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DRURY COLLEGE
LIBRARY

FEB 181986
U. S. DEPOSITORY

I The Federal Government Dollar
i Fiscal Year 1987 Estimate
I

I
I

Where It Comes From ...

I
I

Excise Taxes

I
I

I
I
i
I
I

II
I
I
I

II
I Where It Goes ...
National
Defense

28.

I
I

Off-Budget ~

On-Budget

I
I

D
Grants
to States
and localities

10.

Other
Federal
Operations

TABLE OF CONTENTS
Page

1. BUDGET MESSAGE OF THE PRESIDENT ........................

2. RECENT BUDGET HISTORY AND THE ECONOMIC
OUTLOOK.................................................................................
3. DEALING WITH THE DEFICIT: MAJOR BUDGET
PROPOSALS............................................................................
4. FEDERAL RECEIPTS BY SOURCE......................................
5. FEDERAL PROGRAMS BY FUNCTION: MEETING NATIONAL NEEDS......................................................................
National defense...........................................................................
International affairs ..... ..... ...... ........ ..... ....... ...... ....... ... ...... ..... .....
General science, space, and technology ........... ..... .......... ..... ....
Energy............................................................................................
Natural resources and environment ........................................
Agriculture ... ...... ..... ............ ...... .............. ...... ...... ...... ..... ..... ..........
Commerce and housing credit. ...... ...... ....... ...... ...... .......... ..... ....
Transportation ... ...... ..... ...... ......... ...... ...... ..... ....... ..... .......... ..... .....
Community and regional development ...... ..................... .........
Education .......................................................................................
Training, employment, and social services .............................
Health ............................................................................................
Medicare .......... .... .... ...... ...... ............... ....... ...... .... ............... ...........
Income security ........ .................. ................. ..................... ............
Social security.......... ..... ...... ........ ....... ...... ...... .... ..... ................. .....
Veterans benefits and services ............. ................................ .....
Administration of justice ............ ........... .... ............ .....................
General government....................................................................
General purpose fiscal assistance .................................. ..... ......
Net interest ...................................................................................
Allowances.....................................................................................
Undistributed offsetting receipts ..............................................
Tax expenditures..........................................................................
6. SUPPLEMENTS ..........................................................................
a. The budget process ..... .... ...... ...... ..... ........ ..... ..... ...... .... ......... ...
b. Federal credit budget...... ...... ...... ......... .... .... ..... ....... .... .... .......
c. Glossary of budget terms ........................................................
d. Selected tables..........................................................................

3
13
17
29
33
34
35
37
39
41
42
44
46
48
50
51
52
54
55
57
58
60
61
62
64
65
66
67
68
68
72
74
76

GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Detail in the tables, text, and charts of this volume may not add to the
totals because of rounding.
3. Sequestration of budgetary resources in 1986 is required by the Balanced Budget and Emergency Deficit Control Act of 1985 (P.L. 99-177). All
1986 data shown in this volume incorporate the effects of sequestration,
unless otherwise noted.

Percentage Composition of Federal Government Receipts
""'-'t

m~r-~~------------~~~~----rm

ISoc/aIInswance I

- .... -,

Off-8udgel

Percentage Composition of Federal Government Outlays

,
- - - ..,. - - _

" Off-Budget
"------_

BUDGET MESSAGE OF THE PRESIDENT
To the Congress of the United States:
The economic expansion we are now enjoying is one of the most
vigorous in 35 years. Family income is at an all-time high; production and productivity are increasing; employment gains have been
extraordinary; and inflation, which raged at double-digit rates
when I took office, has been reduced dramatically. Defense capabilities, which had been dangerously weakened during the 1970s,
are being rebuilt, restoring an adequate level of national security
and deterrence to war. Moreover, an insupportable growth in tax
burdens and Federal regulations has been halted.
Let me give you a few highlights:
• Employment has grown by 9.2 million in the past three years,
while the unemployment rate has fallen by 3.8 percentage
points; during the three years preceding my administration,
employment grew by only 5.5 million and the unemployment
rate rose 0.8 percentage points.
• The highest proportion of our adult population (60%) is now
at work, with more blacks and other minorities employed (14
million) than ever before.
• Inflation, which averaged 11.6% a year during the three years
before I took office, has averaged only a third of that-3.8%during the last three years.
• Real GNP has grown at a 4.5% annual rate during the past
three years, compared with only a 2.2% annual rate during
the last three years of the previous administration.
• The prime rate of interest, and other key interest rates, are
less than half what they were when I took office.
• Some 11,000 new business incorporations are generated every
week, and since early 1983, investment in plant and equipment has risen 44% in real terms.
• During the past three years, industrial production has risen
by 25%.
• During the same period, corporate profits increased 117% and
stocks nearly doubled in value.
• Federal tax revenues have returned to historic levels of approximately 18%% of GNP, as tax rates have been cut acrossthe-board and indexed for inflation.

• As a result of all of the above, real after-tax personal income
has risen 10.6% during the last three years-an average increase of $2,500 for each American household.
This dramatic improvement in the performance of our economy
was no accident. We have put in place policies that reflect our
commitment to reduce Federal Government intrusion in the private sector and have eliminated many barriers to the process of
capital formation and growth. We continue to maintain a steadfast
adherence to the four fundamental principles of the economic program I presented in February 1981:
• Reducing the growth of Federal spending;
• Limiting tax burdens;
• Relieving the economy of excessive regulation; and
• Supporting a sound and stable monetary policy.
Conditions are now in place for a sustained era of national
prosperity. But, there is a major threat looming on the horizon: the
Federal deficit. If this deficit is not brought under control, we risk
losing all we've achieved-and more.
We cannot let this happen. Therefore, the budget I am presenting has as its major objective setting the deficit on a downward
path to a balanced budget by 1991. In so doing, my budget meets or
exceeds the deficit reduction targets set out in the Balanced Budget
and Emergency Deficit Control Act, commonly known for its principal sponsors as Gramm-Rudman-Hollings.
BUDGET SUMMARY
(In billions of dollars)

1985

1986

1987

734.1
946.3

777.1
979.9

850.4
994.0

933.2
1,026.8

996.1
1,063.6

1,058.1
1,093.8

1,124.0
1,122.7

Surplus or deficit (-) ...... - 212.3 -202.8 -143.6
Gram m·Rudma n-H 011 i ngs
deficit targets ......................... ................. -171.9 -144.0

-93.6

-67.5

-35.8

1.3

- 108.0

-72.0

-36.0

0.0

-14.4

-4.5

-0.2

-1.3

Receipts ...........................................
Outlays .............................................

Difference ........................... .................

30.9

-0.4

1988

1989

1990

1991

Note.-Totals include social security, which is off·budget.

At the end of the last session of Congress there emerged a
bipartisan consensus that something had to be done about the
deficit. The result-Gramm-Rudman-Hollings-committed both the
President and the Congress to a fixed schedule of progress. By
submitting this budget, I am abiding by the law and keeping my
part of the bargain.
This budget shows, moreover, that eliminating the deficit is possible without raising taxes, without sacrificing our defense preparedness, and without cutting into legitimate programs for the
poor and the elderly. A tax increase would jeopardize our economic
~expansion and might well prove counterproductive in terms of its
4

effect on the deficit.~ We can hardly back away from our defense
build-up without creating confusion among friends and adversaries
alike about our determination to maintain our commitments and
without jeopardizing our prospects for meaningful arms control
talks. And frankly we must not break faith with those poor and
elderly who depend on Federal programs for their security.

THE DEFICIT AND ECONOMIC GROWTH
Until the Second World War, the Federal budget was kept in
balance or ran a surplus during peacetime as a matter of course.
But in the early 1960's this traditional fiscal discipline and political
rectitude began to break down. We have run deficits during 24 of
the last 25 years. In the past ten years, they have averaged 2.5% of
GNP. But last year the deficit was over 5% of GNP. This trend is
clearly in the wrong direction and must be reversed.
Last year's deficit amounted to nearly $1,000 for every man,
woman, and child in the United States. To eliminate the deficit
solely by increasing taxes would mean imposing an extra $2,400
burden on each American household. But taxes are already higher
relative to GNP than they were during the 1960s and early 1970sbefore inflation pushed them to levels that proved insupportable.
The American people have made it clear they will not tolerate a
higher tax burden. Spending is the problem-not taxes-and spending must be cut.
The program of spending cuts and other reforms contained in my
budget will lead to a balanced budget at the end of five years and will
thus remove a serious impediment to the continuation of our economic expansion. As this budget shows, such reforms can be accomplished in an orderly manner, without resorting to desperate measures.
Inappropriate and outmoded programs, and activities that cannot
be made cost effective, must be ended. Activities that are essential,
but that need not be carried out by the Federal Government, can
be placed in the private sector or, if they are properly public in
nature, turned over to State and local governments. As explained
in the Management Report I am also submitting today, efficiencies
can be realized through improved management techniques, increased productivity, and program consolidations.
The need to cut unnecessary Federal spending and improve management of necessary programs must be made a compelling guide
to our policy choices. The result will be a leaner, better integrated,
more streamlined Federal Government-stripped of marginal, nonessential and inappropriate functions and activities, and focusing
its energies and resources entirely on its proper tasks and constitutional responsibilities. That way, resources will be allocated more
efficiently-those things best done by government will be done by

government; those things best done by the private sector will be
directed by the marketplace.
The Balanced Budget and Emergency Deficit Control Act (GrammRudman-Hollings) requires that spending be reduced in accord with
a prescribed formula if projected deficits exceed the predetermined
targets. This mechanism will operate in a limited fashion during the
current fiscal year. However, we should avoid such across-the-board
cuts in the future, and they will not be necessary if Congress adopts
this budget. Achieving budget savings by taking into account relative
priorities among programs is a much better way than resorting to an
arbitrary formula. The latter could dangerously weaken vital programs involving the national security or public health and safety,
while leaving marginal programs substantially intact.
If the spending cuts and other reforms proposed in this budget
are approved, the Federal deficit will be reduced by $166 billion
over the next three years. This represents about $700 for every
individual American and about $1,900 for every household. I believe this is the appropriate way to deal with the deficit: cut
excessive Federal spending rather than attack the family budget by
increasing taxes, or risk a deterioration in our national security
posture, or break faith with the dependent poor and elderly.
On-Ibjget

Federal Government Totals

ReceIpIs

fZ3

$ BIIIons

$BIIIonI

1,200

1,200
1.027

100M

1,000

800

600

200

1986

Off-fblget

Outlays

1987

1988

£aflmate

1989

RESTRUCTURING AND RETURNING THE FEDERAL
GOVERNMENT TO ITS PROPER ROLE
The task of reducing the deficit must be pursued with an eye
toward narrowing the current wide scope of Government activities
to the provision of those, but only those, necessary and essential
services toward which all taxpayers should be contributing-and
providing them as efficiently as possible. This is the underlying
philosophy that I have used in shaping this year's budget. Let me
explain:

High priority programs should be adequately funded.-Despite the
very tight fiscal environment, this budget provides funds for maintaining-and in some cases expanding-high priority programs in
crucial areas of national interest. Necessary services and income
support for the dependent poor and the elderly receive significiant
funding in this budget. So do other programs of national interest,
including drug enforcement, AIDS research, the space program,
nonmilitary research, and national security.
While national security programs continue to be one of my highest priorities, they have not been exempt from general budgetary
stringency. Last summer I reluctantly agreed with Congress to
scale back the planned growth of defense appropriations to a zero
real increase for 1986 and only a 3% real increase each year
thereafter. Congressional action on 1986 appropriations and the
subsequent sequestration for 1986 under Gramm-Rudman-Hollings
have cut defense budget authority well below last year's level. The
budget I am submitting would return defense funding to a steady,
well-managed growth pattern consistent with the program levels
agreed to in last year's budget resolution and consistent with what
the country needs in order to provide for our national security.
During the past five years, we have reversed the decline in defense
spending and have made significant progress in restoring our military capabilities. The moderate increases that are now requested
are necessary to maintain this progress and enable us to move
forward with meaningful arms reduction negotiations with the
Soviet Union.
Unnecessary programs are no longer affordable.-Some government programs have become outmoded, have accomplished their
original purpose, represent an inappropriate area for Federal involvement in the first place, or are marginal in the current tight
budgetary environment. If it would not be appropriate or feasible
for the private sector or for State or local governments to assume
such functions, this budget proposes that programs of this variety
be terminated immediately, phased out in an orderly manner, or
eliminated when their legal authority expires. Examples include

Small Business Administration credit programs, Amtrak grants,
Urban Development Action Grants, the Appalachian Regional
Commission, the Economic Development Administration, the Interstate Commerce Commission, Maritime Administration loan guarantees, education subsidies for health professionals, the work incentives program, and subsidies for air carriers.

Many other programs should be reduced to a more appropriate
scale.-Some Federal programs have become overextended, misdirected, or operate on too expansive a scale given the current tight
budgetary environment. This budget proposes reforms to limit the
costs and future growth of medicare and medicaid, subsidized housing, Civil Service pensions and health benefits, postal subsidies,
interstate highway grants, the Forest Service, and many other
programs.
The Government should not compete with the private sector.Traditionally, governments supply the type of needed services that
would not be provided by the private marketplace. Over the years,
however, the Federal Government has acquired many commercialtype operations. In most cases, it would be better for the Government to get out of the business and stop competing with the private sector, and in this budget I propose that we begin that process.
Examples of such "privatization" initiatives in this budget include
sale of the power marketing administrations and the naval petroleum reserves; and implementation of housing and education voucher programs. I am also proposing the sale of unneeded assets, such
as loan portfolios and surplus real estate, and contracting out
appropriate Federal services.
Many services can be provided better by State and local governments.-Over the years, the Federal Government has preempted
many functions that properly ought to be operated at the State or
local level. This budget contemplates an end to unwarranted Federal intrusion into the State and local sphere and restoration of a
more balanced, constitutionally appropriate, federalism with more
clearly delineated roles for the various levels of government. Examples include new consolidations of restrictive small categorical
grant programs into block grants for transportation and environmental protection, at reduced Federal costs. Continued funding is
maintained for existing block grants for social services, health,
education, job training, and community development.
Administration of the agricultural extension service should be
turned over to State and local governments. Also, the Federal
Government should get out of the business of paying for local
sewage treatment systems, local airports, local law enforcement,
subsidies to State maritime schools, and local coastal management.
8

Remaining Federal activities should be better managed.-As we
proceed with the deficit reduction process over the next several
years, it is important that all remaining Federal operations be well
managed and coordinated to avoid duplication, reduce costs, and
minimize regulatory burdens imposed on the private sector. Management efficiencies must accompany the process of developing a
leaner, more carefully focused Federal role. We can no longer
afford unnecessary overhead and inefficiencies when we are scaling
back the role and cost of the Federal Government.
Substantial savings in overhead costs have been achieved under
provisions of the Deficit Reduction Act of 1984. As described in my
Management Report, more savings are possible, and these effects
are incorporated in this budget. Outmoded, inefficient systems of
agency cash and credit management are being replaced; administrative policies and procedures, approaches to automatic data processing, and agency field structures will be streamlined and upgraded; and waste, fraud, and abuse will be further reduced. All these
initiatives, part of our Reform '88 program, will take advantage of
efficiencies made possible by modern management techniques, improved communications, and new information technology. We shall
run the Federal Government on a business-like basis-improving
service delivery and reducing taxpayer costs.
Administration of Federal agencies will be made more efficient
through the adoption of staffing standards, automation of manual
processes, consolidation of similar functions, and reduction of administrative overhead costs. A program to increase productivity by
20% by 1992 in all appropriate Government functions is being
instituted, and a major effort is proposed to revamp our outmoded
management of a $250 billion Federal credit portfolio. This effort
will include establishing prescreening, origination fees, administration and penalty charges, use of collection agencies, charging appropriate interest rates, and the sale of loan portfolios.
Our management improvement program will result in a leaner
and more efficient Federal structure and is described in greater
detail in my separate Management Report. Improving the management of the Government must be accorded a crucial role and the
priority it deserves.
We must also reduce unnecessary costs and burdens on the nonfederal sector and have already made considerable progress in
reducing the costs imposed on businesses and State and local governments by Federal regulations. These savings are estimated to
total $150 billion over a 10-year period. We have reduced the
number of new regulations in every year I have been in office and
have eliminated or reduced paperwork requirements by over 500
million hours. In addition, regulations are now more carefully
crafted to achieve the greatest public protection for the least cost,

and wherever possible to use market forces instead of working
against them.

Finally, user fees should be charged for services where appropriate.-Those who receive special benefits and services from the Federal Government should be the ones to bear the costs of those
services, not the general taxpayer. Accordingly, this budget imposes fees and premiums for Federal guarantees of loans, and
imposes user fees and charges for Federal cost recovery for meat
and poultry inspection, National park and forest facilities, harbor
and inland waterway use, Coast Guard and Customs inspections,
and for many other services.

REFORM OF THE BUDGET PROCESS
Over the years, Federal spending constituencies have become
increasingly powerful. In part because of their strong and effective
advocacy, Congress has become less and less able to face up to its
budgetary responsibilities. The Congressional budget process is
foundering; last year it fell apart time and time again. The budget
resolution and appropriations bills were months late in passing,
and few real deficit reductions were achieved.
Gramm-Rudman-Hollings offers a significant opportunity to
avoid many of these problems in the future. That act not only sets
deficit targets leading to a balanced budget by 1991, it provides a
mechanism for automatic spending cuts and incorporates certain
reforms in the budget process itself. But Gramm-Rudman-Hollings
does not go far enough in this regard. To meet the clear need for a
greatly strengthened budget process, I propose a number of additional reform measures.
As before, I ask Congress to pass a balanced budget amendment
to the Constitution. In addition, I continue to seek passage of a
line item veto-authority now possessed by 43 of the Nation's
governors. I also urge, for 1988 and beyond, changing the budget
resolution to a joint resolution subject to Presidential signature
and establishing binding expenditure subcategories within the resolution budget totals. Moreover, I urge that serious study be given
to proposals for multiyear appropriations and to the development
of a capital budget.
As I have pointed out time and again, there's not a State in the
Union that doesn't have a better budget process than the Federal
Government. We can-and must-do better.

CONCLUSION
As I said in my address to Congress yesterday, the State of the
Union is strong and growing stronger. We've had some extraordinarily good years, and our economy is performing well, with infla
10

tion coming under control. Economic growth and investment are
up, while interest rates, tax rates, and unemployment have all
come down substantially. Our national security is being restored.
The proliferation of unnecessary and burdensome Federal regulations has been halted. A significant beginning has been made
toward curbing the excessive and unsustainable growth of domestic
spending. Improving the management of the Government has been
given priority and is achieving results. I think most Americans
would agree that America is truly on the move!
The large and stubbornly persistent budget deficit remains as a
dark and threatening cloud on the horizon. It threatens our prosperity and our hopes for continued healthy economic growth.
Congress has recognized this threat. It has mandated a gradual,
orderly movement to a balanced budget over the next 5 years. The
proposals in this budget are a blueprint for achieving those targets
while preserving legitimate programs for the aged and needy, providing for our national security, and doing this without raising
taxes.
I realize it will be difficult for elected officials to make the hard
choices envisioned in this budget. But we must find the political
will to face up to our responsibilities and resist the pleadings of
special interests whose "era of power" in Washington must be
brought to an end-for taxpayers as a whole can no longer be
expected to carry them on their backs. All this will call for statesmanship of a high order. We must all realize that the deficit
problem is also an opportunity-an opportunity to construct a new,
leaner, better focused, and better managed Federal structure. Let's
do it.
I look forward to working with Congress on meeting these formidable challenges. It is our job. Let's get on with it.
RONALD REAGAN
FEBRUARY

5, 1986

Part 2

RECENT BUDGET HISTORY AND THE
ECONOMIC OUTLOOK
BUDGET HISTORY
For the first 150 years of our history, the · prevailing- indeed
unquestioned-belief was that the Federal budget should be balanced. While deficits were unavoidable in wartime, all political
parties, all Presidents, and nearly all Members of Congress operated on the assumption that the "IlOrm" would be budgetary balance,
and the Government even ran sufficient surpluses to repay most of
the debt accumulated during wars and depressions.
The advent of Keynesian economics 50 years ago led to a new
belief that a little "pump priming" could get the economy going
again. It became the conventional wisdom that the Government
could afford to run deficits in periods of subnormal economic activity, which then would be offset by surpluses in periods of prosperity.
It was generally presumed that the budget would remain balanced
over the cycle as a whole.
However, starting around the time of the Vietnam War and
continuing long after that war wound down, even this degree of
discipline began slipping away. Deficits gradually ceased to be a
respectable countercyclical tool and turned into an escape valve for
a lack of political will or for political gridlock. In recent years,
deficits have been large, chronic, and structuraL It is not only that
we have had deficits in 24 of the last 25 years; more importantly,
they have recently become much larger-exceeding 2.5% of GNP
in all but one of the past 10 years and averaging over 5% for the
last 3 years.
As deficits increased, Federal debt mounted at an accelerating
pace. By the end of World War II, Federal debt held by the public
had risen to a then astronomical $235 billion, exceeding 1945 GNP.
Unlike earlier postwar periods in our history, after World War II
the Federal Government made little effort to repay its wartime
borrowings. The debt remained at about the end-of-war level
through 1960. By 1970, however, the debt held by the public had
risen to $285 billion. By 1980 it was $715 billion, and in 1983 it
passed the one trillion dollar mark; it will reach two trillion dollars
well before the end of the decade.

The deficits have resulted from the rapid growth of Government
spending, which has outstripped the growth of receipts. The problem is not a lack of receipts. During the past 20 years, Federal
receipts have risen almost precisely in line with the economy as a
whole. As a share of GNP, receipts (including social security taxes)
have averaged slightly over 18% and stood at 18.6% in 1985. Thus,
Federal receipts as a share of GNP are today running slightly
above the historical norm.
In marked contrast, Federal spending as a share of GNP has
been on an upward trend, rising from 18.2% in 1960 to 24.0% in
1985. Unfortunately, not only was the Federal Government growing too large during this period, but the spending priorities were
also inappropriate. The share of the Nation's resources devoted to
national defense was reduced to only 5% by the time this administration took office, about half of its share two decades earlier. On the
other hand, nondefense spending's share doubled during this period,
reaching 17.1% by 1980, as shown in the table below. Rapidly rising
payments to individuals were largely responsible for this increase.
THE COMPOSITION OF FEDERAL SPENDING
(Percent of GNP)

1960

1970

1980

1985

6.4
5.0
Defense ..............................................................................................
9.5
8.2
17.6
17.1
Nondefense.........................................................................................
8.7
11.5
10.8
10.4
Payments for individuals...........................................................
4.8
6.5
2.2
1.5
Other grants-in-aid to State and local governments..................
0.9
1.6
2.0
3.3
Net interest...............................................................................
1.4
1.5
2.9
3.3
All other ....................................................................................
2.6
2.8
-_
0.8
Undistributed offsetting receipts ............................................... f----_-_O
'-'.9-+-_--C.0_.9+-_-0.7
_-t-_
24.0
Total...................................................................................................
18.2
19.8
22.2

This trend of rapid increase in domestic spending, with little
change in the share of income collected in taxes eventually produced the explosion of the deficit we have seen in the 1980s.
Although the level of the deficit soared during the 1980 and the
1981-82 recessions and remains at record high levels, the seeds of
the problem were sown in the breakdown of fiscal discipline in the
preceding decades. The proposals in this budget bring this situation
under control by meeting the Balanced Budget Act (GrammRudman-Hollings) deficit targets that decline gradually to budget
balance in 1991.

ECONOMIC ASSUMPTIONS
The economy and the budget are interrelated. Federal receipts
and outlays depend directly on the level of economic activity, inflation, interest rates, unemployment, and other economic factors.
Likewise, both outlays and the tax structure have substantial effects on the state of the economy-output, employment, and interest rates. In estimating Federal receipts and outlays for future
years, therefore, the economic assumptions underlying the estimates
must be clearly specified.
The accompanying two tables show the economic assumptions
that underlie the estimates in this budget. The first table shows
the short-range economic forecast through 1987; the second table
shows the long-range assumptions underlying the budget projections. The common practice is followed in showing these assumptions for calendar years, rather than fiscal years. To facilitate
comparisons, the current services estimates are based on the same
economic assumptions; hence differences between current services
and policy are just due to the direct effects of policy changes, and
do not include the possible budgetary effects of any induced
changes in the economy.
SHORT-RANGE ECONOMIC FORECAST
(Calendar years; dollar amounts in

bill~ns)

Item

Gross national product:
Current dollars:
Amount .......................................................................... ...............
Percent change, fourth quarter over fourth quarter ..................... .
Constant (1982) dollars:
Amount ........................................................................................ .
Percent change, fourth quarter over fourth quarter ..................... .
Incomes (current dollars):
Personal income ............................................................................... .
Wages and salaries ........................................................................... .
Corporate profits ................................................................................
Price level (percent change, fourth quarter over fourth quarter):
GNP deflator ............................... .......................................................
Consumer Price Index 2 .. ......................... ............ . .. .. . ....................... .
Unemployment rates (percent):
Total, fourth quarter 3 ... .. ....... . ... .. ... ..... .. ............................ .... .. ........ .
Insured, annual average 4 .. .. . .. ... .. ... .. .. .. .. ... ............................... ... .... .
Federal pay raise (percent):
Military (October) 5 .. ... ..... ... ........ .................................... ... .. .. .. . .. . ... .
Civilian (January) ............................................................................ .
Interest rate, 91·day Treasury bills (percent) 6 ... .. .. .. ... ........................ .

Actual
1984

3,775

Forecast
1985

1986

1987

9.0

3,992
5.8

4,274
8.0

4,629
8.3

3,492
4.7

3,574
2.5

3,695
4.0

3,842
4.0

3,112
1,835
238

3,294
1,961
228

3,486
2,078
281

3,756
2,247
330

4.1
3.6

3.2
3.3

3.8
3.7

4.1
4.1

7.1
2.8

6.9
2.8

6.7
2.7

6.5
2.6

4.0
4.0
9.6

7.0
3.5
7.5

4.0

4.8
3.0
6.5

7.3

I Preliminary actual data.
2 CPI for urban wage earners and clerical workers. Two versions of the CPI are now published. The index shown here is that currently used,
as required by law, in calculating automatic cost-of·living increases for indexed Federal programs. The manner in which this index measures
housing costs changed significantly in January 1985.
3 Percent of total labor force, including armed forces residing in the U.S.
• This indicator 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.
' The 1984 military pay raise occurred in January. In calendar year 1985, there were two military pay raises: 4.0% in January and 3.0% in
October.
6 Average rate on new issues within period, on a bank discount basis.

The economic recovery that began in December 1982 is now in its
fourth year. Although it is a mature expansion, it shows no sign of
ending. On the contrary, most of the evidence points to an acceleration of growth in 1986. Moreover, if the administration's policy
proposals assumed in this budget are enacted, the economy could
grow above its recent trend rate through 1991, making this the
longest period of uninterrupted growth on record.
Real GNP is projected to rise 4.0% this year on a fourth-quarterto-fourth-quarter basis. Faster growth is likely to place some
upward pressure on short-term interest rates. While the inflation
rate is projected to rise slightly, reflecting accelerated growth of the
money supply last year and the decline in the dollar, it is now
projected to be lower than was assumed in last year's budget,
declining to 2% by 1991.
In constant 1982 dollars, real GNP is projected to continue to
grow at an annual rate of 4.0% through 1988, progressively slowing
to 3.5% in 1991, which is close to the economy's postwar average.
This is consistent with a decline in the unemployment rate to 5.5%
by the end of 1991.
LONG-RANGE ECONOMIC ASSUMPTIONS
(Calendar years; dollar amounts in billions)
Assumptions
Item

Gross national product:
Current dollars:
Amount .........................................................................................
Percent change, fourth quarter over fourth quarter ......................
Constant (1982) dollars:
Amount .........................................................................................
Percent change, fourth quarter over fourth quarter ......................
Incomes (current dollars) :
Personal income ................................................................................
Wages and salaries............................................................................
Corporate profits................................................................................
Price level (percent change, fourth quarter over fourth quarter):
GNP deflator ......................................................................................
Consumer Price Index 1.....................................................................
Unemployment rates (percent):
Total, fourth quarter 2.............. .......... ................ .. .............................
Insured, annual average 3.................................................................
Federal pay raise (percent):
Military (October) .............................................................................
Civilian (January) .............................................................................
Interest rate, 91-day Treasury bills (percent) 4 .... ........ .... .... .. .... .. .. .... .. .

1988

1989

1990

1991

4,995
7.7

5,359
7.0

5,709
6.2

6,036
5.6

3,996
4.0

4,151
3.7

4,301
3.6

4,454
3.5

4,012
2,418
366

4,266
2,587
394

4,506
2,743
424

4,748
2,901
430

3.6
3.5

3.2
3.2

2.5
2.5

2.0
2.0

6.2
2.5

6.0
2.3

5.7
2.2

5.5
2.0

5.1
3.0
5.6

4.9
3.0
4.8

4.5
3.0
4.3

NA
3.0
4.0

I CPI for urban wage earners and clerical workers. Two versions of the CPI are now published. The index shown here is that currently used
as requi red by law, in calculating automatic cost-llf·living increases for indexed Federal programs.
'
2 Percent of total labor force, including armed forces residing in the U.S.
' This indicator 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 .
• Average rate on new issues within period, on a bank discount basis. These projections assume, by convention, that interest rates decline with
the rate of inflation.
NA- Not available.

Part 3

DEALING WITH THE DEFICIT: MAJOR
BUDGET PROPOSALS
The President's budget for 1987 accomplishes four key goals:
• It reduces the deficit as required to sustain economic growth
and in doing so meets the deficit targets called for by the
recently-enacted Gramm-Rudman-Hollings law (with a deficit
of no more than $144 billion in 1987 and a balanced budget in
1991).
• It envisions no tax increase.
• It provides necessary funding for national security.
• It contains no cuts for social security benefits and preserves
benefits for those in need.
The budget achieves these goals by ending Federal activities that
have outlived their usefulness; by transferring to State and local
governments or to the private sector those activities they can carry
out more efficiently; by making appropriate changes in the scope of
remaining programs, including the better targeting of social services programs; and by making Government programs more efficient, effective, and accountable.
FEDERAL GOVERNMENT TOTALS
(Dollar amounts in billions)
1986

1987

1988

1989

1990

1991

Current services:

Receipts..................................................................... 776.5 844.1
927.3 989.2 1,053.0 1.120.2
1,025.9 1,077.3 1,128.l 1.179.3 1,224.l
Outlays ...................................................................... t--9_82_.O
-+-"-----l---'--_+-'------+-'-_+--'_
Deficit ................................................................... - 205.6 - 181.8 -150.0 -138.9 -126.3 -103.9
Percent of GNP .....................................................
4.9
4.0
3.1
2.6
2.2
1.7
Proposed:

Receipts..................................................................... 777.1 850.4 933.2
996.l 1,058.1 1,124.0
994.0 1,026.8 1,063.6 1,093.8 1.122.7
Outlays ......................................................................t--9_79_.9-+-_---l---'--_+-'------+-'-_+--'_
Surplus or deficit .................................................. - 202.8 - 143.6 -93.6 -67.5
Percent of GNP .....................................................
4.8
3.2
1.9
1.3
G-R-H deficit target ............................................ -171.9 -144.0 -108.0 -72.0

-35.8
0.6
-36.0

+l.3

'0.05 percent or less.

On a current services basis, the deficit is projected to reach $182
billion in 1987, or 4.0% of GNP, declining to $104 billion, or 1.7%
of GNP, by 1991. The budget proposals would hold the deficit to
$144 billion in 1987, or 3.2% of GNP, with a steady reduction in
the deficit in subsequent years resulting in a surplus of $1 billion
in 1991.

The proposals in this budget are estimated to reduce the 1987
deficit some $38 billion below current services. In total, the budget
proposals reduce the deficit by $166 billion over the next 3 years
and $362 billion over the next 5 years.
FEDERAL GOVERNMENT TOTALS AND PROPOSED CHANGES

(In billions of dollars)

1986

1987

Defense function:
Current services......................................................... 265.8 284.9
Policy change .......................................................................... . - 2.7

1988

1989

1990

1991

303.7
- 4.5

328.6
-6.3

354.1 379.4
-9.3 - 13.1

r----r----+----+----+---~----

Proposed level .................................................. 265.8 282.2 299.1 322.3 344.8 366.3
Social security benefits:
Current services......................................................... 197.6 209.6 223.6 237.5 252.4 261.1
Policy change ............................................................I-..-....-...-...-...+----+----+----+----"!"'----'"
*
* ............... ............... .............
Proposed level .................................................. 197.6 209.6 223.6 237.5 252.4 261.1
Low income support benefits:
.
Current services......................................................... 40.2
40.1
42.7
43.1
43.0
44.4
Policy change ............................................................ - 0.1 - 0.7 - 0.9 -1.1 - 1.3 -1.4
r----r----+----+----+---~---Proposed level .................................................. 40.1
39.4
41.8
41.9
41.7
43.0
Other nondefense programs:
Current services ........................................................ . 371.5 377.8 399.3 416.8 436.7 454.7
Policy change ........................................................... . - 2.0 - 24.9 - 35.8 -47.1 -58.1 - 68.1
Proposed level ................................................. . 369.5 352.9 363.5 369.7 378.6 386.6
Undistributed offsetting receipts:
Current services ......................................................... - 34.6 - 35.8 - 40.7 - 40.7 - 41.9 -44.2
Policy change ........................................................... . - 1.2 - 2.4 -5.6 - 3.1 - 7.3 -6.0
Proposed level .................................................. - 35.8 - 38.1 -46.4 -43.8 -49.3 -50.2
Net interest:
Current services ........................................................ . 141.5 149.2 148.7 142.8 135.1 128.6
Policy change ........................................................... . + 1.2 - 1.2 - 3.6 -6.8 -9.5 -12.8
Proposed level ................................................. . 142.7 148.0 145.1 136.0 125.6 115.9
Total outlays:
Current services........................................................ . 982.0 1,025.9 1,077.3 1,128.1 1,179.3 1,224.1
Policy change ........................................................... . - 2.1 -31.9 -50.5 -64.5 -85.5 -101.4
Proposed level ................................................. . 979.9 994.0 1,026.8 1,063.6 1,093.8 1,122.7
Receipts:
Current services......................................................... 776.5 844.1 927.3 989.2 1,053.0 1,120.2
Policy change ............................................................ 1---+:-.0:.....7+-.:+'-'6...:..3+....:+.....:5...:..9-+-....:+-'6..9-+-....:.+_5_
:.
.0+-..:..
+_3.9
Proposed level .................................................. 777.1 85Q.4 933.2 996.1 1,058.1 1,124.0
Deficit or surplus:
Current services ......................................................... - 205.6 - 181.8 -150.0 -138.9 -126.3 -103.9
Policy change ............................................................ r-+:-.2_.8-+-+
-'---38_.2-+-+-'-56_.4-+-+:....7_1_.4-t-+:-.9_0_
.5++-'----10_5.2
Proposed level .................................................. -202.8 -143.6 - 93.6 - 67.5 - 35.8 +1.3
'$50 million or less.
I Includes off·budget social security outlays and receipts.

Despite the overall fiscal restraint, this budget preserves vital
national security, health, safety, and other services that benefit the
aged, the needy and the general public.

PURSUE PRIORITY INITIATIVES
National defense.-Protection of the Nation's security is one of
the fundamental duties of the Federal Government. It is essential
that we equip, operate, and maintain the military forces needed to
protect our vital national interests. During the 1970's the United
States severely underfunded defense programs. Over the past 5
years the administration reversed the decline in real defense
spending and the United States now possesses the most effective
peacetime military ever. As a consequence, the United States has
been able to embark on meaningful negotiations with the Soviet
Union over mutual, verifiable reductions in nuclear arms.
The compromise budget resolution that Congress passed last year
called for no real growth in defense funding in 1986 and 3% real
growth each year thereafter. The appropriations enacted for 1986
did not provide the defense funding levels agreed to in the resolution. The sequestration required by Gramm-Rudman-Hollings resulted in additional cuts in defense funding. As a result of these
cuts, the level of defense funding provided for 1986 is more than
5% below 1985 in real terms.
The administration is proposing 1987 defense funding levels that
provide the real program agreed to in last year's budget resolution.
Savings from the actual dollar amounts contained in the resolution
have been achieved due to lower inflation and pay assumptions.
The proposed funding levels beyond 1987 permit replacement of
aging systems and maintenance of the increased defense capability
we have achieved.
Security assistance.-While U.S. military strength is the major
deterrent to such challenges, the United States must also assist key
friendly, developing countries in resisting communist and other
aggression. In a number of circumstances, increasing the defense
capacity of these allies can be more effective and less expensive
than equipping U.S. forces for the same task. Therefore, the budget
proposes an international security assistance program of $11.3 billion in budget authority for 1987. These funds will help further the
Middle East peace process, defend against communist aggression in
Central America, secure the right to maintain U.S. military bases
in a number of countries around the world, and strengthen the
military forces of countries such as Pakistan on the southern periphery of the Soviet Union.

Diplomatic security.-The budget provides additional funding in
support of the administration's effort to fight terrorism, particularly attacks on United States citizens. While several of the most
recent incidents have been directed at. Americans travelling
abroad, the greatest continuing threat is to U.S. officials stationed
overseas. Accordingly, the State Department is expanding significantly its program to improve the security of U.S. diplomatic installations abroad.
Law and Drug Enforcement.-Improvements to Federal law enforcement, particularly in the area of drug enforcement, is a major
domestic priority. Budget authority of $1.8 billion is requested for
this program in 1987. The largest portion of the increase ($48
million) will go to the Drug Enforcement Administration, which is
the lead agency in fighting the war on illicit drugs.

Basic Research.-The budget reflects the high priority that this
administration continues to give to support basic research. Governmentwide support for basic research is proposed to increase by
more than 3% in real terms in 1987. Fundamental knowledge in
scientific fields such as mathematics, physics, and materials science, and in the various engineering disciplines provides the basis
for a healthy long-term economy, a strong defense, and a better
quality of life for all our citizens. The proposed 1987 budget of the
National Science Foundation (NSF) provides over $1.4 billion in
support of basic research in science and engineering.
Space.-The budget maintains U.S. leadership in space by continuing most major ongoing space projects, by restoring progress in
the space shuttle program towards routine and reliable space
flight, and by initiating several major space science and technology
efforts. The budget supports a vigorous and balanced research program in space science and the application of advanced space technologies. Budget authority of $7.0 billion is proposed for NASA
space programs in 1987.
Aviation safety.-The budget includes several measures to enhance aviation safety, including additional traffic controllers at
busy locations and increasing the number of safety inspectors. The
Federal Aviation Administration is undertaking a broad effort to
modernize the air traffic control system and related safety facilities. The detection of severe weather will be improved through
procurement of the long-range and terminal doppler weather radar
system. Budget authority of $4.8 billion is proposed for 1987.
AIDS.-Acquired immune deficiency syndrome (AIDS) remains
the highest public health priority of the Department of Health and

Human Services. Complementing State and local programs, the
Federal effort encompasses health education and risk prevention,
as well as research on the causes of and potential treatments for
AIDS. Budget authority of $213 million is requested for AIDS research and education in 1987.

ELIMINATE INEFFECTIVE, DUPLICATIVE, OR
UNNECESSARY PROGRAMS
Government subsidies to businesses often provide an unfair competitive advantage or favor the least efficient firms over their more
productive counterparts. The budget addresses these problems in
several areas by proposing to terminate:
• Credit programs of the Small Business Administration (SBA).
More than 99% of small businesses already obtain financing
without Federal assistance.
• All Federal aid to the six State maritime schools. Such Federal subsidies cannot be justified giv~n the projected oversupply
of licensed merchant marine officers through the early 1990's.
• Several direct assistance or insurance programs for the commercial fishing industry.
• Agricultural Stabilization and Conservation Service cost-sharing programs and the Soil Conservation Service programs on
private lands. The new conservation reserve program and
other conservation provisions authorized by the 1985 farm bill
are far more effective responses to these needs.
Nor should the Federal Government fund State and local governments in activities that assist only specific geographic areas or
allow areas simply to compete with each other at the expense of
the taxpayers as a whole. Therefore, the administration is proposing to terminate:
• Urban development action grants program. This proposal is
part of the Governmentwide effort to reduce local economic
development subsidies and reduce excessive Federal intervention in the economic decisions of firms and individuals. Of
course, cities may use community block grants for economic
development projects if they so choose.
• Economic Development Administration and the Appalachian
Regional Commission. The budget provides for staff to close
out these grants and loan programs, and ensures adequate
debt collection and auditing of outstanding projects. The
budget also proposes to eliminate the regional economic, but
not the power, programs of the Tennessee Valley Authority in
1987 and the rural development loans and grants of the Department of Agriculture.
The administration is also proposing to terminate:

• Federal funding for the Legal Services Corporation.
• The Interstate Commerce Commission. Further deregulation
of the motor carrier, freight forwarder, water carrier, and bus
industries reflects the administration's commitment to the
economic deregulation of the surface transportation industry,
based on a conclusion that the benefits outweigh the costs to
the public.

REFORM SOCIAL SERVICES
The Federal Government funds a wide array of entitlement and
discretionary programs that finance benefits for medical care,
higher education, income support, and other social services. The
administration continues to support reforms to focus assistance on
the people most in need, to promote efficient and effective program
operations, and to eliminate or reduce costly programs.
The administration is proposing no cuts in the benefit levels for
supplemental security income, veterans pensions, food stamps and
aid to families with dependent children (AFDC). The administration is proposing reforms to simplify the administration of food
stamps and AFDC; encourage States to serve the highest risk participants in the special supplemental food program for women,
infants and children (WIC); and increase State liabilities for food
stamps given to people who are not eligible for them.
Under existing laws and regulations, outlays for medicare, which
is one of the largest programs in the Federal budget, are expected
to reach $74.9 billion in 1987-a four-fold ' increase over 10 y~ars
ago. Led by private employers and insurers, third-party payers of
health care have sought aggressively to constrain exploding health
care costs. Following the private sector's lead, the administration is
proposing legislation to reform payments to hospitals for direct
medical education, increase gradually the medicare Part B premiums to 35% of program costs over 5 years, and increase the deductible for supplementary medical insurance, which has been increased only twice since 1966. Even after these changes, medicare
outlays are estimated to rise from $70.2 billion in 1987 to $98.4
billion in 1991.
In the past 20 years, the cost and complexity of Federal programs for student aid have exploded, resulting in a syste,m that is
unnecessarily expensive and difficult to administer. In 1985 about
5.6 million students-almost half of all students-received federally-generated aid totaling over $14 billion. Such aid covered over
20% of the total educational costs of all students and almost 50%
of the educational costs of those students receiving aid. The administration is proposing reforms that would provide aid on a less
costly basis, target aid in 1987 on about 3.9 million students most
22

likely to benefit and in clear need of assistance, and help bring
about significant reductions in program error rates and abuse.
The administration is also proposing reforms in other programs
to:
• Replace the expired trade adjustment assistance program
with improved aid to dislocated workers under the Job Training Partnership Act;
• Concentrate Federal subsidies for meals served in schools and
child care facilities on children from lower-income families;
• Limit Federal medicaid payments to the States to reasonable
annual increases and adopt reforms to control costs;
• Eliminate the unsuccessful work incentive program and require employable AFDC and food stamp recipients to engage
in job search and work activities as a condition for eligibility;
• Implement a means test for veterans medical care, obtain
private insurance reimbursements, and increase the use of
State and community nursing home programs sponsored by
the Veterans Administration;
• Reform refugee and entrant assistance to encourage early
self-sufficiency;
• Eliminate direct Federal subsidies for training of health professionals in view of a projected surplus of professionals in the
1990's;
• Reduce the cost of providing health services to Indians by the
increased use of health maintenance organizations;
• Limit funding for the Job Corps to those centers located near
those they serve;
• Restrict funding for the summer youth employment program
to the most severe youth unemployment areas and increase
literacy training;
• Cover rail workers under the Federal/State unemployment
insurance system;
• Reduce and redirect funding for vocational and adult education so that State grants could only support programs for the
disadvantaged, handicapped, and other special groups; and
• Limit Federal payments for overhead to 20% of research costs
for the 18,000 National Institutes of Health biomedical research grants.
In an era of fiscal restraint, the result of these proposals will be
a reform of social services programs to provide necessary services
to those truly in need on the most efficient basis possible.

REDUCE COMPETITION WITH THE PRIVATE SECTOR
At the present time, the Federal Government is engaged in many
activities that are similar to, or even the same as, those provided

by the private sector. Private firms are forced by the pressures of
competition to be efficient and responsive to consumer demands, or
they will not succeed in the long run. The incentives to control
costs are stronger in the private sector, because Government managers do not have the discipline of the market place.
This year's budget proposes to return some of these activities to
the private sector. Some of these proposals have appeared in previous budgets; others are new. All are designed to take advantage of
the incentives for lowering costs.
, The administration is proposing to sell:
• Power marketing administrations (Bonneville, Alaska, Southeastern, Southwestern, and Western Area). These agencies
sell 6% of all electrical power produced in the United States
each year. This initiative estimated to yield net savings of
$0.2 billion in 1987, $1.6 billion in 1988 and $12.7 billion over
the period 1987 to 1991.
• Naval petroleum reserves.-These reserves consist of two oil
fields that are currently run by the Department of Energy.
This sale is estimated to yield an additional $1.0 billion in
1987 and $1.9 billion in 1988.
• Surplus property.-In 1987, the General Services Administration plans to sell $0.5 billion of surplus real property that
could be used more effectively in the private sector.
The administration is proposing to terminate Federal subsidies to
Amtrak and for land remote sensing satellites (Landsat), which
provide benefits mainly to the recipients of the services in question
and not to the general public. Previous Government support has
subsidized the development of this new technology; if the services it
provides are to continue, the users rather than the general public
should pay the costs.
The budget contains a number of proposals that will shift capital
allocation decisions back to the market and allow private firms to
be more competitive. The administration is proposing to:
• Change the Federal Housing Administration (FHA) singlefamily mortgage insurance program to restrict the availability of Federal mortgage insurance to those with the fewest
options for financing the purchase of a home.
• Increase premium rates and phase out Federal subsidies for
crop insurance by 1991.
• Study how to privatize the provision of political risk insurance
by the Overseas Private Investment Corporation.
• Determine whether to begin using private reinsurers for Federal guaranteed loans with a possible 'test beginning in 1987.
Housing and education vouchers will alter the form of Government support for basic necessities by giving the recipients a choice
of suppliers. The use of vouchers will introduce the benefits of
competition.
24

TRANSFER ACTIVITIES TO STATE AND LOCAL
GOVERNMENTS
Services not truly national in character are more properly administered by State and local governments, which are more responsive to the needs of both benefit recipients and taxpayers. In recognition of the principle of federalism, the administration proposes to
return certain responsibilities to State and local governments. The
administration also proposes to ease the financial burdens created
by this transfer of responsibility by creating or expanding block
grants, and by reducing or eliminating regulatory and reporting
requirements. Specifically:
• The administration is proposing budget authority of $3.3 billion in 1987 for a new transportation block grant, to be financed entirely from Federal gasoline tax receipts. Grants
would be distributed by formula and could be used without
prior Federal approval.
• A new pollution control block grant would combine seven
programs into one consolidated block grant. The seven programs include air and water quality, drinking water, underground injection control, toxic substances enforcement, pesticides, and hazardous waste.
• The administration proposes to expand the existing primary
care health block grant to include three smaller programs for
black lung clinics, migrant health, and family planning.
Budget authority for the expanded grant is proposed to be
$565 million for 1987.
On the other hand, the administration is proposing reductions or
terminations in other grants that are not a Federal priority. States
and localities should determine without Federal involvement
whether these programs justify funding from their own sources:
• Funding for major highway programs is proposed to be $12.8
billion in 1987-$2.6 billion below current services. The interstate system completion and repair programs would be replaced by a combined interstate and primary program, to
finance either new construction or repair.
• For grants to construct sewage treatment plants, the administration will request $1.8 billion in budget authority for 1987
after authorization to phase out the program by 1990 has been
enacted. The original objective of this program will have been
met with the nearly $50 billion of assistance that will have
been provided by the Federal Government since 1972.
• For community and regional development activities, the administration is proposing to terminate a number of categorical programs. The comprehensive and flexible community de-

•

velopment block grant would be the principal vehicle for Federal support of local community development activities.
The administration is proposing to reduce or eliminate several State grant programs for criminal justice assistance, including the juvenile justice program and the State and local
assistance program. The objective of the juvenile justice program has largely been met.
The administration is proposing to terminate the community
services block grant in 1987. A large portion of the Federal
grant pays for the overhead of local community action agencies rather than serving the needy and elderly.
The administration proposes to terminate support for energy
conservation grants and State energy planning and extension
activities. Planning and extension activities are a State and
local responsibility.
The administration is reproposing the termination of local
rail service assistance to States and of the air service subsidy
program, which was established in 1978 to provide a transition period for communities to adjust to deregulation. Both of
these programs have fulfilled their purpose.

MAKE FEDERAL GOVERNMENT SERVICES MORE
EFFICIENT, EFFECTIVE, AND ACCOUNTABLE
Improved management of Federal operations continues to be an
important part of the administration's overall objective of restoring
efficiency, balancing the role, and reducing the size of the Federal
Government. The goal of these efforts is to ensure that the Federal
Government provide needed services in an economical and efficient
way. Early in this administration, President Reagan made management reform one of his top priorities and initiated "Reform '88", a
program to upgrade the management of the F~deral Government.
The key initiatives are:

Fraud, waste, and abuse.-Reduction of fraud, waste, and abuse
in Federal programs remains a high priority. During the past 4-1/2
years the Inspectors General have made recommendations for the
improved use of over $63 billion. Their recommendations have led to
14,291 civil and criminal prosecutions and 14,146 administrative
sanctions or agency actions.
'
Federal personnel and benefits.-The administration is proposing
several reforms of the civil service retirement system in order to
bring Government pension costs closer to those of the vast majority
of private employers. Primary among these are proposals to limit
cost-of-living adjustments, to reduce annuities for those who retire
26

before age 62, and to raise the retirement contributions by two
percentage points in 1987.
The new agency productivity programs being implemented as
part of Reform '88 will make it possible to reduce civilian agency
employment and to achieve savings. The number of employees in
nondefense agencies is projected to decrease by 1.25% a year from
1985 through 1987. The full implementation of the new productivity program should at least double that rate for 1988 through 1991.

Federal resource management.-The budget proposes an indefinite moratorium on further development and fill of the strategic
petroleum reserve (SPR), once it reaches 500 million barrels in
1986. This moratorium is estimated to result in outlay savings of
$1.9 billion over the next 5 years. Over the past 5 years, the Nation
has substantially reduced its vulnerability to supply disruptions by
increasing both the efficiency of oil use and U.S. oil production.
Legislation is also proposed to sell $250 million of unneeded surplus materials from the national defense stockpile in 1987.
Credit management.-The budget proposes to reduce the Government's intervention in the Nation's lending market. This will be
accomplished by phasing out or reducing several Federal credit
programs, changing from direct to guaranteed lending as much as
possible, charging at or above Treasury interest rates, charging
loan origination fees, setting up a borrower prescreening and
postaward review process, using private sector debt collection agencies, offsetting IRS refunds, and undertaking a pilot program to sell
selected loans in the Federal portfolio. The administration will also
consider the establishment of a Federal credit agency to oversee
this program and look into the use of private sector reinsurers for
the guaranteed loan programs.
Several direct loan and loan guarantee programs are proposed to
be eliminated or sharply reduced over the next 5 years. The administration is also proposing to charge borrowers for some of the
benefits they receive from Government loans and loan guarantees.
For example, new or increased fees are proposed for Farmers Home
Administration agricultural credit and export credit provided by
the Commodity Credit Corporation. Higher interest rates are being
proposed for a number of programs, including rural electrification
loans, guaranteed student loans, and reclamation loans. The administration is proposing that the Secretary of the Treasury charge
a special premium for all 100% federally guaranteed loans and
that user fees be imposed on government-sponsored enterprises.
The new fees would allow fully private financial intermediaries
to compete on a more equal basis in lending to the housing, agriculture, and education sectors. Credit fees are estimated to total
$0.3 billion in 1987 and $4.3 billion over the next 5 years.

Charge for government services.-The Federal Government provides numerous services that directly benefit narrow, clearly identifiable groups of business and private users. Because these services
evolved over time, however, the Federal agencies providing them
recover widely varying proportions of their costs through fees on
the users.
Those identifiable groups who directly benefit from a service
should pay the cost of the service. The beneficiaries of the services
for which the administration is instituting new or increased fees
consist in general of corporations- or the relatively affluent. These
include fees for recreational, commercial, and safety services proVided by the Coast Guard, and for the use of the commercial naVigation
facilities operated by the Corps of Engineers; additional customs fees
to offset the cost of processing passengers and commercial carriers;
and fees on Internal Revenue Service letters of determination and
private letter rulings, and a charge to recoup the expense of collecting underpaid taxes.
These and other user fees are estimated to yield $3.3 billion in 1987
and $11.4 billion over 3 years.

CONCLUSION
In summary, the proposals put forth in this budget represent a
comprehensive program for reducing Federal spending by restoring
the Federal Government to its proper role and reforming or eliminating inefficient programs. It contains no cuts in social security
benefits; preserves benefits for t hose in need of Federal aid; provides for a strong national defense; and, if enacted, will result in
the elimination of the Feder al deficit by 1991 without any increase
in taxes.

Part 4

FEDERAL RECEIPTS BY SOURCE
This section describes the major sources of receipts and the legislative proposals and administrative actions affecting them. The
economic assumptions underlying the estimates are in Part 2.

SUMMARY
Total receipts in 1987 are estimated to be $850.4 billion, an
increase of $73.2 billion from the $777.1 billion estimated for 1986.
Receipts in 1988 and 1989 are estimated to be $933.2 billion and
$996.1 billion, respectively.

Composition of budget receipts.-The Federal tax system relies
predominantly on income and payroll taxes. In 1987:
• Income taxes paid by individuals and corporations are estimated at $386.0 billion and $86.7 billion, respectively. Combined, these sources account for 55.6% of total 1987 receipts.
• Social insurance taxes and contributions-composed largely of
payroll taxes levied on wages and salaries, most of which are
paid equally by employers and employees-will yield an estimated $302.8 billion, 35.6% of the total.
• Excise taxes, including the crude oil windfall profit tax, are
expected to provide $35.2 billion, 4.1% of the total.
• Estate and gift taxes, customs duties, and miscellaneous receipts are estimated at $39.7 billion, the remaining 4.7% of
the total.
Under the tax policy and economic assumptions presented in this
budget, the income tax share of total receipts is projected to rise to
57.0% by 1989, 1.4 percentage points more than for 1987. This rise
is the combined effect of a 0.3 percentage point rise in the individual income tax share and a 1.0 percentage point rise in the corporation income tax share. Social insurance taxes and contributions
are projected to increase as a share of total receipts to 36.0%. The
projected share of all other receipts declines by 1.7 percentage
points between 1987 and 1989.

Receipts
$ BIIIonI

$--

UOO~-------------------------------------rUOO

1,000

800

600

200

hIMcbII h:ome TGIOIS

0
~

ENACTED LEGISLATION
Several major tax laws have been enacted since the administration took office in January 1981. The first, the Economic Recovery
Tax Act of 1981 (ERTA), provides incentives for work, saving, and
investment. The major provisions of this Act include an across-theboard reduction in individual income taxes; the annual adjustment
of the zero bracket amount, the personal exemption, and individual
income tax brackets for inflation, beginning in 1985; and the accelerated cost recovery of capital expenditures.
The second major tax law, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), improves the fairness of the tax system
while preserving the incentives for work, saving, and investment
enacted in 1981. This Act increases receipts primarily by eliminating unintended benefits and obsolete incentives, increasing taxpayer compliance, and improving collection techniques.
The Highway Revenue Act of 1982 is the third major tax law
enacted since January 1981. This act increases the excise tax on
gasoline and diesel fuel by 5 cents to 9 cents a gallon and restructures other highway related taxes.

Three major laws affecting receipts were enacted during 1983:
the Social Security Amendments of 1983, the Interest and Dividends Tax Compliance Act of 1983, and the Railroad Retirement
Revenue Act of 1983. The first, the Social Security Amendments of
1983, restored the solvency of the social security trust funds
through a combination of revenue increases and benefit reductions.
The Interest and Dividends Tax Compliance Act of 1983 repeals the
withholding of taxes on interest and dividend income provided in
TEFRA. The tax increases provided in the Railroad Retirement
Revenue Act of 1983, together with the benefit reductions provided
in the Railroad Retirement Solvency Act of 1983, are designed to
place the railroad industry pension program on a sounder financial
basis.
The most recent tax law is the Deficit Reduction Act of 1984
(DEFRA). The major provisions of this Act are designed to increase
the efficiency of the tax system by curbing tax shelter abuse,
limiting unwarranted tax benefits, and increasing taxpayer compliance.
As a result of these legislated changes, taxes have been reduced
by $741.0 billion over the 1985-1989 period relat ive to pre-1981 tax
law.
NET EFFECT OF MAJOR ENACTED LEGISLATION ON RECEIPTS

(In billions of dollars)

1985

1986

1987

1988 -

1989

1985-1 989

Economic Recovery Tax Act of 1981 ......................... - 170.3 -207.5 - 244.8 - 274.0 - 303.7 - 1,200.3
Tax Equity and Fiscal Responsibility Act of 1982 ......
49.2
270.8
39.2
59.2
61.6
61.7
Highway Revenue Act of 1982 ..................................
4.8
4.2
4.5
4.7
5.0
23.2
Social Security Amendments of 1983 ........................
8.7
8.0
9.2
20.0
24.9
70.9
Interest and Dividends Tax Compliance Act of 1983.. -2.4 -2.1
-1.7 -1.8 -2.0
-9.9
Railroad Retirement Revenue Act of 1983 .................
0.7
1.1
1.1
1.1
1.1
5.1
Deficit Reduction Act of 1984 ...................................
9.3
16.0
21.8
24.9
27.2
99.2
Net tax reduction ......................................... - 110.5 - 130.8 -150.6 -163.3 -185.8

-741.0

' These estimates are base<! on the direct effect only of legislative changes at a given level of economic activity. Induced effects on the
economy are taken into account in forecasting incemes, however, and in this way affect the receipts estimates by major source and in total.

RECEIPTS PROPOSALS
Tax simplification and reform.-The administration looks forward to working with the Congress to produce acceptable tax reform
legislation this year. Because such legislation will be revenue
neutral, it is not essential that it be reviewed at this time in the
budget. Although the administration continues to support legislation
to expand the limitations on individual retirement accounts for
married couples with only one spouse working outside the home, and
to extend the tax credit for incremental research and experimental
expenditures, which expired December 31, 1985, these proposals are
not included in the budget because they should be part of the
forthcoming tax reform legislation. In addition, once tax reform

legislation has been enacted, the administration is planning to
repropose an enterprise zone program that would provide tax mcentives for redevelopment of economically distressed areas.

Internal Revenue Service (IRS) revenue initiative.-In an effort to
close the gap between taxes owed and paid, and to improve overall
compliance with the tax laws, the IRS will increase the size of its
examination staff.
Other.-The administration also proposes that:
• earnings on savings deposited in special accounts to pay
future higher education expenses be exempt from tax;
• a tuition tax credit be provided for a portion of tuition expenses paid to qualified private elemeritary and secondary
schools;
• employee contributions to civil service retirement be increased from 7 % to 9% of wages and salaries effective October 1986;
• the 16 cent excise tax on cigarettes, which is scheduled to
expire March 15, 1986, be extended;
• regular Federal/State unemployment insurance coverage be
extended to railroad employment;
• fees on coal production used to finance black lung disability
benefits be increased;
• the State and local government deposit of social security payroll taxes conform to the private sector schedule; and
• taxes used to finance the cleanup of hazardous waste sites be
reauthorized and expanded.
EFFECT OF PROPOSED LEGISLATION AND ADMINISTRATIVE ACTION ON RECEIPTS'
(In billions of dollars)

1986

1987

1988

1989

IRS revenue initiative ................................................................................................... .
0.6
1.5
2.6
Higher education tax incentive ..................................................................................... .
* -0.2 -0.3
Tuition tax credit... ....................................................................................................... . -0.4 -0.6
-0.9
Employee contribution to civil service retirement ..........................................................
0.9
1.2
1.2
Cigarette excise tax 2....................................................................................
0.8
1.7
1.7
1.7
Railroad unemployment insurance coverage ..................................................................
0.1
0.1
0.1
Black lung disability trust fund 2 .. .... ........................ ................................................... .
0.2
0.2
0.2
State and local deposit of payroll taxes ......................................................... .............. .
0.4
0.3
1.2
Hazardous substance response trust fund 2 ................................................................. .
0.1
0.1
0.1
Other 2 .. ....... .. . . .. . .. ................... .. .. ....... . .. ........ . .. . .. . ....... .. ......... ... ... .. .. ... ......... 1-------=-:
0..::...
1 +---=:..:.....J.--=:"+'--'::"":'
2.7
1.5
1.1
Total................................................................................................

0.7

6.3

5.9

6.9

• $50 million 01 less.
'These estimates are based on the direct effect on~ of legislative changes at a given level of economic activity. Induced effects on the
economy are taken into account in forecasting incomes. however, and in this way affect the receipts estimates by major source and in total.
2 Net of income tax offsets.

Part 5
FEDERAL PROGRAMS BY FUNCTION:
MEETING NATIONAL NEEDS
This section discusses the budget in terms of functions, which are
broad categories of activities with similar p'urposes. The programs
are grouped into functions so that related Federal activities that
meet particular national needs are considered together, regardless
of which agencies are responsible for them. The functional structure classifies these activities according to their primary purpose.
Each activity is classified only in the function that defines its most
important purpose, even though it may serve more than one.
There are 19 functions, plus 2 categories-allowances and undistributed offsetting receipts-that are not themselves functions because they do not consist of programs, but are needed to encompass
the entire budget. Each function, in turn, is divided into one or
more subfunctions, which are narrower and more homogeneous
groupings of programs. Since last year's budget, social security and
medicare have been split into two separate functions. As required
by the Balanced Budget and Emergency Deficit Control Act of
1985, the receipts and outlays of social security-the old-age and
survivors insurance and the disability insurance trust funds-are
now excluded from the budget (i.e., "off-budget"). For purposes of
this section, education activities are discussed as if they were a
separate function.
The function-subfunction hierarchy is used in the outlay chart or
table that is presented for each function. The chart or table quantifies the outlays including the results from the President's proposals; the accompanying text explains them. Table 4 at the back of
this volume supplies the outlay data underlying the charts in this
part.
While outlays are an important measure of resources allocated to
Federal programs, they do not cover all Federal activities. Federal
loan guarantees generally require no outlays unless the borrower
defaults. To monitor and control Federal credit activities, a separate credit budget reflects all new guaranteed loan commitments
and direct loan obligations. Table 6 shows these data by agency.

Tax expenditures, also not measured by outlays, are another
means by which the Federal Government can achieve policy objectives. Tax expenditures are provisions of income tax law that allow
a preferential rate of tax, a special credit, a. deferral of tax liability,
or a special exclusion, deduction, or exemption. Tax expenditures
are discussed at the end of this section.

NATIONAL DEFENSE
This function includes activities directly related to the defense
and security of the United States. They seek to maintain peace by
deterring war. To meet the need for strengthened military capabilities, the administration requests an increase in budget authority
for national defense from $286.1 billion in 1986 to $320.3 billion in
1987. Outlays are estimated to be $265.8 billion in 1986, rising to
$282.2 billion in 1987 .

. Conventional forces.-Conventional forces are required to deter
aggression and to respond to aggression if deterrence should fail.
The major elements supporting these forces are pay and benefits
for military personnel; purchase, operation and maintenance of
conventional arms such as tanks, ships and aircraft; procurement
of ammunition and spare parts; and training. Budget authority of
$184.3 billion is requested for these forces in 1987. Major acquisitions include new helicopters and M-1 tanks for the Army, new
Navy ships, and Air Force fighter aircrafL
Strategic forces.-Strategic forces are required to deter Soviet
conventional or nuclear attack against the United States and its
allies. The budget includes proposals for continuing the administration's plan for modernizing strategic forces with the Peacekeeper
(MX), a new intercontinental ballistic missile; procuring Trident
submarines, which carry ballistic missiles; and developing and purchasing air-launched cruise missiles. The strategic program also
calls for developing an advanced technology (stealth) bomber; modernizing warning systems; and developing and procuring reliable
command, control, and communication systems.
Supporting activities.-Supporting defense activities include research and development, training and medical services, central
supply and maintenance, and ot her overhead and logistic activities.
Budget authority of $101.9 billion is requested for these activities
in 1987. Defense research and development programs are intended
to devise new and better weapons systems to meet changing military needs. They involve a broad range of activities, from basic
research to construction of full-scale prototypes of weapons systems.
34

Atomic energy defense and defense-related activities.-The Department of Energy develops, tests, and produces nuclear weapons
and reactors for nuclear-powered ships. Budget authority of $8.2
billion is requested for this work in 1987.
Other defense-related activities include stockpiling strategic materials, developing civil defense plans, and maintaining a stand-by
selective service system.

National Defense (Budget Authority)
$ BIUIons

$ BIIIons

~.-------------------------------------------r~

Atomic Enerw Defense

and Defense-Related

350

ActIvities

300

Total

250

200

150

100

o
~

ConventIonal Fon:es

0
~

INTERNATIONAL AFFAIRS
Amid problems of increased international terrorism and political
instability abroad, the Federal Government has primary responsibility for protecting and advancing the interests of the United
States and its people in international affairs. United States foreign
policy is directed toward achieving a peaceful world environment,
built on international security and prosperity, in which individuals
may enjoy political and economic freedom. Outlays for international affairs programs are estimated to be $18.6 billion in 1987, an
increase of $1.5 billion from the estimated $17.1 biliion in 1986.

Foreign aid.-Outlays for international security assistance programs for 1987 are estimated to be $10.9 billion. These programs

serve to strengthen allied and friendly governments where the
United States has special security concerns. Security assistance
also helps insure U.S. access to military bases and facilities overseas. The major programs in this area are foreign military sales
credits and the economic support fund, with estimated 1987 outlays
of $5.8 billion and $4.1 billion, respectively. The $1.2 billion increase in estimated 1987 outlays from the 1986 level for overall
security assistance is due to an increase of $1.9 billion in foreign
military sales credits. This increase is partially offset by a $0.8
billion decrease in economic support fund outlays.
Outlays for international development and humanitarian assistance are estimated to be $5.0 billion in 1987 and $4.9 billion in
1986. Programs include both multilateral and bilateral assistance
to help meet the development and humanitarian needs in poorer
countries and to encourage the expansion of a market-oriented
international economic system.
Multilateral development assistance is provided through the
World Bank group and regional development banks, the United
Nations, and other international organizations. Bilateral development assistance programs are largely carried out by the Agency for
International Development (AID). The estimated outlays for AID in
1987 are $2.1 billion, the same level as 1986. AID programs support
economic growth in developing countries through projects in agriculture, population, health, education and energy. The agency also
supports the overseas humanitarian relief and development programs of U.S. private and voluntary organizations. Public Law 480
food aid supports economic development, humanitarian relief, security assistance, and export market development.

International financial programs.-The Export-Import Bank's
direct loan program is proposed to be eliminated. The Bank will
maintain its loan guarantee programs, which encourage the export
of U.S. goods and services, supplemented by a new interest rate
subsidy program.
A new fair export financing program is proposed to counteract
unfair competition by foreign competitors. The proposed 1987
budget authority of $300 million would be disbursed over several
years.
Other.-Outlays of $2.4 billion in 1986 and $3.1 billion in 1987
are estimated for the conduct of foreign affairs, reflecting substantial increases in personnel and improved security of U.S. embassies
overseas and limited personnel increases to expand essential reporting and analysis of diplomatic and political conditions overseas.
Special emphasis is being placed by the Department of State on

protecting U.S. employees and facilities abroad against the rising
incidence of terrorism.
Foreign information and exchange activities.-The U.S. Information Agency will continue the expansion and modernization of
Voice of America radio facilities. Outlays of $0.9 billion in 1986 and
$1.0 billion in 1987 are estimated for all foreign information and
exchange activities.

Outlays for Intemational Affairs
$ BIUIons

$ 8IIIons
~.--------------------------------------.~

Total

5_ _ _5

82 83 84 85 86

ffl

GENERAL SCIENCE, SPACE, AND TECHNOLOGY
The programs in this function emphasize investments that contribute to long-term economic growth and the technological
strength of the Nation. Federal support for basic research, space
research and technology, and for space flight based on the space
shuttle and the manned space station helps to meet those needs.
Outlays are estimated to increase from $8.9 billion in 1986 to $9.2
billion in 1987.

Outlays for General Science, Space, and Technology
$ BI80na

$ BIIIIona
n.-----------------------------------~11

---------------- 9

__ ::::~:4 Space F19d (Primarily ~~~~~:::~~~~~~

7
6

__ ::::::::::3f_~~J:::::::::::::: 7
6

32 _ _ _ 32

1!177 78

1
0
79

tfl

General science and basic research.-Outlays for general science
and basic research activities are estimated to increase from $2.2
billion in 1986 to $2.4 billion in 1987. This area covers the scientific
and engineering research programs supported across all disciplines
by the National Science Foundation (NSF) and the general science
programs in nuclear and high energy physics supported by the
Department of Energy. This level of funding maintains the Nation's commitment to these important areas of basic research.
To support research at universities, the NSF will continue to
increase the access of academic scientists to the most advanced
computers and to encourage interdisciplinary efforts in fundamental research. Outlays for this and other research activities of the
NSF are estimated to be $1.6 billion in 1987, a 9% increase from
the 1986 level.
All space programs.-The Federal civilian space program is
under the jurisdiction of the National Aeronautics and Space Administration. Outlays for the civilian space program in 1987 are
estimated to be $6.8 billion. Progress will be restored in the space
shuttle program towards achieving routine and reliable access to
space for all planned users. The development of the manned space
station will start in 1987 to facilitate space-based research, help
38

develop advanced technology useful to the economy, and encourage
greater commercial use of space.
Other programs in this area will support further studies of the
solar system and the universe; studies in remote sensing of the
Earth's resources and environment; efforts to encourage greater
private sector investment and involvement in space; and a new
joint research program with the Department of Defense to explore
new technologies for transatmospheric vehicles that promise to
reduce dramatically the cost of access to space. Funds are also
included for continued support of the Galileo mission to Jupiter
and the Hubble space telescope.

ENERGY
The Nation needs adequate supplies of energy at reasonable
costs. The best way to meet this need is to let market forces work.
The role of the Federal Government in this process should be
limited.
Consistent with this philosophy, the administration proposes a
number of reductions in energy programs and major initiatives
which both provide new revenues and curtail the Federal Government's involvement in energy markets. Total outlays for energy
are estimated to be $4.0 billion in 1987, compared to $4.4 billion in
1986.

Energy supply.-Programs in this area include energy research
and development, direct production programs, and subsidies for
synthetic fuels and certain electric utilities and telephone systems.
The budget proposes reductions in support for energy research
and development, and limits such support to research that complements, rather than supplants, ongoing research and development
investment by the private sector. A total of $2.1 billion in outlays is
estimated in 1987.
Direct production programs include the enrichment of uranium
for use as fuel at nuclear power plants; creation of facilities to
provide for nuclear waste disposal; production of petroleum at the
naval petroleum reserves (NPRs) in California and Wyoming; and
the generation and sale of electricity at the Tennessee Valley
Authority and at the five regional power marketing administrations (PMAs). The administration proposes to sell the NPRs, which
have outlived their usefulness as national security assets and, beginning in 1988, to privatize the PMAs. Privatization can provide
greater regional control and result in a more efficient electric
power system. Income from these sales and privatization is reflected in undistributed offsetting receipts.
Congress has terminated the Synthetic Fuels Corporation, and
transferred responsibility for its previously approved projects to the

Outlays for Energy
$ 8IIIons

$ BIIIona

o~~~~~~~~~~~~~~~~~~~~o

1W7 78
f'IIoaI

v-.

fJl

EatmIIt

Secretary of the Treasury. World oil prices have fallen since the
Corporation was created, greatly reducing prospects for near-term
commercial production of synthetic fuels.
Legislation is being proposed to provide Rural Electrification
Administration direct loans at the cost of Treasury borrowing plus
1-1/8%, in order to reduce the REA loan subsidy now given under
the current 5% interest rate. The administration also proposes to
assess a fee on all generation and transmission facility borrowers
to recover any defaults on their loan repayments.

Energy conservation.-Outlays for energy conservation are expected to be $0.3 billion in 1987. It is anticipated that future
support for State and local government grant programs will come
from the resolution of a number of cases involving petroleum pricing violations under the old oil price control program.
Emergency energy preparedness.-The significant progress made
in filling the strategic petroleum reserve over the past 5 years, as
well as the favorable changes that have occurred in world oil
markets, have caused the administration to propose an indefinite
moratorium on filling the reserve when it reaches 500 million
40

barrels. Estimated outlays in 1987 of $0.2 billion would be used to
maintain the reserve in a state of readiness.

Other.-Outlays for other energy programs for 1987 are estimated to be $0.7 billion, a slight decrease from 1986. These funds
support the work of the Nuclear Regulatory Commission and various Department of Energy operating and administrative expenses.

NATURAL RESOURCES AND ENVIRONMENT
The programs in this function are designed to ensure the responsible management and conservation of the Nation's natural resources. Outlays are estimated to be $12.0 billion in 1987, a $0.9
billion decrease from 1986 that is in large part the result of increased user fees, management improvements, funding fewer new
construction projects, and returning some regulatory powers to the
States.
OUTLAYS FOR NATURAL RESOURCES AND ENVIRONMENT
(In billions of dollars)
Pollution control
Outlays

1977 ..................................
1978 ..................................
1979 ..................................
1980 ..................................
1981 ..................................
1982 ..................................
1983 ..................................
1984 ..................................
1985 ..................................
1986 estimate....................
1987 estimate....................
1988 estimate....................
1989 estimate....................

Receipts

- *
4.3
4.0 - *
4.7
- *
5.5 - *
5.2 - *
5.0
- *
4.3
- *
4.0 - *
4.5 - *
4.7
- *
4.5 -0.1
4.5 -0.1
4.5 -0.2

Water resources
Total

4.3
4.0
4.7
5.5
5.2
5.0
4.3
4.0
4.5
4.6
4.5
4.4
4.4

Outlays

3.3
3.5
3.9
4.3
4.3
4.1
4.0
4.2
4.3
4.2
4.5
4.7
4.9

Receipts

-0.1
-0.1
-0.1
-0.1
-0.2
-0.2
-0.1
-0.2
-0.2
-0.2
-0.6
- 0.7
-0.8

Conservation, recreatioo and
other
Total

3.2
3.4
3.9
4.2
4.1
3.9
3.9
4.1
4.1
4.0
3.8
4.0
4.1

Outlays

4.0
4.9
5.4
6.2
6.4
6.3
6.4
6.7

Receipts

-1.5
-1.3
-l.9
-2.0
-2.2
-2.2
-l.9
-2.2
7.1 -2.3
7.0 -2.7
6.4 -2.8
6.3 -2.9
6.2 -3.0

Total

2.5
3.6
3.6
4.1
4.3
4.0
4.5
4.5
4.8
4.3
3.6
3.4
3.1

Total
outlays

10.0
1l.0
12.1
13.9
13.6
13.0
12.7
12.6
13.4
12.9
12.0
1l.8
11.7

• $50 millIOn or less.

Pollution control.-Outlays for pollution control are estimated to
be $4.5 billion in 1987, including $0.8 billion for cleaning up abandoned hazardous waste sites and chemical spills, which continues
the expanded effort begun in 1986.
While new budget authority of $1.8 billion will be requested in
1987 for the construction of sewage treatment systems, the program must be reauthorized before the request for funding will be
submitted.
Water resources.-Outlays for water resources are estimated to
be $3.8 billion in 1987, $0.1 billion less than 1986. Most of the
proposed funding covers construction of projects started in previous

years and operation and maintenance costs of completed projects.
Nineteen new construction starts, including four projects proposed
by the administration in prior budgets, are proposed. Army Corps
of Engineers expenses for the Nation's harbors are now financed
almost entirely by general tax revenues. IIi anticipation of enactment of pending legislation to recover these expenses, the budget
assumes that budget authority of $0.2 billion for operation and
maintenance will be financed by navigation user fees. The administration's policy is to require the users of Federal commercial services to pay for these services and to require concurrent recovery of
construction-period costs. The administration also proposes to
gradually double the existing lO-cent per gallon user fee on fuel
used to transport cargo on the inland waterway system.
In addition the administration proposes to terminate the Soil
Conservation Service small watershed program, which provides
flood control and drainage facilities that are usually within the
financial and engineering capability of non-Federal entities to provide for themselves.

Conservation, recreation, and other.-Outlays for conservation
and land management are estimated to be $0.6 billion in 1987, a
decrease of $0.5 billion from 1986. The decrease is due to higher
offsetting receipts expected from the sale of timber and minerals
on Federal lands, changes in programs to improve the management
and productivity of the national forests and public lands, streamlining mineral leasing programs, the maturation of the abandoned
mined land reclamation grant program, and termination of several
Soil Conservation Service programs.
Outlays for recreational resources are estimated to be $1.4 billion, a decrease of $0.2 billion from 1986. This reduction is due to a
reduction in recreational land acquisition, management efficiencies, and a proposed increase in user fees.

AGRICULTURE
The goals of Federal agriculture price support, credit, and insurance programs are to promote economic stability and a marketoriented farm economy. These goals will be served by the recently
enacted Farm Security Act of 1985 (known as the farm bim, which
sets farm policy for the next 5 years. That bill will provide the
Secretary of Agriculture with authority to bring U.S. supported
crop prices close to world market levels, thus helping to increase
U.S. agriculture exports. Agricultural productivity is enhanced further through research and other services assisted by the Federal
Government. Total outlays for agriculture in 1987 are expected to
be $19.5 billion, a decrease of $6.3 billion from 1986.
42

Farm income stabilization.-The Commodity Credit Corporation
(CCC) provides producers of agricultural commodities with price
and income support through loans, purchases, payments, and other
activities. Federal crop insurance is the primary means of alleviating losses to crop producers caused by natural disasters. The Farmers Home Administration (FmHA) also provides credit to farmers
through the agricultural credit insurance fund (ACIF).
The administration's budget proposals are intended to reform
existing programs and eliminate costly duplication of subsidies that
distort agricultural markets and harm U.S. farm exports. Outlays
for farm income stabilization programs are expected to increase
from $23.8 billion in 1985 to $24.0 billion in 1986. This is a result of
higher CCC outlays for price support mechanisms set by law. Outlays of $17.9 billion are estimated in 1987. This farm bill should
reduce the need for substantial supply control of agricultural products while still providing price stability. In 1987, $3 billion of new
guaranteed loans will be offered for export sales that would not
occur without Federal intervention. The administration proposes
that the FmHA move toward guarantees of private loans rather
than subsidized direct Federal loans both to enhance credit efficiency and to reduce demands on the Federal budget.

Outlays for Agriculture
$ 8IIIons
30

$ BIIIona
30

o
'1m 78

0
79

ffl

Agricultural research and services.-Agricultural research programs help to increase productivity by developing new knowledge
about human nutrition and food. Long-term basic research will
continue to receive higher priority and more Federal aid than
short-term applied research and development, which is more appropriately financed by private industry. Agricultural services include
marketing, animal and plant health inspection programs, and the
collection and distribution of economic data. Legislation will be
proposed to expand the user fees charged for these services. Outlays for agricultural research and services are estimated to be $1.6
billion in 1987, compared to $1.8 billion in 1986.

COMMERCE AND HOUSING CREDIT
Commerce and housing credit programs channel credit assistance
to the housing sector; support an environment in which all sectors
of the economy may compete equally for credit; insure bank, thrift,
and credit union deposits; and provide postal services. Outlays are
estimated to be $1.4 billion in 1987.
OUTLAYS FOR COMMERCE AND HOUSING CREDIT
(In billions of dollars)
Mortgage
credit and
deposit
insurance

1977 ......................................................................................................
1978......................................................................................................
1979 ......................................................................................................
1980......................................................................................................
1981 ......................................................................................................
1982......................................................................................................
1983 ......................................................................................................
1984......................................................................................................
1985......................................................................................................
1986 estimate........................................................................................
1987 estimate........................................................................................
1988 estimate................................................ ,.......................................
1989 estimate........................................................................................

- 0.2
3.6
2.3
5.6
4.7
4.0
3.9
3.8
0.9
0.2
- 3.1
- 2.4
- 3.4

Postal

Setvice

2.1
1.3
0.9
1.2
1.4
0.2
1.1
1.2
1.4
1.3
2.7
5.1
1.8

Other
advancemerit of
commerce

1.2
1.4
1.5
2.5
2.1
2.1
1.7
1.9
2.0
2.3
1.7
1.2
1.2

Total

3.1
6.3
4.7
9.4
8.2
6.3
6.7
6.9
4.2
3.8
1.4
3.8
- 0.5

Mortgage credit insurance.-The Federal Government aids the
housing industry and homebuyers by promoting stable, noninflationary economic growth. Consistent with the policy to reduce Federal intervention in private markets, the administration is proposing to terminate or privatize programs in which beneficiaries are
served by existing private market mechanisms. The budget also
proposes to raise user fees for credit programs in which the Government unfairly competes with the private sector.

The Federal Housing Administration (FHA) insures home mortgages for individuals. The administration proposes a guaranteed
loan limitation of $50.9 billion in 1987 for this purpose, and also
plans to increase the premium charged for FHA insurance from
3.8% to 5.0%. Other changes proposed for FHA include: better
targeting of programs for low-income homebuyers by restricting
eligibility, and a careful assessment of the most efficient way to
sell FHA mortgage insurance business to the private sector. The
administration proposes the rental housing voucher program to
replace the currently costly new construction programs for housing
for the elderly and handicapped. The Farmers Home Administration housing assistance programs would be terminated. In addition,
the administration proposes fee increases on debt obligations for
Federal Government agencies and Government-sponsored enterprises which participate in the secondary mortgage market. The
Government National Mortgage Association, the Federal Home
Loan Mortgage Corporation and the Federal National Mortgage
Association would each be mandated a fee increase to lessen the
advantages each has over the private market.

Bank, thrift, and credit union deposit insurance.-The provision
of deposit insurance is an increasingly important stabilizing influence on the Nation's economy, given the record number of bank
failures in calendar year 1985 due to severe problems in the agricultural sector. These insurance programs are operated by the
Federal Deposit Insurance Corporation, the Federal Savings and
Loan Insurance Corporation, and the National Credit Union Administration.
Receipts are estimated to exceed costs for these insurance funds
by $1.5 billion in 1986 and $2.4 billion in 1987.
Postal Service.-The administration proposes to stop reimbursing
the Postal Service for losses in revenue associated with carrying
certain categories of mail at free or reduced rates. However, legislation will be proposed to enable the Postal Service itself to continue the subsidy for most existing subsidized mailers. The outlays of
the Postal Service are composed of the payments by the general
fund to the postal service fund, and the net outlays (spending offset
by income, such as proceeds from the sale of stamps) of the postal
service fund. Total outlays for 1987 are estimated to be $2.7 billion.
Other advancement of commerce.-The administration proposes
to transfer the Small Business Administration (SBA) and many of
its noncredit programs to the Department of Commerce as part of
an overall effort to increase reliance on the private sector and
reduce Federal credit programs. SBA's loan programs would be
terminated.

TRANSPORTATION
Federal transportation programs assist State and local governments as well as private enterprise by funding projects and research that promote safe, efficient movement of people and distribution of goods and services. Outlays for transportation are estimated to be $25.5 billion in 1987, $1.6 billion less than in 1986.
The administration stresses the Federal Government's role in
national transportation programs and proposes reduced, but flexible funding for local transportation projects in addition to elimination of maritime and railroad subsidies. The budget also reflects
the administration's continued efforts to reduce the Federal role in
commercial transportation and to require users to pay the full cost
of the transportation services they receive.

Highways.-The administration proposes to limit 1987 funding
for programs supported by the highway trust fund to anticipated
highway user fee receipts. Outlays for highways are estimated at
$13.6 billion in 1987, including outlays associated with a proposed
block grant to fund local transportation projects. The total is $0.5
billion below 1986.
Mass transit.-The administration continues to believe that funding of local transportation is not an appropriate Federal Government role, because benefits accrue locally. The administration
therefore proposes to limit 1987 funding from the mass transit
account to the level of receipts provided by the one cent of the
gasoline tax dedicated to mass t ransit activities. This assistance, in
conjunction with the $2.2 billion in proposed highway block grant
funds, would be distributed by formula block grant and could be
used for local transportation needs. Outlays for mass transit are
estimated to decline from $3.5 billion in 1986 to $3.4 billion in 1987.

Air transportation.-Outlays for air transportation are estimated
at $5.2 billion in 1987, $0.2 billion more than 1986. These levels
include funding for the Federal Aviation Administration's (FAA)
capital modernization program, 15,000 air traffic controllers, additional airline and aircraft inspectors, and elimination of air carrier
subsidies. Legislation has been proposed to finance about 75% of
the FAA's operations and maintenance activities from the airport
and airway trust fund.

Water transportation.-Outlays for water transportation are estimated to decline to $2.9 billion in 1987, from $3.4 billion in 1986.
The budget request for the Coast Guard continues 1986 programs
with emphasis on maritime drug interdiction operations and moderization of shore facilities. The budget also includes proposed
user fees for direct and indirect services provided by the Coast
Guard to commercial operators and recreational boaters. These fees
would yield an estimated $0.2 billion in offsetting receipts in 1987.
The administration continues to support the policy that U.S.-flag
ship operators be permitted to build or acquire vessels abroad. The
budget includes funding for operating subsidies to meet the Federal
Government's obligations on eXUlting contracts; no new contracts
are anticipated. Several new initiatives are being propoiled to
reduce unwarranted maritime subsidies, including termination of
new guaranteed loan commitments for ship construction, Federal
aid to maritime schools, and maritime research and development.
Railroads.-The budget continues the administration's policy of
reducing Federal responsibility for rail activites unrelated to
safety. Subsidies for Amtrak and the United States Railway Association would end. Outlays for railroads are estimated to decline
from $0.9 billion in 1986 to $0.3 billion in 1987.

Outlays for Transportation
$1IIIOans
JO

$--

'fIT7 78

0
79

ffl

COMMUNITY AND REGIONAL DEVELOPMENT
Federal policy emphasizes the primary role that private, State,
and local resources must play in community and regional development. The administration believes that Federal programs that support community and regional development should devolve as much
responsibility as possible to States and local governments, which in
many cases brings closer to the people the decision on whether to
pay to support the programs. Programs that interfere with private
sector activity should be curtailed. Total outlays for this function
are estimated to be $6.5 billion in 1987, a decrease of $1.4 billion
from 1986.

Community development.-The community development block
grant (CDBG) program administered by the Department of Housing
and Urban Development is the principal program in this category.
The CDBG program provides community and economic development support to cities, counties, Indian tribes, and U.S. territories.
The nature of CDBG allows States and localities to allocate funds
to supplement other resources in ways that they choose. The administration will propose to reform the process through which
CDBG grants are distributed to mitigate the effects of program
reductions on communities with the greatest need. Outlays for
CDBG are estimated at $3.1 billion in 1987, down from $3.6 billion
in 1986.
The administration proposes to terminate urban development
action grants, rental development grants, and rental rehabilitation
grants in 1987. The CDBG program will allow communities to meet
most of these same program objectives with greater local discretion. Total outlays for community development are estimated to be
$3.9 billion in 1987, a $0.7 billion decrease from 1986. Since the full .
effect of the proposed terminations will not be felt in the first year,
outlays will continue to decline through 1989.
Area and regional development.-Programs in this category support rural development, development of American Indian tribal
governments, and multi-State regional development. Total outlays
in area and regional development are estimated to be $2.8 billion
ill 1987, down from $3.0 billion in 1986.
Most assistance provided by the Farmers Home Administration
rural development loan and grant programs and the Economic
Development Administration is proposed for termination. The goals
of these programs will continue to be met through the CDBG
program and other methods at the discretion of State and local

governments. The administration continues to propose termination
of the Appalachian Regional Commission, since it has outlived its
purpose following the economic growth experienced by that region
and the Federal funding it has received to date. Also proposed for
termination is direct funding to the Tennessee Valley Authority for
regional economic, community, and agricultural development programs that are more appropriately private or State and local government responsibilities. To the extent that Federal assistance
might be warranted, it can be allocated more equitably by programs administered nationally by other Federal agencies.

Disaster relief and insurance.-The Federal Government provides
disaster relief and insurance to supplement private, State, and
local government resources when these resources are insufficient.
Disaster loans administered by the Small Business Administration
are proposed for termination because insurance is available to
covel;" losses. The administration also proposes to continue the
phaseout of the subsidy in national flood insurance through rate
iD.creases and other changes to recover clearly allocable costs from
beneficiaries.

Outlays for Commurity and Regional Development
$--

$ BIIIons

-2
fIT7 78

82 83 84 85 86

-2
88 89

EDUCATION
The administration's policies on education emphasize national
leadership and dedication to excellence in education for all children. Federal programs for education assist parents, States, and
localities in providing education, especially for educationally disadvantaged, low-income, and handicapped persons. Outlays for this
function are estimated to be $15.4 billion in 1987, a 12.4% decrease
fr.om the 1986 level.

Elementary, secondary and vocational education, and education
for the handicapped.-Programs in this category are primarily Federal grants designed to help States educate students with special
needs. For 1987, the administration proposes to finance mOM of the
major grant programs at or near the 1986 level. A major reduction
is proposed for vocational education; remaining funds will be concentrated on the disadvantaged and handicapped. The administration continues to support legislation to allow parents of children
selected to participate in the compensatory education program the
option of using program funds as vouchers to obtain educational
services at the private or public school of their choice. Outlays for
these programs are estimated to be $7.4 billion in 1987.

Outlays for Education
$1IIIIIona

$ BI1IIona

20-.---------------------.-20

\\\\'\\~_....J 15

o
rm

0
78

Higher education.-Estimated outlays for higher education are
$6.8 billion in 1987. The administration proposes reforms for Federal student aid to reduce excessive levels of spending and to target
available aid to the most needy students.
The Administration is also proposing an income-contingent loan
program to replace national direct student loans. Under this program, students would receive unsubsidized loans with repayments
adjusted according to the students' ability to pay.

TRAINING, EMPLOYMENT, AND SOCIAL SERVICES
Federal programs in this area are designed to facilitate the operation of the labor market and provide social services to needy
individuals. Outlays for these activities are estimated to be $12.1
billion in 1987, a decline of $1.0 billion from 1986.
Training and emplogmenl.-Training and employment programs
are designed both to improve individuals' abilities to obtain and
retain jobs by developing job skills and to support services that
match individuals with jobs. The major Federal activities in this
area are financed through grants to States. These grants include a
block grant that allows States to design training programs to meet
the needs of their disadvantaged population and categorical grants
for the employment service, public service employment for older
workers, summer youth employment and training, and job placement and training for workers displaced by changing economic
conditions. The administration proposes to change the distribution
of the latter two grant programs to ensure that they are targeted
to areas of greatest need.
The administration proposes to reduce the Jobs Corps from
40,500 to 22,000 slots. At the lower program level, centers that
remain open would be near where the youth needing service live,
would afford the best possible learning environment, and would be
most cost effective. Outlays for training and employment are estimated to be $4.5 billion in 1987.
Social services.-The Federal Government makes grants to
States and to public and private institutions for a variety of social
services. Beneficiaries include low-income persons, the elderly, the
disabled, children, youth, and native Americans. Outlays for social
services are estimated to decrease from $7.2 billion in 1986 to $6.9
billion in 1987.
The social services block grant gives States discretion to determine which social services will be offered and who will be eligible
to receive them. Special grants are given to States to aid special
populations such as the elderly and the physically or mentally
handicapped. The administration is proposing to close out the duplicative community services block grant. States may continue
community service programs with social services block grant funds.

Outlays for Training, Employment, and Social Services
$ 8IIIona

$ BIIIona
~.--------------------------------------.~
Total

Block
Grant

rIT7 78

f1IcaIv-..

82 83 84 85 86 ffI 88 89

EafImoIe

The Federal Government also makes grants to help States provide foster care and adoption assistance, and reunite children with
their families. The administration is reproposing a new bonus
system for 1987 to reward States that resolve children's problems
quickly and return them to permanent homes.

HEALTH
The Federal Government contributes to meeting national health
care needs by financing and providing health care services, promoting disease prevention, and supporting research and training. Federal outlays for these programs are estimated to decrease from $36
billion in 1986 to $35 billion in 1987.

Medicaid.-More than two-thirds of Federal outlays for health in
this function is devoted to medicaid. Under current law, estimated
Federal medicaid outlays of $25.9 billion in 1987 and an additional
$21.3 billion provided by States are expected to finance care for
23.6 million poor Americans. For 1987 the administration proposes
limiting medicaid expenditures to $1 billion below projected levels.
52

Outlays for Health
$ sa-

$ BIIIona

4Q,-----------------------------------------r40

r:m

0
78

In subsequent years, the growth in medicaid costs would be limited

to the increase in prices in the medical care sector. The administration also proposes substantial new program reforms to significantly
increase State flexibility to control costs.

Other health programs.-Programs in this category include the
Indian Health Service, the National Health Service Corps, and
health block grants to States. In addition, the Federal Government
provides 85% of the Nation's expenditure on basic, health-related
research. Outlays for this research are estimated to be $5.4 billion
in 1987. Because the supply of health care professionals is now
adequate, the administration .proposes ending direct Federal subsidies for health professions training except for loan guarantees.
Estimated outlays of $0.8 billion in 1987 will help protect consumers from unsafe products, and workers from occu?ational hazards.
The administration has proposed that the Federal employees
health benefits program be modified to increase competition and
reduce costs. Under this proposal, employees would be given a
wider range of choices among health insurance plans and would be
encouraged to choose low-cost plans through a system of rebates.
The administration's proposal is expected to result in outlay savings of $1.2 billion in 1987.

Outlays for child nutrition and other food programs, excluding
food stamps, are estimated to be $5.8 billion in 1987. The budget
proposes to discontinue meal subsidies for students from non-needy
families in school lunch and breakfast programs and child care
facilities.
Under proposed law, estimated food stamp outlays including nutrition assistance to Puerto Rico are $12.3 billion in 1987, compared
to $12.5 billion for 1986. An annual cost-of-living adjustment is due
in October 1986. The budget includes proposals to increase employment opportunities for able-bodied reci')ients and to reform Federal
funding for State and local administrative costs. Similar changes in
funding for administrative costs are proposed for aid to families
with dependent children and medicaid.

Unemployment compensation.-Outlays for unemployment compensation are estimated to increase from $16.5 billion in 1986 to
$16.8 billion in 1987. About 2.2 million workers per week are
estimated to receive benefits in 1987. The administration is proposing legislation to extend Federal-State unemployment insurance
coverage to rail workers.

Outlays for reome Security
$1IIJIIons
140

$ BIIIona
140

Total
120

120

100

"f1T7 78

79 80

n.caI Years

http://fraser.stlouisfed.org/
56
Federal Reserve Bank of St. Louis

81 82 83 84 85 86 ffl 88 89
£atImaIe

Other income securitu.-Outlays for the supplemental security
income program (SSI), which pays benefits to an estimated 4 million needy aged, blind or disabled individuals, are estimated to be
$10.5 billion in 1987. SSI payments continue to be adjusted for
changes in the cost-of-living. Federal outlays for aid to families
with dependent children (AFDC) and child support enforcement are
estimated to be $8.9 billion in 1987. Approximately 3.7 million lowincome families are estimated to receive AFDC benefits in 1987
under current law. The budget proposes to increase recipients'
work opportunities and to reform eligibility rules. Other income
security programs include the earned income tax credit and lowincome home energy assistance.

SOCIAL SECURITY
The Federal Government contributes to the income security of
aged and disabled Americans through social security, which is
comprised of the old-age and survivors insurance (OASI) and the
disability insurance (DI) programs. Social security represents about
one-fifth of estimated total Federal outlays in 1986 and provides
benefits to one in every six Americans. As a result of the Balanced
Budget and Emergency Deficit Control Act of 1985, the receipts
and outlays of the OASI and DI trust funds are now off-budget and
are exempt from any general budget limitation imposed by statute.

Outlays for Social Security
$ 8IIIons

$ 8IIIons

~~--------------------------------------~~

200

150

100

o
f.Tl7 78

ffl

Social security.-Social security affects the lives of most Americans, either through benefits received or through payroll taxes
deducted from earnings. Outlays for social security old-age, survivors, and disability programs are estimated to increase from $200
billion in 1986 to $212 billion in 1987, primarily because of cost-ofliving increases and increases in the number of beneficiaries.

VETERANS BENEFITS AND SERVICES
Benefits and services are provided to meet the Nation's obligation to veterans of military service. Outlays for this function are
expected to be $26.4 billion in 1987.

Hospital and medical care.-The Veterans Administration (VA)
operates the Nation's largest medical care system. The Administration's comprehensive reform of VA medical care eligibility is being
reproposed. This reform would allow V A to target and sustain
quality care primarily for veterans injured during military service
and for veterans without resources to defray all or part of their
health care expenses. In addition, it would require health insurers
to reimburse the Government for care provided to non-ser,viceconnected veterans with health insurance. The budget also proposes to restructure and enhance long-term care policy to make
greater use of VA-sponsored State and community nursing home
care programs and non-institutional programs. Outlays for hospital
and medical care programs (which exclude third party reimbursement) are estimated at $9.9 billion in both 1986 and in 1987.
Compensation.-Compensation btnefits are provided to an estimated 2.6 million veterans with service-connected disabilities and
survivors of such veterans. Outlays for veterans compensation benefits are estimated to increase from $10.5 billion in 1986 to $10.7
billion in 1987. These estimates reflect an administration proposal
to provide a 3.7% increase in compensation benefits effective with
the January 1987 payments.
Pensions.-Pensions are provided to needy veterans with wartime service-both combat and non-combat veterans alike-and to
needy survivors of deceased veterans. Outlays for pension benefits
are estimated at $3.8 billion in both 1986 and 1987. Pension recipients are scheduled to receive an estimated 3.7 % increase in benefits effective with the January 1987 payments.
Education, training, and rehahilitation.-The GI bill provides
education benefits to veterans and active duty personnel who
served, at least in part, between February 1, 1955, and December
31, 1976. These benefits are designed primarily to help veterans
adjust to civilian life.
58

Outlays for Veterans Benefits and Services
$--

$-30.--------------------------------------.30
25

fJ77 78

0
79

82 83 84 85 86

88 89

Individuals who entered military service after 1976 are eligible
for the post-Vietnam era educational assistance program (VEAP).
Enrollment in this program has been closed since July 1985, while
the all-volunteer force educational assistance test program is in
effect. Because this costly program is unnecessary for recruitment,
the administration is proposing to curtail the test and reopen
VEAP on October 1, 1986.
Outlays for this purpose are estimated to decline from $633
million in 1986 to $553 million in 1987 because of the continued
decline in the number of eligible beneficiaries.

Other.-The VA provides additional assistance to veterans
through housing loan guarantees. New guaranteed loan commitments are expected to rise slightly from $12.3 billion in 1986 to
$14.7 billion in 1987. As part of the administration's policy to make
Federal credit programs self-supporting, the existing 1% funding
fee charged on VA-guaranteed housing loans would be increased to
2% in 1987-increasing to 3.8% by 1990-and could be added to the
mortgage amount. Direct loans are available to disabled veterans
eligible for specially adapted housing and to non-veterans who
purchase property from the V A portfolio.

ADMINISTRATION OF JUSTICE
Federal activities in this function include law enforcement, litigative and judicial activities, criminal justice assistance to State
and local Governments, and the operation of prisons to house Federal inmates. Outlays for these activities are estimated at $6.9
billion in 1987.

Federal law enforcement activities.-More than one-half of outlays for programs in this function are for law enforcement activities. Outlays for this purpose are estimated to be $3.9 billion in
1987.
In the Justice Department, the Federal Bureau of Investigation
(FBI) and the Drug Enforcement Administration (DEA) work together with other Federal agencies through 13 regional Organized
Crime Drug Enforcement task forces. The FBI also enforces a
broad range of other criminal statutes, and works with other Federal, State, and local law enforcement authorities. In 1987, additional resources are requested for foreign counterintelligence activities and for the development of artificial intelligence computer
capability to aid in counterterrorism activities and other investigations.

Federal litigative and judicial activities.-The administration's
efforts in this area focus on enforcing organized crime and drug
statutes; strengthening -efforts to combat fraud and waste; recover_ing delinquent debt owed the Government; and defending civil
claims filed against the Government and its officials.
The budget does not include any proposed funding beyond 1986
for the Legal Services Corporation, created to assist State and local
agencies that provide free civil legal assistance to the poor. The
social services block grant is sufficient to fund legal services that
States wish to provide for their citizens. In addition, it is expected
that programs developed by State and local bar associations to
provide free assistance to indigent citizens will continue to grow,
consistent with private attorneys' ethical obligations to provide
such free services. Outlays for litigative and judicial activities are
estimated to be $2.2 billion in 1987.
Federal correctional activities.-The Federal Government is responsible for the care and custody of prisoners charged with or
convicted of violating Federal laws. In response to the growing
Federal prison population, funds are requested for the construction
of three new prisons, as well as for additions and renovations to
existing prison facilities. Outlays for correctional activities are estimated to be $0.7 billion in 1987.
60

Outlays for Administration of JUstice
$ 8IIIons

$ __

8,--------------------------------------.8

2
Federal Law £nfoJ eel i III'Jt AdIvIIIes

1JT7 78 79 80

82 83 84 85 86 fI/

88 89

Criminal justice assistance.-The administration is again requesting no new budget authority for juvenile justice and delinquency prevention programs because the primary objective of the
programs-the separation of juvenile from adult offenders-has
largely been accomplished. In addition, the administration is proposing that States and localities assume primary responsibility for
activities currently funded by the State and local assistance program since the benefits of the program accrue to the States and
localities. Outlays for criminal justice assistance in 1987 are estimated to be $0.2 billion.

GENERAL GOVERNMENT
This function comprises central Government activities for both
the legislative branch and the Executive Office of the President. It
also includes tax collection by the Internal Revenue Service (IRS),
general property and procurement activities of the General Services Administration, central personnel management activities of
the Office of Personnel Management (OPM), and archive and recordkeeping activities. Outlays for general government are estimated to be $6.1 billion in 1987.
61

Outlays for General Government
$ BlIIona

$ BIIIons

7~------------------------------------~7

...--....

~---~
-- ------~--~
-::::::: ::::: :::: : ::::::::::::::::::::::::::::

-------------------------------------------------------------------- 4

o~----------------------------------~~~~o
~

"S77 78

82 83 84 85 86

88 89

Administration initiatives include expanded efforts to identify
and collect unpaid taxes. The IRS will continue to modernize and
streamline its operations, with the use of new tax processing equipment and automated collection of unpaid tax liabilities. Greater
emphasis on audits and increased litigation of tax shelter cases are
expected to encourage voluntary compliance with the tax laws. A
substantial increase in the tax audit staff is proposed, which will
have revenue benefits well beyond the increased cost.

GENERAL PURPOSE FISCAL ASSISTANCE
General purpose fiscal assistance provides financial aid to State
and local governments without major restrictions or matching requirements. Historically, the Federal Government has provided
substantial levels of this assistance, which can generally be used
for State or .local services, construction, debt retirement, and other
purposes of general government. However, the Federal Government can no longer afford to continue the general revenue sharing
program. Consequently, outlays for this assistance are estimated to
decline from $6.2 billion in 1986 to $1.7 billion in 1987.
62

General revenue sharing.-General revenue sharing provides assistance to nearly 39,000 local governments. The administration is
proposing to end general revenue sharing in 1986. This termination
is consistent with the substantial improvements during the past
decade in the abilities of State and most local Governments to meet
their own fiscal needs. Outlays for the general revenue sharing
program are estimated to be zero in 1987, based on the proposed
termination of the final quarterly payment under the currently
authorized program.
Other general purpose fiscal assistance.-This category includes
payments to the District of Columbia and other payments to States,
localities, and territories. Some jurisdictions receive payments from
the Federal Government based on receipts generated from the
timber sales, mineral leases, grazing permits and other activities
on Federal property. Outlays for other general purpose fiscal assistance are estimated to be $1.8 billion in 1986 and $1.7 billion in
1987. The administration is proposing legislation that will allow
the Federal Government to deduct the costs of managing the lands
that generate timber and mineral receipts before calculating the
States' and counties' shares.

Outlays for General Purpose RscaI Assistance
$1IIIIonI

$ IIIIIonI
~,-------------------------------------~~

1W7 78

82 83 84 85 86 fIl

NET INTEREST
Net interest includes the Federal Government's cost of borrowing
and most of its income from lending money. It consists of the
interest costs of borrowing to finance the public debt and the
collections of interest payments from Government trust funds and
from the public.
Despite the projected decline in interest rates, larger borrowing
requirements cause an expected increase in net interest outlays
from $142.7 billion in 1986 to $148.0 billion in 1987.
The public debt is composed of Treasury securities held by the
public and by Government accounts. The interest cost associated
with these securities is shown as interest on the public debt.
Most trust fund balances are required by law to be invested in
Federal securities. The interest outlays on this debt are included in
interest on the public debt. However, the interest earned by most
trust. funds is deducted in this function so that net interest includes
only the Government's net transactions with the public.
Other interest income from Federal agencies and the public as
well as other interest costs of the Government are also included in
this function in order to show net interest transactions with the
public.

Net ~ Outlays
$--

$BIIIon8

175

150

125

125
Told

100

100
....

7S
Net InIInIst

o
W778

79 80

828384 85 86

88 89

NET INTEREST
(In billions of dollars)

1985

1986

1987

1988

1989

actual

estimate

Interest on the public deb!... ................................................
Interest received by on-budget trust funds ..........................
Interest received by off-budget trust funds ..........................
Other interest ............................................~ ..........................

179.1
-22.1
-4.1
- 23.4

196.1
-26.7
-4.4
- 22.3

206.9
-29.6
-4.7
-24.5

211.8
- 33.5
-6.3
-26.9

206.5
-36.7
-8.7
-25.1

Net interest outlays ............................................

129.4

142.7

148.0

145.1

136.0

ALLOWANCES
Allowances cover certain forms of budgetary transactions that
are expected to occur but are not reflected in the program details
of the preceding functions. When these transactions take place,
they are reported as outlays for the appropriate agencies and functions.
The allowance for civilian agency pay raises reflects the assumption that Federal civilian employees will receive a 3.0% pay raise
in January of each year beginning in 1987. The allowance for Coast
Guard military personnel pay raises reflects the administration's
proposed 4.0% pay increase in October 1986 and assumes that pay
raises in all other years will match those granted to Department of
Defense military employees.
In order to conform more closely the financing of Federal civilian
retirement systems to private sector retirement plans, the administration is proposing to increase the contributions by both Federal
employees and employing agencies to the retirement trust funds
from the current 7% of payroll to 9% in 1987. The allowance for
increased employing agency payments for employee retirement
covers the full amount of the additional contributions by civilian
agencies, with the exception of the Postal Service.
An allowance for other requirements contains amounts for potential reestimates and minor programmatic changes, which net to
zero.

UNDISTRIBUTED OFFSETTING RECEIPTS
Offsetting receipts are generally deducted from agency and subfunction totals, but in three instances they are deducted from the
budget totals as undistributed offsetting receipts.
Agency contributions for employee retirement are counted as
outlays of the paying accounts. Deductions for the receipt of these
payments are not made against the receiving agencies and functions because the size of the deductions would seriously distort the
budget totals for these programs. Hence, these collections are deducted as undistributed offsetting receipts. There are two major
categories of these collections: those received by budget accounts,
primarily the military retirement and civil service retirement trust
funds, and those received by the off-budget social security trust
funds. Total collections by the budget accounts are estimated to be
$26.3 billion in 1986 and $28.5 billion in 1987, while the collections
by off-budget accounts amount to $2.8 billion in 1986 and $3.2
billion in 1987. Included in these totals are the effects of the
administration's proposals to increase employing agency contributions from the current 7% of payroll to 9% in 1987 and to require
the Postal Service to begin paying the full employer share of the
cost of employee pensions.
Payments to the Federal Government for rents and royalties on
. the Outer Continental Shelf (OCS) are large, and their inclusion in
a particular function would distort the display of budget totals.
Offsetting collections for OCS are estimated to be $5.4 billion in
1986 and $5.3 billion in 1987.
The administration proposed to sell Conrail for $1.2 billion in
1986 and anticipates that the sale will be concluded in 1986. The
administration also proposes to sell the naval petroleum reserve for
$3.6 billion, payable in two installments in 1987 and 1988, and the
five Federal power marketing administrations, beginning in 1988.
Since the proceeds from these sales are relatively large, they are
recorded as undistributed offsetting receipts.

TAX EXPENDITURES
Tax expenditures are features of the individual and corporation
income tax laws that provide special benefits or incentives in comparison with what would be permitted under the general provisions
of the Internal Revenue Code. They arise from special exclusions,
exemptions, or deductions from gross income, or from special credits, preferential tax rates, or deferrals of tax liability.
Tax expenditures are so designated because they are one means
by which the Federal Government carries out public policy objectives; in many cases, they can be considered as alternatives to
direct expenditures. For example, investment in research and development is encouraged by allowing such costs to be expensed; a
program of direct capital grants could also achieve this objective.
Similarly, State and local governments benefit from both direct
grants and the ability to borrow funds at tax-exempt rates.
Because tax expenditures can be viewed as alternatives to direct
Federal spending programs, it is desirable that estimates of tax
expenditure items be comparable t o outlay programs. Thus, tax
expenditures are generally shown as outlay equivalents, that is, the
amount of budget outlays required to provide the same level of
after-tax benefits by substituting a direct spending program for the
tax expenditure. The accompanying table displays estimates of tax
expenditures classified by funct ion. Special Analysis G contains
more detailed estimates and explanation.
TAX EXPENDITURES ESTIMATED AS OUTLAY EQUIVALENTS
(In billions of dollars)
Function

1985

National defense.............................................................................................................
2.4
International affairs........................................................................................................
4.4
General science, space, and technology .........................................................................
7.0
Energy............................................................................................................................
3.2
Natural resources and environmenl................................................................................
2.0
Agriculture .....................................................................................................................
1.2
Commerce and housing credit ........................................................................................ 188.0
Transporlation ................................................................................................................
0.2
Community and regional development ............................................................................
0.9
Education, training, employment, and social services ..................................................... 27.8
Health ............................................................................................................................ 34.6
Income security.............................................................................................................. 102.8
Social security ................................................................................................................
17.8
Veterans benefits and services .......................................................................................
2.3
General government .......................................................................................................
0.3
General purpose fiscal assistance................................................................................... 31.9
Net interest....................................................................................................................
0.7

1986

2.5
4.6
4.7
2.7
2.4

1987

2.7
5.0
3.7
2.7
2.8

1.2

1.3

204.6
0.2
1.1
32.2
38.7
113.1
18.6
2.3
0.3
34.7
0.7

220.8
0.1
1.2
34.6
42.9
124.5
19.5
2.3
0.3
37.7
0.7

Part 6a

THE BUDGET PROCESS
The Federal Government allocates resources between the private
and public sectors of the economy through taxing, borrowing, and
spending. Within the Federal Government, the allocation of budget
resources among individual spending programs reflects the national priorities determined by the President and the Congress.

Executive formulation and transmittal.-The budget sets forth
the President's financial plan of operation for the Federal Government. The President's transmittal of budget proposals to the Congress is the result of many months of planning and analysis
throughout the executive branch. Formulation of the 1987 budget
began in mid-1985.
First, policy issues are identified, budget projections are made,
and preliminary program plans are presented to the President. The
President reviews the budget projections in light of spending priorities and the economic outlook, and establishes general budget and
fiscal policy guidelines for the fiscal year that begins more -than a
year later. The President's guidelines also cover the 4 fiscal years
beyond the budget year. Tentative policy decisions and planning
ceilings for the budget year and the following 4 years are then
given to the agencies as guidelines for preparing their budgets.
In the summer, agencies prepare their budget requests, which
are reviewed in detail in the fall by tJle Office of Management and
Budget and presented to the President. The budget sent to the
Congress early each calendar year reflects the needs of individual
programs, the total outlays and receipts that are appropriate in
relation to economic conditions, and the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985.
The President is also required by law to transmit current services estimates with the budget. These estimates are the budget
authority and outlays required to continue Federal programs in
subsequent fiscal years without any policy changes, thereby providing a base with which to compare proposed changes.

Major Steps in the Budget Process
Period Before the Fiscal Year
Jan.

Sept. 30

oct.

Formulation of
President's budgel'
Congressional budget
process, including action
on appropriations and
revenue measures
(beginning 9 months
before liscal year)"
Execution of enacled
budget

, In future years , Ihe President's budget is due 10 be transmitted to Congress on Ihe
fi rsl Monday after January 3rd.
" If appropriation action is not compleled by Sept. 30 , Ihe Congress enacls temporary
appropriations (Le., a continuing resolution).

Congressional action.-Before enacting budget authority, which
permits agencies to incur obligations that result in spending, the
Congress enacts legislation to authorize the program. Many programs are authorized indefinitely, or for a specified number of
years; other programs such as space exploration, defense procurement, foreign affairs, and some construction projects require
annual authorizing legislation. Budget authority is usually provided separately in appropriations bills after the program authorizing
legislation has been enacted. In many cases, budget authority becomes available each year only as voted by the Congress. In other
cases, the Congress has voted permanent budget authority, under
which funds become available annually without further congressional action. For example, social security, medicare, and interest
on the public debt are paid under permanent appropriations.
Under procedures established by law, the Congress considers
budget totals before completing action on individual appropriations. Congressional committees must report budget estimates to
the House and Senate budget committees by February 25. The
Congress is scheduled to adopt by April 15 a concurrent budget
resolution as a guide in its subsequent consideration of appropriations and revenue measures. The resolution sets targets for receipts, outlays and budget authority, and for direct loan obligations
and new guaranteed loan commitments.

Congressional budget resolutions do not require Presidential approval. Frequently, however, there is consultation between the congressional leadership and the administration, because subsequent
legislation developed to attain congressional budget targets must be
sent to the President for approval. In some recent years, the Congress enacted omnibus reconciliation legislation that reduced
budget authority and outlays or increased revenues in response to
directives in the concurrent budget resolution.
Congressional consideration of requests for appropriations and
for changes in revenue laws occurs first in the House of Representatives, where the Ways and Means Committee reviews proposed
revenue measures and the Appropriations Committee studies the
appropriations requests. These committees recommend the action
to be taken by the House of Representatives. After the appropriations and tax bills are approved by the House, they are forwarded
to the Senate, which follows a similar process. When the House
and Senate disagree, a conference committee, consisting of Members of both bodies, resolves the issues and submits a report to both
Houses for approval.
After congressional approval, bills are transmitted to the President for approval or veto. When action on appropriations is not
completed by the beginning of the fiscal year, the Congress enacts
continuing resolutions to provide authority for the affected agencies to continue financing operations up to a specified date or until
their regular appropriations are enacted.

Deficit reduction.-The Balanced Budget and Emergency Deficit
Control Act of 1985 requires the deficit to be reduced in gradual
stages to zero by 1991. Annual deficit targets are established for
the President's budget and congressional budget resolutions.
During the last 2 months before the start of a fiscal year, the
directors of the Office of Management and Budget and the Congressional Budget Office estimate the deficit for that year. If it is at
least $10 billion over the specified target, an automatic sequestration (reduction) process is triggered. Since 1986 began before the
Act was passed, special rules were provided for this year. The
deficit is estimated to be above the target for 1986, so the sequestration process has already started for this year. The reductions
are reflected in this budget.
Budget execution and control.-Once approved, the budget becomes the basis for the financial operations of agencies during the
fiscal year. Most budget authority and other budgetary resources
are made available by the Office of Management and Budget under
an apportionment system designed to ensure the effective and orderly use of available authority.

The executive branch must report to the Congress any administrative action to postpone or eliminate spending authorized by law.
Deferrals, which are temporary withholdings of budget authority,
may be overturned by an act of the Congress at any time. Rescissions, which permanently cancel existing budget authority, must be
approved by the full Congress within 45 days of continuous session.
Otherwise, the withheld funds must be made available for spending.

RELATION OF BUDGET AUTHORITY TO OUTLAYS
Not all of the new budget authority for 1987 will be obligated or
spent in that year.
• Budget authority for social security and most other major
trust funds arises from their receipts and is used over time as
needed for purposes specified by law.
• Budget authority for most major construction and procurement programs covers the estimated full cost of projects at
the time they are started.
• Budget authority for many loan and insurance programs provides financing for a period of years or is a backup that may
be used only in the event of defaults.
As a result of these factors, a large amount of budget authority
carries over from one year to the next. Most is earmarked for
specific uses and is not available for other programs.

Relation of Budget Authority to Outlays - 1987
$ Billions

New Authority
Recommended
for 1987
1.102.0

•

To be spent in 1987

758.7

Outlays
in 1987
994. 0

Authority
written oft,
expired, and adjusted

•
•

(net)

21.3
Unspent Authority
Enacted in
Prior Years
1.114.0

•

To be spent in
Future Years

857.6

•

Unspent Authority
for Outlays in
Future Years
1.201 .0

.••
71 .

PART 6b
FEDERAL CREDIT BUDGET
The Federal Government is the largest financial intermediary in
the United States. At the end of 1985, it held $257 billion in its
direct loan portfolio, and it had guaranteed another $410 billion in
loans. Government-sponsored enterprises lent another $370 billion.
Thus, directly or indirectly, the Government had allocated credit
worth more than a trillion dollars at the end of 1985. By way of
contrast, the total debt outstanding in the United States was
nearly $7 trillion.
In 1985, the Government offered $53 billion in new direct loans
and $85 billion in guaranteed loans to farmers, homeowners, students, small businesses, exporters, utilities and State, local and
foreign governments. The subsidies implicit in these direct and
guaranteed loans amounted to $16 billion. The cost of these largely
invisible subsidies has been borne by all borrowers who have not
received subsidized credit. The unsubsidized borrowers have paid
higher interest rates or fees for their credit or have not received
credit at all. The cost of defaults on these loans has been borne by
taxpayers.
The Federal credit budget, which was introduced in 1980, measures and controls the volume of credit authority. Credit authority
is simply the authority to make new direct or guaranteed loans.
The credit budget measures the volume of new credit authority at
the point when the Government legally contracts to provide the
guarantee or direct loan. It controls the credit authority through
annual ceilings set in appropriations acts on the amount of new
direct or guaranteed loans that individual credit programs may
offer. For 1987, the budget proposes new direct loans of $30.6
billion and new guaranteed loans of $79.7 billion. This is a decrease
from 1985 of 42% in direct loans and 6% in guaranteed loans. The
chart shows the credit budget totals.

Total Federal Crecit Budget
$ IIIIIona

$ BIIIona
~,---------------------------------------~~

125

100

1965

UIImaIe

The economic sectors that receive the most Federal credit are
agriculture and housing. Approximately 50% of new direct loans
over the past decade have gone to agriculture, while over 60% of
new guaranteed loans have gone to housing. The basic rationale of
all Federal credit programs is to provide financing on terms and
conditions that are more favorable to the borrower than financing
otherwise available from private sources. Some of these subsidies
serve worthwhile public purposes and should be continued. Others
do not.
The administration has made reform of the Government's credit
programs a major priority because the benefits of some programs
are exceeded by their large but less visible costs. Many of the
programs are not directing credit resources efficiently and are
subsidizing borrowers who should not receive special assistance.
Proposed reforms include eliminating unnecessary direct and guaranteed loans, charging higher interest rates and loan guarantee
fees to cover default costs, and implementing several management
improvement initiatives. In addition, the administration proposes
to undertake a pilot program in 1987 to sell $4.4 billion in loan
assets from 13 programs to the public. It will also consider reinsuring its guaranteed loans with private companies.

Part 6c

GLOSSARY OF BUDGET TERMS

AUTHORIZING LEGISLATION-Legislation enacted by the Congress to set up or
continue the operation of a Federal program or agency. Authorizing legislation
is normally required for subsequent appropriations, but does not usually provide budget authority.
BUDGET-A plan of proposed receipts and spending for the coming fiscal year.
BUDGET AUTHORITY (BA)-Authority provided by law to enter into obligations
that will result in immediate or future outlays. It may be classified by the
period of availability, by the timing of congressional action, or by the manner
of determining the amount available. The basic forms of budget authority are:
Appropriations-Authority that permits Federal agencies to incur obligations and
to make payments.
Authority to borrow-Authority that permits Federal agencies to incur obligations
and to borrow money to make payments.
Contract authority-Authority that permits Federal agencies to enter into contracts or incur other obligations in advance of an appropriation.
CONCURRENT RESOLUTION ON THE BUDGET-A resolution passed by both
Houses of the Congress, but not requiring the signature of the President,
setting outlay and receipt targets for the Congress.
CONTINUING RESOLUTION-Legislation enacted by the Congress to provide
budget authority for specific ongoing activities when a regular appropriation
for those activities has not been enacted by the beginning of the fiscal year.
CREDIT BUDGET-A plan of proposed direct loan obligations and guaranteed loan
commitments. Budget authority and outlays associated with the credit budget
are included in the budget totals.
CURRENT SERVICES ESTIMATES-Estimates of receipts, outlays, and budget
authority for coming fiscal years that assume no policy changes from the year
in progress. The estimates include the effects of anticipated changes in economic conditions (such as unemployment or inflation), beneficiary levels, pay
increases, and changes required under existing law.
DEFERRAL-Executive branch action that temporarily delays the obligation of
budget authority. Deferrals may be overturned at any time by an act of the
Congress.
FEDERAL FUNDS-Amounts collected and used by the Federal Government for
the general purposes of the Government. The major Federal fund is the general fund, which is derived from general taxes and borrowing. The other forms of
Federal funds involve earmarked collections, such as those generated by and
used to finance a continuing cycle of business-type operations.
FISCAL YEAR-The Federal Government's yearly accounting period, which begins
on October 1 and ends on the following September 30. The fiscal year is
designated by the calendar year in which it ends; e.g., fiscal year 1987 begins
on October 1, 1986, and ends on September 30, 1987. (From 1844 to 1976 the
fiscal year began on July 1 and ended on the following June 30.)
I For more details. see A Glossary of Terms Used in the Federal Budget Process. United States Genera l
Accounting Office. Washington, D.C.

OBLIGATIONS-Amounts of orders placed, contracts awarded, services received, or
similar legally binding commitments made by Federal agencies during a given
period that will require outlays during the same or some future period.
OFFSE'ITING RECEIPTS-Collections deposited in receipt accounts that are offset
against budget authority and outlays rather than being counted as budget
receipts. These collections are derived from Government accounts (intragovernmental transactions) or from the public (proprietary receipts) through activities that are of a business-type or market-oriented nature.
OUTLAYS-Payments, normally in the form of checks issued or cash disbursed, net
of refunds, reimbursements, and offsetting collections. Outlays include interest
accrued on the public debt. Social security outlays are now off-budget; all other
outlays are on-budget.
RECEIPTS-Income, net of refunds, collected from the public by the Federal Government in its sovereign capacity, primarily through the exercise of its power
to tax. Business-type transactions (such as sales, interest, and loan repayments) and payments between Government accounts are excluded from receipts and offset against outlays (see offsetting receipts). Social security taxes
are now off-budget; all other receipts are on-budget.
RECONCILIATION-A reconciliation directive is a provision in the concurrent
resolution on the budget that calls on various committees of the Congress to
recommend legislative changes that reduce outlays or increase receipts by
specified amounts. A reconciliation bill contains these changes.
RESCISSION-A legislative action canceling budget authority previously provided
by the Congress.
SEQUESTRATION-Reduction of new budget authority or other budgetary resources, as defined in the Balanced Budget and Emergency Deficit Control Act
of 1985.
SUPPLEMENTAL APPROPRIATION-An appropriation enacted subsequent to a
regular annual appropriations act. Supplemental appropriations acts provide
additional budget authority for programs or activities (including new programs
authorized after the date of the original appropriations act) for which the need
for funds is too urgent to be postponed.
SURPLUS OR DEFICIT-Difference between receipts and outlays.
TAX EXPENDITURES-Provisions of income tax law that allow a special exclusion, exemption, or deduction from gross income or provide a special credit,
preferential rate of tax, or deferral of tax liability. Tax expenditures frequently have results similar to spending programs, loan guarantees, or regulations.
TRUST FUNDS-Amounts collected and used by the Federal Government for carrying out specific purposes and programs according to a statute or trust agreement and specified by law as being trust fund money, such as the social
security and unemployment trust funds. Trust fund receipts that are not
needed immediately are generally invested in Government securities and earn
interest for the trust fund.

Part 6d

SELECTED TABLES
Page

1. Receipts, Outlays, and Debt, 1977-89 ......................................
2. Composition of Outlays in Current and Constant (Fiscal
Year 1982) Prices: 1967-89......................................................
3. Receipts by Source and Outlays by Function, 1977-87 ........
4. Outlays by Function and Subfunction, 1977-89.....................
5. Outlays by Agency, 1985-91.......................................................
6. Credit Budget: New Direct Loan Obligations and Guaranteed Loan Commitments by Agency....................................
7. Federal Finances and the Gross National Product, 1968-89 .
8. Full-Time Equivalent of Federal Civilian Employment .......
9. Total Receipts and Outlays, 1789-1991 ......................................

77
78
80
82
88
89
90
92
93

Table 1. RECEIPTS, OUTLAYS, AND DEBT, 1977-89
(In billions of dollars)
Actual
Description

1983

Receipts:
On-budget:
270.5 316.4 350.9 410.4
Federal ............................................................ 241.3
106.0
86.0
94.7
Trust funds ..................................................... 70.3
76.9
Interfund transactions ..................................... -32.9 -33.2 -37.0 - 41.6 -47.4

409.3
122.l
-57.l

382.4
147.3
-76.5

469.1
130.2

474.3
143.5

453.2
147.3

517.1 599.3
Total receipts ........................................... 355.6 399.6 463.3
Outlays:
On-budget:
Federal funds .................................................. 304.5
342.4 374.9 433.5 496.2
65.7
84.8
94.2
Trust funds ..................................................... 56.9
59.9
Interfund transactions ..................................... -32.9 -33.2 - 37.0 -41.6 -47.4

617.8

600.6

420.4
459.5
485.2
533.3
583.5
622.8
157.5
197.7
207.2
216.7
228.8
240.7
-77.5 -109.4 -ll3.l -ll3.9 -122.0 -131.0
500.4
547.9
579.2
636.1
690.4
732.5
166.l
186.2
197.9
214.3
242.8
263.7
666.5
734.1
777.1
850.4
933.2
966.1

543.4
107.9
- 57.1

613.3
124.4
-76.5

638.6
726.l
750.9
751.8
773.l
799.2
124.9
152.7
157.4
157.5
166.0
175.6
- 77.5 -109.4 -113.l -113.9 -122.0 -131.0

Total on-budget ....................................... 278.7
Off-budget (trust funds) ..................................... 76.8

1978

314.2
85.4

1979

365.3
98.0

1980

403.9
113.2

1984

1985

1986

1987

1988

1989

Total on-budget ....................................... 328.5
Off-budget (trust funds) ..................................... 80.7

369.1
89.7

403.5
100.0

476.6
114.3

543.0
135.2

594.3
151.4

661.2
147.1

686.0
165.8

769.5
176.8

795.2
184.7

795.4
198.6

817.1
209.6

843.8
219.9

Total outlays ............................................ 409.2
Surplus or deficit (-):
Federal funds ...................................................... - 63.l
Trust funds ..........................................................
9.5

458.7

503.5

590.9

678.2

745.7

808.3

851.8

946.3

979.9

994.0

1,026.8

1,063.6

-71.9
12.7

-58.5 -82.6 -85.8 - 134.2 -230.8 -218.2 -266.6 -265.8 -218.5 -189.5 -176.4
18.3
8.8
6.8
6.2
23.l
32.9
54.4
63.0
74.9
96.0
108.9

Total surplus or deficit (-) ................. -53.6 -59.2 -40.2 -73.8
On-budget .............................................. ( -49.7) (-54.9) (-38.2) ( -72.7)
Off-budget ............................................. (-3.9) (-4.3) (-2.0) ( -1.1)
Debt outstanding, end of year:
Gross Federal debt .... .......................................... 709.l
780.4 833.8 914.3
Held by the public ............................................... 551.8
610.9 644.6 7l5.l
-:J
-:J

1981

Estimate

1981

1977

-78.9 -127.9 -207.8 -185.3 -212.3 -202.8 -143.6 -93.6 -67.5
(-73.9) ( - 120.0) ( -208.0) ( -185.6) ( -221.6) ( -216.0) ( -159.3) ( -126.8) ( -111.3)
(33.2)
(-5.0) (-7.9)
(0.2)
(0.3)
(9.4)
(13.2)
(15.7)
(43.8)
1,003.9
794.4

1,147.0
929.4

1.381.9
1,141.8

1,576.7
1,312.6

Note.-for all years, transactions of the SOCial secUrity trust funds are presented off·budget and transacliOns of formerly off·budget accounts are presented on·budget.

1,827.5
1,509.9

2,112.0
1,714.0

2,320.6
1,855.7

2,509.0
1,948.7

2,684.3
2,015.4

Table 2. COMPOSITION OF OUTLAYS IN CURRENT PRICES: 1967-89
(In billions 01 dollars)
Outlays

Memorandum
Nondefense

Fiscal year

Tolal

1967 ............................................................................................................................................
1968 ............................................................................................................................................
1969 ............................................................................................................................................
1970 ............................................................................................................................................
1971 ............................................................................................................................................
1972 ............................................................................................................................................
1973 ............................................................................................................................................
1974 .............................................................................1 ••••••••••••••• . •••••••••••••••••••••••••• .. •• • • • ••••• • •••••••
1975 ............................................................................................................................................
1976 ............................................................................................................................................
TQ ................................................................................................................................................
1977 ............................................................................................................................................
1978 ............................................................................................................................................
1979 ............................................................................................................................................
1980 ............................................................................................................................................
1981... .........................................................................................................................................
1982 ............................................................................................................................................
1983 ............................................................................................................................................
1984 ............................................................................................................................................
1985 ............................................................................................................................................
1986 estimate ..............................................................................................................................
1987 estimate ..............................................................................................................................
1988 estimate ..............................................................................................................................
1989 estimate ..............................................................................................................................
1

Grants to State and local governmenls excluding those for payments for individuals.

157.5
178.1
183.6
195.6
210.2
230.7
245.7
269.4
332.3
371.8
96.0
409.2
458.7
503.5
590.9
678.2
745.7
808.3
851.8
946.3
979.9
994.0
1,026.8
1,063.6

Social security trust funds.

National
defense

71.4
81.9
82.5
81.7
78.9
79.2
76.7
79.3
86.5
89.6
22.3
97.2
104.5
116.3
134.0
157.5
185.3
209.9
227.4
252.7
265.8
282.2
299.1
322.3

Total
nonde·
fense

86.0
96.2
lOLl
114.0
131.3
151.5
169.0
190.0
245.8
282.2
73.7
312.0
354.2
387.1
456.9
520.7
560.4
598.4
624.4
693.6
714.1
711.8
727.6
741.3

Payments
for
individuals

43.2
49.8
57.l
64.7
80.4
92.9
104.5
120.1
153.5
180.1
45.4
196.3
211.0
232.9
277.5
323.4
356.7
395.3
399.8
425.6
445.9
458.8
485.9
513.6

All olher
grants 1

10.4
12.5
13.0
15.4
17.7
20.6
28.1
28.7
33.3
39.4
10.9
46.1
53.7
55.9
59.4
57.8
50.3
50.8
53.2
57.6
58.2
50.5
48.3
46.5

Nel
Inlerest

10.3
ILl
12.7
14.4
14.8
15.5
17.3
21.4
23.2
26.7
6.9
29.9
35.4
42.6
52.5
68.7
85.0
89.8
11Ll
129.4
142.7
148.0
145.1
136.0

Other

Undistrib·
uted
offsetting
receipts

29.5
30.9
26.3
28.1
28.5
32.2
32.5
36.5
49.4
50.4
14.7
54.5
69.9
73.2
87.4
98.8
94.5
96.5
92.3
113.7
103.0
92.5
94.7
89.0

-7.3
-8.0
-8.0
-8.6
-10.1
-9.6
-13.4
-16.7
- 13.6
-14.4
-4.2
-14.9
-15.7
-17.5
-19.9
-28.0
-26.1
-34.0
-32.0
-32.8
-35.8
-38.1
-46.4
-43.8

n·budget

137.0
155.8
158.4
168.0
177.3
193.8
200.1
217.3
271.9
302.2
76.6
328.5
369.1
403.5
476.6
543.0
594.3
661.2
686.0
769.5
795.2
795.4
817.1
843.8

Off·
budget

20.4
22.3
25.2
27.6
32.8
36.9
45.6
52.1
60.4
69.6
19.4
80.7
89.7
100.0
114.3
135.2
151.4
147.1
165.8
176.8
184.7
198.6
209.6
219.9

Table 2. COMPOSITION OF OUTLAYS IN CONSTANT (FISCAL YEAR 1982) PRICES: 1967-39-Continued
(In billions of dollars)
Outlays

Memorandum
Nondefense

~scal

year

Total

1967 ............................................................................................................................................
1968 ............................................................................................................................................
1969 ............................................................................................................................................
1970 ............................................................................................................................................
1971 ............................................................................................................................................
1972 ............................................................. ................... ............................................................
1973 ............................................................................................................................................
197 4............................................................................................................................................
197 5.............................................................................................................. ..............................
1976 ............................................................................... .............................................................
TQ ................................................................................................................................................
1977 ............................................................................................................................................
1978 ............................................................................................................................................
1979 ............................................................................................................................................
1980 ............................................................................................................................................
1981 ............................................................................................................................................
1982 ............................................................................................................................................
1983 ............................................................................................................................................
1984 ............................................................................................................................................
1985 ...................................................................................................... ......................................
1986 estimate..............................................................................................................................
1987 estimate..............................................................................................................................
1988 estimate..............................................................................................................................
1989 estimate............................................ ..................................................................................
~

Grants to State and iocal governments excluding those for payments for individuals.

Social security trust funds.

488.7
525.8
510.4
509.4
509.4
527.6
527.5
528.7
586.0
609.8
152.4
622.6
652.2
660.2
699.1
726.5
745.7
776.5
788.8
846.1
850.0
829.4
824.7
829.9

National
defense

235.1
254.8
243.4
225.6
202.7
190.9
175.1
163.3
159.8
153.6
37.1
154.3
155.0
159.1
164.0
171.4
185.3
200.8
210.4
226.7
232.0
237.6
242.5
256.2

Total
nondefense

253.7
270.9
267.0
283.8
306.7
336.7
352.4
365.3
426.2
456.2
115.3
468.3
497.1
501.0
535.1
555.2
560.4
575.7
578.4
619.4
617.9
591.9
582.2
573.7

Payments
for
individuals

114.6
128.0
140.6
152.2
181.0
200.1
215.7
228.3
265.8
291.7
71.2
295.5
296.8
301.6
324.7
344.3
356.7
379.3
368.7
379.6
384.9
380.6
388.2
396.7

All other
grants 1

33.3
37.9
37.1

40.8
43.3
47.4
60.5
56.8
58.5
64.3
17.3
70.1
75.7
71.8
68.4
61.3
50.3
48.8
49.1
50.5
49.3
41.1
37.6
34.9

Net
Interest

28.6
29.8
32.4
34.7
34.0
33.6
35.9
41.1
40.4
43.0
10.8
44.6
49.4
54.7

62.0
73.7
85.0
86.1
102.5
115.3
123.1
122.6
115.7
104.9

Other

Undistributed
offsetting
receipts

103.1
102.2
82.4
81.4
75.8
79.7
69.8
71.9
84.9
80.1
22.5
79.9
97.0
95.9
103.8
106.0
94.5
95.0
88.6
103.7
92.5
80.5
79.7
72.6

- 26.2
- 27.2
-25.5
- 25.4
-27.3
- 24.1
- 28.1
- 32.8
- 23.4
- 22.9
- 6.4
-21.7
-21.7
- 22.9
-23.8
-30.1
-26.1
-33.4
-30.6
- 29.6
-31.8
-33.0
-38.9
-35.5

On-budget

434.6
468.3
448.7
444.7
435.7
448.4
433.4
429.7
481.4
497.0
121.9
501.0
526.0
530.7
565.4
582.7
594.3
635.8
636.1
688.5
690.7
664.9
657.6
660.5

bu~~t 2

54.1
57.4
61.7
64.6
73.6
79.2
94.1
99.0
104.6
112.8
30.5
121.5
126.2
129.5
133.7
143.9
151.4
140.7
152.7
157.6
159.2
164.5
167.1
169.5

Table 3. RECEIPTS BY SOURCE AND OUTLAYS BY FUNCTION, 1977-87

(In billions of dollars)
Actual
Description

1977

Eslimale

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

RECEIPTS BY SOURCE
Individual income taxes ..............................
Corporation income taxes ...........................

157.6
54.9

181.0
60.0

217.8
65.7

244.1
64.6

285.9
61.1

297.7
49.2

288.9
37.0

298.4
56.9

334.5
61.3

353.7
70.9

386.0
86.7

Social insurance taxes and contributions:
Employment taxes and contributions ......
Unemployment insurance .......................
Other retirement contributions ...............

92.2
11.3
3.0

103.9
13.8
3.2

120.1
15.4
3.5

138.7
15.3
3.7

163.0
15.8
4.0

180.7
16.6
4.2

185.8
18.8
4.4

209.7
25.1
4.6

234.6
25.8
4.8

252.1
23.6
4.7

273.7
23.4
5.6

Total social insurance taxes and
contributions .........................

106.5

121.0

138.9

157.8

182.7

201.5

209.0

239.4

265.2

280.4

302.8

(44.6)
(113.2)

(52.5)
(130.2)

(58.0)
(143.5)

(61.7)
(147.3)

(73.3)
(166.1)

(79.0)
(186.2)

(82.5)
(197.9)

(88.5)
(214.3)

5.6
2.6
6.3
23.3
3.1
40.8

5.4
2.5
6.7
0.1
18.4
3.1
36.3

5.6
4.1
8.3
2.2
12.1
3.0
35.3

5.3
4.7
11.7
2.5
8.9
4.2
37.4

5.6
4.8
13.0
2.9
6.3
3.4
36.0

5.9
4.6
13.0
3.0
4.1
4.1
34.6

5.9
4.6
13.8
'3.2
2.8
4.9
35.2

(35.6)
(40.9)
(29.7)
On-budget ................................
(85.4)
(98.0)
(76.8)
Off -budget ................................
Excise taxes:
Alcohol ...................................................
5.3
5.5
5.5
2.4
2.4
2.5
Tobacco .................................................
6.7
6.9
7.2
Highway ................................................
1.2
1.5
Airport and airway .................................
1.3
Windfall profit tax ................................. ..................... ..................... .....................
Other .....................................................
2.0
2.2
2.0
Total excise taxes .........................

17.5

18.4

18.7

5.6
2.4
6.6
1.9
6.9
0.9
24.3

Estate and gift taxes ..................................
Customs duties ...........................................
Miscellaneous receipts ................................

7.3
5.2
6.5

5.3
6.6
7.4

5.4
7.4
9.3

6.4
7.2
12.7

6.8
8.1
13.8

8.0
8.9
16.2

6.1
8.7
15.6

6.0
11.4
17.0

6.4
12.1
18.5

6.1
12.4
19.0

5.7
12.9
21.1

Total receipts .............................

355.6

399.6

463.3

517.1

599.3

617.8

600.6

666.5

734.1

777.1

850.4

(278.7)
76.8

(314.2)
85.4

(365.3)
98.0

(403.9)
113.2

(469.1 )
130.2

(474.3)
143.5

(453.2)
147.3

(500.4)
166.1

(547.9)
186.2

(579.2)
197.9

(636.1)
214.3

On-budget ................................
Off-bud get ................................

OUTLAYS BY FUNCTION

134.0
National defense .........................................
97.2
104.5
116.3
6.4
7.5
7.5
12.7
International affairs ....................................
5.8
4.7
4.9
5.2
General science, space, and technology ......
9.2
10.2
Energy ........................................................
5.8
8.0
13.9
12.l
Natural resources and environment ............
10.0
11.0
8.8
6.8
11.4
11.2
Agriculture .................................................
9.4
6.3
4.7
Commerce and housing credit ....................
3.l
17.5
21.3
14.8
15.5
Transportation ............................................
11.8
10.5
11.3
Community and regional development ........
7.0
Education, training, employment, and
26.7
30.2
31.8
social services .......................................
21.1
23.2
Health ........................................................
17.3
18.5
20.5
22.8
26.5
32.l
Medicare ....................................................
19.3
66.4
86.5
Income security ..........................................
61.0
61.5
104.l
118.5
Social security ...........................................
85.l
93.9
(0.7)
(0.7)
(0.8)
(0.7)
On-budget ..............................................
(84.3)
(93.l)
(103.3)
(117.9)
Off -budget .............................................
18.0
19.0
19.9
Veterans benefits and services ...................
21.2
Administration of justice ............................
3.6
3.8
4.2
4.6
General government ...................................
3.3
3.6
3.9
4.4
General purpose fiscal assistance ...............
8.4
8.4
9.6
8.6
Net interest ................................................
29.9
35.4
42.6
52.5
(32.5)
(37.8)
(44.8)
(54.9)
On-budget ..............................................
(-2.4)
Off-budget .............................................
( -2.7)
(-2.2)
(-2.3)
Allowances ................................................. ... ................ .. ................. ... . .................. ... .....................
Undistributed offsetting receipts .................
-14.9
- 15.7
-17.5
-19.9
( - 14.7) ( -16.4)
( -18.7)
On-budget .............................................. ( -13.9)
( -1.0)
( -1.1)
( -1.1)
( -1.2)
Off-budget .............................................

157.5
13.1
6.5
15.2
13.6
11.3
8.2
23.4
10.6

185.3
12.3
7.2
13.5
13.0
15.9
6.3
20.6
8.3

209.9
11.8
7.9
9.4
12.7
22.9
6.7
21.3
7.6

227.4
15.9
8.3
7.1
12.6
13.6
6.9
23.7
7.7

252.7
16.2
8.6
5.7
13.4
25.6
4.2
25.8
7.7

265.8
17.l
8.9
4.4
12.9
25.9
3.8
27.1
7.9

282.2
18.6
9.2
4.0
12.0
19.5
1.4
25.5
6.5

33.7
26.9
39.1
99.7
139.6
(0.7)
(138.9)
23.0
4.8
4.6
6.9
68.7
(71.0)
(-2.3)

27.0
27.4
46.6
107.7
156.0

26.6
28.6
52.6
122.6
170.7
(20.0)
(150.7)
24.8
5.l
4.8
6.5
89.8
(91.6)
( -1.8)

27.6
30.4
57.5
112.7
178.2
(7.l)
(171.2)
25.6
5.7
5.l
6.8
111.1
(114.4)
(-3.3)

29.3
33.5
65.8
128.2
188.6
(5.2)
(183.4)
26.4
6.3
5.2
6.4
129.4
(133.6)
(-4.1)

30.7
35.7
68.7
118.1
200.l
(8.0)
(192.0)
26.6
6.8
6.3
6.2
142.7
(147.2)
(-4.4)

~0.8)

(1 5.l)
24.0
4.7
4.5
6.4
85.0
(87.1)
( -2.l)

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

409.2

458.7

503.5

590.9

678.2

Off-budget ....................................
Off-budget .. ..................................

(328.5)
(80.7)

(369.l )
(89.7)

(403.5)
(100.0)

(476.6)
(114.3)

(543.0)
(135.2)

(594.3)
(151.4)

-32.0
(-29.9)
(-2.0)

- 32.8
(-30.3)
(-2.5)

-35.8
(-32.9)
(-2.8)

851.8

946.3

979.9

994.0

(661.2)
(147.1)

(686.0)
(165.8)

(795.2)
(184.7)

(795.4 )
(198.6)

..................... ................... .. ..................... ..................... ................. .... ... ..................

-26.l
(-24.5)
( -1.6)
745.7

' $50 million or less.

-34.0
(-32.2)
( -1.8)
808.3

27.4
35.0
70.2
118.4
212.2
(5.7)
(206.5)
26.4
6.9
6.l
1.7
148.0
(152.7)
( -4.7)
0.8
-38.l
(-35.0)
(-3.2)

-28.0
(-26.6)
( -1.4)

(769.5)
(176.8) I

Table 4. OUTLAYS BY FUNCTION AND SUBFUNCTION, 1917-89
(In billions of dollars)
Estimate

Actual
Function and subfunction

1985

1986

1987

1988

1989

1977

1978

1979

1980

1981

1982

1983

1984

33.7
30.6
18.2

35.6
33.6
20.0

37.3
36.4
25.4

40.9
44.8
29.0

47.9
51.9
35.2

55.2
59.7
43.3

60.9
64.9
53.6

64.2
67.4
61.9

67.8
72.3
70.4

71.4
74.1
75.7

73.6
80.9
76.7

74.8
81.0
81.2

75.5
87.2
88.9

9.8
3.1

10.5
2.7

11.2
3.3

13.1
3.2

15.3
3.6

17.7
4.9

20.6
4.5

23.1
4.3

27.1
7.7

28.7
8.4

31.6
1l.5

36.6
16.9

38.4
23.3

Subtotal, Department of DefenseMilitary ............................................
Atomic energy defense activities....................
Defense-related activities.. .............................

95.3
1.9

113.7
2.5
0.1

131.0
2.9
0.1

153.8
3.4
0.3

180.7
4.3
0.3

204.4
5.2
0.3

220.8
6.1
0.5

245.4
7.1
0.3

258.4
7.2
0.3

274.3
7.7
0.3

290.7
8.4

313.3
9.0

102.3
2.1
0.1

Total national defense .......................

97.2

104.5

116.3

134.0

157.5

185.3

209.9

227.4

252.7

265.8

282.2

299.1

322.3

International affairs:
International development and humanitarian
assistance ....... ..........................................
International security assistance ....................
Conduct of foreign affairs..............................
Foreign information and exchange activities ..
International financial programs .....................

2.8
3.1
1.0
0.4
-0.9

2.6
3.9
1.1
0.4
- 0.6

2.9
3.7
1.3
0.5
-0.9

3.6
4.8
1.4
0.5
2.4

4.1
5.1
l.3
0.5
2.0

3.8
5.4
1.6
0.6
0.9

4.0
6.6
1.8
0.6
-1.1

4.5
7.9
1.9
0.7
0.9

5.4
9.4
2.1
0.8
-1.5

4.9
9.7
2.4
0.9
-0.8

5.0
10.9
3.1
1.0
-1.4

4.9
10.8
3.1
1.1
- 1.7

4.7
10.6
3.5
1.2
-1.9

Total international affairs .................

6.4

7.5

12.7

13.1

12.3

11.8

15.9

16.2

17.1

18.6

18.3

18.0

1.1
2.3
1.0
0.4

1.2
2.3
1.0
0.5

l.3
2.2
1.2
0.6

1.4
2.6
l.3
0.5

1.5
3.1
1.4
0.6

1.6
3.5
1.5
0.6

1.6
4.1
1.5
0.8

1.8
4.0
1.7
0.8

2.0
4.0
1.9
0.8

2.2
3.8
2.1
0.8

2.4
3.8
2.2
0.9

2.5
3.7
2.2
0.9

2.6
4.3
2.3
0.9

4.7

4.9

5.2

5.8

6.5

7.2

7.9

8.3

8.6

8.9

9.2

9.3

10.2

National defense:
Department of Defense-Military:
Military personnel ......................................
Operation and maintenance .................. .....
Procurement .......................... ............... .....
Research, development, test and evaluation ......................................................
Military construction and other 1 .... .. .... ....

General science, space, and technology:
General science and basic research ...............
Space flight ...... .............................................
Space science, applications, and technology ..
Supporting space activities ...... ......................
Total general science, space, and
technology ......................................

Energy:

Energy supply .............. ............................... ...
Energy conservation .......................................
Emergency energy preparedness ................ .. ..
Energy information, policy, and regulation .. ...

4.8
O.l
O.l
0.7

6.l
0.2
0.9
0.8

7.2
0.3
1.0
0.7

8.4
0.6
0.3
0.9

10.2
0.7
3.3
1.0

8.2
0.5
3.9
0.9

6.1
0.5
1.9
0.9

3.3
0.5
2.5
0.8

Total energy .................................... ...

5.8

8.0

9.2

10.2

15.2

13.5

9.4

Water resources .............................................
Conservation and land management .......... .. ..
Recreational resources ...................................
Pollution control and abatement ................ .. ..
Other natural resources .................................

3.2
0.6
1.0
4.3
1.0

3.4
1.0
1.4
4.0
1.2

3.9
0.8
1.5
4.7
1.3

4.2
1.0
1.7
5.5
1.4

4.l
1.2
1.6
5.2
1.5

3.9
1.1
1.4
5.0
1.5

Total natural resources and environment ...................................... .. ..

10.0

11.0

12.1

13.9

13.6

Farm income stabilization .......................... .. ..
Agricultural research and services .............. ...

5.7
1.1

10.2
1.1

9.9
1.3

7.4
1.4

Total agriculture ............................ .. ..

6.8

11.4

11.2

Mortgage credit and deposit insurance ...... .. ..
Postal Service ................................................
Other advancement of commerce ...................

- 0.2
2.l
1.2

3.6
1.3
1.4

Total commerce and housing
credit ........................................... ...

3.1

Ground transportation ................................ .. ..
Air transportation ...........................................
Water transportation ................................... ...
Other transportation ......................................
Total transportation ........................ .

2.6
0.5
1.8
0.7

2.7
0.5
0.5
0.7

2.9
0.3
0.2
0.7

3.5
0.2
0.2
0.6

3.0
O.l
0.2
0.6

7.1

5.7

4.4

4.0

4.5

3.9

3.9
1.5
1.5
4.3
1.5

4.l
1.3
1.6
4.0
1.6

4.l
1.5
1.6
4.5
1.7

4.0
1.1
1.5
4.6
1.7

3.8
0.6
1.4
4.5
1.7

4.0
0.4
1.2
4.4
1.8

4.1
0.2
1.2
4.4
1.7

13.0

12.7

12.6

13.4

12.9

12.0

11.8

11.7

9.8
1.5

14.3
1.6

21.3
1.6

11.9
1.7

23.8
1.8

24.0
1.9

17.9
1.6

18.l
1.6

17.4
1.5

8.8

11.3

15.9

22.9

13.6

25.6

25.9

19.5

19.7

18.9

2.3
0.9
1.5

5.6
1.2
2.5

4.7
1.4
2.l

4.0
0.2
2.l

3.9
1.1
1.7

3.8
1.2
1.9

0.9
1.4
2.0

0.2
1.3
2.3

- 3.1
2.7
1.7

- 2.4
5.l
1.2

- 3.4
1.8
1.2

6.3

4.7

9.4

8.2

6.3

6.7

6.9

4.2

3.8

1.4

3.8

-0.5

10.2
2.8
1.7
O.l

10.4
3.2
1.8
O.l

12.l
3.4
2.0
O.l

15.3
3.7
2.2
O.l

17.l
3.8
2.4
O.l

14.3
3.5
2.7
O.l

14.3
4.0
3.0
O.l

16.2
4.4
3.0
O.l

17.6
4.9
3.2
O.l

18.6
5.0
3.4
O.l

17.3
5.2
2.9
0.2

16.2
5.1
2.6
O.l

15.4
5.2
2.7
O.l

14.8

15.5

17.5

21.3

23.4

20.6

21.3

23.7

25.8

27.1

25.5

24.1

23.4

Natural resources and environment:

Agriculture:

Commerce and housing credit:

Transportation:

Table 4. OUTLAYS BY FUNCTION AND SUBFUNCTlON, 1977-89-Continued
(In billions of dollars)
Estimate

Actual
Function and subfunction

1977

1978

1979

1980

1981

1982

Community and regional development:
Community development ................................
Area and regional development.. ....................
Disaster relief and insurance .........................

3.4
3.0
0.6

3.3
5.7
2.9

4.0
4.9
l.6

4.9
4.3
2.0

5.1
3.8
1.7

4.6
3.8
-0.1

Total community and regional development ......................................

7.0

11.8

10.5

11.3

10.6

Education, training, employment, and
social services:
Elementary, secondary, and vocational education ........................................................
Higher education ............................................
Research and general education aids .............
Training and employment.. .............................
Other labor services .......................................
Social services ...............................................

4.6
3.2
0.9
6.9
0.4
5.1

5.2
3.7
l.0
10.8
0.4
5.6

6.1
5.1
1.1
10.8
0.5
6.6

6.9
6.7
l.2
10.3
0.6
6.1

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

21.1

26.7

30.2

13.0
2.5

13.9
2.8

l.0

Health:
Health care services ......................................
Health research .............................................
Education and training of health care work
force .........................................................
Consumet and occupational health and
safety ........................................................
Total health ................................ ........

1983

4.4
3.2

1984

1985

1986

1988

1989

3.9
2.8
-0.2

3.1
2.1
-0.4

2.9
2.4
-0.3

•

4.5
3.0
0.1

•

4.6
3.0
0.4

8.3

7.6

7.7

7.9

6.5

5.5

5.0

7.2
8.9
l.0
9.2
0.6
6.9

6.8
7.2
l.0
5.5
0.6
5.9

6.3
7.2
1.1
5.3
0.6
6.1

6.5
7.4
l.2
4.6
0.6
7.2

7.6
8.2
1.1
5.0
0.7
6.7

7.4
9.0
l.2
5.2
0.7
7.2

7.4
6.8
l.2
4.5
0.7
6.9

7.4
5.8
1.1
4.4
0.7
6.9

7.2
6.1
1.1
4.3
0.7
7.0

31.8

33.7

27.0

26.6

27.6

29.3

30.7

27.4

26.3

26.4

16.0
3.0

18.0
3.4

2l.2
3.8

21.8
3.9

23.0
4.0

24.5
4.4

27.0
4.9

28.6
5.5

28.4
5.4

30.0
5.5

3l.4
5.4

0.9

0.6

0.7

0.8

0.7

0.6

0.4

0.5

0.4

0.3

0.7

0.8

0.9

l.0

1.1

l.2

0.8

0.9

17.3

18.5

20.5

23.2

26.9

27.4

28.6

30.4

33.5

35.7

35.0

36.7

37.9

4.6
3.1

1987

Medicare .......................................................... F===19=.3==i=2=2=.8=1==2=6.=5=I==32=.1= =i==
39=.1=f=4=6=
.6=1==5=2.=6 =I==57=.5= =i==
65=.8=f=6=8=
.7=1==7=
0.=
2 =I==
76=.0===F= 83
= .0
Income security:

General retirement and disability insurance
(excluding social security) .....................
3.6
3.4
4.4
5.1
5.4
5.6
5.6
5.4
5.6
5.3
5.4
5.6
5.7
Federal employee retirement and disability ...
17.7
19.8
22.7
26.6
31.3
34.3
36.5
38.1
38.6
41.4
42.4
44.5
46.7
Unemployment compensation ........................
15.3
ll.8
10.7
18.0
19.7
23.7
31.5
18.4
17.5
16.5
16.9
17.3
17.3
Housing assistance .......................................
3.0
3.7
4.4
5.6
7.8
8.7
10.0
11.3
25.3
12.4
12.2
11.9
11.1
Food and nutrition assistance .......................
8.5
8.9
10.8
14.0
16.2
15.6
18.0
18.1
18.5
18.7
18.1
18.7
19.3
Other income security ................................... 1--_
13_.0-+_1_3._
9 -t-_1_3_.4-+_1_7.2- t _1_9_.4-+_19_.8- t _2_1_.1-+_2_1.4- t _2_2_.7-+_23_.8-t_2_3_.3-+_25_.3--t_2_5_.
0
Total income security ....................... 1==
61='0=1==6=1=.5=1==6=6.=4=I==86=.5=1==9=9=.7=j::=
10=7.=
7=f:=1=2=
2.6= j=1=12=.7=j:=12=8=.2=j::=
11=8.=1=I==1=18=.4= =1=12=3=.1=j::=12=5=
.7
Social security ...................................... .......... 1==85=.1= 1==9=3=
.9=1==1=0=
4.=1=I==1=18=.5=1==13=9=:.6=j::=
15==6.=
0=f:=1=70=.7= j=1=78=.2=j:=18=8=.6=j::=2=0=0.=
1*=2=12=.2= =1=22=6=.1=j::=23=9=
.9

On·budge!.....................................................
Off·budge!....................................................

(0.7)
(84.3)

(0.7)
(93.1)

(0.8)
(103.3)

(0.7)
(117.9)

(0.7 )
(138.9)

(0.8)
(155.1)

(20.0)
(150.7)

(7.1)
(171.2)

(5.2)
(183.4)

(8.0)
(192.0)

(5.7)
(206.5)

(6.4)
(219.7)

(7.2)
(232.7)

9.2

9.7

10.8

11.1

12.9

13.7

14.3

14.4

14.1

15.1

15.4

15.7

16.1

Veterans benefits and services:

Income security for veterans ........................
Veterans education, training, and rehabilita·
tion ..........................................................
Hospital and medical care for veterans.........
Veterans housing ..........................................

3.7
4.7
-0.1

3.4
2.8
2.3
2.3
1.9
1.6
1.4
1.1
0.6
0.6
0.6
0.5
5.3
5.6
6.5
7.0
7.5
8.3
8.9
9.5
9.9
9.7
9.8
9.6
..
0.2
- *
0.2
0.1
*
0.2
0.2
0.2
- *
* -0.2
Ollimv~e~~~n~~~d~rv~~ ""''''''''1--_0_.5--t__O_.6-+__
~_
6 -t-_0_.7--t. __0_
.7~__~_7-+_ _
~_
7 -t-_0~.8--t_~0~
J-+_~~~
8 ~_0~J~_~0~.9-+_~0~
J
Total veterans benefits and servo
ices ................................................ F==18=:.0=1=====1=9.=0:F=1=9=
.9=1===2=
1.2==1=2=3=
'0=l==24=.0=j:=2=4=
.8=l====25=.6=j:==2=6=.4=l====26=.6=j:====2=6=
.4=l=~
26=.9~====2=6~
.9

Administrat:on of justice:

Federal law enforcement activities................
Federal litigative and judicial activities .........
Federal correctional activities........................
Criminal justice assistance............................

1.1
0.8
0.2
0.8

1.8
0.9
0.3
0.7

2.0
1.1
0.3
0.7

2.2 I
1.3
0.3 I
0.7 i

2.4
1.5
0.4
0.5

2.5
1.5
0.4
0.3

2.9
1.6
0.4
0.2

3.2
1.8
0.5
0.1

3.5
2.1
0.5
0.1

3.7
2.2
0.6
0.2

3.9
2.2
0.7
0.2

3.9
2.2
0.7
0.1

4.0
2.3
0.7
0.1

I----+---t----r---t---+--~--r---t---+--~--r----t-~

Tot~ adm~~kation ofjustice ........ ~=3=~~==3=
~~==
~=
2 ~=4=~~==4=~~==~=7~==
~=
1 ~=5=.7~==6=
~~==l=
8 ~=6=~~==7=J~==l~
1

Table 4. OUTLAYS BY FUNCTION AND SUB FUNCTION, 1977-89-Continued
(In billions of dollars)
Estimate

Actual
function and subfunction

1985

1986

1987

1988

1989

O.l
3.3
0.2
O.l
0.6
-0.5

l.4
O.l
3.5
O.l
0.2
0.5
-0.5

l.5
O.l
3.8
0.4
0.1
0.8
-0.5

l.6
O.l
3.8
0.3
0.1
0.6
- 0.6

1.7
O.l
4.1
-0.3
0.1
0.7
- 0.7

l.6
O.l
4.4
0.3
0.1
0.5
-1,0

4.8

5.1

5.2

6.3

6.1

5.7

6.1

4.6
l.8

4.6
2.2

4.6
l.8

4.4
l.8

1.7

l.8

l.9

6.9

6.4

6.5

6.8

6.4

6.2

1.7

1.8

1.9

74.8
- 9.7
- 2.3
- 10.2

95.5
-11 .5
-2.3
- 13.0

117.2
-14.0
-2.l
-16.1

128.6
-15.3
-l.8
-21.7

153.8
-17.0
-3.3
-22.4

179.1
- 22.1
-4.1
-23.4

196.1
-26.7
-4.4
-22.3

206.9
-29.6
-4.7
-24.5

21l.8
-33.5
-6.3
-26.9

206.5
-36.7
-8.7
-25.1

52.5

68.7

85_0

89.8

111.1

129_4

142_7

148.0

145.1

136_0

(15l.4)
( -6.3)

(144.7)
( - 8.7)

1977

1978

1979

1980

1981

1983

1984

General government:
legislative functions .................................. ....
Executive direction and management.. .... .. .....
Central fiscal operations ................................
General property and records management.. ..
Central personnel management ......................
Other general government .............................
Deductions for offsetting receipts..................

0.8
O.l
l.9
0.2
O.l
0.4
- 0.3

0.9
0.1
2.0
0.3
O.l
0.4
- 0.3

0.9
O.l
2.2
0.3
O.l
0.5
- 0.2

l.0
0.1
2.6
0.3
0.2
0.6
- 0.4

l.0
O.l
2.6
O.l
0.2
0.7
-0.2

l.2
O.l
2.6
0.2
O.l
0.5
- 0.2

l.2
O.l
3.l
0.2
0.1
0.8
- 0.6

Total general government.. ...............

3.3

3.6

3.9

4.4

4.6

4.5

General purpose fiscal assistance:
General revenue sharing .............. ..................
Other general purpose fiscal assistance .........

6.8
2.8

6.8
l.6

6.9
l.5

6.8
1.7

5.1
1.7

Total general purpose fiscal assistance ..........................................

9.6

8.4

8.6

Net interest:
Interest on the public debt .. ..........................
Interest received by on-budget trust funds ....
Interest received by off-budget trust funds ....
Other interest ................................................

4l.9
-5.5
- 2.7
- 3.9

48.7
-6.1
- 2.4
- 4.7

59.8
-7.7
- 2.2
- 7.3

Total net interest.. .............................

29_9

35.4

42.6

On-budget ....................... .. ............................. (32.5)
Off-budget ........................... .......................... ( - 2.7)

(37.8)
(- 2.4)

(44.8)
(- 2.2)

(54.9)
( -2.3)

(71.0)
(- 2.3)

(87.1)
( -2.1)

(9l.6)
( -l.8)

1.3

(114.4)
(- 3.3)

(133.6)
( -4.1)

(147.2)
(-4.4)

* ................. ...............

(152.7)
( -4.7)

Allowances:
Civilian agency pay raises 2 .................................................................................................................................................................................. . ........ ...... .. .
Increased employing agency payments for
employee retirement .................................. ................. .................................................................... .................................................................................... .

0.4

1.9

3.1

0.3

0.4

Total allowances .................................................................................................... ..................................................................................................... .
0.8
Undistributed offsetting receipts:
Employer share, employee retirement (onbudget) ..................................................... -11.5 -12.4
-13.1 -14.6 -16.5 -18.2 -21.7 -23.2 -24.7 -26.3 -28.5
Employer share, employee retirement (offbudget) ..................................................... -1.0
-1.1
-1.1
-1.2
-1.4
-1.6
-1.8
- 2.0
- 2.5
-2.8
-3.2
Rents and royalties on the Outer Continental Shel!.. .................................................. -2.4
-2.3
-3.3
-4.1 -10.1
-6.2
-10.5
-6.7
-5.5
-5.5
-5.3
Sale of major physical assets ........................ ................................................... .................................. .................................................................... -1.2
-1.2
Total undistributed offsetting receipts .......................................... -14.9 -15.7 -17.5 -19.9 -28.0 -26.1
-34.0
-32.0
-32.8
-35.8
-38.1

2.4

3.5

-30.2

-31.7

-3.7

-4.2

-8.2
-4.2

-6.4
-1.5

-46.4

-43.8

On-budget ........................................ (-13.9) ( -14.7) (-16.4) ( -18.7) (-26.6) (-24.5) (-32.2) (-29.9) (-30.3) ( -32.9) (-35.0) (-42.6) ( -39.6)
Off-budget ........................................ ( -1.0) (-1.1) ( -1.1) ( -1.2) ( -1.4) ( -1.6) ( -1.8) (-2.0) (-2.5) (-2.8) (-3.2) ( -3.7) (-4.2)
Total diJtlays ......................................

409.2

458.7

On-budget ...................................................... (328.5) I (369.1)
(89.7)
Off-budget ..................................................... (80.7)

503.5

590.9

678.2

(403.5)
(100.0)

(476.6)
(114.3)

(543.0)
(135.2)

745.7

808.3

851.8

946.3

979.9

994.0

I (594.3)

(661.2)
(147.1)

(686.0)
(165.8)

(769.5)
(176.8)

(795.2)
(184.7)

(795.4)
(198.6)

I (151.4)

*$50 million or less.
I Includes allowances for civilian and military pay raises for Department of Oefense.
2 Includes aiiowance for military pay ralse for the Coast Guard.
Note.-for all years, transactiOlis of the social security trust funds are presented off·budget and transactiOlis of formerly off-budget accounts are presented on-budget.

1.026.8

(817.1)
(209.6)

1,063.6

(843.8)
(219.9)

Table 5. OUTLAYS BY AGENCY, 1985-91
(In billKlns of dollars)
Estimate

1985 actual
1986

Legislative branch .....................
1.6
1.9
The Judiciary .............................
1.0
1.1
Executive Office of the
President ..............................
O.l
0.1
Funds appropriated to the
President ..............................
12.0
12.5
Agriculture ................................
55.5
54.2
Commerce .................................
2.l
2.0
Defense-Military 1 ...... ........... 245.4
258.4
Defense-Civil ..........................
18.8
20.6
Education ..................................
16.7
17.8
Energy ......................................
10.6
10.1
Healtb and Human Services,
except social security ........... 132.l
140.9
Health and Human Services,
social security ...................... 183.4
192.0
Housing and Urban
Development. ........................
28.7
15.2
Interior ......................................
4.8
4.6
Justice ......................................
3.6
3.8
Labor ........................................
23.9
23.l
State .........................................
2.6
2.9
Transportation ...........................
26.3
25.0
Treasury .................................... 165.l
184.7
Environmental Protection
4.5
4.6
Agency .................................
General Services
Administration ...................... - 0.2
*
National Aeronautics and
Space Administration ............
7.3
7.3
Office of Personnel
Management. ........................
23.7
24.1
0.7
0.9
Small Business Administration ..
26.5
Veterans Administration ............
26.3
9.8
10.9
Other independent agencies ......
Allowances 2 . .. ........................ . ...... ........... .................
Undistributed offsetting
-67.1
receipts ................................ - 59.0
Total outlays .................

946.3

979.9

1987

1988

1990

1991

2.0
1.2

2.0

2.l

1.3

O.l

13.8
44.6
2.l
274.3
20.9
15.4
10.2

13.4
44.6
2.2
290.7
22.l
14.4
11.7

12.8
43.6
2.l
313.3
23.4
14.6
12.3

12.l
39.9
2.5
335.5
24.5
14.2
12.6

12.2
35.8
2.2
356.6
25.7
14.0
13.l

139.l

148.8

157.5

166.0

175.3

206.5

219.7

232.7

247.4

257.0

13.9
4.3
4.l
23.2
3.6
24.7
188.3

13.3
4.2
4.2
23.7
3.7
23.3
193.1

12.4
4.l
4.2
23.8
4.l
22.6
188.4

12.5
4.l
4.2
24.0
4.2
22.9
181.9

12.7
4.0
4.3
24.2
4.0
22.2
176.9

4.5

4.4

4.1

3.6

-0.9

-0.3

- 0.3

- 0.4

7.5

8.2

9.0

9.5

26.2

27.4

28.5

29.6

24.7
0.1
26.4
10.1
0.8

..... ... ... ...... ................. ....... .. ........ ................

26.7
12.6
2.4

26.7
8.5
3.5

27.0
7.9
4.7

27.0
7.9
5.9

-72.5

- 88.6

-90.2

- 99.1

-104.2

994.0

1,026.8'

1,063.6

1,093.8

1,122.7

*$50 million or less.
, Includes allowances for civilian and military pay raises for Department of Defense.
2 Includes allowances for civilian agency pay raises and military pay raises for the Coast Guard.

1989

Table 6. CREDIT BUDGET: NEW DIRECT LOAN OBLIGATIONS AND GUARANTEED LOAN COMMITMENTS
BY AGENCY
(In millions of dollars)
Direct loan Obligations
Department or other unit

1985
actual

1986
estimate

1987
estimate

Guaranteed loan Commitments

1985
actual

1986
estimate

1987
estimate

Funds Appropriated to the President ................. . 6,339
6,532
7,260
310
282
150
Agriculture ......................................................... 21,256
23,805
14,425
3,910
7,231
5,500
FFB direct loans ........................................... . 2,063
2,019
1,815
Commerce ......................................................... .
106
20
16
53
57
3
Defense: FFB direct loans .................................. 1,533
495
Education ........................................................... 1,315
1,261
1,567
8,888
9,269
9,756
Energy ............................................................... .
12
33
20
10
21
Health and Human Services .............................. .
22
271
389
100
2,0l3
2,046 47,441
Housing and Urban Development 1 ................. .. . 15,072
49,336
37,164
FFB direct loans ........................................... .
133
50
Interior ...............................................................
74
66
66
42
60
30
labor ..................................................................
1
2
3 .................................. .............. .
State ..................................................................
1
1
1
443
570
Transportation ................................................... .
168
38
67 .............. .
FFB direct loans ........................................... .
2
4
Treasury ............................................................ .
60
Environmental Protection Agency ...................... .
31
32
2
Small business assistance ................................. . 1,017
962
751
2,810
2,950 .............. .
FFB direct loans ............................................
525
514
300
Veterans Administration .................................... . 1,090
1,126
1,166 12,140 12,299
14,7l5
Other independent agenCies:
Export-Import Bank .......................................
660
7,849
11,484 12,000
1,062
Federal Deposit Insurance Corporation ........... .................
110 ................. ............................... .
l30
Federal Savings and Loan Insurance Corporation (FHLBB) ........................................
783
500
500
900
426
350
National Credit Union Administration .............
50
102
81
*
Tennessee Valley Authority ............................
63
66
69
FFB direct loans........................................
206
248
167
United States Synthetic Fuels Corporation ....................................... ................ .
60 ............................... .
TotaL................................................. 52,847 41,634
ADDENDUM
Secondary guaranteed loans 1 . ..... .. . ... .. .. . ... .. .. .. . ................ . ......... ........

30,555
.................

84,711

93,850

79,768

54,597

60,463

55,357

• $500,000 or less.
• Commitments by GNMA to guarantee securities that are backed by loans previous~ insured or guaranteed by . the Federal Housing
Administration, Veterans Administration, or Farmers Home Administration (secondary guarantees) are excluded from the totals and shown as a
memorandum entry.
Note: loans guaranteed by Federal agencies and disbursed by the Federal Financing Bank (FFB) are identified in this table as FFB direct loans.

<:.C
0

Table 7. FEDERAL FINANCES AND THE GROSS NATIONAL PRODUCT, 1968-89
(Dollar al11()unts in billions)
Receipts
Fiscal year

Gross
national
product
Amount

Outlays
Off ·budget

On·budget

Total
Percent
of GNP

Amount

Percent
of GNP

Amount

Total

Percent
of GNP

Amount

Off.budget

On·budget
Percent
of GNP

Amount

Percent
of GNP

Amount

Percent
of GNP

1968 ................. _.........................................................................
1969 __ .____ .__._.. ____ -... --. ---. --.--- -. -------.-.---.-1970 ............................................................................................
1971 .................................... _............................... .......................
1972 ................................... .........................................................

852.4
929.5
990.5
1,057.1
1,151.2

153.0
186.9
192.8
187.1
207.3

17.9
20.1
19.5
17.7
18.0

128.1
157.9
159.3
151.3
167.4

15.0
17.0
16.1
14.3
14.5

24.9
29.0
33.5
35.8
39.9

2.9
3.1
3.4
3.4
3.5

178.1
183..6
195.6
210.2
230.7

20.9
19.8
19.8
19.9
20.0

155.8
158.4
168.0
177.3
193.8

18.3
17.0
17.0
16.8
16.8

22.3
25.2
27.6
32.8
36.9

2.6
2.7
2.8
3.1
3.2

1973 .......................... ........................................ ................... -.....
1974 ...............................................................-........... -..............
1975 ............................................................................................
1976 ....... ............................................................... .......... ............
1977 ............................................................................................

1,285.5
1,417.0
1,523.5
1,699.6
1,935.8

230.8
263.2
279.1
298.1
355.6

18.0
18.6
18.3
17.5
18.4

184.7
209.3
216.6
231.7
2787

14.4
14.8
14.2
13.6
14.4

46.1
53.9
62.5
66.4
76.8

3.6
3.8
4.1
3.9
4.0

245.7
269.4
332.3
371.8
409.2

19.1
19.0
21.8
21.9
21.1

200.1
217.3
271.9
302.2
328.5

15.6
15.3
17.8
17.8
17.0

45.6
52.1
60.4
69.6
807

3.5
3.7
4.0
4.1
4.2

1978 ...................................................................... -....................
1979 ............................................................................................
1980 ................... .....................-..................................................
1981 ............................................................................................
1982 ............................................................... .............................
1983 .............. _.........................................................-.......-........

2,173.4
2,452.2
2,667.6
2,986.2
3,141.5
3,320.9

399.6
463.3
517.1
599.3
617.8
600.6

18.4
18.9
19.4
20.1
19.7
18.1

314.2
365.3
403.9
469.1
474.3
453.2

14.5
14.9
15.1
15.7
15.1
13.6

85.4
98.0
113.2
130.2
143.5
147.3

3.9
4.0
4.2
4.4
4.6
4.4

4587
503.5
590.9
678.2
745.7
808.3

21.1
20.5
22.2
227
23.7
24.3

369.1
403.5
476.6
543.0
594.3
661.2

17.0
16.5
17.9
18.2
18.9
19.9

897
100.0
114.3
135.2
151.4
147.1

4.1
4.1
4.3
4.5
4.8
4.4

1984 ............................................. -.... -..................................-... 3,695.3
1985 ..... _....... ......... _.......................... _....................................... 3,936.8

666.5
734.1

18.0
18.6

500.4
547.9

13.5
13.9

166.1
186.2

4.5
4.7

851.8
946.3

23.1
24.0

686.0
769.5

18.6
19.5

165.8
176.8

4.5
4.5

4,192.2
4,538.1
4,902.9
5,268.9

777.1
850.4
933.2
996.1

18.5
18.7
19.0
18.9

579.2
636.1
690.4
732.5

13.8
14.0
14.1
13.9

197.9
214.3
242.8
263.7

47 979.9
4.7 .994.0
5.0 1,026.8
5.0 1,063.6

23.4
21.9
20.9
20.2

795.2
795.4
817.1
843.8

19.0
17.5
16.7
16.0

184.7
198.6
209.6
219.9

4.4
4.4
4.3
4.2

1986
1987
1988
1989

estimate ........_........................... _.... _._..............................
estimate ........ __ ......................... _....... _.. -..........................
estimate ........ _" ............................................................. -...
estimate .......... "...............................-.-......................... -...

Surplus or deficit (-)
Gross
national
product

Fiscal year

Total
Amount

On·budget
Percent
of GNP

Amount

Percent
of GNP

Federal debt, end of year
Off.budget
Amount

Gross

Percent
of GNP

Amount

Held by Government
accounts
Percent
of GNP

Amount

Percent
of GNP

Held by the public
Amount

Percent
of GNP

1968 ........................................................................... ,.,' ... ".. ".. ,'
1969 .," ',.,', .. ,.,.,., .. "."." .. ".. "."."."., .. ,",.".,, .. "...', .. ,"""', .. ,', .. "...
1970., .. ".,.,.".,.,., .. "".", .. "." .. "",.,.. ".", .. ,"""",.,",.,", .. ,',.,""" ,...
1971 .".. ,.,."" .,.,., .. "".""",.".""" ."".".""",,,,,,,,,"'."" .. ,,, ...,,.,,,.,,
1972 ".. ,.. ,.,., .... ,.,."." .. "." .. "'"." .... "., .. ,., .. ,,.,',' ... ",." ".. ".. """,... '

852.4 - 25,2
929.5
3.2
990.5 -2.8
1,057.1 -23.0
1.151.2 -23.4

-3.0 -27.7
0.3 -0.5
-0.3 -8.7
-2.2 -26.1
-2,0 -26.4

-3.3
-0.1
-0.9
-2.5
-2.3

2,6
3.7
5,9
3.0
3.0

0.3
0.4
0.6
0,3
0,3

369.8
367.1
382,6
409,5
437.3

43.4
39,5
38,6
38.7
38,0

79.1
87.7
97.7
105.1
113.6

9,3
9,4
9,9
9,9
9,9

290.6
279.5
284.9
304.3
323.8

34.1
30.1
28,8
28,8
28.1

1973 ,." .. ,.,.,.".,."., .. ".".,', .. ,.,"",., .. "., .. ,., .. ,.. ," ... ,', ... ,', .. ".. ,', .. ".. ,'
1974 .. ".... ,., .... ,.,., .. ".. ".,', .. ,',""." .,.",.',., .. ,,"'" ... ,',.,", .. ".. ,', .. ".. ,'
1975 ." .. ,." .,.,., .. ,.,.. ".. "." .. "."." .. ,." .. ,., .. ,.. ,."', .... ".. ,', ...... "', .. ,, ... ,
1976 .. ,.. ,.,.,." .... ,." .".".,', .. ,.. "."."."., .. ,."." .. ,'" .. ,",.,', .. ".. ,', .. ".. ,"
1977 ", .. ,., .. ,',.,.. ,., .. "."."' .. ,.. "",., .. ,.. '.. ,'"." .. ,,.... "''''''''''''''''''''''''

1,285.5
1,417.0
1,523.5
1,699.6
1,935,8

-14,9
-6.1
-53,2
-73.7
-53.6

-1.2
-0.4
-3.5
-4.3
-2.8

-15.4
-8.0
-55.3
-70.5
-49.7

-1.2
-0,6
-3.6
-4.1
-2,6

0,5
1.8
2,0
-3.2
-3.9

0.1
0.1
-0,2
-0,2

468.4
486.2
544.1
631.9
709.1

36,4
34.3
35.7
37,2
36,6

125.4
140.2
147.2
151.6
157.3

9,8
9,9
9.7
8,9
8.1

343,0
346.1
396,9
480.3
551.8

26.7
24.4
26.1
28.3
28.5

1978." .".,.".,.""" .. ,.. ,.. "" ,.. ,.. """" .. ", .. ,.. """ "'''''''''' .. ,,''''''''''''''
1979 ", .. ,"""", .. ,', .. ,.. ,"" """""""""", .. ,.. ".. ," .. ,"'",.... ,',,",,',',,','
1980 ", .. ,', .. ,.... ,', .. ,',.. ,", .. ".. ,.. ,""',.. ,.. ,.. ," ,.. ,'" .. ,"""', .. ,"", .. ".. ,'"
1981 ",.. ,.. ,', .. ,"', .. ,.. ,.. ,", .. ,"""',""'".. ,.. ,.. ,.. ,',.... ,".. ", .. """ ,,,,, .. ,,,
1982 ",,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.. ,,,,,.... ,"""", .. ,.. ,""""'"
1983"" .... ,.... ,.... ,"""""',.. ,.. ,"""", .. ,"", .. ,""", .. ,', .. ".. ,',.. ,""", .. ,'

2,173,4
2,452,2
2,667,6
2,986,2
3,141.5
3,320,9

-59,2
-40,2
-73,8
-78,9
-127,9
-207,8

-2.7
-1.6
-2,8
-2,6
-4.1
-6.3

-54,9
-38,2
-72.7
-73.9
-120,0
-208,0

-2,5
-1.6
-2.7
-2,5
-3.8
-6.3

-4.3
-2,0
-1.1
-5,0
-7,9
0,2

780,4
833,8
914,3
1,003.9
1,147,0
1,381.9

35,9
34,0
34.3
33.6
36,5
41.6

169,5
189,2
199,2
209,5
217,6
240.1

7.8 610,9
7.7 644,6
7,5 715.1
7,0 794.4
6,9 929.4
7,2 1.141.8

28.1
26,3
26,8
26,6
29,6
34.4

-5,0 -185,6
-5.4 -221.6

-5,0
-5,6

0.3
9.4

* 1,576.7
0,2 1,827.5

42.7
46,4

264,2
317,6

7J 1,312,6
8.1 1,509,9

35,5
38.4

-4,8
-3.2
-1.9
-1.3

-5,2
-3.5
-2,6
-2.1

13.2
15.7
33,2
43.8

2,112,0
2,320,6
2,509,0
2,684.3

50,4
51.1
51.2
50,9

398,0
464,9
560.3
668,9

1984 "...... ,.. ,', .. ,.... ,.. ,.. ,.. ,", .. ,"""""', .. ,.. ,.. ".. ,', .. """"""'''''' .. """ 3,695,3 -185.3
1985 ", .. ,.. ,.... "...... ".. ,',.. ".... ".. ,.. ,",.. ,.. ,"",'"',, .. ,,', .. ," '"'''''''''''''' 3,936,8 - 212.3
1986 estimate .. ,.. ", .. """" .. ,.. ,''''''''''''''''''''''''''''''''''''''''''''''''''''''
1987 estimate .. ,.... ,.. ,"""" ', .. ,''', .. ,'''', .. ,.. ,''''''''',.. ".. "', .. ,.. ".. ".. ,"
1988 estimate .. ,.... ,''''',.. ,''', .. ,,.. ,', .. ,""', .. ,.. ,,.. ," ,.. " ''''''''''''''''''''''
1989 estimate"""" .. ,.. ".. "" .. ,.. ,.. ,.. ,.. ,.. ,.. ,.. ".. "" .. ".. ", .. ,', .. ,"", .. ,'
'0,05% or less

Social security trust funds,

.....

4.192,2
4,538.1
4,902,9
5,268,9

Note: Excludes transition Quarter.

-202,8
-143.6
-93.6
-67.5

- 216,0
-159.3
-126,8
-111.3

-0,2
-0.1

-0,2
-0.3

0.3
0,3
0.7
0,8

9,5
10,2
11.4
12.7

1,714,0
1,855.7
1,948.7
2,015.4

40,9
40,9
39.7
38.3

Table 8. FULL-TIME EQUIVALENT OF FEDERAL CIVILIAN EMPLOYMENT

Fiscal year
1985
actual 0

Agriculture ................................................................. 106,658
Commerce ..................................................................
32,790
Defense-civil functions ............................................ 28,681
Education ...................................................................
4,876
Energy........................................................................ 16,257
Health and Human Services ....................................... 132,501
Housing and Urban Development ...............................
12,101
Interior .......................................................................
72,166
Justice ........................................................................
60,852
18,176
labor ..........................................................................
State ..........................................................................
24,788
Transportation ............................................................
61,044
Treasury ..................................................................... 127,442
12,459
Environmental Protection Agency ...............................
National Aeronautics and Space Administration ..........
21 ,991
Veterans Administration ............................................. 221 ,292
Other:
Agency for International Development ...................
4,969
General Services Administration .............................
25,254
Nuclear Regulatory Commission .............................
3,498
Office of Personnel Management ...........................
5,666
Panama Canal Commission ....................................
8,215
Small Business Administration ...............................
4,177
Tennessee Valley Authority ....................................
31,098
United States Information Agency .........................
8,572
Miscellaneous ........................................................
39,582
Estimated nondefense lapse....................................... ...................

1986
estimate

1987
estimate

1988
estimate

difference
86- 87

108,750
34,440
28,548
4,579
16,218
128,483
11,720
72,015
64,266
18,549
26,088
60,938
126,467
13,361
21 ,800
221 ,051

98,500
33,830
28,348
4,500
15,721
123,636
11,288
70,305
65,820
18,155
26,937
58,981
129,587
13,161
21,800
212,066

96,570 - 10,250
37,643
- 610
28,348
- 200
4,500
- 79
12,005
- 497
118,674 - 4,847
10,916
- 432
69,955 - 1,710
66,028
1,554
18,060
- 394
27,122
849
57,164 - 1,957
132,345
3,120
13,090
- 200
21,800 .................
204,662 - 8,985

4,700
4,875
4,825
- 50
22,635
22,297 - 2,771
25,406
3,369
- 122
3,491
3,369
5,029
- 91
5,510
5,419
8,300
8,300 .................
8,300
707
0 - 3,512
4,219
31,000
31 ,000 .................
31 ,000
9,369
9,280
160
9.120
40,822
40,552
41,430
- 608
8,180
- 8,180 ................... ...................

Civilian agency employment... .................. 1,085,105 1,082,444 1,058,992 1,043,498
Defense-military functions 3 ......... ........ . .. ... .... ... .. ... 1,036,870 1,034,375 1,037,113 1,037,356

- 23,452

Subtotal ........................................................ 2,121,975 2,116,819 2,096,105 2,080,854
Postal Service Employment 4 .. ... ... .. .... . .. ... .. ... ... ... ...... 692,748
717,694 736,852 764,852

- 20,714
19.158

Total, Executive Branch................................ 2,814,723 2,834,513 2,832,957 2,845,706

- 1,556

2,738

'E.!c1udes deve~menta l positions under the Worker·Trainee Opportunity Program (WTOP) as well as certain statutory exemptions.
o Data are estimated for portions of Defense-eivil functions as well as for the Federal Reserve System, Boord of Governors and the International
Trade Commission.
3 Section 904 of the 1982 Defense Authorization Act (Publ~ Law 97-86) exempts the Department of Defense from full·time equivalent
employment controls. Data shown are estimated .
• Includes the Postal Rate Commission.

Table 9. TOTAL RECEIPTS AND OUTLAYS, 1789-1991 (in millions of dollars)
Fiscal year

Receipts

Outlays

Surplus
or
deficit (-)

1789-1849 ...
1850-1900 ...
1901 ..............
1902 ..............
1903 ..............
1904 ..............
1905 ..............
1906 ..............
1907 ..............
1908 ..............
1909 ..............
19l0 ..............

1,160
14,462
588
562
562
541
544
595
666
602
604
676

1,090
15,453
525
485
517
584
567
570
579
659
694
694

+70
-991
+63
+77
+45
-43
-23
+25
+87
-57
-89
-18

19l1..............
1912 ..............
1913 ..............
1914 ..............
19l5 ..............
1916 ..............
1917 ..............
19l8 ..............
19l9 ..............
1920 ..............

702
693
714
725
683
761
1,101
3,645
5,130
6,649

691
690
715
726
746
713
1,954
12,677
18,493
6,358

+11
+3
-63
+48
-853
-9,032
-13,363
+291

1921... ...........
1922 ..............
1923 ..............
1924... ...........
1925 ..............
1926 ..............
1927 ..............
1928 ..............
1929 ..............
1930 ..............

5,571
4,026
3,853
3,871
3,641
3,795
4,013
3,900
3,862
4,058

5,062
3,289
3,140
2,908
2,924
2,930
2,857
2,961
3,127
3,320

+509
+736
+713
+963
+717
+865
+ 1,155
+939
+734
+738

1931... ...........
1932 ..............
1933 ..............
1934 ..............
1935 ..............
1936 ..............
1937 ..............
1938 ..............
1939 ..............
1940 ..............

3,116
1,924
1,997
2,955
3,609
3,923
5,387
6,751
6,295
6,548

3,577
4,659
4,598
6,541
6,412
8,228
7,580
6,840
9,141
9,468

-462
-2,735
-2,602
-3,586
-- 2,803
-4,304
-2,193
-89
-2,846
-2,920

1941... ...........
1942 ..............
1943 ..............
1944 ..............

8,712
14,634
24,001
43,747

13,653
35,137
78,555
91,304

-4,941
-20,503
-54,554
-47,557

*
*

Fiscal year

Receipts

Outlays

Surplus
or
deficit (-)

1945 ..............
1946 ..............
1947 ..............
1948 ..............
1949 ..............
1950 ..............

45,159
39,296
38,514
41,560
39,415
39,443

92,712
55,232
34,496
29,764
38,835
42,562

-47,553
-15,936
+4,018
+ 11,796
+580
-3,119

1951... ...........
1952 ..............
1953 ..............
1954 ..............
1955 ..............
1956 ..............
1957.. ............
1958 ..............
1959 ..............
1960 ..............

51,616
66,167
69,608
69,701
65,451
74,587
79,990
79,636
79,249
92,492

45,514
67,686
76,101
70,855
68,444
70,640
76,578
82,405
92,098
92,191

+6,102
-1,519
-6,493
-1,154
-2,993
+3,947
+3,412
-2,769
-12,849
+301

1961... ...........
1962 ..............
1963 ..............
1964 ..............
1965 ..............
1966 ..............
1967 ..............
1968 ..............
1969 ..............
1970 ..............

94,388
99,676
106,560
112,613
116,817
130,835
148,822
152,973
186,882
192,807

97,723
106,821
1ll,316
118,528
118,228
134,532
157,464
178,134
183,640
195,649

-3,335
-7,146
-4,756
-5,915
-1,411
-3,698
-8,643
- 25,161
+3,242
-2,842

1971... ...........
1972. .............
1973 ..............
1974 ..............
1975 ..............
1976 ..............

187,139
207,309
230,799
263,224
279,090
298,060
81,232
355,559
399,561
463,302

210,172
230,681
245,707
269,359
332,332
371,779
95,973
409,203
458,729
503,464

-23,033
-23,373
-14,908
-6,135
·-53,242
-73,719
-14,741
-53,644
-59,168
-40,162

1980 ..............
517,112
1981... ...........
599,272
1982 ..............
617,766
1983. .............
600,562
1984 ..............
666,457
1985 ..............
734,057
1986 est... .....
777,139
1987 est... .....
850,372
1988 est... .....
933,179
1989 est... .....
996,115
1990 est... ..... 1,058,096
1991 est ........ 1,124,039

590,920
678,209
745,706
808,327
851,781
946,323
979,928
994,002
1,026,765
1,063,619
1,093,848
1,122,716

-73,808
-78,936
-127,940
-207,764
-185,324
-212,266
-202,789
-143,630
-93,585
-67,504
-35,752
+ 1,323

TQ ..................

1977 ..............
1978 ..............
1979 ..............

*$500 thousand or less,
Note, -Data for 1789- 1933 are for the administrative budget,' daia for 1934 and all following years are for the unified' budget.
Beginning in 1937, includes amounts for social security trust funds that are off-budget.

THE BUDGET DOCUMENTS
Budget of the United States Government, 1987 contains the Budget Message of the
President and presents an overview of the President's budget proposals. It includes
explanations of spending programs in terms of national needs, agency missions, and
basic programs, and an analysis of receipts, including a discussion of the President's
tax program. This document also contains a description of the budget system and
various summary tables on the budget as a whole.
United States Budget in Brief, 1987 is designed for use by the general public. It
provides a more concise, less technical overview of the 1987 budget than the above
volume. Summary and historical tables on the Federal budget and debt are also
provided, together with graphic displays.
Budget of the United States Government, 1987-Appendix contains detailed information on the various appropriations and funds that comprise the budget. The
Appendix contains more detailed information than any of the other budget documents. It includes for each agency: the proposed text of appropriation language,
budget schedules for each account, new legislative proposals, explanations of the
work to be performed and the funds needed, and proposed general provisions applicable to the appropriations of entire agencies or groups of agencies. Supplementals
and rescission proposals for the current year are presented separately. Information
is also provided on certain activities whose outlays are not part of the budget-totals.
Special Analyses, Budget of the United States Government, 1987 contains analyses
that are designed to highlight specified program areas or provide other significant
presentations of Federal budget data. This document includes information about:
alternative views of the budget, i.e., current services and national income accounts;
economic and financial analyses of the budget covering Government finances and
operations as a whole; and Government-wide program and financial information for
Federal civil rights and research and development programs.
Historical Tables, Budget of the United States Government, 1987 provides data on
receipts, outlays, surpluses or deficits, and Federal debt covering extended time
periods-in many cases from 1940-1991. These are much longer time periods than
those covered by similar tables in other budget documents. The data have been
restructured to be consistent with the concepts and presentation used in the 1987
Budget, so these data series are comparable over time.
Management of the United States Government, 1987 provides a description of
efforts to improve the management of Federal agencies. It reports on the President's
Council on Integrity and Efficiency, describes Reform '88 initiatives undertaken by
the President's Council on Management Improvement, and outlines the Administration's management proposals. Management improvement themes covered in the
report include privatization, productivity improvement, return of responsibilities to
State and local governments, administrative streamlining, program delivery improvements, cost reductions, cash and credit management, payment integrity efforts, upgraded information technology systems, and increased use of user fees and
contracting out. Special sections describe current procurement reforms, the status of
Grace Commission recommendations, and implementation of the Debt Collection
Act of 1982, the Prompt Payment Act of 1982, and the Financial Integrity Act of
1982.
Instructions for purchasing copies of any of these documents are on the last two
pages of this volume.

Full text of Budget in Brief : Fiscal Year 1987

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