical Capital Investment in Percentage Terms: 1940-1993 ...........................
Table 9.3—National Defense Outlays for Major Public Direct Physical Capital Investment: 1940-1993 ....................
Table 9.4—Nondefense Outlays for Major Public Direct Physical Capital Investment: 1940-1993 ..............................
Table 9.5—Composition of Outlays for Grants for Major Public Physical Capital Investment: 1941-1993 ...............
Table 9.6—Outlays for Major Public Physical Capital Investment in Constant (FY 1987) Dollars: 1940-1993 ..........

375
375
376
377
378
380
386

282
283

340

267

268

BUDGET BASELINES HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

Contents of the Historical Tables—Continued
Page

Section 10—Federal Government Outlays for the Conduct of Research and Development and for the Conduct of
Education and Training...............................................................................................................................................................................
Table 10.1—Summary of Outlays for the Conduct of Research and Development: 1949-1993 (In Current Dollars,
as Percentages of Total Outlays, as Percentages of GDP, and in Constant (FY 1987) Dollars) .................................
Table 10.2—Composition of Outlays for the Conduct of Research and Development: 1949-1993 ...............................
Table 10.3—Composition of Outlays for the Conduct of Education and Training: 1962-1993 .......................................

392
392
393
399

Section 11—Federal Government Payments for Individuals.............................................................................................................
Table 11.1—Summary Comparison of Outlays for Payments for Individuals: 1940-1993 (In Current Dollars, as
Percentages of Total Outlays, as Percentages of GDP, and in Constant (FY 1987) Dollars) .......................................
Table 11.2—Functional Composition of Outlays for Payments for Individuals: 1940-1993 ............................................
Table 11.3—Outlays for Payments for Individuals by Category and Major Program: 1940-1993 ................................

401

Section 12—Federal Grants To State and Local Governments..........................................................................................................
Table 12.1—Summary Comparison of Total Outlays for Grants to State and Local Governments: 1940-1993 (in
Current Dollars, as Percentages of Total Outlays, as Percentages of GDP, and in Constant (FY 1987) Dollars) ..
Table 12.2—Total Outlays for Grants to State and Local Governments, by Function and Fund Group: 1940-1993
Table 12.3—Total Outlays for Grants to State and Local Governments, by Function, Agency, and Program:
1940-1993 ...............................................................................................................................................................................................

428

428
429

Section 13—Social Security and Medicare................................................................................................................................................
Table 13.1—Cash Income, Outgo, and Balances of the Social Security and Medicare Trust Funds: 1936-1993 .......

462
462

Section 14—Federal Sector Transactions in the National Income and Product Accounts ........................................................
Table 14.1—Federal Transactions in the National Income and Product Accounts for Federal Fiscal Years:
1947-1992 ...............................................................................................................................................................................................
Table 14.2—Federal Transactions in the National Income and Product Accounts as Percentages of GDP for Fed
eral Fiscal Years: 1947-1992 .............................................................................................................................................................

470

Section 15—Total (Federal and State and Local) Government Finances ........................................................................................
Table 15.1—Total Government Receipts in Absolute Amounts and as Percentages of GDP: 1947-1992 ...................
Table 15.2—Total Government Expenditures: 1947-1992 ...........................................................................................................
Table 15.3—Total Government Expenditures as Percentages of GDP: 1947-1992 .............................................................
Table 15.4—Total Government Expenditures by Major Category of Expenditure: 1947-1992 .......................................
Table 15.5—Total Government Expenditures by Major Category of Expenditure as Percentages of GDP:
1947-1992 ...............................................................................................................................................................................................
Table 15.6—Total Government Surpluses or Deficits (-) in Absolute Amounts and as Percentages of GDP:
1947-1992 ...............................................................................................................................................................................................

476
476
477
478
479

401
402
409

433

470

473

480

481

HISTORICAL TABLES
INTRODUCTION

Historical Tables is designed to provide budget users
with a wide range of data on Federal Government
finances. In many cases, the data cover all years from
1940 to the baseline estimates through 1993. Addition
ally, Section 1 provides data on receipts, outlays, and
surpluses or deficits for 1934-1939 and for earlier
multi-year periods.
Structure

This document is composed of 15 sections, each of
which has one or more tables. Each section covers
a common theme. Section 1, for example, provides an
overview of the budget and off-budget totals; Section
2 provides tables on receipts by source; and Section
3 shows outlays by function. The purpose of this set
of tables is to present a broad range of historical budg
etary data in one convenient reference source and to
provide relevant comparisons most likely to be of as
sistance. The most common comparisons are in terms
of proportions (e.g., each major receipt category as a
percentage of total receipts and of the gross domestic
product).
Section notes explain the nature of the activities cov
ered by the tables in each section. The first time any
new budget concept is introduced, the notes provide
a nontechnical definition of the concept. Whenever it
appears that some additional descriptive information
would be useful, this information is also included. Ex
planations are generally not repeated, but there are
occasional cross-references to related materials. When
a section contains several tables, the general rule is
to start with tables showing the broadest overview
data and then work down to more detailed tables.
Because of the numerous changes in the way budget
data have been presented over time, there are inevi
table difficulties in trying to produce comparable data
to cover many years. The general rule underlying all
of these tables is to provide data in as meaningful
and comparable a fashion as possible. To the extent
feasible, the data are presented on a basis consistent
with current budget concepts. When a structural
change is made, insofar as possible the data are ad
justed for all years.
In November 1990, the Omnibus Budget Reconcili
ation Act of 1990 was enacted. Part of this legislation
was the Budget Enforcement Act, which not only pro
vided new enforcement mechanisms, but also included
significant changes in budget concepts. The major con
ceptual change concerns the measurement of Federal

credit activity in the budget. Under current law, only
the subsidy cost (the cost to the Government, including
the cost associated with loan defaults) of direct loans
and loan guarantees is recorded as budget authority
and outlays. The remaining financial transactions of
credit programs are recorded as means of financing
the deficit. This concept applies only to direct loan
obligations and loan guarantee commitments made in
1992 and later years. Unfortunately, the data for credit
programs prior to 1992 could not be converted to this
subsidy cost measurement basis. Thus, data prior to
1992 are on a cash flow or pre-credit reform basis.
Data for 1992 and beyond are on a cash flow basis
for direct loans and loan guarantees made in earlier
years, but reflect the subsidy cost or credit reform
concepts for the forty or so budget program accounts
providing new direct loans or loan guarantees.
The Budget Enforcement Act also changed the con
cept of budget authority for most special and trust
funds shirting with 1992 data. These changes are dis
cussed in the Notes to Section 5 below.

Coverage

The Federal Government has used the unified or
consolidated budget concept as the foundation for its
budgetary analysis and presentation since the 1969
budget. The basic guidelines for the unified budget
were presented in the Report of the President's Commis
sion on Budget Concepts (October 1967). The Commis
sion recommended the budget include all Federal fiscal
activities unless there were exceptionally persuasive
reasons for exclusion. Nevertheless, from the very be
ginning some programs were perceived as warranting
special treatment. Indeed, the Commission itself rec
ommended a bifurcated presentation: a "unified budg
et" composed of an "expenditure account" and a "loan
account." The distinction between the expenditure ac
count and the loan account proved to be confusing
and caused considerable complication in the budget
for little benefit. As a result, this distinction was elimi
nated starting with the 1974 budget. However, even
prior to the 1974 budget, the Export-Import Bank had
been excluded by law from the budget totals, and other
exclusions followed. The structure of the budget was
gradually revised to show the off-budget transactions
in many locations along with the on-budget trans
actions, and the off-budget amounts were added to
the on-budget amounts in order to show total Federal
spending.
269

270

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

The Balanced Budget and Emergency Deficit Control
Act of 1985 (Public Law 99-177) repealed the off-budg
et status of all then existing off-budget entities, but
it included a provision immediately moving the Fed
eral old-age, survivors, and disability insurance funds
(collectively known as social security) off-budget. To
provide a consistent time series, the budget historical
data show social security off-budget for all years since
its inception, and show all formerly off-budget entities
on-budget for all years. Subsequent law (OBRA 1989)
moved the Postal Service fund off-budget, starting in
fiscal year 1989. Prior to that year, the Postal Service
fund is shown on-budget.
Though social security and the Postal Service are
now off-budget, they continue to be Federal programs.
Indeed, social security currently accounts for around
one-third of all Federal receipts and one-quarter of
all Federal spending. Hence, the budget documents
include these funds and focus on the Federal totals
that combine the on-budget and off-budget amounts.
Various budget tables and charts show total Federal
receipts, outlays, and surpluses and deficits, and divide
these totals between the portions that are off-budget
and the remainder of Federal transactions, all of which
are on-budget.
Changes in Historical Outlays and Deficit
The outlay and deficit totals for 1991 published in
the 1993 budget have increased from $1,323.0 billion
and $268.7 billion to 1,323.8 billion and $269.5 billion,
respectively. These increases correct errors in recording
certain TVA purchases and sales of Treasury debt secu
rities. Purchases and sales had been classified as out
lays and offsets to outlays, respectively, instead of non
expenditure transactions; increases and decreases in
holdings of Treasury debt by Government accounts
had not been recorded. The corrections do not affect
total Federal debt. The increases in debt held by Gov
ernment accounts are offset by equal deductions in
debt held by the public. Similar corrections were made
to the outlay and deficit totals for 1989 and 1990.

Note on the Fiscal Year
The Federal fiscal year begins on October 1 and
ends on the subsequent September 30. It is designated
by the year in which it ends; for example, fiscal year
1990 began on October 1, 1989, and ended on Septem
ber 30, 1990. Prior to fiscal year 1977 the Federal fiscal
years began on July 1 and ended on June 30. In cal
endar year 1976 the July-September period was a sepa
rate accounting period (known as the transition quarter
or TQ) to bridge the period required to shift to the
new fiscal year.

Concepts Relevant to the Historical Tables
Budget (or "on-budget") receipts constitute the income
side of the budget; they are composed almost entirely
of taxes or other compulsory payments to the Govern
ment. Any income from business-type activities (e.g.,
interest income or sale of electric power), and any
income by Government accounts arising from pay
ments by other Government accounts is offset in com
puting budget outlays (spending). This method of ac
counting permits users to easily identify the size and
trends in Federal taxes and other compulsory income,
and in Federal spending financed from taxes, other
compulsory income, or borrowing. Budget surplus refers
to any excess of budget receipts over budget outlays,
while budget deficit refers to any excess of budget out
lays over budget receipts.
The terms off-budget receipts, off-budget outlays, offbudget surpluses, and off-budget deficits refer to similar
categories for off-budget activities. The sum of the onbudget and off-budget transactions constitute the con
solidated or total Federal Government transactions.
The budget is divided between two fund groups,
federal funds and trust funds. The Federal funds
grouping includes all receipts and outlays not specified
by law as being trust funds. All Federal funds are
on-budget (except for the Postal Service fund starting
with fiscal year 1989). Most trust funds are on-budget,
but as explained in the general notes above, the two
social security retirement trust funds are shown offbudget for all years.
The term trust fund as used in Federal budget ac
counting is frequently misunderstood. In the private
sector, "trust" refers to funds of one party held by
a second party (the trustee) in a fiduciary capacity.
In the Federal budget, the term "trust fund" means
only that the law requires the funds be accounted for
separately and used only for specified purposes and
that the account in which the funds are deposited is
designated as a "trust fund." A change in law may
change the future receipts and the terms under which
the fund's resources are spent. The determining factor
as to whether a particular fund is designated as a
"Federal" fund or "trust" fund is the law governing
the fund.
The largest trust funds are for retirement and social
insurance (e.g., civil service and military retirement,
social security, medicare, and unemployment benefits).
They are financed largely by social insurance taxes
and contributions and payments from the general fund
(the main component of Federal funds). However,
there are also major trust funds for transportation
(highway and airport and airways) and for other pro
grams financed in whole or in part by user charges.
The budget documents do not separately show user
charges. Frequently there is confusion between the con
cept of user charges and the concept of offsetting col

271

HISTORICAL TABLES

lections. User charges are charges for services ren
dered. Such charges may take the form of taxes (budg
et receipts), such as highway excise taxes used to fi
nance the highway trust fund. They may also take
the form of business-type charges, in which case they
cure offsetting collections—offset against budget outlays
rather than being recorded as budget receipts. Exam
ples of such charges are the proceeds from the sale
of electric power by the Tennessee Valley Authority
and medical insurance premiums paid to the supple
mentary medical insurance trust fund. User charges
may go to the general fund of the Treasury or they
may be "earmarked." If the funds are earmarked, it
means the collections are separately identified and
used for a specified purpose—they are not commingled
(in an accounting sense) with any other money. This
does not mean the money is actually kept in a separate
bank account. All money in the Treasury is merged
for efficient cash management. However, any ear
marked funds are accounted for in such a way that
the balances are always identifiable and available for
the stipulated purposes.
Notes on Section 1 (Overview of Federal
Government Finances)
This section provides an overall perspective on total
receipts, outlays (spending), and surpluses or deficits,
the on-budget and off-budget amounts are also sepa
rately shown. Tables 1.1 and 1.2 have identical struc
tures; 1.1 shows the data in millions of dollars, while
1.2 shows the same data as percentages of the gross
domestic product (GDP). For all the historical tables,
fiscal year GDP is used to calculate percentages of
GDP. The fiscal year GDP data are shown in Table
1.2.
Table 1.3 shows total Federal receipts, outlays, and
surpluses or deficits in current and constant dollars,
and as percentages of GDP. Table 6.1 provides a
disaggregation of the constant dollar outlays.
Table 1.4 shows receipts, outlays and surpluses or
deficits for the consolidated budget by fund group.
The budget is composed of two principal fund
groups—Federal funds and trust funds. Normally,
whenever data are shown by fund group, any pay
ments from programs in one fund group to accounts
of the other are shown as outlays of the paying fund
and receipts of the collecting fund. When the two fund
groups are aggregated to arrive at budget totals these
interfund transactions are deducted from both receipts
and outlays in order to arrive at transactions with
the public. Table 1.4 displays the estimates of receipts
and outlays on a gross basis. That is, in contrast to
normal budget practice, collections of interfund pay
ments are included in the receipts totals rather than
as offsets to outlays. These interfund collections are

grossed-up to more closely approximate cash income
and outgo of the fund groups.
Notes on Section 2 (Composition of Federal
Government Receipts)
Section 2 provides historical information on on-budg
et and off-budget receipts. Table 2.1 shows total re
ceipts divided into five major categories; it also shows
the split between on-budget and off-budget receipts.
Table 2.2 shows the receipts by major category as per
centages of total receipts, while Table 2.3 shows the
same categories of receipts as percentages of GDP.
Table 2.4 disaggregates two of the major receipts cat
egories, social insurance taxes and contributions and
excise taxes, and Table 2.5 disaggregates the "other
receipts" category. While the focus of the section is
on total Federal receipts, auxiliary data show the
amounts of trust fund money in each category, so it
is possible to readily distinguish the Federal fund and
trust fund portions.

Notes on Section 3 (Federal Government Outlays
by Function)

Section 3 displays Federal Government outlays (onbudget and off-budget) according to their functional
classification. The functional structure is divided into
18 broad areas (functions) that provide a coherent and
comprehensive basis for analyzing the budget. Each
function, in turn, is divided into basic groupings of
programs entitled subfunctions. The structure has two
categories—allowances and undistributed offsetting re
ceipts—that are not truly functions but are required
in order to cover the entire budget. At times a more
summary presentation of functional data is needed;
the data by "superfunction" is produced to satisfy this
need. Table 3.1 provides outlays by superfunction and
function while Table 3.2 shows outlays by function
and subfunction.
No major changes have been made in the functional
structure since last year's document. Subfunctional
classifications have not changed, although the classi
fication of one program has been corrected. Payments
to States for AFDC work programs has been moved
from subfunction 609 (Other income security) to
subfunction 504 (Training and employment).
In arraying data on a functional basis, budget au
thority and outlays are classified according to the pri
mary purpose of the activity. To the extent feasible,
this classification is made without regard to agency
or organizational distinctions. Classifying each activity
solely in the function defining its most important pur
pose-even though many activities serve more than
one purpose—permits adding the budget authority and
outlays of each function to obtain the budget totals.
For example, Federal spending for medicaid constitutes
a health care program, but it also constitutes a form

272

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

of income security benefits. However, the spending
cannot be counted in both functions; since the main
purpose of medicaid is to finance the health care of
the beneficiaries, this program is classified in the
"health" function. Section 3 provides data on budget
outlays by function, while Section 5 provides com
parable data on budget authority.

Notes on Section 4 (Federal Government Outlays
by Agency)
Section 4 displays Federal Government outlays (onand off-budget) by agency. Table 4.1 shows the dollar
amounts of such outlays, and Table 4.2 shows the per
centage distribution. The outlays by agency are based
upon the agency structure currently in effect. For ex
ample, the Department of Education was established
by legislation enacted in 1979. However, these data
show the Department of Education spending for all
years, including education spending that was in other
agencies in earlier years.
Notes on Section 5 (Budget Authority—On- and
Off-Budget)

Section 5 provides data on budget authority (BA).
BA is the authority provided by law for agencies to
obligate the Government to spend. Table 5.1 shows
BA by function and subfunction, starting with 1976.
Table 5.2 provides the same information by agency,
and Table 5.3 provides a percentage distribution of
BA by agency.
The data in these tables were compiled using the
same methods used for the budget historical tables
for receipts and outlays (i.e., to the extent feasible,
changes in classification are reflected retroactively so
the data show the same stream of transactions in the
same location for all years). However, BA is hetero
geneous in nature, varying significantly from one pro
gram to another. As a result, it is not additive—either
across programs or agencies for a year or, in many
cases, for an agency or program across a series of
years—in the same sense that budget receipts and
budget outlays are additive. The following are exam
ples of different kinds of BA and the manner in which
there are large divergences between the creation and
use of BA.
• BA and outlays for each year may be exactly
the same (e.g., interest on the public debt).
• All income to a fund (e.g., certain trust funds)
may be permanently appropriated as BA; as long
as the fund has adequate resources, there is no
further relationship between the BA and outlays.
• For each year the Congress may appropriate a
large quantity of BA that will be spent over a
subsequent period of years (e.g., many defense
procurement contracts and major construction
programs).

• Some BA (e.g., the salaries and expenses of an
operating agency) is made available only for a
year and any portion not obligated during that
year lapses (i.e., it ceases to be available to be
obligated).
• Revolving funds may operate spending programs
indefinitely with no new infusion of BA, other
than the authority to spend offsetting collections.
• BA may be enacted with the expectation it is
unlikely ever to be used (e.g., standby borrowing
authority).
• In the past, the Federal Financing Bank (FFB)
was conducted as a revolving fund, making direct
loans to the public or purchasing loan assets from
other funds or accounts. Each new loan by the
FFB required new BA. In many cases, if the same
loan were made by the account being serviced
by the FFB, the loan could be financed from off
setting collections and no new BA would be re
corded. Under terms of the 1985 legislation mov
ing the FFB on-budget, the FFB ceased to make
direct loans to the public. Instead, it makes loans
to the accounts it services, and these accounts,
in turn, make the loans to the public. Such loans
could be made from new BA or other obligational
authority available to the parent account. These
tables have not been reconstructed to shift BA
previously scored in the FFB to the parent ac
counts, because there is no technical way to
reconfigure the data.
• Although major changes in the way BA is meas
ured for credit programs (beginning in 1992) re
sult from the Budget Enforcement Act, these ta
bles could not be reconstructed to show revised
BA figures for 1991 and prior years on the new
basis.
• Beginning in 1992, the measurement of BA
changed in all special and trust funds that have
legislatively imposed limitations or benefit for
mulas that preclude the use of BA. Where pre
viously budget authority was the total income
to the fund, BA in these funds for 1992 and sub
sequent years is an estimate of the obligations
to be incurred during the fiscal year for benefit
payments, administration and other expenses of
the fund.
As a result of the diverse nature of BA, it is difficult
to conceptualize what the BA total means for a single
year, or to determine the significance of a change in
total BA from one year to the next. Sometimes it is
meaningful to compare the BA for one function or
subfunction with that for another function or subfunc
tion, but often it is not. It is also generally not mean
ingful to compare BA for a particular function or
subfunction with total BA. Additionally, since some
BA lapses without being used and some BA is standby

273

HISTORICAL TABLES

and never used, it is impossible to add the BA for
a period of years in a meaningful manner in the same
sense that receipts or outlays can be added over a
period of years.
Despite these qualifications and drawbacks, there is
a desire for historical data on BA, and this section
has been developed to meet that desire. Budget author
ity data are also provided in Table 8.9 for various
discretionary program groupings.
Notes on Section 6 (Composition of Federal
Government Outlays)

The "composition" categories in this section divide
total outlays (including social security) into national
defense and nondefense components, and then disag
gregate the nondefense spending into severed parts:
• Payments for individuals: These are Federal Gov
ernment spending programs designed to transfer
income (in cash or in kind) to individuals or
families. To the extent feasible, this category does
not include reimbursements for current services
rendered (e.g., salaries and interest). The pay
ments may be in the form of cash paid directly
to individuals or they may take the form of the
provision of services or the payment of bills for
activities largely financed from personal income.
They include outlays for the provision of medical
care (in veterans hospitals, for example) and for
the payment of medical bills (e.g., medicare).
They also include subsidies to reduce the cost
of housing below market rates, and food and
nutrition assistance (such as food stamps). The
data base, while not precise, provides a reason
able perspective of the size and composition of
income support transfers within any particular
year and trends over time. Section 11
disaggregates the components of this category.
The data in Section 6 show a significant amount
of payments for individuals takes the form of
grants to State and local governments to finance
benefits for the ultimate recipients. These grants
include medicaid, some food and nutrition assist
ance, and a significant portion of the housing
assistance payments. Sections 11 and 12 provide
a more detailed disaggregation of this spending.
• All other grants to State and local governments: This
category is composed of the Federal nondefense
grants to State and local governments other than
grants defined as payments for individuals. Sec
tion 12 disaggregates this spending.
• Net interest: This category is composed of all
spending (including offsetting receipts) included
in the functional category "net interest." Most
spending for net interest is paid to the public
as interest on the Federal debt. As shown in

Table 3.2, net interest includes, as an offset, sig
nificant amounts of interest income.
• All other: This category is composed of all remain
ing Federal spending and offsetting receipts ex
cept for the offsetting receipts included in the
category "undistributed offsetting receipts." It in
cludes most Federal loan activities and most Fed
eral spending for foreign assistance, farm price
supports, medical and other scientific research,
and, in general, Federal direct program oper
ations.
• Undistributed offsetting receipts: These are propri
etary receipts from the public that are not offset
against any specific agency or function. These off
setting receipts are in function 950 as shown in
the functional tables. Additional details on their
composition can be found at the end of Table
3.2.
Table 6.1 shows these outlays in current and constant
dollars, the percentage distribution of current dollar
outlays, and the current dollar outlays as percentages
of GDP. The term "constant dollars" means the
amounts of money that would have had to be spent
in each year if, on average, the unit cost of everything
purchased within that category each year (including
purchases financed by income transfers, interest, etc.)
were the same as in the base year (1987). The adjust
ments to constant dollars are made by applying a se
ries of price deflators to the current dollar data base.
The composite deflator is used to produce estimates
of constant dollar receipts, and is published in Table
1.3. The separate deflators used for these calculations
are not published, but are available upon request. Re
quests should be sent to Historical Tables, Office of
Management and Budget, Room 6025, NEOB, Washing
ton, DC 20503.
Notes on Section 7 (Federal Debt)

This section provides information about Federal
debt. Table 7.1 contains data on gross Federal debt
and its major components in terms of both the amount
of debt outstanding at the end of each year and that
amount as a percentage of fiscal year GDP. Gross Fed
eral debt is the broadest measure of Federal debt com
monly used. It is composed both of Federal debt held
(owned) by the public and Federal debt held by Fed
eral Government accounts. The largest Federal Govern
ment accounts holding Federal debt securities are the
civil service and military retirement, social security,
and medicare trust funds. However, significant
amounts are also held by some other Government ac
counts, such as the unemployment and highway trust
funds.
Federal debt held by the public is gross Federal debt
not held by Federal Government accounts. For exam
ple, it includes debt held by individuals, private banks

274

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

and insurance companies, the Federal Reserve Banks
and foreign central banks.
Table 7.1 divides debt held by the public between
the amount held by the Federal Reserve Banks and
the remainder. The Federal Reserve Banks, while not
part of the Government, are the central banking system
for the Nation. Those data are shown separately be
cause holdings of Federal debt by the Federal Reserve
Banks do not have the same impact on private credit
markets as other debt held by the public. Their hold
ings of Federal debt arise from their role as the coun
try's central bank, and the size of these holdings has
a major impact on the Nation's money supply. Since
the Federal budget does not forecast Federal Reserve
monetary policy, it does not project future changes
in the amounts of Federal debt that will be held by
the Federal Reserve Banks. Hence, the split of debt
held by the public into that portion held by the Federal
Reserve Banks and the remainder is provided only
for past years. Table 2.5 shows deposits of earnings
by the Federal Reserve System. Most interest paid by
Treasury on debt held by the Federal Reserve Banks
is returned to the Treasury as deposits of earnings,
which are counted as budget receipts.
As a result of a conceptual revision in the quantifica
tion of Federal debt, the data on debt held by the
public and gross Federal debt—-but only a small part
of debt held by Government accounts—were revised
back to 1956 in the 1990 budget The total revision
was relatively small—a change of under one percent
of the recorded value of the debt—but the revised
basis is more consistent with the quantification of inter
est outlays, and provides a more meaningful measure
of Federal debt. The change converted most debt held
by the public from the par value to the sales price
plus amortized discount.
Table 7.2 shows the end-of-year amounts of Federal
debt subject to the general statutory limitation. It is
recorded at par value (except for savings bonds)
through 1988, but by law the basis was changed, in
part, to accrual value for later years. Before World
War I, each debt issue by the Government required
specific authorization by the Congress. Starting in 1917,
the nature of this limitation was modified in several
steps until it developed into a limit on the total amount
of Federal debt outstanding. The Treasury is free to
borrow whatever amounts are needed up to the debt
limit, which is changed from time to time to meet
new requirements. Table 7.3 shows the ceiling at each
point in time since 1940. It provides the specific legal
citation, a short description of the change, and the
amount of the limit specified by each Act. Most of
gross Federal debt is subject to the statutory limit.
However, there are some differences.

Notes on Section 8 (Outlays by Budget
Enforcement Act Categories)
Section 8 is composed of nine tables providing budg
et authority and outlays by the major categories used
under the Budget Enforcement Act (BEA) and under
previous budget agreements between Congress and the
current and previous Administrations. Table 8.1 shows
Federal outlays within each of the categories and
subcategories. The principal categories are outlays for
mandatory and related programs and outlays for dis
cretionary programs. Mandatory and related programs
include direct spending and offsetting receipts whose
budget authority is provided by law other than appro
priations Acts. These include appropriated entitlements
and the food stamp program, which receive pro forma
appropriations. Table 8.2 has the same structure, but
shows the data in constant (FY 1987) dollars. Table
8.3 shows the percentage distribution of outlays by
BEA category and Table 8.4 shows outlays by BEA
category as a percentage of GDP.
Table 8.5 provides additional detail by function and/
or subfunction for mandatory and related programs.
Table 8.6 shows the same data in constant dollars.
Discretionary programs are those whose budgetary
resources (other than entitlement authority) are pro
vided in appropriations Acts. The BEA defines three
categories of discretionary programs: Defense (Function
050), International (Function 150), and Domestic (all
other discretionary programs). Table 8.7 provides addi
tional detail by function and/or subfunction on outlays
for discretionary programs. Table 8.8 provides the
same data in constant dollars. Table 8.9 provides func
tion and/or subfunction detail on budget authority for
discretionary programs.

Notes on Section 9 (Federal Government Outlays
for Major Public Physical Capital Investment)

The tables in this section provide a broad perspective
on Federal Government outlays for major public phys
ical capital. They are based on the data classifications
discussed in Appendix 1, Section C, of this document,
which discusses this spending. These data measure
new Federal spending for major public physical assets,
but they exclude major commodity inventories. In
some cases it was necessary to use supplementary data
sources to estimate missing data in order to develop
a consistent historical data series.
Table 9.1 shows direct Federal and grant outlays
for major public physical capital investment in current
and constant (FY 1987) dollars. Direct Federal outlays
are further disaggregated into capital investment for
national defense and nondefense capital investment.
Table 9.2 has the same structure but shows the percent
age distribution of outlays and the outlays as a per
centage of GDP.

HISTORICAL TABLES

Table 9.3 disaggregates national defense direct out
lays for major public physical capital investment. Table
9.4 disaggregates nondefense direct outlays. Table 9.5
shows the composition of grant outlays for major pub
lic physical capital investment.
Table 9.6 provides total outlays for major public
physical capital investment in constant (FY 1987) dol
lars. Direct outlays and grant outlays are shown with
further disaggregations of each category.
Notes on Section 10 (Federal Government Outlays
for the Conduct of Research and Development
and for the Conduct of Education and Training)
Appendix 1, Section C of this document provides
data showing Federal Government outlays for the con
duct of research and development (R&D) and the con
duct of education and training. The data for the con
duct of R&D exclude outlays for construction and
major equipment for R&D, because such spending is
included in outlays for physical capital (Section 9).
Table 10.1 provides an overall perspective on Federal
Government outlays for the conduct of R&D. It shows
total spending and the split between national defense
and nondefense spending in four forms: in current
dollars, in constant dollars, as percentages of total out
lays, and as percentages of GDP. Table 10.2 shows
the outlays in current dollars by major function and
program. Table 10.3 provides outlays for the conduct
of education and training in current dollars for direct
Federal programs and for grants to State and local
governments. In each of these two categories, outlays
are shown by subfunction. Total outlays for the con
duct of education and training as a percentage of total
Federal outlays and in constant FY 1987 dollars are
also shown.
Table 10.3 shows outlays for the conduct of edu
cation and training in current dollars for direct Federal
programs and for grants to State and local govern
ments. In each of these two categories, outlays are
shown by subfunction. Toted outlays for the conduct
of education and training as a percentage of total Fed
eral outlays and in constant FY 1987 dollars are also
shown. As with the series on physical capital, several
budget data sources have been used to develop a con
sistent data series extending back to 1962. The major
discontinuity occurs between 1991 and 1992 and affects
primarily direct Federal higher education outlays. For
1991 and earlier, these data include net loan outlays.
Beginning in 1992, pursuant to changes in the treat
ment of loans as specified in the Credit Reform Act
of 1990, this series includes liquidating accounts for
loans obligated in 1991 and earlier and credit subsidies
for 1992 and later years.
Table 10.3 also excludes education and training out
lays for physical capital (which are included in Section
9) and education and training outlays for the conduct

275
of research and development (which are in Tables 10.1
and 10.2). Also excluded are education and training
programs for Federal civilian and military employees.

Notes on Section 11 (Federal Government Payments
for Individuals)

This section provides detail on outlays for Federal
Government payments for individuals, which are also
described in the notes on Section 6. The basic purpose
of the payments for individuals aggregation is to pro
vide a broad perspective on Federal spending in cash
or in-kind for which no current service is rendered
yet which constitutes income transfers to individuals
and families. Table 11.1 provides an overview display
of these data in four different forms. All four of these
displays show the total payments for individuals, and
the split of this total between grants to State and local
governments for payments for individuals (such as
medicaid and grants for housing assistance) and all
other (''direct") payments for individuals.
Table 11.2 shows the functional composition of pay
ments for individuals (see notes on Section 3 for a
description of the functional classification), and in
cludes the same grants versus nongrants ("direct")
split provided in Table 11.1. The off-budget social secu
rity program finances a significant portion of the Fed
eral payments for individuals. These tables do not dis
tinguish between the on-budget find off-budget pay
ments for individuals. However, all payments for indi
viduals shown in Table 11.2 in function 650 (social
security) are off-budget outlays, and all other payments
for individuals are on-budget. Table 11.3 displays the
payments for individuals by major program category.
Notes on Section 12 (Federal Grants To State and
Local Governments)
For several decades the Federal budget documents
have provided data on Federal grants to State and
local governments. The purpose of these data is to
identify Federal Government outlays that constitute in
come to State and local governments to help finance
their services and their income transfers (payments for
individuals) to the public. Grants generally exclude
Federal Government payments for services rendered
directly to the Federal Government; for example, they
exclude most Federal Government payments for re
search and development, and they exclude payments
to State social service agencies for screening disability
insurance beneficiaries for the Federal disability insur
ance trust fund.
Table 12.1 provides an overall perspective on grants;
its structure is similar to the structure of Table 11.1.
Table 12.2 displays Federal grants by function (see
notes on Section 3 for a description of the functional
classification). The bulk of Federal grants are included
in the Federal funds group; however, since the creation

276

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

of the highway trust fund in 1957, significant amounts
of grants have been financed from trust funds (see
notes to Section 1 for a description of the difference
between "Federal funds" and "trust funds"). All Fed
eral grants are on-budget. Wherever trust fund outlays
are included in those data, Table 12.2 not only
identifies the total grants by function but also shows
the split between Federal funds and trust funds.
Table 12.3 provides data on grants at the account
or program level, with an identification of the function,
agency, and fund group of the payment.
Notes on Section 13 (Social Security and Medicare)
Over the past several decades the social security pro
grams (the Federal old-age and survivors insurance
(OASI) and the Federal disability insurance (DI) trust
funds) and the medicare programs (the Federal hos
pital insurance (HI) and the Federal supplementary
medical insurance (SMI) trust funds) have grown to
be among the largest parts of the Federal budget. Be
cause of the size, the rates of growth, and the special
ized financing of these programs, policy analysts fre
quently need to identify these activities separately from
all other Federal taxes and spending. As discussed in
the introductory notes, the two social security funds
are off-budget, while the medicare funds are on-budg
et. As Table 13.1 shows, the first of these funds (OASI)
began in 1937. The table traces the annual transactions
of that fund and of the other funds beginning with
their points of origin.
The table provides detailed information about social
security and medicare by fund. It shows total cash
income (including offsetting receipts) by fund, sepa
rately identifying social insurance taxes and contribu
tions, intragovernmental income, and proprietary re
ceipts from the public. Virtually all of the proprietary
receipts from the public, especially those for the sup
plementary medical insurance trust fund, are medicare
insurance premiums. The table shows the income,
outgo, and surplus or deficit of each fund for each
year, and also shows the balances of the funds avail
able for future requirements. Most of these fund bal
ances are invested in public debt securities and con
stitute a significant portion of the debt held by Govern
ment accounts (see Table 7.1).
The SMI fund, which was established in 1967, is
financed primarily by payments from Federal funds
and secondarily by medical insurance premiums (pro
prietary receipts from the public). The other three trust
funds are financed primarily by social insurance taxes.
The law establishing the rate and base of these taxes
allocates the tax receipts among the three funds.
The table shows significant transfers by OASI and
DI to the railroad retirement social security equivalent
account. These transfers are equal to the additional
amounts of money social security would have had to

pay, less additional receipts it would have collected,
if the rail labor force had been included directly under
social security since the inception of the social security
program.
In 1983, when the OASI fund ran short of money,
Congress passed legislation that (a) provided for a one
time acceleration of military service credit payments
to these trust funds, (b) provided for a Federal fund
payment to OASDI for the estimated value of checks
issued in prior years and charged to the trust funds
but never cashed, (c) required that the Treasury make
payments to OASDHI on the first day of the month
for the estimated amounts of their social insurance
taxes to be collected over the course of each month
(thereby increasing each affected trust fund's balances
at the beginning of the month), and (d) subjected some
social security benefits to Federal income or other taxes
and provided for payments by Federal funds to social
security of amounts equal to these additional taxes.
Additionally, in 1983 the OASI fund borrowed from
the DI and HI funds (the tables show the amounts
of such borrowing and repayments of borrowing). The
large intragovernmental collections by OASDHI in 1983
are a result of the transactions described under (a)
and (b) above. Also starting in 1983, OASI began pay
ing interest to DI and HI to reimburse them for the
balances OASI borrowed from them; OASDHI paid
interest to Treasury to compensate it for the balances
transferred to these funds on the first day of each
month. This practice of Treasury making payments on
the first day of the month, and the associated interest
payment, was repealed for OASDI in the Omnibus
Budget Reconciliation Act of 1990. It had been repealed
previously for HI.

Notes on Section 14 (Federal Sector Transactions in
the National Income and Product Accounts)
The principal system used in the United States for
measuring total economic activity is the system of na
tional income and product accounts (NIPA), which
provide calculations of the GDP and related data se
ries. These data are produced by the Bureau of Eco
nomic Analysis (BEA) of the Department of Commerce.
As part of this work the BEA staff analyze the budget
data base and estimate transactions consistent with this
measurement system. The NIPA data are normally pro
duced for calendar years and quarters. Section 14 pro
vides Federal Sector NIPA data on a fiscal year basis
from 1947 through 1992.

Notes on Section 15 (Total (Federal and State and
Local) Government Finances)
Section 15 provides a perspective on the size and
composition of total Government (Federal, State, and
local) receipts and spending. Both the Bureau of the
Census and the Bureau of Economic Analysis in the

HISTORICAL TABLES

Commerce Department provide information (in the na
tional income and product accounts (NIPA) data) on
income and spending for all levels of government in
the United States. These tables include the NIPA State
and local transactions with the Federal budget (deduct

277
ing the amount of overlap due to Federal grants to
State and local governments) to measure total Govern
ment receipts and spending on a fiscal year basis from
1947 through 1992.

278

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-): 1789-1993
fin millions of dollars)

Total
Year

Receipts

Outlays

1,160

1,090

14,462

15,453

588
562
562
541

......................................................................
......................................................................
......................................................................
......................................................................
......................................................................

544

595
666
602
604

1910......................................................................

676
702
693
714
725

1789-1849 ...........................................................
1860-1900 ...........................................................
1901 ......................................................................

1902 ......................................................................
1903 ......................................................................
1904 ......................................................................
1905
1906
1907
1908
1909

1911 ......................................................................
1912 ......................................................................

1913 ......................................................................
1914......................................................................

On-Budget

Surplus or
Defidt(-)

Receipts

1,160

Outlays

Off-Budget
Surplus or
Defidt(-)

1,090
15,453

-991

588

525

485

45
-43

562
562
541

517
584

-43

567

-23

544

567

-23

570
579

25
87
-57
-89

595
666
602
604

570
579
659
694

25
87

-18
11

676
702

694

3
_*
_*

693
714
725

715

3
_*

726

-63

48
-853

683
761
1,101

746
713
1,954

-63
48
-853

70
-991

14,462

525

485
517
584

659
694

694
691

690
715
726

691

690

Outlays

Surplus or
Dencit(—)

-57
-89
-18
11

1917 ......................................................................

683
761
1,101

746
713
1,954

1918 ......................................................................

3,645

12,677

-9,032

3,645

12,677

-9,032

1919 ......................................................................

5,130

18,493

-13,363

5,130

18,493

-13,363

1920 ......................................................................
1921 ....... ,..............................................................

6,649
5,571

6,358
5,062

291
509

6,358

291

1922 ......................................................................
1923 ......................................................................

4,026
3,853

3,289
3,140

736
713

6,649
5,571
4,026

1924 ......................................................................

3,871

2,908

963

1925 ......................................................................

3,641

2,924

717

1926 ......................................................................

3,795

1927 ......................................................................
1928 ......................................................................
1929 ......................................................................

4,013
3,900
3,862

2,930
2,857
2,961
3,127

1930 ......................................................................

4,058

1931 ......................................................................

3,116

1932 ......................................................................
1933 ......................................................................
1934 ......................................................................

1915 ......................................................................
1916 ......................................................................

Receipts

5,062

509

3,289
3,140

736
713

3,871

2,908

963

3,641

2,924

865

3,795

2,930

717
865

1,155
939

4,013
3,900

734

3,862

2,857
2,961
3,127

1,155
939
734

3,320

738

4,058

3,577

-462

3,116

3,320
3,577

-462

1,924
1,997
2,955

4,659
4,598
6,541

-2,735
-2,602
-3,586

1,924
1,997
2,955

4,659
4,598
6,541

-2,735
-2,602
-3,586

3,609
3,923
5,387
6,751
6,295

6,412
8,228
7,580
6,840
9,141

-2,803
-4,304

3,609
3,923
5,122
6,364
5,792

6,412
8,228
7,582
6,850
9,154

-2,803
-4,304
-2,460
-486
-3,362

265
387
503

-2
-10
-13

267
397
516

1940 ......................................................................

6,548
8,712

9,468
13,653

5,998
8,024

9,482
13,618

-3,484
-5,594

550
688

-14
35

564
653

1942 ......................................................................

14,634

35,137

-2,920
-4,941
-20,503

1943 ......................................................................

24,001

78,555

-54,554

1935
1936
1937
1938
1939

1941 ......................................................................

-2,193
-89
-2,846

3,853

738

13,738

35,071

-21,333

896

830

78,466

-55,595

1,130

91,190

-48,735

1,292

114

1,041
1,178

-48,720
-16,964

1,310

143
210

1944 ......................................................................

43,747

91,304

-47,557

22,871
42,455

1945 ......................................................................

45,159

-47,553

43,849

1946 ......................................................................

39,296

92,712
55,232

38,057

1947 ......................................................................

38,514

-15,936
4,018

92,569
55,022

37,055

34,193

2,861

1,459

1,238

1,167
1,028
1,157

1948 ......................................................................

41,560

34,496
29,764

11,796

39,944

29,396

10,548

1,616

303
368

1949 ......................................................................

39,415

38,835

580

37,724

38,408

-684

1,690

427

1,263

1950 ......................................................................

39,443

42,562

-3,119

37,336

42,038

-4,702

2,106

524

1,583

1951 ......................................................................

51,616

45,514

4,259

66,167

67,686

48,496
62,573

44,237

1952 ......................................................................

6,102
-1,519

65,956

-3,383

3,120
3,594

1,277
1,730

1953 .......................................................................

69,608
69,701

76,101

-6,493

65,511

73,771

70,855

-1,154

65,112

67,943

-8,259
-2,831

4,097
4,589

2,330
2,912

1,843
1,864
1,766
1,677

1954 ......................................................................

$500 thousand or less.

1,248

279

HISTORICAL TABLES
Table 1.1-SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-): 1789-1993-Continued
fin millions ol dollars)

Receipts

Outlays

Off-Budget

On-Budget

Total

Year

Surplus or
Deficit(-)

Receipts

1955 ......................................................................

65,451

68,444

-2,993

1956 ......................................................................
1957 ......................................................................

74,587

70,640

79,990

60,370
68,162
73,201

1958 ......................................................................

79,636

76,578
82,405

3,947
3,412
-2,769

1959 ......................................................................

79,249

92,098

1960 ......................................................................

92,492

92,191

1961 ......................................................................
1962 ......................................................................

94,388

Outlays

Surplus or
Defidt(-)

Receipts

Outlays

Surplus or
Defidt(-)

64,461

-4,091

5,081

65,668

2,494

6,425

3,983
4,972

70,562
74,902

2,639

6,789

6,016

773

71,587

-3,315

8,049

7,503

546

-12,849

70,953

83,102

-12,149

8,296

8,996

-700

301

81,851

81,341

510

10,641

10,850

-209

97,723

-3,335

82,279

86,046

-3,766

12,109

11,677

431

106,821
111,316

-7,146

87,405

93,286

-5,881

-4,756

92,385

96,352

13,535
14,964

1964 ......................................................................

112,613

118,528

-5,915

96,248

102,794

-3,966
-6,546

12,271
14,175

-1,265

1963 ......................................................................

99,676
106,560

16,366

15,734

632

1965 ......................................................................

116,817
130,835

118,228
134,532

-1,411

100,094
111,749

148,822

157,464

19,715
20,424

-630

1967 ......................................................................

16,723
19,085
24,401

194

1968 ......................................................................

152,973

178,134

-3,698
-8,643
-25,161

101,699
114,817
137,040

16,529

1966 ......................................................................

1969 ......................................................................

186,882

183,640

1970 ......................................................................

192,807

1971 ......................................................................
1972 ......................................................................
1973 ......................................................................

187,139

195,649
210,172
230,681

230,799

245,707

1974 ......................................................................

263,224

269,359

1975 ......................................................................

279,090
298,060
81,232
355,559

1978 ......................................................................
1979 ......................................................................

399,561

1980 ......................................................................
1981 ......................................................................
1982 ......................................................................

-1,605

155,798

3,242

128,056
157,928

158,436

-3,068
-12,620
-27,742
-507

-2,842

159,348

168,042

-23,033
-23,373

177,346
193,824

-14,908
-6,135

151,294
167,402
184,715

200,118

209,299

217,270

332,332
371,792

-53,242
-73,732

216,633
231,671

271,892

95,975
409,218

-14,744

63,216
278,741

-59,186

463,302

458,746
503,485

517,112

590,947

599,272
617,766

678,249

1983 ......................................................................
1984 ......................................................................

600,562

808,380

666,457

851,846

-73,835
-78,976
-127,989
-207,818
-185,388

1985 ......................................................................

946,391

1986 ......................................................................
1987 ......................................................................
1988 ......................................................................

734,057
769,091
854,143
908,954

-212,334
-221,245

810,079
861,449

-221,698
-237,976
-169,339
-193,986

1989 ......................................................................

990,691

1,143,172

727,026

932,261

-205,235

1990 ......................................................................
1991 ......................................................................

1,031,308
1,054,264

1,252,691

749,652

1,027,626

1,323,785

-221,384
-269,521

760,380

1992 ......................................................................
1993 estimate.....................................................

1,091,631
1,147,588

1,381,791
1,474,935

-290,160
-327,347

789,205
828,183

1976 ......................................................................

TQ .........................................................................

1977 ......................................................................

207,309

745,755

990,336
1,003,911

1,064,140

-53,659
-40,183

-149,769
-155,187
-152,481

124,420

24,917

3,978
2,581

28,953

-8,694

33,459

27,607

5,852

-26,052
-26,423
-15,403
-7,971

35,845
39,907

32,826
36,857

3,019
3,050

46,084
53,925

45,589
52,089

495
1,836

-55,260
-70,512
-13,339

62,458

60,440
69,609

-3,220

19,421

-1,405

80,716

-3,899
-4,266

328,502
369,089
403,507

-49,760

-54,920

85,391

-38,199

97,994

403,903
469,097
474,299
453,242

476,618

-72,715

543,053

500,382

686,032

-73,956
-120,052
-208,030
-185,650

113,209
130,176

547,886
568,862
640,741
667,463

769,584

314,169
365,309

-789

22,336
25,204

66,389
18,016
76,817

302,183
76,555

1,098
1,452

89,657
99,978
114,329
135,196

151,404

3,749

2,018

-1,984

-1,120
-5,020
-7,937
212

143,467
147,320
166,075

147,108

165,813

262

186,171

176,807

200,228

241,491

183,498
193,832
202,691

9,363
16,731
19,570

263,666

210,911

52,754

281,656

225,065

56,590

1,082,098

-277,974
-321,719

293,885

241,687

1,129,475
1,208,120

-340,270
-379,937

302,426
319,405

252,316
266,815

52,198
50,110
52,590

594,351
661,272

806,838

213,402

38,800

280

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 1.2-SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) AS PERCENTAGES OF GDP: 1934-1993
On-Budget

Total

Year

GDP
fin billions
of dollars)

Receipts

Outlays

Surplus
or
Defidt(-)

Receipts

Outlays

Off-Budget

Surplus
or
Defldt(-)

Receipts

Outlays

-2.8

0.3

-0.6
-3.8

0.4
0.6

_*
_*

-3.7

0.6

-5.0
-15.0

1934 ................................................................................

60.4

4.9

10.8

-5.9

4.9

10.8

-5.9

1935 .................................................................................

5.3

9.3
10.6
8.7

-4.1
-5.6
-2.5

5.3

9.3

1936 .................................................................................
1937 ................................................................................

68.7
77.5
86.8

5.1

-4.1
-5.6

1938 ................................................................................

87.8

7.7

87.8

7.2

-0.1
-3.2

7.2

1939 ................................................................................

7.8
10.4

10.6
8.7
7.8
10.4

1940 ................................................................................
1941 ................................................................................

95.4

6.9

9.9

-3.1

6.3

112.5
141.8
175.4

7.7

12.1

1942 ................................................................................
1943 .................................................................... ............

10.3

-4.4
-14.5

201.7

21.7

-23.6

7.1
9.7
13.0
21.0

44.7
45.2

-31.7

1944 ................................................................................

24.8
44.8
45.3

5.1
6.2

13.7

-31.1

5.9

6.6

9.9
12.1
24.7

Surplus
or
Defidtf-)

0.3
0.5

0.6
0.6

0.6

_*
*

0.6

-24.2

0.6
0.6

0.1
0.1

0.6
0.6
0.6
0.6

1945 ................................................................................

212.0

21.3

43.7

-22.4

20.7

43.7

-23.0

0.6

0.1

0.6

1946 ................................................................................

212.5

18.5

-7.5

17.9

25.9

17.3

1.8

16.6

0.1

12.1

4.8

4.3
-0.3

0.7

1949 ................................................................................

16.2
14.4

15.3
11.9
14.6

0.6
0.7

0.5

222.9
246.7
262.7

-8.0
1.3

0.1

1947 ................................................................................

26.0
15.5

0.6

0.1
0.2

0.5
0.5
0.5

1950 ................................................................................
1951 ................................................................................

-1.8
1.4

0.8
1.0

0.2
0.4

0.6

16.8
15.0

14.8

0.2

265.8
313.5

14.8

16.0

16.5

14.5

-1.2
1.9

15.5

15.8
14.1

1952 ................................................................................

340.5

19.4

19.9

-0.4

18.4

19.4

-1.0

1.1

0.5

1953 ................................................................................

363.8

19.1

20.9

-1.8

18.0

0.5

18.9

19.3

-0.3

17.7

-2.3
-0.8

0.6

368.0

20.3
18.5

1.1

1954 ................................................................................

1.2

0.8

0.5

1955 ................................................................................

384.7

17.0

18.3

16.4
16.7

0.6
0.6

1.3
1.5
1.5

1.0
1.2
1.4

0.3

17.9

16.8
15.8
16.1

-1.1

416.3

19.2

-0.8
0.9
0.8
-0.6
-2.7

15.7

1956 ................................................................................
1957 ................................................................................

17.8
17.0

16.0
14.8

16.7
17.3

-0.7
-2.5

1.8
1.7

1.7
1.9

0.1
-0.1

0.1

16.1

0.1
-0.7
-1.1
-0.7

2.1

16.6
16.8
16.5

2.3
2.2
2.4

2.2
2.3
2.4
2.6

0.1
-0.2
0.1

1946 ................................................................................

17.5
18.4

14.0

0.6

0.3
0.2

1958 ................................................................................

438.3
448.1

1959 ................................................................................

480.2

1960 ................................................................................

504.6
517.0

18.3

1961 ................................................................................

18.3

18.3
18.9

-0.6

1962 ................................................................................
1963 ................................................................................

555.2
584.5

18.0
18.2

19.2
19.0

-1.3
-0.8

16.2
15.9
15.7
15.8

1964 ................................................................................

625.3

18.0

19.0

-0.9

15.4

16.4

-1.0

2.6

2.5

1965 ................................................................................

671.0

17.4

17.6

14.9

15.2

-0.2

2.5

1966 ................................................................................

735.4

17.8

18.3

-0.2
-0.5

15.2

15.6

-0.4

2.6

2.7

1967 ................................................................................
1968 ................................................................................
1969 ................................................................................

793.3
847.2
925.7

18.8
18.1
20.2

19.8
21.0
19.8

-1.1

17.3
18.4
17.1

-1.6
-3.3
-0.1

3.1

2.6

-3.0
0.4

15.7
15.1
17.1

-0.1
0.5

2.9
3.1

2.6
2.7

0.3
0.4

1970 ................................................................................

985.4
1,050.9
1,147.8

19.6
17.8

19.9
20.0
20.1
19.3

-0.3
-2.2
-2.0
-1.2
-0.4

16.2
14.4
14.6
14.5

-0.9
-2.5
-2.3
-1.2
-0.6

3.4
3.4
3.5
3.6
3.8

2.8
3.1
3.2
3.6
3.7

0.6
0.3
0.3
*

14.9

17.1
16.9
16.9
15.7
15.5

-3.5
-4.4

18.0
17.9
17.2

-3.7
-4.2

4.0
4.1

0.1
-0.2

1971 .................................................................................
1972 .................................................................................
1973 .................................................................................

17.8
16.5

-0.1

1,274.0
1,403.6

18.1
18.1
18.8

1975 .................................................................................
1976 ................................................................................
TQ....................................................................................

1,509.8
1,684.2

18.5
17.7

445.0

18.3

22.0
22.1
21.6

-3.3

14.3
13.8
14.2

-3.0

4.1
3.9
4.0

4.4

-0.3

1977 .................................................................................

1,917.2

18.5

21.3

-2.8

14.5

17.1

-2.6

4.0

4.2

-0.2

1978 .................................................................................

2,155.0

18.5

21.3

14.6

17.1

-2.5

-0.2

2,429.5

19.1

20.7

15.0

16.6

-1.6

4.0
4.0

4.2

1979 .................................................................................

-2.7
-1.7

4.1

-0.1

1980 .................................................................................

2,644.1

19.6

22.3

-2.8

15.3

18.0

-2.8

4.3

1981 ................................................................................

2,964.4

20.2

22.9

-2.7

15.8

18.3

-2.5

4.4

4.6

-0.2

1974 .................................................................................

19.2

0.1

1982 ................................................................................

3,122.2

19.8

23.9

-4.1

15.2

19.0

-3.8

4.6

4.8

1983 ................................................................................

3,316.5

18.1

24.4

13.7

19.9

-6.3

4.4

-0.3
*

1984 .................................................................................

3,695.0

18.0

23.1

-6.3
-5.0

13.5

18.6

-5.0

4.5

1985 .................................................................................

3,967.7

18.5

13.8

19.4

-5.6

4.7

4,219.0

18.2

23.9
23.5
22.5

-5.4

1986 .................................................................................

-5.2
-3.4

13.5
14.4

19.1

-5.6

18.2

-3.8

4.7
4.8

22.1
22.1

-3.2
-2.9

13.9
14.1

17.9

-4.0
-4.0

5.0
5.1

4.5
4.3
4.4
4.2
4.1

0.2
0.4
0.4
0.8
1.0

1987 ........... ....................................................................

4,452.4

19.2

1968 .................................................................................

4,808.4

18.9

1909 ......................................................................

5,173.3

19.2

* 0.05 percent or less.

18.0

281

HISTORICAL TABLES
Table 1.2-SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) AS PERCENTAGES OF GDP: 1934-1993—
Continued
On-Budget

Total
Year

1990
1991
1992
1993

................................................................................
................................................................................
................................................................................
estimate...............................................................

* 0.05 percent or less.

GDP
(in billions
of dollars)

Surplus

Receipts

Outlays

or
Dofidt(—)

22.9

-4.0

5,868.6

18.9
18.7
18.6

23.5
23.5

6,164.4

18.6

23.9

-4.8
-4.9
-5.3

5,467.1

5,632.6

Off-Budget
Surplus

Surplus

Receipts

13.7
13.5

13.4
13.4

Outlays

or
Defldt(—)

Receipts

18.8
19.2
19.2

-5.1
-5.7
-5.8

5.2

19.6

-6.2

5.2

Outlays

or
Defldt(-)

5.2

4.1
4.3
4.3

1.0
0.9
0.9

5.2

4.3

0.9

282

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 1.3-SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) IN CURRENT DOLLARS, CONSTANT (FY 1987)
DOLLARS, AND AS PERCENTAGES OF GDP: 1940-1993
(doliar amounts in billions)

In Current Dollars

Fiscal Year
Receipts

1940 ........................................
1941 ........................................
1942 ........................................
1943 ........................................
1944 ........................................
1945 ........................................
1946 ................... :....................

1947 ........................................
1948 ........................................
1949 ........................................

6.5
8.7

14.6
24.0
43.7
45.2

39.3
38.5
41.6

Outlays

In Constant (FY 1987 Dollars)

Surplus or
Defidt(-)

Receipts

Outlays

9.5
13.7

-2.9
-4.9

35.1
78.6
91.3

-20.5

131.2

96.8
135.3
315.1

-54.6

200.2
377.1

655.2
787.1

395.8
329.4
257.4

812.6

92.7
55.2

-47.6
-47.6
-15.9

34.5

4.0

29.8

11.8

67.0
86.3

Surplus or
Defidt(-)

Addendum:
Composite
Deflator

-29.9

0.0978

-49.0

0.1009
0.1115

-183.9
-455.0
-410.0

0.1199
0.1160

24.8

-14.5

13.7

44.8

-31.1

21.7

45.3

-23.6

21.3
18.5

43.7

-22.4
-7.5

15.0

14.8

0.2

-19.1

0.1634

14.8

16.0

-1.2

38.3
-9.3

0.1592
0.1627

16.5
19.4

1.9
-0.4

444.5
401.4

-37.9

0.1712

19.1

-6.5

0.1765

18.9

14.5
19.9
20.9
19.3

-16.6
20.7

0.1801
0.1907

17.0

16.9
-13.0

0.2017
0.2124
0.2249

-3.1

241.4

67.7

6.1
-1.5

324.2

66.2

1953 ........................................
1954 ........................................

69.6

76.1
70.9

-6.5
-1.2

406.6

1955
1956
1957
1958
1959

65.5
74.6

68.4
70.6
76.6
82.4

363.4

92.1

-3.0
3.9
3.4
-2.8
-12.8

352.4

380.0
370.4
379.7
388.0
409.5

0.3
-3.3
-7.1

393.4
392.1

392.1

1.3

406.0

-13.9

0.2351
0.2407

396.6
374.9

-3.1

-4.4

260.5
285.9
416.0

0.6

42.6
45.5

80.0
79.6
79.2

9.9
12.1

26.9
76.4
3.7

38.8

391.1

6.9
7.7
10.3

230.6
192.9
245.5

39.4
51.6

Surplus or
Defidt(-)

0.1193
0.1496
0.1543
0.1582

39.4

394.9

Outlays

463.0

0.1141

1950 ........................................
1951 ........................................
1952 ........................................

69.7

Receipts

-416.8
-133.6

269.3
249.1

406.7

As Percentages of GDP

-57.1

1960 ........................................

92.5

1961 ........................................
1962 ........................................

94.4

99.7

92.2
97.7
106.8

406.8

436.0

-29.2

0.2450

1963 ........................................
1964 ........................................

106.6
112.6

111.3
118.5

-4.8
-5.9

418.9

-18.7

433.8

437.6
456.6

-22.8

0.2544
0.2596

1965 ........................................

116.8

118.2

-1.4

440.8

446.1

1966 ........................................

560.0

153.0

-8.6
-25.2

478.9
529.2
522.6

492.4

1968 ........................................

134.5
157.5
178.1

-3.7

1967 ........................................

130.8
148.8

-5.3
-13.5

608.6

1969 ........................................

186.9

183.6

3.2

604.4

1970 ........................................

195.6

-2.8
-23.0

587.5

1971 ........................................

192.8
187.1

533.5

1972 ........................................
1973 ........................................
1974 ........................................

207.3
230.8
263.2

269.4

-23.4
-14.9
-6.1

554.9
582.7
611.2

1975 ........................................
1976 ........................................
TQ............................................
1977 ........................................
1978 ........................................
1979 ........................................

279.1
298.1
81.2
355.6
399.6
463.3

332.3
371.8

-53.2
-73.7

96.0
409.2
458.7
503.5

-14.7
-59.2
-40.2

586.6
584.7
153.6
643.8
674.0
719.3

1980 ........................................

517.1

1981 ........................................

599.3

590.9
678.2

-73.8
-79.0

1982 ........................................

617.8

745.8

-128.0

1983 ........................................

600.6

808.4

-207.8

1984 ........................................

666.5

851.8

1985 ........................................

734.1

1986 ........................................
1987 ........................................

17.3

26.0
15.5

16.8

12.1

17.9
18.3
17.8
16.5
18.3
18.3
18.0
18.2

17.8
17.0
17.5
18.4
19.2
18.3
18.9
19.2

1.8
4.8

-1.8
-0.3
-0.8

0.9
0.8

-0.6
-2.7
0.1
-0.6
-1.3
-0.8

18.0

19.0
19.0

0.2650
0.2732

17.4

17.6

17.8

18.3

-30.7

0.2812

-86.0

0.2927

18.8
18.1

21.0

593.9

10.5

0.3092

20.2

19.8

0.4

596.1

0.3282
0.3508

19.6

19.9

599.1

-8.7
-65.7

17.8

20.0

-0.3
-2.2

617.5
620.3
625.4

-62.6
-37.6
-14.2

0.3736
0.3961
0.4307

18.1
18.1
18.8

20.1
19.3
19.2

-2.0
-1.2
-0.4

698.5
729.3
181.5
740.9
773.9
781.7

-111.9
-144.6
-27.9
-97.2
-99.8
-62.4

0.4758
0.5098
0.5287
0.5523
0.5928
0.6441

18.5
17.7

18.3
18.5
18.5
19.1

22.0
22.1
21.6
21.3

21.3
20.7

-3.5
-4.4
-3.3
-2.8
-2.7
-1.7

728.1

832.1

766.6

867.7

-104.0
-101.0

0.7102
0.7817

19.6
20.2

22.3
22.9

-2.8
-2.7

738.2

891.1

-152.9

0.8369

19.8

23.9

-4.1

684.3

921.1

-236.8

0.8776

18.1

24.4

-6.3

-185.4

730.4

933.5

-203.2

0.9125

18.0

23.1

-5.0

946.4

-212.3

776.6

1,001.3

-224.6

0.9452

18.5

23.9

-5.4

769.1

990.3

-221.2

790.0

1,017.3

-227.3

0.9735

18.2

23.5

-5.2

854.1

1,003.9

-149.8

854.1

1,003.9

-149.8

1.0000

19.2

22.5

-3.4

1988 ........................................

909.0

1,064.1

-155.2

877.3

1,027.1

-149.8

1.0361

18.9

22.1

-3.2

1989 ........................................

990.7

1,143.2

-152.5

916.2

1,057.2

-141.0

1.0813

19.2

22.1

-2.9

1990 ........................................

1,031.3

1,252.7

1,110.1

-196.2

1.1284

18.9

22.9

-4.0

1,054.3

1,323.8

-221.4
-269.5

914.0

1991 ........................................

893.6

1,122.0

-228.4

1.1798

18.7

1992 ........................................

1,091.6

1,381.8

-290.2

899.4

1,138.4

-239.1

1.2138

18.6

23.5
23.5

-4.9

1993 estimate........................

1,147.6

1,474.9

-327.3

918.1

1,180.0

-261.9

1.2499

18.6

23.9

-5.3

210.2
230.7
245.7

-53.7

19.8

-0.9

-0.2
-0.5
-1.1
-3.0

-4.8

283

HISTORICAL TABLES
Table 1 .^RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) BY FUND GROUP: 1934-1993
(in millions of dollars)
Receipts
Fiscal Year

Total

1934 ................................................................

2,955

Federal
Funds

2,926

Outlays

Trust
Funds

Interfund
Trans
actions
-42

Total

6,541

Federal
Funds

Surplus or Defidt(-)
Interfund
Trans
actions

Trust
Funds

6,558

-42

Total

-3,586

Federal
Funds

-3,633

Trust
Funds

1935 ................................................................

3,609

3,578

-45

6,412

6,427

-45

-2,803

-2,849

1936 ................................................................

3,923

3,871

168

-116

8,228

8,335

-116

-4,304

-4,464

159

1937 ................................................................

5,387

4,794

691

-99

7,580

7,620

-99

-2,193

-2,826

1938 ................................................................

6,751

5,477

1,474

-201

6,840

6,689

351

-201

-89

-1,212

633
1,124

1939 ................................................................

6,295

4,822

1,657

-184

9,141

8,718

607

-184

-2,846

-3,896

1,051

1940 ................................................................

6,548

4,929

1,845

-225

9,468

8,974

720

-225

-2,920

-4,045

1,125

1941 ................................................................

6,900

2,090

-277

13,653

13,260

671

-277

-4,941

-6,360

1,419

1942 ................................................................

8,712
14,634

12,336

2,613

-315

35,137

34,831

620

-315

-20,503

-22,496

1,992

1943 ................................................................

24,001

21,117

3,279

-395

78,555

78,765

185

-395

-54,554

-57,648

3,094

4,261

1944 ................................................................

43,747

40,466

3,896

-615

91,304

92,284

-365

-615

-47,557

-51,818

1945 ................................................................

45,159

41,875

5,045

-1,760

92,712

94,846

-374

-1,760

-47,553

-52,972

5,419

1946 ................................................................

39,296

36,357

5,144

-2,205

55,232

56,204

1,234

-2,205

-15,936

-19,847

3,910

1947 ................................................................

38,514

35,380

4,885

-1,751

34,496

34,803

1,444

-1,751

4,018

577

3,441

1948 ................................................................

41,560

37,822

4,894

-1,156

29,764

28,988

1,932

-1,156

11,796

8,834

2,962

1949 ................................................................

39,415

35,849

4,750

-1,184

38,835

37,686

2,333

-1,184

580

-1,838

2,417

1950 ................................................................

39,443

35,334

5,823

-1,715

42,562

38,389

5,888

-1,715

-3,119

-3,055

-65

1951 ................................................................

51,616

46,183

6,729

-1,296

45,514

43,732

3,078

-1,296

6,102

2,451

3,651

1952 ................................................................

66,167

59,989

7,744

-1,566

67,686

64,994

4,257

-1,566

-1,519

-5,005

3,486

1953 ................................................................

69,608

63,085

8,080

-1,557

76,101

73,006

4,652

-1,557

-6,493

-9,921

3,427

1954 ................................................................

69,701

62,774

8,297

-1,370

70,855

65,924

6,301

-1,370

-1,154

-3,151

1,997

1955 ................................................................

65,451

58,168

8,627

-1,344

68,444

62,341

7,447

-1,344

-2,993

-4,173

1,180

1956 ................................................................

74,587

65,594

10,745

-1,753

70,640

64,281

8,111

-1,753

3,947

1,313

2,634

1957 ................................................................

79,990

68,847

13,210

-2,067

76,578

67,189

11,456

-2,067

3,412

1,657

1,755

1958 ................................................................

79,636

66,720

15,082

-2,166

82,405

69,737

14,834

-2,166

-2,769

-3,017

248

1959 ................................................................

79,249

65,800

15,770

-2,321

92,098

77,071

17,348

-2,321

-12,849

-11,271

-1,578

1960 ................................................................

92,492

75,647

19,232

-2,387

92,191

74,856

19,722

-2,387

301

791

-490

1961 ................................................................

94,388

75,175

22,320

97,723

79,368

21,462

-3,107

-3,335

-4,193

858

1962 ................................................................

99,676

79,700

22,981

-3,107
-3,005

106,821

86,546

23,281

-3,005

-7,146

-6,847

-299

1963 ................................................................

106,560

84,013

25,792

-3,245

111,316

90,643

23,918

-3,245

-4,756

-6,630

1,874

1964 ................................................................

112,613

87,511

28,461

-3,358

118,528

96,098

25,788

-3,358

-5,915

-8,588

2,673

2,499

1965 ................................................................

116,817

90,943

29,202

-3,328

118,228

94,853

26,703

-3,328

-1,411

-3,910

1966 ................................................................

130,835

101,428

32,959

-3,552

134,532

106,590

31,495

-3,552

-3,698

-5,162

1,464

1967 ................................................................

148,822

111,835

42,213

-5,227

157,464

127,544

35,147

-5,227

-8,643

-15,709

7,066

1968 ................................................................

152,973

114,726

44,011

-5,764

178,134

143,100

40,799

-5,764

-25,161

-28,373

3,212

1969 ................................................................

186,882

143,322

51,108

-7,549

183,640

148,192

42,996

-7,549

3,242

-4,871

8,112

1970 ................................................................
1971 ................................................................

192,807
187,139

143,159
133,785

58,425
64,937

-8,777
-11,583

195,649
210,172

156,327
163,681

48,099
58,074

-8,777
-11,583

-2,842

-13,168

10,326

-23,033

-29,896

6,863

1972 ................................................................
1973 ................................................................
1974 ................................................................

207,309

148,846
161,357
181,228

71,619

-13,156

230,681

-23,373

-21,325

201,376

89,776

-14,908
-6,135

5,926
10,779

-21,793

-21,325
-21,793

-29,299
-25,687

103,789

245,707
269,359

65,693
79,988

-13,156

90,767

178,144
187,044

-20,148

14,013

187,505

117,647

-26,061

332,332

248,174

110,220

-26,061

201,099
54,085

132,509

-35,548

277,242

130,099

-35,548

31,625

66,878

33,575

-4,478

241,312

151,503

-4,478
-37,256

371,792
95,975

-53,242
-73,732
-14,744

409,218

304,474

142,000

-37,256

-53,659

1975 ................................................................
1976 ................................................................
TQ....................................................................
1977 ................................................................

230,799
263,224

279,090
298,060
81,232
355,559

-60,669

7,427

-76,143

2,410

-12,794

-63,162

-1,950
9,502

1978 ................................................................

399,561

270,490

166,468

-37,397

458,746

342,372

153,771

-37,397

-59,186

-71,882

12,697

1979 ................................................................

463,302

316,366

188,072

-41,136

503,485

374,888

169,733

-41,136

-40,183

-58,522

18,339

1980 ................................................................

517,112

350,856

212,106

-45,850

590,947

433,494

203,302

-45,850

-73,835

-82,639

8,804

1981 ................................................................

599,272

410,422

240,601

-51,751

678,249

496,222

233,778

-51,751

-78,976

-85,799

6,823

1982 ................................................................

617,766

409,253

270,138

-61,625

745,755

543,486

263,894

-61,625

-127,989

-134,233

6,244

1983 ................................................................

600,562

382,432

319,363

-101,233

808,380

613,331

296,282

-101,233

-207,818

-230,899

23,081

1984 ................................................................

666,457

420,370

338,661

-92,574

851,846

638,664

305,756

-92,574

-185,388

-218,293

32,905

1985 ................................................................

734,057

460,280

397,500

-123,723

946,391

726,763

343,351

-123,723

-212,334

-266,483

54,149

1986 ................................................................

769,091

474,001

423,377

-128,287

990,336

757,138

361,485

-128,287

-221,245

-283,138

61,892

1987 ................................................................

854,143

538,499

444,204

-128,560 1,003,911

760,885

371,586

-128,560

-149,769

-222,386

72,618

1988 ................................................................
1989 ................................................................

908,954
990,691

561,098

491,204

-143,349 1,064,140

814,008

393,481

-143,349

-155,187

-252,909

97,723

614,823

535,941

-160,073 1,143,172

890,787

412,458

-160,073

-152,481

-275,964

123,483

See note at end of table.

284

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 1.4—RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS(-) BY FUND GROUP: 1934-1993-Continued
(in millions of dollars)

Fiscal Year

Total

Federal
Funds

Trust
Funds

Surplus or Deficit(-)

Outlays

Receipts
Interfund
Trans
actions

Total

Federal
Funds

Trust
Funds

446,737

Interfund
Trans
actions

1990 .................................................................

1,031,308

635,190

566,917

1991 .................................................................
1992 .................................................................

1,054,264
1,091,631

603,905
636,110

976,754
-170,799 1,252,691
-190,444 1,323,785 1,022,060
-201,142 1,381,791 1,042,844

492,169
540,090

-170,799
-190,444
-201,142

1993 estimate................................................

1,147,588

640,803
656,663
690,509

673,746

-216,666 1,474,935 1,117,570

574,032

-216,666

Total

-221,384
-269,521
-290,160
-327,347

Federal
Funds

-341,564
-381,257
-386,181
-427,061

Trust
Funds

120,180
111,736
96,021
99,714

Note: Receipts and outlays have been adjusted in this table by including interfund offsetting receipts of federal funds and trust funds in each fund's receipt totals and excluding them from
the outlay totals.

285

HISTORICAL TABLES
Table 2.1-RECEIPTS BY SOURCE: 1934-1993
(in millions of dollars)

Fiscal Year

Individual In
come Taxes

Corporation
Income
Taxes1

Social Insurance Taxes and
Contributions2
(On-Budget)

Total

Total Receipts
Excise
Taxes2

Other3
Total

(Off-Budget)

(On-Budget)

1934 ........................................

420

364

(30)

1,354

788

2,955

(2,955)

1935 ........................................

527

529

(31)

1,439

1,084

3,609

(3,609)

(Off-Budget)

1936 ........................................

674

719

(52)

1,631

847

3,923

(3,923)

1937 ........................................

1,092

1,038

580

(315)

(265)

1,876

801

5,387

(5,122)

(265)

1938 ........................................

1,286

1,287

1,541

(1.154)

(387)

1,863

773

6,751

(6,364)

(387)

1939 ........................................

1,029

1,127

1,593

(1,090)

(503)

1,871

675

6,295

(5,792)

(503)

1940 ........................................

892

1,197

1,785

(1,235)

(550)

1,977

698

6,548

(5,998)

(550)

1941 ........................................

1,314

2,124

1,940

(1,252)

(688)

2,552

781

8,712

(8,024)

(688)

1942 ........................................

3,263

4,719

2,452

(1,557)

(896)

3,399

801

14,634

(13,738)

(896)

1943 ........................................

6,505

9,557

3,044

(1,913)

(1,130)

4,096

800

24,001

(22,871)

(1,130)

1944 ........................................

19,705

14,838

3,473

(2,181)

(1,292)

4,759

972

43,747

(42,455)

(1,292)

1945 ........................................

18,372

15,988

3,451

(2.141)

(1,310)

6,265

1,083

45,159

(43,849)

(1,310)

1946 ........................................

16,098

11,883

3,115

(1,877)

(1,238)

6,998

1,202

39,296

(38,057)

(1,238)

1947 ........................................

17,935

8,615

3,422

(1,963)

(1,459)

7,211

1,331

38,514

(37,055)

(1,459)

1948 ........................................

19,315

9,678

3,751

(2,134)

(1,616)

7,356

1,461

41,560

(39,944)

(1,616)

1949 ........................................

15,552

11,192

3,781

(2,091)

(1,690)

7,502

1,388

39,415

(37,724)

(1,690)

1950 ........................................

15,755

10,449

4,338

(2,232)

(2,106)

7,550

1,351

39,443

(37,336)

(2,106)

1951 ........................................

21,616

14,101

5,674

(2,554)

(3,120)

8,648

1,578

51,616

(48,496)

(3,120)

1952 ........................................

27,934

21,226

6,445

(2,851)

(3,594)

8,852

1,710

66,167

(62,573)

(3,594)

1953 ........................................

29,816

21,238

6,820

(2,723)

(4,097)

9,877

1,857

69,608

(65,511)

(4,097)

1954 ........................................

29,542

21,101

7,208

(2,619)

(4,589)

9,945

1,905

69,701

(65,112)

(4,589)

1955 ........................................

28,747

17,861

7,862

(2,781)

(5,081)

9,131

1,850

65,451

(60,370)

(5,081)

1956 ........................................

32,188

20,880

9,320

(2,896)

(6,425)

9,929

2,270

74,587

(68,162)

(6,425)

1957 ........................................

35,620

21,167

9,997

(3,208)

(6,789)

10,534

2,672

79,990

(73,201)

(6,789)

1958 ........................................

34,724

20,074

11,239

(3,190)

(8,049)

10,638

2,961

79,636

(71,587)

(8,049)

1959 ........................................

36,719

17,309

11,722

(3,427)

(8,296)

10,578

2,921

79,249

(70,953)

(8,296)

1960 ........................................

40,715

21,494

14,683

(4,042)

(10,641)

11,676

3,923

92,492

(81,851)

(10,641)

1961 ........................................

41,338

20,954

16,439

(4,331)

(12,109)

11,860

3,796

94,388

(82,279)

(12,109)

1962 ........................................

45,571

20,523

17,046

(4,776)

(12,271)

12,534

4,001

99,676

(87,405)

(12,271)

1963 ........................................

47,588

21,579

19,804

(5,629)

(14,175)

13,194

4,395

106,560

(92,385)

(14,175)

1964 ........................................

48,697

23,493

21,963

(5,597)

(16,366)

13,731

4,731

112,613

(96,248)

(16,366)

1965 ........................................

48,792

25,461

22,242

(5,519)

(16,723)

14,570

5,753

116,817

(100,094)

(16,723)

1966 ........................................

55,446

30,073

25,546

(6,460)

(19,085)

13,062

6,708

130,835

(111,749)

(19,085)

1967 ........................................

61,526

33,971

32,619

(8,217)

(24,401)

13,719

6,987

148,822

(124,420)

(24,401)

1968 ........................................

68,726

28,665

33,923

(9,007)

(24,917)

14,079

7,580

152,973

(128,056)

(24,917)

1969 ........................................

87,249

36,678

39,015

(10,062)

(28,953)

15,222

8,718

186,882

(157,928)

(28,953)

1970 ........................................
1971 ........................................

90,412
86,230

32,829
26,785

44,362
47,325

(10,903)
(11,481)

(33,459)
(35,845)

15,705
16,614

9,499
10,185

192,807
187,139

(159,348)
(151,294)

(33,459)
(35,845)

1972 ........................................

94,737

32,166

52,574

(12,667)

(39,907)

15,477

12,355

207,309

(167,402)

(39,907)

1973 ........................................

103,246

36,153

63,115

(17,031)

(46,084)

16,260

12,026

230,799

(184,715)

(46,084)

1974 ........................................

118,952

38,620

75,071

(21,146)

(53,925)

16,844

13,737

263,224

(209,299)

(53,925)

1975 ........................................

122,386

40,621

84,534

(22,077)

(62,458)

16,551

14,998

279,090

(216,633)

(62,458)

1976 ........................................

131,603

41,409

90,769

(24,381)

(66,389)

16,963

17,317

298,060

(231,671)

(66,389)

TQ...........................................

8,460

25,219

(7,203)

(18,016)

4,473

4,279

81,232

(63,216)

(18,016)

1977 ........................................

38,801
157,626

54,892

106,485

(29,668)

(76,817)

17,548

19,008

355,559

(278,741)

(76,817)

1978 ........................................

180,988

59,952

120,967

(35,576)

(85,391)

18,376

19,278

399,561

(314,169)

(85,391)

1979 ........................................

217,841

65,677

138,939

(40,945)

(97,994)

18,745

22,101

463,302

(365,309)

(97,994)

1980 ........................................

244,069

64,600

157,803

(44,594)

(113,209)

24,329

26,311

517,112

(403,903)

(113,209)

1981 ........................................

285,917

61,137

182,720

(52,545)

(130,176)

40,839

28,659

599,272

(469,097)

(130,176)

1982 ........................................

297,744

49,207

201,498

(58,031)

(143,467)

36,311

33,006

617,766

(474,299)

(143,467)

1983 ........................................

288,938

37,022

208,994

(61,674)

(147,320)

35,300

30,309

600,562

(453,242)

(147,320)

1984 ........................................

298,415

56,893

239,376

(73,301)

(166,075)

37,361

34,412

666,457

(500,382)

(166,075)

1985 ........................................

334,531

61,331

265,163

(78,992)

(186,171)

35,992

37,040

734,057

(547,886)

(186,171)

1986 ........................................

348,959

63,143

283,901

(83,673)

(200,228)

32,919

40,168

769,091

(568,862)

(200,228)

1987 ........................................

392,557

83,926

303,318

(89,916)

(213,402)

32,457

41,884

854,143

(640,741)

(213,402)

1988 ........................................

401,181

94,508

334,335

(92,845)

445,690

103,291

359,416

(95,751)

(241,491)
(263,666)

35,227
34,386

43,702
47,908

908,954

1989 ........................................

(667,463)
(727,026)

(241,491)
(263,666)

See footnotes at end of table.

990,691

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

286

Table 2.1-RECEIPTS BY SOURCE: 1934-1993-Contimied
(in millions of dollars)

Fiscal Year

Individual In
come Taxes

Corporation
income
Taxes1

Social Insurance Taxes and
Contributions2
Total

(On-Budget)

Total Receipts
Excise
Taxes2

Other3

Total

(Off-Budget)

(On-Budget)

(Off-Budget)

1990 ........................................
1991 ........................................
1992 ........................................

466,884
467,827
476,465

93,507

380,047

(98,392)

(281,656)

35,345

55,524

(281,656)

396,016
413,689

(102,131)

(293,885)

(302,426)

49,933
55,638

(760,380)

(111,263)

42,402
45,569

1,031,308
1,054,264
1,091,631

(749,652)

98,086
100,270

(789,205)

(302,426)

1993 estimate........................

510,388

105,501

435,831

(116,426)

(319,405)

47,539

48,329

1,147,588

(828,183)

(319,405)

1 Beginning in 1987, includes trust fund receipts for the hazardous substance superfund. The trust fund amounts are as follows (in millions of dollars): 1987: 196; 1988: 313; 1989: 292;
1990: 461; 1991: 591; 1992: 380; 1993: 607.
2 See Table 2.4 for additional details.
3 See Table 2.5 for additional details.

287

HISTORICAL TABLES
Table 2.2—PERCENTAGE COMPOSITION OF RECEIPTS BY SOURCE: 1934-1993

Fiscal Year

Individual
Income
Taxes

Corporation Social Insurance Taxes and Contributions
Income
(On-Budget) (Off-Budget)
Total
Taxes

Excise
Taxes

Total Receipts
LIIOI
Total

(On-Budget)

(Off-Budget)

1934 ........................................

14.2

12.3

1.0

(10)

45.8

26.7

100.0

(100.0)

1935 ........................................

14.6

14.7

0.9

(0.9)

39.9

30.0

100.0

(100.0)

1936 ........................................

17.2

18.3

41.6

19.3

(5-9)

(4-9)

100.0
100.0

(100.0)
(95.1)

(4-9)

19.1

22.8

(17.1)

(5-7)

34.8
27.6

21.6
14.9

1938 ........................................

20.3
19.1

1.3
10.8

(1.3)

1937 ........................................

100.0

(94-3)

(5.7)

1939 ........................................

16.3

17.9

25.3

(17.3)

(8-0)

29.7

11.5
10.7

100.0

(92.0)

(8-0)

1940 ........................................

13.6
15.1

18.3
24.4

(8-4)
(7-9)

30.2

10.7

(92.1)

(8-4)
(7.9)

22.3
27.1

39.8

(8-0)

(6-1)
(4-7)

23.2
17.1

9.0
5.5

100.0
100.0

(91-6)

29.3

1942 ........................................
1943 ........................................

27.3
22.3
16.8
12.7

(18.9)

1941 ........................................

(93.9)
(95.3)

(6-1)
(4.7)

1944 ........................................

45.0

33.9

7.9

(5-0)

(3-0)

10.9

2.2

100.0
100.0
100.0

(97.0)

(3-0)

1945 ........................................

40.7

35.4

7.6

(4-7)

41.0
46.6

7.9
8.9
9.0
9.6

(4-8)
(5.1)
(5.1)

(2-9,
(3-2)

(5-3)

(3-9)
(4-3,

100.0
100.0
100.0
100.0
100.0

(97.1)
(96.8)
(96.2)

46.5
39.5

30.2
22.4
23.3
28.4

13.9
17.8
18.7
17.7
19.0

2.4

........................................
........................................
........................................
........................................

(2-9)
(3-2)
(3-8)

(96.1)
(95.7)

(3-8)
(3-9)
(4-3,

1950 ........................................

39.9

26.5

(5.7)

(5.3)

1951 ........................................
1952 ........................................

41.9

27.3
32.1
30.5

11.0
11.0

(4.9)
(4-3)

(6-0)
(5-4)

(3-9)

(5.9)

1946
1947
1948
1949

32.2

(14.4)
(10-6)

3.3

3.1
3.5
3.5
3.5

19.1
16.8

3.4

100.0
100.0

(94.7)

(5-3)

3.1

(94.0)

(60)

13.4

2.6
2.7
2.7

100.0
100.0
100.0

(94.6)

(5.4)
(5-9)

1953 ........................................
1954 ........................................

42.2
42.8
42.4

30.3

9.7
9.8
10.3

(3-8)

(6-6)

14.2
14.3

1955 ........................................

43.9

27.3

12.0

(4.2)

(7-8,

14.0

2.8

100.0

(92.2)

(78)

1956 ........................................
1957 ........................................

43.2
44.5

12.5
12.5

(3.9)
(4-0)

(8-6)
(8-5,

(8-6)
(8-5)

14.1
14.8

(4-0)
(4-3)

(10-1)

46.3

(10-5)

13.3

3.0
3.3
3.7
3.7

(91.4)
(91-5)

43.6

13.3
13.2
13.4

100.0
100.0

1958 ........................................
1959 ........................................

28.0
26.5
25.2
21.8

100.0
100.0

(89.9)
(89.5)

(10.1)
(10.5)

1960 ........................................
1961 ........................................
1962 ........................................

44.0

23.2

4.2

100.0

(88.5)

(11.5)

(4-6)

(11-5)
(12.8)

12.6

22.2
20.6

15.9
17.4
17.1

(4-4,

43.8
45.7

(12-3)

4.0
4.0

100.0
100.0

(87.2)

(4.8)

12.6
12.6

(12-8)
(12.3,

18.6
19.5

(5-3)
(5-0)

(13-3)
(14.5,

12.4

4.1

12.2

4.2

100.0
100.0

19.0
19.5

(4-7)
(4-9)

(14.3)
(14.6)

12.5
10.0

4.9
5.1

21.9

(5-5)

22.2
20.9

(5-9)

(16-4)
(16.3)

(5-4)

(15.5)

9.2
9.2
8.1

(5-7)
(6-1)

(17-4)
(19.2)

(6.1,
(7-4)

44.7

20.3

43.2

20.9
21.8

1966 ........................................

41.8
42.4

1967 ........................................

41.3

1968 ........................................

1969 ........................................

44.9
46.7

1970 ........................................
1971 ........................................

46.9
46.1

1972 ........................................

45.7

15.5

1973 ........................................

44.7

15.7

23.0
25.3
25.4
27.3

1974 ........................................

45.2

14.7

28.5

1975 ........................................
1976 ........................................
TQ...........................................
1977 ........................................
1978 ........................................
1979 ........................................

43.9

14.6
13.9
10.4
15.4
15.0
14.2

12.5
10.2

1963 ........................................
1964 ........................................
1965 ........................................

1980 ........................................
1981 ........................................

44.2
47.8
44.3
45.3
47.0

1982 ........................................
1983 ........................................

47.2
47.7
48.2
48.1

(94.1)
(93.4)

(87.7)
(86.7)

(6-6)

(13.3)

(85.5)

(14-5)

100.0
100.0

(85.7)

(14-3)

(85.4)

4.7

100.0

(83.6)

(14.6)
(16.4)

5.0
4.7

100.0
100.0

(83.7)

(16.3)

(84.5)

(15.5)

8.1
8.9

4.9
5.4

(19.2)
(20.0)

7.5
7.0

6.0
5.2

100.0
100.0
100.0

(8-0)

(20.5)

6.4

5.2

30.3
30.5
31.0
29.9
30.3
30.0

(7-9)
(8.2)
(8-9)
(8.3)
(8-9)
(8.8)

(22.4)
(22.3)
(22.2)
(21.6)
(21-4)
(21-2)

5.9
5.7
5.5
4.9
4.6
4.0

(8-6)
(8.8)
(9.4)

(21.9)
(21.7)
(23.2)

4.7
6.8

8.0

30.5
30.5
32.6

6.2

34.8

(10-3)

(24-5)

23.0

22.8
18.7
19.6
17.0
14.3

5.9
5.9

(82.6)

(17.4)

(80.8)
(80.7)

(19-2)
(19-2)

100.0
100.0

(80.0)

(20.0)

(79.5)

(20.5)

5.4
5.8
5.3
5.3
4.8
4.8

100.0
100.0
100.0
100.0
100.0
100.0

(77.6)
(77.7)
(77.8)
(78.4)
(78.6)
(78.8)

(22.4)
(22.3)
(22.2)
(21-6)
(21-4)
(21-2)

5.1
4.8
5.3

100.0
100.0
100.0

(78.1)
(78.3)

(21.9)
(21-7)

5.0

(76.8)
(75.5)

(23.2)
(24-5)

1984 ........................................

44.8

8.5

35.9

(11.0)

(24.9,

5.6

5.2

100.0
100.0

(75.1)

(24.9,

1985 ........................................

45.6

8.4

36.1

(25.4,

4.9

5.0

100.0

(74.6)

(25.4)

1986 ........................................

45.4

8.2

(26.0)

4.3

5.2

46.0

9.8

(10.5)

(25.0)

3.8

4.9

100.0
100.0

(74.0)
(75.0)

(26.0)

1987 ........................................

36.9
35.5

(10.8)
(10.9)

1988 ........................................

44.1

10.4

36.8

(10-2)

(26.6)

3.9

100.0

(73.4)

(26.6)

1989 ........................................

45.0

10.4

36.3

(9-7)

(26.6,

3.5

4.8
4.8

100.0

(73.4)

(26.6)

(25.0)

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

288

Table 2.2—PERCENTAGE COMPOSITION OF RECEIPTS BY SOURCE: 1934-1993-Continued

Fiscal Year

Individual
Income
Taxes

Corporation Social Insurance Taxes and Contributions
Income
(On-Budget) (Off-Budget)
Taxes
Total

Excise
Taxes

Total Receipts
Other

Total

(On-Budget)

(Off-Budget)

1990 ........................................

45.3

9.1

36.9

3.4

5.4

100.0

(72.7)

(27.3)

44.4

9.3

(27-9)

100.0

(72.1)

(27.9)

43.6

9.2

(10.2)

(27.7)

4.0
4.2

4.7

1992 ........................................
1993 estimate........................

37.6
37.9

(9.5)
(9.7)

(27-3)

1991........................................

5.1

44.5

9.2

38.0

(10.1)

(27.8)

4.1

4.2

100.0
100.0

(72.3)
(72.2)

(27.7)
(27.8)

HISTORICAL TABLES

289
Table 2.3—RECEIPTS BY SOURCE AS PERCENTAGES OF GDP: 1934-1993

Fiscal Year

Individual
Income
Taxes

Corporation
Income
Taxes

Social Insurance Taxes and
Contributions

(On-Budget)

Total

Total Receipts
Excise
Taxes

Other

(On-Budget)

Total

(Off-Budget)

0.6

(*)

2.2

1.3

4.9

(4.9)

0.8
0.9
1.3
1.5

0.8
0.9
1.2
1.5

(*)
(0.1)

2.1

1.6
1.1

5.3
5.1
62

(5.3)

2.1

(5.9,

(0-3)

(7.2)

(0-4)

1939 ........................................

1.2

1.3

7.7
7.2

(6-6)

(0-6)

1940 ........................................

1.3

1942 ........................................
1943 ........................................
1944 ........................................

0.9
1.2
2.3
3.7

1.9
3.3
5.4

(6-3)
(7.1,
(9.7)

(0-6)
(06)
(0-6)

9.8

7.4

1.7
1.7

6.9
7.7
10.3
13.7
21.7

(13.0,
(21.0)

(0-6)
(0-6)

(20.7)

(0.6)

(17-9)

(0-6)
(0-7)

16.8

(16-6)
(16.2,

15.0

(14-4)

14.8
16.5

(14-0)
(15-5)

(0.8)
(10)

(18.4)

(1.1)

(11)
(12)

1934 ........................................
1935 ........................................

1936 ........................................
1937 ........................................
1938 ........................................

1941 ........................................

0.7

0.1
0.7

(0-4)

(0-3)

2.2

1.8
1.8

(1.3)
(1.2)

(0-4)
(0-6)

2.1
2.1

1.9
1.7

(1.3)

(0.6,

(1-1)
(1-1)
(1.1)

(0-6)
(0-6)
(0.6)

2.1
2.3
2.4

(1.1)

1.7

0.9
0.9
0.8
0.7
0.7

(0.6,

2.3
2.4

0.6
0.5
0.5

1945 ........................................

8.7

7.5

1.6

(1.0)

(0-6)

3.0

0.5

1946 ........................................
1947 ........................................

7.6

5.6

(0.9)

(0-6)

3.3

0.6

8.0

3.9

1.5
1.5

7.8
5.9

3.9
4.3

1.5
1.4

(0-7)
(0-7)

3.2

1948 ........................................
1949 ........................................

(0.9)
(0.9)
(0.8)

0.6
0.6
0.5

1950 ........................................
1951 ........................................
1952 ........................................

5.9

3.9

1.6

(0.8)

6.9

4.5

1.8

(1.0)

8.2

6.2
5.8

(0.7)

1954 ........................................

8.2
8.0

1.9
1.9

(0.8)
(08)

5.7

2.0

1955 ........................................

7.5

4.6

1956 ........................................

1957 ........................................
1958 ........................................

7.7
8.1
7.7

5.0
4.8
4.5

1959 ........................................

7.6

3.6

2.4

1960 ........................................
1961 ........................................

8.1

4.3

8.0
8.2
8.1
7.8

3.8
4.1

1967 ........................................

7.3
7.5
7.8

1968 ........................................
1969 ........................................

8.1
9.4

1970 ........................................
1971 ........................................

9.2
8.2

1972 ........................................

1953 ........................................

1962 ........................................
1963 ........................................
1964 ........................................
1965 ........................................
1966 ........................................

(0-6)

3.0
2.9

21.3
18.5
17.3

(5.1)

(0.7)
(0-6)

2.8
2.8

0.5

(1.1)

2.6

0.5

2.7

0.5

19.4
19.1

(0.7)

(1.1)
(1.2)

2.7

0.5

18.9

(18.0)
(17.7)

2.0

(0-7)

(1.3)

2.4

0.5

17.0

(15-7)

(1.3)

2.2
2.3
2.5

(0-7)
(0.7)

(1.5)

2.4

17.9

(16-4)

2.4

18.3

(16.7)

(1.5)
(1.5)

(0.7)

(1.5)
(1.8)

2.4

0.5
0.6
0.7

17.8

(1.7)

2.2

0.6

16.5

(16.0)
(14.8)

(1.8)

(0-7)
(0-8)
(08)

(2-1)

0.8
0.7

(16.2)

(23)

2.3
2.3

18.3

4.1

2.9
3.2

18.3

(2-1)
(23)

3.7

3.1

2.3
2.3

18.0

3.4
3.5

(2-2)
(2-4)

0.7

3.7

(0-9)
(1.0)
(0-9)

(15.9)
(15-7)

0.8

18.2

(15.8)

(2-6)

2.2

0.8

18.0

(15.4)

3.3
3.5
4.1
4.0

(0-8)
(09)

(2.5)

2.2

17.8

(14-9)
(15-2)

(2-5)

1.8
1.7

0.9
0.9
0.9

17.4

(2-6)
(3-1)

18.8

(15.7)

1.7

18.1

(15.1)
(17.1)

(3-1,
(2-9)

1.1

3.8

4.3
3.4
4.0

(10)
(1.1)

0.5

(1.7)

(2-2)
(2-4)
(2-6)

(2-6)

4.2

(1-1)

(2-9)
(3-1)

4.5
4.5

(11)
(1.1)

(3-4)
(3-4)

8.3

3.3
2.5
2.8

4.6

(1.1)

(3-5)

1.6
1.6
1.3

1973 ........................................
1974 ........................................

8.1
8.5

2.8
2.8

5.0
5.3

(13)
(1.5)

(3-6)
(3-8)

1.3
1.2

0.9
1.0

18.1
18.8

(14-5)
(14.9)

(36)
(3-8)

8.1
7.8
8.7
8.2
8.4
9.0

2.7
2.5
1.9
2.9

2.8
2.7

5.6
5.4
5.7
5.6
5.6
5.7

(1.5)
(1.4)
(1.6)
(1.5)
(1.7)
(1.7)

(4-1)
(3-9)
(4-0)
(4-0)
(4-0)
(4-0)

1.1
1.0
1.0
0.9
0.9
0.8

1.0
1.0
1.0
1.0
0.9
0.9

18.5
17.7
18.3
18.5
18.5
19.1

(14-3)
(13.8)
(14.2)
(14.5)
(14-6)
(15.0)

(4-1)
(3-9)
(4-0,
(40)
(40)
(4-0)

1980 ........................................
1981 ........................................
1982 ........................................

9.2

2.4
2.1

6.0
6.2

(1.7)
(18)

(4-3)
(4-4)

0.9
1.4

1.0

19.6

9.6

1.0

20.2

(15.3)
(15.8)

(4-3)
(44)

1.6

6.5

(1.9)

(4-6)

6.3
6.5

(1.9)

(4-4)

1.2
1.1

8.1

1.1
1.5

(2-0)

(4.5)

1985 ........................................

8.4

1.5

6.7

(2.0,

1986 ........................................

8.3

1.5

6.7

1987 ........................................

8.8

1.9

6.8

1988 ........................................

8.3

2.0

1989 ........................................

8.6

2.0

1983 ........................................
1984 ........................................

0.05 percent or lees.

9.5
8.7

1.6

0.9
0.9

20.2

1.0

19.6

(16.2)

(3-4)

1.0

17.8

18.1

(14.4)
(14.6)

(3-4)
(3-5)

(3-1)

1.1

19.8

(15.2)

(4-6)

18.1

(13.7)

(4-4)

1.0

0.9
0.9

18.0

(13-5)

(4-5)

(4.7)

0.9

18.5

(13.8)

(4-7)

(2-0)

(4.7)

0.8

1.0

18.2

(13-5)

(4-7)

(2-0)

(4-8)

0.7

0.9

19.2

(14.4)

(4-8)

7.0

(1.9)

(5-0)

0.7

0.9

18.9

(13.9)

(5-0)

6.9

(1.9)

(5-1)

0.7

0.9

19.2

(14.1)

(5-1)

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE

290

Table 2.3-RECEIPTS BY SOURCE AS PERCENTAGES OF GDP: 1934-1993-Continued

Fiscal Year

1990 ........................................

1991 ........................................
1992 ........................................
1993 estimate.......................

Individual
Income
Taxes

Corporation
Income
Taxes

8.5
8.3
8.1

1.7

8.3

1.7

1.7
1.7

Total Receipts

Social Insurance Taxes and
Contributions
(On-Budget)

Total

7.0
7.0
7.0
7.1

(1.8)
(1.8)
(1.9)
(1.9)

Excise
Taxes

Other
Total

(Off-Budget)
(5.2)

(5-2)
(5-2)

(5-2)

0.6
0.8
0.8
0.8

(On-Budget)

(Off-Budget)

1.0
0.9

18.9
18.7

(13.7)

(5-2)

(13-5)

0.9
0.8

18.6
18.6

(13.4)
(13.4)

(5.2)
(5-2)

(5.2)

291

HISTORICAL TABLES
Table 2.4-COMPOSmON OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 1940-1993
(in millions of dollars)
1941

1940

1942

1943

1945

1944

1946

1948

1947

1949

Social Insurance

Employment taxes and contributions:

Old-age and survivors insurance:
Federal funds...............................................................
Trust funds (Off-Budget).............................................
Railroad retirement/pension fund:

54
550

2
688

-1

896

1,130

-2
1,292

-3
1,310

-3
1,238

-5
1,459

-5
1,616

-8
1,690

Federal funds...............................................................

-6

-24

-10

141

215

263

309

292

298

-201
758

-11

120

23
114

Trust funds....................................................................

Total1........................................................................

725

827

1,064

1,338

1,557

1,592

1,517

1,835

2,168

2,246

574

Unemployment insurance:
Federal funds....................................................................

111

Trust funds........................................................................

904

103
953

126
1,172

167
1,310

190
1,454

194
1,375

190
1,126

196
1,133

206
1,138

220
985

Total..........................................................................

1,015

1,056

1,299

1,477

1,644

1,568

1,316

1,329

1,343

1,205

Other retirement contributions:
Employees retirement—employee contributions........
Contributions for non-Federal employees...................

56
1

227

270

256

236

289
2

280

326
4

Total..........................................................................

229

272

291

282

259

239

330

Total social insurance taxes and contributions1

1,785

1,940

2,452

3,044

3,473

3,451

3,115

3,422

3,751

3,781

623
606

818
691

1,604
986
2,169

2,275
929
3,061

2,429

3,352

3,551

2,217
1,297
3,842

2,168

1,043

1,422
913
1,760

2,490
1,156

748

1,046
779
1,573

Total..........................................................................

1,977

2,552

3,399

4,096

4,759

6,265

6,998

7,211

7,356

7,502

Total excise taxes..................................................

1,977

2,552

3,399

4,096

4,759

6,265

6,998

7,211

7,356

7,502

Excise Taxes

Federal funds:
Alcohol taxes.....................................................................
Tobacco taxes..................................................................
Other...................................................................................

See footnotes at end of table.

1,231

1,319
4,015

292

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 2.4-C0MP0SITI0N OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 1940-1993-Continued
fin millions of dollars)

1950

1951

1953

1952

1954

1955

1956

1958

1957

Social Insurance
Employment taxes and contributions:

Old-age and survivors insurance:
Federal funds.....................................................................................
Trust funds (Off-Budget)..................................................................
Disability insurance (Off-Budget)........................................................

-8
2,106

-10

-14

3,120

3,594

300
4,097

4,589

5,081

6,425

6,457

7,138

332

911

Railroad retirement/pension fund:
Federal funds.....................................................................................

550

3
575

Trust funds.......................................................... ..............................

735

625

603

600

634

616

575

Total’.............................................................................................

2,648

3,688

4,315

4,722

5,192

5,981

7,059

7,405

8,624

Unemployment insurance:
Federal funds ................................................................................ •.......
Trust funds.......... ...................................................................................

224

231
1,378

257
1,455

274

1,401

283
1,278

278

1,108

1,172

322
1,368

328
1,623

333
1,601

Total................................................................................................

1,332

1,609

1,712

1,675

1,561

1,449

1,690

1,950

1,933

354
4

373

413
5

418

450
5

426

566

636

673

Other retirement contributions:

Employees retirement—employee contributions.............................

Contributions for non-Federa, employees........................................

Total................................................................................................

358

377

418

423

455

431

571

642

682

Total social insurance taxes and contributions1...................

4,338

5,674

6,445

6,820

7,208

7,862

9,320

9,997

11,239

2,180
1,326

2,515
1,562
4,775

2,723
1,652
5,501

2,738
1,578
5,630

2,689

2,866
1,607
5,455

2,915

1,568
4,874

1,669
4,472

2,882
1,728
4,002

8,852

9,877

9,945

9,131

9,929

9,055

8,612

1,479

2,026

Excise Taxes
Federal funds:
Tobacco taxes........................................................................................
Other....... .................................................................................................

4,044

2,508
1,378
4,761

Total................................................................................................

7,550

8,648

Alcohol taxes..........................................................................................

Trust funds:
Highway...................................................................................................

Total ................................................................................................
Total excise taxes.......................................................................
See footnotes at end of table.

7,550

8,648

8,852

9,877

9,945

9,131

9,929

1,479

2,026

10,534

10,638

HISTORICAL TABLES

293

Table 2.4-COMPOSITION OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 1940-1993-Continued
(in millions of dollars)
1959

1960

1961

1962

1963

1964

1965

1966

1967

Social Insurance

Employment taxes and contributions:
Old-age and survivors insurance (Off-Budget) ...............................

7,418

9,671

11,104

11,267

13,117

15,242

15,567

17,556

22,197

Disability insurance (Off-Budget) .......................................................

878

970

1,005

1,004

1,058

1,124

1,156

1,530

893

2,204
2,645

Hospital insurance.................................................................................

Railroad retirement/pension fund.......................................................

525

607

571

564

572

593

636

683

776

Total1.............................................................................................

8,821

11,248

12,679

12,835

14,746

16,959

17,358

20,662

27,823

Trust funds .............................................................................................

321
1,810

339
2,329

2,903

3,337

4,112

3,997

3,803

3,755

3,575

Unemployment insurance:
Federal funds ........................................................................................

Total...............................................................................................

2,131

2,667

2,903

3,337

4,112

3,997

3,803

3,755

3,575

Other retirement contributions:
Employees retirement—employee contributions .............................
Contributions for non-Federal employees ........................................

760
10

758

845
12

863

933
13

992
15

1,064
16

1,111

1,202
19

Total...............................................................................................

770

768

857

875

946

1,007

1,081

1,129

1,221

Total social insurance taxes and contributions1...................

11,722

14,683

16,439

17,046

19,804

21,963

22,242

25,546

32,619

3,127

3,268

3,366

3,499

3,689

3,720

3,980

1,927
4,084

3,146
1,986
3,931

2,022
4,295

2,075
4,474

2,048
4,664

2,142

Other........................................................................................................

2,938
1,798
3,767

5,081

2,066
3,358

3,221

Total...............................................................................................

8,504

9,137

9,063

9,585

9,915

10,211

10,911

9,145

9,278

Highway..................................................................................................

2,074

2,539

2,798

2,949

3,279

3,519

3,659

3,917

4,441

Total...............................................................................................

2,074

2,539

2,798

2,949

3,279

3,519

3,659

3,917

4,441

Total excise taxes .......................................................................

10,578

11,676

11,860

12,534

13,194

13,731

14,570

13,062

13,719

Excise Taxes

Federal funds:

2,077

Trust funds:

See footnotes at end of table.

294

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 2.4-COMPOSmON OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 194B-1993-Continued
(in millions of dollars)
1968

1969

1970

1971

1972

1973

1974

1975

1976

Employment taxes and contributions:
Old-age and survivors insurance (Off-Budget) ...............................

22,265

25,484

29,396

31,354

58,703

3,469

4,490

5,381

7,250

7,686

Hospital insurance.................................................................................

3,493

4,063
4,755

47,778
6,147

55,207

2,651

35,132
4,775

40,703

Disability insurance (Off-Budget)........................................................

4,874

5,205

7,603

10,551

11,252

Social Insurance

Railroad retirement/pension fund........................................................

814

4,398
885

Total1..............................................................................................

29,224

34,236

Trust funds .............................................................................................

3,346

3,328

Total................................................................................................

3,346

3,328

Employees retirement—employee contributions.............................
Contributions for non-Federal employees........................................

1,334

1,426
24

1,735

Total................................................................................................

1,354

Total social insurance taxes and contributions1...................

919

980

1,008

1,189

1,411

1,489

11,987
1,525

39,133

41,699

46,120

54,876

65,888

75,199

79,901

3,464

3,674

4,357

6,051

6,837

6,771

8,054

3,464

3,674

4,357

6,051

6,837

6,771

8,054

1,916
37

2,058

2,146

2,302

2,513

2,760

1,451

1,765

1,952

2,097

2,187

2,347

2,565

2,814

33,923

39,015

44,362

47,325

52,574

63,115

75,071

84,534

90,769

Alcohol taxes..........................................................................................
Tobacco taxes........................................................................................
Other.........................................................................................................

4,189
2,121

4,447

4,646

4,696

2,205

5,040
2,274

3,391

3,609

2,297

2,522

2,435
2,060

5,238
2,312
1,850

5,318

2,093
3,613

5,004
2,205

5,248

2,136
4,002

Total................................................................................................

9,700

10,585

10,352

10,510

9,506

9,836

9,743

9,400

10,612

4,379

4,637

5,354

5,542

5,322

5,665

649

758

6,260
840

6,188
962

5,413

563

Unemployment insurance:

Other retirement contributions:

Excise Taxes

Federal funds:
2,484

2,810

Trust funds:
Highway...................................................................................................

Airport and airway.................................................................................

938

Total................................................................................................

4,379

4,637

5,354

6,104

5,971

6,424

7,100

7,151

6,351

Total excise taxes .......................................................................

14,079

15,222

15,705

16,614

15,477

16,260

16,844

16,551

16,963

See footnotes at end of table.

HISTORICAL TABLES

295

Table 2.4-C0MP0SITI0N OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 1940-1993-Continued
(in millions of dollars)

1977

1978

1979

1980

68,032

73,141
12,250

1,908

16,668
1,822

83,410
14,584
19,874
2,190

96,581
16,628

Hospital insurance.................................................................................
Railroad retirement/pension fund.......................................................

15,886
2,130
3,457
328

1981

1982

1983

1984

122,840
20,626
34,301
2,917

128,972
18,348

2,323

12,418
30,340
2,457

35,641
2,805

150,312
15,763
40.262
3,321

Social Insurance

Employment taxes and contributions:
Old-age and survivors insurance (Off-Budget) ...............................
Disability insurance (Off-Budget).......................................................

8,786

13,474

23,217

117,757

Total1.............................................................................................

21,801

92,199

103,881

120,058

138,748

162,973

180,686

185,766

209,658

Unemployment insurance:
Trust funds .............................................................................................

2,698

11,312

13,850

15,387

15,336

15,763

16,600

18,799

25,138

Total...............................................................................................

2,698

11,312

13,850

15,387

15,336

15,763

16,600

18,799

25,138

Other retirement contributions:
Employees retirement—employee contributions .............................
Contributions for non-Federal employees........................................

707

2,915
59

3,174

3,428

4,140

4,351
78

4,494

3,660
59

3,908

Total...............................................................................................

720

2,974

3,237

3,494

3,719

3,984

4,212

4,429

4,580

Total social insurance taxes and contributions1...................

25,219

106,485

120,967

138,939

157,803

182,720

201,498

208,994

239,376

1,279

5,295

5,601

5,606

2,492

2,443
6,934

2,581

4,136

5,315
4,660

23,252

5,382
2,537
18,407

5,557

2,393

5,492
2,444

5,531

622

12,135

8,906
2,035

Excise Taxes

Federal funds:

Alcohol taxes..........................................................................................
Tobacco taxes............................... ........................................................
Windfall profits.......................................................................................
Telephone...............................................................................................

Other........................................................................................................

619

1,960

2,118

1,785

585

2,689

2,344

2,258

1,363

Total...............................................................................................

2,520

9,648

10,054

9,808

15,563

34,128

28,670

24,086

22,279

1,676

6,709
1,191

6,904

7,189

6,744

8,297

11,743

1,526
222

6,620
1,874

6,305

1,326
92

21
237

133

491

2,165
494

2,499
518

20
128

30
244

29
230

261

Trust funds:

Highway..................................................................................................
Airport and airway.................................................................................

277

Black lung disability..............................................................................

272

Inland waterway....................................................................................
Hazardous substances response.......................................................
Post-closure liability..............................................................................

39
9
12

Aquatic resources..................................................................................

Total...............................................................................................

1,953

7,900

8,323

8,937

8,766

6,711

7,641

11,214

15,082

Total excise taxes.......................................................................

4,473

17,548

18,376

18,745

24,329

40,839

36,311

35,300

37,361

See footnotes at end of table.

296

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 2.4-COMPOSmON OF SOCIAL INSURANCE TAXES AND CONTRIBUTIONS AND OF EXCISE TAXES: 194<M99J-Continued
(in miMons of dollars)

1985

1986

1987

1988

1989

1990

1991

1992

1993
estimate

169,822
16,348
44,871
2,213
1,391

182,518
17,711

194,541

220,337
21,154

255,031

265,503

273,137

288,503

Disability insurance (Off-Budget)........................................................
Hospital insurance.................................................................................
Railroad retirementfpension fund........................................................
Railroad social security equivalent account.....................................

26,625
68,556

29,289

79,108

30,902
83,208

2,292

28,382
72,842
2,371

2,449

2,313

1,387

1,428

1,508

1,399

Social Insurance
Employment taxes and contributions:
Old-age and survivors insurance (Off-Budget) ...............................

51,335
2,103
1,395

2,220
1,414

2,326

1,417

240,595
23,071
65,396
2,391
1,407

18,861
55,992

59,859

Total1.............................................................................................

234,646

255,062

273,028

305,093

332,859

353,891

370,526

385,491

406,325

Unemployment insurance:
Trust funds.............................................................................................

25,758

24,098

25,575

24,584

22,011

21,635

20,922

23,410

24,727

Total................................................................................................

25,758

24,098

25,575

24,584

22,011

21,635

20,922

23,410

24,727

Other retirement contributions:
Employees retirement—employee contributions.............................

4,672

4,645

4,428

4,405

4,459

122

119

117

108

4,683
105

4,679

4,613
102

4,537

Contributions for non-Federal employees........................................

Total................................................................................................

4,759

4,742

4,715

4,658

4,546

4,522

4,568

4,788

4,779

Total social insurance taxes and contributions1...................

265,163

283,901

303,318

334,335

359,416

380,047

396,016

413,689

435,831

Excise Taxes
Federal funds:

Alcohol taxes..........................................................................................

5,562

5,828

5,971

5,709

5,661

4,779

4,589

4,763

4,616

4,378

5,695
4,081

7,364
4,706

8,011
5,049

7,973

Tobacco taxes........................................................................................
Windfall profits........................................................................................

6,348

2,251

Telephone................................................................................................
Ozone depletion.....................................................................................
Other.........................................................................................................

2,147

2,339

2,522

2,610

2,791

2,995

261

1,046

1,588

3,250

317

3,094
562
2,549

3,146

360
2,460

637
4,993

3,294
886
6,183

Total................................................................................................

19,097

16,053

14,844

16,185

13,147

15,591

18,275

21,836

24,109

13,015
2,851
581
40
273
7

13,363
2,736
547

13,032
3,060
572

14,114
3,189
594

15,628

13,867
3,700

16,979
4,910

16,733
4,645

15
_*

635
-1

48
698

665
63
818

652

810

626
70
818

17,753
3,420
632
82
842

126

165

194
73

-1
143
218
122
159

254
260
123
81

295
271
157
118

234
285
149
33

Trust funds:
Highway...................................................................................................
Airport and airway.................................................................................
Black lung disability...............................................................................
Inland waterway.....................................................................................
Hazardous substances response........................................................
Post-closure liability...............................................................................
Oil spill liability........................................................................................
Aquatic resources..................................................................................
Leaking underground storage tank....................................................
Vaccine injury compensation..............................................................

3,664

-9

563
47
883
-1

208
125
74

187
168
99

5,773

Total................................................................................................

16,894

16,866

17,613

19,042

21,239

19,754

24,127

23,733

23,430

Total excise taxes .......................................................................

35,992

32,919

32,457

35,227

34,386

35,345

42,402

45,569

47,539

1On-budget and off-budget.
Note: Unless otherwise noted, aH receipts shown in this table are trust funds and on-budget
* $500 thousand or less.

297

HISTORICAL TABLES
Table 2.5-COMPOSITION OF “OTHER RECEIPTS”: 1940-1993
(in millions of dollars)

Miscellaneous Receipts
Total
“Other
Receipts"

Estate and
Gift Taxes

Customs
Duties and
Fees

Federal
Reserve
Deposits1

Memorandum: Trust Fund
Amounts Included in “Other
Receipts”

All Other

Customs
Duties and
Fees

1940 ...............

698

353

331

1941 ...............

781

403

365

1942 ...............

801

420

369

1943 ...............

800

441

308

1944 ...............

972

507

417

1945 ...............

1,083

637

341

105

1946 ...............

1,202

668

424

1947 ...............

1,331

771

477

1948 ...............

1,461

890

403

100

1949 ...............

1,388

780

367

187

1950 ...............

1,351

698

407

192

1951 ...............

1,578

708

609

189

1952 ...............

1,710

818

533

278

All Other

109

1953 ...............

1,857

881

596

298

1954 ...............

1,905

934

542

341

1955 ...............

1,850

924

585

251

1956 ...............

2,270

1,161

682

287

140

1957 ...............

2,672

1,365

735

434

139

1958 ...............

2,961

1,393

782

664

123

1959 ...............

2,921

1,333

925

491

171

1960 ...............

3,923

1,606

1,105

1,093

119

1961 ...............

3,796

1,896

982

788

130

1962 ...............

4,001

2,016

1,142

718

125

1963 ...............

4,395

2,167

1,205

828

194

1964 ...............

4,731

2,394

1,252

947

139

22
56

1965 ...............

5,753

2,716

1,442

1,372

222

1966 ...............

6,708

3,066

1,767

1,713

163

1967 ...............

6,987

2,978

1,901

1,805

302

1968 ...............

7,580

3,051

2,038

2,091

400

1969 ...............

8,718

3,491

2,319

2,662

247

1970 ...............

9,499

3,644

2,430

3,266

158

1971 ...............

10,185

3,735

2,591

3,533

325

1972 ...............

12,355

5,436

3,287

3,252

380

1973 ...............

12,026

4,917

3,188

3,495

425

1974 ...............

13,737

5,035

3,334

4,845

523

1975 ...............

14,998

4,611

3,676

5,777

935

1976 ...............

17,317

5,216

4,074

5,451

2,576

TQ..................

4,279

1,455

1,212

1,500

111

1977 ...............

19,008

7,327

5,150

5,908

623

1978 ...............

19,278

5,285

6,573

6,641

778

1979 ...............

22,101

5,411

7,439

8,327

925

1980 ...............

26,311

6,389

7,174

11,767

981

1981 ...............

28,659

6,787

8,083

12,834

956

1982 ...............

33,006

7,991

8,854

15,186

975

100

1983 ...............

30,309

6,053

8,655

14,492

1,108

109

1984 ...............

34,412

6,010

11,370

15,684

1,347

126

1985 ...............

37,040

6,422

12,079

17,059

1,480

145

1986 ...............

40,168

6,958

13,327

18,374

1,510

156

1987 ...............

41,884

7,493

15,065

16,817

2,490

177

1988 ...............

43,702

7,594

16,196

17,163

2,747

174

165

1989 ...............

47,908

8,745

16,334

19,604

3,225

243

•m

1990 ...............

55,524

11,500

16,707

24,319

2,997

210

233

1991 ...............

49,933

11,138

15,949

19,158

3,688

432

1992 ...............

55,638

11,143

17,359

22,920

4,215

563

1993 estimate

48,329

12,594

18,176

13,090

4,469

589

241
238
477

Deposits of earnings by the Federal Reserve System.

298

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993
Superfunction and Function

1941

1940

1942

1943

1944

1945

1946

1947

In millions of dollars

National defense...................................................................................

1,660

6,435

25,658

66,699

79,143

82,965

42,681

12,808

Human resources................................................................................

4,139

4,158

3,599

2,659

1,928

1,859

5,493

9,909

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

1,972
55

1,592
60
1,855

1,062
71
1,828

375

160

134

92
1,739

174
1,503

211

201

102
177

1,137

2,384

2,820

137

177

501

276

217
-126

267
110

358
2,465

466
6,344

Health ..................................................................................................
Income Security ................................................................................

1,514

Social Security ..................................................................................
Veterans benefits and services.....................................................

570

91
560

Physical resources..............................................................................

2,312

1,782

3,892

6,433

5,471

1,747

836

1,227

Energy.................................................................................................

156

116

997

726

642

18
700

550

398

2,151

624

-2,630

Transportation ....................................................................................
Community and regional development.........................................

392
285

353

819
1,521
1,283
113

25
455

Natural resources and environment..............................................
Commerce and housing credit.......................................................

91
817

3,220

3,901

3,654

899
(941)

943

K2)

Other functions.....................................................................................

775

882

1,830

International affairs............................................................................

145

Agriculture ..........................................................................................
Administration of justice...................................................................

369
81

339
92

968
4
344

General government........................................................................

274

306

Net interest............................................................................................
(On-budget) ..............................................................................
(Off-budget) ..............................................................................

123

(999)

1,052
(1,123)

(-56)

(-71)

General science, space and technology......................................

Undistributed offsetting receipts....................................................

-317

-547

Total, Federal outlays........................................................................
(On-budget) ..............................................................................
(Off-budget) ..............................................................................

9,468

13,653

(9,482)
(-14)

(13,618)
(35)

219
1,529

238

(1,616)

2,219
(2,322)

(-87)

(-103)

2,457

3,864

1,286
1

243
3,112

482
-1,857
1,970
200

-923
1,130

302

(3,236)

4,111
(4,259)

4,204
(4,367)

(-124)

(-148)

(-163)

4,418

3,580

7,900

1,449

1,913

5,791

48
1,275

1,935
34
610

117
397

154

192

111
1,635
178

673

900

581

176
825

176
1,114

-894

-1,221

-1,320

-1,389

-1,468

-1,552

78,555

91,304
(91,190)
(114)

92,712

55,232

(92,569)
(143)

(55,022)
(210)

34,496
(34,193)
(303)

35,137
(35,071)
(66)

343

(78,466)
(89)

5
814

As percentages of outlays
National defense.....................................................................................

17.5

47.1

73.0

84.9

86.7

89.5

77.3

37.1

Human resources........ ..........................................................................
Physical resources ................................................................................

30.5
13.1

10.2
11.1

3.0

6.0
2.4

2.0
1.9

6.9

3.4
8.2
1.9

2.1

Net interest.............................................................................................

43.7
24.4
9.5

3.4

9.9
1.5
7.4

28.7
3.6
12.2

Other functions .......................................................................................
Undistributed offsetting receipts..........................................................

8.2
-3.4

6.5
-4.0

5.2
-2.5

3.1
-1.6

4.2
-1.4

4.8
-1.5

6.5
-2.7

22.9
-4.5

Total, Federal outlays........................................................................
(On-budget, ..............................................................................
(Off-budget) ..............................................................................

100.0
(100.2)
(-0.2)

100.0
(99.7)
(0-3)

100.0
(99.8)
(0.2)

100.0
(99.9)
(0.1)

100.0
(99.8)
(0.2)

100.0
(99.6)
(0.4)

100.0
(99.1)
(0-9)

As percentages of GDP
National defense.....................................................................................

Human resources...................................................................................
Physical resources................................................................................
Net interest..............................................................................................

1.7
4.3

5.7
3.7

18.1
2.5

38.0
1.5

39.2

39.1

20.1

5.7

1.0

1.6

2.7

3.7

2.7

2.6
0.4

4.4

2.4

0.9

0.8

0.7

1.1

0.9
0.8
1.5

1.9
-0.7

2.1

1.7

3.5

-0.7

Other functions.......................................................................................

0.8

1.3

0.9
1.4

Undistributed offsetting receipts..........................................................

-0.3

-0.5

-0.6

-0.7

1.9

0.6
1.9

Total, Federal outlays.........................................................................

9.9

12.1

24.8

44.8

45.3

43.7

26.0

15.5

(On-budget) ..............................................................................
(Off-budget) ..............................................................................

(9.9)

(12.1)

(24.7)

(44.7)

(45.2)

(43.7)

(25-9)

(15.3,

(-*)

(*)

(0-1)

(0.1)

(0-1)

(0.1)

* 0.05 percent or less.

299

HISTORICAL TABLES
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Continued
Superfunction and Function

1948

1949

1950

1951

1952

1953

1954

1955

In millions of dollars

National defense......................................... .................. ........ .............

9,105

13,150

13,724

23,566

46,089

52,802

49,266

42,729

Human resources................................................................................

9,868

10,805

14,221

11,001

11,745

11,836

13,076

14,908

370
307

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

191

178

241

235

Health.................................................................................................
Income Security................................................................................
Social Security..................................................................................
Veterans benefits and services.....................................................

162

197

268

323

339
347

441
336

2,499
558
6,457

3,174
657
6,599

4,097

3,352

3,655

781
8,834

1,565
5,526

2,063
5,341

3,823
2,717
4,519

4,613

445
291
5,071
4,427
4,675

Physical resources.............................................................................

2,243

3,104

3,667

3,924

4,182

4,005

2,584

2,732

Enerav ................................................................................................
Natural resources and environment.............................................
Commerce and housing credit......................................................
Transportation ...................................................................................
Community and regional development.........................................

292
780

341
1,080

425
1,289
910
1,264
117

432
1,007

325
940

800
916
-33

383
1,310
1,228
956

474
1,233

306
787
78

327
1,308
1,035
967

-184
1,229
100

92
1,246

5,156
(5,543)
(-387)

4,811
(5,250)
(-439)

4,850

(5,288)
(-438)

4,341
(4,532)

4,523
(4,753)

(-191)

(-230)

Other functions....................................................................................

5,851

International affairs...........................................................................

4,566
1

Net interest............................................................................................
(On-budget) .............................................................................
(Off-budget) .............................................................................

General science, space and technology......................................

Agriculture .........................................................................................
Administration of justice..................................................................
General government........................................................................

Undistributed offsetting receipts....................................................

(On-budget) .............................................................................
(Off-budget) .............................................................................
Total, Federal outlays........................................................................

(On-budget) ............................................ .................. ..............
(Off-budget) .............................................................................

69
170
1,045
-1,643
(-1.643)

1,278
1,124
73

4,434
3,352

129

4,812
(5,069)
(-257)

4,665
(4,952)
(-287)

4,701
(5,035)

9,032

7,955

4,690

4,346

5,873

4,515

6,718

6,052

4,673
55

3,647

2,691

2,119

1,596

2,223

-323
218

49
2,253

2,049
193
986

49
176
267
1,163

74
3,514

48
1,924
184
824

1,097

(-334)

243
1,209

1,817
257
799

256
651

-1,779

-1,817

-2,332

-3,377

-3,571

-3,397

-3,493

(-1,779)

(-1,817)

(-2,332)

(-3,377)

(-3,571)

(-3,396)

(-3,487)

(-1)

(-6)

29,764
(29,396)

(38,408)

(368)

(427)

38,835

42,562
(42,038)
(524)

45,514

67,686

(44,237)
(1,277)

(65,956)

76,101
(73,771)

70,855
(67,943)

68,444
(64,461)

(1,730)

(2,330)

(2,912)

(3,983)

69.5
18.5
3.6
6.8
6.4
-4.8

As percentages of outlays
National defense........................................... ........................................

30.6

Human resources..................................................................................
Physical resources ............................................................... ................

33.2
7.5

Net interest.............................................................................................
Other functions......................................................................................

68.1
17.4

Undistributed offsetting receipts.........................................................

32.2
33.4
8.6
11.3
18.7
-4.3

51.8
24.2

14.6
19.7
-5.5

33.9
27.8
8.0
11.6
23.3
-4.6

8.6
10.2
10.3
-5.1

6.2
6.9
6.4
-5.0

69.4
15.6
5.3
6.8
7.7
-4.7

Total, Federal outlays........................................................................
(On-budget) ................................. ...........................................
(Off-budget) .............................................................................

100.0
(98.8)
(1.2)

100.0
(98.9)
(1-1)

100.0
(98.8)
(1.2)

100.0
(97.2)
(2-8)

100.0
(97.4)
(2.6)

100.0
(96.9)
(3.1)

100.0
(95.9)
(4.1)

100.0
(94.2)

13.5

14.5
3.3
1.1
1.4

13.4
3.6
0.7

62.4
21.8
4.0
7.1

9.8
-5.1

(5-8)

As percentages of GDP

National defense....................................................................................
Human resources..................................................................................
Physical resources ................................................................................
Net interest.............................................................................................
Other functions......................................................................................

3.7
4.0
0.9
1.8
2.4

5.0

Undistributed offsetting receipts.........................................................
Total, Federal outlays........................................................................

4.1
1.2

5.2
5.4
1.4

1.7
3.4

1.8
3.0

7.5
3.5
1.3
1.5
1.5

-0.7

12.1

14.8

16.0

(On-budget) .............................................................................

(11.9)

(14.6)

(Off-budget) ............................... ..............................................

(0.1)

(0-2)

1.6

1.2

11.1
3.9
0.7
1.3
1.7

-1.0

-0.9

14.5

19.9

20.9

19.3

17.8

(15.8)

(14.1)

(19.4)

(20.3)

(18-5)

(16.8)

(0-2)

(0-4)

(0.5)

(0.6)

(0.8)

(10)

3.4
1.2
1.4
1.3

1.3

300

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Continued
Superfunction and Function

1957

1956

1958

1959

1960

1961

1962

1963

In millions of dollars

National defense...................................................................................

42,523

45,430

46,815

49,015

48,130

49,601

52,345

53,400

Human resources................................................................................

16,052

18,161

22,288

24,892

26,184

29,838

31,630

33,522

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

591

590

643

789

479
5,427

541
7,535

5,478
4,891

6,661
5,005

8,219

5,350

1,198
9,193
14,365
5,628

1,451

Social Security ...................................................................................
Veterans benefits and services......................................................

685
8,239
9,737
5,443

1,068
913
9,678
12,474
5,705

1,464

359
4,734

968
795
7,378
11,602
5,441

1,246

Health..................................................................................................
Income Security................................................................................

9,298
15,788
5,521

Physical resources..............................................................................

3,092

4,559

5,188

7,813

7,991

7,754

8,831

8,013

Energy.................................................................................................

174
870

240

348
1,407

382
1,632
1,933

464

1,559
1,618

510
1,779
1,203

3,655
211

4,126
224

3,987
275

604
2,044
1,424
4,290
469

2,251
62
4,596
574

Natural resources and environment..............................................
Commerce and housing credit.......................................................

Transportation ....................................................................................
Community and regional development.........................................

506
1,450
92

1,098
1,424
1,662
135

930
2,334
169

530

5,079
(5,567)

5,354

5,604

5,762

(5,910)

(6,175)

(6,338)

6,947
(7,511)

(—487)

(-557)

(-571)

(-576)

(-563)

6,716
(7,307)
(-591)

Other functions.....................................................................................

7,482

7,220

6,896

9,229

7,760

8,621

12,401

14,437

International affairs............................................................................
General science, space and technology......................................

2,414

3,364

3,144

3,184

141

5,639
1,723

5,308
3,051

3,486

2,411

294
4,509

2,988
599

Agriculture ..........................................................................................
Administration of justice...................................................................
General government........................................................................

3,147
122
2,288

2,623

2,641

303
1,360

325

356

655

926

366
1,184

400
1,354

3,562
429

4,384

302
1,201

1,049

1,230

Undistributed offsetting receipts....................................................
(On-budget) ..............................................................................
(Off-budget) ..............................................................................

1,042

6,889

7,740

(7,498)

(8,322)
(-582)

(-609)

465

-3,589

-4,146

-4,385

-4,613

-4,820

-4,807

-5,274

-5,797

(-3,571)

(-4,058)
(-88)

(-4,240)

(-4,449)

(-4,632)

(-4,601)

(-5,053)

(-5,555)

82,405

92,098

92,191

97,723

(74,902)

(83,102)

(81,341)

(7,503)

(8,996)

(10,850)

(86,046)
(11,677)

(-18)
70,640

Total, Federal outlays........................................................................
(On-budget) ..............................................................................

(65,668)

76,578
(70,562)

(Off-budget) ..............................................................................

(4,972)

(6,016)

(-145)

(-164)

(-188)

(-206)

(-221)

(-242)

106,821

111,316

(93,286)

(96,352)

(13,535)

(14,964)

60.2
22.7

59.3
23.7

56.8
27.0

Physical resources ................................................................................
Net interest..............................................................................................
Other functions.......................................................................................
Undistributed offsetting receipts..........................................................

4.4
7.2

6.0
7.0

10.6
-5.1

9.4
-5.4

6.3
6.8
8.4
-5.3

Total, Federal outlays.........................................................................
(On-budget) ..............................................................................
(Off-budget) ..............................................................................

100.0
(93.0)
(7.0)

100.0
(92.1)
(7.9)

100.0
(90.9)
(9.1)

53.2

52.2

50.8

27.0
8.5
6.3
10.0
-5.0

28.4

30.5

8.7
7.5
8.4
-5.2

7.9
6.9
8.8
-4.9

100.0
(90.2)
(9.8)

100.0
(88.2)
(11.8)

100.0

(88.1)
(11-9)

49.0
29.6
8.3
6.4
11.6
-4.9

48.0
30.1

100.0
(87.3,
(12.7)

100.0
(86.6)
(13.4)

7.2
7.0
13.0
-5.2

As percentages of GDP
9.4
5.7

9.1
5.7

1.6
1.2

1.4

1.3

1.5

1.7

2.2

2.5

-1.0

-0.9

-1.0

National defense.....................................................................................

10.2

10.4

10.2

9.5

9.6

Human resources...................................................................................

3.9

4.1

5.0

5.2

5.8

Physical resources................................................................................

0.7
1.2

1.0

1.6
1.2

1.5

1.2

1.2
1.3

1.6

Net interest..............................................................................................

1.4

Other functions.......................................................................................

1.8

1.6

1.5

1.9

Undistributed offsetting receipts..........................................................

-0.9

-1.0

1.3

Total, Federal outlays.........................................................................

17.0

17.5

18.4

18.9

19.2

19.0

(15.8)

(16.1)

(16.7)

19.2
(17.3)

18.3

(On-budget) ........... „................................................................

(16.1)

(16.6)

(16.8,

(16.5)

(Off-budget) ..............................................................................

(12)

(1.4)

(1.7)

(1.9,

(2-2)

(2-3)

(2-4)

(2.6)

301

HISTORICAL TABLES
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Continued
Superfunction and Function

1965

1964

1966

1967

1968

1969

1970

1971

In millions of dollars

National defense..................................................................................

54,757

50,620

58,111

71,417

81,926

82,497

81,692

78,872

Human resources................................................................................

35,294

36,576

43,257

51,272

59,375

66,410

75,349

91,901

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

2,146
1,791

4,372

6,458

7,642

7,548

8,634

Health....... ........................................................................ ;................

1,563
1,788

2,543

3,351

4,390

5,162

5,907

9,849
6,843

Medicare.............................................................................................
Income Security ................................................................................

6,213

10,248

4,649
11,798

5,695

9,455

13,066

15,645

Social Security ..................................................................................

16,620

17,460

64
9,662
20,694

2,748

9,641

21,725

23,854

27,298

30,270

(On-budget) .............................................................................

(Off-budget) .............................................................................

(16,620)

(17,460)

(20,694)

6,622
22,936
35,872

(94)

(414)

(458)

(465)

(21,631)

(23,760)

(26,885)

(29,812)

(35,408)

Veterans benefits and services.....................................................

5,682

5,723

5,923

6,743

7,042

7,642

8,679

9,778

Physical resources................................................................... .........

9,528

11,264

13,410

14,674

16,002

11,869

15,574

18,286

572
2,364

699

612
2,719

782

997

2,531

Transportation ...................................................................................

418
5,242

1,157
5,763

1,035
3,915
2,366

Community and regional development.........................................

933

1,114

Energy................................................................................................
Natural resources and environment..............................................
Commerce and housing credit......................................................

Net interest............................................................................................
(On-budget) .............................................................................

(Off-budget) ..............................................................................

8,199

8,591

(8,805)

(9,239)

(-607)

(-648)

Other functions....................................................................................

16,458

17,086

International affairs...........................................................................
General science, space and technology......................................

4,945
4,897
4,609
489

5,273
5,823

Agriculture ..........................................................................................
Administration of justice..................................................................
General government........................................................................

1,518

Undistributed offsetting receipts....................................................
(On-budget) ..............................................................................

-5,708
(-5,429)

(Off-budget) .............................................................................

(-279)

Total, Federal outlays.......................................................................

1,010
2,900

3,065

4,280
6,316

-119
6,526

7,008

8,052

1,105

1,108

1,382

1,552

2,392

2,917

9,386
(10,028)

11,090

12,699

(13,848)

14,380
(15,948)

(-1,149)

(-1,568)

(16,783)
(-1,942)

17,126

17,786

18,151

17,286

16,379

5,580

5,566

4,330

6,233
2,990
618
1,719

5,301
5,524

4,600

6,717
2,447
563
1,603

5,020

4,511

4,159
4,182

4,545
659
1,757

5,826
766
1,939

5,166
959
2,320

4,290
1,306
2,442

(-642)

1,499

10,268
(11,060)

2,112

(12,069)
(-979)

16,911

3,955
535

-5,908
(-5,626)
(-282)

1,037
2,988

3,245
5,730

2,869
3,979
5,936

(-792)

-6,542

-7,294

(—6,205)
(-337)

(-6,879)

157,464
(137,040)
(20,424)

118,528

118,228

134,532

(On-budget) .............................................................................

(102,794)

(101,699)

(114,817)

(Off-budget) .............................................................................

(15,734)

(16,529)

(19,715)

(-415)

-8,045
(-7,600)
(-445)

14,841

-7,986

-8,632

(-7,454)

(-7,995)

-10,107
(-9,467)

(-532)

(-637)

(-640)

178,134

183,640

(155,798)

(158,436)

195,649
(168,042)

(177,346)

(22,336)

(25,204)

(27,607)

(32,826)

210,172

As percentages of outlays

National defense....................................................................................
Human resources.........................................
Physical resources.......................................
Net interest....................................................
Other functions..............................................
Undistributed offsetting receipts.................
Total, Federal outlays...............................
(On-budget) .....................................
(Off-budget, .....................................

46.2

42.8

43.2

29.8

30.9

32.2

8.0
6.9

9.5
7.3

13.9
-4.8
100.0
(86.7)
(13.3)

46.0

44.9

10.0
7.0

45.4
32.6
9.3
6.5

33.3
9.0
6.2

36.2
6.5

14.5
-5.0

12.6
-4.9

10.9
-4.6

100.0
(86.0)
(14.0)

100.0
(85.3)
(14.7)

100.0
(87.0)
(13.0)

41.8
38.5

43.7

6.9

8.0
7.4

8.7
7.1

10.0
-4.5

9.9
-4.3

8.8
-4.4

7.8
-4.8

100.0
(87.5)
(12-5)

100.0
(86.3)
(13.7)

100.0
(85.9)
(14.1)

100.0
(84.4)
(15.6)

37.5

As percentages of GDP
National defense...............................
Human resources.............................
Physical resources...........................

8.8
5.6
1.5

7.5
5.5

Net interest........................................

1.3

Other functions.................................
Undistributed offsetting receipts.....
Total, Federal outlays...................

........... . ..................

9.0
6.5

1.7

7.9
5.9
1.8

1.3

2.6

2.5

2.3

2.2

-0.9

1.8

8.9
7.2
1.3

8.3
7.6
1.6

7.5
8.7
1.7

1.3

1.4

1.5

1.4

2.1

2.0

1.8

1.6

-0.9

-1.0

9.7
7.0
1.9

19.0

17.6

18.3

19.8

21.0

19.8

19.9

20.0

(On-budget) .........................

(16.4)

(15.2)

(15.6)

(17.3)

(18.4)

(17.1,

(17.1)

(16.9,

(Off-budget) .........................

(2.5)

(2-7)

(2-6)

(2.6)

(2.7)

(2-8)

(3.1)

302

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Confimie<l
Superfunction and Function

1972

1973

1974

1975

1976

1977

1978

In millions of dollars

National defense..................................... .............................................

79,174

76,681

79,347

86,509

89,619

22,269

97,241

104,495

Human resources.......... .....................................................................

107,211

119,522

135,783

173,245

203,594

52,065

221,895

242,329

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

12,529

12,745

12,457
10,733

21,104
17,302

9,639

12,875

33,699
55,867
(494)

50,160
64,658
(499)

15,834
60,784
73,899
(515)

(39,620)
10,732

9,356
8,052
28,264
49,090
(526)
(48,565)
12,015

18,910
15,734

26,710

8,674

16,022
12,930

5,169

Health..................................................................................................
Medicare..............................................................................................
Income Security............................................................ ......... .........
Social Security............................................... ............... ...................
(On-budget) ..............................................................................

(55,373)
13,388

(64,159)
16,599

(73,384)
18,433

Physical resources..............................................................................

19,574

20,614

25,106

35,449

39,188

Energy.................................................................................................
Natural resources and environment..............................................
Commerce and housing credit.......................................................

1,296
4,241

1,237
4,775

2,222

931

Transportation ....................................................................................

8,392

Community and regional development.........................................

3,423

9,066
4,605

Net interest............................................................................................
(On-budget) ..............................................................................

15,478
(17,584)

17,349

21,449

(19,629)

(23,969)

(Off-budget) ................................ .............................................

(-2,106)

(-2,280)

Other functions....................................................................................

18,828

International affairs............................................................................

4,781

General science, space and technology......................................
Agriculture ....... ..................................................................................
Administration of justice...................................................................
General government........................................................................

(Off-budget) ..............................................................................
Veterans benefits and services......................................................

Undistributed offsetting receipts....................................................
(On-budget) ..............................................................................

7,479
27,638
40,157
(538)

3,924
4,264
14,981

61,044

18,524
22,768
61,488

3,963

85,061
(717)
(84,344)
18,038

93,861
(741)
(93,120)
18,978

9,512

40,746

52,591

7,992
10,983
6,254

19,763
(19,763)

19,345

1,303

2,916

4,204

1,129

5,770

5,697
4,705

7,346
9,947

8,184
7,619

2,524

9,172

10,918

13,739

4,229

4,322

5,442

3,358
1,569

10,032
3,093
14,829
7,021

15,521
11,841

931

26,727

6,949

(-2,520)

23,244
(26,047)
(-2,803)

(29,539)
(-2,812)

(7,042)
(-93)

29,901
(32,551)
(-2,650)

35,458
(37,861)
(-2,403)

24,950

24,423

27,487

27,050

9,388

34,315

39,594

6,433
4,373

4,854

1,653

2,141
9,774

3,328

983
891

10,408

9,747

3,895

6,353
4,736
6,787
3,605
12,833

7,482

3,991
3,036
2,955

2,458
1,162

5,259

5,710
3,980
2,230
2,470
10,032

7,097

4,175

4,149
4,032

2,960
-9,583
(-8,926)

-13,409
(-12,714)

3,170

-16,749

-13,602

-14,386

(—15,985)

(-12,686)

(-13,423)

-4,206
(-3,957)

4,926
11,357
3,813

12,015

-14,879

-15,720

(-13,902)

(-14,660)

(Off-budget) ..............................................................................

(-657)

(-695)

(“764)

(-916)

(-963)

(-249)

(-977)

Total, Federal outlays........................................................................
(Obudget) ..............................................................................

230,681
(193,824)
(36,857)

245,707

269,359

332,332

458,746

(217,270)

(271,892)
(60,440)

95,975
(76,555)
(19.421)

409,218

(200,118)
(45,589)

371,792
(302,183)
(69,609)

(328,502)
(80,716)

(369,089)
(89,657)

(Off-budget) ..............................................................................

(52,089)

(-1,060)

As percentages of outlays
National defense.....................................................................................
Human resources..................................................................................
Physical resources................................................................................
Net interest..............................................................................................
Other functions.......................................................................................
Undistributed offsetting receipts..........................................................

8.2
-4.2

31.2
48.6
8.4
7.1
10.2
-5.5

100.0
(84.0)
(16.0)

100.0
(81.4,
(18.6)

34.3
46.5
8.5
6.7

29.5
50.4

26.0
52.1

9.3
8.0
9.1
-6.2

10.7
7.0
8.3
-4.1

100.0
(80.7)

100.0
(81.8,

(19.3)

(18.2)

24.1
54.8
10.5
7.2
7.3
-3.9

23.2
54.2
9.9
7.2
9.8
-4.4

23.8
54.2

22.8
52.8

10.0
7.3
8.4
-3.6

11.5
7.7
8.6
-3.4

100.0
(81.3)
(18.7)

100.0
(79.8)
(20.2)

100.0
(80.3)
(19.7)

100.0
(80.5)
(19.5)

As percentages of GDP
5.7

5.7

5.3

5.0

5.1

4.8

9.7

11.5

12.1

11.7

11.6

11.2

1.8
1.5

2.3

2.1

2.4

1.4

1.5

1.6

2.0

1.7

1.6

2.1

Undistributed offsetting receipts..........................................................

-0.8

-1.1

-1.2

1.8
-0.9

1.6
1.8

-0.9

-0.8

Total, Federal outlays T~,T........

20.1
(16.9)

19.3
(15.7)

19.2
(15.5,

21.6
(17.2)

21.3

(18.0)

22.1
(17-9)

21.3

(On-budget) ..............................................................................

(17.1)

(Off-budget)..............................................................................

(3.2)

(3-6)

(3-7)

(4.0)

(4.1)

(4.4)

(4.2)

(17-1)
(4.2)

National defense........... -....... ...... ~..........-..........................................

6.9

Human resources...................................................................................

9.3

Physical resources................................................................................

1.7

1.6

Net interest................................................. ............................................

1.3

Other functions.......................................................................................

...........................................

6.0
9.4

22.0

1.6
1.8
-0.7

303

HISTORICAL TABLES
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Continued
Superfunction and Function

1979

1981

1980

1982

1983

1984

1985

1986

In millions of dollars

National defense..................................................................................

116,342

133,995

157,513

185,309

209,903

227,413

252,748

273,375

Human resources................................................................................

267,574

313,374

362,022

388,681

426,003

432,042

471,822

481,594

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

30,223

31,843

33,709

27,029

26,606

27,579

Health.................................................................................................
Medicare.......... ..................................................................................
Income Security...............................................................................

20,494

23,169

27,445

28,641

30,417

29,342
33,542

35,936

57,540
112,668

26,495

32,090

26,866
39,149

46,567

52,588

66,359
104,073
(757)

86,540

99,723

107,717

122,598

118,547
(675)

139,584

170,724

(103,316)
19,931

(117,872)

21,185

(138,914)
22,991

155,964
(844)
(155,120)
23,958

Physical resources.............................................................................

54,013

65,985

70,886

Energy................................................................................................
Natural resources and environment.............................................
Commerce and housing credit......................................................

9,180
12,135

10,156

15,166
13,568

Social Security..................................................................................
(On-budget) .............................................................................

(Off-budget) .............................................................................
Veterans benefits and services.....................................................

Transportation ...................................................................................
Community and regional development.........................................

Net interest............................................................................................
(On-budget) .............................................................................
(Off-budget) .............................................................................

4,686
17,532
10,480

13,858

(670)

(19,993)

178,223
(7,056)

65,822

128,200
188,623
(5,189)

30,585
70,164
119,796

198,757
(8,072)

(171,167)
25,614

(183,434)

24,846

26,292

(190,684)
26.356

61,752

57,600

57,938

56,789

58,614

13,527

9,353

7,086

12,998

12,672
6,681
21,334

12,593

5,685
13,357

13,639

23,669

4,229
25,838

28,117

7,560

7,673

7,680

7,233

9,390

8,206

6,256

21,329

23,379

11,252

10,568

20,625
8,347

(150,731)

6,917

4,735
4,890

42,636

52,538

68,774

111,123

129,504

136,047

(54,877)

(71,062)

85,044
(87,114)

89,828

(44,860)

(91,673)

(114,432)

(133,622)

(140,377)

(-2,224)

(-2,339)

(-2,288)

(-2,071)

(-1,845)

(-3,310)

(-4,118)

(-4,329)

Other functions....................................................................................

40,396

44,996

47,095

51,069

59,023

55,287

68,227

73,713

International affairs...........................................................................
General science, space and technology......................................

7,459
5,235

12,714
5,832

13,104

11,848

15,876

16,176

Agriculture .........................................................................................
Administration of justice........ ..........................................................

11,236

8,839
4,584
13,028

11,323

12,300
7,200
15,944
4,712

7,935
22,901
5,105
11,235

8,317
13,613

8,627
25,565

14,152
8,976
31,449

5,663
11,817

6,270
11,588

6,572
12,564

General government........................................................................

4,173
12,293

Undistributed offsetting receipts....................................................
(On-budget) .............................................................................

-17,476

-19,942

(-16,362)

(-18,738)

(Off-budget) .............................................................................

(-1,114)

(-1,204)

Total, Federal outlays........................................................................
(On-budget) .............................................................................
(Off-budget) .............................................................................

503,485

590,947

(403,507)
(99,978)

(476,618)
(114,329)

6,469

4,769
11,429

-28,041
(-26,611)
(-1,430)
678,249
(543,053)
(135,196)

10,914

-26,099

-33,976

-31,957

(-24,453)

(-32,198)

(-29,913)

(-1,646)

(-1,778)

(-2,044)

745,755

808,380
(661,272)
(147,108)

(686,032)
(165,813)

(594,351)
(151,404)

851,846

-32,698
(-30,189)
(-2,509)

-33,007
(-30,150)
(-2,857)

946,391
(769,584)
(176,807)

(806,838)
(183,498)

990,336

As percentages of outlays

National defense.................................

23.1
53.1
10.7
8.5

13.0

27.6
48.6
5.9
13.7

7.3
-4.2

6.5
-3.8

7.2
-3.5

7.4
-3.3

100.0

100.0
(80.5)
(19.5)

100.0
(81.3)
(18.7)

100.0
(81.5)

6.2
11.7

6.4
11.9

6.5
11.4

23.2

24.8

53.4

26.0
52.7
7.1
11.1

26.7
50.7

10.5
10.1

52.1
8.3
11.4

6.9
-4.1

6.8
-3.5

100.0
(80.1)
(19.9)

100.0
(79.7)
(20.3)

5.9

6.3

12.4

12.8

2.0

1.7

1.6

1.4

2.7

3.0

3.3

3.2

Undistributed offsetting receipts.......

8.0
-3.5

Total, Federal outlays.....................
(On-budget) ...........................
(Off-budget) ...........................

100.0
(80.1)
(19-9)

100.0
(80.7)
(19.3)

Net interest..........................................
Other functions...................................

26.7
49.9
6.0
13.7

22.7

53.0
11.2
8.9
7.6
-3.4

Human resources...............................
Physical resources.............................

(81-8)
(18.2)

6.8

(18.5)

As percentages of GDP
National defense..............................................
Human resources...........................................
Physical resources.........................................

4.8
11.0

11.9

2.2

2.5

5.3
12.2
2.4

Net interest..................... ................................

1.8

2.0

2.3

5.1

Other functions...............................................

1.7

1.6

1.8

1.5

1.7

Undistributed offsetting receipts...................

-0.7

-0.8

-0.9

-0.8

-1.0

-0.9

-0.8

Total, Federal outlays.............................

20.7

22.3

22.9

23.9

24.4

23.1

23.9

23.5

(On-budget) .......................................

(16.6)

(18-0)

(18.3)

(19.0)

(19.9)

(18-6)

(194)

(19.1)

(Off-budget) .......................................

(4.1)

(4.3)

(4.6)

(4.8)

(4-4)

(4-5)

(4.5)

(4.3)

304

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 3.1-OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940-1993-Continued
Superfunction and Function

1987

1988

1989

1990

1991

1993
estimate

1992

In millions of dollars

National defense...........................................................................................................

281,999

290,361

303,559

299,331

273,292

298,361

289,299

Human resources.........................................................................................................

502,196

533,404

568,668

619,327

689,691

773,594

837,865

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

29,724
39,967

31,938
44,487

36,674
48,390

38,755

43,354
71,183

45,248

57,716

89,570

52,292
104,979

119,024
198,073

207,433

Health..........................................................................................................................

Medicare......................................................................................................................
Income Security........................................................................................................
Social Security...........................................................................................................
(On-budget) ......................................................................................................
(Off-budget)......................................................................................................
Veterans benefits and services..............................................................................

75,120

78,878

84,964

123,250
207,353

129,332

136,031

219,341

232,542

(4,930)
(202,422)
26,782

(4,852)
(214,489)
29,428

(5,069)
(227,473)

98,102

104,489
170,301

(2,619)

287,545
(6,127)

30,066

147,019
248,623
(3,625)
(244,998)
29,112

(266,395)
31,349

(281,418)
34,133

269,015

Physical resources......................................................................................................

54,932

68,283

81,068

125,532

134,537

74,788

Energy.........................................................................................................................
Natural resources and environment......................................................................
Commerce and housing credit...............................................................................
(On-budget) ......................................................................................................
(Off-budget) ......................................................................................................

4,115

2,297

3,341

14,606

17,067

29,211
(29,520)
(-310)
27,608

67,142
(65,516)
(1,626)
29,485

2,436
18,552
75,639
(74,321)
(1,317)
31,099

4,509

13,363
6,182
(6,182)

2,706
16,182

Transportation ............................................................................................................
Community and regional development..................................................................

26,222

Net interest.....................................................................................................................

138,652

(On-budget) ......................................................................................................
(Off-budget) ......................................................................................................

5,051

(143,942)
(-5,290)

18,815
(18,815)
27,272
5,294
151,838
(159,253)
(-7,416)

20,017
9,514
(8,877)

(636)
33,337
7,411

5,362

8,498

6,811

169,266

184,221

194,541

199,429

(180,661)
(-11,395)

(200,212)

(214,763)

(-15,991)

(-20,222)

(223,066)
(-23,637)

132,839

304,747
(6,023)
(298,724)
35,575
94,877
4,807
21,462
22,141
(20,514)
(1,627)
36,380
10,086

202,771
(229,793)
(-27,022)

Other functions.............................................................................................................

62,588

57,222

57,822

60,896

71,081

74,901

International affairs ...................................................................................................

11,649

10,471

9,573

13,764

16,106

18,704

General science, space and technology..............................................................

9,216

10,841

12,838

16,409

17,142

Agriculture ...................................................................................................................
Administration of justice...........................................................................................

26,606
7,553
7,565

17,210
9,236
9,464

16,919

14,444
11,958

9,474
9,017

9,995
10,734

15,851
16,111
15,183
12,276
11,661

14,997
14,450
12,939

21,533
15,229

-36,967

-37,212

-36,615

-39,356

-39,280

(-32,585)
(-4,382)

(-32,354)
(-4,858)

(-31,048)
(-5,567)

(-33,553)
(-5,804)

(-33,179)

(810,079)

1,064,140
(861,449)

(193,832)

(202,691)

1,143,172
(932,261)
(210,911)

General government.................................................................................................

Undistributed offsetting receipts ............................................................................
(On-budget) ......................................................................................................
(Off-budget) ......................................................................................................

Total, Federal outlays.................................................................................................
(On-budget) ......................................................................................................
(Off-budget)......................................................................................................

-36,455
(-33,155)
(-3,300)
1,003,911

(-6,101)

87,336

14,728

-37,213
(-30,698)
(-6,515)

1,252,691

1,323,785

1,381,791

1,474,935

(1,027,626)

(1,082,098)

(1,129,475)

(1,208,120)

(225,065)

(241,687)

(252,316)

(266,815)

As percentages of outlays

Human resources...........................................................................................................
Physical resources.........................................................................................................
Net interest......................................................................................................................
Other functions...............................................................................................................
Undistributed offsetting receipts..................................................................................

28.1
50.0
5.5
13.8
6.2
-3.6

27.3
50.1
6.4
14.3
5.4
-3.5

Total, Federal outlays.................................................................................................

100.0

National defense ............................................................................................................

23.9

26.6
49.7
7.1
14.8
5.1

49.4
10.0
14.7

-3.3

-2.9

4.9

20.6
52.1
10.2
14.7

5.4
-3.0

21.6
56.0
5.4

14.4
5.4

19.6
56.8
6.4
13.7

-2.8

5.9
-2.5

100.0

(81.6)

(82.0)

100.0
(81.7)

100.0

(80.7)

100.0
(81-0)

100.0

(On-budget) ......................................................................................................

(81.7)

(81.9)

(Off-budget)......................................................................................................

(19.3,

(19.0)

(18-4)

(18.0)

(18.3)

(18-1,

6.0

5.9
11.0

5.5
11.3

4.9

5.1

4.7

12.2

13.2

13.6

1.3
3.4

As percentages of GDP

National defense.................................................................
Human resources............................................................... .......................................
Physical resources.............................................................

6.3
11.3

11.1

1.2
3.1

1.4

1.6

2.3

2.4

3.2

3.3

3.5

1.5
3.3
1.4

1.4

1.2

1.1

3.4
1.1

Undistributed oifsetthg receipts---------------------------------

-0.8

-0.7

1.3
-0.7

-0.6

Tntel. Federal outlavs .....................................................
................................................................

22.5
(18.2)

22.1
(17.9)

22.1
(18.0)

(Off-budget)......................................................................................................

(4.4)

(4.2)

(4.1)

22.9
(18.8)
(4.1)

23.5
(19.2)
(4.3)

23.5
(19.2)
(4-3)

23.9
(19.6)
(4.3)

Net interest..........................................................................
Other functions....................................................................

(On-budoeO....... ....... ..

1.3

305

HISTORICAL TABLES
Table 3.2-OUTLAYS BY FUNCTION AND SUBFUNCTION: 1962-1993
(in millions of dollars)
Function and Subfunction

1962

1963

1964

1965

1966

1967

1968

1969

1970

050 National defense:
051 Department of Defense—Military:

Military Personnel ...................................................................

16,331

16,256

17,422

17,913

20,009

22,952

25,118

26,914

29,032

Operation and Maintenance..................................................

11,594
14,532

11,874
16,632

11,932

12,349
11,839

6,376
1,144

7,021

19,000
19,012
7,160

20,578
23,283
7,747

22,227
23,988
7,457

21,609
21,584

6,319
1,347

14,710
14,339
6,259
1,334
569

1,389
574
-1,777

1,168
614

-590

1,536
485
-76

1,281

259

1,026
550
-717

56,629

70,069
1,277

80,355
1,336

Procurement.............................................................................
Research, Development, Test, and Evaluation .................
Military Construction ...............................................................

15,351

6,236
1,007
563
-1,127

7,166

Family Housing........................................................................
Other ..........................................................................................

-271

563
-1,696

051 Subtotal, Department of Defense—Military.....................

50,111

51,147

52,585

053 Atomic energy defense activities ......................................
054 Defense-related activities....................................................

2,074
160

2,041

212

1,902
270

220

1,466
16

235

337

154

Total, National defense...............................................................

52,345

53,400

54,757

50,620

58,111

71,417

81,926

82,497

81,692

2,883
1,958

3,079
2,185

3,367
1,830

3,357

3,478

2,484

2,341

1,051

1,102

1,094

249
197

346

336
224

370

228

369
245

354

201

231
207

1,590
354

3,085
1,530

2,879

1,599

237

398
235

353

-503

-690

-242

-69

338

253
765

407

261

5,639

5,308

4,945

5,273

5,580

5,566

5,301

4,600

4,330

150 International affairs:
151 International development and humanitarian assistance
152 International security assistance.......................................
153 Conduct of foreign affairs...................................................
154 Foreign information and exchange activities..................
155 International financial programs........................................

Total, International affairs...........................................................

48,780
1,620

495

1,853

80,771

1,389

-1,050
80,123
1,415

250 General science, space and technology:
251 General science and basic research...............................

497

534

766

789

858

897

930

938

947

252 Space flight, research, and supporting activities...........

1,226

2,516

4,131

5,034

5,858

5,336

4,594

4,082

3,564

Total, General science, space and technology......................

1,723

3,051

4,897

5,823

6,717

6,233

5,524

5,020

4,511

270 Energy:
271 Energy supply.......................................................................
276 Energy information, policy, and regulation .....................

533
71

451
80

485
87

602
97

510
101

673
109

918
118

887
122

856
142

Total, Energy.................................................................................

604

530

572

699

612

782

1,037

1,010

997

300 Natural resources and environment:
301 Water resources ..................................................................
302 Conservation and land management...............................

1,290

1,448

1,461

1,546

1,704

1,685

1,644

1,591

1,514

323
181
87
212

327
204
117
255

341

218
134
292

305
235

402
323

317

369
270
190
354

249
370

268
370
303
368

376

303 Recreational resources.......................................................
304 Pollution control and abatement.......................................
306 Other natural resources......................................................

348
152
70
186

Total, Natural resources and environment..............................

2,044

2,251

2,364

2,531

2,719

2,869

2,988

2,900

3,065

350 Agriculture:
351 Farm income stabilization...................................................

3,222

4,047

4,241

3,551

2,004

337

369

404

444

512

5,304
521

4,589

340

2,515
475

4,032

352 Agricultural research and services...................................

158

363

384

428

577

Total, Agriculture..........................................................................

3,562

4,384

4,609

3,955

2,447

2,990

4,545

5,826

5,166

370 Commerce and housing credit:
371 Mortgage credit.....................................................................
372 Postal Service.............................................................. ........
373 Deposit insurance............................ ....................................
376 Other advancement of commerce.....................................

650
797
-394

-592
770
-423

2,846
1,141

3,261
1,080

-720

307

277
805
-389
465

2,494

371

-54
578
-436
331

-401
394

-522
462

920
-603
284

590
1,510
-501
513

Total, Commerce and housing credit.......................................

1,424

418

1,157

3,245

3,979

4,280

-119

2,112

On-budget unless otherwise stated.

888
-486
348

306

BUDGET BASELINES, HISTORICAL DATA, AND ALTERNATIVES FOR THE FUTURE
Table 3.2—OUTLAYS BY FUNCTION AND SUBFUNCTION: 1962-1993-Continued
fin millions of dollars)

Function and Subfunction

1971

1972

1973

1974

1975

1976

1977

050 National defense:

051 Department of Defense—Military:

Military Personnel ..........................................................................................

29,079

29,571

29,773

30,409

32,162

32,546

8,268

Operation and Maintenance........................................................................

20,941

21,675

21,069

22,478

Procurement....................................................................................................

18,858

17,131

15,654

15,241

26,297
16,042

27,837
15,964

7,232
3,766

Research, Development, Test, and Evaluation........... ...........................
Military Construction......................................................................................
Family Housing..............................................................................................
Other................................................................................................................

7,303
1,095

7,881

598
-376

688
-409

729
-1,468

8,582
1,407
884
-1,137

8,866
1,462
1,124
-1,101

8,923
2,019
1,192
-563

2,206
376
296
-338

9,795

1,108

8,157
1,119

051 Subtotal, Department of Defense—Military...........................................

77,497
1,385

77,645

75,033

87,917

21,807

95,147

1,373

1,409

77,864
1,486

84,852

053 Atomic energy defense activities............................................................

1,506

435

054 Defense-related activities .........................................................................

-10

156

240

-3

151

1,565
137

1,936
158

Total, National defense......................................................................................

78,872

79,174

76,681

79,347

86,509

89,619

22,269

97,241

150 International affairs:
151 International development and humanitarian assistance...................
152 International security assistance.............................................................
153 Conduct of foreign affairs.........................................................................
154 Foreign information and exchange activities........................................
155 International financial programs ...............................................................

2,296
1,367
405
241

2,394
1,446

1,741
1,427

2,430
1,824

3,134

609

-150

274
215

476
295
211

2,636
2,683
727

320
527

348
421

382
4

1,119
1,470
263
115
-509

2,823
3,075

452

2,535
659

Total, International affairs.................................................................................

4,159

4,781

4,149

5,710

7,097

6,433

2,458

6,353

251 General science and basic research.....................................................
252 Space flight, research, and supporting activities.................................

1,009
3,172

979

961

1,017

3,071

2,963

1,038
2,953

1,034

3,196

3,338

292
871

1,078
3,657

Total, General science, space and technology ...........................................

4,182

4,175

4,032

3,980

3,991

4,373

1,162

4,736

270 Energy:
271 Energy supply.............................................................................................

880

1,089

1,007

969

2,446
48

913

4,841

3,530
51
65

38
32

143
123

33,672
30,587
18,178
1,914
1,358
-357

982
386
-913

250 General science, space and technology:

272 Energy conservation..................................................................................
274 Emergency energy preparedness...........................................................
276 Energy information, policy, and regulation ......................................... ...

3
155

207

231

331

389

558

146

664

Total, Energy.......................................................................................................

1,035

1,296

1,237

1,303

2,916

4,204

1,129

5,770

300 Natural resources and environment:
301 Water resources .........................................................................................

1,768

1,948

2,221

2,200

488

445

3,213
589

462

516

148
645

2,742
615

303 Recreational resources..............................................................................
304 Pollution control and abatement.............................................................
306 Other natural resources.............................................................................

320
547

2,608
655

805

302 Conservation and land management.....................................................

702
495

764
567

1,122
565

2,035
668

803
2,523
757

868
3,067
891

1,091

985
4,279

228

966

160

240

Total, Natural resources and environment....................................................

3,915

4,241

4,775

5,697

7,346

8,184

2,524

10,032

350 Agriculture:
351 Farm income stabilization.........................................................................
352 Agricultural research and services..........................................................

3,651

4,553

639

706

4,099
755

1,458
772

2,160
876

2,249
921

743
240

5,735
1,052

Total, Agriculture.................................................................................................

4,290

5,259

4,854

2,230

3,036

3,170

983

6,787

2,609

370 Commerce and housing credit:
371 Mortgage credit...........................................................................................

550

-399

2,119

5,463

4,336

562

372 Postal Service.............................................................................................

2,183

1,772

1,567

2,471

2,989

2,805

212

2,094

373 Deposit insurance........................................................... ...........................

-383

-597

-805

-611

511

-573

-63

-2,788

376 Other advancement of commerce ..........................................................

492

497

568

726

984

1,051

221

1,178

Total, Commerce and housing credit.............................................................

2,366

2,222

931

4,705

9,947

7,619

931

3,093

On-budget unless otherwise stated.

HISTORICAL TABLES

307
Table 3.2-OUTLAYS BY FUNCTION AND SUBFUNCTION: 1962-1993-Continued
(in millions of dollars)

Function and Subfunction

1978

1979

1980

1981

35,553

37,345
36,440
25,404

40,897

47,941

33,580
19,976

44,788
29,021

51,885
35,191

43,271

10,508
1,932

11,152
2,080

13,127

2,450

15,278
2,458

Other................................................................................................................

1,405
-694

1,468
-284

1,680
-1,050

051 Subtotal, Department of Defense—Military...........................................

102,259

113,605

053 Atomic energy defense activities............................................................
054 Defense-related activities .........................................................................

2,070

2,541

166

196

Total, National defense.....................................................................................

104,495

151 international development and humanitarian assistance...................
152 International security assistance.............................................................
153 Conduct of foreign affairs.........................................................................
154 Foreign information and exchange activities........................................

1982

1983

1984

1985

55,170

60,886

64,158

59,695

67,388

17,729
2,922

64,932
53,624
20,554
3,524

67,842
72,371
70,381
27,103
4,260

1,721
-605

1,993
-65

2,126
-1,236

130,912

153,868

180,714

204,410

2,878

4,309

5,171

220,928
6,120

206

3,398
246

286

322

365

495

116,342

133,995

157,513

185,309

209,903

227,413

252,748

2,647
3,926
1,128

2,910
3,655

3,626
4,763

4,131

3,772
5,416

3,955
6,613

4,478

5,409

7,924

9,391

1,310

1,366

1,625

1,761

1,872

2,043

155 International financial programs..............................................................

423
-642

465
-881

534
2,425

1,343
528
2,007

575
911

607
-1,089

691
910

805
-1,471

Total, International affairs.................................................................................

7,482

7,459

12,714

13,104

12,300

11,848

15,876

16,176

251 General science and basic research.....................................................

1,160

1,477

1,849

2,019

4,451

4,992

1,607
5,593

1,644

3,766

1,298
3,937

1,381

252 Space flight, research, and supporting activities.................................

6,290

6,469

6,607

Total, General science, space and technology ...........................................

4,926

5,235

5,832

6,469

7,200

7,935

8,317

8,627

270 Energy:
271 Energy supply.............................................................................................
272 Energy conservation..................................................................................
274 Emergency energy preparedness...........................................................

6,075
221

7,165

8,367
569

10,202

252

730

8,263
516

6,143
477

3,255
527

2,615
491

897

1,021

342

3,280

3,877

1,855

2,518

276 Energy information, policy, and regulation ...........................................

798

742

878

955

871

878

787

1,838
740

Total, Energy.......................................................................................................

7,992

9,180

10,156

15,166

13,527

9,353

7,086

5,685

300 Natural resources and environment:
301 Water resources ........................................................................................
302 Conservation and land management.....................................................

3,431

3,904

4,070

4,122

1,043
1,677
5,510
1,405

4,132
1,191
1,597
5,170
1,478

3,948

303 Recreational resources.............................................................................
304 Pollution control and abatement.............................................................
306 Other natural resources............................................................................

3,853
821
1,487
4,707
1,266

4,223

1,029
1,408
3,965
1,151

1,084
1,435
5,012
1,519

1,503
1,454
4,263
1,548

1,302
1,581
4,044
1,595

1,481
1,621
4,465
1,668

Total, Natural resources and environment....................................................

10,983

12,135

13,858

13,568

12,998

12,672

12,593

13,357

351 Farm income stabilization.........................................................................
352 Agricultural research and services.........................................................

10,228
1,129

9,895
1,340

7,441
1,398

9,783
1,540

14,344
1,599

21,323
1,578

11,877
1,736

23,751
1,813

Total, Agriculture................................................................................................

11,357

11,236

8,839

11,323

15,944

22,901

13,613

25,565

370 Commerce and housing credit:
371 Mortgage credit...........................................................................................
372 Postal Service.............................................................................................
373 Deposit insurance.................................................................. ...................
376 Other advancement of commerce .........................................................

4,553
1,282
-988
1,406

3,991
896
-1,745
1,545

5,887
1,246
-285
2,542

6,063
1,432
-1,371
2,083

6,056
154
-2,056
2,101

5,135
1,111
-1,253
1,688

4,382
1,239

-616
1,913

3,054
1,351
-2,198
2,022

6,254

4,686

9,390

8,206

6,256

6,681

6,917

4,229

050 National defense:
051 Department of Defense—Military:
Military Personnel..........................................................................................
Operation and Maintenance........................................................................

Procurement....................................................................................................
Research, Development, Test, and Evaluation.......................................
Military Construction .....................................................................................

Family Housing..............................................................................................

61,879
23,117
3,706
2,413
-1,732

2,642
553

245,154