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25. Introduction to Alternative
Budget Presentations




Part Three-1




25. INTRODUCTION TO ALTERNATIVE BUDGET PRESENTATIONS
The budget presentation and concepts used in most
of this document are the traditional ones used in presenting a President's budget. In many respects, the concepts and presentation are legally required and are effective tools for Federal budgeting.
There is, however, no single "right" way of looking
at Federal receipts and outlays and therefore no single
"right" structure for the Federal budget.
• The dividing line between the Federal Government and the private sector cannot be delineated
unequivocally.
• Some Federal activities may not be quantifiable
or at least not quantifiable in a way that is commensurate with budget receipts and expenditures.
• Federal finances may be presented according to
alternative conceptual structures for specialized
purposes other than budgeting.
• Budget data may be organized in alternative ways
to view spending or receipts from complementary
perspectives.
• As the Government, the economy, the political
process, and the technical capability of budgeting
change over time, the appropriate scope and organization of the budget may also change.
The form of the budget is therefore continually being
adjusted to the needs of the President and the Congress
for establishing priorities and controlling Federal receipts, expenditures, and borrowing; the needs of the
Federal agencies for a workable system of effective program management based on legal requirements and
policy guidelines; and the needs of the public, including
the press and independent researchers, for information
with which to judge Federal operations. The change
in budgeting for credit that is effective this year, and
the change in budgeting for insurance that is proposed
in the present budget, are major examples of such development.
The current budget concept, known as the "unified
budget" or "consolidated budget," was developed in conformance with the recommendations of the President's
Commission on Budget Concepts (1967). While various
adaptations have occurred over the years, the Commission's report continues to provide the basic framework
for Federal budget concepts and presentations. The consolidated budget is intended to be comprehensive, encompassing the full scope of Federal programs. It includes a diverse array of activities—most unique to government and others similar to business operations—
and must accommodate extensive and sometimes inconsistent legal requirements. It is based primarily on the
Government's cash receipts and outlays.
The Comptroller General and some Members of Congress, accountants, economists, corporate leaders, and
others have criticized the current budget presentation.
Some, notably the General Accounting Office, believe
the budget's primary focus on obligation controls and



cash flows distorts decisionmaking, prejudicing investment and understating liabilities. Others decry the artificiality, even gimmickry, of certain distinctions between on-budget and off-budget, and the practice of
classifying certain Federal entities (such as REFCORP)
as non-budgetary Government-sponsored enterprises.
On the other hand, some argue that the budget should
be more like State budgets that separate activities financed by general funds from those financed by earmarked funds; some argue that the current practice
of including business-type income as an offset to outlays
should be replaced by including such income in receipts
and showing outlays on a gross basis; and others argue
that the retirement trust funds and the debt and interest portions of the budget should be separately displayed.
There is no dispute that receipts and spending should
be viewed in more than one way. Some standard alternatives have been used longer than the consolidated
budget and were taken for granted or strongly endorsed
by the President's Commission on Budget Concepts.
And there is a degree of merit in many of the criticisms
of the present budget. Accordingly, this part of the
budget document provides a selection of alternative
budget presentations—in order to view Federal finances
in different ways, display alternatives to those who
have not previously considered them, allow those who
criticize the conventional approach to examine the effects of alternatives, and encourage further discussion.
The alternative budget presentations are considered
in the next seven chapters. The first of these chapters
discusses generational accounts, which is a new method
being developed by academic economists to compare the
fiscal treatment of different generations over the very
long-term. It is still being developed, and a number
of the assumptions used to estimate the accounts are
controversial. This chapter explains the concept and
presents some illustrative results.
The second chapter in this part describes the Federal
sector as measured in the national income and product
accounts, which are an integrated set of measures of
aggregate economic activity, including the gross domestic product, prepared for many years by the Department
of Commerce. The following two chapters present longstanding alternative ways of dividing up the budget
totals that complement the normal presentation. One
divides the budget between trust funds and Federal
funds; the other focuses on physical capital.
The final three chapters in this part of the budget
document show alternative presentations that could replace the consolidated budget, rather than complement
it. These presentations and the consolidated budget all
contain similar information but are arranged differently. The principal difference is in their focus—that
which is highlighted for decision makers and the public.
The focus, in turn, may affect the incentive to make
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Part Three-4
one budgetary decision rather than another. The alternative presentations are not exact but rather are approximations of each approach that illustrate the general concepts and some of the key considerations. These
three presentations are:
• The proposal made by the General Accounting Office, which focuses separately on operating and
capital uses, on Federal, trust, and enterprise
funds, and on aggregate totals.
• A budget cast in the form of the State of California's budget, which, like most State budgets, focuses on individual funds rather than consolidated
totals.
• A budget divided threefold among an operating
fund, a retirement fund, and a debt and interest
fund.




THE BUDGET FOR FISCAL YEAR 1993

The three presentations are compared with each
other and the consolidated budget at the end of the
chapter discussing the last of these presentations,
Chapter 32.
The chapters in this part of the document do not
reflect the proposed Defense savings to the adjusted
Defense baseline or the proposed extension of unemployment benefits. Furthermore, the details of the
President's Comprehensive Health Reform Plan—which
will meet the pay-as-you-go requirements of the Budget
Enforcement Act—are not included in this document
and therefore also are not reflected in these chapters.
Detailed tables showing the budgetary effects of both
proposals will be provided in February 1992.

26. Generational Accounts
Presentation




Part Three-5




26. GENERATIONAL ACCOUNTS PRESENTATION
Government deficits and the composition of government receipts and expenditures affect the distribution
of income and wealth among different generations.
Generational accounting is a new method for comparing
the fiscal treatment of different generations.1 It is still
being developed, and a number of the assumptions used
to estimate the accounts are controversial. This chapter
explains the concept and presents some illustrative results, which should encourage further development of
generational accounting and other analyses of the
intergenerational effects of the budget.
• Future generations are estimated to pay 79 percent more in taxes, net of social security and other
transfers they receive, than the generation of people who have just been born. This result is the
combined effect of Federal, State, and local government budgets, not the Federal budget alone.
• The Omnibus Budget Reconciliation Act of 1990
(OBRA) significantly reduced the imbalance between generations. If OBRA had not been enacted,
future generations would be estimated to pay an
additional 18 percent more in taxes, net of the
transfers they receive, than the generation of people just born.
• The effect of OBRA depends crucially on whether
it permanently affects budget outlays and receipts,
as the above comparison assumes. If taxes and
expenditures return to their previous path after
1995, future generations would be estimated to
pay an additional 14 percent more in taxes net
of transfers than the generation of people just
born—almost as much as if OBRA had never been
enacted.
• Returning to pay-as-you-go finance of social security would significantly increase the fiscal burden
on children, people just born, and future generations compared to those who are now adults and
earning income.
• A large part of the heavy net tax payment by
future generations, compared to those just born,
is because medicare and medicaid transfers are
projected to grow faster than the economy well
beyond the turn of the century. Suppose, instead,
that this health care spending was stabilized as
a percentage of GNP after the year 2000 (except
for the effects of demographic change). The payment of taxes (net of transfers) by future generations, compared to those just born, would fall from
79 percent to 41 percent.
Generational accounting was developed by Alan J. Auerbach, Jagadeesh Gokhale, and
Laurence J. Kotlikoff. See Auerbach, Gokhale,and Kotlikoff, "Generational Accounts: A Meaningful Alternative to Deficit Accounting," in David Bradford, ed., Tax Policy and the Economy, vol. 5 (MIT FVess for the National Bureau of Economic Research, 1991), pp. 55-110,
and Laurence J. Kotlikoff, Generational Accounting—Knowing Who Pays, and When, for
What We Spend (New York: The Free FVess, forthcoming March 1992).
1




The Nature of Generational Accounts
The budget normally measures receipts and outlays
for one year at a time. It usually shows these estimates
for only a few years into the future, and even the longrange projections displayed in Chapter 2 extend only
to 2001. The standard budget presentation, moreover,
while it divides up receipts and outlays in a number
of complementary classifications, does not organize the
results in a way that compares the effects of policy
on different generations.
Generational accounts, in contrast, are forward looking over a period of many years; and they classify taxes
paid and transfers received—social security, medicare,
food stamps, and so forth—according to the generation
that pays or receives the money. For an existing generation, they estimate the taxes and transfers yearby-year over its entire remaining lifespan; and they
summarize these amounts for a generation in terms
of one number, the present value of its entire annual
series of average future payments and receipts.2 For
future generations, generational accounts estimate the
net payments based on the proposition that the government's bills will have to be paid either by people who
are now alive or by future generations. They calculate
how much future generations will have to pay to the
government, above the amounts they will receive in
transfers, if the government's total spending is not reduced from the projected path and if the people now
alive do not pay more than projected.
Defined more precisely, generational accounts measure, as of a particular base year, the present value
of the future taxes that the average member of each
given generation is estimated to pay to the government
minus the present value of the future transfers that
the average member is estimated to receive. This difference is called the "net payment" in the following
discussion. A generation is defined as all the males
or all the females who are born in one given year.
Generational accounts can be used to make two types
of comparison. First, they can be used to compare the
net payment by future generations and the generation
of people just born. These groups are comparable because their generational accounts cover all the taxes
they will pay and all the transfers they will receive
during their entire lifetimes.
The net payments of generations born in past years,
however, cannot be compared at the present stage of
development of the accounts. This is because their future taxes and transfers are only part of the taxes
2 The "present value" is the value to someone at the present time of amounts of money
that he will pay or receive in the future. The value of $1.00 to be paid or received today
is simply $1.00. Future amounts, however, are discounted for the fact that they are not
yet available. The disadvantage of not having money available until the future is the
loss of interest that could otherwise be earned on the money in the meanwhile. Therefore,
the discounted value is based on the interest rate. The discounted value is smaller for
years farther into the future, because the loss of interest earnings is greater as interest
is lost for more years.

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Part Three-8
and transfers over their entire lifetimes. The portion
remaining in the future differs depending on whether
a generation is 10, 40, or 80 years old. Generational
accounts therefore cannot be used to judge whether
the government is treating a generation born in the
past well or poorly compared to any other existing generation or future generations. Comparison of the lifetime net payment of existing generations is a goal for
future research.
Secondly, generational accounts can be used to compare the effects of actual or proposed policy changes.
These effects can be compared for all generations, including those born in past years, because the changes
in lifetime taxes and transfers will all be in the future
and thus are included in the comparison. This comparison can be made equally well for policies that change
the totals of receipts or expenditures and those that
change the composition of the budget without affecting
the deficit.
When using generational accounts, their scope needs
to be kept in mind. These accounts, unlike almost every
other table in this budget, include the taxes and transfers of all levels of government alike—Federal, State,
and local. The baseline generational accounts thus do
not show the separate effect of the Federal budget as
a whole. Since the difference in generational accounts
due to a policy change can be confined to the Federal
Government alone, this limitation does not affect the
ability to use generational accounts in assessing the
effects of a change in Federal policy.
Generational accounts reflect only taxes paid to the
government and transfers received. They do not impute
to particular generations the value of the government
purchases of goods and services made to provide them
with education, highways, national defense, and other
services. Therefore, they do not show the full net benefit or burden that any generation receives from government policy as a whole, although they can show a generation's net benefit or burden from a particular policy
change that affects only taxes and transfers. Imputations appear feasible for certain types of government
purchases, such as for primary school education, and
they could be included in future improvements of
generational accounts.
Generational accounting also does not, as yet, incorporate any feedback effects of policy on the economy's
growth and interest rates. Feedback effects can be significant, but they generally occur slowly, so their impact on the discounted values used in the generational
accounts may be small. Moreover, there is reason to
believe they would reinforce the conclusions derived
here. For example, policies that decrease the net payment by current generations and increase the net payment by future generations are likely to reduce investment over time. This, in turn, will lower real wage
growth and raise real interest rates, which on balance
will harm future generations in absolute terms.
Even within the scope of generational accounts as
now constructed, the results in this chapter should be
viewed as illustrative. They are necessarily based on
a number of simplifying assumptions, about which reasonable people may disagree, concerning the pattern
of future taxes and transfers, the interest rate used




THE BUDGET FOR FISCAL YEAR 1993

to discount future taxes and transfers to form present
values, mortality rates, birth rates, and so forth. The
absolute amounts of the generational accounts are sensitive to these assumptions. However, the generational
accounts can be illuminating when considered in the
light of their assumptions, as has been the case for
the 75-year projections made every year by the social
security trustees. Moreover, the most fundamental result holds for a wide range of reasonable changes in
the assumptions: the net payment by future generations
is relatively much larger than the net payment by the
generation just born.
The following sections illustrate the results of
generational accounting. An appendix explains the concepts, calculations, and other assumptions more fully.
The Remaining Net Payments by Existing
Generations
Tables 26-1 and 26-2 show the generational accounts
as of calendar year 1990 for every fifth generation of
males and females alive in that year. The first column,
"net payment," is the difference between the present
value of taxes that an average member of each generation will pay over his remaining life and the present
value of the transfers he will receive. The other columns show the average present values of the different
taxes and transfers. All Federal, State, and local taxes
and transfers are included in these calculations. Because of the time needed to prepare these estimates,
Federal spending and receipts are based on the baseline
in the Mid-Session Review of the 1992 Budget rather
than the policy in the present budget.
The young and middle aged generations will pay
much more in future taxes in present value than they
will receive in future transfers. For males who were
age 40 in 1990, for example, the present value of future
taxes is $177,000 more than the present value of future
transfers. These amounts are large because these generations are nearing their peak tax paying years. For
newborn males, on the other hand, the present value
net payment is much smaller, $76,000. They will not
pay much in taxes for a number of years. The older
generations, who are largely retired, have negative net
payments. They will receive more social security, medicare, and other future benefits than they will pay in
future taxes. Females have smaller net payments than
males, mostly because they earn less income and therefore pay less income and social security taxes.
As emphasized previously, the net payment by a generation does not include the taxes paid or the transfers
received in the past. This needs to be kept in mind
in considering the net payments by those now alive.
The fact that 40 year-old males can expect to pay more
in the future than they receive, in present value terms,
while the reverse is true for 65 year-old males, does
not mean that the Federal, State, and local governments are treating 40 year-old males unfairly. Males
who are now 65 years old paid considerable taxes when
they were younger, and these past taxes are not included in the accounts. Therefore, as noted above, the
net payment by one existing generation cannot be directly compared with another.

Part Three-9

26. GENERATIONAL ACCOUNTS PRESENTATION

Table 26-1. GENERATIONAL ACCOUNTS FOR MALES: PRESENT VALUE OF TAXES AND TRANSFERS AS OF 1990
(In thousands of dollars)
Taxes paid
Generation's age in 1990

Net payment

Labor income
taxes

0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90

76.4
98.1
123.6
154.8
182.2
196.8
201.1
195.2
177.4
146.3
103.9
52.2
-6.4
-58.3
-65.1
-58.2
-47.5
-35.8
-2.0

28.6
36.7
46.9
59.9
71.3
76.5
77.1
74.0
67.5
58.1
46.7
34.5
21.5
9.7
4.3
1.9
0.6

Future generations

136.9

Percentage difference: future generations and a(je zero ..

79.2

Capital income
taxes

Transfers received

Payroll taxes

30.3
38.9
49.7
63.5
75.9
81.5
82.3
79.1
72.3
62.3
50.2
37.1
23.3
10.5
4.6
2.1
0.6

—

10.9
14.1
17.9
23.0
28.7
35.5
42.7
49.8
55.3
58.2
57.8
54.2
47.9
40.0
31.6
23.9
18.2
15.1
6.9

—
-

Excise taxes

Social security

Health

Welfare

—

5.5
6.8
8.2
10.0
11.9
14.1
17.1
21.2
26.6
34.5
44.9
58.5
74.5
83.0
71.7
55.7
41.8
31.6
5.8

10.9
11.1
12.1
13.7
15.1
16.6
18.5
21.3
24.9
29.3
34.2
39.8
45.7
52.9
47.9
41.6
34.3
27.3
4.9

—

—

—

—

—

—

-

—

26.3
30.5
34.8
38.9
41.4
42.5
42.8
42.3
40.7
37.8
34.0
29.9
25.6
21.4
17.5
14.0
11.0
8.9
1.8

-

-

-

-

-

—

3.3
4.2
5.4
6.9
8.1
8.5
8.1
7.5
6.9
6.4
5.8
5.2
4.6
4.0
3.5
2.8
1.9
0.8
*

*$0.05 thousand or less.
Table 26-2. GENERATIONAL ACCOUNTS FOR FEMALES: PRESENT VALUE OF TAXES AND TRANSFERS AS OF 1990
(In thousands of dollars)
Taxes paid
Generation's age in 1990

Net payment

29.7
41.0
53.5
67.8
79.4
83.4
81.4
74.8
62.5
42.6
15.4
-19.4
-58.0
-88.4
-90.0
-81.0
-67.5
-53.0
-8.1

0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90

Labor income
taxes

Capital income
taxes

Transfers received

Payroll taxes

17.0
21.8
27.9
35.6
42.0
43.3
41.6
38.9
35.0
29.9
23.9
17.3
10.8
5.5
2.3
0.7

—

4.1
5.2
6.7
8.6
10.7
13.3
16.7
20.4
23.7
26.2
27.4
27.2
25.4
22.4
18.5
14.0
9.3
4.7
0.5

16.1
20.6
26.3
33.5
39.4
40.5
39.0
36.4
32.7
27.9
22.3
16.1
10.0
5.1
2.2
0.7
*
—

Excise taxes

Social security

Health

Welfare

—

24.0
27.9
32.5
37.2
40.6
42.5
43.1
42.6
41.1
38.5
35.1
31.2
27.1
23.1
19.4
16.0
13.0
10.5
1.8

6.1
7.5
8.9
11.0
13.2
15.8
18.7
22.1
26.0
31.9
40.1
51.5
64.8
70.9
64.9
54.0
42.5
32.3
5.0

18.7
18.6
20.1
22.3
24.3
26.2
28.7
32.2
36.7
42.4
48.9
56.1
63.4
70.9
65.0
56.3
45.7
34.6
5.2

6.6
8.5
10.9
13.8
15.7
14.1
11.6
9.3
7.3
5.6
4.3
3.5
3.0
2.7
2.4
2.1
1.7
1.3
0.2

*
—

Future generations

53.2

-

-

-

-

-

-

-

Percentage difference: future generations and ajje zero ..

79.2

-

-

-

-

-

-

-

*$0.05 thousand or less.

The Net Payments by Future Generations
Future generations—those born in 1991 and later—
are estimated to make a 79 percent larger net payment
to the government, on average, than those born in 1990.
The $137,000 net payment by the average future male
and the $53,000 net payment by the average future
female assume that the ratio of net payments by males
to that of females is the same for future generations
as for those born in 1990. They also assume that all
those of a particular sex born in the future will make




the same net payment over their lifetimes after adjusting for economic growth.
A growth adjustment is needed because future generations can be expected to pay more in taxes, net
of the transfers they receive, simply because their incomes will be higher. To properly assess the relative
net payment by future generations, it is necessary to
calculate the net payment they would make above and
beyond the amount that would arise due to economic
growth. Assuming that all future generations pay the

Part Three-10

THE BUDGET FOR FISCAL YEAR 1993

same amount after the adjustment for growth, one
number in the table stands for all future generations
of the same sex.
The size of the imbalance between future generations
and the newly born is sensitive to the assumptions
about the interest rate used for discounting and the
growth rate of the economy. Table 26-3 shows the percentage differential under alternative assumptions. It
considers interest rates of 3, 6, and 9 percent and productivity growth rates of 0.25, 0.75, and 1.25 percent.
The central assumptions used in this chapter were an
interest rate of 6 percent and a growth rate of 0.75
percent. This led to a 79 percent larger net payment
by future generations than the newly born. Under the
alternatives in table 26-3, the difference ranges from
51 percent to 146 percent. While this differential is
large, the basic conclusion is unchanged. Future generations are estimated to make a much larger payment
of taxes to the government, net of transfers received,
than those just born.
Table 26-3. PERCENTAGE DIFFERENCE IN NET PAYMENTS OF FUTURE
GENERATIONS AND AGE ZERO FOR ALTERNATIVE ASSUMPTIONS
Growth rate
Interest rate
0.25

90
107
146

3.0
6.0
9.0

0.75

68
79
108

1.25

51
58
77

The generational imbalance also depends on the policy assumption that all future generations of the same
sex have the same net payment (after adjusting for
growth). Alternatively, suppose that the future generations born during 1991-2000 pay only the same amount
as the generation born in 1990. Because these future
generations pay less than previously assumed, those
future generations born after 2000 will have to make
a net payment that is 133 percent larger, rather than
79 percent larger, than the net payment of the 1990
generation. The longer the delay in changing policy,
the larger the net payment by generations after the
change in made.
The 1990 Budget Agreement
The Omnibus Budget Reconciliation Act of 1990
(OBRA) enacted an agreement between the President
and the Congress to reduce the Federal deficit by about
half a trillion dollars compared to what it would otherwise have been over the period from fiscal year 1991
through fiscal year 1995.
The first column of tables 26-4 and 26-5 shows the
impact of OBRA on the generational accounts. It equals
the difference between the 1990 baseline generational
accounts (column one of tables 26-1 and 26-2), which
include OBRA, and the 1990 generational accounts that
would have prevailed in the absence of OBRA. OBRA
is assumed to permanently change the projected paths
of spending and receipts. Had OBRA not been enacted,
future generations of males would have had to pay
$10,700 more on average (on a growth-adjusted basis).
Their net payment would have been 97 percent higher,
instead of 79 percent higher, than the net payment
by people born in 1990. The reduction of net payments




by future generations under OBRA came at the cost
of higher net payments by existing generations. For
males alive in 1990, the increased net payment ranged
from $1,500 for those born in 1990, to $2,900 for 30
year-olds, to $200 for 85 year-olds. In effect, OBRA
imposed a relatively small sacrifice on living generations to achieve a significant reduction of the burden
on future generations.
The effects of OBRA depend crucially on whether it
permanently affects the budget. Column two shows the
result if taxes and transfers return to their previous
paths after 1995. Future generations would pay 93 percent more in taxes, net of the transfers they receive,
than the generation of people just born. Except for older
generations, most of the effect of OBRA on generational
accounts depends on budget policy after 1995.
Illustrative Policy Changes
The other columns of tables 26-4 and 26-5 further
illustrate the use of generational accounts in analyzing
policy changes. Column three shows the effect of returning social security to pay-as-you-go finance. Under this
policy, social security taxes are adjusted each year so
that the social security trust fund receipts from taxes,
interest, and other sources are just enough to meet
benefit payments. While this would reduce social security payroll taxes in the near-term and thus lower the
net payments made by those who were in their twenties
or older in 1990, their benefit would be at the expense
of younger and future generations. For example, 40
year-old males would have a $4,500 decrease in their
remaining lifetime net payments to the government,
whereas newly born males would have a $4,000 increase. The absolute increase in net payment by future
generations would be larger still, $4,600, but in relative
terms future generations and the newly born would
remain nearly the same.
A large part of the heavy net payments by future
generations in the baseline, compared to people just
born, is because government spending for medicare and
medicaid is growing exceptionally fast. The baseline
generational accounts use the middle scenario through
2030 that was recently published by actuaries at HCFA
(Health Care Financing Administration) in the Department of Health and Human Services.3 After 2030
health care transfers are assumed to stabilize as a percentage of GNP, apart from the effect of changes in
the composition of the population by age and sex.
The fourth and fifth columns of tables 26-4 and 26-5
show the impact on the generational accounts that
would result from stabilizing health care spending
(apart from demographic change) as a percentage of
GNP after 1995 and after 2000, respectively, rather
than after 2030. Existing generations would receive less
transfers than under the HCFA projections used for
the baseline and so would make a larger net payment
to the government. This, in turn, would mean a smaller
net payment by future generations. Early stabilization
of health care spending can have quite significant effects. If it is stabilized as a percentage of GNP (apart
3 For a discussion of this scenario and projections to 2000, see Sally Sonnefeld and others,
"Projections of National Health Expenditures through the Year 2000," Health Care Financing
Review (volume 13, Fall 1991).

Part Three-11

26. GENERATIONAL ACCOUNTS PRESENTATION
Table 26-4. CHANGES IN GENERATIONAL ACCOUNTS FOR MALES DUE TO ALTERNATIVE POLICIES AS OF
1990
(In thousands of dollars)

OBRA not
enacted

Generation's age in 1990

OBRA effects
end in 1995

Pay-as-you-go
social security

Stabilizing health care spending
after—
1995

2000

0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90

-1.5
-1.8
-2.1
-2.5
-2.8
-2.9
-2.9
-2.8
-2.6
-2.3
-2.0
-1.6
-1.2
-0.8
-0.6
-0.4
-0.3
-0.2
0.1

-1.4
-1.6
-1.9
-2.1
-2.2
-2.2
-2.1
-1.9
-1.7
-1.4
-1.1
-0.8
-0.6
-0.4
-0.3
-0.2
-0.1

4.0
3.4
2.3
0.7
-1.2
-2.7
-3.7
-4.3
-4.5
-4.2
-3.5
-2.7
-1.7
-0.8
-0.3
-0.2
-0.1

—
—

Future generations

10.7

8.0

4.6

-45.0

-26.6

Percentage difference in net payment: future generations and age
zero

97.1

93.2

76.0

15.5

40.8

3.1
3.6
4.0
4.7
5.2
5.9
6.8
8.0
9.5
11.1
12.3
12.7
11.2
8.6
6.0
3.5
1.7

—

—

—

—

—

—

1.9
2.2
2.5
2.9
3.3
3.8
4.4
5.3
6.3
7.2
7.4
6.5
4.9
3.2
1.8
0.7

—

Table 26-5. CHANGES IN GENERATIONAL ACCOUNTS FOR FEMALES DUE TO ALTERNATIVE POLICIES AS OF
1990
(In thousands of dollars)

Generation's age in 1990

OBRA not
enacted

OBRA effects
end in 1995

Pay-as-you-go
social security

Stabilizing health care spending
after—
1995

-1.1
-1.3
-1.5
-1.8
-2.0
-2.1
-2.1
-2.0
-1.9
-1.7
-1.4
-1.2
-0.9
-0.7
-0.5
-0.4
-0.3
-0.2

0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90

*

Future generations
Percentage difference in net payment: future generations and age
zero

-1.0
-1.2
-1.4
-1.6
-1.6
-1.6
-1.5
-1.4
-1.2
-1.1
-0.9
-0.7
-0.5
-0.4
-0.3
-0.2
-0.1

2.0
1.6
0.9

- *

5.1
5.7
6.4
7.2
8.0
8.8
10.0
11.5
13.4
15.5
17.2
18.0
16.5
13.3
9.8
6.1
2.9

—

—

—

—

—

—

*

-0.9
-1.6
-1.9
-2.1
-2.2
-2.0
-1.7
-1.2
-0.8
-0.4
-0.2
-0.1

2000

3.1
3.5
3.9
4.4
5.0
5.6
6.4
7.4
8.7
9.9
10.4
9.6
7.8
5.5
3.3
1.4
—

—

—

3.1

2.2

2.6

-13.0

-7.1

97.1

93.2

76.0

15.5

40.8

*$0.05 thousand or less.

from demographic change) after 2 0 0 0 , the net payment
by future generations of males is reduced by $ 2 6 , 6 0 0 ;
and the net payment is 41 percent more than the net
payment of those just born, instead of 79 percent as




in the baseline. If health care spending is stabilized
after 1995, the net payment by future generations of
males is reduced by $45,000; and relative to those just
born the net payment would be only 16 percent higher.

Part Three-12

THE BUDGET FOR FISCAL YEAR 1993

APPENDIX: CONSTRUCTION OF THE GENERATIONAL ACCOUNTS
The Present Value Constraint
Generational accounting is based on the present
value budget constraint of the government sector. In
simple terms it says that the government must ultimately pay for its purchases of goods and services with
resources it obtains from current and future generations or with its current assets (net of debt). If current
generations pay less in taxes (net of transfers received)
to cover government purchases, future generations will
have to pay more. For illustration, suppose that
through borrowing the payments for the government's
bills were repeatedly shifted to future generations by
each successive current generation. Then this debt
would grow, with interest. Eventually the interest
would exceed the lifetime income of future generations,
which would result in default.
More precisely, the government's present value constraint says that, at any point in time, the present
value of the government's future purchases of goods
and services cannot exceed the sum of three items:
(1) the present value of future taxes to be paid (net
of transfers received) by existing generations (i.e., the
sum of their generational accounts multiplied by the
number of people in each generation), (2) the present
value of taxes to be paid (net of transfers received)
by future generations, and (3) the value of government
assets that yield income, less the government debt.
Generational accounting estimates the present value of
the government's purchases of goods and services and
the amounts (1) and (3). Amount (2), the present value
of taxes to be paid by all future generations (net of
transfers received), is calculated as the present value
of future government purchases minus amounts (1) and
(3).
The generational accounts for future generations are
derived from the aggregate amount (2). For most of
the illustrations in this chapter, different net payments
(after adjusting for economic growth) are not estimated
for different future generations. Rather, the aggregate
present value net payment by future generations is divided on an even basis among all the future generations
in such a way that the net payment by the average
member of each generation keeps pace with the economy's growth in productivity. Thus, as shown in tables
26-1 and 26-2, one single (growth adjusted) average
figure stands as the generational account for all future
generations of a given sex. Because the generational
account is calculated indirectly from the above aggregates, rather than from specific taxes and transfers,
it can only be shown as a total amount.
The Underlying Calculations
The calculation of the generational accounts is a
three-step process. The first step entails projecting each
currently living generation's average taxes and transfers to each future year in which at least some member
of the generation will be alive. The second step converts
these projected average taxes and transfers into a
present value, using assumptions for the discount rate
and the probability that the generation's members will
be alive in each of the future years. The sum of these




present values, with transfers subtracted from taxes,
is the generational account or "net payment" for existing generations shown in the first column of tables
26-1 and 26-2. The third step is to estimate the other
terms of the present value constraint explained in the
previous section so as to derive the average net payment by future generations. The calculations are based
on projections to 2200.
Projection of taxes and transfers.—The projection
of average future taxes and transfers begins with the
national totals of all Federal, State, and local taxes
and transfers as reported by the national income and
product accounts (NIPAs) for calendar year 1990. (All
years in this chapter are calendar years unless otherwise stated.) The relationship of the NIPA data to the
Federal budget is described in Chapter 27. Employee
retirement and veterans benefits paid by government
are considered a form of employee compensation and
classified as the purchase of a service rather than a
transfer payment.
The base year NIPA totals are distributed to all existing generations, as defined by age and sex, based on
the corresponding distributions in cross-section survey
data. These surveys include the Survey of Income and
Program Participation by the Bureau of the Census
and the Survey of Consumer Expenditures by the Bureau of Labor Statistics. Those taxes not directly paid
by persons and so not appearing in these surveys, such
as the corporation income tax, are allocated. Since
generational accounting attributes taxes and transfers
to individuals, household taxes and transfers are attributed to the individuals in the household. The attribution rules affect the values of the baseline accounts
but are not likely to alter the generational implications
of policy changes.
The distribution of average taxes and transfers by
age and sex in the future is assumed to equal the
base year average amounts after adjustments for
growth and projected policy. In the case of Federal
taxes and transfers for 1991-95, the Amounts correspond to the estimated tax and transfer totals in
the Mid-Session Review of the 1992 Budget (July 1991),
updated for the actual fiscal year 1991 results. These
estimates take into account the provisions of OBRA.
In the case of State and local taxes and transfers for
1991-95, the amounts are based on the GNP assumptions in this budget and the assumption that the ratios
of State and local tax and transfer aggregates to GNP
remain constant at the 1990 levels. After 1995 the average taxes and transfers by age and sex are assumed,
with two exceptions, to increase at the assumed rate
of productivity growth. Productivity (both labor and
multi-factor productivity) is assumed to increase at 0.75
percent a year, which is close to the average annual
rate of multi-factor productivity growth since 1970.
Social security and health care transfers are the two
exceptions. The projected social security transfers take
account of the provision in current law that gradually
raises the age at which full retirement benefits are
available beginning in 2000. The projected medicare

26. GENERATIONAL ACCOUNTS PRESENTATION

and medicaid transfers through 2030 are the HCFA
middle scenario estimates, as explained above. They
are assumed to increase subsequently at the rate of
productivity growth with an adjustment for demographic change.

Part Three-13

are from the latest Mid-Session Review updated for the
actual fiscal year 1991 results. State and local purchases through 1995 are kept at the same ratio to
GNP as in 1990. Federal, State, and local purchases
after 1995 were divided between (1) those made on
behalf of specific age groups—the young, middle aged,
Assumptions for present value.—The appropriate and elderly—such as educational expenditures; and (2)
discount rate for calculating the present value of future those that are more nearly pure public goods, such
amounts depends on whether or not these amounts are as defense and public safety. Purchases per person in
known with certainty. Future government receipts and each of the three age groups, and purchases of public
expenditures are risky, which suggests that they be goods per capita, increase at the assumed rate of prodiscounted by a rate higher than the real rate of inter- ductivity growth.
est on government securities. On the other hand, govThe economic value of the government's assets that
ernment receipts and expenditures appear to be less yield income, less the government debt, was estimated
volatile than the real return on capital, which suggests by capitalizing the government's net interest in the
that they be discounted by a lower rate than that. NIPAs (with some minor adjustments, including one
The baseline calculations assume a 6 percent real dis- for the current surplus of government enterprises). Net
count rate, which is intermediate between the roughly interest was divided by a nominal interest rate cal2 percent average real return available in recent years culated as the sum of the assumed real interest rate
on short-term Federal securities and the roughly 10 (6 percent) and the 4.1 percent rate of inflation in 1990
percent real return available in recent years on capital. as measured by the GNP deflator.
The present values of future average taxes and transThe average growth-adjusted net payment to be made
fers are also discounted for mortality probabilities. The
by future generations was determined by the aggregate
probabilities through 2066 are those embedded in the
present value of the net payment (as derived through
social security trustees' intermediate projection (alterthe present value budget constraint), by the assumed
native II) in 1991 of the population by age and sex.
productivity growth, and by the projected size of future
The mortality probabilities in 2066 were used for later
generations. The size of future generations was estiyears.
mated using the social security alternative II projection
Other projections.—Federal purchases of goods and through 2066 and the demographic assumptions for
services through 1995, like Federal taxes and transfers, 2066 applied to later years.







27. National Income and
Product Account Presentation




Part Three-15




27. NATIONAL INCOME AND PRODUCT ACCOUNT PRESENTATION
The National Income and Product Accounts (NIPAs)
are an integrated set of measures of aggregate economic
activity that are prepared by the Department of Commerce. One of the many purposes of the NIPAs is to
measure the Nation's total current production of goods
and services, known as gross domestic product (GDP)
and the incomes generated in its production.1 Because
the NIPAs are widely used in economic analysis, it
is important to show the NIPA presentation of Federal
transactions.
GDP is the sum of the net products of the household,
business, government, and foreign sectors. Federal
transactions are included in the NIPAs as part of the
government sector. The concepts for the Federal sector
have been designed to measure certain important economic effects of Federal transactions in a way that
is consistent with the conceptual structure of the entire
set of integrated accounts. The NIPA Federal sector
is not itself a budget, for it is not a financial plan
for proposing, determining, and controlling the fiscal
activities of the Government. Rather, it is an accounting
translation of the budget to meet specialized and important needs, chiefly the measurement of the impact of
Federal receipts, outlays, and the deficit on the national
economy. NIPA concepts differ in many ways from
budget concepts, and therefore the NIPA presentation
of Federal finances is significantly different from that
of the budget.
GDP is a measure of final output which excludes
intermediate product to avoid double counting. Government purchases of goods and services are included in
GDP as part of final output, together with personal
consumption expenditures, gross private domestic investment, and net exports of goods and services. Other
Federal expenditures—transfer payments, grants to
State and local governments, subsidies, and net interest
payments—are not part of final output. Rather, they
are transfers of income to others, whose consumption,
investment, purchases, or transactions with foreigners
are part of final output. An entire set of receipt and
expenditure transactions of the Federal Government is
prepared as one sector of the NIPAs; however, when
the accounts for all the sectors are consolidated into
a summary account for the Nation as a whole, transfer
payments, grants, subsidies, and net interest expenditures are canceled out by receipt of those payments
as income in other sectors. This leaves only purchases
to be included in final output.
1 Until last year, the most widely used measure of national production was gross national
product (GNP). When the Department of Commerce released its benchmark revisions of
the NIPAs in December, it began to feature gross domestic product (GDP) as the preferred
measure of national production. This is the concept that most countries in the world also
emphasize. Accordingly, the budget has adopted GDP as its preferred measure of total
national production. For the United States, GDP is very nearly as large as GNP (99.8
percent of GNP in 1990, for example). The distinctions between GNP and GDP are discussed
at length in the August 1991 issue of the Department of Commerce publication Survey
of Current Business.




Differences Between the NIPAs and the Budget
Federal transactions in the NIPAs are measured according to NIPA accounting rules in order to be compatible with the purposes of the NIPAs and other transactions recorded in the NIPAs. As a result they differ
from the budget in netting, timing, and coverage. These
differences cause total receipts and expenditures in the
NIPAs to differ from total receipts and outlays in the
budget. Differences in timing and coverage also cause
the deficit to differ. Netting differences have the same
effect on both receipts and expenditures and thus have
no effect on the deficit. Besides these differences, the
NIPAs combine transactions into different categories
from those used in the budget.
Netting differences arise when the budget records
certain transactions as offsets to outlays while they
are recorded as receipts in the NIPAs (or vice versa).
The budget treats all income that comes to the Government due to its sovereign powers—mainly, but not exclusively, taxes—as Governmental receipts. However,
any intragovernmental income from one account to another is offset against outlays rather than being recorded as a receipt. Government contributions for employee retirement is one example. The budget offsets
these payments against outlays while the NIPAs treat
the Federal Government as any other employer and
show contributions for employee social insurance as expenditures by the employing agencies and receipts to
the appropriate social insurance funds. The NIPAs also
include certain imputations which the budget does not.
For example, unemployment benefits for Federal employees are financed by direct appropriations rather
than social insurance contributions. The NIPAs impute
social insurance contributions by employing agencies to
finance these benefits.
The budget also offsets against outlays any income
that arises from voluntary business-type transactions
with the public. The budget classifies Medicare Part
B premiums as business-type transactions, whereas the
NIPAs record them as receipts.
Timing differences occur for receipts because the
NIPAs generally record personal taxes and social insurance contributions when they are paid and business
taxes when they are accrued, while the budget records
all receipts when they are received. The principal timing difference between NIPA expenditures and budget
outlays occurs because purchases are recorded on a delivery basis in the NIPAs, but when cash is disbursed
in the budget. This difference can be large for major
defense purchases because progress payments are recorded as outlays in the budget, while the NIPAs do
not record expenditures until delivery is made. The
NIPAs count work in progress as part of business inventories until delivery is made to the Government.
Part Three-17

Part Three-18

THE BUDGET FOR FISCAL YEAR 1993

The budget and the NIPAs also have coverage differences. The NIPAs include off-budget Federal entities
and exclude transactions with U.S. territories. The
NIPAs also exclude the proceeds from the sales of assets such as land. Bonuses paid on Outer Continental
Shelf oil leases are shown as offsetting receipts in the
budget and are deducted from budget outlays. In the
NIPAs these transactions are excluded as an exchange
of assets.
Financial transactions such as loans, loan repayments, loan asset sales, and loan guarantees are excluded from the NIPAs on the grounds that such transactions involve an exchange of assets with no production involved. Through 1991, in contrast, the budget
recorded loans as outlays when disbursed and as offsets
to outlays when repaid or sold. With the enactment
of the Federal Credit Reform Act of 1990, the budget
has made a fundamental change in the way that it
records lending transactions. For direct loan obligations
and loan guarantee commitments made after 1991, the
budget records the estimated subsidy cost of the direct
loan or loan guarantee when the direct loan or guaranteed loan is disbursed. The nonsubsidized cash flows
are recorded in nonbudgetary accounts as a means of
financing the budget deficit rather than as budgetary
transactions themselves. This treatment recognizes that
part of a Federal direct loan is an exchange of assets
with equal value but that part is normally a subsidy
to the borrower. It also recognizes the subsidy normally
granted by loan guarantees. In the NIPAs, neither the
subsidies nor the loan transactions are included; however, the NIPAs will continue to include all interest
transactions with the public, including interest paid to
the new financing accounts.
Deposit insurance outlays for resolving failed banks
and thrift institutions are similarly excluded from the
NIPAs on the grounds that there are no offsetting current income flows from these transactions. For 1991,

this exclusion is the largest difference between the
NIPAs and the budget.
Federal Sector Receipts
Table 27-1 shows Federal receipts in the four major
categories used in the NIPAs, which are similar to the
budget categories but with significant differences.
Personal tax and non-tax receipts is the largest category. It is composed primarily of personal income
taxes, but also includes estate and gift taxes, fees, fines,
and other receipts.
Corporate profits tax accruals differ in classification
from the corresponding budget category primarily because the NIPAs include the deposit of earnings of the
Federal Reserve System as corporate profits taxes,
while the budget treats these collections as miscellaneous receipts. The timing difference between the
NIPAs and the budget, as discussed above, is especially
large for this category of receipts.
Indirect business tax and nontax accruals are composed of excise taxes, customs duties, royalties, fines,
and other receipts.
Contributions for social insurance differ from the corresponding budget category primarily because: (1) the
NIPAs include Federal employer contributions for employee retirement in this category as a Government
receipt, while the budget offsets the contributions
against outlays as undistributed offsetting receipts; (2)
the NIPAs include premiums for social insurance programs including Part B of medicare as Government
receipts, which the budget also nets against outlays;
and (3) the NIPAs include imputations for Federal employees' unemployment insurance and workers' compensation.

Table 27-1. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 1982-1991
(In billions of dollars)

Description
1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

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

290.7
56.4
52.0
247.3

300.4
75.1
57.0
279.3

337.0
75.0
59.1
305.9

353.1
80.4
53.8
326.5

396.3
99.4
57.9
345.5

403.8
107.6
59.6
384.1

455.7
116.7
62.2
412.5

472.2
113.1
63.7
438.9

474.5
103.2
75.6
462.9

642.7

Total receipts

308.4
51.6
51.5
231.2

646.4

711.7

777.0

813.8

899.1

955.1

1,047.1

1,087.9

1,116.2

259.5
(187.3)
(72.2)
311.4
(305.6)

289.8
(210.2)
(79.6)
346.3
(339.8)
(6.5
86.2
89.6
16.8
0.4

302.2
(228.2)

363.7
(274.3)
(89.3)
393.1

379.9
(287.6)

386.3
(295.1)

(399.4)
(9.9
103.4
133.6
24.9
-0.1

«

399.0
(299.2)
(99.8)
459.4
(448.5)
(10.9
115.8
160.3
27.6

416.4
(308.4)
(108.1)
502.0

91.5
107.5
23.0
-0.1

335.2
(251.7)
(83.5)
372.2
(360.7)
(11.5)
98.6
125.2
21.6
0.1

445.8
(325.9)
(119.9)
505.3
(534.2)
(-28.9
146.3
185.2
22.8
_*

747.6

829.2

875.3

952.9

1,017.6

1,051.1

1,098.5

1,162.1

1,245.6

1,305.4

-105.0

-182.8

-163.6

-175.9

-203.9

-151.9

-143.3

-115.0

-157.8

-189.2

EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage disbursements less accruals
Total expenditures
Deficit ( - )
*$50 million or less.




81.8
11.5
*

s

108.3
130.5
22.1

fif

J91.2)

108.4
143.8
28.9
0.1

w
128.3
175.3
23.7

27.

Part Three-19

NATIONAL INCOME AND PRODUCT ACCOUNT PRESENTATION
Table 27-2. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPA
(In billions of dollars)
1984

1983

1985

1986

1989

1988

1987

1990

1991

Receipts
990.7
41.2
14.7
1.5
-1.5
0.6

1,031.3
44.2
17.8
-3.9
-1.6
0.1

1,054.3
47.2
21.3
-5.0
-1.7
0.1

955.1

1,047.1

1,087.9

1,116.2

1,003.9
35.4
11.1
-0.5
-2.9
4.0
4.1
-5.4
1.6
-0.4

1,064.1
38.7
14.1
-3.5
-12.5
3.2
-0.3
-5.6
1.3
-1.0

1,144.2
41.2
14.7
-2.1
-22.8
-7.3
0.5
-6.0
0.9
-1.1

1,251.8
44.2
17.8
-14.2
-56.7
4.4
3.8
-6.5
1.1
-0.2

1,323.0
47.2
21.3
-14.0
-66.7
3.1
-2.0
-6.8
0.9
-0.6

1,051.0

1,098.5

1,162.1

1,245.6

1,305.4

Unified budget receipts
Government contributions for employee retirement (grossing)
Other netting and grossing
Timing adjustments
Geographic exclusions
Other

600.6
28.3
9.5
9.2
-1.3
0.2

666.5
29.7
11.6
5.2
-1.4
0.2

734.1
32.3
13.0
-1.2
-1.5
0.3

769.1
33.7
10.6
2.7
-1.6
-0.6

854.1
35.4
11.1

NIPA receipts

646.4

711.7

777.0

813.8

899.1

Unified budget outlays
Government contributions for employee retirement (grossing)
Other netting and grossing
Lending transactions
Deposit insurance and other financial transactions
Defense timing adjustment
Other timing adjustments
Geographic exclusions
Bonuses on outer continental shelf land leases
Other

808.4
28.3
9.5
-16.0
-2.3
-0.8
-4.8
7.5
-0.4

851.8
29.7
11.6
-11.7
-3.6
0.3
-0.8
-5.1
3.4
-0.4

946.4
32.3
13.0
-31.9
-0.9
-0.2
-1.4
-5.3
1.9
-1.1

990.3
33.7
10.6
-14.3
-3.2
2.8
-0.7
-5.4
2.1
1.8

NIPA expenditures

829.2

875.3

952.9

1,017.6

*

-1.8
0.1

909.0
38.7
14.1
-5.1
-1.4
*

Expenditures

*

Federal Sector Expenditures

Benchmark Revisions

Table 27-1 shows expenditures in the six major NIPA
categories, which are very different from the budget
categories.
Purchases of goods and services include the goods
and services purchased by the Federal Government, including employee compensation. This category is divided into defense and non-defense components.
Transfer payments is the largest expenditure category. Domestic transfer payments are mainly for income security programs, such as social security and
medicare. Foreign transfer payments include grants to
foreign governments and payments under social security and other similar programs to individuals living
abroad.
Grants-in-aid to State and local governments are designed to help finance a range of programs. Grants
are for income security, capital expenditures for infrastructure, and other purposes.
Net interest paid is the interest paid by the Government on its borrowing, less interest received on its lending.
Subsidies less current surplus of Government enterprises consists of two elements: (1) subsidy payments
for resident businesses (including farms); and (2) the
current surplus (or deficit) of "Government enterprises",
such as the Postal Service, which are business-type operations of Government that usually appear in the
budget as public enterprise revolving funds. NIPA subsidies do not include the imputed credit subsidies estimated as part of credit reform in the budget. Rather,
they are categorized as financial transactions and are
excluded from the NIPAs.
Wage disbursements less accruals is an adjustment
that is necessary when wages are earned in a different
period than they are paid.

The benchmark revisions of the NIPAs, released in
December, included a number of conceptual changes
that affect the Government sector. Six Federal Government agencies were reclassified from their former designations as government enterprises to general government agencies, which added their operating expenses
to Federal purchases (and GDP). Two agencies were
shifted the other way.
The Panama Canal Commission was reclassified from
a government enterprise to a foreign entity.
Receipts for providing certain services—including
health and hospital charges, tuition, and park and
recreation charges—are now offset against expenditures
instead of being recorded as personal nontaxes, reducing both receipts and expenditures. This change has
a substantially larger effect on State and local governments than on the Federal government.
Other changes that affect Federal government receipts and expenditures include recognition of courtmandated escrow accounts, reclassification of Commodity Credit Corporation commodity loans, and recording
of non-resident tax payments as transfer payments. The
changes are fully described in the September, 1991
issue of the Survey of Current Business.
Taken together, these changes lower the NIPA Federal deficit. Between 1980 and 1990, the deficit was
lowered an average of 1.6 billion due to conceptual
changes.




Differences in the Estimates.
Since the introduction of the unified budget in January 1968, NIPA receipts have exceeded budget receipts
in each year, due principally to the imputed employer
contributions for employee retirement. NIPA expenditures have usually been higher than budget outlays
for the same reason. However there are two components
of budget outlays that are sometimes sufficiently large

Part Three-20

THE BUDGET FOR FISCAL YEAR 1993

to overwhelm the grossing adjustments. These are financial transactions and payments to U.S. territories.
Budget outlays were greater in 1980 and 1991. With
the enactment of credit reform, effective in 1992, lending activity with the public as recorded in the budget
has been treated in a way that is closer to the NIPA
treatment. Disbursement and repayment of loans now
occur outside the budget as in the NIPAs, and only
imputed credit subsidies will remain as budget outlays.
However, this narrowing of differences in lending activity is likely to be overwhelmed, at least in the short
run, by large increases in other financial transactions,
principally outlays for the resolution of failed financial
institutions.




Since 1968, the consolidated on-budget plus off-budget surplus or deficit has exceeded the Federal surplus
or deficit as measured in the NIPAs in all but three
years. In 1991, the consolidated budget deficit was
$268.7 billion, while the NIPA deficit was $189.2 billion.
Table 27-1 displays Federal transactions using NIPA
concepts with actual data for the years 1982-1991.
These estimates reflect the effects of the comprehensive
revisions of the NIPAs released in December 1991.
Table 27-2 displays the reasons for differences between
the data using budget concepts and NIPA concepts.

In previous years, a NIPA translation of the President's proposed budget has been published in the Budget. This year,
these estimates will be published in a forthcoming issue of the
Survey of Current Business. Next year, the NIPA translation of
the President's Budget will return to the 1994 Budget.

o

28. Trust Funds and
Federal Funds Presentation




Part Three-21




28. TRUST FUNDS AND FEDERAL FUNDS PRESENTATION
The budget consists of two major groups of funds:
Federal funds and trust funds.
The Federal funds group, which comprises the larger
part of the budget, includes all transactions not classified by law as being in trust funds. The main component of the Federal funds group is the general fund,
which is used for the general purposes of Government
rather than being restricted by law to a specific program. It consists of all receipts not earmarked by law
to finance other funds, including virtually all income
taxes and many excise taxes, and all outlays financed
by these receipts and by general Treasury borrowing.
The Federal funds group also includes special funds
and revolving funds. Special funds are financed by earmarked receipts. Where the law requires that Federal
fund receipts from a specified source be earmarked to
finance a particular program, such as the license fees
deposited into the land and water conservation fund,
the receipts and associated outlays are recorded in special fund receipt and expenditure accounts. As a general
rule, special fund receipts must be appropriated before
they can be obligated and payments made.
Revolving funds, such as the Postal Service fund, conduct continuing cycles of business-type activity. They
charge for the sale of products or services and use the
proceeds to finance their spending. The proceeds are
recorded as offsets (reductions) to spending within the
fund that makes the expenditure. These collections generally are available automatically for obligation.
Intragovernmental funds are a special class of revolving
funds that conduct business-like operations within and
between Government agencies.
Trust funds consist primarily of funds that are designated by law as trust funds, but they also include
funds established to carry out the stipulations of trust
agreements where the Government is the fiduciary.
Trust funds are financed by earmarked receipts. Most
trust funds finance social insurance and other payments for individuals, such as social security, medicare,
Federal employees retirement, and unemployment compensation. Other major trust funds finance highway
construction and airport and airway development.
These programs are not trust funds in the private sec-

tor meaning of assets held in a fiduciary capacity for
the beneficiary of the trust. Instead, the Federal Government owns the "trust's" assets, and it can raise or
lower future trust fund collections and payments by
enacting changes to existing law.
Although trust fund receipts must be used for the
purposes designated by law, a trust fund may accumulate some of its receipts for future use rather than
spending them all as soon as they are collected. A surplus of receipts over outlays adds to the trust funds
balances of assets that are available for future use.
Any net cash inflow to the trust fund from the public
decreases the Treasury's need to borrow from the public
in order to finance the Federal fund deficit.
Much attention has focused recently on the trust fund
surpluses, the Federal fund deficits, and the contribution of each to the consolidated deficit. Over the
past three decades, growing trust fund surpluses have
offset a major part of the large and growing Federal
fund deficits. As shown in the bottom of table 28-1,
this pattern is expected to continue for several years.
However, these estimates of the Federal fund deficits
and the trust fund surpluses overstate the impact of
each on the consolidated budget deficit. This is because
the consolidated budget deficit measures the Government's net transactions with the public, while the surplus or deficit for each fund group includes the effect
of transactions between the fund groups as well as with
the public.
In 1991, for example, the trust fund surplus amounted to $112 billion, and the Federal fund deficit was
$381 billion, but both included $175 billion of net payments from Federal funds to trust funds. On the basis
of transactions with the public, the trust fund group
experienced a $63 billion deficit, and the Federal fund
deficit was $206 billion. These converge over time. By
1997 payments to the public by each fund group are
estimated to exceed their collections from the public
by $106 billion.
A particularly large component of the trust fund income from Federal funds is interest on trust fund holdings of Treasury securities. Trust fund interest income
was $71 billion in 1991, and it will grow to $115 billion

Table 28-1. SURPLUS OR DEFICIT BY FUND GROUP
(In billions of dollars)
1991 actual

Surplus or deficit ( - ) excluding interest:
Federal funds
Trust funds
Net interfund interest receipts/payments ( - ) :
Federal funds
Trust funds
Surplus or deficit ( - ) including interest:
Federal funds
Trust funds




1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

-310.3
41.6

-386.5
21.3

-374.2
36.9

-291.9
43.8

-275.8
52.9

-258.3
58.5

-272.3
60.5

-70.7
70.7

-77.2
77.2

-82.4
82.4

-89.3
89.3

-96.8
96.8

-105.6
105.6

-115.2
115.2

-381.0
112.3

-463.8
98.5

-456.5
119.3

-381.1
133.1

-372.6
149.7

-363.8
164.1

-387.5
175.7

Part Three-23

Part Three-24

THE BUDGET FOR FISCAL YEAR 1993

by 1997. These Treasury payments to trust funds add
to the trust fund surplus and the Federal fund deficit
by equal amounts. As shown in the top of table 28-1,
the trust fund surplus is reduced by about two-thirds
if interfund interest transactions are excluded, and the
Federal fund deficit is reduced substantially.
Trust fund interest income has risen rapidly in the
past decade, largely because trust fund balances have
built up substantially during this period. The size of
the balance anticipated for many trust funds in the
future is unprecedented, and it results mainly from
a change in the way trust funds are financed.
Until the 1980s, most trust funds operated on a payas-you-go basis. Taxes and user fees were set at levels
high enough to finance benefits and administrative expenses and to maintain a prudent reserve, generally
defined as being equal to one year's expenditures. As
a result, trust fund balances tended to grow at about
the same rate as their annual expenditures.
Pay-as-you-go financing was replaced in the 1980s
by full or partial accrual funding for some of the larger
trust funds. In order to partially prefund the "babyboomers" social security benefits, the Social Security
Amendments of 1983 raised FICA taxes above the levels necessary to finance current expenditures. In 1985
a new system was set up to finance military retirement
benefits on a full accrual basis. In 1986 full accrual
funding of retirement benefits was mandated for Federal civilian employees hired after December 31, 1983.
Because of these changes and the impact of inflation,
trust fund balances grew from $205 billion at the end
of 1982 to $897 billion at the end of 1991, and it is
estimated that they will rise to $1.7 trillion by the
end of 1997. Almost all of these balances are invested

in Treasury debt. Since they earn interest, these balances effectively represent the value, in current dollars,
of taxes and user fees that have been paid in advance
for future benefits and services.
Table 28-2 shows income, outgo, and surplus or deficit by fund group. In addition to governmental receipts,
income includes both proprietary receipts and interfund
collections (receipts by one fund of payments from a
fund in the other fund group) that are deposited in
receipt accounts. Interfund collections include the interest on trust fund holdings of Treasury debt. Outgo consists of payments made to the public and interfund
payments.
Collections that are offset, by law, against the outlays
of an expenditure account, such as agency payments
to the Federal Employees Health Benefits Fund, are
classified as outgo, not as income. In addition, income
and outgo exclude transactions between funds within
the same fund group. These intrafund transactions
must be subtracted when the income and outgo for
all funds within a fund group are added, so that the
totals for each fund group record only transactions with
the public or with the other fund group.
Table 28-2 also shows the amount of offsetting receipts that must be deducted from the sum of Federal
fund and trust fund income and outgo in order to derive
consolidated budget receipts and outlays. Receipts resulting from voluntary business-like transactions with
the public are income for a fund group, but they are
recorded as offsets to the outlays that generate the
receipts in the consolidated budget. In this way, consolidated budget receipts and outlays measure, respectively, the amount of collections raised by the Government in its sovereign capacity and the amount of re-

Table 28-2. RECEIPTS, OUTLAYS, AND SURPLUS OR DEFICIT BY FUND GROUP
(In billions of dollars)
1991 actual

Receipts:
Federal funds income:
From the public
From trust funds:
Interest
Other

692.1

1992 estimate

659.2

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

709.9

775.8

826.0

879.5

921.8

3.7

3.8

4.0

4.1

4.3

4.5

700.1

662.8

713.8

779.8

830.1

883.8

926.3

448.0

463.4

502.7

538.6

570.8

604.6

635.3

71.2
111.8

77.2
118.2

82.4
123.4

89.3
129.3

96.8
142.9

105.6
156.1

115.2
170.5

Total, Trust funds income
Offsetting receipts

631.1
-276.9

658.9
-246.1

708.4
-258.1

757.2
-273.7

810.6
-296.4

866.2
-321.7

921.1
-344.3

Total, consolidated budget receipts
Outlays:
Federal funds outgo
Trust funds outgo
Offsetting receipts

1,054.3

1,075.6

1,164.1

1,263.4

1,344.3

1,428.4

1,503.0

1,081.1
518.8
-276.9

1,126.6
560.3
-246.1

1,170.3
589.1
-258.1

1,161.0
624.1
-273.7

1,202.7
660.8
-296.4

1,224.3
702.1
-321.7

1,313.8
745.4
-344.3

1,323.0

1,440.9

1,501.3

1,511.4

1,567.1

1,604.8

1,714.8

-381.0
112.3

-463.8
98.5

-456.5
119.3

-381.1
133.1

-372.6
149.7

-340.5
164.1

-387.5
175.7

-268.7

-365.2

-337.2

-248.0

-222.9

-176.4

-211.8

Total, Federal funds income
Trust funds income:
From the public
From Federal funds:
Interest
Other

Total, consolidated budget outlays
Surplus or deficit ( - ) :
Federal funds
Trust funds
Total, consolidated surplus/deficit (-)

0.5
7.5

_*

Receipts includes governmental, interfund, and proprietary receipts. Excludes intrafund receipts, which are offset against intrafund payments so that income and outgo are not overstated.
$50 million or less.




28.

TRUST FUNDS AND FEDERAL FUNDS PRESENTATION

sources allocated by the Government in a non-market
capacity. Interfund offsetting receipts also constitute income for a fund group, but they are offset against
interfund payments in the consolidated budget, so that
the consolidated totals record only transactions with
the public.
Table 28-3 shows the income, outgo, and balances
of each of the major trust funds and the trust funds
as a group. Transactions with the public and with other
Government accounts are separately identified. Receipts
from Federal funds are further divided between interest
and other interfund receipts. The definitions of income
and outgo for individual funds are the same as for
the fund groups, with one exception. In the data for
individual funds, but not the data for the fund groups,
intrafund transactions are recorded as outgo of the fund
making the payment and as income of the fund collecting the payment. In this way, the income and outgo
for each fund measure its total transactions with the
public and with other funds.
The trust funds vary considerably in size, their
sources of income, annual surpluses or deficits, and
end-of-year balances. The social security trust funds
in combination (OASI and DI) have the largest income
and outgo by far. In 1991 they accounted for slightly
more than half of income and outgo for the trust funds
as a group. The second largest, in terms of income
and outgo, are the medicare trust funds (HI and SMI),
which are less than half as large as social security,
i xie various Federal employee retirement funds and the
unemployment trust fund also have relatively large ino jme and outgo.
The trust fund finances are alike in that each earns
interest on Its balances. Beyond that, their sources of
income are very different. This can be seen by comparing the social security, Federal employee retirement
(military and civilian), and the medicare trust funds.




Part Three-25
Almost all of social security's non-interest income is
taxes paid by the public. A small portion comes from
the Government's payments for its employees. In contrast, the bulk of the non-interest income of the Federal
employees retirement trust funds consists of the Government's payments as an employer for the retirement
benefits accrued by its employees. Payments by Federal
employees represent a much smaller share. The medicare trust funds derive their non-interest income from
a combination of HI taxes paid by the public, premiums
charged to individuals for coverage under the Medicare
Part B program, a large general fund subsidy payment
for the 75 percent of the costs of the Medicare Part
B program not covered by premiums, and the Government's payments as an employer for its portion of the
HI tax.
Most of the trust funds have substantial balances
when compared in absolute levels or in relation to thenincome or outgo. The balances of the social security,
Federal employee retirement, and medicare trust funds
are the largest in absolute dollars. Due to the partial
prefunding of social security benefits for the "babyboom" generation and the full accrual of retirement
benefits for almost two-thirds of Federal employee, the
balances of the social security and the Federal employees retirement trust funds are expected to continue to
grow rapidly in the future. In contrast, the balances
of the medicare trust funds are expected to be depleted
by the turn of the century unless policy is changed.
Increased utilization of health care services by an aging
population and escalating medical prices are expected
to cause medicare payments to increase much faster
than its income under current law. The balances of
the highway trust fund, which have grown in recent
years, are expected to decline as a result of planned
increases in spending.

Part Three-26

THE BUDGET FOR FISCAL YEAR 1993

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Airport and airway trust funds
Balance, start of year
Income:
Governmental receipts
Interfund receipts:
Interest

14.4

15.3

16.0

15.6

15.1

14.9

15.1

4.9

5.2

5.7

6.2

6.7

7.3

7.9

1.3

1.3

1.2

1.1

1.0

0.9

0.9

Subtotal, income

6.2

6.5

6.9

7.2

7.7

8.2

8.9

5.3

5.8

7.4

7.7

7.9

8.0

8.1

5.3

5.8

7.4

7.7

7.9

8.0

8.1

-0.4
1.3

-0.6
1.3

-1.7
1.2

-1.5
1.1

-1.2
1.0

-0.8
0.9

-0.2
0.9

Subtotal, surplus or deficit (-)
Adjustments:
Transfers/lapses (net)
Other adjustments

0.9

0.7

-0.5

-0.5

-0.2

0.2

0.7

*

*

Total, change in fund balance

0.9

0.8

-0.5

-0.5

-0.2

0.2

0.7

15.3

16.0

15.6

15.1

14.9

15.1

15.8

245.6

269.0

294.7

322.5

352.3

383.8

416.1

4.6

4.6

5.1

5.7

6.0

6.1

6.1

22.7
29.9

24.0
31.5

25.3
33.1

26.6
34.8

27.8
36.8

29.2
37.9

30.5
39.6

*

*

*

Outgo:
To the public
Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

Balance, end of year

*

Federal employees retirement funds
Balance, start of year
Income:
Governmental receipts
Interfund receipts:
Interest
Other
Intrafund receipts
Subtotal, income
Outgo:
To the public
Intrabudgetary payments

*

*

*

*

57.2

60.1

63.4

67.1

70.6

73.2

76.2

33.7

34.5

35.6

37.3

39.1

40.9

42.7

*

*

*

*

*

*

33.7

34.5

35.6

37.3

39.1

40.9

42.7

0.8
22.7

1.7
24.0

2.5
25.3

3.2
26.6

3.7
27.8

3.1
29.2

3.0
30.5

Subtotal, surplus or deficit (-)
Adjustments:
Other adjustments

23.5

25.6

27.8

29.8

31.6

32.3

33.5

Total, change in fund balance

23.5

25.6

27.8

29.8

31.6

32.3

33.5

269.0

294.7

322.5

352.3

383.8

416.1

449.6

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

Balance, end of year




*

_*

28.

Part Three-27

TRUST FUNDS AND FEDERAL FUNDS PRESENTATION

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Foreign military sales trust fund
Balance, start of year
Income:
Proprietary receipts

5.7

6.8

6.9

6.8

6.2

5.7

5.1

12.5

11.4

11.2

10.4

9.9

9.4

9.0

12.5

11.4

11.2

10.4

9.9

9.4

9.0

11.5

11.3

11.3

11.0

10.5

10.0

9.6

11.5

11.3

11.3

11.0

10.5

10.0

9.6

1.1

0.1

-0.1

-0.6

-0.6

-0.6

-0.5

1.1

0.1

-0.1

-0.6

-0.6

-0.6

-0.5

1.1

0.1

-0.1

-0.6

-0.6

-0.6

-0.5

6.8

6.9

6.8

6.2

5.7

5.1

4.6

Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other

214.9

268.4

318.6

382.1

457.9

544.8

645.9

293.9

300.9

325.8

348.8

369.9

394.3

418.3

20.2
11.8

23.9
12.2

27.0
12.9

31.1
13.8

35.7
14.7

41.1
15.7

47.4
16.7

Subtotal, income
Outgo:
To the public
Intrabudgetary payments

325.9

336.9

365.7

393.6

420.3

451.1

482.4

265.2
7.1

283.0
3.7

298.4
3.9

313.7
4.0

329.3
4.1

345.8
4.3

363.0
4.4

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

272.4

286.7

302.3

317.7

333.5

350.0

367.4

33.3
20.2

26.4
23.9

36.4
27.0

44.8
31.1

51.1
35.7

59.9
41.1

67.6
47.4

Subtotal, surplus or deficit (-)
Adjustments:
Other adjustments

53.5

50.2

63.4

75.9

86.9

101.1

115.0

Total, change in fund balance

53.5

50.2

63.4

75.9

86.9

101.1

115.0

268.4

318.6

382.1

457.9

544.8

645.9

760.9

Subtotal, income
To the public
Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Subtotal, surplus or deficit (-)
Total, change in fund balance
Balance, end of year
Federal old-age, survivors and disability insurance trust funds

Balance, end of year




*

*

Part Three-28

THE BUDGET FOR FISCAL YEAR 1993

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Health insurance: HI trust fund
Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other

95.6

109.9

124.9

143.8

160.0

173.2

182.0

72.8
0.4

79.0
0.5

86.5
0.5

92.6
0.6

98.1
0.7

104.4
0.8

110.6
0.8

9.0
2.8

10.1
3.0

11.0
2.9

11.9
2.9

12.7
3.0

13.3
3.1

13.6
3.2

Subtotal, income

85.0

92.6

100.9

108.1

114.4

121.5

128.1

69.6
1.1

77.6

83.6

91.8

101.3

112.7

124.0

70.7

77.6

83.6

91.8

101.3

112.7

124.0

5.3
9.0

4.9
10.1

6.4
11.0

4.3
11.9

0.4
12.7

-4.5
13.3

-9.4
13.6

Subtotal, surplus or deficit (-)
Adjustments:
Transfers/lapses (net)
Other adjustments

14.3

15.1

17.4

16.2

13.1

8.8

4.2

*

-0.1

1.6
-0.1

Total, change in fund balance

14.3

15.0

18.9

16.2

13.1

8.8

4.2

109.9

124.9

143.8

160.0

173.2

182.0

186.1

14.5

15.7

15.1

10.6

8.1

8.8

10.5

11.8

12.7

14.8

17.0

19.4

20.9

21.9

1.6
34.7

1.6
39.5

1.3
42.1

0.9
48.2

0.7
58.1

0.7
68.0

0.8
78.4

Subtotal, income
Outgo:
To the public

48.2

53.7

58.2

66.2

78.2

89.6

101.2

47.0

54.2

61.1

68.6

77.5

87.9

99.2

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

47.0

54.2

61.1

68.6

77.5

87.9

99.2

-0.5
1.6

-2.1
1.6

-4.2
1.3

-3.4
0.9

_*

0.7

1.0
0.7

1.2
0.8

Subtotal, surplus or deficit (-)
Adjustments:
Transfers/lapses (net)

1.1

-0.6

-2.9

-2.5

0.7

1.8

2.0

Total, change in fund balance

1.1

-0.6

-4.5

-2.5

0.7

1.8

2.0

15.7

15.1

10.6

8.1

8.8

10.5

12.5

To the public
Intrabudgetary payments
Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

Balance, end of year
Health insurance: SMI trust fund
Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other

Balance, end of year




*

-1.6

28.

TRUST FUNDS AND FEDERAL FUNDS PRESENTATION

Part Three-29

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Highway trust funds
Balance, start of year
Income:
Governmental receipts
Interfund receipts:
Interest

17.9

20.7

22.2

22.0

20.5

19.0

17.6

17.0

17.4

17.7

18.1

18.5

18.9

19.3

1.5

1.6

1.5

1.4

1.2

1.0

0.9

Subtotal, Income

18.5

19.0

19.2

19.5

19.7

19.9

20.2

15.7

17.4

19.9

21.0

21.2

21.3

21.2

15.7

17.4

19.9

21.0

21.2

21.3

21.2

1.6

-2.2
1.5

-2.9
1.4

-2.7
1.2

-2.4
1.0

-1.9
0.9

1.6

-0.7

-1.5

-1.6

-1.4

-1

Outgo:
To the public
Subtotal, Outgo
Change in fund balance:
Surplus or deficit:
Excluding interest
Interest
Subtotal, surplus or deficit
Adjustments:
Transfers/lapses (net)
Other adjustments

1.3
1.5
2.8
*

_*

-0.5
0.5

0.5

2.7

1.6

-0.2

-1.5

-1.6

-1.4

-1

20.7

22.2

22.0

20.5

19.0

17.6

16.6

77.7

90.5

102.7

114.9

124.5

134.6

145.4

8.0
28.0

9.1
27.4

10.2
27.6

11.3
25.3

12.5
25.9

13.7
26.8

15.0
27.9

Subtotal, income
Outgo:
To the public
Intrabudgetary payments

36.0

36.5

37.7

36.6

38.4

40.5

42.9

23.1

24.3

25.6

26.9

28.3

*

29.7

*

31.2

*

*

*

*

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

23.1

24.3

25.6

26.9

28.3

29.7

31.2

4.9
8.0

3.1
9.1

2.0
10.2

-1.7
11.3

-2.4
12.5

-3.0
13.7

-3.3
15.0

12.9

12.2

12.2

9.7

10.1

10.8

11.7

12.9

12.2

12.2

9.7

10.1

10.8

11.7

90.5

102.7

114.9

124.5

134.6

145.4

157.1

Total, Change in fund balance
Balance, End of Year
Military retirement fund
Balance, start of year
Income:
Interfund receipts:
Interest
Other

Subtotal, surplus or deficit (-)
Total, change in fund balance
Balance, end of year




Part Three-30

THE BUDGET FOR FISCAL YEAR 1993

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollais)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Railroad retirement trust funds
9.7

10.4

11.2

11.8

12.3

12.7

13.0

3.9

3.8

3.8

3.9

3.7

3.7

3.7

1.0
2.9
3.5

0.8
3.2
3.4

0.8
3.1
3.6

0.9
3.2
3.7

0.9
3.4
3.8

0.9
3.5
4.0

0.9
3.6
4.1

Subtotal, income
Outgo:
To the public
Intrabudgetary payments

11.3

11.2

11.4

11.7

11.8

12.0

12.3

7.2
2.9

7.5
3.0

7.7
3.2

7.9
3.3

8.0
3.4

8.1
3.6

8.3
3.7

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

10.1

10.5

10.9

11.2

11.4

11.7

12.0

0.2
1.0

-0.1
0.8

-0.4
0.8

-0.4
0.9

-0.5
0.9

-0.6
0.9

-0.6
0.9

1.2

0.7

0.5

0.5

0.4

0.3

0.3

-0.4

0.1

0.1

0.8

0.8

0.6

0.5

0.4

0.3

0.3

10.4

11.2

11.8

12.3

12.7

13.0

13.3

Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other

50.7

47.8

38.4

38.3

42.1

48.6

57.2

20.8

22.4
0.1

25.5
0.2

28.9
0.4

31.0
0.5

32.2
0.5

31.2
0.6

4.3
0.4

3.3
0.5

25
0.8

2.4
0.5

2.6
0.5

3.0
0.6

3.5
0.6

Subtotal, income
Outgo:
To the public

25.5

26.3

29.0

32.2

34.6

36.3

35.9

28.4

35.7

29.1

28.4

28.1

27.7

28.0

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest

28.4

35.7

29.1

28.4

28.1

27.7

28.0

-7.2
4.3

-12.7
3.3

-2.6
2.5

1.4
2.4

3.9
2.6

5.6
3.0

4.4
3.5

-2.9

-9.4

-0.1

3.8

6.5

8.6

7.9

-2.9

-9.4

-0.1

3.8

6.5

8.6

7.9

47.8

38.4

38.3

42.1

48.6

57.2

65.1

Balance, start of year
Income:
Governmental receipts
Interfund receipts:
Interest
Other
Intrafund receipts

Subtotal, surplus or deficit (-)
Adjustments:
Othpr adjustments

Total, change in fund balance
Balance, end of year
Unemployment trust fund

Subtotal, surplus or deficit (-)
Adjustments:
O t h e r aHii ictmontQ

Total, change in fund balance
Balance, end of year




*

_*

28.

Part Three-31

TRUST FUNDS AND FEDERAL FUNDS PRESENTATION

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Veterans life insurance trust funds
Balance, start of year
Income:
Proprietary receipts
Interfund receipts:
Interest
Other

12.4

12.7

12.9

13.0

13.1

13.1

13.1

0.4

0.4

0.3

0.3

0.3

0.3

0.3

1.1

1.1

1.1

1.1

1.1

1.1

*

*

*

1.0

*

*

*

*

Subtotal, income
Outgo:
To the public

1.5

1.5

1.4

1.4

1.4

1.4

1.3

1.2

1.3

1.3

1.3

1.4

1.4

1.4

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

1.2

1.3

1.3

1.3

1.4

1.4

1.4

-0.8
1.1

-0.9
1.1

-0.9
1.1

-1.0
1.1

-1.1
1.1

-1.1
1.1

-1.1
1.0

Subtotal, surplus or deficit (-)
Mujusimenis.
Other adjustments

0.3

0.2

0.1

0.1

Total, change in fund balance

0.3

0.2

0.1

0.1

12.7

12.9

13.0

13.1

13.1

13.1

13.0

25.7

29.6

31.6

33.8

35.9

38.8

41.1

3.5
1.5

3.5
1.5

3.7
1.8

3.8
1.9

4.1
2.1

3.8
2.2

3.6
1.9

0.5
1.3

0.5
1.0

0.5
0.9

0.6
0.7

0.6
0.6

0.5
0.6

0.6
0.6

Subtotal, income
Outgo:
To the public
Intrabudgetary payments

6.8

6.5

7.0

7.0

7.4

7.1

6.7

2.8
0.3

4.1
0.3

4.4
0.4

4.5
0.4

4.2
0.4

4.4
0.4

4.2
0.5

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

3.1

4.5

4.8

4.9

4.6

4.8

4.7

3.2
0.5

1.5
0.5

1.7
0.5

1.5
0.6

2.2
0.6

1.8
0.5

1.4
0.6

3.7

2.0

2.2

2.1

2.9

2.3

2.0

Balance, end of year

*

-0.1

_*

*

-0.1

Other trust funds
Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other
Intrafund receipts

*

Subtotal, surplus or deficit (-)
Adjustments:
Transfers/lapses (net)
Other adjustments

0.2

-0.1

Total, change in fund balance

19

1.9

2.2

2.1

2.9

2.3

2.0

29.6

31.6

33.8

35.9

38.8

41.1

43.1

Balance, end of year




*
*

Part Three-32

THE BUDGET FOR FISCAL YEAR 1993

Table 28-3. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS-Continued
(In billions of dollars)
1991 actual

1992 estimate

1993 estimate

1994 estimate

1995 estimate

1996 estimate

1997 estimate

Total Trust Funds
Balance, start of year
Income:
Governmental receipts
Proprietary receipts
Interfund receipts:
Interest
Other

784.7

896.8

995.3

1,115.0

1,248.1

1,397.9

1,562.0

421.4
26.6

436.9
26.5

473.8
28.9

508.0
30.6

537.9
32.9

570.5
34.0

600.8
34.5

71.2
111.8

77.2
118.2

82.4
123.4

89.3
129.3

96.8
142.9

105.6
156.1

115.2
170.5

Subtotal, income
Outgo:
To the public
Intrabudgetary payments

631.1

658.9

708.4

757.2

810.6

866.2

921.1

510.8
7.9

556.7
3.7

585.3
3.8

620.1
4.0

656.7
4.1

697.8
4.3

740.9
4.5

Subtotal, outgo
Change in fund balance:
Surplus or deficit (-):
Excluding interest
Interest

518.8

560.3

589.1

624.1

660.8

702.1

745.4

41.6
70.7

21.3
77.2

36.9
82.4

43.8
89.3

52.9
96.8

58.5
105.6

60.5
115.2

Subtotal, surplus or deficit (-)
Adjustments:
Transfers/lapses (net)
Other adjustments

112.3

98.5

119.3

133.1

149.7

164.1

175.7

*

-0.2

-0.5
0.4

Total, change in fund balance

112.1

98.5

119.8

133.1

149.7

164.1

175.7

896.8

995.3

1,115.0

1,248.1

1,397.9

1,562.0

1,737.7

Balance, end of year
*$50 million or less.




_*

0.5

29. Physical and Other Capital
Presentation




Part Three-33




29. PHYSICAL AND OTHER CAPITAL PRESENTATION
FEDERAL PHYSICAL CAPITAL AND OTHER CAPITAL OUTLAYS
The importance and role of Federal investment for
the future of the Nation are discussed broadly in several chapters in Part One. In contrast this section classifies Federal outlays into several more technically defined categories of physical and other capital. As noted
in the introduction to Part Three, this presentation is
an alternative way of dividing the consolidated budget
totals, as opposed to a replacement of the existing
structure. This presentation has been a part of the
budget for many years.
The major categories for physical and other capital
are: major public physical capital, conduct of research
and development, conduct of education and training,
financial capital outlays, and other capital. The technical presentation in this section provides continuity
with previously published analyses, is consistent with
outlays for physical capital, conduct of research and
development, and conduct of education and training
that appear in the Historical Tables (to be published
subsequently), and presents detailed data by program.
For the first time, this section includes estimates of
the stock of federally financed physical capital and the
stock of research and development.
The section that follows this one, "Supplemental
Physical Capital Information," is provided in accordance
with the requirements of the Federal Capital Investment Program Information Act of 1984. It projects outlays for ten years on a current services basis and presents other data according to categories specified in
the Act. For consistency, the totals match the category
"major public physical capital" used in this section.
Capital outlays are outlays that yield long-term benefits. They take several forms and are made for many
purposes. They are in the form of grants to State and
local governments and direct Federal outlays. They can
be for physical capital, which yields a stream of services
over a period of years; or for research, development,
education, and training, which are less tangible but
also provide long-term benefits. They can also be for
loans, which yield monetary returns, although the loans
usually provide subsidies to the borrowers as well and
therefore the face amount of the loans overstates the
value of these assets.
Inherent in the classification of these data are two
problems, one involving grants to others, and one involving spending that could be shown in more than
one category.
• For some grants to State and local governments,
the recipient jurisdiction, not the Federal Government, ultimately determines whether the money
is used to finance capital or current programs.
This analysis classifies all of the outlays in the
category where the recipient jurisdictions are expected to spend most of the money. Hence, shared




revenues are classified as current spending, although some may be spent by recipient jurisdictions on physical capital. Community development
block grants are classified as physical capital, although some may be spent for current purposes.
• Some spending could be classified into more than
one category. For example, grants for construction
of education facilities finance the acquisition of
physical assets, but they also contribute to the
provision of education and training. To avoid double counting, the outlays are classified in the category that is most commonly recognized as capital.
Consequently the conduct of education and training does not include the cost of education facilities,
because these facilities are included in the category of construction and rehabilitation of physical
assets. Similarly, the purchase of equipment for
research atid development is included as acquisition of equipment, not conduct of research and
development.
This section has three parts:
• the composition of Federal capital outlays;
• federally financed capital stocks; and
• detailed tables.
Composition of Federal Capital Outlays
The composition of Federal capital outlays consistent
with the Administrations budget is shown in Table
29-1. These outlays are estimated to be $256.1 billion
in 1993, $8.3 billion or 3 percent more than the 1992
estimate. This section initially discusses physical capital, such as construction, rehabilitation, and the acquisition of major equipment, and discusses the more marginal categories (in terms of classification) at the end,
such as purchases of agricultural commodities and
international development activities. These data are
shown in more detail in tables 29-5 and 29-6.
Outlays for major public physical capital (hereafter
referred to as physical capital in the text) are estimated
to be $126.9 billion in 1993, $0.8 billion less than the
1992 estimate of $127.8 billion. This capital includes
primarily outlays for construction, rehabilitation, and
major equipment. Direct physical capital outlays by the
Federal Government are estimated to be $97.3 billion
in 1993, and grants to State and local governments
for physical capital are estimated to be $29.6 billion.
Direct physical capital outlays by the Federal Government are primarily for national defense, estimated to
be $76.5 billion in 1993. Almost all of this, or an estimated $69.5 billion, is for the procurement of weapons
and other military equipment, and the remainder, $7.0
billion, is primarily for construction of military bases
and family housing for military personnel.
Part Three-35

Part Three-36

THE BUDGET FOR FISCAL YEAR 1993
Table 29-1. COMPOSITION OF FEDERAL CAPITAL OUTLAYS
(In bilions of dollars)

1991 actual

Major public physical capital:
Direct
National defense
Nondefense

1992
estimate

1993
estimate

87.2
16.3

80.4
19.2

76.5
20.8

103.5
26.5

99.6
28.1

97.3
29.6

130.1

127.8

126.9

4.9

6.0

6.2

41.7
24.3

44.6
26.8

46.2
28.8

Subtotal, conduct of research and development
Conduct of education and training:
Direct
Grants to State and local governments

66.0

71.4

75.1

17.8
18.1

17.3
20.7

20.7
21.8

Subtotal, conduct of education and training
Loans and other financial capital
Commodity inventories
Other

35.8
-9.6
0.3
6.4

38.0
-1.8
-1.1
7.5

42.5
-2.1
-0.2
7.7

233.8

247.8

256.1

129.5
104.3

125.6
122.3

123.0
133.2

Subtotal, major public direct physical capital
Grants to State and local governments
Subtotal, major public physical capital
Other physical capital (nondefense, direct)
Conduct of research and development
National defense
Nondefense

Total, Federal capital outlays
MEMORANDUM
National defense
Nondefense

Outlays for direct physical capital for nondefense purposes are estimated to be $20.8 billion in 1993, $1.6
billion more than the 1992 estimate. The 1993 outlays
include $13.7 billion for construction and rehabilitation.
These outlays are largely for water, power, and natural
resources projects of the Corps of Engineers, the Department of Interior, the Tennessee Valley Authority,
the power administrations in the Department of Energy, and the construction and rehabilitation of veterans hospitals and Postal Service facilities. Outlays
for the acquisition of major equipment are estimated
to be $7.1 billion in 1993. The largest items are for
the space program and the air traffic control system.
Grants to State and local governments for physical
capital are estimated to be $29.6 billion in 1993, $1.5
billion more than the 1992 estimate. More than half
of these outlays, or $16.9 billion in 1993, are to assist
with construction of the Interstate Highway System
and other major highways. Other major grants for physical capital are for sewage treatment plants, community
development, airports, and mass transit. Information
on total grants to State and local governments, both
for capital and for other purposes, is available in this
volume in Chapter 21, "Providing Federal Aid to State
and Local Governments."
Outlays for other physical capital (nondefense, direct)
are estimated to be $6.2 billion in 1993. This category
includes conservation programs for the improvement of
land, the purchase and sale of assets, and other activities.
Outlays for the conduct of research and development
are estimated to be $75.1 billion in 1993, $3.6 billion
more than the 1992 estimate. These outlays are devoted
to increasing our basic scientific knowledge and promot-




ing related research and development activities. They
increase our national security, improve the marginal
productivity of capital and labor for both public and
private purposes, and enhance the quality of life. More
than three-fifths of the outlays for the conduct of research and development, an estimated $46.2 billion in
1993, are for national defense. Physical capital for research and development is included in the physical capital category.
Nondefense outlays for the conduct of research and
development are estimated to be $28.8 billion in 1993,
$2.0 billion or 8 percent more than the 1992 estimate.
This is almost entirely direct spending by the Federal
Government, and is largely for the space programs, the
National Science Foundation, health research, and research for nuclear and non-nuclear energy facilities.
These programs as well as others are discussed in
Chapter 6, "Enhancing Research and Development and
Expanding the Human Frontier."
Outlays for the conduct of education and training
are estimated to be $42.5 billion in 1993, $4.5 billion
more than the 1992 estimate. These outlays add to
the stock of human capital by developing a more skilled
and productive labor force. Grants to State and local
governments for this category are estimated to be $21.8
billion in 1993, more than half of the total. They are
primarily for the disadvantaged and the handicapped,
and for vocational and adult education. Direct education
and training outlays by the Federal Government are
estimated to be $20.7 billion in 1993, $3.4 billion more
than the 1992 estimate. Programs in this category are
primarily aid for higher education through student financial assistance, loan subsidies, the veterans GI bill,
and health training programs.

29.

PHYSICAL CAPITAL PRESENTATION

This category does not include outlays for education
and training of Federal civilian and military employees.
Outlays for education and training that are for physical
capital, conduct of research and development, and loans
are included in those categories.
Loans1 and other financial capital were -$9.6 billion
in 1991. These include direct loan disbursements for
new loans, repayments of previous loans, the sale of
loan assets, and related activities, largely contributions
to international development banks. Because of credit
reform legislation enacted in 1990, loan data in this
category include activity only for loans obligated in
1991 or earlier. For loans, repayments, sales, and other
adjustments are expected to exceed disbursements by
$11.2 billion in 1991. The major loan activities are for
the sale of military equipment to foreign countries, promotion of exports and housing, and assistance to farmers and college students. The Federal Credit Reform
Act of 1990 has changed the treatment of loans obligated or guarantees committed in 1992 or later. For
these direct and guaranteed loans, only the estimated
subsidy value of the assistance is included as budget
outlays. The subsidies are not classified in this loan
category but are classified according to their program
purpose, such as for construction, education and training, or non-capital outlays. The unsubsidized cash flows
are not included in the budget. More information on
the new credit reform concepts is available in Chapter
13, "Identifying Long-Term Obligations and Reducing
Underwriting Risks", and Appendix One, Chapter 3,
"Federal Credit Programs."
Sales of commodity inventories are estimated to exceed purchases by $0.2 billion in 1993. These are entirely for direct Federal nondefense purposes. Outlays
in this category are for the purchase or sale of agricultural products pursuant to farm price support programs, purchases of oil for the strategic petroleum reserve, and for other purposes.
Other capital outlays are for the collection of information, such as by the Bureau of the Census, and for
foreign economic assistance grants for general economic
development or humanitarian needs. These outlays are
estimated to be $7.7 billion in 1993.
Federally Financed Capital Stocks
Capital stocks are the amount of capital available
for productive use. This section presents very rough
measures of two different kinds of Federal capital
stocks: the stock of public physical capital financed by
the Federal Government and the stock of research and
development (R&D) financed by the Federal Government.
Federal outlays for physical assets are an investment
that adds to the Nation's capital stock of tangible assets, such as roads, bridges, buildings, missiles, and
aircraft carriers. These assets deliver a flow of services
over their lifetime. The capital depreciates as the asset
is used, wears out, or becomes obsolete.
Federal outlays for the conduct of research and development are an investment that adds to an "intangible"
1 Includes offsets for writeoffs of defaulted loans, which do not directly affect outlays.
In such cases, there is an offsetting adjustment in the category that is not for capital
outlays.




Part Three-37
asset, the Nation's stock of knowledge. Although financed by the Federal Government, the research and
development can be performed by Federal or State government laboratories, universities and other nonprofit
organizations, or private industry. The research and
development can cover a wide range of endeavors from
the investigation of subatomic particles to the exploration of outer space; it can be "basic" research without
specific applications in mind, or it can have a highly
specific practical use. Like physical assets, the capital
stock of R&D provides services over a number of years
and depreciates as it becomes outdated.
Both capital stocks were estimated in constant fiscal
year 1987 dollars using the perpetual inventory method. In this method, the estimates are based on the
sum of net investment in prior years, rather than, for
example, a survey of the current market worth of the
asset. Each year's Federal outlays are treated as gross
investment, adding to the capital stock; depreciation
and discards reduce the capital stock. Gross investment
less depreciation and discards is net investment.
The capital stock estimates are only rough approximations. There are substantial margins for estimating
differences, and the estimates provide a basis only for
broad generalization. The sources of error include:
• The historical outlay series.—The historical outlay
series for physical capital was extended back from
1940 to 1915 using data from selected sources.
There are no consistent outlay data on physical
capital for this earlier period, and the estimates
are approximations. In addition, the historical outlay series for physical capital extending back to
1940 may be incomplete. The historical outlay series for the conduct of research and development
began in the early 1950s and required selected
sources to be extended back to 1940. In addition,
separate outlay data for basic research and applied R&D were not available for any years and
had to be estimated according to obligations and
budget authority data.
• Price adjustments.—The replacement cost of the
Federal stock of physical and R&D capital has
increased through time, but the rate of increase
is not known exactly. An estimate of costs in fiscal
year 1987 prices was made through the application of the National Income and Product Accounts
deflator series, but these estimates should be considered only approximations of the costs of replacing these assets in 1987.
• Depreciation estimates.—The useful lives of physical and R&D capital, as well as the rate at which
they depreciate, are very uncertain. This is
compounded by using estimated lives for broad
classes of assets, which do not apply uniformly
to all the components of each group. As a result,
the depreciation estimates should also be considered approximations.
Research continues on the best methods to estimate
physical capital stocks and research and development
stocks. The estimates in the following tables could
change as better information becomes available on the
underlying investment data and as improved methods

Part Three-38

THE BUDGET FOR FISCAL YEAR 1993

are developed for estimating the stocks based on those
data.
T H E STOCK OF PHYSICAL CAPITAL

This section presents data on physical capital assets
and estimates of the depreciation on these assets, which
is the reduction in value due to wear and tear, obsolescence, and other factors.
For many years, current and constant-dollar data on
the value of most forms of both public and private
physical capital—e.g., roads, factories, and housing—
have been estimated by the Department of Commerce,
Bureau of Economic Analysis, and published in the Survey of Current Business. (See pp. 31-32 of the October
1990 issue and the references therein.) However, the
Commerce data are not directly linked to the Federal
budget and do not include estimates for the years covered by the budget. For budgetary purposes, OMB prepared separate estimates.
Data sources.—The estimates were developed from
the OMB historical data base for physical capital outlays and grants to State and local governments for
physical capital. These are the same major public physical capital outlays presented in the previous section.
This data base extends back to 1940 and was supplemented by rough estimates for 1915-1939.
Deflators.—The deflators for Federal, State, and local
purchases of durables and structures were used going
back to 1940. There are no specific price indices for
public purchases of durables and structures for 1915
through 1939, and estimates were made on the basis
of Census Bureau historical statistics on constant price
public capital formation. Using these deflators, the outlays were converted to constant fiscal year 1987 dollars.

Depreciation.—The resulting series was adjusted for
depreciation. The data were depreciated on a straightline basis over the following assumed useful lives: 46
years for water and power projects; 40 years for other
direct Federal construction and capital financed by
grants (primarily highways); 16 years for major
nondefense equipment; and 14 years for defense procurement.
Trends.—Table 29-2 shows the value of the total net
federally financed physical capital stock in constant fiscal year 1987 dollars. In 1991, that stock was estimated
to be $1,272 billion. National defense capital stock accounted for $608 billion or 48 percent of the total, and
nondefense stocks accounted for $664 billion, or 52 percent of the total. Based on proposed outlays in this
budget, the stock is estimated to increase to $1,292
billion in 1993.
For national defense, the stocks declined steadily
from 1970 to 1982, as depreciation from earlier years
exceeded new capital investment in military construction and procurement. Since 1982 the stock of defense
capital has grown steadily, although the rate of growth
is declining. From 1982 to 1990 the stock grew at an
average annual rate of 5.0 percent, but in 1991 it grew
only 2.0 percent.
For nondefense, 41 percent of the stock in 1970 was
capital owned by the Federal Government, and 59 percent was capital owned by State and local governments
but financed by Federal grants to these governments.
By 1991 this ratio had changed, with 32 percent of
the stock for direct Federal capital and 68 percent for
capital owned by State and local governments.
The nondefense stocks grew steadily from 1970 to
1991, increasing at an average annual rate of growth

Table 29-2. NET STOCK OF FEDERALLY FINANCED PHYSICAL CAPITAL
(In billions of constant FY 1987 dollars)
Direct Federal Capital
Total

National
Defense

Total
NonDefense

Total

Water
and
Power

Capital Rnanced by Federal Grants
Other

Total

Transportation

Community and
Regional

Natural
Resources

Other

1970
1971
1972
1973
1974
1975

989
992
987
974
958
945

625
613
592
563
533
507

364
380
396
411
425
438

149
150
153
155
158
160

90
92
94
95
97
99

59
59
59
60
61
61

215
229
243
256
268
278

164
172
179
186
191
195

26
30
35
39
42
45

11
12
13
15
18
21

15
16
16
17
17
17

1976
1977
1978
1979

938
934
936
941

484
456
437
423

454
478
499
518

162
165
168
172

101
104
107
110

61
61
61
62

292
313
330
346

201
208
213
218

48
55
63
69

25
32
37
42

18
18
18
17

1980
1981
1982
1983
1984

946
954
964
983
1,014

410
402
402
412
431

536
551
562
571
583

175
177
179
180
182

112
113
113
114
113

63
64
66
66
69

362
374
383
391
401

224
230
233
237
243

74
78
81
84
86

46
50
53
55
57

17
16
16
15
15

1985
1986
1987
1988
1989

1,055
1,099
1,145
1,185
1,221

458
488
523
551
577

597
611
622
634
644

186
189
193
198
202

113
113
113
114
113

72
76
79
84
89

412
422
430
436
442

250
257
263
268
273

89
90
91
92
92

59
61
62
64
64

14
14
13
13
13

1990
1991
1992 est
1993 est

1,250
1,272
1,286
1,292

596
608
610
604

654
664
676
688

207
211
218
225

114
114
113
114

93
98
105
111

447
452
458
463

278
283
288
294

92
92
92
92

65
66
66
67

12
12
11
11




29.

Part Three-39

PHYSICAL CAPITAL PRESENTATION

obligations and budget authority. The data are for the
conduct of R&D and exclude outlays for physical capital
for research and development, because they are included in the section on physical capital.
Deflators.—Nominal outlays were deflated by the implicit price deflator for gross domestic product (GDP)
in 1987 dollars to obtain estimates of constant dollar
R&D spending. This is virtually the same as the gross
national product implicit price deflator used by the National Science Foundation to deflate R&D spending.
Depreciation.—The appropriate depreciation rate of
intangible R&D capital is even more uncertain than
that of physical capital. Empirical evidence on the issue
is inconclusive. It was assumed that basic research capital does not depreciate while applied research and development capital has a ten percent geometric depreciation. These are the same assumptions used in a study
published by the Bureau of Labor Statistics estimating
the R&D stock financed by private industry. (See U.S.
Department of Labor, Bureau of Labor Statistics, The
Impact of Research and Development on Productivity
Growth Bulletin 2331, September 1989.)
Trends.—As shown in Table 29-4, the R&D capital
stock created by Federal outlays is estimated to be $592
billion in 1991 in constant 1987 dollars. About onethird of the R&D stock is the stock of basic research
knowledge; about two-thirds is the stock of applied research and development.
T H E STOCK OF RESEARCH AND DEVELOPMENT
Based on proposed outlays in this Budget, the conThis section presents data on the stock of research stant dollar stock of federally financed R&D is projected
and development, taking into account adjustments for to rise to $624 billion by 1993. The basic and applied
shares in 1993 are projected to be about the same as
its depreciation or obsolescence.
Data sources.—The estimates were developed first of those in 1991.
The total federally financed R&D stock in 1991 was
all from a data base for the conduct of research and
development largely consistent with the data in Histori- roughly evenly divided between the defense and
cal Tables, to be published subsequently. Although nondefense stocks. Although investment in defense
there is not a consistent time series on basic and ap- R&D has exceeded that of nondefense R&D in almost
plied R&D for defense and nondefense outlays back every year, the two stocks are about the same because
to 1940, it was possible to estimate the data using of the different emphasis between basic research and

of 3.0 percent from 1970 to 1990. The value of the
direct Federal stock grew at an average annual rate
of 1.7 percent during these 20 years, while the value
of the capital stock financed by grants grew at more
than twice this rate, at 3.7 percent per year on the
average.
The growth in the stock of physical capital financed
by grants has come in several areas. The growth in
the physical stock for transportation is largely grants
for highways, including grants for the Interstate Highway System. The growth in community and regional
development occurred largely with the enactment of the
community development block grant in the early 1970s.
The value of this capital stock has been unchanged
in the past few years. The growth in the capital stock
in the natural resources area occurred primarily because of construction grants for sewage treatment facilities, a program that is being phased out. The value
of this federally financed stock is also relatively stable,
as responsibility for this area shifts back to State and
local governments.
Table 29-3 shows nondefense capital outlays both
gross and net of depreciation for selected years from
1960 to 1985 and annually from 1985 to 1993. The
net capital outlays in this table are the change in the
net nondefense physical capital stock displayed in Table
29-2.

Table 29-3. COMPOSITION OF GROSS AND NET FEDERAL AND FEDERALLY FINANCED NONDEFENSE PUBLIC PHYSICAL CAPITAL IN CONSTANT
PRICES
(Outlays in billions of constant FY 1987 dollars)
Capital financed by Federal grants

Direct Federal capital

Total nondefense capital

Composition of net capital

Composition of net
capital
Year
Gross

Five year intervals:
1960
1965
1970
1975
1980
Annual data:
1985
1986
1987
1988
1989
1990
1991
1992 estimate
1993 estimate
*$50 million or less.




Depreciation

Net

Gross

Depreciation

Net

Water
and
power

Gross

Depreciation

Net

Other

Transportation
(mainly
highways)

Community and
regional
development

Natural resources
and environment

Other

3.7
5.5
7.9
10.3
12.4

10.0
14.0
14.0
10.3
15.2

10.2
12.4
8.6
3.8
6.1

-0.3
1.4
3.8
2.9
4.8

-0.2

1.0

13.7
19.5
21.9
20.6
27.6

0.4
3.3
4.8

0.3
0.3
1.2
0.3
-0.5

3.7
3.2
3.8
5.1
4.3
4.2
5.1
6.6
6.5

25.7
26.4
23.7
23.7
22.8
23.5
23.8
24.5
24.9

15.2
15.9
16.4
16.9
17.5
18.0
18.5
19.0
19.6

10.5
10.6
7.3
6.8
5.3
5.5
5.3
5.4
5.3

6.7
7.5
5.4
5.4
4.6
5.2
5.0
5.4
5.3

2.3
1.6
0.9
0.7
0.4

1.9
1.9
1.5
1.0
0.7
0.7
0.8
0.5
0.3

-0.4
-0.5
-0.5
-0.4
-0.4
-0.4
-0.5
-0.4
-0.1

21.0
29.9
29.2
29.9
37.7

8.1
10.9
14.3
17.4
19.9

12.9
19.1
14.9
12.5
17.7

7.3
10.5
7.3
9.3
10.0

4.4
5.4
6.4
7.2
7.5

2.9
5.1
0.9
2.2
2.6

1.5
2.2
1.1
2.2
1.5

1.4
2.9
-0.2

37.8
37.8
36.3
38.0
36.1
37.6
38.7
41.4
42.7

23.4
24.3
25.0
25.8
26.7
27.6
28.6
29.6
30.6

14.3
13.6
11.3
12.2
9.4
10.0
10.1
11.9
12.1

12.1
11.4
12.5
14.3
13.3
14.1
14.9
17.0
17.8

8.2
8.4
8.6
8.9
9.3
9.6
10.1
10.5
11.0

3.9
3.0
3.9
5.4
4.0
4.4
4.8
6.5
6.8

0.2
-0.2
0.1
0.3
-0.2
0.3
-0.3
-0.1
0.3

*

*

-0.1
-0.1
-0.2

Part Three-40

THE BUDGET FOR FISCAL YEAR 1993
Table 2&-4. NET STOCK OF FEDERALLY FINANCED RESEARCH AND DEVELOPMENT1
(In billions of constant FY 1987 dollars)
National Defense

Fiscal Year

Basic
Research

Total

Nondefense
Applied
Research and
Development

Basic
Research

Total

Total Federal
Applied
Research and
Development

Basic
Research

Total

Applied
Research and
Development

1970
1971
1972
1973
1974

211
214
216
219
220

14
15
16
16
17

197
199
201
202
203

162
170
178
195
191

45
49
54
58
63

118
122
124
127
129

373
384
394
404
411

59
64
69
74
80

315
320
325
329
332

1975
1976
1977
1978
1979

221
220
220
220
219

18
18
19
20
20

203
202
201
200
199

197
204
210
217
224

66
71
76
81
86

130
133
135
137
138

418
424
430
437
443

84
89
95
100
106

333
334
336
336
337

1980
1981
1982
1983
1984

220
222
226
232
238

21
22
22
23
24

199
200
203
208
214

231
237
240
243
246

92
98
103
110
117

139
139
137
133
129

451
459
466
474
484

113
119
126
133
141

338
339
340
341
343

1985
1986
1987
1988
1989

247
260
272
283
294

25
26
27
27
28

222
235
246
256
266

249
253
257
263
270

124
131
138
146
155

126
122
119
116
115

496
514
530
546
564

148
157
165
174
183

348
357
365
372
381

1990
1991
1992 est
1993 est

301
305
310
316

29
30
31
32

272
275
280
284

278
287
298
309

163
172
182
191

115
115
116
117

579
592
608
624

192
202
212
223

387
390
396
401

1

Excludes outlays for physical capital for research and development, which are included in Tables 29-2 and 29-3.

applied R&D. Defense R&D outlays are heavily concentrated in applied research and development, which
is assumed to depreciate at a 10 percent geometric rate.
In contrast, a greater share of nondefense R&D is for
basic research, which is assumed not to depreciate.
Therefore, the total defense stock depreciates much
more quickly than the total nondefense stock.
The defense R&D stock rose slowly during the 1970s,
as gross outlays for R&D trended down in constant
dollars and the stock created in the 1960s depreciated.
A renewed emphasis on defense R&D spending from
1980 through 1989 contributed to a more rapid growth
of the R&D stock. Since then, gross defense R&D outlays have tapered off, depreciation has grown and, as
a result, net defense R&D stock has grown more slowly.
The growth of the nondefense R&D stock slowed from
the 1970s to the late 1980s. Investment trended down




during much of the 1980s, and about three-fourths of
new outlays went to replacing depreciated R&D. Since
1987, however, gross nondefense R&D outlays have
been on an upward trend while depreciation has edged
down. As a result, the net nondefense R&D capital
stock has grown more rapidly.
Detailed Tables
Tables 29-5 and 29-6 provide detail on the composition of physical and other capital outlays. They provide two basic displays. Table 29-5 shows data on national defense and nondefense capital outlays, and
Table 29-6 shows data on capital grants for State and
local governments and for direct Federal capital outlays.

29.

Part Three-41

PHYSICAL CAPITAL PRESENTATION




Table 29-5. DETAIL OF FEDERAL CAPITAL OUTLAYS BY DEFENSE AND NONDEFENSE
(In millions of dollars)
1991 actual

1992 estimate

1993 estimate

CAPITAL OUTLAYS:
NATIONAL DEFENSE:
Major public physical capital:
Construction and rehabilitation:
Military construction
Family housing
Atomic energy defense activities and other

2,972
402
1,282

3,666
505
1,231

5,064
702
1,284

Subtotal, construction and rehabilitation

4,656

5,402

7,050

Acquisition of major equipment:
Procurement
Atomic energy defense activities and other

82,058
617

74,356
741

68,898
617

Subtotal, acquisition of major equipment

82,676

75,097

69,514

87,331

80,499

76,565

35,330
6,339

37,525
7,097

39,529
6,698

41,669

44,622

46,228

Subtotal, major public physical capital
Other capital outlays:
Conduct of research and development
Defense military
Atomic energy and other
Subtotal, defense research and development

517
Subtotal, other capital outlays
Subtotal, national defense capital outlays

443

160

42,186

45,065

46,388

129,517

125,563

122,953

14,214
3,218
46
1,598
135
2,976
939
3,494
2,540
1,008
2,304
916
1,277
600
1,397

15,752
3,150
141
1,629
136
3,125
1,060
3,384
2,567
1,241
2,658
1,195
1,777
874
1,866

16,894
2,878
201
1,854
122
3,339
1,002
3,401
2,322
1,359
3,562
1,292
780
1,345
2,309

36,664

40,555

42,659

1,579
486
1,841
170
449
85
346
523

1,838
411
1,680
204
541
519
418
527

2,099
320
1,431
279
550
1,266
401
735

5,479

6,136

7,080

NONDEFENSE:
Major public physical capital:
Construction and rehabilitation:
Mass transportation

Water transportation
Community development block grants
Other community and regional development
Pollution control and abatement
Water resources
Other natural resources and environment
Veterans hospitals and other health
Postal Service
Federal buildings fund
Other programs
Subtotal, construction and rehabilitation
Acquisition of major equipment:
Air transportation
Other transportation
Space flight, research, and supporting activities
General science and basic research
Veterans medical care
General supply fund
Other
Subtotal, acquisition of major equipment

Subtotal, major public physical capital
Other capital outlays:
Other physical assets (direct)
Conduct of research and development:
General science, space, and technology:
NASA
National Science Foundation
Other general science
Subtotal, general science, space, technology
Transportation:
Department of Transportation

603

591

641

42,745

47,282

50,379

4,855

6,005

6,161

6,277
1,631
834

6,363
1,840
952

6,751
2,056
1,250

8,741

9,154

10,057

2,501

Other physical assets (grants)

3,072

3,231

333

407

455

Part Three-42




THE BUDGET FOR FISCAL YEAR 1993
Table 29-5. DETAIL OF FEDERAL CAPITAL OUTLAYS BY DEFENSE AND NONDEFENSEContinued
(In millions of dollars)
1991 actual

NASA

1992 estimate

1993 estimate

795

909

959

1,127

1,316

1,414

7,257
1,272

7,929
1,489

8,542
1,613

8,528

9,418

10,155

990
1,323
1,085

1,069
1,538
1,256

1,116
1,523
1,350

24,296

26,824

28,847

11,301
12,337
1,546
3,863
3,146

12,975
11,213
1,677
4,138
3,502

13,761
14,178
1,780
4,238
3,731

32,193

33,505

37,689

655
803
1,327
753

948
1,068
1,496
867

1,036
1,231
1,474
935

Subtotal, conduct of education and training

35,730

37,883

42,364

Loans and other financial capital:
Loans:
International affairs
Agriculture
Mortgage credit
Deposit insurance
Other advancement of commerce
Transportation
Disaster relief
Other community and regional development
Education
Other

-10,814
-3,697
3,381
-868
-98
-64
50
331
-396
972

-2,337
-2,183
1,004
41
-190
91
-149
201
-100
195

-2,545
-960
-304
31
-260
91
93
352
-102
*

-11,203

-3,426

-3,604

1,430
136

1,571
72

1,487
87

Subtotal,transportation
Health:
National Institutes of Health
All other health
Subtotal, health
Agriculture
Natural resources and environment
All other research and development
Subtotal, conduct of research and development
Conduct of education and training:
Education, training, employment and social services:
Elementary, secondary, and vocational education
Higher education
Research and general education aids
Training and employment
Social services
Subtotal, education, training, and social services
Income security
Veterans education, training, and rehabilitation
Veterans and other healthtraining
Other education and training

Subtotal, loans
Other financial capital:
International development
Other
Subtotal, other financial capital
Subtotal, loans and other financial capital
Commodity inventories:
Agriculture
Strategic petroleum reserve
Subtotal, commodity inventories
Other outlays:
Collection of information
International development

1,566

1,642

1,574

-9,637

-1,784

-2,031

647
-420

-1,201
137

-171
188

227

-1,064

17

2,096
3,983

2,429
4,687

2,444
5,001

6,079

7,116

7,445

61,550

74,980

82,802

Subtotal, nondefense capital outlays

104,295

122,262

133,181

Total, capital outlays

233,812

247,825

256,135

Subtotal, other outlays
Subtotal, other capital outlays

*$500 thousand or less.

29.

Part Three-43

PHYSICAL CAPITAL PRESENTATION




Table 29-6. DETAIL OF FEDERAL CAPITAL OUTLAYS BY GRANTS AND DIRECT FEDERAL
PROGRAMS
(In millions of dollars)
1992 estimate

1993 estimate

14,197
3,218
8
1,541
2,714
178
2,976
759
336

15,695
3,150
14
1,556
2,540
231
3,125
862
382

16,867
2,878
30
1,759
2,509
170
3,339
775
634

25,927

27,555

28,961

603

591

641

26,529

28,145

29,602

401

434

459

10,444
79
478
2,985
3,045
1,033

12,138
106
524
3,145
3,384
1,372

12,914
99
508
3,191
3,615
1,458

18,063

20,670

21,785

83

81

58

Subtotal, other capital outlays

18,548

21,185

22,302

Subtotal, grants for capital outlays

45,077

49,330

51,903

4,546
2,408
1,744
2,304
248
877
1,277
268
600
1,123

5,316
2,401
2,020
2,658
392
1,149
1,777
250
874
1,565

7,028
2,231
2,171
3,562
415
1,232
780
442
1,345
1,543

Subtotal, construction and rehabilitation

15,393

18,402

20,748

Acquisition of major equipment:
National defense
General science and basic research
Space flight, research, and supporting activities
Energy
Postal Service
Air transportation
Water transportation (Coast Guard)
Hospital and medical care for veterans
General supply fund
Other

82,676
170
1,841
269
85
1,579
294
449
346
446

75,097
204
1,680
337
519
1,838
283
541
418
319

69,514
279
1,431
369
1,266
2,099
266
550
401
419

1991 actual

CAPITAL OUTLAYS:
GRANTS:
Major public physical capital:
Construction and rehabilitation:
Highways
Mass transportation
Rail transportation
Air transportation
Pollution control and abatement
Other natural resources and environment
Community development block grants
Other community and regional devSlopment
Other construction
Subtotal, construction and rehabilitation
Other physical assets
Subtotal, major public physical capital
Other capital outlays:
Conduct of research and development
Conduct of education and training:
Elementary, secondary, and vocational education
Higher education
Research and general education aids
Training and employment
Social services
Other
Subtotal, conduct of education and training
Collection of information

DIRECT FEDERAL PROGRAMS:
Major public physical capital:
Construction and rehabilitation:
National defense
Water resource projects
Other natural resources and environment
Energy
Transportation
Veterans hospitals and other health facilities
Postal Service
Federal Prison System
Federal buildings fund
Other construction

Subtotal, acquisition of major equipment
Subtotal, major public physical capital
Other capital outlays:
Other physical assets
Conduct of research and development
Conduct of education and training:
Elementary, secondary, and vocational education
Higher education
Research and general education aids

88,155

81,233

76,595

103,548

99,635

97,343

4,855
65,563

5,999
71,011

6,155
74,616

857
12,258
1,068

837
11,107
1,153

847
14,079
1,272

Part Three-44




THE BUDGET FOR FISCAL YEAR 1993
Table 29-6. DETAIL OF FEDERAL CAPITAL OUTLAYS BY GRANTS AND DIRECT FEDERAL
PROGRAMS—Continued
(In millions of dollars)
1991 actual

1992 estimate

1993 estimate

Training and employment
Health
Hospital and medical care for veterans
Veterans education, training, and rehabilitaion
Other

879
608
719
803
578

993
739
756
1,068
672

1,047
675
799
1,231
758

Subtotal, conduct of education and training

17,768

17,325

20,707

-10,814
2,080
-3,697
3,381
-868
-98
-64
50
-396
-226
-34
-517

-2,337
421
-2,183
1,004
41
-190
91
-149
-100
-501
69
407

-2,545
-397
-960
-304
31
-260
91
93
-102
-245
13
932

-11,203

-3,426

-3,652

1,566

1,642

1,574

-9,637

-1,784

-2,079

-420
647
82

137
-1,201
3

190
-171
-212

Loans and other financial capital:
Loans:
International affairs
Energy supply
Agriculture
Mortgage credit
Deposit insurance
Other advancement of commerce
Transportation
Disaster relief and insurance
Higher education
Veterans benefits and services
Housing assistance
Other
Subtotal, loans
Other financial capital
Subtotal, loans and other financial capital
Commodity inventories:
Strategic petroleum reserve
Commodity Credit Corporation
Other
Subtotal, commodity inventories

309

-1,061

-193

2,013
4,317

2,348
5,022

2,386
5,296

85,187

98,859

106,889

Subtotal, direct Federal capital outlays

188,735

198,495

204,231

Total, capital outlays

233,812

247,825

256,135

Collection of information
International development
Subtotal, other capital outlays

29.

Part Three-45

PHYSICAL CAPITAL PRESENTATION

SUPPLEMENTAL PHYSICAL CAPITAL INFORMATION
Introduction
The Federal Capital Investment Program Information
Act of 1984 (Title II of Public Law 98-501; hereafter
referred to as the Act) requires that the budget include
projections of Federal physical capital spending and information regarding recent assessments of public civilian physical capital needs. This section is submitted
to fulfill that requirement.
Data on historical trends going back to 1940 for Federal major public physical capital spending, using the
definitions in the previous section in this chapter, can
be found in the Historical Tables, to be published subsequently.
This section is organized in two major parts. The
first part projects Federal outlays for public physical
capital and the second part presents information regarding public civilian physical capital needs.
Projections of Federal Outlays For Public
Physical Capital
Summary of projections.—Federal public physical
capital spending was $130.1 billion in 1991 and, for
current services estimates,2 is projected to increase to
$154.8 billion by 2001. The largest components are for
national defense and for roads and bridges, which together accounted for about four-fifths of Federal public
physical capital spending in 1991.
2 In this chapter, current services estimates are consistent with the caps enacted as
part of the Budget Enforcement Act of 1990. For a discussion of current services estimates,
see Appendix Two, Chapter 37, "Current Services Estimates."

Definitions.—Federal public physical capital spending is defined here to be the same as the "major public
physical capital investment" category in the previous
section. It covers spending for construction and rehabilitation, acquisition of major equipment, and other physical assets.
This section excludes financial capital, such as loans,
and outlays for human capital, such as the conduct
of education, training, and research. The data in this
section generally exclude offsetting collections that finance the spending, such as collections from the sale
of energy.
Projections.—Table 29-7 shows projected current
services outlays for Federal physical capital by the
major categories specified in the Act. Total Federal outlays for transportation-related physical capital were
$21.2 billion in 1991, and current services outlays are
estimated to increase to $30.8 billion by 2001. Outlays
for nondefense housing and buildings were $3.0 billion
in 1991 and are estimated to increase to $7.9 billion
by 2001. Physical capital outlays for other nondefense
categories were $18.5 billion in 1991 and are projected
to be $25.9 billion by 2001. For national defense, this
spending was $87.3 billion in 1991 and is estimated
to increase to $90.3 billion in 2001.
Table 29-8 shows current services projections adjusted for inflation on a constant dollar basis to 1997,
using fiscal year 1987 as the base year.
Table 29-9 compares the current services and Presidential policy projections from 1991 to 1997 in current
and constant dollars.

Table 29-7. CURRENT SERVICES OUTLAY PROJECTIONS FOR FEDERAL PHYSICAL CAPITAL SPENDING
(In billions of dollars)
Estimate
1991 actual
1992

Nondefense:
Transportation-related categories:
Roadways and bridges
Airports and airway facilities
Mass transportation systems
Railroads
Subtotal, transportation
Housing and buildings categories:
Federally assisted housing
Hospitals
Public buildings1
Subtotal, housing and buildings
Other nondefense categories:
Wastewater treatment and related facilities
Water resources projects
Space and communications facilities
Energy programs
Community development programs
Other nondefense
Subtotal, other nondefense
Subtotal, nondefense
National defense
Total




1993

1994

1995

1996

1997

1998

1999

2000

2001

14.6
3.2
3.2
0.2

16.1
3.5
3.1
0.3

17.0
3.8
3.2
0.4

17.6
4.0
3.1
0.4

18.0
4.2
2.9
0.4

18.6
4.3
3.0
0.4

19.2
4.4
3.1
0.4

19.8
4.6
3.2
0.4

20.4
4.7
3.3
0.4

21.1
4.9
3.4
0.4

21.7
5.0
3.6
0.4

21.2

23.0

24.5

25.2

25.5

26.3

27.1

28.0

28.9

29.8

30.8

0.1
1.3
1.6

0.1
1.4
2.4

0.4
1.6
3.2

1.1
1.6
3.7

1.6
1.6
3.3

1.6
1.7
3.4

1.7
1.7
3.5

1.8
1.8
3.6

1.8
1.8
3.8

1.9
1.9
3.9

1.9
2.0
4.0

3.0

3.9

5.2

6.5

6.5

6.7

6.9

7.2

7.4

7.6

7.9

2.5
3.2
3.7
2.6
3.2
3.4

2.4
3.1
4.6
3.0
3.5
3.8

2.4
3.1
4.3
3.9
3.5
3.9

2.4
3.2
4.4
4.2
3.6
4.0

2.4
3.4
4.4
3.9
3.3
4.0

2.5
3.5
4.5
4.0
3.4
4.2

2.6
3.6
4.7
4.1
3.5
4.3

2.7
3.7
4.8
4.3
3.7
4.4

2.8
3.8
5.0
4.4
3.8
4.6

2.8
3.9
5.1
4.5
3.9
4.7

2.9
4.1
5.3
4.7
4.0
4.9

18.5

20.4

21.1

21.9

21.4

22.1

22.8

23.6

24.3

25.1

25.9

42.7
87.3

47.2
80.5

50.7
77.0

53.6
74.1

53.4
74.8

55.1
77.2

56.9
79.6

58.7
82.2

60.6
84.8

62.5
87.5

64.5
90.3

130.1

127.7

127.7

127.7

128.2

132.3

136.5

140.9

145.4

150.0

154.8

Part Three-46

THE BUDGET FOR FISCAL YEAR 1993

Table 29-8. CURRENT SERVICES OUTLAY PROJECTIONS FOR FEDERAL PHYSICAL CAPITAL SPENDING (IN CONSTANT (1987) DOLLARS)
On billions of dollars)

Actual
1991

Nondefense:
Transportation-related categories:
Roadways and bridges
Airports and airway facilities
Mass transportation systems
Railroads

1993

1994

1995

1996

1997

13.1
2.9
2.9
0.2

14.4
3.3
2.5
0.4

14.1
3.3
2.3
0.3

14.1
3.3
2.3
0.3

14.1
3.3
2.3
0.3

20.1

20.6

20.5

20.1

20.1

20.1

0.1
1.3
2.1

0.4
1.4
2.7

0.9
1.4
3.1

1.3
1.3
2.7

1.3
1.3
2.7

1.3
1.3
2.7

2.7

3.4

4.4

5.3

5.2

5.2

5.2

2.3
2.9
3.3
2.3
2.9
3.1

Subtotal, other nondefense

14.4
3.3
2.7
0.3

0.1
1.1
1.5

Subtotal, housing and buildings
Other nondefense categories:
Wastewater treatment and related facilities
Water resources projects
Space and communications facilities
Energy programs
Community development programs
Other nondefense

14.0
3.0
2.7
0.2

19.1

Subtotal, transportation
Housing and buildings categories:
Federally assisted housing
Hospitals
Public buildings1

2.1
2.8
4.0
2.6
3.1
3.3

2.0
2.7
3.7
3.3
2.9
3.3

2.0
2.7
3.6
3.5
3.0
3.3

1.9
2.7
3.5
3.1
2.6
3.2

1.9
2.7
3.5
3.1
2.6
3.2

1.9
2.7
3.5
3.1
2.6
3.2

16.8

17.9

17.9

18.1

17.1

17.1

17.1

38.7
80.5

41.4
72.0

42.0
66.6

43.9
62.1

42.3
59.9

42.3
59.9

42.3
59.9

119.2

113.4

108.6

106.0

102.3

102.3

102.3

Subtotal, nondefense
National defense
Total
1

Estimate
1992

Excludes outlays for public buildings that are included in other categories in this table.
Table 29-9. PROJECTIONS OF FEDERAL OUTLAYS FOR PHYSICAL CAPITAL: CURRENT SERVICES AND PRESIDENTIAL POLICY
(In billions of dollars)

Actual
1991

In current dollars:
Current services:
Federal physical capital:
Nondefense
National defense

Estimate
1992

1993

1994

1995

1996

1997

42.7
87.3

47.2
80.5

50.7
77.0

53.6
74.1

53.4
74.8

55.1
77.2

56.9
79.6

Total
Presidential policy:
Federal physical capital:
Nondefense
National defense

130.1

127.7

127.7

127.7

128.2

132.3

136.5

42.7
87.3

47.3
80.5

50.4
76.6

54.3
74.7

53.3
74.6

52.4
75.6

52.2
77.0

Total
In constant 1987 dollars:
Current services:
Federal physical capital:
Nondefense
National defense

130.1

127.8

126.9

129.0

127.9

128.0

129.2

38.7
80.5

41.4
72.0

42.0
66.6

43.9
62.1

42.3
59.9

42.3
59.9

42.3
59.9

Total
Presidential policy:
Federal physical capital:
Nondefense
National defense

119.2

113.4

108.6

106.0

102.3

102.3

102.3

38.7
80.4

41.4
72.0

42.7
66.3

44.5
62.6

42.3
60.5

40.1
59.4

38.7
58.6

119.1

113.4

109.0

107.1

102.8

99.5

97.3

Total

For outlay details for most programs, see the items
included in major public physical capital in tables 29-5
and 29-6. For major programs that are formula grants
to States, information on the estimated distributions
by State for 1991-1993, consistent with Presidential
policy estimates, can be found in a separate publication
entitled Budget Information for States, prepared by the
Office of Management and Budget.




Public Civilian Capital Needs Assessments
The Act requires information regarding the state of
major Federal infrastructure programs, including highways and bridges, airports and airway facilities, mass
transit, railroads, federally assisted housing, hospitals,
water resources projects, and space and communications investments. Funding levels, long-term projec-

29.

Part Three-47

PHYSICAL CAPITAL PRESENTATION

tions, policy issues, needs assessments, and critiques,
are required for each category.
Capital needs assessments change little from year
to year, in part due to the long-term nature of the
facilities themselves, and in part due to the consistency
of the analytical techniques used to develop the assessments and the comparatively steady but slow changes
in underlying demographics. As a result, the practice
has arisen in reports in previous years to refer to earlier discussions, where the relevant information had
been carefully presented and changes had been minimal.

The needs assessment material in reports of earlier
years is incorporated this year largely by reference to
earlier editions and by reference to other needs assessments. The needs analyses, their major components,
and their critical evaluations have been fully covered
in past Supplements, such as the 1990 Supplement to
Special Analysis D. Supporting tables are presented
below, and the reader is referred both to the individual
program summaries in Part One of the budget for policy
matters and to previous reports for methodological discussions.

Significant Factors Affecting Infrastructure Needs Assessments
Significant Factors

Amount
Highways

1. Projected annual growth in travel to the year 2009
2.5 percent
2. Annual cost to maintain overall 1989 conditions on highways eligible for Federal-aid
$31.2 billion (1989 dollars)
3. Annual cost to maintain overall 1989 conditions on bridges . $4.2 billion (1989 dollars)
Airports and Airway Facilities
1. Airports in the National Plan of Integrated Airport Systems
with scheduled passenger traffic
568
2. Air traffic control towers
403
3. Airport development eligible under airport improvement
program for period 1990-1999
$40.5 billion ($28.2 billion for capacity) (1989 dollars)
Mass Transportation Systems
1. Yearly cost to restore existing rail facilities over a period of
10 years
2. Yearly cost to replace and maintain the urban, rural, and
special services bus fleet

$1.5 billion-$2.2 billion (1989 dollars)
$1,505 million (1989 dollars)

Wastewater Treatment
$80.5 billion (1990 dollars)
1. Total needs of sewage treatment facilities
2. Total Federal expenditures under the Clean Water Act of
$60 billion
1972
3. Percent of population served by centralized treatment facilities that benefits from at least secondary sewage treatment
95 percent
systems
51
4. States and territories served by State Revolving Funds
Housing
1. Total unsubsidized very low income renter families:
A. In severely substandard units
B. With a rent burden greater than 50 percent




0.4 million
3.4 million

Part Three-48

THE BUDGET FOR FISCAL YEAR 1993

Significant Factors Affecting Infrastructure Needs Assessments—Continued
Significant Factors

Amount

Indian Health (IHS) Care Facilities
1.
2.
3.
4.
5.

IHS hospital occupancy rates (1991)
Average length of stay, IHS hospitals (days) (1991)
Hospital admissions (1989)
Outpatient visits (1990)
Population (1990)

47 percent
4.5
102,793
4,634,945
1,102,001

Department of Veterans Affairs (VA) Hospitals
1.
2.
3.
4.
5.

Hospitals
Outpatient clinics
Domiciliaries
Outreach centers
VA owned nursing home beds

171
358
35
196
16,746
Water Resources

1.
2.
3.
4.
5.
6.
7.
8.

Navigation (deepwater ports and inland waterway)
Flood control and storm damage protection.
Irrigation.
Hydropower.
Municipal and industrial water supply.
Recreation.
Fish and wildlife mitigation and enhancement.
Soil conservation.

Needs data are not regularly collected by the
Federal Government. Most recent estimates of
the need for navigation, flood control and
shoreline storm damage protection, and municipal and industrial (M&I) water supply are
found in the National Council on Public Works
Improvement, 1987. Meeting M&I needs as
well as certain other water resource needs estimated in this report (e.g., urban storm water
management and dam safety) is primarily a
non-Federal responsibility. Program reforms
have emphasized non-Federal cost sharing
which encourages reexamination of needs, responding to changing values (instream flows
for fish and wildlife versus consumptive use for
irrigation and industrial purposes), coping with
drought and transfers of existing supplies from
one purpose to another.

Investment Needs Assessment References
Highways and Bridges
1.
Report of the Secretary of Transportation to the U.S. Congress. The Status of the Nation's Highways and
Bridges: Conditions and Performance and Highway Replacement and Rehabilitation Program 1989. June,
1989.
Airports and Airways Facilities
1.
Federal Aviation Administration. The National Plan of Integrated Airport Systems Report, March 4, 1991.
Mass Transportation Systems
1.
Federal Transit Administration. Public Transportation in the United States: Performance and Conditions.
February 1991.
Indian Health Care Facilities
1.
Indian Health Service. Priority System for Health Facility Construction (Document Number 0820B or
2046T). September 19, 1981.




29.

PHYSICAL CAPITAL PRESENTATION

Part Three-49

Investment Needs Assessment References—Continued
2.
3.
4.

Office of Audit, Office of Inspector General, U.S. Department of Health and Human Services. Review of
Health Facilities Construction Program. Indian Health Service Proposed Replacement Hospital at
Shiprock, New Mexico (CIN A-06-88-00008). June, 1989.
Office of Audit, Office of Inspector General, U.S. Department of Health and Human Services. Review of
Health Facilities Construction Program. Indian Health Service Proposed Construction Project for the
Alaska Native Medical Center at Anchorage Alaska (CIN A-09-89-00096). July, 1989.
Office of Technology Assessment. Indian Health Care (OTA-H-290). April, 1986.

Wastewater Treatment
1.
Environmental Protection Agency, Office of Wastewater Enforcement and Compliance. Assessment of Needed Publicly Owned Wastewater Treatment Facilities in the United States—Including Federally-Recognized
Indian Tribes and Alaska Native Villages (EPA 430/09-91-024). November 1991.
Water Resources
1.
"Water Resources: Increasing Demand and Scarce Supplies," Chapter 2 of America's Renewable Resources:
Historical Trends and Current Challenges," Kenneth Frederick and Roger Sedjo editors, Resources for
the Future, Washington, DC, 1991.
2.
National Council on Public Works Improvement. The Nation's Public Works, Washington, D.C., May, 1987.
see "Defining the Issues—Needs Studies," Chapter II; Report on Water Resources, Shilling et al., and Report on Water Supply, Miller Associates.
3.
McDonnell, Lawrence J., et al, Instream Flow Protection in the West, Natural Resources Law Center, University of Colorado School of Law, Boulder, CO, 1989.
4.
Wahl, Richard W., Markets for Federal Water, Resources for the Future, Washington, DC, 1989.







30. General Accounting Office
Preferred Presentation




Part Three-51




30. GENERAL ACCOUNTING OFFICE PREFERRED PRESENTATION
The Comptroller General has in recent years become
increasingly concerned that the unified budget's almost
exclusive focus on obligation controls and cash transactions prejudices investments and understates liabilities. The General Accounting Office stated in its October 1989 Report (entitled "Managing the Cost of Government: Proposals for Reforming Federal Budgeting
Practices") that consolidation into a single unified budget of trust and non-trust receipts and outlays, and of
the accounting for operating and capital needs, has permitted financing other parts of the budget through trust
fund receipts (especially from Social Security); prevented appropriate budgetary treatment of the special
needs of the Government's business-type entities (e.g.,
the U.S. Postal Service and the Tennessee Valley Authority); biased decisionmaking against capital investment by requiring the recording of the entire cost of
an asset in the year of acquisition; and failed to distinguish operating deficits from capital financing requirements.
To address its concerns with the unified budget, GAO
has proposed to divide the budget into three separate
fund groups: Federal funds (less enterprise funds), trust
funds, and enterprise funds. The fund groups would
themselves be aggregated separately in an operating
budget and a capital budget. The data in Table 30-1
show an approximation of the 1993 budget totals on
a basis consistent with GAO recommendations.
As compared with the unified budget, which focuses
primarily on aggregate totals (although it provides details by fund group and separately identifies trust funds
and revolving funds), the GAO proposal focuses separately on operating and capital needs; disaggregated
Federal, trust and enterprise funds; and aggregate totals.
Capital and Operating Budgets.—GAO's proposed
capital budget separates disbursements for physical
capital and credit flows (i.e., credit financing excluding
credit subsidies) from the operating budget. The cost
of newly acquired assets would be recorded in the capital budget and as assets on the balance sheet, with
most forms of capital subjected to depreciation charges
recorded as operating budget outlays (with concomitant
reduction in the value of capital assets on the balance
sheet). Aggregate totals of the capital and operating
budgets would be provided (as in the unified budget),
but the distinctions between the two uses of funds
would be set out in all summary presentations.
The GAO proposal includes only physical and loan
capital in its capital budget. The failure to treat R&D
and human capital on a par with physical and loan
capital has been criticized in Congress and elsewhere,
and GAO is studying the issue. In Table 30-1, expenditures for R&D and human capital—education, for example—is retained in the operating budget.



The GAO proposal would also include in the capital
budget the value (or cost) of State and local physical
facilities financed by Federal grants. These would be
recorded on Federal balance sheets as Federal assets
financed but not owned by the Federal Government.
The GAO proposal, like the unified budget, would
record Federal highway and airport and airway trust
fund collections as receipts, but the GAO proposal
would include them as receipts to finance the capital
budget. A problem with the GAO proposal is that its
allocation of depreciation cannot be charged to the trust
funds which finance these investments through earmarked taxes. Recording both earmarked receipts and
depreciation would require double counting with respect
to assets acquired after the GAO proposal went into
effect.
The GAO proposal would tend to reduce the impediments to Government investment and, as a result, could
encourage the Government to make those cost-effective
purchases required to meet longer term needs. The portion of the Federal budget attributable to investment
in physical capital has declined in recent years as a
percentage of GDP—from 4.4 percent in 1960 to 2.2
percent in 1992. While most of this decline is attributable to Defense and NASA, there is a question of
whether infrastructure needs have been adequately attended to.
On the other hand, GAO's proposal could also reduce
the impediments to "pork barrel" spending in that
charges to the operating budget would switch from the
point at which they can be controlled—the time of acquisition—to the later time at which they cannot be
controlled when depreciation charges would be recorded. Additionally, GAO's attempt to reduce the disincentives to physical capital expenditures would favor
physical over human capital.
Treatment of Sovereign and Business-Type Income.—The GAO proposal would abolish the distinction
between sovereign and business-type income from the
public. Most collections from the public would be recorded as Federal fund, trust fund, or public enterprise
fund operating budget receipts and outlays, and outlays
would be recorded gross rather than net of offsetting
collections. The issue here is the degree to which the
budget aggregates should focus on receipts arising from
the exercise of Government's sovereign power as opposed to total Government revenues and spending (including business-type activities). GAO would focus on
the total of Government activity; current budget concepts treat as receipts only those which the Federal
Government collects in its role as a government.
Allocations by Function—Table 30-1 shows most
of the GAO adjustments by function. Line 14 (Additional Operating Costs Not Currently Allocated by
Part Three-53

Part Three-54

THE BUDGET FOR FISCAL YEAR 1993

also offset in the capital budget, is included in
Function), however, includes estimates of two items for
the amounts on line B(l).
which a distribution by function is unavailable. Specifi• Line 14(b) records a lump sum $28.9 billion imcally:
puted payment from the general fund to amortize
• Line 14(a) records a lump sum estimate of $20.4
unfunded pension liabilities.
billion as a non-defense "asset consumption
charge" (depreciation) and a corresponding reducComparison with Other Alternatives.—The GAO
tion of $20.4 billion in the capital budget net inproposal is compared with the alternatives discussed
vestment. Defense depreciation of $56.9 billion,
in Chapters 31 and 32, and with the unified budget,
at the end of Chapter 32.
Table 30-1. GAO FEDERAL BUDGET PRESENTATION (COMPARED TO UNIFIED BUDGET PRESENTATION)
(1993, in billions of dollars)

Unified
Budget

A. RECEIPTS/REVENUES
Governmental Receipts:
(1) Income, Estate, Gift, Customs
Duties
(2) Social Insurance Taxes and
Contributions
(3) Excise taxes and miscellaneous
receipts
TOTAL RECEIPTS, Federal
Budget Basis
Offsetting Collections Converted to
Receipts:
(4) Proprietary Receipts from the
Public
(5) Reimbursements to Appropriations
TOTAL GAO REVENUES
B. OUTLAYS, EXPENSES, AND
INVESTMENTS
Outlays by Function:
(1) Defense/International (050,150) ...
(2) Science, Space, Technology (250)
(3) Energy, Natural Resources,
Agriculture (270, 300, 350)
(4) Commerce and Housing Credit
(370)
(5) Transportation (400)
(6) Education, Training, Employment,
and Social Services (500)
(7) Health and Medicare (550,570) ...
(8) Income Security (600)
(9) Social Security (650)
(10) Veterans Benefits and Services
(700)
(11) Other (450,750,800,870,920)
(12) Net Interest (900)
(13) Undistributed Offsetting Receipts
(950)
TOTAL OUTLAYS
(14) Additional Operating Costs Not
Currently Allocated by Function:
(a) Asset Consumption
(b) Pension liabilities
(15) Total Expenses and Investments
Before Transfers
(16) Interfund Transfers
TOTAL OUTLAYS/AMOUNT TO
BE FINANCED
C. SURPLUS/DEFICIT/FINANCING
*$50 million or less.




General

Trust

GAO Capital Budget

GAO Operating Budget

GAO Comprehensive Budget

General

Enterprise

Trust

General

Enterprise

Trust

Enterprise

1.0

24.7

24.7

647.5

446.7

446.7

42.8

26.1

44.1

42.8

1.3

48.5
116.6
1,329.2

18.7
29.7
738.7

28.9
7.0
509.7

0.4
79.9
80.3

47.6
99.9
1,285.8

18.6
21.3
730.2

28.1
7.0
483.0

0.4
71.6
72.0

0.9
16.7
43.4

0.1
8.4
8.5

339.7
17.3

326.4
17.2

12.0
0.1

1.3

318.6
15.0

306.6
14.9

12.0

0.1

21.1
2.3

19.8

74.2

52.5

3.8

18.0

48.2

32.9

648.6

446.7

446.7

68.8

68.8

647.5

647.5

1.0

1.0

648.6

446.7

1,164.1

1,164.1

314.2
17.0
40.8

0.1

0.8

26.6

8.3
8.3

1.3

2.3

13.7

26.0

19.6

2.2

4.3

0.7
2.4

22.0

5.3
0.1

*

0.1

*

0.3
1.0

0.3
27.4

96.3
0.6

117.8
11.7

26.5
5.8

0.3
5.4

91.0
0.5

6.0
24.5

45.3
109.3
108.2

1.2
148.9
93.8
302.3

4.4
0.1

50.7
257.7
197.7
302.3

45.1
108.8
103.9

1.2
148.8
93.8
302.3

4.4

0.2
0.5
4.3

0.1
0.4
4.3

37.5
43.0
218.9

34.5
40.4
218.8

2.4
0.3

0.7
2.3

35.9
33.5
222.0

33.0
31.9
221.9

2.3
0.3

0.5
1.4

1.7
9.5
-3.1

1.4
8.5
-3.1

-37.5

-37.5

-37.5

-37.5

20.4

20.4
28.9

-20.4

-20.4

-28.9

63.6
35.1

123.8
36.2

27.2

49.6
237.5
197.3
302.3

50.9
258.2
201.9
302.3

34.3
36.6
214.6
-41.6

8.2

1,501.3

28.9
1,666.4

-337.2

-28.9

979.2
201.9

563.4
-201.9

123.8

1,593.8
3.1

943.1
201.9

539.2
-198.8

111.5

72.6
-3.1

6.1

24.2
-3.1

12.3

1,666.4
-337.2

1,181.1
- 442.4

361.5
148.2

123.8
-43.5

1,596.9
-311.1

1,145.0
-414.8

340.3
142.7

111.5
-39.4

69.5
-26.1

36.1
-27.6

21.1
5.5

12.3
-4.1

31. State-Type Presentation




Part Three-55




31. STATE-TYPE PRESENTATION
California offers a fairly typical example of a State
budget presentation. The California budget (Table 31-1)
differs significantly from the other alternatives in this
Part. It focuses on separate general, special, and capital
funds, although it also provides aggregate totals (albeit
inflated through double counting) of these funds. The
separate State GAAP (Generally Accepted Accounting
Principles) presentation includes proprietary and fiduciary funds excluded from the California budget (i.e.,
public enterprise and working capital revolving funds,
self-financing bond funds, employee retirement funds,
and certain funds deemed to be held in trust).
When the California approach combines fund groups,
it leaves the inter-fund collections in receipts, thereby
overstating total collections from, and payments to, the
public. Additionally, when capital expenditures are financed by bond funds, they are double counted, because
the bond spending and debt amortization are both included in combined total spending. The bottom line is
that the California and State GAAP presentations are
the least consolidated and most disaggregated of the
alternatives discussed in this part of the budget document. In California, the individual funds matter most.
The standard California budget presentation has a
two-way distribution of income and a three-way distribution of spending. Receipts go to the general and
special funds, whereas outlay^expenses and investments are spent from these funds plus the capital fund.
The norm for California's special funds is that they
should have cash in hand before they spend (similar
to the norm for Federal trust funds). At the same time,
both the California general and special funds can spend
more in a year than they take in by reducing carry
over balances; this is not deemed to create a deficit.

spending is financed by borrowing, which is not income.
The California capital fund only includes bonds that
are to be amortized by the general fund. "Self-liquidating" bonds (such as for toll bridges, the California
water plan, and college dormitories) are excluded from
the regular budget altogether, but are displayed in the
budget documents for information purposes (similar to
the way the Federal budget displays GSEs but leaves
them out of the totals).
The estimate of the Capital Projects Fund in Table
31-1 (and the associated amortization) was based on
several imputations. First, Federal fund (i.e., non-trust)
capital outlays (other than those made by the public
enterprise funds and other than for grants) are identified as equivalent to the investment that California
finances through its Capital Projects Fund. Second, an
estimate of amortization of prior debt was made and
allocated as expenditures of the general fund. There
is currently no solid basis for amortizing total debt,
much less for amortizing debt by function. However,
Table 31-1 assumes an amortization by function equal
to new debt-financed capital investment. It does not
provide for a distribution of interest back to the functions charged with the borrowing.
Sovereign Versus Business-Type Operations and
Employee Retirement.—The California budget excludes both business operations and employee retirement and related funds from the budget. So, in the
reconstruction of the Federal budget in the form of
the California budget, most of the public enterprise
funds—plus the civil service, military, and foreign service retirement funds—were excluded from the budget
totals (although payments to these funds were left in
the budget figures). Thus, the general fund coverage
in Table 31-1 is less comprehensive than the Federal
fund group in the unified budget, and the special fund
coverage is less comprehensive than the trust fund coverage in the unified budget.
While the California procedure excludes business operations from the budget, any incidental non-tax income
to the State (such as rents, royalties, and interest) is
included in budget receipts.

Balanced Budget Requirement.—California's constitutional requirement of balanced budgets, combined
with constitutional limitations on taxes and spending,
result in procedures different from Federal procedures.
These include appropriated allowances for contingencies, with payments charged back to the activity
for which the payment is made, and "encumbrances"
(similar to obligations in the Federal budget) for which
the spending is charged to the year in which the enState GAAP Basis.—Table 31-1 also includes a
cumbrance occurs.
presentation that approaches a State GAAP presenThe California budget document has information tables on total State indebtedness (akin to the Federal tation. While the State is moving toward GAAP, this
display of total Federal debt). In contrast to the Federal will take years to accomplish. The GAAP presentation
Government, however, California's ability to borrow is in the California budget is an auxiliary display of
subject to several restrictions: borrowing can normally spending only. Table 31-1, on the other hand, reconoccur only for capital projects (whether general or self- structs the total budget on a State GAAP equivalent
liquidating); and debt normally cannot be issued unless basis. The GAAP display adds "proprietary funds" (i.e.,
business operations) and "fiduciary funds" (which inapproved by both the legislature and the voters.
clude the pension funds and the funds the State collects
Capital Projects Fund.—The Capital Projects Fund and spends from Federal grants) to the normal Califoris displayed only on the spending side, since bond fund nia presentation.



Part Three-57

Part Three-58

THE BUDGET FOR FISCAL YEAR 1993

Comparison with Other Alternatives.—The California budget is compared with the alternatives dis-

cussed in Chapters 30 and 32, and with the unified
budget, at the end of Chapter 32.

Table 31-1. CALIFORNIA PRESENTATION OF THE FEDERAL BUDGET (COMPARED TO UNIFIED BUDGET PRESENTATION)
(1993, in billions of dollars)
Normal California Budget Presentation
Unified
Budget

A. RECEIPTS
Governmental Receipts:
(1) Income, Estate, Gift, Customs Duties
(2) Social Insurance Taxes and Contributions
(3) Other Governmental Receipts
TOTAL RECEIPTS, Federal Budget Basis
Offsetting Collections Converted to Receipts:
(4) Proprietary Receipts from the Public
(5) Reimbursements to Appropriations
(6) Interfund Transfers

General
Revenue
Funds

648.6
446.7
68.8

647.5

1,164.1

Special
Revenue
Funds

Budget
Total

Additional Transactions for GAAP Presentation

Capital
Projects
Funds

Total
Including
Bond Funds

40.7

1.1
441.6
28.1

648.6
441.6
68.8

648.6
441.6
68.8

688.2

470.8

1,159.0

1,159.0

12.7
45.6
3.8

24.3
0.2
108.6

37.0
45.8
112.5

37.0
45.8
112.5

Proprietary
Funds

Fiduciary
Funds

Grand Total

5.1
Z Z
11.5
161.9
1.1
TO

648.6
446.7
68.8

5A

1,164.1

96.0

48.5
207.7
209.6

lOlil

1,629.9

TOTAL RECEIPTS, California basis
B. OUTLAYS, EXPENSES, AND INVESTMENTS
Outlays by Function:
(1) Defense and International (050,150)
(2) Science, Space, Technology (250)
(3) Energy, Natural Resources, Agriculture (270, 300,
350)
(4) Commerce & Housing Credit (370)
(5) Transportation (400)
(6) Education, Training, Employment, and Social Services
(500)
(7) Health and Medicare (550, 570)
(8) Income Security (600)
(9) Social Security (650)
(10) Veterans Benefits and Services (700)
(11) Other (450, 750, 800, 920)
(12) Net Interest (900)
(13) Undistributed Offsetting Receipts (950)

1,164.1

750.3

60&9

1,354.3

314.2
17.0

415.7
19.5

0.3
0.1

416.0
19.6

76.9
2.3

492.9
21.9

13.2

506.1
21.9

40.8
63.6
35.1

62.5
48.2
9.0

7.5
0.2
29.5

70.0
48.5
38.5

4.1

74.2
48.5
39.3

13.3
164.3
0.5

87.4
212.8
39.8

49.6
237.5
197.3
302.3
34.3
36.6
214.6
-41.6

49.7
152.5
112.4
6.4
37.2
62.2
301.8

1.2
144.8
36.4
302.3
0.5
3.2
-0.5

50.9
297.2
148.8
308.7
37.7
65.4
301.3

0.1
0.4

51.0
297.7
148.8
308.7
39.0
68.2
301.3

0.8
4.1
1.2

51.8
301.8
211.1
308.7
41.6
68.9
301.3

TOTAL OUTLAYS
C. SURPLUS/DEFICIT

1,501.3
-337.2

1,277.3
-527.0

525.4
78.6

1,802.7
-448.4

88.8

*$50 million or less.




1,354.3

*

0.8

*

1.3
2.8

1,891.5
-537.2

61.2

2.6
0.7

200.6
-26.1

61.2

2,153.2
-523.3

32. Operating, Retirement, and
Debt and Interest Presentation




Part Three-59




32. OPERATING, RETIREMENT, AND DEBT AND INTEREST PRESENTATION
In 1991, Senator Sanford introduced a bill, the "HonThe operating budget would include the receipts and
est Budgel/Balanced Budget Act" (S. 101), which pro- expenditures not included in the other two budgets.
posed another budget presentation. As shown in Table Cost of federal deposit insurance, while included in the
32-1, the unified budget would be subdivided into three receipts and expenditures of the operating budget,
budgets—the operating budget, the retirement funds would not be counted against the operating budget defibudget, and the debt and interest budget.
cit. The operating budget would have to be balanced
The President's budget would present the unified in the President's budget; legislation that would cause
budget totals, as well as totals for the three separate an operating budget deficit would be subject to a point
budgets. The social security trust funds and the Postal of order in the Congress. (In Table 32-1, which presents
Service would be included in the unified budget totals 1993 President's budget numbers, the operating budget
and the appropriate component totals. However, the is not balanced.) If, in spite of these requirements, the
presentation would focus on the deficit or surplus for deficit exceeded the maximum deficit amount (defined
only the operating budget; this and other requirements in the Congressional Budget Act of 1974, as amended
are quite different from the unified budget concept.
by the Budget Enforcement Act of 1990, Public Law
101-508), the next year's operating budget would inTable 32-1. OPERATING, RETIREMENT, AND DEBT AND INTEREST PRESENTATION OF THE FEDERAL BUDGET (COMPARED TO UNIFIED BUDGET
PRESENTATION)
(In billions of dollars)
Alternative Presentation
Unified
Budget

Total
Budget

Operating
Budget

Debt and
Interest
Budget

Retirement
Funds Budget

A. RECEIPTS
Governmental Receipts:
(1) Income, Estate, Gift, Customs Duties
(2) Social Insurance Taxes and Contributions
(3) Other Governmental Receipts

648.6
446.7
68.8

648.6
446.7
68.8

648.6
25.5
68.2

421.2
0.7

TOTAL RECEIPTS, Federal Budget Basis

1,164.1

1,164.1

742.3

421.8

1,164.1

1,637.5

742.3

314.2
17.0
40.8
63.6
35.1
49.6
237.5
197.3
302.3
34.3
36.6
214.6
-41.6

314.2
17.0
40.8
63.6
35.1
49.6
237.5
197.3
302.3
34.3
36.6
214.6
-41.6

326.3
17.0
40.8
63.6
35.1
49.6
150.9
131.3
6.4
34.3
56.4
-25.7
-4.1

1,501.3

1,501.3

1,501.3

1,501.3

Proceeds from Borrowing Converted to Receipts:
(4) Increase in the non-Retirement Funds Debt
TOTAL RECEIPTS, Alternative Basis
B. OUTLAYS, EXPENSES, AND INVESTMENTS
Outlays by Function:
(1) Defense and International (050,150)
(2) Science, Space, Technology (250)
(3) Energy, Natural Resources, Agriculture (270, 300, 350)
(4) Commerce and Housing Credit (370)
(5) Transportation (400)
(6) Education, Training, Employment, and Social Services (500)
(7) Health and Medicare (550, 570)
(8) Income Security (600)
(9) Social Security (650)
(10) Veterans Benefits and Services (700)
(11) Other (450, 750, 800, 920)
(12) Net Interest (900)
(13) Undistributed Offsetting Receipts (950)
TOTAL OUTLAYS, Federal Budget Basis

473.4

473.4
473.4

421.8

-12.1

86.7
66.0
295.8

315.9

-19.8
-75.5
-37.5

881.9

315.9

303.5

881.9

315.9

303.5

157.5

118.3

Repayment of Borrowing Converted to Outlays:
(14) Previous Year Excess Over Maximum Deficit
TOTAL OUTLAYS, Alternative Basis
Outlays Not Counted Againsdt the Operating Budget Deficit:
(15) Costs of federal deposit insurance
C. SURPLUS/DEFICIT




-55.7
-337.2

136.2

-84.0

Part Three-61

Part Three-62

THE BUDGET FOR FISCAL YEAR 1993

elude an expenditure equal to the previous year's deficit
excess. This would result in budgeting for an excess
of receipts over current expenditures in the operating
budget if the previous year's deficit target is not met.
The retirement funds budget would include the receipts and expenditures of the social security and medicare trust funds, the civilian and military retirement
trust funds, the railroad retirement trust funds, and
such other funds or accounts that OMB, in cooperation
with GAO and the Congress, agree upon. The estimates
in Table 32-1 also include the black lung disability
trust fund in the retirement funds budget.
The debt and interest budget includes "receipts and
expenditures" for reductions or increases in the public
debt, and interest on the public debt. During time of
declared war or declared recession, Treasury borrowing
would be permitted in the debt and interest budget.
Borrowed funds would then be transferred to the operating budget as receipts to maintain the operating
budget in balance. This definition of "receipts and expenditures" would treat the proceeds of borrowing as
receipts and the repayment of borrowing as outlays.
Under current budget concepts, borrowing is treated
as a means of financing a deficit, not as a part of
the calculation of the deficit; the repayment of borrowing is treated as the use of a surplus. Apart from other,

relatively small means of financing the deficit, the
treatment of borrowing and repayment of borrowing as
receipts and outlays in the alternative proposal would
balance the sum of the operating and debt and interest
budgets by definition. If transfers to the operating
budget are treated as expenditures of the debt and
interest budget, it follows that they are to be treated
as receipts of the operating budget. The operating budget would also, therefore, be balanced during time of
war or a recession, by definition.
In the Sanford proposal, the budget deficit would be
redefined to mean the amount by which the combined
outlays of the operating and debt and interest budgets
exceed their receipts. The retirement funds budget
would be completely excluded. The President's budget
and budget legislation would have to stay within the
maximum deficit amounts, as well as balancing the
operating budget. With the operating and debt and interest budgets in balance by definition, the unified
budget would have the same surplus or deficit as the
retirement funds budget.
The debt and interest budget would also include a
new "trust fund for the reduction of the deficit and
the public debt." A special tax could be established
for this fund.

SOME DIFFERENCES AMONG THE ALTERNATIVE PRESENTATIONS
A comparison of the GAO, California, and Sanford
presentations with each other, and with the unified
budget, is presented below.
• The GAO and California budget presentations reflect, primarily, the concerns of financial accounting. The Sanford budget proposal is primarily designed to protect the retirement trust funds and
to direct attention to controlling the newly defined
operating budget.
• Employee retirement funds are included by GAO
as part of its trust fund grouping, and by Sanford
as part of his retirement funds budget. The California approach moves these funds into the fiduciary funds category outside the normal budget
presentation (but inside the GAAP presentation).
The unified budget includes these funds in the
consolidated budget totals.
• Enterprise funds are included as part of the operating budget in the Sanford proposal. GAO carries
the enterprise funds as one of three separate
groupings, together with the general funds and
trust funds. The California budget excludes enterprise funds from the normal budget displays but
includes them in the GAAP presentation. The unified budget includes these funds in the consolidated budget totals.
• GAO, the Sanford proposal, and the unified budget
handle interfund transfers as adjustments on the
outlay side; they cancel out in deriving the consoli-




dated totals. The California approach adds them
to the receipts of each fund group, and does not
net them out in combined totals.
• GAO has a capital budget that includes all capital
expenditures for physical and loan assets, no matter how financed. It does not have a bond fund.
In the main, the GAO capital budget is financed
by depreciation charges and earmarked receipts
(mainly highway and airport and airway excise
taxes). The California approach has a capital fund
but includes only those capital expenditures financed by borrowing to be repaid from the general
fund on an amortization basis. The Sanford proposal and the unified budget do not distinguish
capital expenditures in the budget aggregates. The
President's budget, however, does have an auxiliary tabulation of outlays for both physical and
intangible capital (see Chapter 29).
• GAO includes grants to State and local governments for physical capital investment in its capital
budget. The Sanford proposal and the unified
budget do not distinguish these grants in the
budget aggregates, but the President's budget does
include grants for capital investment in its auxiliary tabulation of Federal capital expenditures
(see Chapter 29). The California budget does not
include grants to localities for capital projects in
its capital fund.