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F I SCA L Y E A R 2019

EFFICIENT, EFFECTIVE, ACCOUNTABLE

AN

AMERICAN

BUDGET
ANALYTICAL
PERSPECTIVES
BUDGET OF THE U.S. GOVERNMENT
OFFICE OF MANAGEMENT AND BUDGET | OMB.GOV

THE BUDGET DOCUMENTS
Budget of the United States Government, Fiscal Year
2019 contains the Budget Message of the President, information
on the President’s priorities, and summary tables.
Analytical Perspectives, Budget of the United States
Government, Fiscal Year 2019 contains analyses that are
designed to highlight specified subject areas or provide other
significant presentations of budget data that place the budget
in perspective. This volume includes economic and accounting
analyses; information on Federal receipts and collections; analyses of Federal spending; information on Federal borrowing and
debt; baseline or current services estimates; and other technical
presentations.
The Analytical Perspectives volume also has supplemental
materials that are available on the internet at www.whitehouse.
gov/omb/analytical-perspectives/ and on the Budget CD-ROM.
These supplemental materials include tables showing the budget by agency and account and by function, subfunction, and
program.
Appendix, Budget of the United States Government,
Fiscal Year 2019 contains detailed information on the various
appropriations and funds that constitute the budget and is designed primarily for the use of the Appropriations Committees.
The Appendix contains more detailed financial information on
individual programs and appropriation accounts than any of
the other budget documents. It includes for each agency: the
proposed text of appropriations language; budget schedules for
each account; legislative proposals; narrative explanations of
each budget account; and proposed general provisions applica-

ble to the appropriations of entire agencies or group of agencies.
Information is also provided on certain activities whose transactions are not part of the budget totals.
ELECTRONIC SOURCES OF BUDGET INFORMATION
The information contained in these documents is available in
electronic format from the following sources:
Internet. All budget documents, including documents that
are released at a future date, spreadsheets of many of the budget tables, and a public use budget database are available for
downloading in several formats from the internet at www.whitehouse.gov/omb/budget/. Links to documents and materials
from budgets of prior years are also provided.
Budget CD-ROM. The CD-ROM contains all of the printed
budget documents in fully indexed PDF format along with the
software required for viewing the documents.
The Internet and CD-ROM also include many of the budget
tables in spreadsheet format, and supplemental materials that
are part of the Analytical Perspectives volume. It also includes
Historical Tables that provide data on budget receipts, outlays,
surpluses or deficits, Federal debt, and Federal employment
over an extended time period, generally from 1940 or earlier to
2019 or 2023.
For more information on access to electronic versions of the
budget documents (except CD-ROMs), call (202) 512-1530 in the
D.C. area or toll-free (888) 293-6498. To purchase the Budget
CD-ROM or printed documents call (202) 512-1800.

GENERAL NOTES
1. All years referenced for budget data are fiscal years unless otherwise noted. All years referenced for economic data are calendar years unless otherwise noted.
2. At the time of this writing, none of the full-year appropriations bills for 2018 have been enacted, therefore,
the programs and activities normally provided for in the full-year appropriations bills were operating under a
continuing resolution (Public Law 115-56, division D, as amended). In addition, the Additional Supplemental
Appropriations for Disaster Relief Requirements Act, 2017 (Public Law 115-72, division A) provided additional appropriations for 2018 for certain accounts within the Departments of Agriculture, Homeland Security,
and the Interior. The Department of Defense Missile Defeat and Defense Enhancements Appropriations Act,
2018 (Public Law 115-96, division B) also provided additional appropriations for 2018 for certain accounts
within the Department of Defense. Accordingly, references to 2018 spending in the text and tables reflect the
levels provided by the continuing resolution and, if applicable, Public Laws 115-72 (division A) and 115-96
(division B).
3. The Budget does not incorporate the effects of Public Law 115-120, including the reauthorization of the
Children’s Health Insurance Program and amendments to the tax code in that law.
4. Detail in this document may not add to the totals due to rounding.

U.S. GOVERNMENT PUBLISHING OFFICE, WASHINGTON 2018

TABLE OF CONTENTS
Page
List of Charts and Tables ��������������������������������������������������������������������������������������������������������������������� iii
Introduction
1. Introduction ����������������������������������������������������������������������������������������������������������������������������������3
Economic Assumptions and Interactions with the Budget
2. Economic Assumptions and Interactions with the Budget���������������������������������������������������������9
3. Long-Term Budget Outlook��������������������������������������������������������������������������������������������������������21
4. Federal Borrowing and Debt�������������������������������������������������������������������������������������������������������29
Performance and Management
5. Social Indicators��������������������������������������������������������������������������������������������������������������������������47
6. Building and Using Evidence to Improve Government Effectiveness��������������������������������������59
7. Strengthening the Federal Workforce����������������������������������������������������������������������������������������65
Budget Concepts and Budget Process
8. Budget Concepts��������������������������������������������������������������������������������������������������������������������������77
9. Coverage of the Budget�������������������������������������������������������������������������������������������������������������101
10. Budget Process���������������������������������������������������������������������������������������������������������������������������107
Federal Receipts
11. Governmental Receipts�������������������������������������������������������������������������������������������������������������127
12. Offsetting Collections and Offsetting Receipts������������������������������������������������������������������������141
13. Tax Expenditures�����������������������������������������������������������������������������������������������������������������������153
Special Topics
14. Aid to State and Local Governments����������������������������������������������������������������������������������������197
15. Strengthening Federal Statistics����������������������������������������������������������������������������������������������215
16. Information Technology�������������������������������������������������������������������������������������������������������������221
17. Federal Investment�������������������������������������������������������������������������������������������������������������������227
18. Research and Development�������������������������������������������������������������������������������������������������������233
19. Credit and Insurance����������������������������������������������������������������������������������������������������������������243
20. Budgetary Effects of the Troubled Asset Relief Program��������������������������������������������������������263

i

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21. Cybersecurity Funding��������������������������������������������������������������������������������������������������������������273
22. Federal Drug Control Funding�������������������������������������������������������������������������������������������������289
Technical Budget Analyses
23. Current Services Estimates������������������������������������������������������������������������������������������������������293
24. Trust Funds and Federal Funds ����������������������������������������������������������������������������������������������305
25. Comparison of Actual to Estimated Totals�������������������������������������������������������������������������������319

*Available on the Internet at http://www.whitehouse.gov/omb/analytical-perspectives/ and on the Budget CD-ROM
ii

LIST OF CHARTS AND TABLES

iii

LIST OF CHARTS AND TABLES
LIST OF CHARTS

Page

2–1. Range of Uncertainty for the Budget Deficit�����������������������������������������������������������������������������19
3–1. Comparison of Publicly Held Debt����������������������������������������������������������������������������������������������21
3–2. Comparison of Annual Surplus/Deficit���������������������������������������������������������������������������������������23
3–3. Alternative Productivity and Interest Assumptions������������������������������������������������������������������24
3–4. Alternative Health Care Costs����������������������������������������������������������������������������������������������������24
3–5. Alternative Discretionary Assumptions�������������������������������������������������������������������������������������25
3–6. Alternative Revenue Assumptions���������������������������������������������������������������������������������������������25
3–7. Long-Term Uncertainties������������������������������������������������������������������������������������������������������������26
7–1. Masters Degree or Above By Year for Federal and Private Sectors������������������������������������������66
7–2. High School Graduate or Less by Year for Federal and Private Sectors����������������������������������66
7–3. Average Age by Year for Federal and Private Sectors���������������������������������������������������������������70
7–4. Changes from 1975 to 2017 in Employment as a Percent of Population����������������������������������70
7–5. The Human Capital Business Reference Model (HCBRM)�������������������������������������������������������71
7–6. Federal Employee Review Processes for Major Disciplinary Actions���������������������������������������72
8–1. Relationship of Budget Authority to Outlays for 2019��������������������������������������������������������������90
10–1. Illustrative Scoring of $2 Billion Purchase using the Federal Capital Revolving Fund�������120
16–1. Trends in Federal IT Spending Grants Spending Removal Comparison�������������������������������221
16–2. 2019 IT Investment Portfolio Summary�����������������������������������������������������������������������������������222
16–3. Percentage of 2019 IT Spending by Number of Investments��������������������������������������������������223
16–4. CIO Risk Ratings for Investments�������������������������������������������������������������������������������������������223
16–5. IT Spending by DME and O&M�����������������������������������������������������������������������������������������������224
19–1. Face Value of Federal Credit Outstanding�������������������������������������������������������������������������������257

v

LIST OF TABLES
Page
Economic Assumptions and Interactions with the Budget
Economic Assumptions and Interactions with the Budget
2–1. Economic Assumptions �����������������������������������������������������������������������������������������������������
2–2. Comparison of Economic Assumptions in the 2018 and 2019 Budgets ��������������������������
2–3. Comparison of Economic Assumptions ����������������������������������������������������������������������������
2–4. Sensitivity of the Budget to Economic Assumptions ������������������������������������������������������
2–5. Forecast Errors, January 1982–Present ���������������������������������������������������������������������������
2–6. Differences Between Estimated and Actual Surpluses or Deficits for
Five-Year Budget Estimates Since 1986 (As a Percent of GDP) ����������������������������������

11
13
14
15
16
17

Long-Term Budget Outlook
3–1. 25-Year Debt Projections under Alternative Budget Scenarios �������������������������������������� 23
3–2. Intermediate Actuarial Projections for OASDI And HI, 2017 Trustees’ Reports ����������� 27
Federal Borrowing and Debt
4–1. Trends In Federal Debt Held by the Public and Interest on the Debt
Held by the Public ����������������������������������������������������������������������������������������������������������
4–2. Federal Government Financing and Debt ������������������������������������������������������������������������
4–3. Debt Held by the Public Net of Financial Assets and Liabilities ������������������������������������
4–4. Agency Debt �����������������������������������������������������������������������������������������������������������������������
4–5. Debt Held by Government Accounts ���������������������������������������������������������������������������������
4–6. Federal Funds Financing and Change in Debt Subject to Statutory Limit �������������������
4–7. Foreign Holdings of Federal Debt �������������������������������������������������������������������������������������

30
32
35
37
39
42
43

Performance and Management
Social Indicators
5–1. Social Indicators ���������������������������������������������������������������������������������������������������������������� 49
5–2. Sources for Social Indicators ��������������������������������������������������������������������������������������������� 53
Building and Using Evidence to Improve Government Effectiveness
Strengthening the Federal Workforce
7–1. Occupations of Federal and Private Sector Workforces ���������������������������������������������������
7–2. Federal Civilian Employment in the Executive Branch ��������������������������������������������������
7–3. Personnel Pay and Benefits �����������������������������������������������������������������������������������������������
7–4. Total Federal Employment ������������������������������������������������������������������������������������������������

67
68
69
71

Budget Concepts and Budget Process
Budget Concepts
Budget Calendar ������������������������������������������������������������������������������������������������������������������������������� 79
8–1. Totals For the Budget and the Federal Government ������������������������������������������������������� 84
Coverage of the Budget
9–1. Comparison of Total, On-Budget, and Off-Budget Transactions ����������������������������������� 102
Budget Process
10–1. Program Integrity Discretionary Cap Adjustments, Including Mandatory Savings ��� 109
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10–2. Proposed Program Integrity Cap Adjustment for the
Internal Revenue Service (IRS) �����������������������������������������������������������������������������������
10–3. Mandatory and Receipt Savings from Other Program Integrity Initiatives ����������������
10–4. Disaster Relief Cap Adjustment - Historical Data and Current Law ���������������������������
10–5. Proposed Wildfire Suppression Operations Fund
United States Departments of Agriculture and the Interior �������������������������������������
10–6. Discretionary Pell Funding Needs ����������������������������������������������������������������������������������

110
111
115
116
118

Federal Receipts
Governmental Receipts
11–1. Receipts by Source—Summary ���������������������������������������������������������������������������������������
11–2. Adjustments to the Balanced Budget and Emergency Deficit Control Act (BBEDCA)
Baseline Estimates Of Governmental Receipts ���������������������������������������������������������
11-3. Effect of Budget Proposals �������������������������������������������������������������������������������������������������
11–4. Receipts by Source �����������������������������������������������������������������������������������������������������������

127
132
135
137

Offsetting Collections and Offsetting Receipts
12–1. Offsetting Collections and Offsetting Receipts from the Public ����������������������������������� 142
12–2. Summary of Offsetting Receipts by Type ����������������������������������������������������������������������� 143
12–3. Gross Outlays, User Charges, Other Offsetting Collections and
Offsetting Receipts from the Public, And Net Outlays ����������������������������������������������� 143
12–4. User Charge Proposals in the FY 2019 Budget �������������������������������������������������������������� 151
12–5. Offsetting Receipts by Type ������������������������������������������������������������������������������������������������ *
12–6. Offsetting Collections and Offsetting Receipts, Detail—FY 2019 Budget ������������������������ *
Tax Expenditures
13–1. Estimates of Total Income Tax Expenditures for Fiscal Years 2017-2027 ��������������������
13–2A. Estimates of Total Corporate Income Tax Expenditures for
Fiscal Years 2017-2027 ������������������������������������������������������������������������������������������������
13–2B. Estimates of Total Individual Income Tax Expenditures for
Fiscal Years 2017-2027 ������������������������������������������������������������������������������������������������
13–3. Income Tax Expenditures Ranked by Total Fiscal Year 2018–2027
Projected Revenue Effect ���������������������������������������������������������������������������������������������
13–4. Present Value of Selected Tax Expenditures for Activity in Calendar Year 2017 ��������

156
161
167
172
176

Special Topics
Aid to State and Local Governments
14–1. Federal Grants to State and Local Governments—Budget Authority and Outlays ���� 202
14–2. Trends in Federal Grants to State and Local Governments ����������������������������������������� 213
14–3. Summary of Programs by Agency, Bureau, and Program ������������������������������������������������� *
14–4. Summary of Programs by State ������������������������������������������������������������������������������������������ *
14–5.—14–39. 2019 Budget State-by-State Tables ���������������������������������������������������������������������� *
Strengthening Federal Statistics
15–1. 2017–2019 Budget Authority for Principal Statistical Agencies ���������������������������������� 219
Information Technology
16–1. Federal IT Spending �������������������������������������������������������������������������������������������������������� 221
*Available on the Internet at http://www.whitehouse.gov/omb/analytical-perspectives/ and on the Budget CD-ROM
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16–2. Estimated FY 2019 Federal IT Spending and Percentage by Agency �������������������������� 222
Federal Investment
17–1. Composition of Federal Investment Outlays ������������������������������������������������������������������ 228
17–2. Federal Investment Budget Authority and Outlays: Grant and
Direct Federal Programs ���������������������������������������������������������������������������������������������� 230
Research and Development
18–1. Total Federal R&D Funding By Agency at the Bureau or Account Level ������������������� 233
18–2. Federal Research and Development Spending ������������������������������������������������������������� 238
Credit and Insurance
19–1. Estimated Future Cost of Outstanding Direct Loans and Loan Guarantees �������������� 258
19–2. Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2017–2019 �������������� 259
19–3. Loan Guarantee Subsidy Rates, Budget Authority, and Loan Levels, 2017–2019 ������� 260
19–4. Summary of Federal Direct Loans and Loan Guarantees ��������������������������������������������� 261
19–5. Reestimates of Credit Subsidies on Loans Disbursed Between 1992-2017 ���������������������� *
19–6. Face Value of Government-Sponsored Lending ����������������������������������������������������������������� *
19–7. Lending and Borrowing by Government-Sponsored Enterprises (GSEs) ������������������������ *
19–8. Direct Loan Transactions of the Federal Government ������������������������������������������������������ *
19–9. Guaranteed Loan Transactions of the Federal Government ��������������������������������������������� *
Budgetary Effects of the Troubled Asset Relief Program
20–1. Change in Programmatic Costs of Troubled Asset Relief Program �����������������������������
20–2. Troubled Asset Relief Program Current Value ��������������������������������������������������������������
20–3. Troubled Asset Relief Program Effects on the Deficit and Debt������������������������������������
20–4. Troubled Asset Relief Program Effects on the Deficit and Debt
Calculated on a Cash Basis �����������������������������������������������������������������������������������������
20–5. Troubled Asset Relief Program Reestimates ������������������������������������������������������������������
20–6. Detailed TARP Program Levels and Costs ���������������������������������������������������������������������
20–7. Comparison of CBO and OMB TARP Costs �������������������������������������������������������������������

263
264
266
266
267
268
269

Cybersecurity Funding
21–1. Agency Cybersecurity Funding Totals ���������������������������������������������������������������������������� 274
21–2. Civilian Agency Cybersecurity Funding by Account ����������������������������������������������������� 276
Federal Drug Control Funding
22–1. Drug Control Funding FY 2017—FY 2019 ��������������������������������������������������������������������� 289
Technical Budget Analyses
Current Services Estimates
23–1. Category Totals for the Adjusted Baseline ��������������������������������������������������������������������� 293
23–2. Summary of Economic Assumptions ������������������������������������������������������������������������������ 296
23–3. Baseline Beneficiary Projections for Major Benefit Programs �������������������������������������� 297
23–4. Impact of Regulations, Expiring Authorizations, and Other
Assumptions in the Baseline ������������������������������������������������������������������������������������������� *
23–5. Receipts by Source in the Projection of Adjusted Baseline ������������������������������������������� 298
23–6. Effect on Receipts of Changes in the Social Security Taxable Earnings Base ������������� 299
23–7. Change in Outlay Estimates by Category in the Adjusted Baseline ���������������������������� 299
*Available on the Internet at http://www.whitehouse.gov/omb/analytical-perspectives/ and on the Budget CD-ROM
ix

Page
23–8. Outlays by Function in the Adjusted Baseline �������������������������������������������������������������� 300
23–9. Outlays by Agency in the Adjusted Baseline ����������������������������������������������������������������� 301
23–10. Budget Authority by Function in the Adjusted Baseline ���������������������������������������������� 302
23–11. Budget Authority By Agency in the Adjusted Baseline ������������������������������������������������� 303
23–12. Current Services Budget Authority and Outlays by Function, Category, and Program ���� *
Trust Funds and Federal Funds
24–1. Receipts, Outlays and Surplus or Deficit by Fund Group ���������������������������������������������
24–2. Comparison of Total Federal Fund and Trust Fund Receipts to
Unified Budget Receipts, Fiscal Year 2017 �����������������������������������������������������������������
24–3. Income, Outgo, and Balances of Trust Funds Group �����������������������������������������������������
24–4. Income, Outgo, and Balance of Major Trust Funds �������������������������������������������������������
24–5. Income, Outgo, and Balance of Selected Special Funds ������������������������������������������������
Comparison of Actual to Estimated Totals
25–1. Comparison of Actual 2017 Receipts with the Initial Current Services Estimates �����
25–2. Comparison of Actual 2017 Outlays with the Initial Current Services Estimates ������
25–3. Comparison of the Actual 2017 Deficit with the Initial Current Services Estimate ���
25–4. Comparison of Actual and Estimated Outlays for Mandatory and Related Programs
Under Current Law ������������������������������������������������������������������������������������������������������
25–5. Reconciliation of Final Amounts For 2017 ���������������������������������������������������������������������

306
308
309
311
318
319
320
321
322
323

Detailed Functional Tables
26–1. Budget Authority and Outlays by Function, Category and Program ����������������������������������� *
Federal Budget by Agency and Account
27–1. Federal Budget by Agency and Account ��������������������������������������������������������������������������������� *
California Bay Delta Federal Budget Crosscut Report ������������������������������������������������������������������� **

*Available on the Internet at http://www.whitehouse.gov/omb/analytical-perspectives/ and on the Budget CD-R
**Available on the Internet at http://www.whitehouse.gov/omb/analytical-perspectives/ only

x

INTRODUCTION

1

1. INTRODUCTION

The Analytical Perspectives volume presents analyses that highlight specific subject areas or provide
other significant data that place the President’s 2019
Budget in context and assist the public, policymakers,
the media, and researchers in better understanding
the budget. This volume complements the main Budget
volume, which presents the President’s budget policies
and priorities, and the Budget Appendix volume, which
provides appropriations language, schedules for budget
expenditure accounts, and schedules for selected receipt accounts.
Presidential budgets have included separate analytical presentations of this kind for many years. The 1947
Budget and subsequent budgets included a separate
section entitled “Special Analyses and Tables” that covered four, and later more, topics. For the 1952 Budget,
the section was expanded to 10 analyses, including many
subjects still covered today, such as receipts, investment,
credit programs, and aid to State and local governments.
With the 1967 Budget this material became a separate
volume entitled “Special Analyses,” and included 13 chapters. The material has remained a separate volume since
then, with the exception of the Budgets for 1991–1994,
when all of the budget material was included in one volume. Beginning with the 1995 Budget, the volume has
been named Analytical Perspectives.
Several supplemental tables as well as several longer
tables that were previously published within the volume
are available at http://www.whitehouse.gov/omb/analytical-perspectives and on the Budget CD-ROM. These
tables are shown in the List of Tables in the front of this
volume with an asterisk instead of a page number.
Overview of the Chapters
Economic and Budget Analyses
Economic Assumptions and Interactions with the
Budget. This chapter reviews recent economic developments; presents the Administration’s assessment of the
economic situation and outlook; compares the economic
assumptions on which the 2019 Budget is based with the
assumptions for last year’s Budget and those of other
forecasters; provides sensitivity estimates for the effects
on the Budget of changes in specified economic assumptions; and reviews past errors in economic projections.
Long-Term Budget Outlook. This chapter assesses the
long-term budget outlook under current policies and under
the Budget’s proposals. It focuses on 25-year projections
of Federal deficits and debt to illustrate the long-term
impact of the Administration’s proposed policies, and
shows how alternative long-term budget assumptions affect the results. It also discusses the uncertainties of the

long-term budget projections and discusses the actuarial
status of the Social Security and Medicare programs.
Federal Borrowing and Debt. This chapter analyzes
Federal borrowing and debt and explains the budget estimates. It includes sections on special topics such as
trends in debt, debt held by the public net of financial assets and liabilities, investment by Government accounts,
and the statutory debt limit.
Management
Social Indicators. This chapter presents a selection
of statistics that offers a numerical picture of the United
States and illustrates how this picture has changed over
time. Included are economic, demographic and civic,
socioeconomic, health, security and safety, and environmental and energy statistics.
Building and Using Evidence to Improve Government
Effectiveness. This chapter discusses evidence and its
role in improving government programs and policies. It
articulates important principles and practices including
building and using a portfolio of evidence, developing a
learning agenda, building an evidence infrastructure, and
making better use of administrative data.
Strengthening the Federal Workforce. This chapter
presents summary data on Federal employment and compensation, and discusses the approach the Administration
is taking with Federal human capital management.
Budget Concepts and Budget Process
Budget Concepts. This chapter includes a basic description of the budget process, concepts, laws, and terminology,
and includes a glossary of budget terms.
Coverage of the Budget. This chapter describes activities that are included in budget receipts and outlays (and
are therefore classified as “budgetary”) as well as those
activities that are not included in the Budget (and are
therefore classified as “non-budgetary”). The chapter also
defines the terms “on-budget” and “off-budget” and includes illustrative examples.
Budget Process. This chapter discusses proposals to
improve budgeting and fiscal sustainability within individual programs as well as across Government.
Federal Receipts
Governmental Receipts. This chapter presents information on estimates of governmental receipts, which
consist of taxes and other compulsory collections. It includes descriptions of tax-related legislation enacted in
the last year and describes proposals affecting receipts in
the 2019 Budget.
Offsetting Collections and Offsetting Receipts. This
chapter presents information on collections that offset
outlays, including collections from transactions with the

3

4
public and intragovernmental transactions. In addition,
this chapter presents information on “user fees,” charges
associated with market-oriented activities and regulatory
fees. The user fee information includes a description of
each of the user fee proposals in the 2019 Budget. A detailed table, “Table 12–5, Offsetting Receipts by Type” is
available at the Internet address cited above and on the
Budget CD-ROM.
Tax Expenditures. This chapter describes and presents estimates of tax expenditures, which are defined as
revenue losses from special exemptions, credits, or other
preferences in the tax code.
Special Topics
Aid to State and Local Governments. This chapter
presents crosscutting information on Federal grants to
State and local governments. The chapter also includes a
table showing historical grant spending, and a table with
budget authority and outlays for grants in this Budget.
Tables showing State-by-State spending for major grant
programs are available at the Internet address cited
above and on the Budget CD-ROM.
Strengthening Federal Statistics. This chapter discusses the vital role of the Federal Government’s statistical
agencies and programs in generating data that citizens,
businesses, and governments need to make informed decisions. This chapter also provides examples of innovative
developments and applications throughout the Federal
statistical community and highlights 2019 Budget proposals for the Government’s principal statistical programs.
Information Technology.
This chapter addresses
Federal information technology (IT), highlighting initiatives to improve IT management through modern
solutions to enhance service delivery. The Administration
will invest in modern, secure technologies and services
to drive enhanced efficiency and effectiveness. This will
include undertaking complex Government-wide modernization efforts, driving improved delivery of citizen-facing
services, and improving the overall management of the
Federal IT portfolio. The Administration will also continue its efforts to further build the Federal IT workforce
and strategically reduce the Federal Government’s cybersecurity risk.
Federal Investment. This chapter discusses Federallyfinanced spending that yields long-term benefits. It
presents information on annual spending on physical
capital, research and development, and education and
training.
Research and Development. This chapter presents a
crosscutting review of research and development funding
in the Budget.
Credit and Insurance. This chapter provides crosscutting analyses of the roles, risks, and performance of
Federal credit and insurance programs and Governmentsponsored enterprises (GSEs). The chapter covers the
major categories of Federal credit (housing, education,
small business and farming, energy and infrastructure,
and international) and insurance programs (deposit insurance, pension guarantees, disaster insurance, and

ANALYTICAL PERSPECTIVES

insurance against terrorism-related risks). Five additional tables address transactions including direct loans,
guaranteed loans, and Government-sponsored enterprises. These tables are available at the Internet address
cited above and on the Budget CD-ROM.
Budgetary Effects of the Troubled Asset Relief Program.
The chapter provides special analyses of the Troubled
Asset Relief Program (TARP) as described in Sections 202
and 203 of the Emergency Economic Stabilization Act of
2008, including information on the costs of TARP activity
and its effects on the deficit and debt.
Cybersecurity Funding. This chapter displays enacted and proposed cybersecurity funding for Federal
departments and agencies, and includes analysis of broad
cybersecurity trends across government.
Federal Drug Control Funding. This chapter displays
enacted and proposed drug control funding for Federal departments and agencies.
Technical Budget Analyses
Current Services Estimates. This chapter discusses
the conceptual basis of the Budget’s current services, or
“baseline,” estimates, which are generally consistent with
the baseline rules in the Balanced Budget and Emergency
Deficit Control Act of 1985 (BBEDCA). The chapter presents estimates of receipts, outlays, and the deficit under
this baseline. Two detailed tables addressing factors that
affect the baseline and providing details of baseline budget authority and outlays are available at the Internet
address cited above and on the Budget CD-ROM.
Trust Funds and Federal Funds. This chapter provides
summary information about the two fund groups in the
budget—Federal funds and trust funds. In addition, for
the major trust funds and certain Federal fund programs,
the chapter provides detailed information about income,
outgo, and balances.
Comparison of Actual to Estimated Totals. This chapter compares the actual receipts, outlays, and deficit for
2017 with the estimates for that year published in the
2017 Budget, published in February 2016.
The following materials are available at the Internet
address cited above and on the Budget CD-ROM:
Detailed Functional Table
Detailed Functional Table.
Table 26–1, “Budget
Authority and Outlays by Function, Category, and
Program,” displays budget authority and outlays for
major Federal program categories, organized by budget
function (such as health care, transportation, or national
defense), category, and program.
Federal Budget by Agency and Account
The Federal Budget by Agency and Account. Table
27–1, “Federal Budget by Agency and Account,” displays
budget authority and outlays for each account, organized
by agency, bureau, fund type, and account.
The following report is available at the Internet address cited above:

1. Introduction

California Bay-Delta Federal Budget Crosscut
California Bay-Delta Federal Budget Crosscut. The
California Bay-Delta interagency budget crosscut report

5
includes an estimate of Federal funding by each of the participating Federal agencies to carry out its responsibilities
under the California Bay-Delta Program, fulfilling the reporting requirements of section 106 of Public Law 108-361.

ECONOMIC ASSUMPTIONS AND
INTERACTIONS WITH THE BUDGET

7

2. ECONOMIC ASSUMPTIONS AND INTERACTIONS WITH THE BUDGET

This chapter presents the economic assumptions that
underlie the Administration’s Fiscal Year 2019 Budget.1
It describes the recent performance of the U.S. economy,
explains the Administration’s projections for key macroeconomic variables, compares them with forecasts
prepared by other prominent institutions and discusses
the uncertainty inherent in producing an eleven-year
forecast.
After contracting by more than 4 percent over 2007Q4
to 2009Q2, the United States economy has experienced
stable but relatively modest growth, especially when compared with past recoveries. From the trough in the second
quarter of 2009, it took about two years for the economy
to recover to its previous output peak, much longer than
in the other post-World War II recoveries. Over the first
three years of recoveries from previous postwar recessions,
average output growth averaged 4.5 percent annually. In
the first three years following the most recent recession,
average annual growth was only about 2.3 percent.
The disappointing recovery has motivated this
Administration’s aggressive economic strategy, two key
elements of which are cutting taxes and reforming the
tax code along with reducing the burden of Federal regulations. The Administration’s efforts succeeded on both
of these fronts in its first year, with the passage of the
Tax Cut and Jobs Act in December 2017 and the elimination of scores of unnecessary regulations under Executive
Orders 13771 and 13777. In addition, the Administration
is pursuing policies to encourage domestic energy development and investments in infrastructure, reform
welfare programs to encourage work, establish paid family leave for new parents, negotiate more attractive trade
agreements, and reduce Federal budget deficits. Taken
together, these actions should encourage investment by
American firms, stimulate productivity growth, and slow
the expected decline in the labor force participation rate,
leading to stronger growth in output and putting more
Americans to work.
This chapter proceeds as follows:
• The first section reviews the recent performance of
the U.S. economy, examining a broad array of economic outcomes.

• The second section provides a detailed exposition of

the Administration’s economic forecast for the FY
2019 Budget, discussing how a number of macroeconomic variables are expected to evolve over the
years 2018 to 2028.

• The third section compares the forecast of the Administration with those prepared by the Congressio-

1   Economic performance, unless otherwise specified, is generally discussed in terms of calendar years. Budget figures are discussed in terms
of fiscal years.

nal Budget Office, the Federal Open Market Committee of the Federal Reserve, and the Blue Chip
panel of private sector forecasters.

• The

fourth section discusses the sensitivity of the
Administration’s projections of Federal receipts and
outlays to fluctuations in the main macroeconomic
variables discussed in the forecast.

• The

fifth section considers the errors and possible
biases2 in past Administration forecasts, comparing them with the errors in forecasts produced by
the Congressional Budget Office, and the Blue Chip
panel of private professional forecasters. The sixth
section uses information on past accuracy of Administration forecasts to provide a sense of the uncertainty associated with the Administration’s current
forecast of the budget balance.
Recent Economic Performance3

The U.S. economy continued to exhibit robust growth
in the fourth quarter of 2017, growing at 2.6 percent after having grown 3.1 and 3.2 percent in the second and
third quarter, respectively. The first quarter had lackluster growth at 1.2 percent. For the four quarters ending
December 2017, real Gross Domestic Product (GDP)
growth averaged 2.5 percent. In contrast, during the four
quarters of 2016, real GDP grew by 1.8 percent. This
came on the heels of real GDP growing at 2.0 percent
during 2015, and an average growth rate of 2.1 percent
(fourth quarter-on-fourth quarter) since 2010. Among
the demand components of GDP, real consumer spending has accounted for 76 percent of the demand growth in
2017, with consumption of nondurables and services contributing 54 percent and consumption of durable goods
contributing the remaining 22 percent. Gross private
domestic investment contributed 22 percent to real GDP
growth, government consumption and gross investment
have been slightly positive and net exports have made a
negative contribution of 3 percent to real GDP growth.
On the supply side, weak labor productivity growth limited overall growth during 2017, as it has over the past
several years. Over the four quarters through 2017Q4,
nonfarm productivity increased at 1.1 percent compared
to 0.8 percent a year ago. Productivity growth has been
relatively sluggish since the end of 2007, increasing by
1.2 percent at an annual rate; over the past two years,
through 2017Q4, labor productivity (output per hour) in
2   As discussed later in this chapter, “bias” here is defined in the statistical sense and refers to whether previous Administrations’ forecasts
have tended to make positive or negative forecast errors on average.
3   The statistics in this section are based on information available in
late January 2018.

9

10
the nonfarm business sector has increased just 1.0 percent at an annual rate. These rates are notably slower
than the rate of 2.6 percent annual rate observed over the
period from 1994Q4 through 2007Q4 and the long run average of 2.1 percent during the post-World War II period
from 1947 to 2016.
Labor Markets.—Labor markets continued to improve
in 2017 across a broad array of metrics. The unemployment rate continued to decline, falling from 5.0 percent
at the end of 2015 to 4.7 percent at the end of 2016, and
further to 4.1 percent in January of 2018, the lowest level
since December 2000, and well below the long-term average of 5.8 percent. During the 12 months of 2017, the
labor force participation rate averaged 62.8 percent, up
from 62.7 percent in 2015 but about the same as in 2016.
Although the participation rate has stabilized somewhat
following a steep decline since 2000, demographic forces
are expected to exert continued downward pressure as
the baby boom generation continues retiring in large
numbers. The proportion of the labor force employed
part-time for economic reasons has fallen to 3.1 percent
in December 2017, well below its peak of over 6.0 percent
during the Great Recession. Furthermore, the proportion
of the labor force unemployed for longer than 27 weeks
has fallen to 0.9 percent from a peak of nearly 4.4 percent.
In spite of these improvements, several metrics suggest that the labor market has not regained the ground it
had lost. Compared with the last business cycle peak at
the end of 2007, the proportion of the labor force working
part-time for economic reasons and the proportion unemployed for more than 27 weeks are still elevated, as are
the shares of the working-age population only marginally
attached to the labor force or too discouraged to look for
work. The aging of the baby boom cohorts into retirement
does not explain the drop in the labor force participation
rates for prime-age men and women (age 25-54). From
2007 to 2017, the participation rate for prime-age men
(aged 20-54) fell 2.2 percentage points from 2007 to 2017,
while the rate for prime-age women fell 0.4 percentage
point. Real average hourly wages for production and nonsupervisory workers have grown only 0.7 percent at an
annual rate during the 10 years since 2007. In December
2017, the employment-to-population ratio for Americans
aged between 25 and 54 years old was still 0.6 percentage point below where it was at the start of the “Great
Recession.”
Housing.—The effect of the housing market on the
broader economy was mixed in 2017. House prices, as
measured by the Federal Housing Finance Agency’s
(FHFA) purchase-only index, were 6.5 percent higher in
November 2017 than in November 2016. Higher house
prices help fortify household balance sheets and support
personal consumption expenditures. They also encourage
further activity in the housing sector, with sales volumes
rising for both new and existing homes. Despite the rising house prices, measures of new construction edged up
only slightly or were roughly flat. The number of housing
starts decreased from an annual rate of about 1.33 million
in October 2016 to 1.29 million in October 2017. Building
permits increased 2.4 percent over the same period. And

ANALYTICAL PERSPECTIVES

residential fixed investment increased 2.3 percent over
the four quarters ending in December 2017.
Some weaknesses still remain in the housing market, however. As of November 2017, while the FHFA
house-price index was about 13.1 percent higher than
its pre-crisis peak, the S&P-Case Shiller index was only
about 6 percent above its previous apex. Homeownership
rates steadily declined since the recession began and after matching the lowest rate on record in the middle of
2016, started edging up in 2017.
Consumption.—Consumer spending was a primary
driver of demand growth in 2017, growing by 2.8 percent
over the four quarters ending December 2017. At close
to 70 percent of the economy, consumption is essential to
overall growth. Consumption growth was spread over a
number of different categories, including motor vehicles
and parts (4.5 percent), furnishings and household equipment (9.5 percent), recreational goods and vehicles (9.3
percent), food and beverages (3.0 percent), medical care
(2.6 percent), and financial services and insurance (3.4
percent).
Investment.—For the four quarters ending in
December 2017, growth in nonresidential fixed investment was strong, coming in at 6.3 percent relative to 0.7
percent during the year-earlier period. Equipment spending was up 8.8 percent, spending on structures was up 3.7
percent, and spending on intellectual property products
increased 4.8 percent. Growth in overall private fixed
investment (residential and nonresidential) was 5.4 percent compared with virtually zero growth over the four
quarters ending December 2016, and 2.4 percent the year
prior.
Government.—Overall demand growth by the government sector has been 0.7 percent over the four quarters
ending in December 2017. State and local spending grew
0.5 percent, while Federal purchases were up 1.1 percent.
The Federal deficit as a percentage of GDP increased to
3.5 percent in fiscal year 2017 from 3.2 percent in fiscal
year 2016. While increasing deficits might be expected to
lead to higher interest rates and subsequent crowding out
of private investment, the low interest rate environment
in recent years has mitigated this potentially negative
force.
Monetary Policy.—After holding the nominal Federal
funds rate near zero for seven years, the Federal Open
Market Committee of the Federal Reserve raised the target range for the Federal funds rate by 25 basis points
at the end of 2015. After a moderate pause, the Federal
Reserve continued the normalization of monetary policy,
with a 25 basis point increase in each meeting held in
December 2016, March 2017, June 2017, and December
2017. In its December policy statement, the FOMC
characterized as “solid” the job gains and the rising rate
of economic activity with expectations for continued
strengthening of labor markets, as well as rates of inflation around the 2.0 percent target in the medium term.
The yield on the 10-year Treasury note has also increased
recently, from an average of 1.6 percent in the third quarter of 2016 to an average of 2.4 percent during the fourth
quarter of 2017.

11

2. Economic Assumptions and Interactions with the Budget

Oil and Natural Gas Supply.—After reaching a
post-financial crisis peak above $100 per barrel, crude oil
prices began to tumble in mid-2014. They continued to
fall in 2015 and bottomed out around $30 in early 2016.
Prices have since rebounded, rising above the $50 mark
in late 2016 where they have stayed in the latter half of
2017. Higher oil prices act as a kind of tax on consumers’ purchasing power, so their net decline from $100 per
barrel in early 2014 to above $50 per barrel raised disposable incomes, which has supported consumer spending.
With new technology such as hydraulic fracturing, U.S. oil
producers have emerged as important swing producers in

global oil markets, helping to lower prices and moderate
price fluctuations. Domestic production of crude oil for
the year ending September 2017 averaged about 9.0 million barrels per day (mbd), up from 8.9 mbd in calendar
year 2016 and 7.5 mbd in calendar year 2013, although
down from 9.4 million barrels per day in 2015 (calendar
year). The decline from 2015 likely reflects the decline
in oil prices. Production of natural gas has averaged
about 89.2 billion cubic feet per day in the year ending
September 2017, down 0.6 percent from year-earlier production levels, but 13.4 percent higher than in the year
ending September 2013.

Table 2–1. ECONOMIC ASSUMPTIONS 1
(Calendar Years, Dollar Amounts in Billions)
Actual
2016

Projections
2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

18,624
16,716

19,372
17,090

20,262
17,601

21,263
18,157

22,345
18,727

23,482
19,296

24,672
19,875

25,923
20,471

27,234
21,085

28,598
21,705

30,001
22,320

31,461
22,945

32,991
23,588

111.4

113.4

115.1

117.1

119.3

121.7

124.1

126.6

129.2

131.8

134.4

137.1

139.9

Percent Change, Fourth Quarter over Fourth
Quarter:
Current Dollars ��������������������������������������������������
Real, Chained (2009) Dollars ����������������������������
Chained Price Index (2009=100) �����������������������

3.4
1.8
1.5

4.1
2.5
1.6

4.7
3.1
1.6

5.1
3.2
1.8

5.1
3.1
1.9

5.1
3.0
2.0

5.1
3.0
2.0

5.1
3.0
2.0

5.1
3.0
2.0

5.0
2.9
2.0

4.9
2.8
2.0

4.9
2.8
2.0

4.9
2.8
2.0

Percent Change, Year over Year:
Current Dollars ��������������������������������������������������
Real, Chained (2009) Dollars ����������������������������
Chained Price Index (2009=100) �����������������������

2.8
1.5
1.3

4.0
2.2
1.7

4.6
3.0
1.6

4.9
3.2
1.7

5.1
3.1
1.9

5.1
3.0
2.0

5.1
3.0
2.0

5.1
3.0
2.0

5.1
3.0
2.0

5.0
2.9
2.0

4.9
2.8
2.0

4.9
2.8
2.0

4.9
2.8
2.0

Incomes, Billions of Current Dollars:
Domestic Corporate Profits �������������������������������������
Employee Compensation ����������������������������������������
Wages and Salaries ������������������������������������������������
Other Taxable Income 2 �������������������������������������������

1,679
9,979
8,085
4,427

1,753
10,320
8,365
4,576

1,893
10,750
8,713
4,793

1,985
11,225
9,094
5,068

2,050
11,774
9,550
5,386

2,060
12,408
10,058
5,704

2,047
13,104
10,620
6,053

2,035
13,843
11,217
6,398

2,043
14,622
11,844
6,738

2,048
15,438
12,506
7,072

2,041
16,291
13,195
7,360

2,049
17,160
13,902
7,683

2,046
18,092
14,642
7,943

240.0

245.1

250.2

255.1

260.7

266.7

272.7

278.9

285.2

291.7

298.3

305.1

312.0

1.8
1.3

2.1
2.1

1.9
2.1

2.0
2.0

2.3
2.2

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

Unemployment Rate, Civilian, Percent:
Fourth Quarter Level �����������������������������������������������
Annual Average �������������������������������������������������������

4.7
4.9

4.1
4.4

3.8
3.9

3.7
3.7

3.8
3.8

3.9
3.9

4.1
4.0

4.2
4.2

4.4
4.3

4.5
4.5

4.8
4.7

4.8
4.8

4.8
4.8

Federal Pay Raises, January, Percent:
Military 4 �������������������������������������������������������������������
Civillian 5 ������������������������������������������������������������������

1.3
1.3

2.1
2.1

2.4
1.9

2.6
0.0

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

2.9
3.6

2.9
3.6

2.9
3.6

2.9
3.6

Gross Domestic Product (GDP):
Levels, Dollar Amounts in Billions:
Current Dollars ��������������������������������������������������
Real, Chained (2009) Dollars ����������������������������
Chained Price Index (2009=100), Annual
Average ��������������������������������������������������������

Consumer Price Index (All Urban): 3
Level (1982–1984 = 100), Annual Average �������������
Percent Change, Fourth Quarter over Fourth
Quarter ���������������������������������������������������������������
Percent Change, Year over Year ������������������������������

Interest Rates, Percent:
91-Day Treasury Bills 6 ��������������������������������������������
0.3
0.9
1.5
2.3
2.9
3.0
3.0
2.9
2.9
10-Year Treasury Notes �������������������������������������������
1.8
2.3
2.6
3.1
3.4
3.6
3.7
3.7
3.6
N/A=Not Available
1 Based on information available as of mid-November 2017.
2 Rent, interest, dividend, and proprietors’ income components of personal income.
3 Seasonally adjusted CPI for all urban consumers.
4 Percentages apply to basic pay only; percentages to be proposed for years after 2019 have not yet been determined.
5 Overall average increase, including locality pay adjustments. Percentages to be proposed for years after 2019 have not yet been determined.
6 Average rate, secondary market (bank discount basis).
* 0.05 percent or less.

12

ANALYTICAL PERSPECTIVES

External Sector.—Real exports grew 4.9 percent over
the last four quarters ending in December 2017, while
real imports grew 4.6 percent. Net exports made less of
a negative contribution to real GDP growth in 2017 than
in 2016. Worldwide, 2017 is projected to have been a better year for economic growth than 2016. According to the
International Monetary Fund’s World Economic Outlook,
October 2017, the advanced economies were poised to
grow by 2.2 percent (year over year) in 2017 versus 1.7
percent in 2016. The emerging and developing economies were expected to collectively grow by 4.6 percent in
2017 versus 4.3 percent in 2016.4 Many large emerging
market countries (with the exception of India) have experienced lower growth rates, relative to the past, in recent
years, while Brazil and Russia went through recessions in
2015-16. These developments, as well as a strengthening
dollar, have contributed to the soft performance of U.S. exports. Looking ahead, the faster global growth expected
by the IMF and other forecasters, and better trade agreements will support U.S. export performance.
Economic Projections
The Administration’s economic forecast is based on
information available as of mid-November 2017. The
forecast informs the Fiscal Year 2019 Budget and rests on
the central assumption that all of the President’s policy
proposals will be enacted. The Administration’s projections are reported in Table 2-1 and summarized below.
Real GDP.—In mid-November, when the forecast was
finalized, the Administration projected that real GDP
growth would average 2.5 percent during the four quarters of 2017. It appears that 2017 growth was in line with
expectations. The pace of growth is projected to increase
to 3.1 percent over the four quarters of 2018. The enactment of tax reform and the Administration’s additional
policies for cutting regulation, building infrastructure,
reforming health care, and boosting domestic energy production are expected to improve the supply side of the
U.S. economy to allow these growth rates. As for demand,
lower taxes and an expected pick up in global growth in
2017 and 2018 should bolster demand for American goods
and services.5
Medium and Long-Run Growth.—In the medium
term the rate of real GDP growth is expected to remain
strong at 3.0 percent as the effects of growth-enhancing
4   Besides the U.S.A. the other advanced economies are: Australia,
Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hong Kong SAR, Iceland, Ireland,
Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Macao SAR,
Malta, Netherlands, New Zealand, Norway, Portugal, Puerto Rico, San
Marino, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, Province of China, and the United Kingdom.
5 For estimates on productivity enhancing and economic growth effects of tax and regulation policies, see: The Growth Effects of Corporate Tax Reform and Implications for Wages, The Council of Economic
Advisers October 2017, https://www.whitehouse.gov/sites/whitehouse.
gov/files/images/Corporate%20Tax%20Reform%20and%20Growth%20
Final.pdf; The Growth Potential of Deregulation, The Council of Economic Advisers October 2, 2017,https://www.whitehouse.gov/sites/
whitehouse.gov/files/documents/The%20Growth%20Potential%20
of%20Deregulation_1.pdf

policies play out in terms of an increasing capital stock
per employed worker and consequently higher labor
productivity growth. As the economy settles into a new
steady state with higher capital stock per worker, the annual rate of real GDP growth is expected to edge down
to a pace of 2.8 percent by 2026. While expected GDP
growth of 2.8 percent per year at the end of the forecast is
below the average growth rate seen in the post-World War
II period, it is consistent with present-day and expected
demographic trends for the U.S.
Unemployment.—As of January 2018, the unemployment rate stood at 4.1 percent. The Administration
expects the unemployment rate to decrease as a result
of increasing business investment and higher real GDP
growth, reaching a low of 3.7 percent in 2019. After that,
the forecast assumes that it will rise back toward 4.8
percent, a rate roughly consistent with stable inflation.
Theory suggests that when the unemployment rate is at
this rate, pressures on inflation are broadly in balance, so
that inflation neither creeps up nor down.
Interest Rates.—As growth increases, the Administration expects that interest rates will begin to rise to
values more consistent with historical experience. The
rate on the 91-day Treasury bill is expected to increase
from 0.9 percent in 2017 to 3.0 percent in 2021 and then
taper down to 2.9 percent in the last 6 years of the forecast window. The interest rate on the 10-year Treasury
note is expected to rise in a similar fashion, from 2.3 percent in 2017 to 3.6 percent in the long run. Economic
theory suggests that real GDP growth rates and interest
rates are positively correlated, so interest rates are expected to be propelled higher by the stronger growth that
the Administration anticipates.
Inflation.—Since the onset of the financial crisis,
inflation, whether measured by the GDP price index,
the Consumer Price Index (CPI), or the price index for
Personal Consumption Expenditures (PCE), has been
subdued compared with the post-World War II average.
This observation holds even when looking at the “core”
indexes that exclude volatile food and energy prices. The
Administration expects CPI inflation to rise 1.9 percent
in 2018 (on a fourth quarter-over-fourth quarter basis),
before rising to 2.3 percent in the long run. The GDP
price index is forecast to rise by 1.6 percent in 2018 (on
a fourth-quarter-over-fourth-quarter basis) and, with
stronger aggregate demand for goods and labor, rise by
2021 to 2.0 percent where it is expected to stay through
the longer term.
Changes in Economic Assumptions from Last
Year’s Budget.—Table 2-2 compares the Administration’s
forecast for the FY 2019 Budget with that from the FY
2018 Budget. Compared with the previous forecast, the
Administration expects output growth to rise earlier
before edging down to growth of 2.8 percent annually
whereas the previous forecast expected growth to rise
more gradually and stabilize at a slightly higher growth
path of 3.0 percent annually. In 2027, both forecasts
predict similar levels of nominal and real GDP. Both
forecasts are predicated on the implementation of the
Administration’s policies designed to boost productivity

13

2. Economic Assumptions and Interactions with the Budget

Table 2–2. COMPARISON OF ECONOMIC ASSUMPTIONS IN THE 2018 AND 2019 BUDGETS
(Calendar Years, Dollar Amounts in Billions)
2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Nominal GDP:
2018 Budget Assumptions 1 �����������������������������������������������
2019 Budget Assumptions �������������������������������������������������

19,419
19,372

20,291
20,262

21,253
21,263

22,313
22,345

23,442
23,482

24,628
24,672

25,874
25,923

27,183
27,234

28,558
28,598

30,003
30,001

31,522
31,461

Real GDP (2009 Dollars):
2018 Budget Assumptions 1 �����������������������������������������������
2019 Budget Assumptions �������������������������������������������������

17,093
17,090

17,508
17,601

17,978
18,157

18,504
18,727

19,059
19,296

19,631
19,875

20,220
20,471

20,826
21,085

21,451
21,705

22,095
22,320

22,758
22,945

Real GDP (Percent Change): 2
2018 Budget Assumptions 1 �����������������������������������������������
2019 Budget Assumptions �������������������������������������������������

2.3
2.2

2.4
3.0

2.7
3.2

2.9
3.1

3.0
3.0

3.0
3.0

3.0
3.0

3.0
3.0

3.0
2.9

3.0
2.8

3.0
2.8

GDP Price Index (Percent Change): 2
2018 Budget Assumptions 1 �����������������������������������������������
2019 Budget Assumptions �������������������������������������������������

1.9
1.7

2.0
1.6

2.0
1.7

2.0
1.9

2.0
2.0

2.0
2.0

2.0
2.0

2.0
2.0

2.0
2.0

2.0
2.0

2.0
2.0

Consumer Price Index (All-Urban; Percent Change): 2
2018 Budget Assumptions �������������������������������������������������
2019 Budget Assumptions �������������������������������������������������

2.6
2.1

2.3
2.1

2.3
2.0

2.3
2.2

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

2.3
2.3

Civilian Unemployment Rate (Percent): 3
2018 Budget Assumptions �������������������������������������������������
2019 Budget Assumptions �������������������������������������������������

4.6
4.4

4.4
3.9

4.6
3.7

4.7
3.8

4.8
3.9

4.8
4.0

4.8
4.2

4.8
4.3

4.8
4.5

4.8
4.7

4.8
4.8

91-Day Treasury Bill Rate (Percent): 3
2018 Budget Assumptions �������������������������������������������������
2019 Budget Assumptions �������������������������������������������������

0.8
0.9

1.5
1.5

2.1
2.3

2.6
2.9

2.9
3.0

3.0
3.0

3.0
2.9

3.1
2.9

3.1
2.9

3.1
2.9

3.1
2.9

2.7
2.3

3.3
2.6

3.4
3.1

3.8
3.4

3.8
3.6

3.8
3.7

3.8
3.7

3.8
3.6

3.8
3.6

3.8
3.6

3.8
3.6

10-Year Treasury Note Rate (Percent): 3
2018 Budget Assumptions �������������������������������������������������
2019 Budget Assumptions �������������������������������������������������
1 Adjusted for July 2017 NIPA Revisions
2 Calendar Year over Calendar Year
3 Calendar Year Average

and labor force participation. These include deregulation,
tax reform, an improved fiscal outlook, and inducements
for infrastructure investment, which should boost investment and bolster the incentives to work and save. The
Administration’s expectations for inflation differ little
from the previous forecast, except for lower CPI inflation
in the near term in light of the fact that price pressures
in the economy have been remarkably contained despite
falling unemployment and higher economic growth.
The forecast for the unemployment rate is also broadly
similar, although the 2019 Budget projections have the
unemployment rate dropping to a trough of 3.7 percent,
lower than was previously expected, but the unemployment rate in both projections gradually edges up to 4.8
percent, the rate at which inflation pressures are broadly balanced in the long term. On the 91-day Treasury
bill rate, the 2019 Budget expects it to rise more rapidly
in the near term before settling at a steady state rate.
The steady-state Treasury bill rate in the latter half of
the forecast window is expected to be below that of the
2018 Budget. The yield on the 10-year Treasury note
is lower at all points of the forecast horizon relative to
the 2018 Budget. This lowering of the yield, relative to
the 2018 Budget projection in the near term, is largely
driven by lower long-term interest rates observed in the
recent data. Over the medium term, the yield rises rap-

idly to levels consistent with the steady state annual
GDP growth projection of 2.8 percent in contrast to the
3.0 percent growth forecast in the 2018 Budget.
Comparison with Other Forecasts
For some additional perspective on the Administration’s
forecast, this section compares it with forecasts prepared
by the Congressional Budget Office (CBO), the Federal
Open Market Committee of the Federal Reserve (FOMC),
and the Blue Chip panel of private-sector forecasters.
There are some important differences to bear in mind
when making such a comparison.
The most important difference between these forecasts is that they make different assumptions about the
implementation of the Administration’s policies. As already noted, the Administration’s forecast assumes full
implementation of these proposals. At the opposite end of
the spectrum, CBO produces a forecast that assumes no
changes to current law. It is not clear to what extent the
FOMC participants and the Blue Chip panel incorporate
policy implementation in their respective outlooks. The
Blue Chip panel, in particular, compiles a large number
of private-sector forecasts, which are marked by considerable heterogeneity across individual forecasters and their
policy expectations.

14

ANALYTICAL PERSPECTIVES

Table 2–3. COMPARISON OF ECONOMIC ASSUMPTIONS
(Calendar Years)
2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Nominal GDP:
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������

19,372
19,310
19,351

20,262
20,118
20,105

21,263
20,847
20,950

22,345
21,566
21,830

23,482
22,378
22,725

24,672
23,262
23,657

25,923
24,186
24,626

27,234
25,150
25,661

28,598
26,150
26,739

30,001
27,191
27,862

31,461
28,273
29,032

32,991
N/A
30,251

Real GDP (Year-over-Year):
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������

2.2
2.1
2.2

3.0
2.2
2.4

3.2
1.7
2.1

3.1
1.4
2.1

3.0
1.7
2.0

3.0
1.9
2.0

3.0
1.9
2.1

3.0
1.9
2.1

2.9
1.9
2.1

2.8
1.9
2.1

2.8
1.9
2.1

2.8
N/A
2.1

Real GDP (Fourth Quarter-over-Fourth Quarter):
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������
Federal Reserve Median Projection ���������������������

2.5
2.2
2.3
2.5

3.1
2.0
2.3
2.5

3.2
1.5
2.1
2.1

3.1
1.5
2.1
2

GDP Price Index: 1
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������

1.7
1.8
1.7

1.6
2.0
1.9

1.7
1.9
2.1

1.9
2.0
2.1

2.0
2.0
2.1

2.0
2.0
2.1

2.0
2.0
2.1

2.0
2.0
2.1

2.0
2.1
2.1

2.0
2.1
2.1

2.0
2.1
2.1

2.0
N/A
2.1

Consumer Price Index (CPI-U): 1
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������

2.1
2.3
2.1

2.1
2.2
1.9

2.0
2.3
2.3

2.2
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
2.4
2.3

2.3
N/A
2.3

Unemployment Rate: 2
2019 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������
Federal Reserve Median Projection 3 �������������������

4.4
4.4
4.4
4.1

3.9
4.2
4.1
3.9

3.7
4.4
4.2
3.9

3.8
4.7
4.3
4

0.9
0.9
0.9

1.5
1.5
1.7

2.3
2.2
2.4

2.9
2.6
2.7

3.0
3.0
3.0
3.0
2.9
2.8
2.8
2.8
1.8
1.9
1.9
1.9
1.9
1.9
1.9
N/A
2.0
2.0
2.1
2.1
2.1
2.1
2.1
2.1
----------------------------------------------1.8 longer run----------------------------------------------

3.9
4.0
4.2
4.3
4.5
4.7
4.8
4.8
4.9
5.0
4.9
4.9
4.9
4.9
4.9
N/A
4.4
4.5
4.5
4.6
4.6
4.6
4.6
4.6
----------------------------------------------4.6 longer run----------------------------------------------

Interest Rates: 2
91-Day Treasury Bills (discount basis):
2019 Budget ���������������������������������������������������
CBO ����������������������������������������������������������������
Blue Chip ��������������������������������������������������������

3.0
2.8
2.8

3.0
2.8
2.8

2.9
2.8
2.8

2.9
2.8
2.8

2.9
2.8
2.9

2.9
2.8
2.9

2.9
2.8
2.9

10-Year Treasury Notes:
2019 Budget ���������������������������������������������������
2.3
2.6
3.1
3.4
3.6
3.7
3.7
3.6
3.6
3.6
3.6
CBO ����������������������������������������������������������������
2.4
2.8
3.2
3.5
3.6
3.7
3.7
3.7
3.7
3.7
3.7
Blue Chip ��������������������������������������������������������
2.3
2.8
3.4
3.5
3.5
3.6
3.6
3.7
3.7
3.7
3.7
Sources: Administration; CBO, An Update to the Budget and Economic Outlook: 2017 to 2027, June 2017; October 2017 Blue Chip Economic Indicators, Aspen Publishers, Inc.;
Federal Reserve Open Market Committee, December 13, 2017
N/A=Number is not available.
1 Year-over-Year Percent Change
2 Annual Averages, Percent
3 Median of Fourth Quarter Values

A second difference is the publication dates of the
various forecasts. While the forecast put out by the
Administration is based on actual data available in midNovember, the Blue Chip long-term forecast is based
on their October Survey, the FOMC projections were
released on December 13, and the CBO forecast was published much earlier, in June of 2017.
In spite of these differences, the forecasts share several
attributes. All of them project a further short-run decline
in unemployment, followed by a rise back toward a rate
consistent with stable inflation. They all forecast a rise
in inflation, followed by a stable path at its long-run rate.

2.9
N/A
2.9
3.6
N/A
3.7

Finally, they all foresee a gradual rise in interest rates
over the course of the forecast horizon. What separates
the Administration’s forecast from those of the other bodies is their respective views on real output growth.
Real GDP.—The Administration forecasts a higher
path for real GDP growth compared with the CBO, FOMC,
and Blue Chip forecasts throughout the forecast period after 2017. After 2017, the Administration’s forecast diverges
from the other forecasts, with a growth rate 0.6 percentage
point faster than the next fastest in 2018 and 0.7 percentage point faster than the others at the end of the forecast
window. This reflects the Administration’s expectation

15

2. Economic Assumptions and Interactions with the Budget

Table 2–4. SENSITIVITY OF THE BUDGET TO ECONOMIC ASSUMPTIONS
(Fiscal Years; In Billions Of Dollars)
Budget Effect

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Total of Budget
Effects: 20182028

Real Growth and Employment:
Budgetary effects of 1 percent lower real GDP growth:
(1) For calendar year 2018 only, with real GDP recovery in
2018–2019: 1
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

–16.1
8.4
24.5

–25.5
18.9
44.4

–13.1
9.2
22.3

–2.1
3.0
5.1

0.2
2.8
2.6

0.2
2.8
2.6

0.2
2.7
2.6

0.2
2.8
2.6

0.2
2.8
2.6

0.2
2.9
2.7

0.2
2.9
2.8

–55.7
59.1
114.7

(2) For calendar year 2018 only, with no subsequent
recovery: 1
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

–16.1
8.4
24.5

–33.7
23.0
56.6

–39.4
23.8
63.2

–41.7
25.3
67.0

–43.7
27.2
70.9

–46.0
29.0
75.0

–48.3
31.0
79.3

–50.8
33.2
83.9

–53.6
35.3
88.9

–56.3
37.4
93.7

–58.9
40.5
99.4

–488.3
314.1
802.4

(3) Sustained during 2018–2028, with no change in
unemployment:
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

–16.1
0.0
16.1

–50.0
0.5
50.6

–91.3 –137.5 –187.1 –241.6 –300.8 –364.7 –436.3 –511.3 –590.3
2.4
5.5
9.4
14.2
20.0
27.2
35.6
45.2
56.6
93.7 143.0 196.4 255.8 320.9 391.9 471.9 556.6 646.9

–2,927.2
216.6
3,143.7

Budgetary effects of 1 percentage point higher rate of:
(4) Inflation and interest rates during calendar year 2018
only:
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

17.2
25.6
8.4

33.9
50.0
16.1

36.4
45.7
9.4

37.1
45.2
8.1

39.0
45.0
6.0

41.0
44.8
3.8

43.1
43.0
–0.1

45.2
44.1
–1.1

47.7
43.3
–4.4

50.1
45.1
–5.0

52.4
47.0
–5.4

443.0
478.8
35.8

(5) Inflation and interest rates, sustained during
2018–2028:
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

17.2
23.7
6.5

51.7
73.3
21.6

91.0
120.9
29.9

134.2
170.6
36.4

181.8
225.9
44.1

234.3
279.9
45.6

292.1
332.7
40.6

355.2
395.3
40.1

426.6
456.5
29.9

502.3
522.8
20.5

583.3
601.8
18.5

2,869.7
3,203.4
333.7

1.1
11.5
10.4

2.5
38.1
35.6

3.1
62.0
58.9

3.5
83.9
80.4

3.8
105.2
101.5

4.0
126.1
122.1

4.3
143.9
139.6

4.6
160.4
155.8

4.9
175.0
170.1

5.2
189.7
184.6

5.4
204.1
198.7

42.4
1,299.8
1,257.5

16.0
12.2
–3.9

49.1
35.1
–13.9

87.8
58.8
–29.0

130.7
86.7
–44.0

177.9
120.8
–57.1

230.0
154.0
–76.0

287.5 350.3 421.3 496.7 577.4
189.2 235.5 282.2 334.1 398.9
–98.3 –114.8 –139.1 –162.6 –178.5

2,824.6
1,907.5
–917.1

Inflation and Interest Rates:

(6) Interest rates only, sustained during 2018–2028:
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������
(7) Inflation only, sustained during 2018–2028:
Receipts ��������������������������������������������������������������������������������
Outlays ���������������������������������������������������������������������������������
Decrease in deficit (–) ������������������������������������������������������

Interest Cost of Higher Federal Borrowing:
(8) Outlay effect of 100 billion increase in borrowing in
2018 ��������������������������������������������������������������������������������������
0.7
2.1
3.0
3.4
3.5
3.5
1 The unemployment rate is assumed to be 0.5 percentage point higher per 1 percent shortfall in the level of real GDP.

of full implementation of its policy proposals, while other
forecasters are unlikely to be operating under the same assumption. The CBO in particular is constrained to assume
a continuation of current law in its forecast, which in the
case of its June 2017 forecast was prepared prior to the
enactment of the Tax Cuts and Jobs Act.
Unemployment.—On the unemployment rate,
the Administration’s expectations are largely aligned
with those of the other forecasters. Along with the
Administration, all forecasters expect further declines
in unemployment in 2018. After 2018 other forecasters
expect the unemployment rate to rise gradually while

3.6

3.7

3.8

3.9

4.1

35.3

the Administration believes that because of its policies
there is more room for the economy to grow and for the
unemployment rate to decrease. After 2019, all forecasters project a gradual uptick in the unemployment rate to
their respective estimates of the long-term rate (4.8 percent for the Administration, 4.9 percent for the CBO, and
4.6 percent for the FOMC and the Blue Chip panel).
Interest Rates.—There are not significant differences in the outlooks for interest rates. For both short- and
long-term rates, all forecasters agree that they will tend
to gradually rise, the Treasury bill rate is expected to rise
to a steady-state level of around 2.9 percent and the 10-

16

ANALYTICAL PERSPECTIVES

Table 2–5. FORECAST ERRORS, JANUARY 1982–PRESENT
REAL GDP ERRORS
Administration
2-Year Average Annual Real GDP Growth
Mean Error ���������������������������������������������������������������������������������������������������������������������
0.2
Mean Absolute Error ������������������������������������������������������������������������������������������������������
1.2
Root Mean Square Error �����������������������������������������������������������������������������������������������
1.5
6-Year Average Annual Real GDP Growth
Mean Error ���������������������������������������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������������������������������������

CBO
Blue Chip
–0.1
–0.1
1.0
1.1
1.3
1.4

0.4
1.1
1.3

0.1
1.0
1.2

0.1
0.9
1.1

0.3
0.7
0.9

Blue Chip
0.4
0.7
0.8

0.5
0.8
1.0

0.7
0.9
1.0

0.5
0.9
1.3

Blue Chip
0.6
1.0
1.2

1.4
1.5
1.8

1.5
1.6
1.9

INFLATION ERRORS
2-Year Average Annual Change in the GDP Price Index
Administration
Mean Error ���������������������������������������������������������������������������������������������������������������������
0.3
Mean Absolute Error ������������������������������������������������������������������������������������������������������
0.7
Root Mean Square Error �����������������������������������������������������������������������������������������������
0.9
6-Year Average Annual Change in the GDP Index
Mean Error ���������������������������������������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������������������������������������

CBO

0.4
0.6
0.8

INTEREST RATE ERRORS
2-Year Average 91-Day Treasury Bill Rate
Administration
Mean Error ���������������������������������������������������������������������������������������������������������������������
0.3
Mean Absolute Error ������������������������������������������������������������������������������������������������������
1.0
Root Mean Square Error �����������������������������������������������������������������������������������������������
1.2
6-Year Average 91-Day Treasury Bill Rate
Mean Error ���������������������������������������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������������������������������������

year Treasury note yield is expected to lie between 3.6
percent and 3.7 percent.
Inflation.—Expectations for inflation are similar
across the Administration, the CBO, and the Blue Chip.
The CBO expects a CPI inflation rate of 2.4 percent in the
long run, while the Administration and the Blue Chip expect a 2.3 percent long run rate. For the GDP price index,
the three forecasts also exhibit little disagreement, other
than a marginally higher long-run rate from the Blue
Chip panel and CBO.
Sensitivity of the Budget to Economic Assumptions
Federal spending and tax collections are heavily influenced by developments in the economy. Tax receipts are
a function of growth in incomes for households and firms.
Spending on social assistance programs may rise when
the economy enters a downturn, while increases in spending on Social Security and other programs are dependent
on consumer price inflation. A robust set of projections
for macroeconomic variables assists in budget planning,
but unexpected developments in the economy have ripple
effects for Federal spending and revenues. This section
seeks to provide an understanding of the magnitude of

0.9
1.4
1.7

CBO

the effects that unforeseen changes in the economy can
have on the budget.
To make these assessments, the Administration relies
on a set of rules of thumb that can predict how certain
spending and revenue categories will react to a change in
a given subset of macroeconomic variables, holding almost
everything else constant. These rules of thumb provide a
sense of the broad changes one would expect after a given
development, but they cannot anticipate how policy makers would react and potentially change course in such an
event. For example, if the economy were to suffer an unexpected recession, the rules of thumb suggest that tax
revenues would decline and that spending on programs
such as unemployment insurance would go up. In such a
situation, however, policy makers might cut tax rates to
stimulate the economy, and such behavior would not be
accounted for by the historical relationships captured by
these rules of thumb.
Another caveat is that it is often unrealistic to suppose
that one macroeconomic variable might change while
others would remain constant. Most macroeconomic
variables interact with each other in complex and subtle
ways. These are important considerations to bear in mind
when examining Table 2-4.

17

2. Economic Assumptions and Interactions with the Budget

Table 2–6. DIFFERENCES BETWEEN ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS
FOR FIVE-YEAR BUDGET ESTIMATES SINCE 1986 (AS A PERCENT OF GDP)
Estimate for Budget Year Plus:
Current Year
Estimate

Budget Year
Estimate

One Year
(BY + 1)

Two Years
(BY + 2)

Three Years
(BY + 3)

Four Years
(BY + 4)

Average Difference 1 ����������������������������������������������������������������
–0.8
0.2
1.1
1.7
2.1
2.5
Average Absolute Difference 2 �������������������������������������������������
1.1
1.4
2.2
2.8
3.4
3.7
Standard Deviation ������������������������������������������������������������������
1.0
2.0
2.8
3.3
3.5
3.5
Root Mean Squared Error �������������������������������������������������������
1.3
2.0
3.0
3.7
4.0
4.2
1 A positive number represents an overestimate of the surplus or an underestimate of the deficit. A negative number represents an overestimate of the deficit or an underestimate of
the surplus.
2 Average absolute difference is the difference without regard to sign

For real growth and employment:
• The first panel in the table illustrates the effect on
the deficit resulting from a one percentage point
reduction in real GDP growth, relative to the Administration’s forecast, in 2018 that is followed by
a subsequent recovery in 2019 and 2020. The unemployment rate is assumed to be half a percentage
point higher in 2018 before returning to the baseline level in 2019 and 2020. The table shows that
receipts would temporarily be somewhat lower and
outlays would temporarily be higher. The long run
effect on the budget deficit would be an increase of
$114.7 billion over the eleven-year forecast horizon
due to lower receipts and higher interest payments
resulting from higher short-run deficits.

• The next panel in the table reports the effect of a re-

duction of one percentage point in real GDP growth
in 2018 that is not subsequently made up by faster
growth in 2019 and 2020. Consistent with this output path, the rate of unemployment is assumed to
rise by half a percentage point relative to that assumed in the Administration’s forecasts. Here, the
effect on the budget deficit is more substantial, as
receipts are lowered in every year of the forecast,
while outlays rise gradually over the forecast window. This is because unemployment will be higher,
leading to lower tax revenues and higher outlays on
unemployment insurance, as well as higher interest
payments that follow from increased short-run deficits.

• The

third panel in the table shows the impact of
a GDP growth rate that is permanently reduced
by one percentage point, while the unemployment
rate is not affected. This is the sort of situation that
would arise if, for example, the economy were hit by
a permanent decline in productivity growth. In this
case, the effect on the budget deficit is large, with
receipts being reduced substantially throughout the
forecast window and outlays rising due to higher
interest payments. The accumulated effect over the
eleven-year horizon is an additional $3.1 trillion of
deficits.

For inflation and interest rates:
• The fourth panel in Table 2-4 shows the effect on
the Budget in the case of a one percentage point
higher rate of inflation and a 1 percentage point
higher nominal interest rate in 2018. Both inflation
and interest rates return to their assumed levels
in 2019. This would result in a permanently higher
price level and nominal GDP over the course of the
forecast horizon. The effect on the Budget deficit
would be fairly modest, as receipts would increase
slightly less than outlays over the eleven years. This
is because revenues, interest payments, and nondiscretionary outlays rise with inflation while discretionary outlays are assumed fixed. Over the years
from 2018-2028, the budget deficit would increase by
about $36 billion.

• The fifth panel in the table illustrates the effects on

the budget deficit of an inflation rate and an interest rate one percentage point higher than projected
in every year of the forecast. The overall effect on the
deficit over the forecast is $334 billion accumulated
as both receipts, interest payments, and mandatory
outlays (on Social Security and Federal pensions rise
with inflation while discretionary outlays are presumed to be fixed. It is still important to note, however, that faster inflation implies that the real value
of Federal discretionary spending would be eroded.

• The next panel reports the effect on the deficit re-

sulting from an increase in interest rates in every
year of the forecast, with no accompanying increase
in inflation. The result is a much higher accumulated deficit, as the Federal Government would have
to make much higher interest payments on its debt.
Receipts would be slightly higher as households
would pay higher taxes on interest income.

• The seventh panel in the table reports the effect on

the budget deficit of an inflation rate one percentage
point higher than projected in every year of the forecast window, while the interest rate remains as forecast. In this case, the result is a much smaller deficit
over the eleven years of the forecast relative to the
baseline. Permanently higher inflation results in
much higher revenues over the next eleven years,
which helps to reduce interest payments on debt.

18

ANALYTICAL PERSPECTIVES

Outlays rise due to higher cost-of-living increases on
items such as Social Security, though not so much as
to offset the revenue increases.

• Finally, the table shows the effect on the budget defi-

cit if the Federal government were to borrow an additional $100 billion in 2018, while all of the other
projections remain constant. Outlays rise over the
forecast window by an accumulated $35 billion, due
to higher interest payments.

These simple approximations that inform the sensitivity analysis are symmetric. This means that the effect of,
for example, a one percentage point higher rate of growth
over the forecast horizon would be of the same magnitude
as a one percentage point reduction in growth, though
with the opposite sign.
Forecast Errors for Growth,
Inflation, and Interest Rates
As with any forecast, the Administration’s projections
will not be fully accurate. It is impossible to foresee every eventuality over a one–year horizon, much less ten or
more years. This section evaluates the historical accuracy of the forecasts of past Administrations for real GDP,
inflation, and short-term interest rates, especially as compared with the accuracy of forecasts produced by the CBO
or Blue Chip panel. For this exercise, forecasts produced
by all three entities going as far back as the Fiscal Year
1983 Budget are compared with realized values of these
important variables.
The results of this exercise are reported in Table 2-5
and contain three different measures of accuracy. The
first is the average forecast error. When a forecaster has
an average forecast error of zero, it may be said that the
forecast has historically been unbiased, in the sense that
realized values of the variables have not been systematically above or below the forecasted value. The second is
the average absolute value of the forecast error, which offers a sense of the magnitude of errors. Even if the past
forecast errors average to zero, the errors may have been
of a very large magnitude, with both positive and negative values. Finally, the table reports the square root of
the mean of squared forecast error (RMSE). This metric
applies an especially harsh penalty to forecasting systems
prone to large errors. The table reports these measures
of accuracy at both the 2-year and the 6-year horizons,
thus evaluating the relative success of different forecasts
in the short run and in the medium term.
For real GDP growth rates, at both the 2-year and
6-year horizons, the mean forecast error suggests that all
of the forecasts (Administration, the CBO, and the Blue
Chip panel) have been broadly unbiased, with small average errors close to zero. The mean absolute error and the
RMSE both suggest that the Administration’s past forecasts have tended to make slightly larger errors than the
others. This could be due to partial adoption of the various Administrations’ proposed policies in the past.
When it comes to inflation, there is more evidence of
some systematic bias in all three forecasts. The mean er-

rors at the 2- and 6-year horizons are all positive and larger
than the errors in projecting real GDP growth. This implies
that the Administration, the CBO, and the Blue Chip have
expected faster inflation than ultimately materialized. A
closer look at the data reveals that the errors were largest
in the 1980s, as the U.S. economy shifted from a period of
high inflation in the 1970s to a period of more moderate
price rises. The mean absolute error and the RMSE metrics imply that the errors in the Administration’s inflation
forecast have tended to be of equal or smaller magnitude
than those of the CBO or Blue Chip panel.
Finally, on interest rates, the story is similar to that for
inflation. All of the forecasts have historically projected
interest rates that were higher than what later occurred,
probably because they expected higher inflation as shown
above. Across the three forecasters, the Administration
has generally made errors of lesser magnitude than the
other two.
Uncertainty and the Deficit Projections
This section assesses the accuracy of past Budget forecasts for the deficit or surplus, measured at different time
horizons. The results of this exercise are reported in Table
2-6, where the average error, the average absolute error,
and the RMSE (as well as the standard deviation of the
forecast error) are reported.
In the table, a negative number means that the Federal
Government ran a greater surplus than was expected,
while a positive number in the table indicates a smaller
surplus or a larger deficit. In the current year in which
the Budget is published, the Administration has tended
to understate the surplus (or, equivalently, overstate the
deficit). For every year beyond the current year, however,
the historical pattern has been for the budget deficit to be
larger than the Administration expected. One possible
reason for this is that past Administrations’ policy proposals have not all been implemented. The forecast errors
tend to grow with the time horizon, which is not surprising given that there is much greater uncertainty in the
medium run about both the macroeconomic situation and
the specific details of policy enactments.
It is possible to construct a probabilistic range of outcomes for the deficit. This is accomplished by taking the
RMSE of previous forecast errors and assuming that
these errors are drawn from a normal distribution. This
exercise is undertaken at every forecast horizon from the
current year to five years down the road. Chart 2-1 displays the projected range of possible deficits. In the chart,
the middle line represents the Administration’s expected
budget balance and can be interpreted as the 50th percentile outcome. The rest of the lines in the chart may
be read in the following fashion. The top line reports the
95th percentile of the distribution of outcomes over 2018
to 2023, meaning that there is a 95 percent probability
that the actual balance in those years will be more negative than expressed by the line. Similarly, there is a 95
percent probability that the balance will be more positive
than suggested by the bottom line in the chart. In 2018,
there is a 95 percent chance of a budget deficit greater

19

2. Economic Assumptions and Interactions with the Budget

than 2.0 percent of GDP. By 2023, there is only a 5 percent chance of a budget deficit greater than 9.9 percent of

Percent of GDP

GDP. In addition, the chart reports that there is a significant probability of a budget surplus by 2023.

Chart 2-1. Range of Uncertainty
for the Budget Deficit

Percentiles:

6
95th

4

90th

2
0

75th

-2

Deficit
Forecast

-4
-6

25th

-8

10th

-10
-12

5th

2018

2019

2020

2021

2022

2023

3. LONG-TERM BUDGET OUTLOOK

The 2019 President’s Budget improves the Federal
Government’s long-term fiscal picture by promoting rapid
economic growth, responsibly controlling spending, and
increasing efficiencies Government-wide. This chapter
demonstrates the positive impact of the Administration’s
policies by comparing long-term budget forecasts under current policy (baseline projections) with forecasts
based on the 2019 Budget proposals (policy projections).
Baseline projections indicate that the deficit will continue
at elevated levels beyond the 10-year window and that
publicly held debt will continue to rise as a share of the
economy. Conversely, policy projections indicate that enacting the Budget’s proposed reforms could dramatically
reduce deficits and publicly held debt as a percentage of
GDP.
Chart 3-1 shows the path of debt as a percent of GDP
under continuation of current policy, without the proposed
changes in the President’s Budget, as well as the debt
trajectory under the President’s policies. Under current
policy, the ratio of debt to GDP will rise from 78.8 percent
in 2018 to 88.3 percent in 2028, an increase of about 9.5
percentage points over that period. In contrast, the debt
ratio is projected to be 72.6 percent in 2028 under the proposed policy changes. By the end of the 25-year horizon,
the difference in the debt burden—93.7 percent of GDP
under current policy compared to 39.2 percent of GDP under Budget policy—is even starker. The savings proposed
by the Administration from 2019-2028 are a significant
down payment towards reducing debt and reaching a balanced budget by 2039.

While the detailed estimates of receipts and outlays in
the President’s Budget extend only 10 years, this chapter presents the longer-term budget outlook, both under
a continuation of current policies and under the policies
proposed in the Budget. The projections in this chapter
are highly uncertain. Small changes in economic or other
assumptions can cause large differences to the results especially for projections over longer horizons.
The chapter is organized as follows:
• The first section details the assumptions used to
create the baseline projection and analyzes the
long-term implications of leaving current policies in
place. This forecast serves as a point of comparison
against the proposals in the 2019 Budget in the second section.

• The second section demonstrates how the Adminis-

tration’s policies will significantly alter the current
trajectory of the Federal budget by reducing deficits
and debt, and by balancing the budget by 2039 under
a long-term term extension of the Budget’s policies.

• The third section discusses alternative assumptions

about the evolution of key variables and uncertainties in the resulting projections.

• The

fourth section discusses the actuarial projections for Social Security and Medicare.

• The appendix provides further detail on data sources, assumptions, and other methods for estimation.

Chart 3-1. Comparison of Publicly Held Debt
Debt as a percent of GDP
120
100

Continuation of Current Policies

80
60
40

2019 Budget Policy

20
0

21

22

ANALYTICAL PERSPECTIVES

Long-Run Projections under
Continuation of Current Policies
For the 10-year budget window, the Administration produces both baseline projections, which show how deficits
and debt would evolve under current policies, and projections showing the impact of proposed policy changes. Like
the budget baseline more generally, long-term projections
should provide policymakers with information about the
Nation’s expected fiscal trajectory in the absence of spending and tax changes. For this reason, a set of economic
assumptions based in current law, including the projected
effects of the 2017 tax reform and excluding the growthincreasing effects of the Administration’s proposed fiscal
policies, underlie the baseline projections in this chapter.
Using the same set of economic assumptions for baseline
and policy projections would understate the severity of
the current-law fiscal problem and fail to illustrate the
full impact of the 2019 Budget policies.
The baseline long-term projections assume that current policy continues for Social Security, Medicare,
Medicaid, other mandatory programs, and revenues.1
For discretionary spending, it is less clear how to project a continuation of current policy. After the expiration
of the statutory caps in 2021, both the Administration’s
and CBO’s 10-year baselines assume that discretionary
funding levels generally grow slightly above the rate of
inflation (about 2.5 percent per year) per statutory baseline rules. Thereafter, the baseline long-run projections
assume that per-person discretionary funding remains
constant, which implies an annual nominal growth rate
of about 2.9 percent.
Over the next 10 years, debt in the baseline projection
rises from 78.8 percent of GDP in 2018 to 88.3 percent of
GDP in 2028. Beyond the 10-year horizon, debt continues
to increase, reaching 93.7 percent of GDP by 2043, the
end of the 25-year projection window. The key drivers of
that increase are an aging population and rapid health
care cost growth, which are only partly offset by growth
in Federal revenues and a decline in discretionary spending relative to GDP. Without policy changes, the public
debt will continue to grow, increasing the burden on future generations.
Aging Population.—Over the next 10 years, an aging
population will put significant pressure on the budget. In
2008, when the oldest members of the baby boom generation became eligible for early retirement under Social
Security, the ratio of workers to Social Security beneficiaries was 3.2. By the end of the 10-year budget window,
that ratio will fall to 2.3, and it will reach about 2.1 in the
mid-2030s, at which point most of the baby boomers will
have retired.
1    The long-run baseline projections are consistent with the Budget’s
baseline concept, which is explained in more detail in Chapter 22, “Current Services Estimates,” in this volume. The projections assume extension of the individual income tax and estate tax provisions of the Tax
Cuts and Jobs Act beyond their expiration in 2025, and also assume full
payment of scheduled Social Security and Medicare benefits without regard to the projected depletion of the trust funds for these programs. Additional baseline assumptions beyond the 10-year window are detailed
in the appendix to this chapter.

With fewer active workers paying taxes and more retired workers eligible for Social Security, Medicare, and
Medicaid (including long-term care), budgetary pressures will increase. Social Security program costs will
grow from 4.9 percent of GDP today to 5.6 percent of GDP
by 2043, with most of that growth occurring within the
10-year budget window. Likewise, even if per-beneficiary health care costs grew at the same rate as GDP per
capita, Medicare and Medicaid costs would still increase
substantially, as a percent of GDP, due solely to the aging
population.
Health Costs.—Health care costs per capita have risen much faster than per-capita GDP growth for decades,
thus requiring both public and private spending on health
care to increase as a share of the economy. While in recent years spending per enrollee has grown roughly in
line with, or more slowly than, per-capita GDP in both the
public and private sectors, this slower per-enrollee growth
is not projected to continue. Trends in per-enrollee costs,
together with the demographic trends discussed above,
are the primary drivers of long-term fiscal projections.
Based on projections of Medicare enrollment and expenditures included in the 2017 Medicare Trustees Report,
the projections here assume that Medicare per-beneficiary spending growth will increase, with the growth rate
averaging about 1.0 percentage points above the growth
rate of per-capita GDP over the next 25 years. (This average growth rate is still below the historical average for
the last 25 years.) Under these assumptions, Medicare
and Medicaid costs increase by a total of 2.5 percentage
points as a percent of GDP by 2043.
Revenues and Discretionary Spending.—Under
the 2017 tax reform law, receipts will grow slightly faster
than GDP over the long run. The increase in revenues as
a percent of GDP occurs primarily because individuals’
real, inflation-adjusted incomes grow over time, and so
a portion of their income falls into higher tax brackets.
(Bracket thresholds are indexed for inflation but do not
grow in real terms.) In addition, under baseline assumptions discretionary spending grows slower than GDP.
Both of these factors act to restrain deficits relative to
GDP, partially offsetting the pressure from increases in
spending for Social Security and health programs.
The Impact of 2019 Budget Policies on
the Long-Term Fiscal Outlook
To show the long-term effects of implementing new
policies, expenditures and revenues are extended through
the 25-year timeframe. The President’s 2019 Budget
proposals reduce deficits while continuing to invest in national security and other critical priorities that promote
economic growth by decreasing non-defense discretionary and mandatory spending over the next 10 years.
Beyond the 10-year window, most categories of mandatory spending grow at the same rates as under the baseline
projection, discretionary spending keeps up with inflation
and population, and revenues continue as a fixed percentage of GDP based on their level in 2028. Details about the
assumptions are available in the appendix.

23

3. Long-Term Budget Outlook

Chart 3-2. Comparison of Annual Surplus/Deficit
Surplus (+)/Deficit (-) as a percent of GDP
4
2

2019 Budget Policy

0
-2
-4
Continuation of Current Policies

-6
-8
-10
-12
2000

2010

2020

As shown in Chart 3-2, 2019 Budget policies reduce the
deficit to 1.4 percent of GDP by 2028 and ultimately lead
to a balanced budget by 2039. Over the decade and a half
after 2028, the debt-to-GDP ratio continues to decline. At
the end of the 25-year horizon, the debt ratio would be the
lowest since before 2008, representing significant progress in reducing the Federal debt burden.
One way to quantify the size of the Nation’s long-term
fiscal challenges is to determine the size of the increase
in taxes or reduction in non-interest spending needed
to reach a target debt-to-GDP ratio over a given period.
There is no one optimal debt ratio, but two illustrative
targets are keeping the debt ratio stable, and reaching the
average postwar debt ratio of 45 percent. Policy adjustments of about 0.7 percent of GDP to baseline projections
would be needed each year to keep the debt ratio stable at
79 percent. Alternatively, policy adjustments of about 2.2
percent of GDP would steer the debt ratio to the postwar
average by the end of the 25-year horizon. In comparison,
the President’s Budget policies are projected to decrease
the debt ratio within the 10-year window and reduce it by
nearly 40 percentage points by 2043, more than satisfying
the definition of fiscal sustainability.
The Budget achieves these fiscal goals through prioritizing expenditures that promote economic growth and
security while improving the efficiency of the Federal government. For example, the President’s Budget includes a
$200 billion initiative to improve the Nation’s crumbling
infrastructure and an increase of $65 billion to defense
spending for 2019 above the current discretionary caps.
Continuing reductions of regulatory burden will promote
job creation, and extending tax reform will allow families
to keep more of their earnings. In addition, the Budget
proposes streamlining Medicare to make it a better deal
for seniors and the Government. Eliminating fraud,

2030

2040

waste, and abuse from Medicare contributes to a lower
debt and deficit in the long run.
Table 3–1. 25-YEAR DEBT PROJECTIONS UNDER
ALTERNATIVE BUDGET SCENARIOS
(Percent of GDP)
2019 Budget Policy ����������������������������������������������������������������������������������������������

39.2

Health:
Excess cost growth averages 1.5% �����������������������������������������������������������������
Zero excess cost growth ����������������������������������������������������������������������������������

51.3
32.1

Discretionary Outlays:
Grow with inflation �������������������������������������������������������������������������������������������
Grow with GDP ������������������������������������������������������������������������������������������������

37.1
45.6

Revenues:
Revenues rise as as a share of GDP, with bracket creep ��������������������������������

32.7

Productivity and Interest: 1
Productivity grows by 0.25 percentage point per year faster than the base
case ������������������������������������������������������������������������������������������������������������
24.2
Productivity grows by 0.25 percentage point per year slower than the base
case ������������������������������������������������������������������������������������������������������������
56.1
1 Interest rates adjust commensurately with increases or decreases in productivity.

Uncertainty and Alternative Assumptions
Future budget outcomes depend on a host of unknowns:
changing economic conditions, unforeseen international
developments, unexpected demographic shifts, and unpredictable technological advances. The longer budget
projections are extended, the more the uncertainties
increase. These uncertainties make even accurate shortrun budget forecasting quite difficult. For example, the
Budget’s projection of the deficit in five years is 3.0 percent of GDP, but a distribution of probable outcomes
ranges from a deficit of 8.4 percent of GDP to a surplus

24

ANALYTICAL PERSPECTIVES

Chart 3-3. Alternative Productivity and
Interest Assumptions
Debt as a percent of GDP
90
80
70
60
50

2019 Budget Policy

40

Higher Productivity Growth

30

Lower Productivity Growth

20
10
0

of 2.4 percent of GDP, at the 10th and 90th percentiles,
respectively.
Productivity and Interest Rates.—The rate of
future productivity growth has a major effect on the longrun budget outlook (see Chart 3-3). Higher productivity
growth improves the budget outlook, because it adds directly to the growth of the major tax bases while having
a smaller effect on outlay growth. Productivity growth is
also highly uncertain. For much of the last century, output
per hour in nonfarm business grew at an average rate
of around 2.1 percent per year, but there were long periods of sustained productivity growth at notably higher
and lower rates than the long-term average. The base
case long-run projections assume that real GDP per hour
worked will grow at an average annual rate of 2.0 percent
per year and assume interest rates on 10-year Treasury
securities of 3.6 percent. The alternative scenarios il-

lustrate the effect of raising and lowering the projected
productivity growth rate by 0.25 percentage point and
changing interest rates commensurately. At the end of the
25-year horizon, the public debt ranges from 24.2 percent
of GDP in the high productivity scenario to 56.1 percent
of GDP in the low productivity scenario. This variation
highlights the importance of investment and smarter tax
policy, which can contribute to higher productivity.
Health Spending.—Health care cost growth represents another major source of uncertainty in the long-term
budget projections. As noted above, the baseline projections follow the Medicare Trustees in assuming that
Medicare per-beneficiary costs grow an average of about
1.0 percentage points faster than per-capita GDP growth
over the next 25 years. However, in the past, especially
prior to 1990, health care costs grew even more rapidly.
Over the last few years, per-enrollee health care costs

Chart 3-4. Alternative Health Care Costs
Debt as a percent of GDP
90
80
70
60
50
40
30
20
10
0

2019 Budget Policy
Zero Excess Growth Rate
Higher Average Excess Growth Rate

25

3. Long-Term Budget Outlook

Chart 3-5. Alternative Discretionary Assumptions
Debt as a percent of GDP
90
80
70
60
50
40

Discretionary Spending Grows
with Inflation Only

30

2019 Budget Policy

20

Discretionary Spending Grows
with GDP

10
0

have grown roughly in line with or more slowly than GDP
per capita, with particularly slow growth in Medicare and
Medicaid.
Chart 3-4 shows the large impacts that either slower or
faster health care cost growth would have on the budget.
If health care cost growth averaged 1.5 percentage points
faster than per-capita GDP growth, the debt ratio in 25
years would increase from 39.2 percent of GDP under the
base case Budget policy to 51.3 percent of GDP. If health
care costs grew with GDP per-capita, the debt ratio in 25
years would be 32.1 percent of GDP.
Policy Assumptions.—As evident from the discussion
of the 2019 Budget proposals, policy choices will also have
a large impact on long-term budget deficits and debt. The
base case policy projection for discretionary spending assumes that after 2028, discretionary spending grows with
inflation and population (see Chart 3-5). Alternative assumptions are to grow discretionary spending with GDP
or inflation only. At the end of the 25-year horizon, the
debt ratio ranges from 37.1 percent of GDP if discretion-

ary spending grows with inflation only to 39.2 percent of
GDP in the base case and 45.6 percent of GDP if discretionary spending grows with GDP.
In the base case policy projection, tax receipts remain a
constant percent of GDP after the budget window. Chart
3-6 shows an alternative receipts assumption. Without
changes in law, revenues would gradually increase with
rising real incomes adding to budget surpluses that can
further improve the debt outlook. At the end of the 25year horizon, the debt ratio falls from 39.2 percent of GDP
in the base case to 32.7 percent of GDP in the alternative
case where tax brackets are not regularly increased after
2028.
Finally, Chart 3-7 shows how uncertainties compound
over the forecast horizon. As the chart shows, under the
base case Budget policy projections, debt declines to 39.2
percent of GDP. Alternatively, assuming a combination
of slower productivity growth and higher health care
cost growth results in less debt reduction, with the debt
ratio reaching 69.0 percent by the end of the window.

Chart 3-6. Alternative Revenue Assumptions
Debt as a percent of GDP
90
80
70

2019 Budget Policy

60
50
40
30
20
10
0

Revenues Rise as a share of GDP,
with Bracket Creep

26

ANALYTICAL PERSPECTIVES

Chart 3-7. Long-Term Uncertainties
Debt as a percent of GDP
90
80
70
60
50
40
30
20

2019 Budget Policy
Pessimistic
Optimistic

10
0

Meanwhile, assuming a combination of higher productivity growth and slower health care cost growth results in
the debt ratio reaching 17.5 percent in 2043.
Despite considerable uncertainties, long-term projections are helpful in highlighting some of the budget
challenges on the horizon, especially the impact of an
aging population. In addition, the wide range of the projections highlight the need for policy awareness of key
drivers of future budgetary costs and potential action to
address them.
Actuarial Projections for Social
Security and Medicare
While the Administration’s long-run projections focus on the unified budget outlook, Social Security and
Medicare Hospital Insurance benefits are paid out of
trust funds financed by dedicated payroll tax revenues.
Projected trust fund revenues fall short of the levels necessary to finance projected benefits over the next 75 years.
The Social Security and Medicare Trustees’ reports
feature the actuarial balance of the trust funds as a summary measure of their financial status. For each trust
fund, the balance is calculated as the change in receipts
or program benefits (expressed as a percentage of taxable
payroll) that would be needed to preserve a small positive
balance in the trust fund at the end of a specified time period. The estimates cover periods ranging in length from
25 to 75 years.
Under the Medicare Modernization Act (MMA) of 2003,
the Medicare Trustees must issue a “warning” when
two consecutive Trustees’ reports project that the share
of Medicare funded by general revenues will exceed 45
percent in the current year or any of the subsequent six
years. The 2017 Trustees’ Report made a determination of
excess revenues, but did not issue a warning since no such
determination was made in the 2016 Trustees’ Report.
The MMA requires that, if there is a Medicare funding
warning, the President submit proposed legislation responding to that warning, within 15 days of submitting

the Budget. In accordance with the Recommendations
Clause of the Constitution and as the Executive Branch
has noted in prior years, the Executive Branch considers a
requirement to propose specific legislation to be advisory.
Table 3-2 shows the projected income rate, cost rate,
and annual balance for the Medicare HI and combined
OASDI trust funds at selected dates under the Trustees’
intermediate assumptions in the 2017 reports. There is a
continued imbalance in the long-run projections of the HI
program due to demographic trends and continued high
per-person costs. The HI trust fund is projected to become
insolvent in 2029.
As a result of reforms legislated in 1983, Social Security
had been running a cash surplus with taxes exceeding
costs up until 2009. This surplus in the Social Security
trust fund helped to hold down the unified budget deficit.
The cash surplus ended in 2009, when the trust fund began using a portion of its interest earnings to cover benefit
payments. The 2017 Social Security Trustees’ report projects that the trust fund will not return to cash surplus,
but the program will continue to experience an overall
surplus for a few more years because of the interest earnings. After that, however, Social Security will begin to
draw on its trust fund balances to cover current expenditures. Over time, as the ratio of workers to retirees falls,
costs are projected to rise further while revenues excluding interest are projected to rise slightly. In the process,
the Social Security trust fund, which was built up since
1983, would be drawn down and eventually be exhausted
in 2034. These projections assume that benefits would
continue to be paid in full despite the projected exhaustion of the trust fund to show the long-run implications
of current benefit formulas. Under current law, not all
scheduled benefits could be paid after the trust funds are
exhausted. However, benefits could still be partially funded from current revenues. According to the 2017 Trustees’
report, beginning in 2034, 77 percent of projected Social
Security scheduled benefits would be funded. This percentage would eventually decline to 73 percent by 2091.

27

3. Long-Term Budget Outlook

Table 3–2. INTERMEDIATE ACTUARIAL PROJECTIONS FOR
OASDI AND HI, 2017 TRUSTEES’ REPORTS
2015

2020

2030

2040

2080

3.8
4.7
–0.9
50 years
–0.6

4.3
5.0
–0.7
75 years
–0.6

13.3
17.0
–3.7
50 years
–2.4

13.3
17.5
–4.2
75 years
–2.8

Percent of Payroll
Medicare Hospital Insurance (HI):
Income Rate ��������������������������������������������������������������������������������
Cost Rate �������������������������������������������������������������������������������������
Annual Balance ���������������������������������������������������������������������
Projection Interval ������������������������������������������������������������������������
Actuarial Balance ������������������������������������������������������������������

3.4
3.4
–0.1

3.4
3.4
*

3.6
4.2
–0.5
25 years
–0.5

Percent of Payroll
Old Age Survivors and Disability Insurance (OASDI):
Income Rate ��������������������������������������������������������������������������������
Cost Rate �������������������������������������������������������������������������������������
Annual Balance ���������������������������������������������������������������������
Projection Interval ������������������������������������������������������������������������
Actuarial Balance ������������������������������������������������������������������
* 0.05 percent or less.

12.8
13.9
–1.1

13.0
13.9
–0.9

13.2
16.3
–3.1
25 years
–1.7

TECHNICAL NOTE: SOURCES OF DATA AND METHODS OF ESTIMATING
The long-run budget projections are based on actuarial
projections for Social Security and Medicare as well as demographic and economic assumptions. A simplified model
of the Federal budget, developed at OMB, is used to compute the budgetary implications of these assumptions.
Demographic and Economic Assumptions.—For
the years 2018-2028, the assumptions are drawn from the
Administration’s economic projections used for the 2019
Budget. The economic assumptions are extended beyond
this interval by holding the inflation rate, interest rates,
and the unemployment rate constant at the levels assumed
in the final year (2028) of the budget forecast. Population
growth and labor force growth are extended using the intermediate assumptions from the 2017 Social Security
Trustees’ report. The projected rate of growth for real GDP
is built up from the labor force assumptions and an assumed rate of productivity growth. Productivity growth,
measured as real GDP per hour, is assumed to equal its
average annual rate of growth in the Budget’s economic assumptions—2.3 percent per year. For the baseline
projections, GDP growth is adjusted to remove the growthincreasing effects of the Administration’s fiscal policies.
Under Budget policies, the CPI inflation rate is held
constant at 2.3 percent per year, the unemployment rate
is held constant at 4.8 percent, the yield to maturity on
10-year Treasury notes is constant at 3.6 percent, and the
91-day Treasury bill rate is kept at 2.9 percent. Consistent
with the demographic assumptions in the Trustees’ reports, U.S. population growth slows from an average of
0.8 percent per year during the budget window to about
three-quarters of that rate by 2035, and slower rates of
growth beyond that point. By the end of the 25-year projection period total population growth is slightly above 0.5
percent per year. Real GDP growth is projected to be less
than its historical average of around 3.3 percent per year
because the slowdown in population growth and the in-

crease in the population over age 65 reduce labor supply
growth. In these projections, real GDP growth averages
between 2.7 percent and 2.8 percent per year for the period following the end of the 10-year budget window.
The economic and demographic projections described
above are set exogenously and do not change in response
to changes in the budget outlook. This makes it easier to
interpret the comparisons of alternative policies.
Budget Projections.—For the period through 2028,
receipts and outlays in the baseline and policy projections
follow the 2019 Budget’s baseline and policy estimates
respectively. Under Budget policies, total tax receipts
are constant relative to GDP after 2028. Discretionary
spending grows at the rate of growth in inflation and
population outside the budget window. Long-run Social
Security spending is projected by the Social Security
actuaries using this chapter’s long-run economic and demographic assumptions. Medicare benefits are projected
based on a projection of beneficiary growth and excess
health care cost growth from the 2017 Medicare Trustees’
report current law baseline. For the policy projections,
these assumptions are adjusted based on the Budget
proposal to streamline Medicare. Medicaid outlays are
based on the economic and demographic projections2 in
the model, which assume average excess cost growth of
approximately 1.0 percentage point above growth in GDP
per capita after 2028. For the policy projections, these assumptions are adjusted based on the Budget proposals
to reform Medicaid funding. Other entitlement programs
are projected based on rules of thumb linking program
spending to elements of the economic and demographic
projections such as the poverty rate.
2 The Medicaid per capita projections assumed in this chapter contain a higher degree of uncertainty than they have in past years. This is
due to ongoing system changes that have resulted in complete Medicaid
claims and enrollment data being unavailable for the most recent several years.

4. FEDERAL BORROWING AND DEBT

Debt is the largest legally and contractually binding
obligation of the Federal Government. At the end of 2017,
the Government owed $14,665 billion of principal to the
individuals and institutions who had loaned it the money
to fund past deficits. During that year, the Government
paid the public approximately $310 billion of interest on
this debt. At the same time, the Government also held financial assets, net of financial liabilities other than debt,
of $1,515 billion. Therefore, debt held by the public net of
financial assets was $13,151 billion.
In addition, at the end of 2017 the Treasury had issued $5,540 billion of debt to Government accounts. As a
result, gross Federal debt, which is the sum of debt held
by the public and debt held by Government accounts, was
$20,206 billion. Interest on the gross Federal debt was
$457 billion in 2017. Gross Federal debt is discussed in
more detail later in the chapter.
The $14,665 billion debt held by the public at the end of
2017 represents an increase of $498 billion over the level
at the end of 2016. This increase is the result of the $665
billion deficit in 2017 and other financing transactions
that reduced the need to borrow by $168 billion. Debt
held by the public fell from 76.7 percent of Gross Domestic
Product (GDP) at the end of 2016 to 76.5 percent of GDP
at the end of 2017. The deficit is estimated to increase to
$833 billion, or 4.2 percent of GDP, in 2018, and to $984
billion, or 4.7 percent of GDP, in 2019. After 2019, the deficit is projected to begin to decrease as a percent of GDP,
falling to 1.4 percent of GDP by 2027. Debt held by the
public is projected to grow to 78.8 percent of GDP at the
end of 2018 and 80.3 percent of GDP at the end of 2019.
Debt held by the public as a percent of GDP is projected
to begin to decline in 2023, falling to 72.6 percent of GDP
in 2028. Debt held by the public net of financial assets is
expected to similarly grow to 69.8 percent of GDP at the
end of 2018 and to 71.3 at the end of 2019, then to begin
to decline in 2023, falling to 64.9 percent of GDP at the
end of 2028.
Trends in Debt Since World War II
Table 4–1 depicts trends in Federal debt held by the
public from World War II to the present and estimates
from the present through 2028. (It is supplemented for
earlier years by Tables 7.1–7.3 in the Budget’s historical tables, available as supplemental budget material.1)
Federal debt peaked at 106.1 percent of GDP in 1946, just
after the end of the war. From that point until the 1970s,
Federal debt as a percentage of GDP decreased almost every year because of relatively small deficits, an expanding
economy, and unanticipated inflation. With households
borrowing large amounts to buy homes and consumer

durables, and with businesses borrowing large amounts
to buy plant and equipment, Federal debt also decreased
almost every year as a percentage of total credit market
debt outstanding. The cumulative effect was impressive.
From 1950 to 1975, debt held by the public declined from
78.5 percent of GDP to 24.5 percent, and from 53.3 percent of credit market debt to 17.9 percent. Despite rising
interest rates, interest outlays became a smaller share of
the budget and were roughly stable as a percentage of
GDP.
Federal debt relative to GDP is a function of the Nation’s
fiscal policy as well as overall economic conditions. During
the 1970s, large budget deficits emerged as spending grew
faster than receipts and as the economy was disrupted by
oil shocks and rising inflation. The nominal amount of
Federal debt more than doubled, and Federal debt relative to GDP and credit market debt stopped declining for
several years in the middle of the decade. Federal debt
started growing again at the beginning of the 1980s, and
increased to almost 48 percent of GDP by 1993. The ratio
of Federal debt to credit market debt also rose during this
period, though to a lesser extent. Interest outlays on debt
held by the public, calculated as a percentage of either
total Federal outlays or GDP, increased as well.
The growth of Federal debt held by the public was
slowing by the mid-1990s. In addition to a growing economy, three major budget agreements were enacted in the
1990s, implementing spending cuts and revenue increases and significantly reducing deficits. The debt declined
markedly relative to both GDP and total credit market
debt, with the decline accelerating as budget surpluses
emerged from 1997 to 2001. Debt fell from 47.8 percent
of GDP in 1993 to 31.4 percent of GDP in 2001. Over that
same period, debt fell from 26.3 percent of total credit
market debt to 17.4 percent. Interest as a share of outlays peaked at 16.5 percent in 1989 and then fell to 8.9
percent by 2002; interest as a percentage of GDP fell by a
similar proportion.
The progress in reducing the debt burden stopped and
then reversed course beginning in 2002. A decline in the
stock market, a recession, the attacks of September 11,
2001, and two major wars, and other policy changes all
contributed to increasing deficits, causing debt to rise, both
in nominal terms and as a percentage of GDP. Following
the most recent recession, which began in December 2007,
the deficit began increasing rapidly in 2008 and 2009, as
the Government acted to rescue several major corporations and financial institutions as well as enact a major
stimulus bill. Since 2008, debt as a percent of GDP has
grown rapidly, increasing from 35.2 percent at the end of
2007 to 76.7 percent at the end of 2016. In 2017, debt as
a percent of GDP fell to 76.5 percent.

1 The historical tables are available at https://www.whitehouse.gov/
omb/historical-tables/ and on the Budget CD-ROM.

29

30

ANALYTICAL PERSPECTIVES

Under the proposals in the Budget, the deficit is
projected to grow to $833 billion in 2018. The deficit is
projected to stabilize in nominal terms in 2020 and then
begin to decrease in subsequent years, falling to $445 billion, or 1.4 percent of GDP, in 2028. Gross Federal debt
is projected to grow to 107.2 percent of GDP in 2018 and
then begin to fall after 2020, to 91.8 percent of GDP in
2028. Debt held by the public as a percent of GDP is es-

timated to be 78.8 percent at the end of 2018, to continue
to grow gradually through 2022, and then to begin to decline, falling to 72.6 percent of GDP by 2028. Debt held
by the public net of financial assets as a percent of GDP is
estimated to similarly grow to 69.8 percent of GDP at the
end of 2018, grow gradually through 2022, and then begin
to fall, reaching 64.9 percent of GDP by the end of 2028.

Table 4–1. TRENDS IN FEDERAL DEBT HELD BY THE PUBLIC AND INTEREST ON THE DEBT HELD BY THE PUBLIC
(Dollar amounts in billions)

Fiscal Year

Debt held by the public
Current
dollars

FY 2017
dollars 1

Debt held by the public as a Interest on the debt held by the Interest on the debt held by the
percent of
public 3
public as a percent of 3
Credit market
debt 2

GDP

Current
dollars

FY 2017
dollars 1

Total
outlays

GDP

1946 ������������������������������������������������������������������������������

241.9

2,492.6

106.1

N/A

4.2

43.1

7.6

1.8

1950 ������������������������������������������������������������������������������
1955 ������������������������������������������������������������������������������

219.0
226.6

1,826.1
1,660.5

78.5
55.7

53.3
42.1

4.8
5.2

40.4
38.0

11.4
7.6

1.7
1.3

1960 ������������������������������������������������������������������������������
1965 ������������������������������������������������������������������������������

236.8
260.8

1,537.6
1,585.7

44.3
36.7

33.1
26.4

7.8
9.6

50.8
58.2

8.5
8.1

1.5
1.3

1970 ������������������������������������������������������������������������������
1975 ������������������������������������������������������������������������������

283.2
394.7

1,434.8
1,473.8

27.0
24.5

20.3
17.9

15.4
25.0

77.9
93.4

7.9
7.5

1.5
1.6

1980 ������������������������������������������������������������������������������
1985 ������������������������������������������������������������������������������

711.9
1,507.3

1,850.0
2,989.5

25.5
35.3

18.5
22.2

62.8
152.9

163.1
303.3

10.6
16.2

2.2
3.6

1990 ������������������������������������������������������������������������������
1995 ������������������������������������������������������������������������������

2,411.6
3,604.4

4,112.4
5,424.2

40.8
47.5

22.5
26.3

202.4
239.2

345.1
360.0

16.2
15.8

3.4
3.2

2000 ������������������������������������������������������������������������������
2005 ������������������������������������������������������������������������������

3,409.8
4,592.2

4,730.3
5,683.6

33.6
35.6

18.8
17.1

232.8
191.4

323.0
236.8

13.0
7.7

2.3
1.5

2010 ������������������������������������������������������������������������������
2011 ������������������������������������������������������������������������������
2012 ������������������������������������������������������������������������������
2013 ������������������������������������������������������������������������������
2014 ������������������������������������������������������������������������������

9,018.9
10,128.2
11,281.1
11,982.7
12,779.9

10,103.9
11,120.9
12,163.7
12,705.5
13,309.0

60.9
65.9
70.4
72.6
74.1

25.2
27.5
29.4
30.1
30.8

228.2
266.0
232.1
259.0
271.4

255.6
292.0
250.2
274.6
282.7

6.6
7.4
6.6
7.5
7.7

1.5
1.7
1.4
1.6
1.6

2015 ������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������
2018 estimate ����������������������������������������������������������������
2019 estimate ����������������������������������������������������������������

13,116.7
14,167.6
14,665.5
15,789.7
16,871.7

13,497.0
14,411.2
14,665.5
15,546.5
16,338.7

72.9
76.7
76.5
78.8
80.3

30.6
31.4
31.3
N/A
N/A

260.6
283.8
309.9
360.4
415.2

268.2
288.7
309.9
354.9
402.1

7.1
7.4
7.8
8.6
9.4

1.4
1.5
1.6
1.8
2.0

2020 estimate ����������������������������������������������������������������
2021 estimate ����������������������������������������������������������������
2022 estimate ����������������������������������������������������������������
2023 estimate ����������������������������������������������������������������
2024 estimate ����������������������������������������������������������������

17,946.8
18,950.5
19,946.3
20,808.6
21,495.3

17,063.7
17,669.3
18,232.1
18,644.9
18,882.7

81.3
81.7
81.9
81.3
79.9

N/A
N/A
N/A
N/A
N/A

498.6
566.8
627.5
681.5
724.4

474.0
528.5
573.6
610.6
636.4

10.8
11.9
12.6
13.2
13.7

2.3
2.4
2.6
2.7
2.7

2025 estimate ����������������������������������������������������������������
22,137.0
19,063.5
78.4
N/A
757.2
652.1
13.7
2.7
2026 estimate ����������������������������������������������������������������
22,703.3
19,165.6
76.6
N/A
784.9
662.6
13.7
2.6
2027 estimate ����������������������������������������������������������������
23,194.0
19,194.0
74.6
N/A
813.1
672.9
13.7
2.6
2028 estimate ����������������������������������������������������������������
23,683.6
19,213.3
72.6
N/A
835.8
678.1
13.3
2.6
N/A = Not available.
1 Amounts in current dollars deflated by the GDP chain-type price index with fiscal year 2017 equal to 100.
2 Total credit market debt owed by domestic nonfinancial sectors. Financial sectors are omitted to avoid double counting, since financial intermediaries borrow in the credit market
primarily in order to finance lending in the credit market. Source: Federal Reserve Board flow of funds accounts. Projections are not available.
3 Interest on debt held by the public is estimated as the interest on Treasury debt securities less the “interest received by trust funds” (subfunction 901 less subfunctions 902 and 903).
The estimate of interest on debt held by the public does not include the comparatively small amount of interest paid on agency debt or the offsets for interest on Treasury debt received
by other Government accounts (revolving funds and special funds).

4. Federal Borrowing and Debt

Debt Held by the Public and Gross Federal Debt
The Federal Government issues debt securities for two
main purposes. First, it borrows from the public to provide
for the Federal Government’s financing needs, including
both the deficit and the other transactions requiring financing, most notably disbursements for direct student
loans and other Federal credit programs.2 Second, it issues debt to Federal Government accounts, primarily trust
funds, that accumulate surpluses. By law, trust fund surpluses must generally be invested in Federal securities.
The gross Federal debt is defined to consist of both the
debt held by the public and the debt held by Government
accounts. Nearly all the Federal debt has been issued by
the Treasury and is sometimes called “public debt,’’ but a
small portion has been issued by other Government agencies and is called “agency debt.’’3
Borrowing from the public, whether by the Treasury
or by some other Federal agency, is important because
it represents the Federal demand on credit markets.
Regardless of whether the proceeds are used for tangible or intangible investments or to finance current
consumption, the Federal demand on credit markets has
to be financed out of the saving of households and businesses, the State and local sector, or the rest of the world.
Federal borrowing thereby competes with the borrowing
of other sectors of the domestic or international economy
for financial resources in the credit market. Borrowing
from the public thus affects the size and composition of
assets held by the private sector and the amount of saving imported from abroad. It also increases the amount
of future resources required to pay interest to the public
on Federal debt. Borrowing from the public is therefore
an important concern of Federal fiscal policy. Borrowing
from the public, however, is an incomplete measure of
the Federal impact on credit markets. Different types of
Federal activities can affect the credit markets in different ways. For example, under its direct loan programs,
the Government uses borrowed funds to acquire financial
assets that might otherwise require financing in the credit markets directly. (For more information on other ways
in which Federal activities impact the credit market, see
the discussion at the end of this chapter.) By incorporating the change in direct loan and other financial assets,
debt held by the public net of financial assets adds useful
insight into the Government’s financial condition.
Issuing debt securities to Government accounts
performs an essential function in accounting for the operation of these funds. The balances of debt represent
the cumulative surpluses of these funds due to the excess
2 For the purposes of the Budget, “debt held by the public” is defined
as debt held by investors outside of the Federal Government, both domestic and foreign, including U.S. State and local governments and foreign governments. It also includes debt held by the Federal Reserve.
3 The term “agency debt’’ is defined more narrowly in the budget than
customarily in the securities market, where it includes not only the debt
of the Federal agencies listed in Table 4–4, but also certain Governmentguaranteed securities and the debt of the Government-sponsored enterprises listed in Table 19–7 in the supplemental materials to the “Credit
and Insurance” chapter. (Table 19–7 is available on the Internet at:
https://www.whitehouse.gov/omb/analytical-perspectives and on the
Budget CD-ROM.)

31
of their tax receipts, interest receipts, and other collections over their spending. The interest on the debt that
is credited to these funds accounts for the fact that some
earmarked taxes and user fees will be spent at a later
time than when the funds receive the monies. The debt
securities are assets of those funds but are a liability of
the general fund to the funds that hold the securities, and
are a mechanism for crediting interest to those funds on
their recorded balances. These balances generally provide
the fund with authority to draw upon the U.S. Treasury
in later years to make future payments on its behalf to
the public. Public policy may result in the Government’s
running surpluses and accumulating debt in trust funds
and other Government accounts in anticipation of future
spending.
However, issuing debt to Government accounts does not
have any of the credit market effects of borrowing from the
public. It is an internal transaction of the Government,
made between two accounts that are both within the
Government itself. Issuing debt to a Government account
is not a current transaction of the Government with the
public; it is not financed by private saving and does not
compete with the private sector for available funds in the
credit market. While such issuance provides the account
with assets—a binding claim against the Treasury—
those assets are fully offset by the increased liability of
the Treasury to pay the claims, which will ultimately be
covered by the collection of revenues or by borrowing.
Similarly, the current interest earned by the Government
account on its Treasury securities does not need to be financed by other resources.
Furthermore, the debt held by Government accounts
does not represent the estimated amount of the account’s
obligations or responsibilities to make future payments
to the public. For example, if the account records the
transactions of a social insurance program, the debt that
it holds does not necessarily represent the actuarial present value of estimated future benefits (or future benefits
less taxes) for the current participants in the program;
nor does it necessarily represent the actuarial present
value of estimated future benefits (or future benefits less
taxes) for the current participants plus the estimated
future participants over some stated time period. The
future transactions of Federal social insurance and employee retirement programs, which own 90 percent of the
debt held by Government accounts, are important in their
own right and need to be analyzed separately. This can be
done through information published in the actuarial and
financial reports for these programs.4
This Budget uses a variety of information sources to
analyze the condition of Social Security and Medicare, the
Government’s two largest social insurance programs. The
excess of future Social Security and Medicare benefits rel4  Extensive actuarial analyses of the Social Security and Medicare
programs are published in the annual reports of the boards of trustees
of these funds. The actuarial estimates for Social Security, Medicare, and
the major Federal employee retirement programs are summarized in
the Financial Report of the United States Government, prepared annually by the Department of the Treasury in coordination with the Office of
Management and Budget, and presented in more detail in the financial
statements of the agencies administering those programs.

32

ANALYTICAL PERSPECTIVES

Table 4–2. FEDERAL GOVERNMENT FINANCING AND DEBT
(In billions of dollars)
Actual
2017
Financing:
Unified budget deficit ���������������������������������������������������������������
Other transactions affecting borrowing from the public:
Changes in financial assets and liabilities: 1
Change in Treasury operating cash balance �����������������
Net disbursements of credit financing accounts:
Direct loan accounts ������������������������������������������������
Guaranteed loan accounts ��������������������������������������
Troubled Asset Relief Program equity purchase
accounts �������������������������������������������������������������
Subtotal, net disbursements ��������������������������
Net purchases of non-Federal securities by the National
Railroad Retirement Investment Trust �������������������������
Net change in other financial assets and liabilities 2 �����������
Subtotal, changes in financial assets and liabilities ���
Seigniorage on coins ���������������������������������������������������������
Total, other transactions affecting borrowing from the
public ������������������������������������������������������������������������
Total, requirement to borrow from the public
(equals change in debt held by the public) �����
Changes in Debt Subject to Statutory Limitation:
Change in debt held by the public �������������������������������������������
Change in debt held by Government accounts �����������������������
Less: change in debt not subject to limit and other
adjustments ������������������������������������������������������������������������
Total, change in debt subject to statutory limitation �����������
Debt Subject to Statutory Limitation, End of Year:
Debt issued by Treasury ����������������������������������������������������������
Less: Treasury debt not subject to limitation (–) 3 ��������������������
Agency debt subject to limitation ���������������������������������������������
Adjustment for discount and premium 4 �����������������������������������
Total, debt subject to statutory limitation 5 �������������������������

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

665.4

832.6

984.4

986.9

915.9

907.8

778.5

612.1

579.2

517.4

449.7

445.0

–194.0

190.7

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

54.7
–13.7

101.0
0.9

93.9
5.1

86.9
2.7

87.0
2.1

89.6
–0.1

87.0
–2.0

79.6
–3.8

69.0
–5.4

59.0
–9.1

49.9
–8.1

45.7
–0.5

–0.3
40.7

–0.1
101.8

–*
99.0

–*
89.6

–*
89.2

–*
89.5

–*
85.0

.........
75.8

.........
63.6

.........
49.9

.........
41.8

.........
45.2

1.2
–15.2
–167.3
–0.2

–0.5
.........
292.0
–0.4

–1.0
.........
97.9
–0.4

–1.1
.........
88.5
–0.4

–1.0
.........
88.2
–0.4

–1.1
.........
88.4
–0.4

–0.7
.........
84.3
–0.4

–0.8
.........
75.0
–0.4

–0.7
.........
62.9
–0.4

–0.6
.........
49.3
–0.4

–0.3
.........
41.5
–0.4

–0.1
.........
45.1
–0.4

–167.5

291.6

97.6

88.1

87.8

88.0

83.9

74.6

62.5

48.9

41.0

44.6

497.8 1,124.3 1,082.0 1,075.1 1,003.7

995.8

862.4

686.7

641.7

566.3

490.7

489.6

497.8 1,124.3 1,082.0 1,075.1 1,003.7
168.4
148.3
142.6
123.0
115.6

995.8
65.0

862.4
88.8

686.7
119.4

641.7
56.0

566.3
52.6

490.7
–54.8

489.6
–138.4

3.9
1.5
2.2
2.8
2.0
2.0
670.2 1,274.0 1,226.8 1,200.9 1,121.3 1,062.8

2.1
953.2

2.2
808.3

1.4
699.1

1.5
620.3

1.9
437.9

1.8
353.0

20,179.5 21,452.4 22,677.7 23,877.0 24,997.1 26,058.6 27,010.6 27,818.0 28,517.1 29,137.1 29,574.2 29,926.4
–11.9
–10.8
–9.3
–7.7
–6.5
–5.3
–4.1
–3.2
–3.2
–2.8
–2.0
–1.1
*
*
*
*
*
*
*
*
*
*
*
*
41.1
41.1
41.1
41.1
41.1
41.1
41.1
41.1
41.1
41.1
41.1
41.1
20,208.6 21,482.6 22,709.4 23,910.3 25,031.6 26,094.4 27,047.6 27,855.9 28,555.0 29,175.3 29,613.2 29,966.3

Debt Outstanding, End of Year:
Gross Federal debt: 6
Debt issued by Treasury ����������������������������������������������������
Debt issued by other agencies ������������������������������������������
Total, gross Federal debt �����������������������������������������������
As a percent of GDP ������������������������������������������������

20,179.5 21,452.4 22,677.7 23,877.0 24,997.1 26,058.6 27,010.6 27,818.0 28,517.1 29,137.1 29,574.2 29,926.4
26.2
25.8
25.1
23.9
23.1
22.3
21.5
20.2
18.8
17.7
16.6
15.6
20,205.7 21,478.2 22,702.8 23,900.9 25,020.2 26,081.0 27,032.1 27,838.2 28,535.9 29,154.8 29,590.7 29,942.0
105.4% 107.2% 108.1% 108.3% 107.9% 107.0% 105.6% 103.5% 101.0% 98.3% 95.2% 91.8%

Held by:
Debt held by Government accounts ����������������������������������
5,540.3 5,688.5 5,831.1 5,954.2 6,069.7 6,134.7 6,223.5 6,342.9 6,398.9 6,451.5 6,396.8 6,258.4
Debt held by the public 7 ���������������������������������������������������� 14,665.5 15,789.7 16,871.7 17,946.8 18,950.5 19,946.3 20,808.6 21,495.3 22,137.0 22,703.3 23,194.0 23,683.6
As a percent of GDP ������������������������������������������������������
76.5% 78.8% 80.3% 81.3% 81.7% 81.9% 81.3% 79.9% 78.4% 76.6% 74.6% 72.6%
*$50 million or less.
1 A decrease in the Treasury operating cash balance (which is an asset) is a means of financing a deficit and therefore has a negative sign. An increase in checks outstanding (which
is a liability) is also a means of financing a deficit and therefore also has a negative sign.
2 Includes checks outstanding, accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liability accounts; and, as
an offset, cash and monetary assets (other than the Treasury operating cash balance), other asset accounts, and profit on sale of gold.
3 Consists primarily of debt issued by the Federal Financing Bank.
4 Consists mainly of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discount on Government
account series securities.
5 The statutory debt limit is approximately $20,456 billion, as increased after December 8, 2017.
6 Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at sales price plus amortized discount or less amortized
premium. Agency debt securities are almost all measured at face value. Treasury securities in the Government account series are otherwise measured at face value less unrealized
discount (if any).
7 At the end of 2017, the Federal Reserve Banks held $2,465.4 billion of Federal securities and the rest of the public held $12,200.0 billion. Debt held by the Federal Reserve Banks is
not estimated for future years.

4. Federal Borrowing and Debt

ative to their dedicated income is very different in concept
and much larger in size than the amount of Treasury securities that these programs hold.
For all these reasons, debt held by the public and debt
held by the public net of financial assets are both better
gauges of the effect of the budget on the credit markets
than gross Federal debt.
Government Deficits or Surpluses
and the Change in Debt
Table 4–2 summarizes Federal borrowing and debt
from 2017 through 2028.5 In 2017 the Government borrowed $498 billion, increasing the debt held by the public
from $14,168 billion at the end of 2016 to $14,665 billion
at the end of 2017. The debt held by Government accounts
grew by $168 billion, and gross Federal debt increased by
$666 billion to $20,206 billion.
Debt held by the public.—The Federal Government
primarily finances deficits by borrowing from the public,
and it primarily uses surpluses to repay debt held by the
public.6 Table 4–2 shows the relationship between the
Federal deficit or surplus and the change in debt held by
the public. The borrowing or debt repayment depends on
the Government’s expenditure programs and tax laws, on
the economic conditions that influence tax receipts and
outlays, and on debt management policy. The sensitivity of the budget to economic conditions is analyzed in
Chapter 2, “Economic Assumptions and Interactions with
the Budget,’’ in this volume.
The total or unified budget consists of two parts: the onbudget portion; and the off-budget Federal entities, which
have been excluded from the budget by law. Under present law, the off-budget Federal entities are the two Social
Security trust funds (Old-Age and Survivors Insurance
and Disability Insurance) and the Postal Service Fund.7
The on-budget and off-budget surpluses or deficits are
added together to determine the Government’s financing
needs.
Over the long run, it is a good approximation to say
that “the deficit is financed by borrowing from the public’’
or “the surplus is used to repay debt held by the public.’’ However, the Government’s need to borrow in any
given year has always depended on several other factors
besides the unified budget surplus or deficit, such as the
change in the Treasury operating cash balance. These
other factors—“other transactions affecting borrowing
from the public’’—can either increase or decrease the
Government’s need to borrow and can vary considerably
5 For projections of the debt beyond 2028, see Chapter 3, “Long-Term
Budget Outlook.”
6 Treasury debt held by the public is measured as the sales price plus
the amortized discount (or less the amortized premium). At the time of
sale, the book value equals the sales price. Subsequently, it equals the
sales price plus the amount of the discount that has been amortized
up to that time. In equivalent terms, the book value of the debt equals
the principal amount due at maturity (par or face value) less the unamortized discount. (For a security sold at a premium, the definition
is symmetrical.) For inflation-indexed notes and bonds, the book value
includes a periodic adjustment for inflation. Agency debt is generally
recorded at par.
7 For further explanation of the off-budget Federal entities, see Chapter 9, “Coverage of the Budget.’’

33
in size from year to year. The other transactions affecting borrowing from the public are presented in Table 4–2
(where an increase in the need to borrow is represented
by a positive sign, like the deficit).
In 2017 the deficit was $665 billion while these other
factors reduced the need to borrow by $168 billion, or 34
percent of total borrowing from the public. As a result, the
Government borrowed $498 billion from the public. The
other factors are estimated to increase borrowing by $292
billion (26 percent of total borrowing from the public) in
2018, and $98 billion (9 percent) in 2019. In 2020–2028,
these other factors are expected to increase borrowing by
annual amounts ranging from $41 billion to $88 billion.
Three specific factors presented in Table 4–2 have historically been especially important.
Change in Treasury operating cash balance.—The cash
balance increased by $155 billion in 2016, to $353 billion,
and decreased by $194 billion in 2017, to $159 billion.
The large 2017 decrease in the cash balance is primarily
due to Treasury drawing down the cash balance as it took
measures to continue to finance Federal Government operations while at the debt ceiling. For risk management
purposes, Treasury seeks to maintain a cash balance
roughly equal to one week of Government outflows, with
a minimum balance of about $150 billion. The operating
cash balance is projected to increase by $191 billion, to
$350 billion at the end of 2018. Changes in the operating
cash balance, while occasionally large, are inherently limited over time. Decreases in cash—a means of financing
the Government—are limited by the amount of past accumulations, which themselves required financing when
they were built up. Increases are limited because it is
generally more efficient to repay debt.
Net financing disbursements of the direct loan and
guaranteed loan financing accounts.—Under the Federal
Credit Reform Act of 1990 (FCRA), the budgetary
program account for each credit program records the estimated subsidy costs—the present value of estimated net
losses—at the time when the direct or guaranteed loans
are disbursed. The individual cash flows to and from the
public associated with the loans or guarantees, such as
the disbursement and repayment of loans, the default
payments on loan guarantees, the collection of interest
and fees, and so forth, are recorded in the credit program’s non-budgetary financing account. Although the
non-budgetary financing account’s cash flows to and from
the public are not included in the deficit (except for their
impact on subsidy costs), they affect Treasury’s net borrowing requirements.8
In addition to the transactions with the public, the
financing accounts include several types of intragovernmental transactions. They receive payment from the
credit program accounts for the subsidy costs of new
direct loans and loan guarantees and for any upward
reestimate of the costs of outstanding direct and guaranteed loans. They also receive interest from Treasury on
balances of uninvested funds. The financing accounts pay
8 The FCRA (sec. 505(b)) requires that the financing accounts be nonbudgetary. They are non-budgetary in concept because they do not measure cost. For additional discussion of credit programs, see Chapter 19,
“Credit and Insurance,” and Chapter 8, “Budget Concepts.’’

34
any negative subsidy collections or downward reestimate
of costs to budgetary receipt accounts and pay interest on
borrowings from Treasury. The total net collections and
gross disbursements of the financing accounts, consisting
of transactions with both the public and the budgetary
accounts, are called “net financing disbursements.’’ They
occur in the same way as the “outlays’’ of a budgetary account, even though they do not represent budgetary costs,
and therefore affect the requirement for borrowing from
the public in the same way as the deficit.
The intragovernmental transactions of the credit
program, financing, and downward reestimate receipt accounts do not affect Federal borrowing from the public.
Although the deficit changes because of the budgetary account’s outlay to, or receipt from, a financing account, the
net financing disbursement changes in an equal amount
with the opposite sign, so the effects are cancelled out.
On the other hand, financing account disbursements to
the public increase the requirement for borrowing from
the public in the same way as an increase in budget outlays that are disbursed to the public in cash. Likewise,
receipts from the public collected by the financing account
can be used to finance the payment of the Government’s
obligations, and therefore they reduce the requirement
for Federal borrowing from the public in the same way as
an increase in budgetary receipts.
Borrowing due to credit financing accounts was $41
billion in 2017. In 2018 credit financing accounts are projected to increase borrowing by $102 billion. After 2018,
the credit financing accounts are expected to increase borrowing by amounts ranging from $42 billion to $99 billion
over the next 10 years.
In some years, large net upward or downward reestimates in the cost of outstanding direct and guaranteed
loans may cause large swings in the net financing disbursements. In 2017, net upward reestimates received by
the financing accounts reduced financing disbursements
by $49.3 billion, due largely to upward reestimates for student loan programs and Federal Housing Administration
(FHA) Mutual Mortgage Insurance guarantees. In 2018,
upward reestimates for FHA guarantees are more than
offset by downward reestimates for student loans, resulting in a net downward reestimate of $0.9 billion.
Net purchases of non-Federal securities by the National
Railroad Retirement Investment Trust (NRRIT).—
This trust fund, which was established by the Railroad
Retirement and Survivors’ Improvement Act of 2001,
invests its assets primarily in private stocks and bonds.
The Act required special treatment of the purchase or sale
of non-Federal assets by the NRRIT trust fund, treating
such purchases as a means of financing rather than as
outlays. Therefore, the increased need to borrow from the
public to finance NRRIT’s purchases of non-Federal assets is part of the “other transactions affecting borrowing
from the public’’ rather than included as an increase in
the deficit. While net purchases and redemptions affect
borrowing from the public, unrealized gains and losses on
NRRIT’s portfolio are included in both the “other transactions” and, with the opposite sign, in NRRIT’s net outlays

ANALYTICAL PERSPECTIVES

in the deficit, for no net impact on borrowing from the
public. In 2017, net increases, including purchases and
gains, were $1.2 billion. A $0.5 billion net decrease is projected for 2018 and net annual decreases ranging from
$0.1 billion to $1.1 billion are projected for 2019 and subsequent years.9
Debt held by Government accounts.—The amount
of Federal debt issued to Government accounts depends
largely on the surpluses of the trust funds, both on-budget and off-budget, which owned 90 percent of the total
Federal debt held by Government accounts at the end of
2017. Net investment may differ from the surplus due
to changes in the amount of cash assets not currently invested. In 2017, the total trust fund surplus was $154
billion, while trust fund investment in Federal securities
increased by $146 billion. The remainder of debt issued
to Government accounts is owned by a number of special
funds and revolving funds. The debt held in major accounts and the annual investments are shown in Table
4–5.
Debt Held by the Public Net of
Financial Assets and Liabilities
While debt held by the public is a key measure for examining the role and impact of the Federal Government
in the U.S. and international credit markets and for other purposes, it provides incomplete information on the
Government’s financial condition. The U.S. Government
holds significant financial assets, which can be offset
against debt held by the public and other financial liabilities to achieve a more complete understanding of
the Government’s financial condition. The acquisition of
those financial assets represents a transaction with the
credit markets, broadening those markets in a way that
is analogous to the demand on credit markets that borrowing entails. For this reason, debt held by the public is
also an incomplete measure of the impact of the Federal
Government in the United States and international credit
markets.
One transaction that can increase both borrowing
and assets is an increase to the Treasury operating cash
balance. When the Government borrows to increase
the Treasury operating cash balance, that cash balance
also represents an asset that is available to the Federal
Government. Looking at both sides of this transaction—
the borrowing to obtain the cash and the asset of the cash
holdings—provides much more complete information
about the Government’s financial condition than looking
at only the borrowing from the public. Another example
of a transaction that simultaneously increases borrowing
from the public and Federal assets is Government borrowing to issue direct loans to the public. When the direct
loan is made, the Government is also acquiring an asset
in the form of future payments of principal and interest, net of the Government’s expected losses on the loan.
Similarly, when NRRIT increases its holdings of non-Federal securities, the borrowing to purchase those securities
is offset by the value of the asset holdings.
9 The budget treatment of this fund is further discussed in Chapter
8, “Budget Concepts.’’

35

4. Federal Borrowing and Debt

The acquisition or disposition of Federal financial assets very largely explains the difference between the
deficit for a particular year and that year’s increase in
debt held by the public. Debt held by the public net of
financial assets is a measure that is conceptually closer to
the measurement of Federal deficits or surpluses; cumulative deficits and surpluses over time more closely equal
the debt held by the public net of financial assets than
they do the debt held by the public.
Table 4–3 presents debt held by the public net of the
Government’s financial assets and liabilities. Treasury
debt is presented in the Budget at book value, with no
adjustments for the change in economic value that results
from fluctuations in interest rates. The balances of credit
financing accounts are based on projections of future cash
flows. For direct loan financing accounts, the balance
generally represents the net present value of anticipated
future inflows such as principal and interest payments
from borrowers. For guaranteed loan financing accounts,
the balance generally represents the net present value
of anticipated future outflows, such as default claim payments net of recoveries, and other collections, such as
program fees. NRRIT’s holdings of non-Federal securities
are marked to market on a monthly basis. Governmentsponsored enterprise (GSE) preferred stock is measured
at market value.
Due largely to the $194 billion decrease in the Treasury
operating cash balance, net financial assets fell by $183
billion, to $1,515 billion, in 2017. This $1,515 billion
in net financial assets included a cash balance of $159
billion, net credit financing account balances of $1,295 billion, and other assets and liabilities that aggregated to a
net asset of $60 billion. At the end of 2017, debt held by
the public was $14,665 billion, or 76.5 percent of GDP.

Therefore, debt held by the public net of financial assets
was $13,151 billion, or 68.6 percent of GDP. As shown
in Table 4–3, the value of the Government’s net financial
assets is projected to increase to $1,809 billion in 2018,
principally due to projected increases in the Treasury
cash balance and the value of the direct loan financing
accounts. While debt held by the public is expected to
increase from 76.5 percent to 78.8 percent of GDP during
2018, debt held by the public net of financial assets is expected to increase by a smaller amount, from 68.6 percent
to 69.8 percent of GDP.
Debt securities and other financial assets and liabilities do not encompass all the assets and liabilities of the
Federal Government. For example, accounts payable occur in the normal course of buying goods and services;
Social Security benefits are due and payable as of the end
of the month but, according to statute, are paid during the
next month; and Federal employee salaries are paid after
they have been earned. Like debt securities sold in the
credit market, these liabilities have their own distinctive
effects on the economy. The Federal Government also has
significant holdings of non-financial assets, such as land,
mineral deposits, buildings, and equipment. The different types of assets and liabilities are reported annually
in the financial statements of Federal agencies and in the
Financial Report of the United States Government, prepared by the Treasury Department in coordination with
the Office of Management and Budget (OMB).
Treasury Debt
Nearly all Federal debt is issued by the Department
of the Treasury. Treasury meets most of the Federal
Government’s financing needs by issuing marketable securities to the public. These financing needs include both

Table 4–3. DEBT HELD BY THE PUBLIC NET OF FINANCIAL ASSETS AND LIABILITIES
(Dollar amounts in billions)
Actual
2017
Debt Held by the Public:
Debt held by the public ������������������������������������������������
As a percent of GDP ����������������������������������������������
Financial Assets Net of Liabilities:
Treasury operating cash balance ��������������������������������
Credit financing account balances:
Direct loan accounts ����������������������������������������������
Guaranteed loan accounts ������������������������������������
Troubled Asset Relief Program equity purchase
accounts �����������������������������������������������������������
Subtotal, credit financing account balances ������
Government-sponsored enterprise preferred stock �����
Non-Federal securities held by NRRIT ������������������������
Other assets net of liabilities ����������������������������������������
Total, financial assets net of liabilities ��������������������
Debt Held by the Public Net of Financial Assets and
Liabilities:
Debt held by the public net of financial assets ������������
As a percent of GDP ����������������������������������������������
*$50 million or less.

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

14,665.5 15,789.7 16,871.7 17,946.8 18,950.5 19,946.3 20,808.6 21,495.3 22,137.0 22,703.3 23,194.0 23,683.6
76.5% 78.8% 80.3% 81.3% 81.7% 81.9% 81.3% 79.9% 78.4% 76.6% 74.6% 72.6%
159.3

350.0

350.0

350.0

350.0

350.0

350.0

350.0

350.0

350.0

350.0

350.0

1,281.3
13.9

1,382.3
14.8

1,476.2
19.9

1,563.1
22.6

1,650.1
24.7

1,739.7
24.7

1,826.7
22.7

1,906.3
18.9

1,975.2
13.5

2,034.3
4.4

2,084.2
–3.7

2,129.9
–4.2

0.1
1,295.3
92.6
25.3
–58.0
1,514.6

*
1,397.1
94.6
24.8
–58.0
1,808.6

*
1,496.1
94.6
23.7
–58.0
1,906.5

*
1,585.7
94.6
22.7
–58.0
1,995.0

*
1,674.8
94.6
21.7
–58.0
2,083.2

*
1,764.4
94.6
20.6
–58.0
2,171.6

–*
1,849.4
94.6
19.9
–58.0
2,255.9

–*
1,925.1
94.6
19.1
–58.0
2,330.9

–*
1,988.7
94.6
18.4
–58.0
2,393.8

–*
2,038.7
94.6
17.8
–58.0
2,443.1

–*
2,080.4
94.6
17.5
–58.0
2,484.6

–*
2,125.7
94.6
17.4
–58.0
2,529.7

13,150.9 13,981.2 14,965.2 15,951.8 16,867.3 17,774.7 18,552.8 19,164.4 19,743.2 20,260.1 20,709.4 21,153.9
68.6% 69.8% 71.3% 72.3% 72.7% 72.9% 72.5% 71.2% 69.9% 68.3% 66.6% 64.9%

36
the change in debt held by the public and the refinancing—or rollover—of any outstanding debt that matures
during the year. Treasury marketable debt is sold at public auctions on a regular schedule and, because it is very
liquid, can be bought and sold on the secondary market at
narrow bid-offer spreads. Treasury also sells to the public a relatively small amount of nonmarketable securities,
such as savings bonds and State and Local Government
Series securities (SLGS).10 Treasury nonmarketable debt
cannot be bought or sold on the secondary market.
Treasury issues marketable securities in a wide range
of maturities, and issues both nominal (non-inflationindexed) and inflation-indexed securities. Treasury’s
marketable securities include:
Treasury Bills—Treasury bills have maturities of one
year or less from their issue date. In addition to the regular auction calendar of bill issuance, Treasury issues
cash management bills on an as-needed basis for various reasons such as to offset the seasonal patterns of the
Government’s receipts and outlays.
Treasury Notes—Treasury notes have maturities of
more than one year and up to 10 years.
Treasury Bonds—Treasury bonds have maturities of
more than 10 years. The longest-maturity securities issued by Treasury are 30-year bonds.
Treasury Inflation-Protected Securities (TIPS)—
Treasury inflation-protected—or inflation-indexed—securities are coupon issues for which the par value of the
security rises with inflation. The principal value is adjusted daily to reflect inflation as measured by changes in
the Consumer Price Index (CPI-U-NSA, with a two-month
lag). Although the principal value may be adjusted downward if inflation is negative, at maturity, the securities
will be redeemed at the greater of their inflation-adjusted
principal or par amount at original issue.
Floating Rate Securities—Floating rate securities have
a fixed par value but bear interest rates that fluctuate
based on movements in a specified benchmark market
interest rate. Treasury’s floating rate notes are benchmarked to the Treasury 13-week bill. Currently, Treasury
is issuing floating rate securities with a maturity of two
years.
Historically, the average maturity of outstanding debt
issued by Treasury has been about five years. The average maturity of outstanding debt was 71 months at the
end of 2017. Over the last several years there have been
many changes in financial markets that have ultimately
resulted in significant structural demand for high-quality, shorter-dated securities such as Treasury bills. At the
same time, Treasury bills as a percent of outstanding issuance had fallen to historically low levels of around 10
percent. In recognition of these structural changes, in
November 2015, the Treasury announced that it would
increase issuance of shorter-dated Treasury securities.
In addition to quarterly announcements about the
overall auction calendar, Treasury publicly announces
in advance the auction of each security. Individuals can

ANALYTICAL PERSPECTIVES

participate directly in Treasury auctions or can purchase
securities through brokers, dealers, and other financial
institutions. Treasury accepts two types of auction bids:
competitive and noncompetitive. In a competitive bid, the
bidder specifies the yield. A significant portion of competitive bids are submitted by primary dealers, which
are banks and securities brokerages that have been designated to trade in Treasury securities with the Federal
Reserve System. In a noncompetitive bid, the bidder
agrees to accept the yield determined by the auction.11
At the close of the auction, Treasury accepts all eligible
noncompetitive bids and then accepts competitive bids in
ascending order beginning with the lowest yield bid until
the offering amount is reached. All winning bidders receive the highest accepted yield bid.
Treasury marketable securities are highly liquid and
actively traded on the secondary market, which enhances
the demand for Treasuries at initial auction. The demand
for Treasury securities is reflected in the ratio of bids received to bids accepted in Treasury auctions; the demand
for the securities is substantially greater than the level of
issuance. Because they are backed by the full faith and
credit of the United States Government, Treasury marketable securities are considered to be credit “risk-free.”
Therefore, the Treasury yield curve is commonly used as a
benchmark for a wide variety of purposes in the financial
markets.
Whereas Treasury issuance of marketable debt is based
on the Government’s financing needs, Treasury’s issuance
of nonmarketable debt is based on the public’s demand for
the specific types of investments. Decreases in outstanding balances of nonmarketable debt, such as occurred in
2017, increase the need for marketable borrowing.12
Agency Debt
A few Federal agencies other than Treasury, shown in
Table 4–4, sell or have sold debt securities to the public
and, at times, to other Government accounts. Currently,
new debt is issued only by the Tennessee Valley Authority
(TVA) and the Federal Housing Administration; the remaining agencies are repaying past borrowing. Agency
debt was $26.2 billion at the end of 2017. Agency debt is
less than one-quarter of one percent of Federal debt held
by the public. Primarily as a result of TVA activity, agency debt is estimated to fall to $25.8 billion at the end of
2018 and to $25.1 billion at the end of 2019.
The predominant agency borrower is TVA, which had
borrowings of $26.0 billion from the public as of the end of
2017, or 99 percent of the total debt of all agencies other
than Treasury. TVA issues debt primarily to finance capital projects.
TVA has traditionally financed its capital construction by selling bonds and notes to the public. Since 2000,
it has also employed two types of alternative financing
methods, lease financing obligations and prepayment obligations. Under the lease financing obligations method,
11

10

Under the SLGS program, the Treasury offers special low-yield securities to State and local governments and other entities for temporary
investment of proceeds of tax-exempt bonds.

Noncompetitive bids cannot exceed $5 million per bidder.
Detail on the marketable and nonmarketable securities issued by
Treasury is found in the Monthly Statement of the Public Debt, published on a monthly basis by the Department of the Treasury.
12

37

4. Federal Borrowing and Debt

TVA signs long-term contracts to lease some facilities and
equipment. The lease payments under these contracts ultimately secure the repayment of third party capital used
to finance construction of the facility. TVA retains substantially all of the economic benefits and risks related
to ownership of the assets.13 Under the prepayment obligations method, TVA’s power distributors may prepay a
portion of the price of the power they plan to purchase
in the future. In return, they obtain a discount on a specific quantity of the future power they buy from TVA. The
quantity varies, depending on TVA’s estimated cost of
borrowing.
OMB determined that each of these alternative financing methods is a means of financing the acquisition
of assets owned and used by the Government, or of refinancing debt previously incurred to finance such assets.
They are equivalent in concept to other forms of borrowing from the public, although under different terms and
conditions. The budget therefore records the upfront cash
proceeds from these methods as borrowing from the public, not offsetting collections.14 The budget presentation
13 This arrangement is at least as governmental as a “lease-purchase
without substantial private risk.’’ For further detail on the current budgetary treatment of lease-purchase without substantial private risk, see
OMB Circular No. A–11, Appendix B.
14 This budgetary treatment differs from the treatment in the
Monthly Treasury Statement of Receipts and Outlays of the United
States Government (Monthly Treasury Statement) Table 6 Schedule C,
and the Combined Statement of Receipts, Outlays, and Balances of the
United States Government Schedule 3, both published by the Department of the Treasury. These two schedules, which present debt issued
by agencies other than Treasury, exclude the TVA alternative financing
arrangements. This difference in treatment is one factor causing minor
differences between debt figures reported in the Budget and debt figures
reported by Treasury. The other factors are adjustments for the timing
of the reporting of Federal debt held by NRRIT and treatment of the
Federal debt held by the Securities Investor Protection Corporation and
the Public Company Accounting Oversight Board.

is consistent with the reporting of these obligations as liabilities on TVA’s balance sheet under generally accepted
accounting principles. Table 4–4 presents these alternative financing methods separately from TVA bonds and
notes to distinguish between the types of borrowing. At
the end of 2017, lease financing obligations were $1.7 billion and obligations for prepayments were $0.1 billion.
Although the FHA generally makes direct disbursements to the public for default claims on FHA-insured
mortgages, it may also pay claims by issuing debentures.
Issuing debentures to pay the Government’s bills is equivalent to selling securities to the public and then paying
the bills by disbursing the cash borrowed, so the transaction is recorded as being simultaneously an outlay and
borrowing. The debentures are therefore classified as
agency debt.
A number of years ago, the Federal Government guaranteed the debt used to finance the construction of buildings
for the National Archives and the Architect of the Capitol,
and subsequently exercised full control over the design,
construction, and operation of the buildings. These arrangements are equivalent to direct Federal construction
financed by Federal borrowing. The construction expenditures and interest were therefore classified as Federal
outlays, and the borrowing was classified as Federal agency borrowing from the public.
Several Federal agencies borrow from the Bureau of the
Fiscal Service (Fiscal Service) or the Federal Financing
Bank (FFB), both within the Department of the Treasury.
Agency borrowing from the FFB or the Fiscal Service is
not included in gross Federal debt. It would be double
counting to add together (a) the agency borrowing from
the Fiscal Service or FFB and (b) the Treasury borrowing from the public that is needed to provide the Fiscal
Service or FFB with the funds to lend to the agencies.

Table 4–4. AGENCY DEBT
(In millions of dollars)
2017 Actual

2018 Estimate

2019 Estimate

Borrowing/ Debt, End-of- Borrowing/ Debt, End-of- Borrowing/ Debt, End-ofRepayment(–)
Year
Repayment(–)
Year
Repayment(–)
Year
Borrowing from the public:
Housing and Urban Development:
Federal Housing Administration �������������������������������������������������������������������������������������
Architect of the Capitol ���������������������������������������������������������������������������������������������������������
National Archives ������������������������������������������������������������������������������������������������������������������

.........
–9.0
–23.0

18.5
89.5
52.3

.........
–9.5
–25.0

18.5
80.0
27.2

.........
–11.0
–27.2

18.5
69.0
.........

Tennessee Valley Authority:
Bonds and notes ��������������������������������������������������������������������������������������������������������������
Lease financing obligations ���������������������������������������������������������������������������������������������
Prepayment obligations ���������������������������������������������������������������������������������������������������
Total, borrowing from the public �����������������������������������������������������������������������������

36.7
–118.6
–100.0
–213.9

24,207.3
1,704.3
109.6
26,181.5

–97.0
–131.1
–100.0
–362.7

24,110.3
1,573.1
9.6
25,818.9

–514.7
–122.6
–9.6
–685.2

23,595.6
1,450.5
.........
25,133.7

Borrowing from other funds:
Tennessee Valley Authority 1 ��������������������������������������������������������������������������������������������������
Total, borrowing from other funds ��������������������������������������������������������������������������
Total, agency borrowing ������������������������������������������������������������������������������������

–3.0
–3.0
–211.8

1.2
1.2
26,182.8

.........
.........
–362.7

1.2
1.2
25,820.1

.........
.........
–685.2

1.2
1.2
25,134.9

33.7

24,208.6

–97.0

24,111.5

–514.7

23,596.8

Memorandum:
Tennessee Valley Authority bonds and notes, total ���������������������������������������������������������������
1 Represents open market purchases by the National Railroad Retirement Investment Trust.

38
Debt Held by Government Accounts
Trust funds, and some special funds and public enterprise revolving funds, accumulate cash in excess of
current needs in order to meet future obligations. These
cash surpluses are generally invested in Treasury debt.
The total investment holdings of trust funds and other
Government accounts increased by $168 billion in 2017.
Net investment by Government accounts is estimated
to be $148 billion in 2018 and $143 billion in 2019, as
shown in Table 4–5. The holdings of Federal securities by
Government accounts are estimated to increase to $5,831
billion by the end of 2019, or 26 percent of the gross
Federal debt. The percentage is estimated to decrease
gradually over the next 10 years.
The Government account holdings of Federal securities
are concentrated among a few funds: the Social Security
Old-Age and Survivors Insurance (OASI) and Disability
Insurance (DI) trust funds; the Medicare Hospital
Insurance (HI) and Supplementary Medical Insurance
(SMI) trust funds; and four Federal employee retirement
funds. These Federal employee retirement funds include
two trust funds, the Military Retirement Fund and the
Civil Service Retirement and Disability Fund (CSRDF),
and two special funds, the uniformed services MedicareEligible Retiree Health Care Fund (MERHCF) and the
Postal Service Retiree Health Benefits Fund (PSRHBF).
At the end of 2019, these Social Security, Medicare, and
Federal employee retirement funds are estimated to own
86 percent of the total debt held by Government accounts.
During 2017–2019, the Military Retirement Fund has a
large surplus and is estimated to invest a total of $218
billion, 48 percent of total net investment by Government
accounts. Some Government accounts are projected
to have net disinvestment in Federal securities during
2017–2019.
Technical note on measurement.—The Treasury securities held by Government accounts consist almost entirely
of the Government account series. Most were issued at
par value (face value), and the securities issued at a discount or premium are traditionally recorded at par in the
OMB and Treasury reports on Federal debt. However,
there are two kinds of exceptions.
First, Treasury issues zero-coupon bonds to a very few
Government accounts. Because the purchase price is a
small fraction of par value and the amounts are large, the
holdings are recorded in Table 4–5 at par value less unamortized discount. The only two Government accounts
that have held zero-coupon bonds during the period of
this table are the Nuclear Waste Disposal Fund in the
Department of Energy and the Pension Benefit Guaranty
Corporation (PBGC). PBGC disinvested its holdings of
zero-coupon bonds during 2017. The unamortized discount on zero-coupon bonds held by the Nuclear Waste
Disposal Fund was $15.7 billion at the end of 2017.
Second, Treasury subtracts the unrealized discount
on other Government account series securities in calculating “net Federal securities held as investments of
Government accounts.’’ Unlike the discount recorded for

ANALYTICAL PERSPECTIVES

zero-coupon bonds and debt held by the public, the unrealized discount is the discount at the time of issue and is
not amortized over the term of the security. In Table 4–5
it is shown as a separate item at the end of the table and
not distributed by account. The amount was $10.3 billion
at the end of 2017.
Debt Held by the Federal Reserve
The Federal Reserve acquires marketable Treasury
securities as part of its exercise of monetary policy. For
purposes of the Budget and reporting by the Department
of the Treasury, the transactions of the Federal Reserve
are considered to be non-budgetary, and accordingly the
Federal Reserve’s holdings of Treasury securities are
included as part of debt held by the public.15 Federal
Reserve holdings were $2,465 billion (17 percent of debt
held by the public) at the end of 2017. Over the last 10
years, the Federal Reserve holdings have averaged 15
percent of debt held by the public. The historical holdings
of the Federal Reserve are presented in Table 7.1 in the
Budget’s historical tables. The Budget does not project
Federal Reserve holdings for future years.
Limitations on Federal Debt
Definition of debt subject to limit.—Statutory limitations have usually been placed on Federal debt. Until
World War I, the Congress ordinarily authorized a specific
amount of debt for each separate issue. Beginning with
the Second Liberty Bond Act of 1917, however, the nature
of the limitation was modified in several steps until it developed into a ceiling on the total amount of most Federal
debt outstanding. This last type of limitation has been in
effect since 1941. The limit currently applies to most debt
issued by the Treasury since September 1917, whether
held by the public or by Government accounts; and other
debt issued by Federal agencies that, according to explicit
statute, is guaranteed as to principal and interest by the
U.S. Government.
The third part of Table 4–2 compares total Treasury
debt with the amount of Federal debt that is subject to the
limit. Nearly all Treasury debt is subject to the debt limit.
A large portion of the Treasury debt not subject to
the general statutory limit was issued by the Federal
Financing Bank. The FFB is authorized to have outstanding up to $15 billion of publicly issued debt. The FFB has
on occasion issued this debt to CSRDF in exchange for
equal amounts of regular Treasury securities. The FFB
securities have the same interest rates and maturities as
the Treasury securities for which they were exchanged.
The FFB issued: $14 billion of securities to the CSRDF
on November 15, 2004, with maturity dates ranging from
June 30, 2009, through June 30, 2019; $9 billion to the
CSRDF on October 1, 2013, with maturity dates from
June 30, 2015, through June 30, 2024; and $3 billion of
securities to the CSRDF on October 15, 2015, with maturity dates from June 30, 2026, through June 30, 2029. The
outstanding balance of FFB debt held by CSRDF was $11
15 For further detail on the monetary policy activities of the Federal
Reserve and the treatment of the Federal Reserve in the Budget, see
Chapter 9, “Coverage of the Budget.”

39

4. Federal Borrowing and Debt

Table 4–5. DEBT HELD BY GOVERNMENT ACCOUNTS 1
(In millions of dollars)
Investment or Disinvestment (–)
Description

2017
Actual

2018
Estimate

Holdings,
End of 2019
Estimate

2019
Estimate

Investment in Treasury debt:
Commerce:
Public safety trust fund �������������������������������������������������������������������������������������������������������������������������������������������������������������

.........

5,000

3,650

8,983

Defense—Military:
Host nation support fund for relocation ������������������������������������������������������������������������������������������������������������������������������������

420

–145

158

1,272

Energy:
Nuclear waste disposal fund 1 ���������������������������������������������������������������������������������������������������������������������������������������������������
Uranium enrichment decontamination fund ������������������������������������������������������������������������������������������������������������������������������

1,712
–156

415
–176

421
1,791

38,193
3,955

Health and Human Services:
Federal hospital insurance trust fund ���������������������������������������������������������������������������������������������������������������������������������������
Federal supplementary medical insurance trust fund ���������������������������������������������������������������������������������������������������������������
Vaccine injury compensation fund ��������������������������������������������������������������������������������������������������������������������������������������������
Child enrollment contingency fund �������������������������������������������������������������������������������������������������������������������������������������������

5,626
7,253
–10
574

2,614
25,200
94
2,327

9,102
6,701
109
–2,305

209,551
102,490
3,798
1,167

Homeland Security:
Aquatic resources trust fund �����������������������������������������������������������������������������������������������������������������������������������������������������
Oil spill liability trust fund ����������������������������������������������������������������������������������������������������������������������������������������������������������
National flood insurance reserve fund ��������������������������������������������������������������������������������������������������������������������������������������

12
722
–1,039

20
355
860

–18
447
40

1,924
6,474
900

Housing and Urban Development:
Federal Housing Administration mutual mortgage insurance capital reserve ��������������������������������������������������������������������������
Guarantees of mortgage-backed securities �����������������������������������������������������������������������������������������������������������������������������

–5,562
1,322

–4,960
1,058

7,346
983

33,265
19,317

Interior:
Abandoned mine reclamation fund �������������������������������������������������������������������������������������������������������������������������������������������
Federal aid in wildlife restoration fund ��������������������������������������������������������������������������������������������������������������������������������������
Environmental improvement and restoration fund ��������������������������������������������������������������������������������������������������������������������
Natural resource damage assessment fund ����������������������������������������������������������������������������������������������������������������������������
Justice: Assets forfeiture fund ���������������������������������������������������������������������������������������������������������������������������������������������������

–16
139
37
508
–922

–23
65
20
200
–2,773

–18
51
32
100
–1,291

2,719
2,256
1,518
1,600
1,187

Labor:
Unemployment trust fund ���������������������������������������������������������������������������������������������������������������������������������������������������������
Pension Benefit Guaranty Corporation 1 �����������������������������������������������������������������������������������������������������������������������������������
State: Foreign service retirement and disability trust fund ����������������������������������������������������������������������������������������������������

6,934
4,878
447

14,389
4,868
317

14,950
4,949
338

90,050
38,259
19,447

Transportation:
Airport and airway trust fund ����������������������������������������������������������������������������������������������������������������������������������������������������
Highway trust fund ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Aviation insurance revolving fund ���������������������������������������������������������������������������������������������������������������������������������������������

4
–12,297
338

–285
–11,297
37

1,521
–11,297
56

14,640
29,738
2,303

Treasury:
Exchange stabilization fund ������������������������������������������������������������������������������������������������������������������������������������������������������
Treasury forfeiture fund �������������������������������������������������������������������������������������������������������������������������������������������������������������
Gulf Coast Restoration trust fund ���������������������������������������������������������������������������������������������������������������������������������������������
Comptroller of the Currency assessment fund �������������������������������������������������������������������������������������������������������������������������

–590
–373
262
134

161
–383
47
–108

282
–591
194
.........

22,533
1,343
1,431
1,683

Veterans Affairs:
National service life insurance trust fund ����������������������������������������������������������������������������������������������������������������������������������
Veterans special life insurance fund �����������������������������������������������������������������������������������������������������������������������������������������
Corps of Engineers: Harbor maintenance trust fund ���������������������������������������������������������������������������������������������������������������

–641
–97
345

–703
–138
373

–560
–137
519

2,341
1,328
9,923

Other Defense-Civil:
Military retirement fund �������������������������������������������������������������������������������������������������������������������������������������������������������������
Medicare-eligible retiree health care fund ��������������������������������������������������������������������������������������������������������������������������������
Education benefits fund ������������������������������������������������������������������������������������������������������������������������������������������������������������

69,924
12,365
–156

69,037
12,973
–20

79,417
11,384
–67

809,424
250,204
971

Environmental Protection Agency: Hazardous substance superfund �����������������������������������������������������������������������������������

2

2

2

4,804

International Assistance Programs:
Overseas Private Investment Corporation ��������������������������������������������������������������������������������������������������������������������������������
Development Finance Institution ����������������������������������������������������������������������������������������������������������������������������������������������

72
.........

61
.........

–5,799
5,823

.........
5,823

40

ANALYTICAL PERSPECTIVES

Table 4–5. DEBT HELD BY GOVERNMENT ACCOUNTS 1—Continued
(In millions of dollars)
Investment or Disinvestment (–)
Description

2017
Actual

2018
Estimate

2019
Estimate

Holdings,
End of 2019
Estimate

Office of Personnel Management:
Civil service retirement and disability trust fund �����������������������������������������������������������������������������������������������������������������������
Postal Service retiree health benefits fund �������������������������������������������������������������������������������������������������������������������������������
Employees life insurance fund ��������������������������������������������������������������������������������������������������������������������������������������������������
Employees and retired employees health benefits fund �����������������������������������������������������������������������������������������������������������

17,942
–2,004
512
2,292

17,273
1,376
444
68

13,876
–2,536
763
41

936,252
48,331
46,887
26,130

Social Security Administration:
Federal old-age and survivors insurance trust fund 2 ���������������������������������������������������������������������������������������������������������������
Federal disability insurance trust fund 2 ������������������������������������������������������������������������������������������������������������������������������������
District of Columbia: Federal pension fund ������������������������������������������������������������������������������������������������������������������������������
Farm Credit System Insurance Corporation: Farm Credit System Insurance fund ��������������������������������������������������������������
Federal Communications Commission: Universal service fund ���������������������������������������������������������������������������������������������
Federal Deposit Insurance Corporation: Deposit insurance fund ������������������������������������������������������������������������������������������
National Credit Union Administration: Share insurance fund �������������������������������������������������������������������������������������������������
Postal Service fund 2 �������������������������������������������������������������������������������������������������������������������������������������������������������������������
Railroad Retirement Board trust funds �������������������������������������������������������������������������������������������������������������������������������������
Securities Investor Protection Corporation 3 ����������������������������������������������������������������������������������������������������������������������������
United States Enrichment Corporation fund ����������������������������������������������������������������������������������������������������������������������������
Other Federal funds ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other trust funds �������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Unrealized discount 1 ������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, investment in Treasury debt 1 ���������������������������������������������������������������������������������������������������������������������������������

23,488
23,789
1
428
–923
8,638
785
2,438
155
245
–16
–335
–716
–459
168,432

–24,520
22,367
1
476
–706
12,267
2,358
–2,256
–486
99
34
–59
32
.........
148,251

–7,048
–1,960
–24
290
–695
10,550
778
2,067
–181
115
–1,640
249
–312
.........
142,616

2,788,632
90,076
3,730
5,219
5,695
102,978
16,225
10,776
1,707
3,164
.........
5,170
3,587
–10,252
5,831,120

–3
–3
168,429

.........
.........
148,251

.........
.........
142,616

1
1
5,831,122

Investment in agency debt:
Railroad Retirement Board:
National Railroad Retirement Investment Trust ������������������������������������������������������������������������������������������������������������������������
Total, investment in agency debt 1 �����������������������������������������������������������������������������������������������������������������������������������
Total, investment in Federal debt 1 ������������������������������������������������������������������������������������������������������������������������������

Memorandum:
Investment by Federal funds (on-budget) ��������������������������������������������������������������������������������������������������������������������������������������
20,106
30,576
30,341
617,054
Investment by Federal funds (off-budget) �������������������������������������������������������������������������������������������������������������������������������������
2,438
–2,256
2,067
10,776
Investment by trust funds (on-budget) �������������������������������������������������������������������������������������������������������������������������������������������
99,066
122,085
119,216
2,334,836
Investment by trust funds (off-budget) �������������������������������������������������������������������������������������������������������������������������������������������
47,277
–2,153
–9,008
2,878,708
Unrealized discount 1 ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
–459
.........
.........
–10,252
¹Debt held by Government accounts is measured at face value except for the Treasury zero-coupon bonds held by the Nuclear Waste Disposal Fund and the Pension Benefit Guaranty
Corporation (PBGC), which are recorded at market or redemption price; and the unrealized discount on Government account series, which is not distributed by account. Changes are not
estimated in the unrealized discount. If recorded at face value, at the end of 2017 the debt figures would be $15.7 billion higher for the Nuclear Waste Disposal Fund than recorded in this
table. PBGC disinvested its holdings of zero-coupon bonds during 2017.
2 Off-budget Federal entity.
3 Amounts on calendar-year basis.

billion at the end of 2017 and is projected to be $10 billion
at the end of 2018.
The other Treasury debt not subject to the general limit consists almost entirely of silver certificates and other
currencies no longer being issued. It was $481 million at
the end of 2017 and is projected to gradually decline over
time.
The sole agency debt currently subject to the general
limit, $209 thousand at the end of 2017, is certain debentures issued by the Federal Housing Administration.16
Some of the other agency debt, however, is subject to its
own statutory limit. For example, the Tennessee Valley
16       At the end of 2017, there were also $18 million of FHA debentures not subject to limit.

Authority is limited to $30 billion of bonds and notes
outstanding.
The comparison between Treasury debt and debt subject to limit also includes an adjustment for measurement
differences in the treatment of discounts and premiums.
As explained earlier in this chapter, debt securities may
be sold at a discount or premium, and the measurement of
debt may take this into account rather than recording the
face value of the securities. However, the measurement
differs between gross Federal debt (and its components)
and the statutory definition of debt subject to limit. An
adjustment is needed to derive debt subject to limit (as
defined by law) from Treasury debt. The amount of the
adjustment was $41 billion at the end of 2017 compared

4. Federal Borrowing and Debt

with the total unamortized discount (less premium) of
$65 billion on all Treasury securities.
Changes in the debt limit.—The statutory debt limit
has been changed many times. Since 1960, the Congress
has passed 83 separate acts to raise the limit, revise the
definition, extend the duration of a temporary increase, or
temporarily suspend the limit.17
The five most recent laws addressing the debt limit
have each provided for a temporary suspension followed
by an increase in an amount equivalent to the debt that
was issued during that suspension period in order to fund
commitments requiring payment through the specified
end date. Most recently, the Continuing Appropriations
Act, 2018 and Supplemental Appropriations for Disaster
Relief Requirements Act, 2017, suspended the $19,809
billion debt ceiling from September 8, 2017, through
December 8, 2017, and then raised the debt limit on
December 9, 2017, by $647 billion to $20,456 billion.
At many times in the past several decades, including 2014, 2015, and 2017, the Government has reached
the statutory debt limit before an increase has been enacted. When this has occurred, it has been necessary for
the Department of the Treasury to take “extraordinary
measures” to meet the Government’s obligation to pay its
bills and invest its trust funds while remaining below the
statutory limit. On December 6, 2017, near the end of the
most recent debt limit suspension period, the Secretary of
the Treasury sent a letter to Congress announcing that
Treasury would begin to take extraordinary measures on
December 9.
One such extraordinary measure is the partial or
full suspension of the daily reinvestment of the Thrift
Savings Plan (TSP) Government Securities Investment
Fund (G-Fund).18 The Treasury Secretary has statutory authority to suspend investment of the G-Fund in
Treasury securities as needed to prevent the debt from
exceeding the debt limit. Treasury determines each day
the amount of investments that would allow the fund to
be invested as fully as possible without exceeding the
debt limit. The TSP G-Fund had an outstanding balance
of $223 billion at the end of November and $69 billion at
the end of December. The Secretary is also authorized to
suspend investments in the CSRDF and to declare a debt
issuance suspension period, which allows him or her to
redeem a limited amount of securities held by the CSRDF.
The Postal Accountability and Enhancement Act of 2006
provides that investments in the Postal Service Retiree
Health Benefits Fund shall be made in the same manner as investments in the CSRDF.19 Therefore, Treasury
is able to take similar administrative actions with the
PSRHBF. The law requires that when any such actions
are taken with the G-Fund, the CSRDF, or the PSRHBF,
the Secretary is required to make the fund whole after
the debt limit has been raised by restoring the forgone
17 The Acts and the statutory limits since 1940 are listed in Table 7.3
of the Budget’s historical tables, available at https://www.whitehouse.
gov/omb/historical-tables/.
18 The TSP is a defined contribution pension plan for Federal employees. The G-Fund is one of several components of the TSP.
19 Both the CSRDF and the PSRHBF are administered by the Office
of Personnel Management.

41
interest and investing the fund fully. Another measure
for staying below the debt limit is disinvestment of the
Exchange Stabilization Fund. The outstanding balance
in the Exchange Stabilization Fund was $22 billion at the
end of December 2017.
As the debt has neared the limit, including in 2017,
Treasury has also suspended the issuance of SLGS to reduce unanticipated fluctuations in the level of the debt.
At times, Treasury has also adjusted the schedule for auctions of marketable securities.
In addition to these steps, Treasury has previously
exchanged Treasury securities held by the CSRDF with
borrowing by the FFB, which, as explained above, is not
subject to the debt limit. This measure was most recently
taken in October 2015.
The debt limit has always been increased prior to the
exhaustion of Treasury’s limited available administrative actions to continue to finance Government operations
when the statutory ceiling has been reached. Failure to
enact a debt limit increase before these actions were exhausted would have significant and long-term negative
consequences. The Federal Government would be forced
to delay or discontinue payments on its broad range of obligations, including Social Security and other payments to
individuals, Medicaid and other grant payments to States,
individual and corporate tax refunds, Federal employee
salaries, payments to vendors and contractors, principal
and interest payments on Treasury securities, and other obligations. If Treasury were unable to make timely
interest payments or redeem securities, investors would
cease to view U.S. Treasury securities as free of credit risk
and Treasury’s interest costs would increase. Because interest rates throughout the economy are benchmarked
to the Treasury rates, interest rates for State and local
governments, businesses, and individuals would also rise.
Foreign investors would likely shift out of dollar-denominated assets, driving down the value of the dollar and
further increasing interest rates on non-Federal, as well
as Treasury, debt.
The debt subject to limit is estimated to increase to
$21,483 billion by the end of 2018 and to $22,709 billion by the end of 2019. The Budget anticipates timely
Congressional action to address the statutory limit as
necessary before exhaustion of Treasury’s extraordinary
measures.
Federal funds financing and the change in debt
subject to limit.—The change in debt held by the public,
as shown in Table 4–2, and the change in debt held by the
public net of financial assets are determined primarily by
the total Government deficit or surplus. The debt subject
to limit, however, includes not only debt held by the public
but also debt held by Government accounts. The change
in debt subject to limit is therefore determined both by
the factors that determine the total Government deficit
or surplus and by the factors that determine the change
in debt held by Government accounts. The effect of debt
held by Government accounts on the total debt subject
to limit can be seen in the second part of Table 4–2. The
change in debt held by Government accounts results in 7

42

ANALYTICAL PERSPECTIVES

percent of the estimated total increase in debt subject to
limit from 2018 through 2028.
The budget is composed of two groups of funds, Federal
funds and trust funds. The Federal funds, in the main,
are derived from tax receipts and borrowing and are used
for the general purposes of the Government. The trust
funds, on the other hand, are financed by taxes or other
receipts dedicated by law for specified purposes, such as
for paying Social Security benefits or making grants to
State governments for highway construction.20
A Federal funds deficit must generally be financed by
borrowing, which can be done either by selling securities to the public or by issuing securities to Government
accounts that are not within the Federal funds group.
Federal funds borrowing consists almost entirely of
Treasury securities that are subject to the statutory debt
limit. Very little debt subject to statutory limit has been
issued for reasons except to finance the Federal funds
deficit. The change in debt subject to limit is therefore
determined primarily by the Federal funds deficit, which
is equal to the difference between the total Government
deficit or surplus and the trust fund surplus. Trust fund
surpluses are almost entirely invested in securities subject to the debt limit, and trust funds hold most of the
debt held by Government accounts. The trust fund surplus reduces the total budget deficit or increases the total
budget surplus, decreasing the need to borrow from the
public or increasing the ability to repay borrowing from
the public. When the trust fund surplus is invested in
Federal securities, the debt held by Government accounts
increases, offsetting the decrease in debt held by the pub20 For further discussion of the trust funds and Federal funds groups,
see Chapter 24, “Trust Funds and Federal Funds.’’

lic by an equal amount. Thus, there is no net effect on
gross Federal debt.
Table 4–6 derives the change in debt subject to limit.
In 2017 the Federal funds deficit was $819 billion, and
other factors reduced financing requirements by $169 billion. The change in the Treasury operating cash balance
reduced financing requirements by $194 billion, the net
financing disbursements of credit financing accounts increased financing requirements by $41 billion, and other
Federal fund factors reduced financing requirements
by $15 billion. In addition, special funds and revolving
funds, which are part of the Federal funds group, invested
a net of $23 billion in Treasury securities. A $6 billion adjustment is also made for the difference between the trust
fund surplus or deficit and the trust funds’ investment or
disinvestment in Federal securities (including the changes in NRRIT’s investments in non-Federal securities). As
a net result of all these factors, $666 billion in financing was required, increasing gross Federal debt by that
amount. Since Federal debt not subject to limit fell by
$2 billion and the adjustment for discount and premium
changed by $2 billion, the debt subject to limit increased
by $670 billion, while debt held by the public increased by
$498 billion.
Debt subject to limit is estimated to increase by $1,274
billion in 2018 and by $1,227 billion in 2019. The projected increases in the debt subject to limit are caused by
the continued Federal funds deficit, supplemented by the
other factors shown in Table 4–6. While debt held by the
public increases by $9,018 billion from the end of 2017
through 2028, debt subject to limit increases by $9,758
billion.

Table 4–6. FEDERAL FUNDS FINANCING AND CHANGE IN DEBT SUBJECT TO STATUTORY LIMIT
(In billions of dollars)
Description
Change in Gross Federal Debt:
Federal funds deficit ������������������������������������������������������������
Other transactions affecting borrowing from the public -Federal funds 1 ����������������������������������������������������������������
Increase (+) or decrease (–) in Federal debt held by
Federal funds ������������������������������������������������������������������
Adjustments for trust fund surplus/deficit not invested/
disinvested in Federal securities 2 �����������������������������������
Change in unrealized discount on Federal debt held by
Government accounts ����������������������������������������������������
Total financing requirements �������������������������������������
Change in Debt Subject to Limit:
Change in gross Federal debt ���������������������������������������������
Less: increase (+) or decrease (–) in Federal debt not
subject to limit �����������������������������������������������������������������
Less: change in adjustment for discount and premium 3 �����
Total, change in debt subject to limit �������������������������

Actual
2017
819.0

Estimate
2018

2019

2020

976.3 1,087.7 1,067.2

2021

2022

2023

2024

2025

2026

2027

2028

991.6

933.5

827.7

692.5

597.3

534.8

357.2

268.7

–168.7

292.2

98.6

89.2

88.8

89.1

84.6

75.4

63.2

49.5

41.3

44.8

22.5

28.3

32.4

42.8

39.9

39.3

39.5

39.0

38.0

35.1

37.7

37.9

–6.1

–24.3

5.8

–1.1

–1.0

–1.1

–0.7

–0.8

–0.7

–0.6

–0.3

–0.1

–0.5
.........
.........
.........
.........
.........
666.3 1,272.5 1,224.6 1,198.1 1,119.3 1,060.8

.........
951.1

.........
806.1

.........
697.7

.........
618.9

.........
436.0

.........
351.2

666.3 1,272.5 1,224.6 1,198.1 1,119.3 1,060.8

951.1

806.1

697.7

618.9

436.0

351.2

–1.8
–1.5
–2.2
–2.8
–2.0
–2.0
–2.1
.........
.........
.........
.........
.........
670.2 1,274.0 1,226.8 1,200.9 1,121.3 1,062.8

–2.1
.........
953.2

–2.2
.........
808.3

–1.4
.........
699.1

–1.5
.........
620.3

–1.9
.........
437.9

–1.8
.........
353.0

Memorandum:
Debt subject to statutory limit 4
20,208.6 21,482.6 22,709.4 23,910.3 25,031.6 26,094.4 27,047.6 27,855.9 28,555.0 29,175.3 29,613.2 29,966.3
Federal fund transactions that correspond to those presented in Table 4–2, but that are for Federal funds alone with respect to the public and trust funds.
2 Includes trust fund holdings in other cash assets and changes in the investments of the National Railroad Retirement Investment Trust in non-Federal securities.
3 Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds).
4 The statutory debt limit is approximately $20,456 billion, as increased after December 8, 2017.
1 Includes

43

4. Federal Borrowing and Debt

Foreign Holdings of Federal Debt
During most of American history, the Federal debt was
held almost entirely by individuals and institutions within the United States. In the late 1960s, foreign holdings
were just over $10 billion, less than 5 percent of the total
Federal debt held by the public. Foreign holdings began
to grow significantly starting in the 1970s and since 2004
have represented over 40 percent of outstanding debt.
This increase has been almost entirely due to decisions
by foreign central banks, corporations, and individuals,
rather than the direct marketing of these securities to
foreign investors.
Foreign holdings of Federal debt are presented in Table
4–7. At the end of 2017, foreign holdings of Treasury debt
were $6,323 billion, which was 43 percent of the total debt
held by the public.21 Foreign central banks and other foreign official institutions owned 64 percent of the foreign
holdings of Federal debt; private investors owned nearly
all the rest. At the end of 2017, the nations holding the
largest shares of U.S. Federal debt were China, which held
19 percent of all foreign holdings, and Japan, which held
17 percent. All of the foreign holdings of Federal debt are
denominated in dollars.
21 The debt calculated by the Bureau of Economic Analysis is different, though similar in size, because of a different method of valuing securities.

Although the amount of foreign holdings of Federal
debt has grown greatly over this period, the proportion
that foreign entities and individuals own, after increasing
abruptly in the very early 1970s, remained about 15–20
percent until the mid-1990s. During 1995–97, however,
growth in foreign holdings accelerated, reaching 33 percent by the end of 1997. Foreign holdings of Federal debt
resumed growth in the following decade, increasing to 48
percent by the end of 2008. After 2008, foreign holdings
as a percent of total Federal debt remained relatively stable through 2015 and then fell from 47 percent at the end
of 2015 to 43 percent at the end of 2016. Foreign holdings
remained at 43 percent at the end of 2017. The dollar
increase in foreign holdings was about 34 percent of total
Federal borrowing from the public in 2017 and 25 percent
over the last five years.
Foreign holdings of Federal debt are around 20-25 percent of the foreign-owned assets in the United States,
depending on the method of measuring total assets. The
foreign purchases of Federal debt securities do not measure the full impact of the capital inflow from abroad on
the market for Federal debt securities. The capital inflow
supplies additional funds to the credit market generally,
and thus affects the market for Federal debt. For example, the capital inflow includes deposits in U.S. financial
intermediaries that themselves buy Federal debt.

Table 4–7. FOREIGN HOLDINGS OF FEDERAL DEBT
(Dollar amounts in billions)
Change in debt held by the
public 2

Debt held by the public

Fiscal Year

Foreign 1

Total

Percentage
foreign

Total

Foreign

1965 ������������������������������������������������������

260.8

12.2

4.7

3.9

0.3

1970 ������������������������������������������������������
1975 ������������������������������������������������������

283.2
394.7

14.0
66.0

4.9
16.7

5.1
51.0

3.7
9.1

1980 ������������������������������������������������������
1985 ������������������������������������������������������

711.9
1,507.3

126.4
222.9

17.8
14.8

71.6
200.3

1.3
47.3

1990 ������������������������������������������������������
1995 ������������������������������������������������������

2,411.6
3,604.4

463.8
820.4

19.2
22.8

220.8
171.3

72.0
138.4

2000 ������������������������������������������������������
2005 ������������������������������������������������������

3,409.8
4,592.2

1,038.8
1,929.6

30.5
42.0

–222.6
296.7

–242.6
135.1

2010 ������������������������������������������������������
2011 ������������������������������������������������������
2012 ������������������������������������������������������
2013 ������������������������������������������������������
2014 ������������������������������������������������������

9,018.9
10,128.2
11,281.1
11,982.7
12,779.9

4,324.2
4,912.1
5,476.1
5,652.8
6,069.2

47.9
48.5
48.5
47.2
47.5

1,474.2
1,109.3
1,152.9
701.6
797.2

753.6
587.9
564.0
176.7
416.4

2015 ������������������������������������������������������
13,116.7
6,105.9
46.6
336.8
36.7
2016 ������������������������������������������������������
14,167.6
6,155.9
43.5
1,050.9
50.0
2017 ������������������������������������������������������
14,665.5
6,323.0
43.1
497.8
167.1
1 Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be
small. The data on foreign holdings are recorded by methods that are not fully comparable with the data on debt held by the
public. Projections of foreign holdings are not available.
2 Change in debt held by the public is defined as equal to the change in debt held by the public from the beginning of the
year to the end of the year.

44
Federal, Federally Guaranteed, and
Other Federally Assisted Borrowing
The Government’s effects on the credit markets arise
not only from its own borrowing but also from the direct loans that it makes to the public and the provision
of assistance to certain borrowing by the public. The
Government guarantees various types of borrowing by
individuals, businesses, and other non-Federal entities,
thereby providing assistance to private credit markets.
The Government is also assisting borrowing by States
through the Build America Bonds program, which subsidizes the interest that States pay on such borrowing. In

ANALYTICAL PERSPECTIVES

addition, the Government has established private corporations—Government-sponsored enterprises—to provide
financial intermediation for specified public purposes; it
exempts the interest on most State and local government
debt from income tax; it permits mortgage interest to be
deducted in calculating taxable income; and it insures
the deposits of banks and thrift institutions, which themselves make loans.
Federal credit programs and other forms of assistance
are discussed in Chapter 19, “Credit and Insurance,’’ in
this volume. Detailed data are presented in tables accompanying that chapter.

PERFORMANCE AND MANAGEMENT

45

5. SOCIAL INDICATORS

The social indicators presented in this chapter illustrate in broad terms how the Nation is faring in selected
areas. Indicators are drawn from six domains: economic,
demographic and civic, socioeconomic, health, security
and safety, and environment and energy. The indicators
shown in the tables in this chapter were chosen in consultation with statistical and data experts from across the
Federal Government. These indicators are only a subset
of the vast array of available data on conditions in the
United States. In choosing indicators for these tables, priority was given to measures that are broadly relevant to
Americans and consistently available over an extended
period. Such indicators provide a current snapshot while
also making it easier to draw comparisons and establish
trends.
The measures in these tables are influenced to varying degrees by many Government policies and programs,
as well as by external factors beyond the Government’s
control. They do not measure the impacts of Government
policies. Instead, they provide a quantitative picture of
the baseline on which future policies are set and useful
context for prioritizing budgetary resources.
Economic.—The 2008-2009 economic downturn produced the worst labor market since the Great Depression.
The employment-population ratio dropped sharply from
its pre-recession level, and real GDP per person also
declined. The unemployment rate has since recovered,
standing at 4.1 percent in December 2017, down from a
high of 10 percent in October 2009. Despite the recovery
in the unemployment rate, the employment-population
ratio remains low relative to its pre-recession levels. From
1985 to 2007, the employment-population ratio ranged
from 60.1 to 63.1 percent, and in 2007 it stood at 63.0 percent. After the 2008-2009 recession, it fell to 58.4 percent
in 2011 and has recovered only partly to 60.1 percent in
2017.
Over the entire period since 1960, the primary pattern
has been one of economic growth and rising living standards. Real GDP per person has tripled as technological
advancements and accumulation of human and physical capital increased the Nation’s productive capacity.
The stock of physical capital including consumer durable
goods, like cars and appliances, amounted to $55 trillion
in 2016, approximately five times the size of the capital
stock in 1960 after accounting for inflation.
However, national saving, a key determinant of future
prosperity because it supports capital accumulation, remains low relative to historical standards, standing at 2.3
percent of GDP in 2016, down from 10.9 percent in 1960.
Meanwhile, the labor force participation rate, also critical
for growth, has generally been on the decline since 2000
and fell abruptly during the 2008-2009 recession. Though

it increased slightly in the past two years, the labor force
participation rate remains far below pre-recession levels.
In addition to the size of the economy, the structure of
the economy has also changed considerably. From 2000
to 2016, goods-producing industries declined from 24.9 to
21.0 percent of total private goods and services, measured
in value added as a percent of GDP, while services-producing industries increased from 75.1 to 79.0 percent. This
period coincided with a steep decline in manufacturing
employment, potentially due to import competition from
China and changes in technology.1 The United States
has experienced persistent trade deficits since the early
1980s, reaching $714 billion in 2005 and standing at $505
billion in 2016.
Demographic and Civic.—The U.S. population
steadily increased from 1970 to 2017, growing from 204
million to 326 million. Since 1970, the foreign born population has rapidly increased, more than quadrupling from
about 10 million in 1970 to 44 million in 2016. The U.S.
population is getting older, due in part to the aging of the
baby boomers, improvements in medical technology, and
declining birth rates. From 1970 to 2016, the percent of
the population aged 65 and over increased from 9.8 to
15.2, and the percent aged 85 and over increased from 0.7
to 2.0. In contrast, the percent of the population aged 17
and younger declined from 28.0 in 1980 to 22.6 in 2017.
The composition of American households and families has evolved considerably over time. The percent of
Americans who have ever married has declined from 78.0
to 68.0 percent of Americans aged 15 and over. Average
family sizes have also fallen over this period, a pattern
that is typical among developed countries, from 3.7 to
3.1 members per family household. Births to unmarried women aged 15-17 and the fraction of single parent
households both reached turning points in 1995 after increasing for over three decades. From 1995 to 2016, the
number of births per 1,000 unmarried women aged 15-17
fell from 30 to 9, the lowest level on record. The fraction
of single parent households comprised 9.1 percent of all
households in 1995, up from only 4.4 percent in 1960, but
since 1995 it has stabilized and in recent years has decreased to 8.4 percent in 2017.
Charitable giving among Americans, measured by the
average charitable contribution per itemized tax return,
has generally increased over the past 50 years.2 The effects of the 2008-2009 recession are evident in the sharp
drop in charitable giving from 2005 to 2010, but that
1 Autor, David H., David Dorn, and Gordon H. Hanson (2013). The
China Syndrome: Local Labor Market Effects of Import Competition in
the United States, American Economic Review, 103(6).
2    This measure includes charitable giving only among those who
claim itemized deductions. It is therefore influenced by changes in tax
laws and in the characteristics of those who itemize.

47

48
decline was reversed by 2014 and charitable giving continues to increase.
Socioeconomic.—Education is a critical component of
the Nation’s economic growth and competitiveness, while
also benefiting society in areas such as health, crime, and
civic engagement. Between 1960 and 1980, the percentage of 25- to 34-year olds who have graduated from high
school increased from 58 percent to 84 percent, a gain of
13 percentage points per decade. The rate of increase has
slowed since then with a six percentage point gain over
the past 36 years. The percentage of 25- to 34-year olds
who have graduated from college continues to rise, from
only 11 percent in 1960 to 35 percent in 2016. While the
percentage of the population with a graduate degree has
risen over time, the percentage of graduate degrees in science and engineering fell by half in the period between
1960 and 1980, from 22 percent to 11 percent. However,
since 2010 this decline has partially reversed, with science and engineering degrees rising from 12 to 16 percent
of all graduate degrees in 2016.
Although national prosperity has grown considerably
over the past 50 years, these gains have not been shared
equally. Real disposable income per capita more than tripled since 1960, but for the median household, real income
increased by only 23 percent since 1970, and nearly all of
those gains took place prior to 2000. The median wealth
of households aged 55-64 declined dramatically from $321
thousand in 2005 to only $171 thousand in 2014, before
increasing to $187 thousand in 2016. From 2000 to 2010,
the poverty rate, the percentage of food-insecure households, and the percentage of Americans receiving benefits
from the Supplemental Nutrition Assistance Program
(SNAP), increased, with most of this increase taking place
during and after the 2008-2009 economic downturn. The
poverty rate has recovered to approximately its pre-recession level, while food insecurity and the percentage of the
population on SNAP have declined over the past several
years but still remain elevated.
After increasing from 1990 to 2005, homeownership
rates have fallen continuously since the 2008 housing crisis. The share of families with children and severe housing
cost burdens more than doubled from 8 percent in 1980 to
18 percent in 2010, before falling to 15 percent in 2015.
The share of families with children and inadequate housing steadily decreased from a high of 9 percent in 1980 to
a low of 5 percent in 2013, but has since increased to over
6 percent in 2015.
Health.—America has by far the most expensive
health care system in the world. National health expenditures as a share of GDP have increased from 5 percent in
1960 to nearly 18 percent in 2016. This increase in health
care spending coincides with improvements in medical
technologies that have improved health. However, the level of per capita health care spending in the United States
is far greater than in other Organization for Economic
Cooperation and Development (OECD) countries that
have experienced comparable health improvements.3
3 Squires, D. and C. Anderson (2015). U.S. Health Care from a Global
Perspective: Spending, Use of Services, Prices and Health in 13 Countries, The Commonwealth Fund.

ANALYTICAL PERSPECTIVES

Average private health insurance premiums paid by individuals with private health insurance increased by 19
percent from 2010 to 2016, after adjusting for inflation.
Some key indicators of national health have improved
since 1960. Infant mortality fell from 26 to under 6 per
1,000 live births, with a rapid decline occurring in the
1970s. Life expectancy at birth increased by 8.9 years,
from 69.7 in 1960 to 78.6 in 2016. However, between 2014
and 2016, life expectancy declined from its high of 78.9.
Improvements in health-related behaviors among
Americans have been mixed. Although the percent of
adults who smoke cigarettes in 2016 was less than half
of what it was in 1970, rates of obesity have soared. In
1980, 15 percent of adults and 6 percent of children were
obese; in 2016, 40 percent of adults and 19 percent of children were obese. Adult obesity continued to rise even as
the share of adults engaging in regular physical activity
increased from 15 percent in 2000 to 23 percent in 2016.
Security and Safety.—The last three decades have
witnessed a remarkable decline in crime. From 1980
to 2016, the property crime rate dropped by 76 percent
while the murder rate fell by 48 percent. However, the
downward decline in the murder rate ended in 2014, with
the rate rising between 2014 and 2016, and the property
crime rate rose from 2015 to 2016. The prison incarceration rate increased more than five-fold from 1970 through
2005, before declining by 8 percent from 2005 through
2015. Road transportation has become safer. Safety belt
use increased by 19 percentage points from 2000 to 2017,
and the annual number of highway fatalities fell by 29
percent from 1970 to 2016 despite the increase in the
population.
In recent years, the number of military personnel on
active duty has fallen to its lowest levels since at least
1960. The highest count of active duty military personnel
was 3.1 million in 1970, reached during the Vietnam War.
It now stands at 1.3 million. The number of veterans has
declined from 29 million in 1980 to 20 million in 2017.
Environment and Energy.—Substantial progress
has been made on air quality in the United States, with
the concentration of particulate matter falling 42 percent
from 2000 to 2016 and ground level ozone falling by 31 percent from 1980 to 2016. Gross greenhouse gas emissions
per capita and per real dollar of GDP have fallen since at
least 1990. As of 2016, 91 percent of the population served
by community water systems received drinking water in
compliance with applicable Federal water quality standards, which has remained relatively constant since 2000.
Technological advances and a shift in production patterns mean that Americans use less than half as much
energy per real dollar of GDP as they did 50 years ago,
and per capita energy consumption is at its lowest since
the 1960s despite rising income levels. From 2005 to 2016,
coal production fell by 36 percent, with most of that decrease occurring from 2014 to 2016. The decrease in coal
production since 2005 coincided with increases in the production of natural gas, petroleum, and renewable energy
as well as new regulatory proposals and requirements.

49

5. Social Indicators

Table 5–1. SOCIAL INDICATORS
Calendar Years

1960

1970

1980

1990

1995

2000

2005

2010

2014

2015

2016

2017

Economic
1
2
3
4
5
6
7
8

9
10
11
12
13
14
15
16

17
18
19
20
21
22
23
24

General Economic Conditions
Real GDP per person (chained 2009 dollars) ������������������������������ 17,198 23,024 28,325 35,794 38,167 44,475 48,090 47,720 50,216 51,286 51,690
Real GDP per person change, 5-year annual average ����������
0.8
2.4
2.6
2.4
1.3
3.1
1.6
–0.1
1.4
1.5
1.4
Consumer Price Index 1 ���������������������������������������������������������������
12.5
16.4
34.8
55.2
64.4
72.7
82.5
92.1 100.0 100.1 101.4
Private goods producing (%) �������������������������������������������������������
N/A
N/A
N/A
N/A
N/A
24.9
23.9
22.3
22.9
21.8
21.0
Private services producing (%) ����������������������������������������������������
N/A
N/A
N/A
N/A
N/A
75.1
76.1
77.7
77.1
78.2
79.0
New business starts (thousands) 2 ����������������������������������������������
N/A
N/A
452
477
513
482
544
385
404
414
N/A
Business failures (thousands) 3 ���������������������������������������������������
N/A
N/A
371
371
386
406
416
417
392
396
N/A
International trade balance (billions of dollars; + surplus / deficit) 4 �����������������������������������������������������������������������������������
3.5
2.3 –19.4 –80.9 –96.4 –372.5 –714.2 –494.7 –490.3 –500.4 –504.8
Jobs and Unemployment
Labor force participation rate (%) ������������������������������������������������
Employment (millions) �����������������������������������������������������������
Employment-population ratio (%) ������������������������������������������������
Payroll employment change - December to December, SA
(millions) ���������������������������������������������������������������������������������
Payroll employment change - 5-year annual average, NSA
(millions) ���������������������������������������������������������������������������������
Civilian unemployment rate (%) ���������������������������������������������������
Unemployment plus marginally attached and underemployed
(%) ������������������������������������������������������������������������������������������
Receiving Social Security disabled-worker benefits (% of
population) 5 ���������������������������������������������������������������������������

N/A
N/A
103.5
N/A
N/A
N/A
N/A
N/A

59.4
65.8
56.1

60.4
78.7
57.4

63.8
99.3
59.2

66.5
118.8
62.8

66.6
124.9
62.9

67.1
136.9
64.4

66.0
141.7
62.7

64.7
139.1
58.5

62.9
146.3
59.0

62.7
148.8
59.3

62.8
151.4
59.7

62.9
153.3
60.1

–0.4

–0.5

0.3

0.0

2.2

2.0

2.5

1.1

3.0

2.7

2.2

2.1

0.7
5.5

2.0
4.9

2.7
7.1

2.8
5.6

1.6
5.6

2.9
4.0

0.4
5.1

–0.7
9.6

1.5
6.2

2.3
5.3

2.5
4.9

2.5
4.4

N/A

N/A

N/A

N/A

10.1

7.0

8.9

16.7

12.0

10.4

9.6

8.5

0.9

2.0

2.8

2.5

3.3

3.7

4.5

5.5

6.0

5.8

5.7

N/A

Infrastructure, Innovation, and Capital Investment
Nonfarm business output per hour (average 5 year % change) 6 
1.8
2.1
1.2
1.6
1.6
2.8
3.2
1.9
1.1
0.6
0.6
Corn for grain production (million bushels) ���������������������������������� 3,907 4,152 6,639 7,934 7,400 9,915 11,112 12,425 14,216 13,601 15,148
Real net stock of fixed assets and consumer durable goods
(billions of chained 2009 dollars) �������������������������������������������� 11,383 16,921 23,265 30,870 34,246 40,217 46,305 50,332 52,943 53,814 54,659
Population served by secondary wastewater treatment or better
(%) 7 ����������������������������������������������������������������������������������������
N/A
41.6
56.4
63.7
61.1
71.4
74.3
72.0
74.5
N/A
N/A
Electricity net generation (kWh per capita) ���������������������������������� 4,202 7,486 10,076 12,170 12,594 13,475 13,723 13,335 12,850 12,707 12,624
Patents for invention, U.S. origin (per million population) 8 ����������
N/A
231
164
190
209
301
253
348
453
439
N/A
Net national saving rate (% of GDP) �������������������������������������������
10.9
8.5
7.1
3.9
4.0
5.9
2.7
–0.8
3.5
3.7
2.3
R&D spending (% of GDP) 9 �������������������������������������������������������
2.52
2.44
2.21
2.54
2.40
2.61
2.48
2.72
2.73
2.73
2.74

N/A
14,578
N/A
N/A
N/A
N/A
N/A
N/A

Demographic and Civic
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Population
Total population (millions) 10 ��������������������������������������������������������
Foreign born population (millions) 11 �������������������������������������������
17 years and younger (%) 10 �������������������������������������������������������
65 years and older (%) 10 ������������������������������������������������������������
85 years and older (%) 10 ������������������������������������������������������������
Household Composition
Ever married (% of age 15 and older) 12 �������������������������������������
Average family size 13 ������������������������������������������������������������������
Births to unmarried women age 15–17 (per 1,000 unmarried
women age 15–17) �����������������������������������������������������������������
Single parent households (%) �����������������������������������������������������
Civic and Cultural Engagement
Average charitable contribution per itemized tax return (2015
dollars) 14 ��������������������������������������������������������������������������������
Voting for President (% of voting age population) 15 ��������������������
Persons volunteering (% age 16 and older) 16 ����������������������������
Attendance at visual or performing arts activity, including moviegoing (% age 18 and older) 17 ������������������������������������������������
Reading: Novels or short stories, poetry, or plays (not required
for work or school; % age 18 and older) 17 �����������������������������

N/A
9.7
N/A
N/A
N/A

204.0
9.6
N/A
9.8
0.7

227.2
14.1
28.0
11.3
1.0

249.6
19.8
25.7
12.5
1.2

266.3
N/A
26.1
12.7
1.4

282.2
31.1
25.7
12.4
1.5

295.5
37.5
24.9
12.4
1.6

309.3
40.0
24.0
13.1
1.8

318.6
42.4
23.1
14.5
1.9

320.9
43.3
22.9
14.9
2.0

323.1
43.7
22.8
15.2
2.0

325.7
N/A
22.6
N/A
N/A

78.0
3.7

75.1
3.6

74.1
3.3

73.8
3.2

72.9
3.2

71.9
3.2

70.9
3.1

69.3
3.2

68.3
3.1

68.2
3.1

67.8
3.1

68.0
3.1

N/A
4.4

17.1
5.2

20.6
7.5

29.6
8.3

30.1
9.1

23.9
8.9

19.4
8.9

16.8
9.1

10.6
8.9

9.6
8.8

8.6
8.7

N/A
8.4

2,242
63.4
N/A

2,224
57.0
N/A

2,566
55.1
N/A

3,226
56.4
20.4

3,430
49.8
N/A

4,552
52.1
N/A

4,569
56.7
28.9

3,966
58.3
26.3

4,795
54.9
25.3

4,978
N/A
24.9

N/A
55.7
N/A

N/A
N/A
N/A

N/A

N/A

71.7

72.1

N/A

70.1

N/A

63.9

N/A

66.5

N/A

N/A

N/A

N/A

56.4

54.2

N/A

46.6

N/A

50.2

N/A

43.1

N/A

N/A

50

ANALYTICAL PERSPECTIVES

Table 5–1. SOCIAL INDICATORS—Continued
Calendar Years

1960

1970

1980

1990

1995

2000

2005

2010

2014

2015

2016

2017

Socioeconomic
39
40
41
42
43
44

45
46
47
48
49
50
51
52
53
54

55
56
57

Education
High school graduates (% of age 25–34) 18 ��������������������������������
College graduates (% of age 25–34) 19 ���������������������������������������
Reading achievement score (age 17) 20 ��������������������������������������
Math achievement score (age 17) 21 �������������������������������������������
Science and engineering graduate degrees (% of total graduate
degrees) ���������������������������������������������������������������������������������
Receiving special education services (% of age 3–21 public
school students) ���������������������������������������������������������������������

58.1
11.0
N/A
N/A

71.5
15.5
285
304

84.2
23.3
285
298

84.1
22.7
290
305

N/A
N/A
288
306

83.9
27.5
288
308

86.4
29.9
283
305

87.2
31.1
286
306

89.1
33.5
N/A
N/A

89.7
34.1
N/A
N/A

90.1
34.9
N/A
N/A

N/A
N/A
N/A
N/A

22.0

17.2

11.2

14.7

14.2

12.6

12.7

12.1

13.7

15.0

16.3

N/A

N/A

N/A

10.1

11.4

12.4

13.3

13.7

13.0

13.0

13.2

N/A

N/A

Income, Savings, and Inequality
Real median income: all households (2016 dollars) 22 ����������������
N/A 48,194 49,131 53,350 53,330 58,544 56,935 54,245 54,398 57,230 59,039
Real disposable income per capita (chained 2009 dollars) ��������� 11,877 16,643 20,158 25,555 27,180 31,524 34,424 35,685 37,441 38,720 38,988
Adjusted gross income share of top 1% of all taxpayers �������������
N/A
N/A
8.5
14.0
14.6
20.8
21.2
18.9
20.6
20.7
N/A
Adjusted gross income share of lower 50% of all taxpayers �������
N/A
N/A
17.7
15.0
14.5
13.0
12.9
11.7
11.3
11.3
N/A
Personal saving rate (% of disposable personal income) ������������
10.0
12.6
10.6
7.8
6.4
4.2
2.6
5.6
5.7
6.1
4.9
Foreign remittances (billions of 2016 dollars) 23 ��������������������������
N/A
N/A
N/A
N/A
N/A
32.6
38.5
40.5
42.4
44.8
46.5
Poverty rate (%) 24 �����������������������������������������������������������������������
22.2
12.6
13.0
13.5
13.8
11.3
12.6
15.1
14.8
13.5
12.7
Food-insecure households (% of all households) 25 ��������������������
N/A
N/A
N/A
N/A
11.9
10.5
11.0
14.5
14.0
12.7
12.3
Supplemental Nutrition Assistance Program (% of population on
SNAP) �������������������������������������������������������������������������������������
N/A
3.3
9.5
8.2
9.9
6.1
8.9
13.1
14.7
14.3
13.7
Median wealth of households, age 55–64 (in thousands of 2016
dollars) 26 ��������������������������������������������������������������������������������
80
N/A
158
183
180
251
321
198
171
N/A
187
Housing
Homeownership among households with children (%) 27 ������������
Families with children and severe housing cost burden (%) 28 ����
Families with children and inadequate housing (%) 29 ����������������

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
13.0
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
8
9

63.6
10
9

65.1
12
7

67.5
11
7

68.4
14.5
5.4

65.5
17.9
5.3

61.0
15.4
5.6

59.5
15.1
6.3

N/A
N/A
N/A

N/A
N/A
N/A

Health
58
59
60
61
62

Health Status
Life expectancy at birth (years) ���������������������������������������������������
Infant mortality (per 1,000 live births) ������������������������������������������
Low birthweight [<2,500 gms] (% of babies) �������������������������������
Disability (% of age 18 and over) 30 ���������������������������������������������
Disability (% of age 65 and over) 30 ���������������������������������������������

69.7
26.0
7.7
N/A
N/A

70.8
20.0
7.9
N/A
N/A

73.7
12.6
6.8
N/A
N/A

75.4
9.2
7.0
N/A
N/A

75.8
7.6
7.3
N/A
N/A

76.8
6.9
7.6
N/A
N/A

77.6
6.9
8.2
N/A
N/A

78.7
6.1
8.2
8.9
22.6

78.9
5.8
8.0
9.9
21.6

78.7
5.9
8.1
9.5
21.6

78.6
5.9
8.2
8.6
18.2

N/A
N/A
N/A
N/A
N/A

63
64
65
66
67

Health Behavior
Engaged in regular physical activity (% of age 18 and older) 31 ��
Obesity (% of age 20–74 with BMI 30 or greater) 32 �������������������
Obesity (% of age 2–19) 33 ����������������������������������������������������������
Cigarette smokers (% of age 18 and older) ���������������������������������
Heavier drinker (% of age 18 and older) 34 ����������������������������������

N/A
13.4
N/A
N/A
N/A

N/A
N/A
N/A
37.1
N/A

N/A
15.0
5.5
33.1
N/A

N/A
23.2
10.0
25.3
N/A

N/A
N/A
N/A
24.6
N/A

15.0
30.9
13.9
23.1
4.3

16.6
35.1
15.4
20.8
4.8

20.7
36.1
16.9
19.3
5.2

21.5
38.2
17.2
17.0
5.2

21.6
N/A
N/A
15.3
5.0

22.7
40.0
18.5
15.9
5.3

N/A
N/A
N/A
N/A
N/A

5.0

6.9

8.9

12.1

13.3

13.3

15.5

17.4

17.4

17.7

17.9

N/A

N/A

N/A

N/A

N/A

N/A

3,700

4,905

5,437

5,913

6,038

6,101

N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
N/A
N/A

N/A
16.9
13.0

N/A
18.9
12.6

N/A
19.3
9.3

3,062
22.3
7.8

3,438
16.3
5.5

3,547
13.0
4.5

3,657
12.2
5.2

N/A
N/A
N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

56.6

71.6

72.2

70.7

N/A

N/A

N/A 49,610 34,890 31,547 19,043 15,947 12,541 11,806 11,072 11,944

N/A

N/A
5.1

N/A
7.9

4,940
10.2

4,410
9.4

7,068
8.2

3,749
5.5

2,842
5.6

1,928
4.8

2,010
4.4

1,858
4.9

2,112
5.3

N/A
N/A

118.8

95.8

145.6

311.9

430.4

508.8

518.2

523.3

491.7

476.7

N/A

N/A

68
69
70
71
72
73

Access to Health Care
Total national health expenditures (% of GDP) ����������������������������
Average total single premium per enrolled employee at privatesector establishments (2016 dollars) 35 ����������������������������������
Average health insurance premium paid by an individual or
family (2016 dollars) 36 �����������������������������������������������������������
Persons without health insurance (% of age 18–64) 37 ���������������
Persons without health insurance (% of age 17 and younger) 37 
Children age 19–35 months with recommended vaccinations
(%) 38 ��������������������������������������������������������������������������������������
Security and Safety

74
75
76
77

Crime
Property crimes (per 100,000 households) 39 �����������������������������
Violent crime victimizations (per 100,000 population age 12 or
older) 40 ����������������������������������������������������������������������������������
Murder rate (per 100,000 persons) ����������������������������������������������
Prison incarceration rate (state and federal institutions, rate per
100,000 persons) 41 ����������������������������������������������������������������

51

5. Social Indicators

Table 5–1. SOCIAL INDICATORS—Continued
Calendar Years

1960

1970

1980

1990

1995

2000

2005

2010

2014

2015

2016

2017

78
79

National Security
Military personnel on active duty (thousands) 42 ������������������������� 2,475 3,065 2,051 2,044 1,518 1,384 1,389 1,431 1,338 1,314 1,301
Veterans (thousands) ������������������������������������������������������������������ 22,534 26,976 28,640 27,320 26,198 26,206 24,542 22,668 21,250 20,784 20,392

1,307
19,999

80
81

Transportation Safety
Safety belt use (%) ����������������������������������������������������������������������
N/A
N/A
N/A
N/A
N/A
70.7
81.7
85.1
86.7
88.5
90.1
Highway fatalities ������������������������������������������������������������������������� 36,399 52,627 51,091 44,599 41,817 41,945 43,510 32,999 32,744 35,485 37,461

89.7
N/A

Environment and Energy
82
83
84
85
86
87
88
89

90
91
92
93
94
95
96

Air Quality and Greenhouse Gases
Ground level ozone (ppm) 43 �������������������������������������������������������
Particulate matter 2.5 (ug/m3) 44 �������������������������������������������������
Annual mean atmospheric CO2 concentration (Mauna Loa,
Hawaii; ppm) ���������������������������������������������������������������������������
Gross greenhouse gas emissions (teragrams CO2 equivalent)
45 ���������������������������������������������������������������������������������������������
Net greenhouse gas emissions, including sinks (teragrams CO2
equivalent) ������������������������������������������������������������������������������
Gross greenhouse gas emissions per capita (metric tons CO2
equivalent) ������������������������������������������������������������������������������
Gross greenhouse gas emissions per 2009$ of GDP (kilograms
CO2 equivalent) ����������������������������������������������������������������������
Population that receives drinking water in compliance with
standards (%) 46 ���������������������������������������������������������������������
Energy
Energy consumption per capita (million Btu) �������������������������������
Energy consumption per 2009$ GDP (thousand Btu per 2009$) 
Electricity net generation from renewable sources, all sectors (%
of total) 47 ��������������������������������������������������������������������������������
Coal production (million short tons) ���������������������������������������������
Natural gas production (dry) (trillion cubic feet) 48 �����������������������
Petroleum production (million barrels per day) ����������������������������
Renewable energy production (quadrillion Btu) ���������������������������

N/A
N/A

N/A
N/A

0.10
N/A

0.09
N/A

0.09
N/A

0.08
13.4

0.08
12.8

0.07
9.9

0.07
8.8

0.07
8.5

0.07
7.8

N/A
N/A

316.9

325.7

338.7

354.4

360.8

369.5

379.8

389.9

398.6

400.8

404.2

406.5

N/A

N/A

N/A

6,363

6,709

7,214

7,313

6,926

6,740

6,587

N/A

N/A

N/A

N/A

N/A

5,544

5,923

6,462

6,582

6,208

5,978

5,828

N/A

N/A

N/A

N/A

N/A

25.1

24.8

25.2

24.4

22.1

20.9

20.2

N/A

N/A

N/A

N/A

N/A

0.71

0.66

0.57

0.51

0.47

0.42

0.40

N/A

N/A

N/A

N/A

N/A

N/A

83.8

90.8

88.5

92.2

92.5

91.1

91.2

N/A

250
14.5

331
14.4

344
12.1

338
9.4

342
9.0

350
7.9

339
7.0

315
6.6

309
6.2

303
5.9

302
5.9

N/A
N/A

19.7
434
12.2
8.0
2.9

16.4
613
21.0
11.3
4.1

12.4
830
19.4
10.2
5.4

11.8
1,029
17.8
8.9
6.0

11.5
1,033
18.6
8.3
6.6

9.4
1,074
19.2
7.7
6.1

8.8
1,131
18.1
6.9
6.2

10.4
1,084
21.3
7.5
8.1

13.2
1,000
25.9
11.8
9.6

13.3
897
27.1
12.8
9.5

14.9
728
26.7
12.4
10.2

N/A
N/A
N/A
N/A
N/A

N/A=Number is not available.
1 Adjusted CPI-U. 2014=100.
2 New business starts are defined as firms with positive employment in the current year and no paid employment in any prior year of the LBD. Employment is measured as of the
payroll period including March 12th.
3 Business failures are defined as firms with employment in the prior year that have no paid employees in the current year.
4 Calculated as the value of U.S. exports of goods and services less the value of U.S. imports of goods and services, on a balance of payments basis. This balance is a component of
the U.S. International Transactions Balance of Payments) Accounts.
5 Gross prevalence rate for persons receiving Social Security disabled-worker benefits among the estimated population insured in the event of disability at end of year. Gross rates do
not account for changes in the age and sex composition of the insured population over time.
6 Values for prior years have been revised from the prior version of this publication.
7 Data correspond to years 1972, 1982, 1992, 1996, 2000, 2004, 2008, and 2012.
8 Patent data adjusted by OMB to incorporate total population estimates from U.S. Census Bureau.
9 The data point for 2016 is estimated and may be revised in the next report of this time series. The R&D to GDP ratio data reflect the new methodology introduced in the 2013
comprehensive revision of the GDP and other National Income and Product Accounts by the U.S. Bureau of Economic Analysis BEA). In late July 2013, BEA reported GDP and related
statistics that were revised back to 1929. The new GDP methodology treats R&D as investment in all sectors of the economy, among other methodological changes. For further details
see NSF’s InfoBrief “R&D Recognized as Investment in U.S. Gross Domestic Product Statistics: GDP Increase Slightly Lowers R&D-to-GDP Ratio” at http://www.nsf.gov/statistics/2015/
nsf15315/nsf15315.pdf.
10 Data source and values for 2010 to 2016 have been updated relative to the prior version of this publication.
11 Data source for 1960 to 2000 is the decennial census; data source for 2006, 2010, 2011, 2012, 2013, 2014, 2015, and 2016 is the American Community Survey.
12 For 1960, age 14 and older.
13 Average size of family households. Family households are those in which there is someone present who is related to the householder by birth, marriage, or adoption.
14 Charitable giving reported as itemized deductions on Schedule A.
15 Data correspond to years 1964, 1972, 1980, 1992, 1996, 2000, 2004, 2008, 2012 and 2016. The voting statistics in this table are presented as ratios of official voting tallies, as
reported by the U.S. Clerk of the House, to population estimates from the Current Population Survey.
16 Refers to those who volunteered at least once during a one-year period, from September of the previous year to September of the year specified. For 1990, refers to 1989 estimate
from the CPS Supplement on volunteers.
17 The 1980, 1990, 2000, and 2010 data come from the 1982, 1992, 2002, and 2008 waves of the Survey of Public Participation in the Arts, respectively.
18 For 1960, includes those who have completed 4 years of high school or beyond. For 1970 and 1980, includes those who have completed 12 years of school or beyond. For 1990
onward, includes those who have completed a high school diploma or the equivalent.
19 For 1960 to 1980, includes those who have completed 4 or more years of college. From 1990 onward, includes those who have a bachelor’s degree or higher.
20 Data correspond to years 1971, 1980, 1990, 1994, 1999, 2004, 2008, and 2012.

52

ANALYTICAL PERSPECTIVES

Table 5–1. SOCIAL INDICATORS—Continued
21 Data

correspond to years 1973, 1982, 1990, 1994, 1999, 2004, 2008, and 2012.
with 2013, data are based on redesigned income questions. The source of the 2013 data is a portion of the CPS ASEC sample which received the redesigned income
questions, approximately 30,000 addresses. For more information, please see the report Income and Poverty in the United States: 2014, U.S. Census Bureau, Current Population Reports,
P60-252.
23 Foreign remittances, referred to as ‘personal transfers’ in the U.S. International Transactions Balance of Payments) Accounts, consist of all transfers in cash or in kind sent by the
foreign-born population resident in the United States to households resident abroad. Adjusted by OMB to 2016 dollars using the CPI-U.
24 The poverty rate does not reflect noncash government transfers. Beginning with 2013, data are based on redesigned income questions. The source of the 2013 data is a portion of
the CPS ASEC sample which received the redesigned income questions, approximately 30,000 addresses. For more information, please see the report Income and Poverty in the United
States: 2014, U.S. Census Bureau, Current Population Reports, P60-252.
25 Food-insecure classification is based on reports of three or more conditions that characterize households when they are having difficulty obtaining adequate food, out of a total of 10
such conditions.
26 Data values shown are 1962, 1983, 1989, 1995, 2001, 2004, 2010, 2013, and 2016. For 1962, the data source is the SFCC; for subsequent years, the data source is the SCF
27 Some data interpolated.
28 Expenditures for housing and utilities exceed 50 percent of reported income. Some data interpolated.
29 Inadequate housing has moderate to severe problems, usually poor plumbing, or heating or upkeep problems. Some data interpolated.
30 Disability is defined by level of difficulty in six domains of functioning: vision, hearing, mobility, communication, cognition, and self-care. Persons indicating “a lot of difficulty,” or “cannot
do at all/unable to do” in at least one domain are considered to have a “Disability.”
31 Participation in leisure-time aerobic and muscle-strengthening activities that meet 2008 Federal physical activity guidelines.
32 BMI refers to body mass index. The 1960, 1980, 1990, 2000, 2005, 2010, 2014, 2016 data correspond to survey years 1960-1962, 1976-1980, 1988-1994, 1999-2000, 2005-2006,
2009-2010, 2013-2014, and 2015-2016, respectively.
33 Percentage at or above the sex-and age-specific 95th percentile BMI cutoff points from the 2000 CDC growth charts. The 1980, 1990, 2000, 2005, 2010, 2014, 2016 data correspond
to survey years 1976-1980, 1988-1994, 1999-2000, 2005-2006, 2009-2010, 2013-2014, and 2015-2016, respectively.
34 Heavier drinking is based on self-reported responses to questions about average alcohol consumption and is defined as, on average, more than 14 drinks per week for men and more
than 7 drinks per week for women.
35 Includes only employees of private-sector establishments that offer health insurance. Adjusted to 2016 dollars by OMB.
36 Unpublished data. This is the mean total private health insurance premium paid by an individual or family for the private coverage that person is on. If a person is covered by more
than one plan, the premiums for the plans are added together. Those who pay no premiums towards their plans are included in the estimates. Adjusted to 2016 dollars by OMB.
37 A person was defined as uninsured if he or she did not have any private health insurance, Medicare, Medicaid, CHIP (1999-2016), state-sponsored, other government-sponsored
health plan (1997-2016), or military plan. Beginning in 2014, a person with health insurance coverage through the Health Insurance Marketplace or state-based exchanges was
considered to have private coverage. A person was also defined as uninsured if he or she had only Indian Health Service coverage or had only a private plan that paid for one type of
service such as accidents or dental care. In 1993-1996 Medicaid coverage is estimated through a survey question about having Medicaid in the past month and through participation in
Aid to Families with Dependent Children (AFDC) or Supplemental Security Income (SSI) programs. In 1997 to 2016, Medicaid coverage is estimated through a question about current
Medicaid coverage. Beginning in the third quarter of 2004, a Medicaid probe question was added to reduce potential errors in reporting Medicaid status. Persons under age 65 with no
reported coverage were asked explictly about Medicaid coverage.
38 Recommended vaccine series consists of 4 or more doses of either the diphtheria, tetanus toxoids, and pertussis vaccine (DTP), the diphtheria and tetanus toxoids vaccine (DT),
or the diphtheria, tetanus toxoids, and acellular pertussis vaccine (DTaP); 3 or more doses of any poliovirus vaccine; 1 or more doses of a measles-containing vaccine (MCV); 3 or more
doses or 4 or more doses of Haemophilus influenzae type b vaccine (Hib) depending on Hib vaccine product type (full series Hib); 3 or more doses of hepatitis B vaccine; 1 or more doses
of varicella vaccine; and 4 or more doses of pneumococcal conjugate vaccine (PCV).
39 Property crimes, including burglary, motor vehicle theft, and property theft, reported by a sample of households. Includes property crimes both reported and not reported to law
enforcement. Due to methodological changes in the 2016 NCVS, use caution when comparing 2016 criminal victimization estimates to other years. See Criminal Victimization, 2016 (BJS
Web, NCJ 251150, December, 2017) for more information.
40 Violent crimes include rape, robbery, aggravated assault, and simple assault. Includes crimes both reported and not reported to law enforcement. Due to methodological changes
in the enumeration method for NCVS estimates from 1993 to present, use caution when comparing 1980 and 1990 criminal victimization estimates to future years. Estimates from 1995
and beyond include a small number of victimizations, referred to as series victimizations, using a new counting strategy. High-frequency repeat victimizations, or series victimizations,
are six or more similar but separate victimizations that occur with such frequency that the victim is unable to recall each individual event or describe each event in detail. Including series
victimizations in national estimates can substantially increase the number and rate of violent victimization; however, trends in violence are generally similar regardless of whether series
victimizations are included. See Methods for Counting High-Frequency Repeat Victimizations in the National Crime Victimization Survey, NCJ 237308, BJS web, April 2012 for further
discussion of the new counting strategy and supporting research. Due to methodological changes in the 2016 NCVS, use caution when comparing 2016 criminal victimization estimates to
other years. See Criminal Victimization, 2016 (BJS Web, NCJ 251150, December, 2017) for more information.
41 Prior to 1977, the National Prisoners Statistics (NPS) Program reports were based on custody population. Beginning in 1977, the report reoriented to jurisdiction population.
Generally, State inmates housed in local jails because of overcrowding are considered to be under State jurisdiction. Most, but not all, States reserve prison for offenders sentenced to a
year or more.
42 For all years, the actuals reflect Active Component only excluding full-time Reserve Component members and RC mobilized to active duty. End Strength for 2017 is preliminary.
43 Ambient ozone concentrations based on 206 monitoring sites meeting minimum completeness criteria.
44 Ambient PM2.5 concentrations based on 455 monitoring sites meeting minimum completeness criteria.
45 The gross emissions indicator does not include sinks, which are processes (sometimes naturally occurring) that remove greenhouse gases from the atmosphere. Gross emissions are
therefore more indicative of trends in energy consumption and efficiency than are net emissions.
46 Percent of the population served by community water systems that receive drinking water that meets all applicable health - based drinking water standards.
47 Includes net generation from solar thermal and photovoltaic (PV) energy at utility-scale facilities. Does not include distributed (small-scale) solar thermal or photovoltaic generation.
48 Dry natural gas is also known as consumer-grade natural gas.
22 Beginning

53

5. Social Indicators

Table 5–2. SOURCES FOR SOCIAL INDICATORS
Indicator

Source

Economic
1
2
3
4
5
6
7
8

9
10
11
12
13
14
15
16

17
18
19
20
21

22

23
24

General Economic Conditions
Real GDP per person (chained 2009 dollars) �������������������������������������������������������������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
Real GDP per person change, 5-year annual average ������������������������������������������������������������������ Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
Consumer Price Index ������������������������������������������������������������������������������������������������������������������������� Bureau of Labor Statistics, BLS Consumer Price Index Program. https://
www.bls.gov/cpi/
Private goods producing (%) ��������������������������������������������������������������������������������������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
Private services producing (%) ������������������������������������������������������������������������������������������������������������ Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
New business starts (thousands) �������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Business Dynamics Statistics. https://www.census.
gov/ces/dataproducts/bds/
Business failures (thousands) ������������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Business Dynamics Statistics. https://www.census.
gov/ces/dataproducts/bds/
International trade balance (billions of dollars; + surplus �������������������������������������������������������������������� Bureau of Economic Analysis, International Economics Accounts, https://
www.bea.gov/International/index.htm
Jobs and Unemployment
Labor force participation rate (%) �������������������������������������������������������������������������������������������������������� Bureau of Labor Statistics, Current Population Survey. https://www.bls.gov/
cps
Employment (millions) ������������������������������������������������������������������������������������������������������������������� Bureau of Labor Statistics, Current Population Survey. https://www.bls.gov/
cps
Employment-population ratio (%) �������������������������������������������������������������������������������������������������������� Bureau of Labor Statistics, Current Population Survey. https://www.bls.gov/
cps
Payroll employment change - December to December, SA (millions) ������������������������������������������������� Bureau of Labor Statistics, Current Employment Statistics program. https://
www.bls.gov/ces/
Payroll employment change - 5-year annual average, NSA (millions) ������������������������������������������������� Bureau of Labor Statistics, Current Employment Statistics program. https://
www.bls.gov/ces/
Civilian unemployment rate (%) ����������������������������������������������������������������������������������������������������������� Bureau of Labor Statistics, Current Population Survey. https://www.bls.gov/
cps
Unemployment plus marginally attached and underemployed (%) ����������������������������������������������������� Bureau of Labor Statistics, Current Population Survey. https://www.bls.gov/
cps
Receiving Social Security disabled-worker benefits (% of population) ������������������������������������������������ Social Security Administration, Office of Research, Evaluation, and
Statistics, Annual Statistical Supplement to the Social Security Bulletin,
(tables 4.C1 and 5.A4). http://www.ssa.gov/policy/docs/statcomps/
supplement/
Infrastructure, Innovation, and Capital Investment
Nonfarm business output per hour (average 5 year % change) ���������������������������������������������������������� Bureau of Labor Statistics, Major Sector Productivity Program. https://www.
bls.gov/lpc/
Corn for grain production (million bushels) ������������������������������������������������������������������������������������������ National Agricultural Statistics Service, Agricultural Estimates Program.
http://www.nass.usda.gov/
Real net stock of fixed assets and consumer durable goods (billions of chained 2009 dollars) ���������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
Population served by secondary wastewater treatment or better (%) ������������������������������������������������� U.S. Environmental Protection Agency, Clean Watersheds Needs Survey.
http://www.epa.gov/cwns
Electricity net generation (kWh per capita) ������������������������������������������������������������������������������������������ U.S. Energy Information Administration (EIA) calculation from: EIA, Monthly
Energy Review (October 2017); and Table 7.2a https://www.eia.gov/
totalenergy/data/monthly; and U.S. Census Bureau, Population Division,
Vintage 2016 Population Estimates (2010-2016) https://www.census.
gov/data/tables/2016/demo/popest/nation-total.html
Patents for invention, U.S. origin (per million population) �������������������������������������������������������������������� U.S. Patent and Trademark Office, Patent Technology Monitoring Team,
U.S. Patent Statistics Chart, Calendar Years 1963-2015. https://www.
uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm; and, U.S. Census
Bureau, Population Division.
Net national saving rate (% of GDP) ��������������������������������������������������������������������������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
R&D spending (% of GDP) ������������������������������������������������������������������������������������������������������������������ National Science Foundation, National Patterns of R&D Resources. http://
www.nsf.gov/statistics/natlpatterns/
Demographic and Civic

25

Population
Total population (millions) �������������������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2017 Population
Estimates (2017), Vintage 2016 Population Estimates (2010-2016),
2000-2010 Intercensal Estimates (2000-2005), 1990-1999 Intercensal
Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980), 19701980 Intercensal Estimates (1970).

54

ANALYTICAL PERSPECTIVES

TABLE 5–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
26
27

28

29

Source

Foreign born population (millions) ������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Decennial Census and American
Community Survey. http://www.census.gov/prod/www/abs/decennial/
and http://www.census.gov/acs
17 years and younger (%) ������������������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2017 Population
Estimates (2017), Vintage 2016 Population Estimates (2010-2016),
2000-2010 Intercensal Estimates (2000-2005), 1990-1999 Intercensal
Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980), 19701980 Intercensal Estimates (1970).
65 years and older (%) ������������������������������������������������������������������������������������������������������������������������ U.S. Census Bureau, Population Division, Vintage 2017 Population
Estimates (2017), Vintage 2016 Population Estimates (2010-2016),
2000-2010 Intercensal Estimates (2000-2005), 1990-1999 Intercensal
Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980), 19701980 Intercensal Estimates (1970).
85 years and older (%) ������������������������������������������������������������������������������������������������������������������������ U.S. Census Bureau, Population Division, Vintage 2017 Population
Estimates (2017), Vintage 2016 Population Estimates (2010-2016),
2000-2010 Intercensal Estimates (2000-2005), 1990-1999 Intercensal
Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980), 19701980 Intercensal Estimates (1970).

Household Composition
Ever married (% of age 15 and older) ������������������������������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey. http://www.census.gov/
hhes/families/
31
Average family size ������������������������������������������������������������������������������������������������������������������������������ U.S. Census Bureau, Current Population Survey. http://www.census.gov/
hhes/families/
32
Births to unmarried women age 15-17 (per 1,000 unmarried women age 15-17) ������������������������������� National Center for Health Statistics, National Vital Statistics System
(natality); Births: Final data for 2016 forthcomoing.
33
Single parent households (%) ������������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey. http://www.census.gov/
hhes/families/
30

34
35
36
37
38

Civic and Cultural Engagement
Average charitable contribution per itemized tax return (2015 dollars) ����������������������������������������������� U.S. Internal Revenue Service, Statistics of Income - Individual Income Tax
Returns (IRS Publication 1304). http://www.irs.gov/uac/SOI-Tax-StatsIndividual-Income-Tax-Returns-Publication-1304-(Complete-Report)
Voting for President (% of voting age population) �������������������������������������������������������������������������������� The Office of the Clerk of the U.S. House of Representatives and the U.S.
Census Bureau, Current Population Survey. http://www.census.gov/cps/
Persons volunteering (% age 16 and older) ���������������������������������������������������������������������������������������� Corporation for National and Community Service, Volunteering and Civic
Life in America, https://data.nationalservice.gov/Volunteering-and-CivicEngagement/Volunteering-and-Civic-Life-in-America/spx3-tt2b/data
Attendance at visual or performing arts activity, including movie-going (% age 18 and older) ������������ The National Endowment for the Arts, Survey of Public Participation in the
Arts & Annual Arts Basic Survey.
Reading: Novels or short stories, poetry, or plays (not required for work or school; % age 18 and
The National Endowment for the Arts, Survey of Public Participation in the
older) ����������������������������������������������������������������������������������������������������������������������������������������������
Arts & Annual Arts Basic Survey.
Socioeconomic

39
40
41
42
43
44

Education
High school graduates (% of age 25-34) ��������������������������������������������������������������������������������������������� U.S. Census Bureau, Decennial Census and American Community Survey.
http://www.census.gov/prod/www/decennial.html and http://www.
census.gov/acs
College graduates (% of age 25-34) ���������������������������������������������������������������������������������������������������� U.S. Census Bureau, Decennial Census and American Community Survey.
http://www.census.gov/prod/www/decennial.html and http://www.
census.gov/acs
Reading achievement score (age 17) �������������������������������������������������������������������������������������������������� National Center for Education Statistics, National Assessment of
Educational Progress. https://nces.ed.gov/nationsreportcard/
Math achievement score (age 17) ������������������������������������������������������������������������������������������������������� National Center for Education Statistics, National Assessment of
Educational Progress. https://nces.ed.gov/nationsreportcard/
Science and engineering graduate degrees (% of total graduate degrees) ���������������������������������������� National Center for Education Statistics, Integrated Postsecondary
Education Data System. http://nces.ed.gov/ipeds/
Receiving special education services (% of age 3-21 public school students) ����������������������������������� National Center for Education Statistics, Digest of Education Statistics,
2012. http://nces.ed.gov/programs/digest/d12/tables/dt12_046.asp

Income, Savings, and Inequality
Real median income: all households (2014 dollars) ���������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey, Annual Social and
Economic Supplements. http://www.census.gov/hhes/www/income/data/
historical/household/
46
Real disposable income per capita (chained 2009 dollars) ����������������������������������������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
47
Adjusted gross income share of top 1% of all taxpayers ��������������������������������������������������������������������� U.S. Internal Revenue Service, Statistics of Income. http://www.irs.gov/uac/
SOI-Tax-Stats-Individual-Statistical-Tables-by-Tax-Rate-and-IncomePercentile
48
Adjusted gross income share of lower 50% of all taxpayers ��������������������������������������������������������������� U.S. Internal Revenue Service, Statistics of Income. http://www.irs.gov/uac/
SOI-Tax-Stats-Individual-Statistical-Tables-by-Tax-Rate-and-IncomePercentile
45

55

5. Social Indicators

TABLE 5–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
49
50
51
52
53
54

Source

Personal saving rate (% of disposable personal income) �������������������������������������������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://
www.bea.gov/national/
Foreign remittances (billions of 2016 dollars) �������������������������������������������������������������������������������������� Bureau of Economic Analysis, International Economics Accounts, https://
www.bea.gov/International/index.htm
Poverty rate (%) ����������������������������������������������������������������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey, Annual Social and
Economic Supplements. http://www.census.gov/hhes/www/poverty/
publications/pubs-cps.html
Food-insecure households (% of all households) �������������������������������������������������������������������������������� Economic Research Service, Household Food Security in the United
States report series. http://www.ers.usda.gov/topics/food-nutritionassistance/food-security-in-the-us/readings.aspx
Supplemental Nutrition Assistance Program (% of population on SNAP) ������������������������������������������� Food and Nutrition Service, USDA
Median wealth of households, age 55-64 (in thousands of 2016 dollars) ������������������������������������������� Board of Governors of the Federal Reserve System, Survey of Consumer
Finances 2013 Estimates inflation-adjusted to 2013 dollars (Internal
Data) http://www.federalreserve.gov/econresdata/scf/scfindex.htm

Housing
Homeownership among households with children (%) ������������������������������������������������������������������������ U.S. Census Bureau, American Housing Survey (Current Housing Report).
Estimated by Housing and Urban Development’s Office of Policy
Development and Research. http://www.census.gov/housing/ahs
56
Families with children and severe housing cost burden (%) ���������������������������������������������������������������� U.S. Census Bureau, American Housing Survey. Tabulated by Housing
and Urban Development’s Office of Policy Development and Research.
http://www.census.gov/housing/ahs
57
Families with children and inadequate housing (%) ���������������������������������������������������������������������������� U.S. Census Bureau, American Housing Survey. Tabulated by Housing
and Urban Development’s Office of Policy Development and Research.
http://www.census.gov/housing/ahs
55

Health
58
59
60
61
62

63
64

65

66

67

Health Status
Life expectancy at birth (years) ����������������������������������������������������������������������������������������������������������� National Center for Health Statistics, National Vital Statistics System:
Health, United States 2017 forthcoming, Table 15.
Infant mortality (per 1,000 live births) �������������������������������������������������������������������������������������������������� National Center for Health Statistics, National Vital Statistics System:
Health, United States, 2017 forthcoming, Table 11.
Low birthweight [<2,500 gms] (% of babies) ��������������������������������������������������������������������������������������� National Center for Health Statistics, National Vital Statistics System
(natality); Births: Final data for 2016 forthcoming.
Disability (% of age 18 and over) ��������������������������������������������������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey,
http://www.cdc.gov/nchs/nhis.htm
Disability (% of age 65 and over) ��������������������������������������������������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey,
http://www.cdc.gov/nchs/nhis.htm
Health Behavior
Engaged in regular physical activity (% of age 18 and older) �������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey,
http://www.cdc.gov/nchs/nhis.htm: Health, United States, 2017
forthcoming, Table 57, age adjusted.
Obesity (% of age 20-74 with BMI 30 or greater) �������������������������������������������������������������������������������� National Center for Health Statistics, National Health and Nutrition
Examination Survey, http://www.cdc.gov/nchs/nhanes.htm. Health
E-stat: http://www.cdc.gov/nchs/data/hestat/obesity_adult_13_14/
obesity_adult_13_14.pdf and unpublished data (2016 data), ageadjusted
Obesity (% of age 2-19) ����������������������������������������������������������������������������������������������������������������������� National Center for Health Statistics, National Health and Nutrition
Examination Survey, http://www.cdc.gov/nchs/nhanes.htm. Health
E-stat: http://www.cdc.gov/nchs/data/hestat/obesity_child_13_14/
obesity_child_13_14.pdf. Hales CM, Carroll MD, Fryar CD, Ogden CL.
Prevalence of obesity among adults and youth: United States, 20152016. NCHS data brief, no 288. Hyattsville, MD: National Center for
Health Statistics, 2017 (2015 data).
Cigarette smokers (% of age 18 and older) ����������������������������������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey,
http://www.cdc.gov/nchs/nhis.htm: Health, United States, 2017
forthcoming, Table 47 and unpublished data (1970 and 1980 data), age
adjusted.
Heavier drinker (% of age 18 and older) ���������������������������������������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey,
http://www.cdc.gov/nchs/nhis.htm: Health, United States, 2014, Table 58
and unpublished data (2014-2016 data), age adjusted.

Access to Health Care
Total national health expenditures (% of GDP) ������������������������������������������������������������������������������������ Centers for Medicare and Medicaid Services, National Health Expenditures
Data. http://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/NationalHealthExpendData/index.html
69
Average total single premium per enrolled employee at private-sector establishments (2016 dollars)  Agency for Healthcare Research and Quality, Medical Expenditure Panel
Survey. https://meps.ahrq.gov
70
Average health insurance premium paid by an individual or family (2016 dollars) ������������������������������ Centers for Disease Control and Prevention, National Center for Health
Statistics, National Health Interview Survey, 2010-2015, Family Core
component.
68

56

ANALYTICAL PERSPECTIVES

TABLE 5–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
71
72
73

Source

Persons without health insurance (% of age 18-64) ���������������������������������������������������������������������������� National Center for Health Statistics, National Health Interview Survey.
Persons without health insurance (% of age 17 and younger) ������������������������������������������������������������ National Center for Health Statistics, National Health Interview Survey.
Children age 19-35 months with recommended vaccinations (%) ������������������������������������������������������ National Center for Immunization and Respiratory Diseases, National
Immunization Survey: http://www.cdc.gov/vaccines/imz-managers/
coverage/nis/child/: Health, United States, 2017 forthcoming, Table 66.
Security and Safety

Crime
Property crimes (per 100,000 households) ����������������������������������������������������������������������������������������� Bureau of Justice Statistics, National Crime Victimization Survey. http://
www.bjs.gov/index.cfm?ty=dcdetail&iid=245
75
Violent crime victimizations (per 100,000 population age 12 or older) ������������������������������������������������ Bureau of Justice Statistics, National Crime Victimization Survey. http://
www.bjs.gov/index.cfm?ty=dcdetail&iid=245
76
Murder rate (per 100,000 persons) ������������������������������������������������������������������������������������������������������ Federal Bureau of Investigation, Uniform Crime Reports, Crime in the
United States. https://ucr.fbi.gov/ucr
77
Prison incarceration rate (state and federal institutions, rate per 100,000 persons) ��������������������������� U.S. Department of Justice, Bureau of Justice Statistics, National Prisoner
Statistics Program. https://www.bjs.gov/index.cfm?ty=dcdetail&iid=269
74

National Security
Military personnel on active duty (thousands) ������������������������������������������������������������������������������������� ES actuals for 1960 and 1970 as reported in Table 2-11 of the DoD
Selected Manpower Statistics for FY 1997 (DoD WHS, Directorate for
Information Operations and Reports). The source for the remaining
fiscal year actuals are the Service budget justification books.
79
Veterans (thousands) �������������������������������������������������������������������������������������������������������������������������� U.S. Department of Veterans Affairs. 1960-1999 (Annual Report of the
Secretary of Veterans Affairs); 2000-2017 (VetPop16), Predictive
Analytics and Actuary. http://www.va.gov/vetdata/Veteran_Population.
asp
78

Transportation Safety
Safety belt use (%) ������������������������������������������������������������������������������������������������������������������������������ National Highway Traffic Safety Administration, National Center for
Statistics and Analysis. https://crashstats.nhtsa.dot.gov/Api/Public/
ViewPublication/812465
81
Highway fatalities ��������������������������������������������������������������������������������������������������������������������������������� National Highway Traffic Safety Administration, National Center for
Statistics and Analysis. https://crashstats.nhtsa.dot.gov/Api/Public/
ViewPublication/812456
80

Environment and Energy
82
83
84
85

86

87

88

89

Air Quality and Greenhouse Gases
Ground level ozone (ppm) ������������������������������������������������������������������������������������������������������������������� U.S. Environmental Protection Agency, AirTrends Website. https://www.epa.
gov/air-trends/ozone-trends
Particulate matter 2.5 (ug/m3) ������������������������������������������������������������������������������������������������������������� U.S. Environmental Protection Agency, AirTrends Website. https://www.epa.
gov/air-trends/particulate-matter-pm25-trends
Annual mean atmospheric CO2 concentration (Mauna Loa, Hawaii; ppm) ����������������������������������������� National Oceanic and Atmospheric Administration. http://www.esrl.noaa.
gov/gmd/ccgg/trends/
Gross greenhouse gas emissions (teragrams CO2 equivalent) ���������������������������������������������������������� U.S. Environmental Protection Agency (2017). Inventory of U.S.
Greenhouse Gas Emissions and Sinks 1990-2015 (EPA Publication
No. 431-P-17-001. https://www.epa.gov/ghgemissions/inventory-usgreenhouse-gas-emissions-and-sinks
Net greenhouse gas emissions, including sinks (teragrams CO2 equivalent) ������������������������������������� U.S. Environmental Protection Agency (2017). Inventory of U.S.
Greenhouse Gas Emissions and Sinks 1990-2015 (EPA Publication
No. 431-P-17-001. https://www.epa.gov/ghgemissions/inventory-usgreenhouse-gas-emissions-and-sinks
Gross greenhouse gas emissions per capita (metric tons CO2 equivalent) ���������������������������������������� U.S. Environmental Protection Agency (2017). Inventory of U.S.
Greenhouse Gas Emissions and Sinks 1990-2015 (EPA Publication
No. 431-P-17-001. https://www.epa.gov/ghgemissions/inventory-usgreenhouse-gas-emissions-and-sinks
Gross greenhouse gas emissions per 2009$ of GDP (kilograms CO2 equivalent) ����������������������������� U.S. Environmental Protection Agency (2017). Inventory of U.S.
Greenhouse Gas Emissions and Sinks 1990-2015 (EPA Publication
No. 431-P-17-001. https://www.epa.gov/ghgemissions/inventory-usgreenhouse-gas-emissions-and-sinks
Population that receives drinking water in compliance with standards (%) ����������������������������������������� U.S. Environmental Protection Agency, 2016a. Safe Drinking Water
Information System, Federal Version. https://cfpub.epa.gov/roe/indicator.
cfm?i=45#1

Energy
Energy consumption per capita (million Btu) ��������������������������������������������������������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 1.7 https://www.eia.gov/totalenergy/data/monthly
91
Energy consumption per 2009$ GDP (thousand Btu per 2009$) �������������������������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 1.7 https://www.eia.gov/totalenergy/data/monthly
92
Electricity net generation from renewable sources, all sectors (% of total) ����������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 7.2a https://www.eia.gov/totalenergy/data/monthly
93
Coal production (million short tons) ����������������������������������������������������������������������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 6.1 https://www.eia.gov/totalenergy/data/monthly
90

57

5. Social Indicators

TABLE 5–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
94
95
96

Source

Natural gas production (dry) (trillion cubic feet) ����������������������������������������������������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 4.1 https://www.eia.gov/totalenergy/data/monthly
Petroleum production (million barrels per day) ������������������������������������������������������������������������������������ U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 3.1 https://www.eia.gov/totalenergy/data/monthly
Renewable energy production (quadrillion Btu) ����������������������������������������������������������������������������������� U.S. Energy Information Administration, Monthly Energy Review (October
2017), Table 10.1 https://www.eia.gov/totalenergy/data/monthly

6. BUILDING AND USING EVIDENCE TO IMPROVE
GOVERNMENT EFFECTIVENESS
The Administration is committed to a vision for results-driven government that improves mission delivery
and directs taxpayer dollars to the most effective and efficient purposes. Achieving this vision means ensuring
accountability for results, having the necessary analytical
tools, identifying and investing in effective practices, and
accessing and using data to transform it into evidence
that informs action. With stronger evidence, we can learn
from and improve programs to better serve the American
people.
The bipartisan Ryan/Murray Commission on EvidenceBased Policymaking was charged with determining how
the Federal government could improve how it builds and
uses evidence to improve policies and programs, and overcome the current obstacles to doing so. The Commission’s
September 2017 final report articulates its vision of “a
future in which rigorous evidence is created efficiently,
as a routine part of government operations, and used to
construct effective public policy.” The Commission identified many barriers to the effective use of government
data to generate evidence, and recommended strategies
to improve data access in a secure and accountable manner and strengthen Federal capacity to build and use
evidence. These strategies recognize the power of data
and evidence to improve government while reducing burden on the American public. The Commission concluded
that achieving this vision requires Executive Branch
leadership, including that of the White House Office of
Management and Budget (OMB). The Administration
supports the Commission’s vision and believes that evidence-based policymaking is a cornerstone of effective
and efficient government. As described in this chapter,
implementing this vision requires the infrastructure and
capacity to credibly build and use evidence and develop a
culture of learning and continuous improvement.
Building the Infrastructure for
Evidence-based Policymaking
Effective and efficient government requires understanding how well current policies and programs are
working, and identifying alternatives for improvements.
A variety of considerations go into decision-making,
but incorporating evidence is crucial. Multiple forms of
evidence—including evaluations, program monitoring,
performance measurement, statistics, and other forms
of research and analysis—can inform decision-making.
For example, statistical indicators examined over time
provide context in which policies are set and programs operate, performance data can be used to measure outcomes,
and evaluations can inform understanding of program
and policy variations and their impacts. The best forms of
evidence to use depend on the questions being asked, the
current state of knowledge, the context in which a policy

or program operates, and practical and methodological
considerations.
Routinely creating and using evidence requires a strong
infrastructure and commitment. The President’s 2018
Budget outlined widely accepted principles and practices
for evaluation, which, along with similar principles and
practices for Federal statistics, provide the foundation
to build and use evidence. The 2018 Budget encouraged
agencies to think about evidence-building broadly, highlighting how a range of analytic activities can contribute
to building and using evidence. To be successful however,
agencies need a strong evidence infrastructure, including
hiring and deploying trained staff; ensuring independence
and rigor in statistics and evaluations; using cost-effective, cutting-edge methods; and bringing evidence to bear
in policy and program decisions. This infrastructure will
also support agencies in making better use of existing
administrative data by ensuring that there are processes
and tools in place to use and share data in appropriate
and secure ways. This Budget reaffirms and builds upon
these evidence principles and practices, and further articulates the Administration’s vision for building and using
evidence.
Current Federal Landscape
Building and using evidence: Ensuring that evidence
can inform policy or program development and implementation requires coordination, agency leadership, available
data, robust information technology and other tools, and
relevant expertise, among other factors. Using evidence
in decision-making entails ongoing coordination between
those implementing and managing the operations of a program, including its data, and those responsible for using
analysis to determine program effectiveness, opportunities for program improvement, and future policy options.
Evidence-based policymaking requires strong leadership
from multiple parts of an agency—agency officials, program administrators, performance managers, strategic
planners, policy and budget staff, evaluators, analysts,
and statisticians—to ensure that data and evidence are
developed, analyzed, understood, and acted upon appropriately. Yet, current capacity in Federal agencies to build
and use evidence varies widely. While some agencies have
made great progress in integrating evidence into policy
development, strategic planning, and day-to-day decisionmaking and operations, in other agencies, the creation
and use of evidence is often isolated or limited.
Program evaluation: An important form of evidencebuilding is program evaluation. Evaluation involves the
systematic application of rigorous scientific methods to
assess the design, implementation, outcomes, or impact
of a policy or program. Evaluation can answer essential
questions regarding program effectiveness and cost-

59

60
efficiency—questions that cannot be answered through
performance measurement and monitoring, descriptive
statistics, or simple analysis of program data alone. It can
answer the questions “did it work and compared to what?”
and “would these outcomes have occurred regardless of
the program or did the program intervention make the
difference?”
However, there is tremendous variation across Federal
agencies in their capacity to conduct evaluations, as well
as the sophistication and rigor of their evaluation capabilities. Unlike complementary government functions like
performance measurement and statistics, there is not a
formal, comprehensive infrastructure for Federal evaluation to support consistency across agencies, exchange
information, allow for the promulgation of principles and
practices, and coordinate and collaborate on areas of common interest. As a result, we lack any evaluation findings
for many policies and programs, which greatly limits
evidence-based policymaking. A strong infrastructure for
Federal evaluation would allow formal coordination and
support of evaluation activity across agencies in order
to improve evaluation within individual agencies, and
enhance the quality, utility, and efficiency of evaluation
across government.
Some agencies have impressive evaluation capacity
and activity, with independent, centralized evaluation
offices working across the agency to conduct rigorous
and relevant evaluations. In other cases, agencies have
strong evaluation components, but they are in silos
that limit their scope and prevent them from leveraging evaluation resources and expertise throughout the
agency. Many agencies do not understand or undertake
evaluation, or conduct poor-quality evaluation that is of
limited utility and may provide misleading or incorrect
information. Agencies need to increase their expertise
and evaluation capacity to ensure the necessary evidence
and understanding to inform program and policy decisions and improvements. One recent successful strategy
for increasing agency capacity is the Office of Evaluation
Sciences (OES) at the General Services Administration,
which pairs experts with Federal agency partners to
conduct evaluations that identify cost-effective ways to
improve certain policies and programs. OES has had particular success in using existing administrative data at
agencies to conduct low-cost evaluations that test no- or
very low-cost changes to programs and agency processes.
OES complements the evaluation activities at a number
of Federal agencies, including bridging gaps at agencies
that have limited or no evaluation capacity.
Key Strategies to Strengthen Evidence
A Federal commitment to building and using evidence
requires effective strategies. A number of evidence-building strategies are being used across Federal agencies and
programs, and new strategies are proposed in this Budget.
These strategies vary in their focus and mechanisms, but
all serve to enhance how we build and use evidence.
Evaluation principles and practices: The commitment
to strengthen Federal evaluation and adhere to key principles and practices was articulated in the President’s

ANALYTICAL PERSPECTIVES

Budget for 2018. While the process for developing a set of
evaluation standards is ongoing, fundamental principles
emerge as common themes in established U.S. and international frameworks, as well as several official Federal
agency evaluation policies. 1 These principles include
rigor, relevance, independence, transparency, and ethics.
Principles and practices for evaluation help to ensure that
Federal program evaluations meet scientific standards,
are relevant and useful, and are conducted and have
results disseminated without bias or inappropriate influence. These principles, along with similar ones in place for
statistical agencies, provide a foundation for furthering
agencies’ capacity to routinely build and use high-quality
evidence to improve program performance and identify
policy options. They also help evaluation offices maintain
standards across changes in leadership and personnel.
The new guidelines for monitoring and evaluation of foreign assistance, issued in January 2018 as required by
the Foreign Aid Transparency and Accountability Act of
2016, also include a set of similar principles.
Designated evaluation officials and offices: For complementary Federal systems, such as performance and
statistics, an essential component is having a designated
senior official in each agency responsible for coordinating
agency activity in the area, providing necessary direction
and guiding relevant resources within the agency, serving as a point of contact for other agencies and OMB, and
being accountable for agency performance. Agencies with
strong evaluation capacity have an independent evaluation office with the organizational standing, resources,
independence, and expertise to inform agency leadership,
collaborate with policy and program staff, and coordinate with statistical and performance offices. The most
effective approach for strengthening Federal program
evaluation includes having centralized, independent
evaluation offices at agencies, each with a senior career
official possessing evaluation expertise and experience
given lead responsibility for evaluation at the agency. To
minimize budgetary impacts and agency burden, agencies should develop structures most appropriate to their
particular context that allow them to make efficient and
flexible use of existing resources.
Some agencies already have established centralized
evaluation functions, while other agencies are strengthening these functions and are establishing evaluation offices
staffed with relevant expertise. For example, the Small
Business Administration (SBA) recognized the need to
strengthen evidence-based decision-making to support
continuous learning and organizational effectiveness and
efficiency. The agency recently established a team of evaluation experts in its performance management office, and
is building an evidence registry, establishing a community
of practice, coordinating an agency-wide learning agenda,
and conducting independent evaluations to support their
new framework. The SBA will make evaluation results
public and incorporate findings into its performance
1 For example, the Chief Evaluation Office at DOL, the Administration for Children and Families at HHS, the Office of Policy Development
and Research at HUD, and Statistical Policy Directive No. 1: Fundamental Responsibilities of Federal Statistical Agencies and Recognized
Statistical Units.

6. Building and Using Evidence to Improve Government Effectiveness

management framework. In September 2017, the US
Department of Agriculture (USDA) Rural Development
Innovation Center established a Data Analytics and
Evidence Team that is quickly establishing processes and
protocols to conduct independent, rigorous, and relevant
program evaluations across rural development programs
to build a more robust portfolio of evidence. The 21st
Century Cures Act, enacted in 2016, includes provisions
to strengthen leadership and accountability for behavioral health at the Federal level and to ensure that mental
health and substance abuse programs keep pace with
science and technology. The Act requires the Substance
Abuse and Mental Health Services Administration
(SAMHSA) to disseminate research findings and evidence-based program models to service providers, ensure
that grants are evaluated, strengthen the role of the Chief
Medical Officer and a new Office of Evaluation, and create
a National Mental Health and Substance Use Disorder
Policy Laboratory to promote evidence-based practices
and services.
Multi-year learning agendas: Learning agendas are
a way to allow agencies to plan how to focus evaluation
and evidence-building activities over a multi-year period,
while enabling them to modify these agendas as needed
to reflect changing priorities and new learning. Through
collaborative development of such agendas, agencies can
identify critical questions and the evidence needed to
answer these questions, given agency priorities, available resources, and challenges. Learning agendas should
reflect current knowledge and availability of data, identify where new data collection is necessary and how to
effectively build evidence, highlight opportunities for
cross-agency collaboration and using common tools and
resources, and be modified over time to reflect changing
priorities and new evidence. The learning that results
should be shared with agency leadership, policy and
program staff, and key stakeholders in order to facilitate policy and program improvement. For example, the
Social Security Administration (SSA) effectively balances
comprehensive, long-term research planning in retirement and disability policy with the need to respond to
emerging issues and make adjustments given new challenges and information. Through its Retirement Research
Consortium and Disability Research Consortium, SSA
has cooperative agreements with universities and research organizations. These agreements give SSA access
to a pool of independent experts that address priority
questions and identify additional issues for consideration,
collaborate with SSA researchers to access administrative data and conduct analyses, and quickly respond to
unanticipated needs. The resulting portfolio of evidence
addresses the priorities of SSA leadership, policy and program staff, Administration officials, Congress, and key
stakeholders.
Strengthening interagency coordination: The Federal
evidence community is increasingly sharing lessons
learned, strategies, tools, and insights from building
and using evidence through agency-led trainings, an online Federal community of practice, and dissemination
of common standards and metrics. Such coordination is

61

critical for sharing new methods throughout the government and enabling agencies with less experience to learn
from more experienced peers. Even for agencies sophisticated in evidence-building, interagency coordination is
needed to avoid duplication, highlight service delivery
differences, and develop comparable performance measurement systems for analysis and evaluation. A notable
example of such interagency coordination is the bipartisan Workforce Innovation and Opportunity Act (WIOA,
PL 113-128), which reauthorized the workforce system
for the first time in 15 years, improving coordination,
collaboration, and service delivery across the six major
Departments of Labor (DOL) and Education employment and training programs. For the first time, these core
programs were required to conduct joint state planning
and report on a standardized set of employment-oriented
performance metrics (e.g., participants’ placement in a
job). In addition to the core WIOA programs, DOL is also
aligning performance indicators and data element definitions across most of its other employment and training
programs to report on the WIOA performance indicators.
States also have the option to fold additional programs
or activities into their strategic planning, including the
Temporary Assistance for Needy Families (TANF) program, Supplemental Nutrition Assistance Program
(SNAP), Community Services Block Grant, and others.
In the first round of state planning, 29 states elected to
include non-required programs in their plans, indicating
states’ desire for broader cross-program coordination.
Funding flexibilities and set-asides: Rigorous, independent evaluations and statistical surveys are essential for
building evidence. Yet, this inherently complex, dynamic
work can span several fiscal years, encompass timing
uncertainties, and involve cost variances. For example,
the announcement of a new program or policy priority
may be delayed, which could postpone procurement of
an independent evaluator to study the program’s implementation and effectiveness. Similarly, a study’s design
may need to be altered to respond to natural disasters
or factors that were not anticipated. Further, although
estimates based on prior work can inform timelines necessary to obtain a sufficient number of study or survey
participants, the actual time needed can fluctuate. Many
other factors can influence timing and schedule changes
during implementation of an evaluation, research, or statistical project such as technological advancements for
collecting and analyzing data that may yield significant
project efficiencies. Additionally, funding parameters and
available Federal procurement strategies and processes
often lack the flexibility and agility needed to address
the dynamic nature of evaluation and statistical projects.
Inflexible appropriations and agency processes may also
limit agencies’ ability to coordinate on studies of mutual
interest and combine funding sources, even though there
are important benefits to doing so, including cost efficiencies, burden reduction, and shared learning. In order to
improve efficiency of these projects and use of funds, the
Budget proposes to leverage existing flexibilities and give
agencies the ability to spend funds over longer periods of
time. Another proposed flexibility rewards agencies who

62
efficiently and effectively use funds by allowing them to
put unused contract funds towards other priority evaluation or statistical activities.
Specifically, the Budget includes a previously enacted
general provision (PL 115-31 K, Title II, Sec. 232) allowing the Department of Housing and Urban Development
(HUD) to deobligate and then reobligate—in the same
fiscal year or the subsequent fiscal year—funds that
are unexpended at the time of completion of a contract,
grant, or cooperative agreement for research, evaluation,
or statistical purposes. A general provision in the Budget
will provide this flexibility for other agencies and extend
the period of fund availability to five years for funds appropriated or transferred for evaluation, research, and
statistical activities in the Department of Labor’s Chief
Evaluation Office and Bureau of Labor Statistics and
Health and Human Services’ (HHS) Assistant Secretary
for Planning and Evaluation and Administration for
Children and Families’ (ACF) Office for Planning,
Research and Evaluation. These flexibilities will allow
agencies to better target evaluation and statistical funds
to reflect changing circumstances as a study unfolds.
The Budget also uses set-asides to ensure that agencies
have adequate resources to undertake rigorous evaluations. For example, the 2019 Budget enhances research
and evaluation on child care supply, demand, and quality
through the utilization of the full statutory research and
evaluation set-aside of one-half of one percent of funding
for the HHS Child Care and Development Fund. As another example of the importance of set-asides, the 2017
Consolidated Appropriations Act included a 0.33 percent
set-aside of the TANF program to be used for research,
evaluation, and technical assistance. This enabled ACF to
develop a demonstration to rigorously evaluate state and
local interventions to help low-income persons achieve
employment and economic security, with an emphasis on
interventions that address opioid dependency, substance
abuse, and mental health. The set-aside also allowed ACF
to launch a project to improve state-level TANF programs
through enhanced use of TANF and related human services data, as well as to develop (in collaboration with the
Department of Labor) a database of proven and promising
approaches to move TANF recipients into work.
Improving Data Access and Governance
for Evidence-Building
Data are a central element for building and using evidence to improve government effectiveness. In
order for the Federal government to successfully leverage data as strategic assets, we must address the silos
across Federal agencies that can stymie collaboration
and result in fragmented services and efforts. Greater
coordination is needed among and within agencies,
including OMB, to improve how we manage and use
data. The government needs a coordinated strategy to
ensure that high priority data are collected, and that
already-collected data are used to their full extent. A
comprehensive data strategy will acknowledge both
external and internal needs for data access, recognizing that both have a role to play in addressing the big

ANALYTICAL PERSPECTIVES

questions and challenges of the day, such as solving the
opioid epidemic or fueling economic growth.
Congress has already provided OMB with many of the
tools needed to implement a coordinated data strategy
across agencies. These include the authority to designate
single collection authorities for shared data needs, set
data quality and classification standards, and manage
and coordinate across interagency bodies, among others.
These tools rest with multiple statutory offices across
the institution. In response, OMB is organizing itself to
use these tools together in service of building evidence.
This will serve as a model for how agencies can maximize
their use of data to build evidence across their own organizational silos. When agencies improve their own use of
data for evidence-building, the American people will see
improved service delivery, more effective programs, and a
more responsive and efficient government.
Data as strategic assets: In undertaking its mission,
the Federal government collects large amounts of data,
whether for administering a program, assessing or enforcing a regulation, or monitoring contracts and grants.
Federal and state administrative data include rich information on labor market outcomes, health care, criminal
justice, housing, and other important topics. These data
are strategic assets that can be used to meet a number
of needs within and outside of government, including to
build evidence as the President’s 2018 Budget and the
Commission on Evidence-Based Policymaking noted. On
their own, these data can be used to answer important
questions about service delivery, the population served,
and the outcomes for an individual program. Yet, these
data are often underutilized and do not reach their full
potential to evaluate program effectiveness, measure
day-to-day performance, and inform the public about how
society and the economy are faring. Integrating data systems and linking administrative data across programs
or to survey data, where appropriate, provides another
opportunity to maximize the power of data for evidencebuilding and program improvement. Many notable efforts
have demonstrated the potential that government data
offer to improve internal government operations and
increase efficiency, effectiveness, transparency, and accountability, all while reducing the burden on the public
and limiting costs from new data collections.
Efforts to better access and use data: Federal agencies
are making greater use of their own administrative data
for program operations and analytic and statistical activities, including evaluation. Many agencies have data that
would be useful to other agencies, other levels of government, and outside researchers, citizens, and businesses.
However, systemic legal, policy, and procedural barriers
frequently prevent Federal, state, and local agencies from
maximizing whether and how they use data. The range of
challenges are broad, and include appropriate concerns
about confidentiality and privacy, but also restrictive legislative authorities and policies, unclear administrative
processes and hurdles, the inability to share data, and, in
some cases, lack of sufficient analytic, evaluation, and/or
information technology capacity.

6. Building and Using Evidence to Improve Government Effectiveness

Federal law rightly protects some of the most valuable
data for building evidence about some of the nation’s largest programs, and access must be provided in a secure and
confidential manner with appropriate transparency and
accountability. Nonetheless, as the Commission’s recommendations recognized, the country’s laws and practices
are not currently optimized to support the use of data for
evidence-building, or in a manner that best protects the
data. To correct these problems, it recommended using
secure technology and cutting-edge statistical methods
to blend data in a highly protective manner, building on
the tradition of data stewardship and tradition of strong
confidentiality of the nation’s principal statistical agencies, as discussed in the Strengthening Federal Statistics
Chapter of the Budget. The Commission also recommended revising laws, where needed, to enable more
consistent, efficient access to data for evidence-building,
with appropriate confidentiality and privacy protections
in place based on the sensitivity of the data. For example, the access and use of Department of Education (ED)
data collected to administer ED student aid programs
are governed by a complex, overlapping patchwork of
laws that result in inconsistent privacy protections and
use restrictions. In addition to inconsistently protecting
student privacy, these restrictions make it unnecessarily
burdensome for ED to use the data it currently collects
to improve the government and public understanding
of student loan program costs and improve student aid
program effectiveness. A reauthorization of the Higher
Education Act should clarify and simplify student aid administrative data use and access restrictions to ensure
that student privacy is strongly and consistently protected while allowing the Federal government to efficiently
and effectively administer the student aid programs.
To begin to address other statutory barriers, the Budget
proposes to provide access to valuable employment and
earnings data for certain agencies and programs to
achieve government efficiencies. The National Directory
of New Hires (NDNH)—a Federal database of new hire,
employment, and unemployment insurance data used for
administering HHS’ Office of Child Support Enforcement
programs—is governed by statute that specifies authorized uses of the data and mandates tight controls to
protect the data from unauthorized use or disclosure.
Entities with the authority to access NDNH are able to
use the data to support program administration (e.g., eligibility verification) and evidence-building, subject to the
necessary data protections required by law and HHS. In
particular, NDNH access allows some programs to eliminate duplicative efforts to collect the same employment
and earnings data already in NDNH, improve program
integrity, access reliable outcomes data, and create important government efficiencies.
The Budget proposal enables access to NDNH for units
within Federal agencies that conduct research, statistical
activities, evaluation, and/or performance measurement
associated with assessing labor market outcomes. Access
to NDNH would enable research and performance measurement that would otherwise require costly surveys
or state-by-state or other one-off agreements to obtain

63

wage data. For example, the proposal would enable the
Departments of Labor and Education to use NDNH data
to conduct program evaluations on employment and training programs including for WIOA. The proposal would
also enable state agencies (designated by each governor
with WIOA responsibilities) with the authority to match
their data with NDNH for program administration, including program oversight and evaluation of WIOA and
other Departments of Labor and Education employment and training programs. Additionally, the proposal
would authorize data exchanges between state child support agencies, state agencies that administer workforce
programs, and state agencies that administer Adult
Education and Vocational Rehabilitation to improve coordination between the programs.
Beyond the evidence-building proposals described, the
full proposal on NDNH access includes good government
provisions to enable efficiencies for program integrity and
eligibility verification. The Budget allows the Department
of the Treasury’s Do Not Pay Business Center to serve
as a pass-through between NDNH and Federal agency
programs that are authorized NDNH access for improper payment purposes. The proposal also permits USDA’s
Rural Housing Service to verify eligibility and validate
the income source information provided by means-tested,
single family housing loan applicants and multifamily
housing project-based tenants. Lastly, the Budget proposes the use of NDNH to establish eligibility for processing
Railroad Retirement Board disability benefits in a more
efficient manner.
Integrated data systems: Federal agencies also recognize the potential that integrated data systems, which
link individual- or household-level data across different
programs and services, offer to support evidence-building
activities and improve programs. Integrated data systems
allow for richer analyses across programs and outcome
areas, and enable the use of data for case management
and effective service provision, ensuring that programs
allocate funds effectively and efficiently. Integrating data
systems and linking administrative data often requires
that disparate data systems must communicate with
one another. Supporting the development of interoperable data systems, which can communicate and exchange
data with one another while maintaining the appropriate
privacy and security protections, is critical to realize the
full potential of shared administrative data. For example,
the National Information Exchange Model is a Federallysupported tool that enables interoperability and data
exchange at all levels of government across program
areas and does so in partnership with private industry
stakeholders and state/local partners. This work is done
to ensure that technical solutions for data sharing follow
the legal requirements.
The Federal government is in a unique position to
leverage the data it already collects for a range of evidence-building activities. Using data as strategic assets
allows Federal agencies and state, local, and private sector
partners to continuously monitor and improve programs,
develop evidence on effective approaches and interven-

64
tions, and ensure that programs and services reach their
intended targets.
Using Evidence to Learn and Improve
Evidence should be used as a regular part of decisionmaking processes. Using the full range of evidence for
learning and improvement is especially important for
addressing the most pressing policy challenges facing
our nation. For example, substantial numbers of individuals with disabilities or serious health conditions have
dropped out of the labor market, and in many cases receive disability benefits that consume substantial Federal
resources. The Administration is pursuing an ambitious
set of demonstration projects to build an evidence base
for reforming disability programs to promote employment and self-sufficiency among persons with a disability
and to reduce future costs. SSA and DOL are partnering
to develop the Retaining Employment and Talent After
Injury/Illness Network (RETAIN) demonstration, which
will test early interventions to help workers maintain employment after experiencing a work-threatening injury,
illness, or disability, thus avoiding the need for disability
benefits. The Administration is requesting demonstration
authority to test time-limited disability benefits for claimants whose conditions are most likely to be temporary
and to enable return to employment. Expanded demonstration authority that allows for universal participation
would allow SSA to test new interventions and modified
program rules in order to identify effective strategies for
helping persons with a disability return to employment.
Evaluation findings would be considered by an expert
panel in developing recommendations for permanent
changes to Federal disability programs.
Another example of an agency building evidence
to learn and make critical decisions and improvements in policy is the Health Resources and Services
Administration (HRSA), which is beginning a process
for a coordinated impact assessment of HRSA programs.
Beginning with its largest programs, HRSA will conduct
a systematic review of the available research, evaluation,
and performance measures—with a focus on compara-

ANALYTICAL PERSPECTIVES

tive effectiveness, patient and population outcomes, and
costs—to inform policy decisions, undertake program improvements, prioritize future research and data collection,
and better integrate planning, performance, program administration, and evaluation. It is also critical for states
to learn and improve their operations, as many Federal
dollars pass through to states and localities for administration. As an example, WIOA now requires states to use
a portion of their state set-aside funds to conduct evaluations of their programs so that they can learn about
effective program strategies and service delivery models.
WIOA also requires states to cooperate with Federal evaluations, which will facilitate cross-agency and cross-state
learnings.
Conclusion
Policymakers and the American people are rightly
concerned with the effectiveness and efficiency of many
government programs, yet the evidence base and understanding of these programs are uneven. Some Federal
agencies have strong capacity to build and use evidence,
while in others that capacity is minimal or the work is
siloed. There has been exciting progress in using administrative data for program accountability, learning, and
improvement; however, some of the most valuable data
sources remain off limits to those who could most benefit
from secure access. There is a way forward. A bipartisan
consensus has emerged regarding the need to embrace evidence-based policymaking by using available evidence to
make decisions and building evidence where it is lacking.
Doing so requires leadership and capacity within agencies, adherence to key principles and practices, agency
learning agendas, coordination across government, the
tools and flexibility necessary for rigorous evidence-building, and strategic use of valuable administrative data.
The Administration supports this vision and is prepared
to work with Congress to advance evidence-based policymaking. Using evidence to improve government is what
taxpayers deserve—carefully and wisely using limited resources to address national priorities and solve pressing
problems.

7. STRENGTHENING THE FEDERAL WORKFORCE

Federal employees underpin nearly all the operations
of the Government, ensuring the smooth functioning of
our democracy. While most Americans will never meet
the President or even their Member of Congress, they will
interact with the Federal employees who work in their
community, keep them safe at airports, or welcome them
to a National Park. Regional offices of the Department of
Agriculture (USDA) and the Department of Interior (DOI)
provide services to farmers and ranchers where they
live. When emergencies occur, entities like the Federal
Emergency Management Agency, the Coast Guard, and
the Small Business Administration help to save and rebuild communities.
Americans expect the Federal Government to keep
their food and medication safe, transportation system
working, assets protected, and lives spared from natural
disaster. Members of the Armed Forces work side-byside with more than 730,000 civilian counterparts at the
Department of Defense (DOD) to help them accomplish
their mission. Veterans rely on the more than 350,000
Department of Veterans Affairs (VA) personnel to ensure they receive the medical care and benefits they have
earned. More than 20,000 Department of State personnel help safeguard the Nation while serving in posts both
foreign and domestic. Federal employees work to cure
diseases, explore outer space, and otherwise promote the
general welfare. Since Federal workers perform many essential functions, failures can chip away at the citizenry’s
collective trust in Government.
The cost of employing this workforce is significant. The
Federal Government is the single largest direct employer in the Nation. About 1.7 million of the approximately
2.1 million direct Federal employees live outside of the
Washington, D.C., metro area. An even larger “indirect”
workforce carries out much of the work paid for by Federal
funds. These are the Federal contractor personnel, as well
as the State, local, and nonprofit employees – many of
whose jobs are entirely funded through Federal grants
and transfer payments – located all across the Nation, in
every state and territory. The size of this broader workforce is unknown, and a subject of dispute.
The Administration is committed to redefining the
role of the Federal Government by reprioritizing Federal
spending toward those activities that advance the safety
and security of the American people. This reassessment
includes the cost of Government operations. All too often
the basic operating expenses of the Federal Government,
including personnel-related expenses such as pay, benefits, and office space, are treated as essentially fixed
costs. The Federal Government, with annual civilian
personnel costs of almost $300 billion, should always be
seeking to ensure it has an optimally sized and skilled
workforce operating out of locations best suited to accom-

plish its various missions. It is important to appropriately
compensate personnel based on mission needs and labor
market dynamics.
Budgeting for Federal personnel has typically proceeded
in the same “incremental” fashion as program budgeting,
with proposed staffing and compensation levels determined by annually tweaking prior year totals, instead of
reassessing underlying cost drivers and installing a better paradigm. Incremental personnel staff budgeting can
perpetuate legacy inefficiencies and perennially forestall
investment in the sort of workforce innovations that routinely occur in the private sector.
While pursuing a series of proposals to overhaul
Federal compensation and benefits, the Administration
also intends to partner with Congress to cull statutory
and regulatory rules that have over time created an increasingly incomprehensible and unmanageable civil
service system. The Administration will propose changes
in hiring and dismissal procedures to empower Federal
managers with greater flexibility. Agency managers will
be encouraged to restore management prerogatives that
have been ceded to Federal labor unions and create a new
partnership with these entities that maintains the primacy of each Agency’s obligation to efficiently and effectively
accomplish its public mission.
Federal Workforce Demographics
The Federal workforce is comprised of approximately
2.1 million non-postal civilian workers and 1.4 million
active duty military, in addition to nearly 1 million military reserve personnel, serving throughout the country
and the world. As of September 2017, the Federal civilian
workforce self-identifies as 62.9 percent White, 18.6 percent Black, 8.9 percent Hispanic of all races, 5.9 percent
Asian, 0.5 percent Native Hawaiian/Pacific Islander, 1.6
percent American Indian/Alaska Native, and 1.6 percent
more than one race. Men comprise 56.7 percent of all permanent Federal employees and women are 43.3 percent.
Veterans are 31.1 percent of the entire Federal workforce,
which includes the 13.3 percent of the workforce who are
veterans receiving disability compensation. By comparison, veterans comprise approximately 6 percent of the
private sector non-agricultural workforce. The Federal
workforce continues to age, with more than 600,000 employees older than 55, which is about 40,000 more than in
2013. Roughly 155,000 employees are younger than 30, a
decrease of about 20,000 since 2013.
Using data from the Bureau of Labor Statistics (BLS)
on full-time, full-year workers, Table 7-1 breaks all
Federal and private sector jobs into 22 occupation groups
to demonstrate the differences in composition between
the Federal and private workforces. Charts 7-1 and 7-2

65

66

ANALYTICAL PERSPECTIVES

Chart 7-1. Masters Degree or Above By Year
for Federal and Private Sectors
30%

Federal
Private Sector All Firms

25%

Private Sector Large Firms

20%
15%
10%
5%
0%
1992

1997

2002

2007

2012

2017

Source: 1992-2017 Current Population Survey, Integrated Public Use Microdata Series.
Notes: Federal excludes the military and Postal Service, but includes all other Federal
workers. Private Sector excludes the self-employed. Neither category includes State and
local government workers. Large firms have at least 1,000 workers. This analysis is limited to
full-time, full-year workers, i.e. those with at least 1,500 annual hours of work and presents
five-year averages. Industry is from the year preceding the year on the horizontal axis.

Chart 7-2. High School Graduate or Less
By Year for Federal and Private Sectors
60%
Federal
Private Sector All Firms
Private Sector Large Firms

50%

40%

30%

20%

10%
1992

1997

2002

2007

2012

2017

Source: 1992-2017 Current Population Survey, Integrated Public Use Microdata Series.
Notes: Federal excludes the military and Postal Service, but includes all other Federal
workers. Private Sector excludes the self-employed. Neither category includes State and
local government workers. Large firms have at least 1,000 workers. This analysis is limited to
full-time, full-year workers, i.e. those with at least 1,500 annual hours of work and presents
five-year averages. Industry is from the year preceding the year on the horizontal axis.

67

7. Strengthening the Federal Workforce

present trends in educational levels for the Federal and
private sector workforces over the past two decades. Chart
7-3 shows the trends in average age in both the Federal
and private sectors.
When the Administration prepared its Budget request, it did not set specific full-time equivalent (FTE)
levels for each Agency. While many agencies plan to reduce FTEs, in some cases, the Administration seeks to
increase the workforce. Table 7-2 shows actual Federal
civilian FTE levels in the Executive Branch by Agency for
2016 and 2017, with estimates for 2018 and 2019. At the
time the Budget was prepared, funding provided for the
2018 annual appropriations bills were operating under
a continuing resolution, and FTE estimates reflect this
funding. Actual 2018 FTE levels are likely to be different,
to account for final appropriations, administrative decisions within agencies, and other factors. Chart 7-4 broadly
shows the trends in personnel as a percent of the population in the Federal security related agencies (inclusive of
the Departments of Defense, Homeland Security, Justice,
State, and Veterans Affairs) and non-security agencies, in
comparison to State and local governments and the private sector.
A System Whose Time Has Come - And Gone
Today’s Federal personnel system is a relic of an earlier era. The Federal civil service is mired in a job system
largely codified in 1949, when the General Schedule (GS)
classification system was first created. About two-thirds
of Federal civilian employees continue to work under
the GS. This antiquated structure hinders the Federal
Government’s ability to accomplish its mission. The mission and required skills have changed, but the system has
not. The competitive personnel system that Civil Service
Commissioner Theodore Roosevelt envisioned to elevate
the country has fallen into disrepute, criticized from most
quarters as a compliance-oriented regime that ill-serves
Federal managers, employees, or the Nation at large.
“No Time to Wait,” a clarion call to civil service reform,
was issued last year by the National Academy of Public
Administration. That report questioned whether a “onesize fits all” Federal personnel system is necessary or even
effective. The Government Accountability Office regularly
includes human capital management on its semiannual
High-Risk list of pressing problems facing the Federal
Government. The inadequacies of the civil service are
chronicled in scores of books and articles. The consensus
is that the status quo is unacceptable, and an underlying
cause of an array of Government failures rooted in an inability to recruit and manage people.
Back in 2002, the Office of Personnel Management
(OPM) issued “A Fresh Start for Federal Pay,” a white paper critiquing the Government’s pay and job evaluation
system as a “system whose time has come - and gone.” The
paper points out that the workforce “is no longer a government of clerks.” It describes the pay system as insensitive
to both market forces and individual performance. Fifteen
years later, little has changed systemically. When pressing needs arise, statutory fixes are devised to bypass the
existing system. Such laws typically allow specific agen-

Table 7–1. OCCUPATIONS OF FEDERAL AND
PRIVATE SECTOR WORKFORCES
(Grouped by Average Private Sector Salary)
Percent
Occupational Groups

Private
Federal Sector
Workers Workers

Highest Paid Occupations Ranked by Private Sector Salary:
Lawyers and judges �����������������������������������������������������������������������
Engineers ��������������������������������������������������������������������������������������
Scientists and social scientists ������������������������������������������������������
Managers ���������������������������������������������������������������������������������������
Pilots, conductors, and related mechanics ������������������������������������
Doctors, nurses, psychologists, etc. ����������������������������������������������
Miscellaneous professionals ���������������������������������������������������������
Administrators, accountants, HR personnel ����������������������������������
Inspectors ��������������������������������������������������������������������������������������

2.3%
4.4%
5.1%
12.1%
2.2%
7.4%
16.0%
6.4%
1.2%

0.6%
1.9%
0.7%
14.0%
0.5%
6.4%
9.1%
2.7%
0.3%

Total Percentage �������������������������������������������������������������������������������

57.1%

36.2%

Medium Paid Occupations Ranked by Private Sector Salary:
Sales including real estate, insurance agents �������������������������������
Other miscellaneous occupations ��������������������������������������������������
Automobile and other mechanics ��������������������������������������������������
Law enforcement and related occupations ������������������������������������
Office workers ��������������������������������������������������������������������������������
Social workers �������������������������������������������������������������������������������
Drivers of trucks and taxis �������������������������������������������������������������
Laborers and construction workers �����������������������������������������������
Clerks and administrative assistants ���������������������������������������������
Manufacturing ��������������������������������������������������������������������������������

1.1%
3.2%
1.6%
8.8%
2.3%
1.6%
0.9%
3.1%
13.2%
2.6%

6.1%
4.5%
3.1%
0.7%
5.7%
0.6%
3.3%
9.7%
10.5%
7.5%

Total Percentage �������������������������������������������������������������������������������

38.2%

51.6%

Lowest Paid Occupations Ranked by Private Sector Salary:
Other miscellaneous service workers ��������������������������������������������
Janitors and housekeepers �����������������������������������������������������������
Cooks, bartenders, bakers, and wait staff �������������������������������������

2.5%
1.4%
0.8%

5.8%
2.3%
4.0%

Total Percentage �������������������������������������������������������������������������������
4.7%
12.2%
Source: 2013-2017 Current Population Survey, Integrated Public Use Microdata Series.
Notes: Federal workers exclude the military and Postal Service, but include all other
Federal workers in the Executive, Legislative, and Judicial Branches. However, the vast
majority of these employees are civil servants in the Executive Branch. Private sector
workers exclude the self-employed. Neither category includes state and local government
workers. This analysis is limited to full-time, full-year workers, i.e. those with at least 1,500
annual hours of work.

cies to work around intractable parts of the outdated civil
service structure. Chart 7-5 is an OPM mapping of the
15 functions and 54 sub-functions comprising the Federal
human capital management system.
Complex and outdated, the laws and regulations
governing hiring, performance management, pay, and
retirement number in the thousands. The rigidity of the
system requires human resources specialists to focus on
rule-based compliance instead of achieving the best hires.
This is in part due to the reality that the civil service system was conceived at a time when the Nation’s workforce
was much more static than it is today, with employees
typically staying with the same job for decades.
The Civil Service Reform Act of 1978 turns 40 this year.
It is time to reconsider where that law has succeeded and

68

ANALYTICAL PERSPECTIVES

Table 7–2. FEDERAL CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH
(Civilian employment as measured by full-time equivalents (FTE) in thousands, excluding the Postal Service)
Actual

Agency

2016

Estimate
2017

2018

Change: 2018 to 2019
2019

FTE

Percent

Cabinet agencies:
Agriculture ����������������������������������������������������������������������������������������������������������������������������������
Commerce ����������������������������������������������������������������������������������������������������������������������������������
Defense--Military Programs ��������������������������������������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������
Energy ����������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services �������������������������������������������������������������������������������������������������������
Homeland Security ���������������������������������������������������������������������������������������������������������������������
Housing and Urban Development �����������������������������������������������������������������������������������������������
Interior ����������������������������������������������������������������������������������������������������������������������������������������
Justice ����������������������������������������������������������������������������������������������������������������������������������������
Labor ������������������������������������������������������������������������������������������������������������������������������������������
State �������������������������������������������������������������������������������������������������������������������������������������������
Transportation �����������������������������������������������������������������������������������������������������������������������������
Treasury ��������������������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ��������������������������������������������������������������������������������������������������������������������������

86.8
40.3
725.3
4.1
14.9
72.6
183.5
8.0
64.2
114.9
16.5
32.1
54.3
93.4
345.1

87.3
40.9
726.2
4.1
14.7
74.1
182.4
7.9
64.9
118.2
16.2
27.6
54.7
92.5
351.6

88.7
42.6
741.5
3.9
15.4
75.5
182.0
7.7
64.4
117.1
15.7
25.7
55.1
90.0
359.3

80.9
51.7
744.5
3.9
15.1
74.9
195.0
7.5
59.8
116.8
15.8
25.5
54.7
88.3
366.3

–7.8
9.1
3.0
–*
–0.2
–0.6
13.0
–0.2
–4.6
–0.3
*
–0.2
–0.4
–1.8
7.0

–8.8%
21.3%
0.4%
–1.1%
–1.4%
–0.8%
7.2%
–2.6%
–7.1%
–0.3%
0.3%
–0.6%
–0.7%
–1.9%
1.9%

Other agencies—excluding Postal Service:
Broadcasting Board of Governors ����������������������������������������������������������������������������������������������
Bureau of Consumer Financial Protection ����������������������������������������������������������������������������������
Corps of Engineers--Civil Works ������������������������������������������������������������������������������������������������
Environmental Protection Agency ����������������������������������������������������������������������������������������������
Equal Employment Opportunity Commission �����������������������������������������������������������������������������
Federal Communications Commission ���������������������������������������������������������������������������������������
Federal Deposit Insurance Corporation ��������������������������������������������������������������������������������������
Federal Trade Commission ���������������������������������������������������������������������������������������������������������
General Services Administration ������������������������������������������������������������������������������������������������
International Assistance Programs ���������������������������������������������������������������������������������������������
National Aeronautics and Space Administration ������������������������������������������������������������������������
National Archives and Records Administration ��������������������������������������������������������������������������
National Credit Union Administration ������������������������������������������������������������������������������������������
National Labor Relations Board ��������������������������������������������������������������������������������������������������
National Science Foundation ������������������������������������������������������������������������������������������������������
Nuclear Regulatory Commission ������������������������������������������������������������������������������������������������
Office of Personnel Management �����������������������������������������������������������������������������������������������
Securities and Exchange Commission ���������������������������������������������������������������������������������������
Small Business Administration ���������������������������������������������������������������������������������������������������
Smithsonian Institution ���������������������������������������������������������������������������������������������������������������
Social Security Administration ����������������������������������������������������������������������������������������������������
Tennessee Valley Authority ���������������������������������������������������������������������������������������������������������
All other small agencies ��������������������������������������������������������������������������������������������������������������

1.6
1.6
21.8
14.7
2.2
1.6
6.5
1.2
11.2
5.7
17.1
2.9
1.2
1.5
1.4
3.5
5.1
4.6
3.2
4.9
63.7
10.7
13.4

1.7
1.7
21.7
14.8
2.1
1.5
6.1
1.1
11.5
5.6
17.2
2.9
1.2
1.5
1.4
3.2
5.5
4.6
3.4
5.0
61.4
10.1
13.5

1.6
1.8
21.6
15.4
2.1
1.4
6.4
1.1
11.7
5.5
17.3
2.8
1.2
1.3
1.4
3.4
5.9
4.5
3.2
5.2
61.5
10.0
13.9

1.6
1.8
21.6
11.6
2.0
1.4
6.4
1.1
11.9
5.1
17.2
2.7
1.2
1.2
1.4
3.3
5.8
4.5
3.3
5.2
60.8
9.9
13.4

*
*
*
–3.8
–*
.........
–0.1
.........
0.2
–0.3
–0.1
–0.1
–*
–0.1
.........
–0.1
–0.1
–0.1
*
–*
–0.8
–0.1
–0.5

0.3%
0.9%
*
–24.6%
–0.8%
.........
–1.0%
.........
1.5%
–6.3%
–0.3%
–3.0%
–1.2%
–7.2%
.........
–4.4%
–2.3%
–1.4%
0.5%
–0.1%
–1.2%
–1.1%
–3.7%

2,057.3

2,062.1

2,085.1

2095.2

10.1

0.5%

Total, Executive Branch civilian employment �����������������������������������������������������������������������������
* 50 or less.

where it has failed. The private sector continually finds
new ways to evolve human capital management programs
to maximize the return from their most valuable asset:
their people. The Federal Government should do no less.
Federal Workforce Compensation Reform
The civil service salary schedules present an incomplete
portrait of Federal pay. Private sector best practice focuses
on total compensation, which includes both salary and ben-

efits. Total Federal compensation is summarized in Table
7-3. A Congressional Budget Office (CBO) report issued in
April 2017 found that, based on observable characteristics,
Federal employees on average received a combined 17 percent higher wage and benefits package than the private
sector average over the 2011-2015 period. The disparity
is overwhelmingly on the benefits side: CBO found that
Federal employees receive on average 47 percent higher
benefits and 3 percent higher wages than counterparts in
the private sector. These gaps result from disproportion-

69

7. Strengthening the Federal Workforce

Table 7–3. PERSONNEL PAY AND BENEFITS
(In millions of dollars)
Change: 2018 to 2019

Description

2017 Actual

2018 Estimate 2019 Estimate

Dollars

Percent

Civilian Personnel Costs:
Executive Branch (excluding Postal Service):
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

190,243
82,938
273,181

194,656
84,587
279,243

198,507
85,767
284,274

3,851
1,180
5,031

2.0%
1.4%
1.8%

Postal Service:
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

37,265
13,541
50,806

37,328
18,113
55,441

37,978
13,863
51,841

650
–4,250
–3,600

1.7%
–23.5%
–6.5%

Legislative Branch:
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

2,177
690
2,867

2,234
699
2,933

2,354
766
3,120

120
67
187

5.4%
9.6%
6.4%

Judicial Branch:
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

3,207
1,069
4,276

3,304
1,101
4,405

3,420
1,116
4,536

116
15
131

3.5%
1.4%
3.0%

Total, Civilian Personnel Costs �����������������������������������������������������������������������������������������������������������������

331,130

342,022

343,771

1,749

0.5%

Department of Defense—Military Programs:
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

97,263
43,775
141,038

101,203
47,038
148,241

105,038
51,595
156,633

3,835
4,557
8,392

3.8%
9.7%
5.7%

All other Executive Branch uniform personnel:
Pay ������������������������������������������������������������������������������������������������������������������������������������������������������
Benefits �����������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

3,381
715
4,096

3,387
741
4,128

3,534
749
4,283

147
8
155

4.3%
1.1%
3.8%

Total, Military Personnel Costs �����������������������������������������������������������������������������������������������������������������

145,134

152,369

160,916

8,547

5.6%

Grand total, personnel costs ���������������������������������������������������������������������������������������������������������������������

476,264

494,391

504,687

10,296

2.1%

Former Civilian Personnel:
Pensions ��������������������������������������������������������������������������������������������������������������������������������������������������
Health benefits �����������������������������������������������������������������������������������������������������������������������������������������
Life insurance ������������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

85,200
12,654
43
97,897

86,443
12,917
44
99,404

89,861
13,642
45
103,548

3,418
725
1
4,144

4.0%
5.6%
2.3%
4.2%

Former Military Personnel:
Pensions ��������������������������������������������������������������������������������������������������������������������������������������������������
Health benefits �����������������������������������������������������������������������������������������������������������������������������������������
Subtotal ������������������������������������������������������������������������������������������������������������������������������������������

59,574
10,326
69,900

60,912
10,905
71,817

62,618
11,451
74,069

1,706
546
2,252

2.8%
5.0%
3.1%

Total, Former Personnel �����������������������������������������������������������������������������������������������������������������������������

167,797

171,221

177,617

6,396

3.7%

Military Personnel Costs:

ADDENDUM

ately high Federal compensation paid to individuals with
a bachelor’s degree or less; Federal employees with professional degrees are actually undercompensated relative to
private sector peers, in CBO’s analysis.

The generous benefits package offered by the Federal
Government includes a defined benefit annuity plan
and retiree health care benefits – both are increasingly
rare in the private sector. The Federal defined benefit

70

ANALYTICAL PERSPECTIVES

Chart 7-3. Average Age by Year for Federal and
Private Sectors
48
46
44
42
40

Federal
Private Sector All Firms

38

Private Sector Large Firms

36
1992

1997

2002

2007

2012

2017

Source: 1992-2017 Current Population Survey, Integrated Public Use Microdata Series.
Notes: Federal excludes the military and Postal Service, but includes all other Federal
workers. Private Sector excludes the self-employed. Neither category includes State and
local government workers. Large firms have at least 1,000 workers. This analysis is limited to
full-time, full-year workers, i.e. those with at least 1,500 annual hours of work and presents
five-year averages. Industry is from the year preceding the year on the horizontal axis.

plan, according to CBO, is the single greatest factor
contributing to the disparity in total compensation
between the Federal and private sector workforce. To
better align with the private sector, the Budget reduces

Federal personnel compensation costs, primarily the
annuity portion.
The Budget carries forward several FY 2018 Budget
proposals, including: increasing employee payments to
the Federal Employee Retirement System (FERS) de-

Chart 7-4. Changes from 1975 to 2017 in
Employment as a Percent of Population
50%

Federal - Security
Federal - Non-Security
Private Sector
State & Local

40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
1975

1982

1989

1996

2003

2010

2017

Source: Office of Personnel Management and the Bureau of Labor Statistics.
Notes: Federal excludes the military and Postal Service. Security agencies include the
Department of Defense, the Department of Homeland Security, the Department of State,
and the Department of Veterans Affairs. Non-Security agencies include the remainder of the
Executive Branch. State & Local excludes educational workers.

71

7. Strengthening the Federal Workforce

Chart 7-5
The Human Capital Business Reference Model (HCBRM) funconal framework
defines Federal Human Capital Management. This map represents
the 15 Funcons and 54 Sub-funcons in the HC lifecycle.

Maintained by: HRLOB@opm.gov

Federal Talent Management
Government-Wide
F1
F2
Federal
Federal
Human Capital Oversight and
Leadership
Evaluaon

F3
Federal
Ve­ng

Enabling

F4 Federal
Benefits

F1.1
F2.1
F3.1
F4.1 Benefit
F5.1
Federal
Human Capital
Veng
Program
PreHuman Capital Strategic and
Standards and Administra on Re rement
Regula on and Opera onal
Oversight and Oversight
Ac vi es
Policy
Oversight

A1.1
Workforce
Planning

F1.2
F5.2
A1.2
Human Capital
F2.2
F3.2
F4.2 Benefits
Human Capital Suitability and
Re rement Human Capital
Service
Enrollment
Delivery
Evalua on
Fitness
Case Planning
Strategy
Model
F2.3
Human Capital
F3.3
Agency
Creden aling
Guidance and
Evalua on

F4.3 Agency
Benefits
Counseling

Employee Lifecycle

A1
Agency Human
A10
A2
F5 Federal
Capital
Agency
Talent
Rerement
Strategy, Human Capital
Acquision
Policies, and
Evaluaon
Operaon

F5.3
PostRe rement
Customer
Service

F3.4
F4.4
Background
Miscellaneous
Inves ga on
Benefits
Opera ons

F: OPM-specific Func ons
A: Agency-specific Func ons
*Federal Talent Management is defined as the
employee lifecycle

Supporting

A4
A6
A3
A5
Employee
Separaon
Talent
Compensaon
Performance
and
Development
and Benefits
Management
Rerement

A7
Employee
Relaons and
Connuous
Ve­ng

A8
Labor
Relaons

A9
Workforce
Analycs and
Employee
Records

A10.1
A2.1
A3.1
A4.1
A5.1
A6.1
Human Capital
Talent
Talent
Employee
Compensa on Separa on
Programma c Acquisi on Development Performance
Management Counseling
Planning
Management
Evalua on Management

A7.1
Employee
Accountability
for Conduct

A8.1
Labor
Management
Rela ons

A9.1
Employee
Inquiry
Processing

A8.2
Nego ated
Grievances
and ThirdParty
Proceedings

A9.2
Employee
Research

A8.3
Collec ve
Bargaining

A9.3
Workforce and
Performance
Analy cs

A2.2
A3.2
A5.2
A6.2
A7.2
A4.2
Candidate
Talent
Work Schedule Re rement
Employee
Recogni on
Sourcing and Development
and Leave Planning and Accountability
Management
Recruitment and Training
Management Processing for Performance

A1.3
Posi on
Classifica on
and Posi on
Management

A4.3
Performance
A2.3
A3.3
Appraisal
A5.3
Candidate
Learning
System
Benefits
Assessment
Administra on Cer fica on Management
and Selec on
for SES and
SL/ST

A7.3
Administra ve
Grievances and
Third-Party
Proceedings

A1.4
Diversity and
Inclusion

A2.4
Applicant
Screening,
Reciprocity,
Inves ga on

A5.4
Work-Life
Wellness /
Employee
Assistance
Programming

A7.4
Reasonable
Accommoda on

A9.4
Workforce and
Performance
Repor ng

A1.5
Employee
Engagement

A2.5
Veng
Adjudica on

A7.5
Con nuous
Veng

A9.5
Employee
Records
Recordkeeping
A9.6
Employee
Records
Disclosure

A2.6
New Hire InProcessing and
Onboarding

Table 7–4. TOTAL FEDERAL EMPLOYMENT
(As measured by Full-Time Equivalents)
Description
Executive Branch Civilian:
All Agencies, Except Postal Service �����������������������������������������������������������������������������������������������������������������
Postal Service 1 �������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, Executive Branch Civilian ������������������������������������������������������������������������������������������������������������

2017
Actual
2,062,068
591,179
2,653,247

2018
Estimate
2,085,101
582,346
2,667,447

2019
Estimate
2,095,203
583,078
2,678,281

Change: 2018 to 2019
FTE
10,102
732
10,834

Executive Branch Uniformed Military:
Department of Defense 2 ���������������������������������������������������������������������������������������������������������������������������������
1,337,669
1,352,081
1,378,630
26,549
Department of Homeland Security (USCG) �����������������������������������������������������������������������������������������������������
41,137
41,503
41,495
–8
Commissioned Corps (DOC, EPA, HHS) ���������������������������������������������������������������������������������������������������������
6,792
6,929
7,024
95
Subtotal, Uniformed Military �����������������������������������������������������������������������������������������������������������������������
1,385,598
1,400,513
1,427,149
26,636
Subtotal, Executive Branch �������������������������������������������������������������������������������������������������������������������������
4,038,845
4,067,960
4,105,430
37,470
Legislative Branch 3 ����������������������������������������������������������������������������������������������������������������������������������������������
29,640
32,745
33,408
663
Judicial Branch �����������������������������������������������������������������������������������������������������������������������������������������������������
32,810
33,214
33,351
137
Grand Total ������������������������������������������������������������������������������������������������������������������������������������������������
4,101,295
4,133,919
4,172,189
38,270
1 Includes Postal Rate Commission.
2 Includes activated Guard and Reserve members on active duty. Does not include Full-Time Support (Active Guard & Reserve (AGRSs)) paid from Reserve Component
appropriations.
3 FTE data not available for the Senate (positions filled were used for actual year and extended at same level).
* Non-zero less than 0.1%

Percent
0.5%
0.1%
0.4%
1.9%
–*
1.4%
1.9%
0.9%
2.0%
0.4%
0.9%

72

ANALYTICAL PERSPECTIVES

CHART 7-6
FEDERAL EMPLOYEE REVIEW PROCESSES FOR MAJOR DISCIPLINARY ACTIONS
[REMOVAL; SUSPENSION > 14 DAYS; REDUCTION IN GRADE OR PAY]
* BEGIN HERE *
NEGOTIATED
PROCESS

YES

IS EMPLOYEE
COVERED BY
A UNION
CONTRACT?

ADMINISTRATIVE
PROCESSES

NO

ELECTION

ELECTION

UNION
GRIEVANCE

DISCRIMINATION
COMPLAINT

APPEAL TO
MSPB

WHISTLEBLOWER
RETALIATION
COMPLAINT

ARBITRATION
HEARING

AGENCY
INVESTIGATION

AJ HEARING
& DECISION

OSC
INVESTIGATION

ARBITRATOR
DECISION

FINAL
AGENCY
DECISION

REVIEW &
FINAL MSPB
DECISION

REVIEW &
DECISION
FROM EEOC

Grievance process
EEO process
MSPB process
OSC process
Judicial review

FEDERAL
DISTRICT
COURT

U.S COURT
OF APPEALS:
REGIONAL

U.S. COURT
OF APPEALS:
FED. CIR.

[AS OF 12/26/17]

Source: Merit Systems Protection Board

fined benefit plan, so that employees and their employing
agency pay an equal share of the employee’s annuity cost;
and reducing or eliminating cost of living adjustments for
existing and future retirees. Increased employee annuity
contributions would be phased in at a rate of one percent per year. Also carried forward from the 2018 Budget
are proposals to base annuity calculations on employees’
“High-5” salary years instead of their “High-3” salary
years (a common private sector practice), and the elimination of the FERS Special Retirement Supplement for
those employees who retire before their Social Security
eligibility age.
This Budget further proposes to modify the “G”
fund, an investment vehicle available only through the
Thrift Savings Plan (TSP), the defined contribution
plan for Federal employees. G fund investors benefit
from receiving a medium-term Treasury Bond rate of
return on what is essentially a short-term security.

The Budget would instead base the G-fund yield on a
short-term T-bill rate. The TSP, one of the largest defined contribution plans in the world, is popular among
Federal employees, who appreciate having a pre-tax
investment vehicle with low administrative costs and
employer matching contributions. The TSP is also
taxpayer-friendly, since the program has no unfunded
liabilities. In contrast, the Civil Service Retirement
and Disability Fund, the Federal defined benefit programs’ trust fund, operates like Social Security; it has
large, unfunded liabilities backed only by Government
IOUs. The TSP is a particularly attractive benefit to
young, mobile workers not intending to make a career
of Federal service. The Budget, therefore, funds a study
to explore the potential benefits, including the recruitment benefit, of creating a defined-contribution only
annuity benefit for new Federal workers, and those desiring to transfer out of the existing hybrid system.

7. Strengthening the Federal Workforce

Federal employee sick and annual leave benefits are
also disproportionate to the private sector. All Federal employees receive 10 paid holidays and up to 13 sick days
annually, as well as 13 to 26 vacation days, depending on
tenure. This Budget proposes to transition the existing
civilian leave system to a model that has worked well in
the private sector, which is to grant employees maximum
flexibility by combining all leave into one paid time off
category. This would reduce total leave days, while adding
a short term disability insurance policy to protect employees who experience a serious medical situation.
Across the board pay increases have long-term fixed
costs, yet fail to address existing pay disparities, or target mission critical recruitment and retention goals. The
Administration therefore proposes a pay freeze for Federal
civilian employees for 2019. This Administration believes in
pay for performance. The existing Federal salary structure
rewards longevity over performance. This is most evident
in the tenure-based “step-increase” promotions that whitecollar workers receive on a fixed, periodic schedule without
regard to whether they are performing at an exceptional
level or merely passable (they are granted 99.7 percent of
the time). The Budget proposes to slow the frequency of
these step increases, while increasing performance-based
pay for workers in mission-critical areas.
Separately, the Budget proposes $50 million for a centrally-managed fund to finance innovative approaches
to meeting critical recruitment, retention and reskilling needs across the Government. The President’s
Management Council would designate a board of Federal
officials to manage the fund, which would review and select from among agency and cross-agency proposals to
pilot innovative and cost-effective ways to strengthen
the workforce, to meet future workforce challenges, and
to evaluate the impacts in a manner that best informs
future policies.
Fixing Hiring and Employee Relations
Federal jobs can take more than a year to fill. The job
announcements remain a confusing cipher to applicants.
The hiring process – which includes at least 14 steps – is
cumbersome and frustrating for Federal hiring managers.
As the nature of work changes, the Federal Government
requires more term employees. Many individuals are interested in public service but not seeking a career in the
civil service. Existing Federal hiring rules make term hiring as difficult as hiring a permanent employee.
Another major hindrance to timely hiring is a massive
security investigation inventory. The Administration inherited a significant and growing inventory of background
investigations for Federal employment and security clearances. The inventory grew from a steady-state of about
190,000 cases in August 2014 to more than 722,000 by
August of last year. It currently stands at more than
706,000. The inventory creates dramatic delays in the
hiring process across Government, especially those
agencies in need of personnel with a security clearance.
Beyond the immediate problem, fundamental reform of
the background investigation process is necessary, to both
increase efficiency and reduce costs.

73
Federal Agencies face challenges in effectively implementing information technology (IT) workforce planning
and defining cybersecurity staffing needs. Execution of
the National Initiative for Cybersecurity Education coding structure is expected to identify critical cyber needs
by the end of 2018. IT and cybersecurity recruitment and
retention initiatives will continue to focus on mitigation
of critical skill gaps and retaining current IT and cybersecurity talent. The Government will experiment in finding
new ways to hire the necessary cyber workforce.
As agencies implement new technology and processes,
the Administration will invest in reskilling the workforce
to meet current needs. Employees who perform transactional work that is phased out can shift to working more
directly with customers or on more complex and strategic
issues. Current employees can shift from legacy positions
into emerging fields in which the Government faces shortages, including data analysis, cybersecurity and other IT
disciplines.
Another area of focus is the Senior Executive Service
(SES), the roughly 7,000 high-ranking Federal managers
who hold many of the most responsible career positions
in the Government. SES members are disproportionately
retirement-eligible. The Administration is continuing efforts to modernize policies and practices governing the
SES, including creating a more robust and effective SES
succession pipeline, which could include more recruitment outreach into the private sector.
Many new Federal employees still have paper copies
of onboarding documents printed and stored. Employees
who move between agencies need to have personnel data,
such as basic identifiers or health benefits elections manually re-entered. Electronic personnel files contain scanned
copies of old documents, as opposed to being truly digital
and interoperable between agencies. The Administration,
however, is creating a single electronic identifier for employees that follows them throughout their career and
will enable agencies to advance their use of data-driven
human resources decisions.
At the end of their careers, a long-standing backlog
in Federal retirement claims processing remains an inconvenience to Federal retirees. Paper personnel files on
individual employees are maintained in a facility housed
in a Pennsylvania mine with 28,000 filing cabinets.
Retirement claims may require manual intervention or
labor-intensive calculations.
Federal employer-employee relations activities currently consume considerable management time and taxpayer
resources, and may negatively impact efficiency, effectiveness, cost of operations, and employee accountability and
performance. About 60 percent of Federal employees belong to a union. Federal statute defines the parameters
of collective bargaining, which are different than those
in the private sector and State or local governments.
Federal employees are not allowed to strike and unions
must represent all eligible employees regardless of paid
membership. Fewer items are negotiable than in the private sector. Yet, collective bargaining contracts can have a
significant impact on agency performance, workplace productivity, and employee satisfaction. The Administration

74
sees an opportunity for progress on this front and intends
to overhaul labor-management relations. On September
29, 2017, Executive Order 13812 rescinded the requirement for labor-management forums. Agencies were
further instructed to remove any internal policies, programs, or guidelines related to existing forums.

ANALYTICAL PERSPECTIVES

Long-term Workforce Planning and Strategies

agencies, primarily in security-related agencies (DOD,
VA, and particularly DHS), as well as Commerce as it
prepares for the 2020 Census, which requires a large influx of short-term staff. Table 7-4 shows actual 2017 total
Federal employment and estimated totals for 2018 and
2019, including the Uniformed Military, Postal Service,
Judicial and Legislative branches.

All agencies are responsible for being good stewards of
taxpayer funds. To that end, in M-17-22, “Comprehensive
Plan for Reforming the Federal Government and Reducing
the Federal Civilian Workforce,” the Office of Management
and Budget (OMB) required agencies to create short and
long term workforce plans to right-size their workforces
in keeping with the agency’s current mission. The agency
plans were used to develop long-term workforce strategies, including the staffing levels proposed in the 2019
Budget.
Agencies will continue to examine their workforces
to determine what jobs they need to accomplish their
mission, taking into account the impact of technological investments that automate transactional processes,
artificial intelligence that can streamline the byzantine
compliance and regulatory processes, online and telephone
chat-bots to improve customer service, and other such
tools that may reduce agency personnel needs. Currently,
many professionals are performing tasks that the private
sector dispatches via technology tools such as “bots” and
artificial intelligence. A Deloitte study used BLS data
to show that Federal agencies spend millions of hours
performing tasks like documenting and recording paperwork, evaluating information to determine compliance,
monitoring resources, and responding to routine questions. The study estimated that VA spent more than 150
million hours on documenting and recording information.
It found that Department of Homeland Security (DHS)
could save 800,000 hours annually by increasing automation of compliance with standards.
Agencies for too long have devoted too many positions
to low-value work. Several agencies are already using
shared-service models for mission-support positions,
which can also reduce their need for full-time employees.
Fewer staff positions may also be needed due to changes
in Federal procurement, real estate utilization and administrative processes.
Due to the initial hiring freeze and subsequent efforts, non-security agencies (i.e. USDA, DOI, Treasury,
Housing & Urban Development, and Environmental
Protection Agency) conducted substantial decreases to
the size of their workforce. The 2019 Budget details further proposed reductions in specific agencies. Estimated
employment levels for 2019 are higher than the 2017 actual FTE levels and an increase from the 2018 estimates,
all of which are slightly less than 2.1 million civilian employees. The Federal workforce increased only modestly
in 2017, from 2,057,300 to 2,062,100. From 2018 to 2019,
increases occur in 7 of the 24 Chief Financial Officers Act

One of the Administration’s first priorities was to address poor performers and conduct violators. In lifting
the January 23, 2017 hiring freeze, the Administration
chose to focus on improving the quality of the current
workforce. OMB required all agencies to submit plans to
address employee performance. The Administration recognizes that the vast majority of employees uphold their
Oath of Office and work diligently. A percentage, however,
are simply unable or unwilling to perform at acceptable
levels. Their peers in the Federal workforce recognize this
issue. Every year, the vast majority of Federal workers
surveyed disagree with the statement that, “in my work,
steps are taken to deal with a poor performer who cannot
or will not improve.”
The requirements to successfully remove an employee for misconduct or poor performance are onerous (see
Chart 7-6). Employees have a variety of avenues to appeal
and challenge actions. Agencies may settle cases to avoid
the expense of litigation, regardless of the strength and
documentation of a manager’s case. Settling can avoid the
prospect of an even more costly decision by an arbitrator
unaccountable to taxpayers. Federal managers are reluctant to expend the energy necessary to go through the
process of dismissing the worst performers and conduct
violators. In some cases, the most immediate victims of
employee misconduct are fellow employees, who may file
claims themselves that they are being harassed, hazed, or
threatened by their colleague.
Each year, fewer than one in 200 Federal employees is
fired. In contrast, more than 99 percent of employees are
rated as fully successful or higher in their evaluations. The
failure of Federal performance management systems to adequately differentiate the performance of individuals extends
up to the SES cadre, where the modal rating is “exceeds expectations,” and at many agencies it is “outstanding.” This
sort of grade inflation does little to help managers reward
high performers or otherwise make necessary distinctions
to inform decisions concerning the workforce. This is yet another area where the Federal workforce could benefit from
adopting some private sector norms.
The Federal workforce also contains untold numbers
of selfless civil servants who perform their jobs in a manner that honors and uplifts their fellow citizens. They
are part of the fabric that makes this Nation great. We
need reforms that recognize and reward such individuals, and free them from unnecessary red tape so that they
can more efficiently and effectively support the mission of
Government.

Maximizing Employee Performance

BUDGET CONCEPTS AND BUDGET PROCESS

75

8. BUDGET CONCEPTS

The budget system of the United States Government
provides the means for the President and the Congress
to decide how much money to spend, what to spend it
on, and how to raise the money they have decided to
spend. Through the budget system, they determine the
allocation of resources among the agencies of the Federal
Government and between the Federal Government and
the private sector. The budget system focuses primarily on dollars, but it also allocates other resources, such
as Federal employment. The decisions made in the budget process affect the Nation as a whole, State and local
governments, and individual Americans. Many budget
decisions have worldwide significance. The Congress and
the President enact budget decisions into law. The budget
system ensures that these laws are carried out.
This chapter provides an overview of the budget system
and explains some of the more important budget concepts.
It includes summary dollar amounts to illustrate major
concepts. Other chapters of the budget documents discuss

these amounts and more detailed amounts in greater
depth.
The following section discusses the budget process,
covering formulation of the President’s Budget, action
by the Congress, and execution of enacted budget laws.
The next section provides information on budget coverage, including a discussion of on-budget and off-budget
amounts, functional classification, presentation of budget
data, types of funds, and full-cost budgeting. Subsequent
sections discuss the concepts of receipts and collections,
budget authority, and outlays. These sections are followed
by discussions of Federal credit; surpluses, deficits, and
means of financing; Federal employment; and the basis
for the budget figures. A glossary of budget terms appears
at the end of the chapter.
Various laws, enacted to carry out requirements of the
Constitution, govern the budget system. The chapter refers to the principal ones by title throughout the text and
gives complete citations in the section just preceding the
glossary.

THE BUDGET PROCESS
The budget process has three main phases, each of
which is related to the others:
1. Formulation of the President’s Budget;
2. Action by the Congress; and
3. Execution of enacted budget laws.
Formulation of the President’s Budget
The Budget of the United States Government consists
of several volumes that set forth the President’s fiscal
policy goals and priorities for the allocation of resources
by the Government. The primary focus of the Budget is
on the budget year—the next fiscal year for which the
Congress needs to make appropriations, in this case 2019.
(Fiscal year 2019 will begin on October 1, 2018, and end
on September 30, 2019.) The Budget also covers the nine
years following the budget year in order to reflect the effect
of budget decisions over the longer term. It includes the
funding levels provided for the current year, in this case
2018, which allows the reader to compare the President’s
Budget proposals with the most recently enacted levels.
The Budget also includes data on the most recently completed fiscal year, in this case 2017, so that the reader can
compare budget estimates to actual accounting data.
In a normal year, the President begins the process of
formulating the budget by establishing general budget

and fiscal policy guidelines, usually by the spring of each
year, at least nine months before the President transmits
the budget to the Congress and at least 18 months before
the fiscal year begins. (See the “Budget Calendar” later
in this chapter.) Based on these guidelines, the Office of
Management and Budget (OMB) works with the Federal
agencies to establish specific policy directions and planning levels to guide the preparation of their budget
requests.
During the formulation of the budget, the President,
the Director of OMB, and other officials in the Executive
Office of the President continually exchange information,
proposals, and evaluations bearing on policy decisions
with the Secretaries of the departments and the heads
of the other Government agencies. Decisions reflected in
previously enacted budgets, including the one for the fiscal year in progress, reactions to the last proposed budget
(which the Congress is considering at the same time the
process of preparing the forthcoming budget begins), and
evaluations of program performance all influence decisions concerning the forthcoming budget, as do projections
of the economic outlook, prepared jointly by the Council of
Economic Advisers, OMB, and the Treasury Department.
In early fall, agencies submit their budget requests to
OMB, where analysts review them and identify issues
that OMB officials need to discuss with the agencies.
OMB and the agencies resolve many issues themselves.
Others require the involvement of White House policy officials and the President. This decision-making process
is usually completed by late December. At that time, the

77

78

ANALYTICAL PERSPECTIVES

final stage of developing detailed budget data and the
preparation of the budget documents begins.
The decision-makers must consider the effects of economic and technical assumptions on the budget estimates.
Interest rates, economic growth, the rate of inflation, the
unemployment rate, and the number of people eligible
for various benefit programs, among other factors, affect
Government spending and receipts. Small changes in
these assumptions can alter budget estimates by many
billions of dollars. (Chapter 2, “Economic Assumptions
and Interactions with the Budget,’’ provides more information on this subject.)
Thus, the budget formulation process involves the
simultaneous consideration of the resource needs of individual programs, the allocation of resources among the
agencies and functions of the Federal Government, and
the total outlays and receipts that are appropriate in light
of current and prospective economic conditions.
The law governing the President’s budget requires
its transmittal to the Congress on or after the first
Monday in January but not later than the first Monday
in February of each year for the following fiscal year,
which begins on October 1. The budget is usually scheduled for transmission to the Congress on the first Monday
in February, giving the Congress eight months to act on
the budget before the fiscal year begins. In years when
a Presidential transition has taken place, this timeline
for budget release is commonly extended to allow the new
Administration sufficient time to take office and formulate its budget policy. While there is no specific timeline
set for this circumstance, the detailed budget is usually
completed and released in April or May. However, in order
to aid the congressional budget process (discussed below),
new Administrations often release a budget blueprint
that contains broad spending outlines and descriptions of
major policies and priorities in February or March.
Congressional Action1
The Congress considers the President’s budget proposals and approves, modifies, or disapproves them. It
can change funding levels, eliminate programs, or add
programs not requested by the President. It can add or
eliminate taxes and other sources of receipts or make
other changes that affect the amount of receipts collected.
The Congress does not enact a budget as such. Through
the process of adopting a planning document called a budget resolution (described below), the Congress agrees on
targets for total spending and receipts, the size of the deficit or surplus, and the debt limit. The budget resolution
provides the framework within which individual congressional committees prepare appropriations bills and other
spending and receipts legislation. The Congress provides
spending authority—funding—for specified purposes in
appropriations acts each year. It also enacts changes each
year in other laws that affect spending and receipts. Both
1     For a fuller discussion of the congressional budget process, see Bill
Heniff Jr., Introduction to the Federal Budget Process (Congressional
Research Service Report 98–721), and Robert Keith and Allen Schick,
Manual on the Federal Budget Process (Congressional Research Service
Report 98–720, archived).

appropriations acts and these other laws are discussed in
the following paragraphs.
In making appropriations, the Congress does not vote
on the level of outlays (spending) directly, but rather on
budget authority, or funding, which is the authority provided by law to incur financial obligations that will result
in outlays. In a separate process, prior to making appropriations, the Congress usually enacts legislation that
authorizes an agency to carry out particular programs,
authorizes the appropriation of funds to carry out those
programs, and, in some cases, limits the amount that
can be appropriated for the programs. Some authorizing
legislation expires after one year, some expires after a
specified number of years, and some is permanent. The
Congress may enact appropriations for a program even
though there is no specific authorization for it or its authorization has expired.
The Congress begins its work on its budget resolution
shortly after it receives the President’s budget. Under
the procedures established by the Congressional Budget
Act of 1974, the Congress decides on budget targets before commencing action on individual appropriations.
The Act requires each standing committee of the House
and Senate to recommend budget levels and report legislative plans concerning matters within the committee’s
jurisdiction to the Budget Committee in each body. The
House and Senate Budget Committees then each design
and report, and each body then considers, a concurrent
resolution on the budget—a congressional budget plan,
or budget resolution. The budget resolution sets targets
for total receipts and for budget authority and outlays,
both in total and by functional category (see “Functional
Classification’’ later in this chapter). It also sets targets
for the budget deficit or surplus and for Federal debt subject to statutory limit.
The congressional timetable calls for the House and
Senate to resolve differences between their respective
versions of the congressional budget resolution and adopt
a single budget resolution by April 15 of each year.
In the report on the budget resolution, the Budget
Committees allocate the total on-budget budget authority and outlays set forth in the resolution to the
Appropriations Committees and the other committees
that have jurisdiction over spending. These committee allocations are commonly known as “302(a)” allocations, in
reference to the section of the Congressional Budget Act
that provides for them. The Appropriations Committees
are then required to divide their 302(a) allocations of
budget authority and outlays among their subcommittees. These subcommittee allocations are known as
“302(b)” allocations.
There are procedural hurdles
associated with considering appropriations bills (“discretionary” spending) that would breach or further breach an
Appropriations subcommittee’s 302(b) allocation. Similar
procedural hurdles exist for considering legislation that
would cause the 302(a) allocation for any committee to
be breached or further breached. The Budget Committees’
reports may discuss assumptions about the level of funding for major programs. While these assumptions do not

79

8. Budget Concepts

bind the other committees and subcommittees, they may
influence their decisions.
Budget resolutions may include “reserve funds,” which
permit adjustment of the resolution allocations as necessary to accommodate legislation addressing specific
matters, such as health care or tax reform. Reserve funds
are most often limited to legislation that is deficit neutral,
including increases in some areas offset by decreases in
others.
The budget resolution may also contain “reconciliation
directives’’ (discussed below) to the committees responsible for tax laws and for mandatory spending—programs
not controlled by annual appropriation acts—in order to
conform the level of receipts and this type of spending to
the targets in the budget resolution.
Since the concurrent resolution on the budget is not a
law, it does not require the President’s approval. However,
the Congress considers the President’s views in preparing budget resolutions, because legislation developed to
meet congressional budget allocations does require the
President’s approval. In some years, the President and
the joint leadership of Congress have formally agreed on
plans to reduce the deficit or balance the budget. These
agreements were then reflected in the budget resolution
and legislation passed for those years.
If the Congress does not pass a budget resolution, the
House and Senate typically adopt one or more “deeming
resolutions” in the form of a simple resolution or as a provision of a larger bill. A deeming resolution may serve
nearly all functions of a budget resolution, except it may
not trigger reconciliation procedures in the Senate.
Once the Congress approves the budget resolution, it
turns its attention to enacting appropriations bills and
authorizing legislation. Appropriations bills are initiated
in the House. They provide the budgetary resources for
the majority of Federal programs, but only a minority of
Federal spending. The Appropriations Committee in each
body has jurisdiction over annual appropriations. These
committees are divided into subcommittees that hold
hearings and review detailed budget justification materials prepared by the Executive Branch agencies within the
subcommittee’s jurisdiction. After a bill has been draft-

ed by a subcommittee, the full committee and the whole
House, in turn, must approve the bill, sometimes with
amendments to the original version. The House then
forwards the bill to the Senate, where a similar review
follows. If the Senate disagrees with the House on particular matters in the bill, which is often the case, the two
bodies form a conference committee (consisting of some
Members of each body) to resolve the differences. The conference committee revises the bill and returns it to both
bodies for approval. When the revised bill is agreed to,
first in the House and then in the Senate, the Congress
sends it to the President for approval or veto.
Since 1977, when the start of the fiscal year was established as October 1, there have been only three fiscal years
(1989, 1995, and 1997) for which the Congress agreed to
and enacted every regular appropriations bill by that
date. When one or more appropriations bills has not been
agreed to by this date, Congress usually enacts a joint
resolution called a “continuing resolution’’ (CR), which is
an interim or stop-gap appropriations bill that provides
authority for the affected agencies to continue operations
at some specified level until a specific date or until the
regular appropriations are enacted. Occasionally, a CR
has funded a portion or all of the Government for the entire year.
The Congress must present these CRs to the President
for approval or veto. In some cases, Congresses have failed
to pass a CR or Presidents have rejected CRs because
they contained unacceptable provisions. Left without
funds, Government agencies were required by law to shut
down operations—with exceptions for some limited activities—until the Congress passed a CR the President would
approve. Shutdowns have lasted for periods of a day to
several weeks.
The Congress also provides budget authority in laws
other than appropriations acts. In fact, while annual appropriations acts fund the majority of Federal programs,
they account for only about a third of the total spending in a typical year. Authorizing legislation controls the
rest of the spending, which is commonly called “mandatory spending.” A distinctive feature of these authorizing
laws is that they provide agencies with the authority or

BUDGET CALENDAR
The following timetable highlights the scheduled dates for significant budget events during a normal budget year:
Between the 1st Monday in January and the
1st Monday in February ������������������������������ President transmits the budget
Six weeks later................................................... Congressional committees report budget estimates to Budget Committees
April 15............................................................... Action to be completed on congressional budget resolution
May 15................................................................ House consideration of annual appropriations bills may begin even if the budget resolution has
not been agreed to.
June 10............................................................... House Appropriations Committee to report the last of its annual appropriations bills.
June 15............................................................... Action to be completed on “reconciliation bill” by the Congress.
June 30............................................................... Action on appropriations to be completed by House
July 15................................................................ President transmits Mid-Session Review of the Budget
October 1............................................................. Fiscal year begins

80
requirement to spend money without first requiring the
Appropriations Committees to enact funding. This category of spending includes interest the Government pays
on the public debt and the spending of several major
programs, such as Social Security, Medicare, Medicaid, unemployment insurance, and Federal employee retirement.
This chapter discusses the control of budget authority and
outlays in greater detail under “Budget Authority and
Other Budgetary Resources, Obligations, and Outlays.”
Almost all taxes and most other receipts also result from
authorizing laws. Article I, Section 7, of the Constitution
provides that all bills for raising revenue shall originate
in the House of Representatives. In the House, the Ways
and Means Committee initiates tax bills; in the Senate,
the Finance Committee has jurisdiction over tax laws.
The budget resolution often includes reconciliation
directives, which require authorizing committees to
recommend changes in laws that affect receipts or mandatory spending. They direct each designated committee
to report amendments to the laws under the committee’s
jurisdiction that would achieve changes in the levels of
receipts or reductions in mandatory spending controlled
by those laws. These directives specify the dollar amount
of changes that each designated committee is expected to
achieve, but do not specify which laws are to be changed or
the changes to be made. However, the Budget Committees’
reports on the budget resolution frequently discuss assumptions about how the laws would be changed. Like
other assumptions in the report, they do not bind the committees of jurisdiction but may influence their decisions.
A reconciliation instruction may also specify the total
amount by which the statutory limit on the public debt is
to be changed.
The committees subject to reconciliation directives
draft the implementing legislation. Such legislation may,
for example, change the tax code, revise benefit formulas
or eligibility requirements for benefit programs, or authorize Government agencies to charge fees to cover some
of their costs. Reconciliation bills are typically omnibus
legislation, combining the legislation submitted by each
reconciled committee in a single act.
Such a large and complicated bill would be difficult
to enact under normal legislative procedures because it
usually involves changes to tax rates or to popular social programs, generally to reduce projected deficits. The
Senate considers such omnibus reconciliation acts under
expedited procedures that limit total debate on the bill.
To offset the procedural advantage gained by expedited
procedures, the Senate places significant restrictions on
the substantive content of the reconciliation measure
itself, as well as on amendments to the measure. Any
material in the bill that is extraneous or that contains
changes to the Federal Old-Age and Survivors Insurance
and the Federal Disability Insurance programs is not in
order under the Senate’s expedited reconciliation procedures. Non-germane amendments are also prohibited.
The House does not allow reconciliation bills to increase
mandatory spending in net, but does allow such bills to
increase deficits by reducing revenues. Reconciliation
acts, together with appropriations acts for the year, are

ANALYTICAL PERSPECTIVES

usually used to implement broad agreements between
the President and the Congress on those occasions where
the two branches have negotiated a comprehensive budget plan. Reconciliation acts have sometimes included
other matters, such as laws providing the means for enforcing these agreements, as described under “Budget
Enforcement.”
Budget Enforcement
The Federal Government uses three primary enforcement mechanisms to control revenues, spending, and
deficits. First, the Statutory Pay-As-You-Go Act of 2010,
enacted on February 12, 2010, reestablished a statutory
procedure to enforce a rule of deficit neutrality on new
revenue and mandatory spending legislation. Second, the
Budget Control Act of 2011 (BCA), enacted on August
2, 2011, amended the Balanced Budget and Emergency
Deficit Control Act of 1985 (BBEDCA) by reinstating
limits (“caps”) on the amount of discretionary budget
authority that can be provided through the annual appropriations process. Third, the BCA also created a Joint
Select Committee on Deficit Reduction that was instructed to develop a bill to reduce the Federal deficit by at least
$1.5 trillion over a 10-year period and imposed automatic
spending cuts to achieve $1.2 trillion of deficit reduction
over 9 years after the Joint Committee process failed to
achieve its deficit reduction goal.
BBEDCA divides spending into two types—discretionary spending and direct or mandatory spending.
Discretionary spending is controlled through annual
appropriations acts. Funding for salaries and other operating expenses of government agencies, for example,
is generally discretionary because it is usually provided
by appropriations acts. Direct spending is more commonly called mandatory spending. Mandatory spending is
controlled by permanent laws. Medicare and Medicaid
payments, unemployment insurance benefits, and farm
price supports are examples of mandatory spending,
because permanent laws authorize payments for those
purposes. Receipts are included under the same statutory
enforcement rules that apply to mandatory spending because permanent laws generally control receipts.
Discretionary cap enforcement. BBEDCA specifies spending limits (“caps”) on discretionary budget
authority for 2012 through 2021. Similar enforcement
mechanisms were established by the Budget Enforcement
Act of 1990 and were extended in 1993 and 1997, but expired at the end of 2002. The caps originally established
by the BCA were divided between security and nonsecurity categories for 2012 and 2013, with a single cap for
all discretionary spending established for 2014 through
2021. The security category included discretionary budget authority for the Departments of Defense, Homeland
Security, and Veterans Affairs, the National Nuclear
Security Administration, the Intelligence Community
Management account, and all budget accounts in the
international affairs budget function (budget function
150). The nonsecurity category included all discretionary
budget authority not included in the security category.

8. Budget Concepts

As part of the enforcement mechanisms triggered by the
failure of the BCA’s Joint Committee process, the security
and nonsecurity categories were redefined and established for all years through 2021. The “revised security
category” includes discretionary budget authority in the
defense budget function 050, which primarily consists
of the Department of Defense. The “revised nonsecurity
category” includes all discretionary budget authority not
included in the defense budget function 050. The redefined categories are commonly referred to as the “defense”
and “non-defense” categories, respectively, to distinguish
them from the original categories.
Since the Joint Committee sequestration that was ordered on March 1, 2013, the Congress and the President
have enacted two agreements to provide more resources
to discretionary programs than would have been available
under the Joint Committee enforcement mechanisms.
These increases to the caps were paid for largely with
savings in mandatory spending. The Bipartisan Budget
Act (BBA) of 2013 set new discretionary caps for 2014 at
$520.5 billion for the defense category and $491.8 billion
for the non-defense category and for 2015 at $521.3 billion
for the defense category and $492.4 billion for the nondefense category. The BBA of 2015 set new discretionary
caps for 2016 at $548.1 billion for the defense category
and $518.5 for the non-defense category and for 2017 at
$551.1 billion for the defense category and $518.5 billion for the non-defense category. In addition, the BBA
of 2013 reaffirmed the defense and non-defense category
limits through 2021 and the BBA of 2015 left these in
place after 2017. However, these limits are still subject
to Joint Committee reductions if those procedures remain
in place.
BBEDCA requires OMB to adjust the caps each year
for: changes in concepts and definitions; appropriations
designated by the Congress and the President as emergency requirements; and appropriations designated by
the Congress and the President for Overseas Contingency
Operations/Global War on Terrorism. BBEDCA also specifies cap adjustments (which are limited to fixed amounts)
for: appropriations for continuing disability reviews and
redeterminations by the Social Security Administration;
the health care fraud and abuse control program at the
Department of Health and Human Services; and appropriations designated by Congress as being for disaster
relief.
BBEDCA requires OMB to provide cost estimates of
each appropriations act in a report to the Congress within
7 business days after enactment of such act and to publish three discretionary sequestration reports: a “preview”
report when the President submits the budget; an “update” report in August, and a “final” report within 15 days
after the end of a session of the Congress.
The preview report explains the adjustments that are
required by law to the discretionary caps, including any
changes in concepts and definitions, and publishes the
revised caps. The preview report may also provide a summary of policy changes, if any, proposed by the President
in the Budget to those caps. The update and final reports
revise the preview report estimates to reflect the effects of

81
newly enacted discretionary laws. In addition, the update
report must contain a preview estimate of the adjustment
for disaster funding for the upcoming fiscal year.
If OMB’s final sequestration report for a given fiscal
year indicates that the amount of discretionary budget
authority provided in appropriations acts for that year exceeds the cap for that category in that year, the President
must issue a sequestration order canceling budgetary resources in nonexempt accounts within that category by
the amount necessary to eliminate the breach. Under sequestration, each nonexempt account within a category is
reduced by a dollar amount calculated by multiplying the
enacted level of sequestrable budgetary resources in that
account by the uniform percentage necessary to eliminate
a breach within that category. BBEDCA specifies special rules for reducing some programs and exempts some
programs from sequestration entirely. For example, any
sequestration of certain health and medical care accounts
is limited to 2 percent. Also, if a continuing resolution is
in effect when OMB issues its final sequestration report,
the sequestration calculations will be based on the annualized amount provided by that continuing resolution.
During the 1990s and so far under the BCA caps, the
threat of sequestration proved sufficient to ensure compliance with the discretionary spending limits. In that
respect, discretionary sequestration can be viewed first as
an incentive for compliance and second as a remedy for
noncompliance.
Supplemental appropriations can also trigger spending reductions. From the end of a session of the Congress
through the following June 30th, a within-session discretionary sequestration of current-year spending is imposed
if appropriations for the current year cause a cap to be
breached. In contrast, if supplemental appropriations
enacted in the last quarter of a fiscal year (i.e., July 1
through September 30) cause the caps to be breached, the
required reduction is instead achieved by reducing the
applicable spending limit for the following fiscal year by
the amount of the breach, because the size of the potential
sequestration in relation to the unused funding remaining for the current year could severely disrupt agencies’
operations.
Direct spending enforcement. The Statutory PayAs-You-Go Act of 2010 requires that new legislation
changing mandatory spending or revenue must be enacted on a “pay-as-you-go” (PAYGO) basis; that is, that the
cumulative effects of such legislation must not increase
projected on-budget deficits. Unlike the budget enforcement mechanism for discretionary programs, PAYGO is a
permanent requirement, and it does not impose a cap on
spending or a floor on revenues. Instead, PAYGO requires
that legislation reducing revenues must be fully offset
by cuts in mandatory programs or by revenue increases,
and that any bills increasing mandatory spending must
be fully offset by revenue increases or cuts in mandatory
spending.
This requirement of deficit neutrality is not enforced
on a bill-by-bill basis, but is based on two cumulative
scorecards that tally the cumulative budgetary effects
of PAYGO legislation as averaged over rolling 5- and 10-

82
year periods starting with the budget year. Any impacts of
PAYGO legislation on the current year deficit are counted
as budget year impacts when placed on the scorecard.
Like the discretionary caps, PAYGO is enforced by sequestration. Within 14 business days after a congressional
session ends, OMB issues an annual PAYGO report and
determines whether a violation of the PAYGO requirement has occurred. If either the 5- or 10-year scorecard
shows net costs in the budget year column, the President
is required to issue a sequestration order implementing
across-the-board cuts to nonexempt mandatory programs by an amount sufficient to offset those net costs.
The PAYGO effects of legislation may be directed in
legislation by reference to statements inserted into the
Congressional Record by the chairmen of the House and
Senate Budget Committees. Any such estimates are determined by the Budget Committees and are informed by,
but not required to match, the cost estimates prepared by
the Congressional Budget Office (CBO). If this procedure
is not followed, then the PAYGO effects of the legislation
are determined by OMB. During the first year of statutory PAYGO, nearly half the bills included congressional
estimates. Subsequently, OMB estimates were used for all
but one of the enacted bills due to the absence of a congressional estimate. Provisions of mandatory spending or
receipts legislation that are designated in that legislation
as an emergency requirement are not scored as PAYGO
budgetary effects.
The PAYGO rules apply to the outlays resulting from
outyear changes in mandatory programs made in appropriations acts and to all revenue changes made in
appropriations acts. However, outyear changes to mandatory programs as part of provisions that have zero net
outlay effects over the sum of the current year and the
next five fiscal years are not considered PAYGO.
The PAYGO rules do not apply to increases in mandatory spending or decreases in receipts that result
automatically under existing law. For example, mandatory spending for benefit programs, such as unemployment
insurance, rises when the number of beneficiaries rises,
and many benefit payments are automatically increased
for inflation under existing laws.
The Senate imposes points of order against consideration of tax or mandatory spending legislation that would
violate the PAYGO principle, although the time periods
covered by the Senate’s rule and the treatment of previously enacted costs or savings may differ in some respects
from the requirements of the Statutory Pay-As-You-Go
Act of 2010. The House, in contrast, imposes points of order on legislation increasing mandatory spending in net,
whether or not those costs are offset by revenue increases,
but the House rule does not constrain the size of tax cuts
or require them to be offset.
Joint Committee reductions. The failure of the Joint
Select Committee on Deficit Reduction to propose, and the
Congress to enact, legislation to reduce the deficit by at
least $1.2 trillion triggered automatic reductions to discretionary and mandatory spending in fiscal years 2013
through 2021. The reductions are implemented through
a combination of sequestration of mandatory spending

ANALYTICAL PERSPECTIVES

and reductions in the discretionary caps. These reductions have already been ordered to take effect for 2013
through 2018, with some modifications as provided for
in the American Taxpayer Relief Act of 2012, the BBA of
2013, and the BBA of 2015. Unless any legislative changes are enacted, further reductions will be implemented by
pro rata reductions to the discretionary caps from 2019
through 2021, which would be reflected in OMB’s discretionary sequestration preview report for those years,
and by a sequestration of non-exempt mandatory spending for 2019 onward, which would be ordered when the
President’s Budget is transmitted to Congress and would
take effect beginning October 1 of the upcoming fiscal
year.
OMB is required to calculate the amount of the deficit
reduction required for 2019 onward as follows:

• The $1.2 trillion savings target is reduced by 18 percent to account for debt service.

• The resulting net savings of $984 billion is divided

by nine to spread the reductions in equal amounts
across the nine years, 2013 through 2021.

• The annual spending reduction of $109.3 billion is

divided equally between the defense and non-defense functions.

• The annual reduction of $54.7 billion for each func-

tional category of spending is divided proportionally
between discretionary and direct spending programs,
using as the base the discretionary cap, redefined as
outlined in the discretionary cap enforcement section above, and the most recent baseline estimate of
non-exempt mandatory outlays.

• The resulting reductions in defense and non-defense

direct spending are implemented through a sequestration order released with the President’s Budget
and taking effect the following October 1st. The reductions in discretionary spending are applied as reductions in the discretionary caps, and are enforced
through the discretionary cap enforcement procedures discussed earlier in this section.

Subsequent to the enactment of the BCA, the mandatory sequestration provisions were extended beyond 2021 by
the BBA of 2013, which extended sequestration through
2023, P.L. 113-82, commonly referred to as the Military
Retired Pay Restoration Act, which extended sequestration through 2024, and the BBA of 2015, which extended
mandatory sequestration through 2025. Sequestration in
these four years is to be applied using the same percentage reductions for defense and non-defense as calculated
for 2021 under the procedures outlined above.2
The 2019 Budget proposes to remain within the discretionary total of $1,092 billion under current law after
2    The BBA of 2015 specified that, notwithstanding the 2 percent
limit on Medicare sequestration in the BCA, in extending sequestration
into 2025 the reduction in the Medicare program should be 4.0 percent
for the first half of the sequestration period and zero for the second half
of the period.

83

8. Budget Concepts

accounting for the discretionary cap reductions for 2019,
as ordered in the Joint Committee enforcement report issued simultaneously with the 2019 Budget. However, the
Budget would set the 2019 cap for defense programs at
$627 billion (up from $562 billion) and the non-defense
cap at $465 billion (down from $530 billion). The Budget
further proposes new caps for the outyears that would
fund defense needs while further reducing the non-defense category. In addition, the Budget proposes that the
Joint Committee mandatory sequestration be extended
to 2028. For more information on these proposals, see
Chapter 10 of this volume, “Budget Process.”
Budget Execution
Government agencies may not spend or obligate more
than the Congress has appropriated, and they may use
funds only for purposes specified in law. The Antideficiency
Act prohibits them from spending or obligating the
Government to spend in advance of an appropriation, unless specific authority to do so has been provided in law.
Additionally, the Act requires the President to apportion
the budgetary resources available for most executive
branch agencies. The President has delegated this authority to OMB. Some apportionments are by time periods
(usually by quarter of the fiscal year), some are by projects or activities, and others are by a combination of both.
Agencies may request OMB to reapportion funds during

the year to accommodate changing circumstances. This
system helps to ensure that funds do not run out before
the end of the fiscal year.
During the budget execution phase, the Government
sometimes finds that it needs more funding than the
Congress has appropriated for the fiscal year because of
unanticipated circumstances. For example, more might
be needed to respond to a severe natural disaster. Under
such circumstances, the Congress may enact a supplemental appropriation.
On the other hand, the President may propose to reduce a previously enacted appropriation. The President
may propose to either “cancel” or “rescind” the amount.
If the President initiates the withholding of funds while
the Congress considers his request, the amounts are apportioned as “deferred” or “withheld pending rescission”
on the OMB-approved apportionment form. Agencies are
instructed not to withhold funds without the prior approval of OMB. When OMB approves a withholding, the
Impoundment Control Act requires that the President
transmit a “special message” to the Congress. The historical reason for the special message is to inform the
Congress that the President has unilaterally withheld
funds that were enacted in regular appropriations acts.
The notification allows the Congress to consider the
proposed rescission in a timely way. The last time the
President initiated the withholding of funds was in fiscal
year 2000.

COVERAGE OF THE BUDGET
Federal Government and Budget Totals
The budget documents provide information on all
Federal agencies and programs. However, because the
laws governing Social Security (the Federal Old-Age and
Survivors Insurance and the Federal Disability Insurance
trust funds) and the Postal Service Fund require that
the receipts and outlays for those activities be excluded
from the budget totals and from the calculation of the
deficit or surplus, the budget presents on-budget and offbudget totals. The off-budget totals include the Federal
transactions excluded by law from the budget totals. The
on-budget and off-budget amounts are added together to
derive the totals for the Federal Government. These are
sometimes referred to as the unified or consolidated budget totals.
It is not always obvious whether a transaction or activity should be included in the budget. Where there is
a question, OMB normally follows the recommendation
of the 1967 President’s Commission on Budget Concepts
to be comprehensive of the full range of Federal agencies,
programs, and activities. In recent years, for example, the
budget has included the transactions of the Affordable
Housing Program funds, the Universal Service Fund,
the Public Company Accounting Oversight Board, the
Securities Investor Protection Corporation, Guaranty
Agencies Reserves, the National Railroad Retirement
Investment Trust, the United Mine Workers Combined

Benefits Fund, the Federal Financial Institutions
Examination Council, Electric Reliability Organizations
(EROs) established pursuant to the Energy Policy Act
of 2005, the Corporation for Travel Promotion, and the
National Association of Registered Agents and Brokers.
In contrast, the budget excludes tribal trust funds
that are owned by Indian tribes and held and managed by the Government in a fiduciary capacity on
the tribes’ behalf. These funds are not owned by the
Government, the Government is not the source of their
capital, and the Government’s control is limited to the
exercise of fiduciary duties. Similarly, the transactions of
Government-sponsored enterprises, such as the Federal
Home Loan Banks, are not included in the on-budget or
off-budget totals. Federal laws established these enterprises for public policy purposes, but they are privately
owned and operated corporations. Nevertheless, because
of their public charters, the budget discusses them and
reports summary financial data in the budget Appendix
and in some detailed tables.
The budget also excludes the revenues from copyright
royalties and spending for subsequent payments to copyright holders where (1) the law allows copyright owners
and users to voluntarily set the rate paid for the use of
protected material, and (2) the amount paid by users of
copyrighted material to copyright owners is related to the
frequency or quantity of the material used. The budget
excludes license royalties collected and paid out by the

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ANALYTICAL PERSPECTIVES

Copyright Office for the retransmission of network broadcasts via cable collected under 17 U.S.C. 111 because
these revenues meet both of these conditions. The budget
includes the royalties collected and paid out for license
fees for digital audio recording technology under 17 U.S.C.
1004, since the amount of license fees paid is unrelated to
usage of the material.
The Appendix includes a presentation for the Board
of Governors of the Federal Reserve System for information only. The amounts are not included in either the
on-budget or off-budget totals because of the independent
status of the System within the Government. However,
the Federal Reserve System transfers its net earnings to
the Treasury, and the budget records them as receipts.
Chapter 9 of this volume, “Coverage of the Budget,”
provides more information on this subject.
Table 8–1. TOTALS FOR THE BUDGET AND
THE FEDERAL GOVERNMENT
(In billions of dollars)
2017
Actual

• A function encompasses activities with similar pur-

poses, emphasizing what the Federal Government
seeks to accomplish rather than the means of accomplishment, the objects purchased, the clientele
or geographic area served (except in the cases of
functions 450 for Community and Regional Development, 570 for Medicare, 650 for Social Security,
and 700 for Veterans Benefits and Services), or the
Federal agency conducting the activity (except in
the case of subfunction 051 in the National Defense
function, which is used only for defense activities
under the Department of Defense—Military).

•A

function must be of continuing national importance, and the amounts attributable to it must be
significant.

• Each

Estimate
2018

The following criteria are used in establishing functional categories and assigning activities to them:

2019

Budget authority
Unified �������������������������������������������������
On-budget ��������������������������������������
Off-budget ��������������������������������������

4,154
3,349
805

4,264
3,405
859

4,571
3,651
920

Receipts:
Unified �������������������������������������������������
On-budget ��������������������������������������
Off-budget ��������������������������������������

3,316
2,466
851

3,340
2,488
852

3,422
2,517
905

Outlays:
Unified �������������������������������������������������
On-budget ��������������������������������������
Off-budget ��������������������������������������

3,982
3,180
801

4,173
3,316
857

4,407
3,494
913

Deficit (–) / Surplus (+):
Unified �������������������������������������������������
On-budget ��������������������������������������
Off-budget ��������������������������������������

–665
–715
49

–833
–828
–5

–984
–977
–7

Functional Classification
The functional classification is used to organize budget authority, outlays, and other budget data according
to the major purpose served—such as agriculture,
transportation, income security, and national defense.
There are 20 major functions, 17 of which are concerned
with broad areas of national need and are further divided into subfunctions. For example, the Agriculture
function comprises the subfunctions Farm Income
Stabilization and Agricultural Research and Services.
The functional classification meets the Congressional
Budget Act requirement for a presentation in the
budget by national needs and agency missions and programs. The remaining three functions—Net Interest,
Undistributed Offsetting Receipts, and Allowances—
enable the functional classification system to cover the
entire Federal budget.

basic unit being classified (generally the appropriation or fund account) usually is classified according to its primary purpose and assigned to only
one subfunction. However, some large accounts that
serve more than one major purpose are subdivided
into two or more functions or subfunctions.

In consultation with the Congress, the functional classification is adjusted from time to time as warranted.
Detailed functional tables, which provide information on
Government activities by function and subfunction, are
available online at https://www.whitehouse.gov/omb/
analytical-perspectives/ and on the Budget CD-ROM.
Agencies, Accounts, Programs,
Projects, and Activities
Various summary tables in the Analytical Perspectives
volume of the Budget provide information on budget authority, outlays, and offsetting collections and receipts
arrayed by Federal agency. A table that lists budget authority and outlays by budget account within each agency
and the totals for each agency of budget authority, outlays, and receipts that offset the agency spending totals
is available online at: https://www.whitehouse.gov/omb/
analytical-perspectives/ and on the Budget CD-ROM. The
Appendix provides budgetary, financial, and descriptive
information about programs, projects, and activities by
account within each agency.
Types of Funds
Agency activities are financed through Federal funds
and trust funds.
Federal funds comprise several types of funds.
Receipt accounts of the general fund, which is the greater part of the budget, record receipts not earmarked by
law for a specific purpose, such as income tax receipts.
The general fund also includes the proceeds of general
borrowing. General fund appropriations accounts record
general fund expenditures. General fund appropriations

85

8. Budget Concepts

draw from general fund receipts and borrowing collectively and, therefore, are not specifically linked to receipt
accounts.
Special funds consist of receipt accounts for Federal
fund receipts that laws have designated for specific purposes and the associated appropriation accounts for the
expenditure of those receipts.
Public enterprise funds are revolving funds used for
programs authorized by law to conduct a cycle of business-type operations, primarily with the public, in which
outlays generate collections.
Intragovernmental funds are revolving funds that
conduct business-type operations primarily within and
between Government agencies. The collections and the
outlays of revolving funds are recorded in the same budget account.
Trust funds account for the receipt and expenditure
of monies by the Government for carrying out specific
purposes and programs in accordance with the terms of
a statute that designates the fund as a trust fund (such
as the Highway Trust Fund) or for carrying out the stipulations of a trust where the Government itself is the
beneficiary (such as any of several trust funds for gifts and
donations for specific purposes). Trust revolving funds
are trust funds credited with collections earmarked by
law to carry out a cycle of business-type operations.
The Federal budget meaning of the term “trust,” as applied to trust fund accounts, differs significantly from its
private-sector usage. In the private sector, the beneficiary
of a trust usually owns the trust’s assets, which are managed by a trustee who must follow the stipulations of the
trust. In contrast, the Federal Government owns the assets of most Federal trust funds, and it can raise or lower
future trust fund collections and payments, or change the
purposes for which the collections are used, by changing
existing laws. There is no substantive difference between
a trust fund and a special fund or between a trust revolving fund and a public enterprise revolving fund.
However, in some instances, the Government does
act as a true trustee of assets that are owned or held for
the benefit of others. For example, it maintains accounts
on behalf of individual Federal employees in the Thrift
Savings Fund, investing them as directed by the individual employee. The Government accounts for such funds

in deposit funds, which are not included in the budget.
(Chapter 23 of this volume, “Trust Funds and Federal
Funds,” provides more information on this subject.)
Budgeting for Full Costs
A budget is a financial plan for allocating resources—deciding how much the Federal Government should
spend in total, program by program, and for the parts of
each program and deciding how to finance the spending.
The budgetary system provides a process for proposing
policies, making decisions, implementing them, and reporting the results. The budget needs to measure costs
accurately so that decision makers can compare the cost
of a program with its benefits, the cost of one program
with another, and the cost of one method of reaching a
specified goal with another. These costs need to be fully
included in the budget up front, when the spending decision is made, so that executive and congressional decision
makers have the information and the incentive to take
the total costs into account when setting priorities.
The budget includes all types of spending, including
both current operating expenditures and capital investment, and to the extent possible, both are measured on
the basis of full cost. Questions are often raised about the
measure of capital investment. The present budget provides policymakers the necessary information regarding
investment spending. It records investment on a cash
basis, and it requires the Congress to provide budget authority before an agency can obligate the Government
to make a cash outlay. However, the budget measures
only costs, and the benefits with which these costs are
compared, based on policy makers’ judgment, must be
presented in supplementary materials. By these means,
the budget allows the total cost of capital investment
to be compared up front in a rough way with the total
expected future net benefits. Such a comparison of total
costs with benefits is consistent with the formal method
of cost-benefit analysis of capital projects in government,
in which the full cost of a capital asset as the cash is paid
out is compared with the full stream of future benefits (all
in terms of present values). (Chapter 17 of this volume,
“Federal Investment,’’ provides more information on capital investment.)

RECEIPTS, OFFSETTING COLLECTIONS, AND OFFSETTING RECEIPTS
In General
The budget records amounts collected by Government
agencies two different ways. Depending on the nature of
the activity generating the collection and the law that established the collection, they are recorded as either:

• Governmental receipts, which are compared in total to outlays (net of offsetting collections and offsetting receipts) in calculating the surplus or deficit; or

• Offsetting

collections or offsetting receipts,
which are deducted from gross outlays to calculate

net outlay figures.
Governmental Receipts
Governmental receipts are collections that result from
the Government’s exercise of its sovereign power to tax
or otherwise compel payment. Sometimes they are called
receipts, budget receipts, Federal receipts, or Federal
revenues. They consist mostly of individual and corporation income taxes and social insurance taxes, but also
include excise taxes, compulsory user charges, regulato-

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ANALYTICAL PERSPECTIVES

ry fees, customs duties, court fines, certain license fees,
and deposits of earnings by the Federal Reserve System.
Total receipts for the Federal Government include both
on-budget and off-budget receipts (see Table 8–1, “Totals
for the Budget and the Federal Government,” which appears earlier in this chapter.) Chapter 11 of this volume,
“Governmental Receipts,’’ provides more information on
governmental receipts.
Offsetting Collections and Offsetting Receipts
Offsetting collections and offsetting receipts are recorded as offsets to (deductions from) spending, not as
additions on the receipt side of the budget. These amounts
are recorded as offsets to outlays so that the budget totals
represent governmental rather than market activity and
reflect the Government’s net transactions with the public.
They are recorded in one of two ways, based on interpretation of laws and longstanding budget concepts and
practice. They are offsetting collections when the collections are authorized by law to be credited to expenditure
accounts and are generally available for expenditure
without further legislation. Otherwise, they are deposited
in receipt accounts and called offsetting receipts; many of
these receipts are available for expenditure without further legislation.
Offsetting collections and offsetting receipts result
from any of the following types of transactions:

• Business-like

transactions or market-oriented
activities with the public—these include voluntary collections from the public in exchange for
goods or services, such as the proceeds from the sale
of postage stamps, the fees charged for admittance
to recreation areas, and the proceeds from the sale
of Government-owned land; and reimbursements
for damages. The budget records these amounts as
offsetting collections from non-Federal sources (for
offsetting collections) or as proprietary receipts (for
offsetting receipts).

• Intragovernmental transactions—collections

from other Federal Government accounts. The budget records collections by one Government account
from another as offsetting collections from Federal
sources (for offsetting collections) or as intragovernmental receipts (for offsetting receipts). For example, the General Services Administration rents
office space to other Government agencies and records their rental payments as offsetting collections
from Federal sources in the Federal Buildings Fund.
These transactions are exactly offsetting and do
not affect the surplus or deficit. However, they are
an important accounting mechanism for allocating
costs to the programs and activities that cause the
Government to incur the costs.

• Voluntary

gifts and donations—gifts and donations of money to the Government, which are treated
as offsets to budget authority and outlays.

• Offsetting

governmental transactions—collections from the public that are governmental in nature and should conceptually be treated like Federal
revenues and compared in total to outlays (e.g., tax
receipts, regulatory fees, compulsory user charges,
custom duties, license fees) but required by law or
longstanding practice to be misclassified as offsetting. The budget records amounts from non-Federal
sources that are governmental in nature as offsetting governmental collections (for offsetting collections) or as offsetting governmental receipts (for offsetting receipts).
Offsetting Collections

Some laws authorize agencies to credit collections directly to the account from which they will be spent and,
usually, to spend the collections for the purpose of the
account without further action by the Congress. Most revolving funds operate with such authority. For example,
a permanent law authorizes the Postal Service to use
collections from the sale of stamps to finance its operations without a requirement for annual appropriations.
The budget records these collections in the Postal Service
Fund (a revolving fund) and records budget authority in
an amount equal to the collections. In addition to revolving funds, some agencies are authorized to charge fees to
defray a portion of costs for a program that are otherwise
financed by appropriations from the general fund and
usually to spend the collections without further action by
the Congress. In such cases, the budget records the offsetting collections and resulting budget authority in the
program’s general fund expenditure account. Similarly,
intragovernmental collections authorized by some laws
may be recorded as offsetting collections and budget authority in revolving funds or in general fund expenditure
accounts.
Sometimes appropriations acts or provisions in other
laws limit the obligations that can be financed by offsetting collections. In those cases, the budget records budget
authority in the amount available to incur obligations, not
in the amount of the collections.
Offsetting collections credited to expenditure accounts
automatically offset the outlays at the expenditure account level. Where accounts have offsetting collections,
the budget shows the budget authority and outlays of
the account both gross (before deducting offsetting collections) and net (after deducting offsetting collections).
Totals for the agency, subfunction, and overall budget are
net of offsetting collections.
Offsetting Receipts
Collections that are offset against gross outlays but
are not authorized to be credited to expenditure accounts
are credited to receipt accounts and are called offsetting
receipts. Offsetting receipts are deducted from budget
authority and outlays in arriving at total net budget authority and outlays. However, unlike offsetting collections

87

8. Budget Concepts

credited to expenditure accounts, offsetting receipts do
not offset budget authority and outlays at the account
level. In most cases, they offset budget authority and outlays at the agency and subfunction levels.
Proprietary receipts from a few sources, however, are
not offset against any specific agency or function and are
classified as undistributed offsetting receipts. They are
deducted from the Government-wide totals for net budget authority and outlays. For example, the collections of
rents and royalties from outer continental shelf lands are
undistributed because the amounts are large and for the
most part are not related to the spending of the agency
that administers the transactions and the subfunction
that records the administrative expenses.
Similarly, two kinds of intragovernmental transactions—agencies’ payments as employers into Federal
employee retirement trust funds and interest received
by trust funds—are classified as undistributed offsetting
receipts. They appear instead as special deductions in
computing total net budget authority and outlays for the
Government rather than as offsets at the agency level.
This special treatment is necessary because the amounts
are so large they would distort measures of the agency’s
activities if they were attributed to the agency.

User Charges
User charges are fees assessed on individuals or organizations for the provision of Government services and
for the sale or use of Government goods or resources. The
payers of the user charge must be limited in the authorizing legislation to those receiving special benefits from, or
subject to regulation by, the program or activity beyond
the benefits received by the general public or broad segments of the public (such as those who pay income taxes
or customs duties). Policy regarding user charges is established in OMB Circular A–25, “User Charges.” The term
encompasses proceeds from the sale or use of Government
goods and services, including the sale of natural resources
(such as timber, oil, and minerals) and proceeds from asset sales (such as property, plant, and equipment). User
charges are not necessarily dedicated to the activity they
finance and may be credited to the general fund of the
Treasury.
The term “user charge” does not refer to a separate budget category for collections. User charges are classified in
the budget as receipts, offsetting receipts, or offsetting collections according to the principles explained previously.
See Chapter 12, “Offsetting Collections and Offsetting
Receipts,” for more information on the classification of
user charges.

BUDGET AUTHORITY, OBLIGATIONS, AND OUTLAYS
Budget authority, obligations, and outlays are the primary benchmarks and measures of the budget control
system. The Congress enacts laws that provide agencies
with spending authority in the form of budget authority.
Before agencies can use these resources—obligate this
budget authority—OMB must approve their spending
plans. After the plans are approved, agencies can enter
into binding agreements to purchase items or services
or to make grants or other payments. These agreements
are recorded as obligations of the United States and deducted from the amount of budgetary resources available
to the agency. When payments are made, the obligations
are liquidated and outlays recorded. These concepts are
discussed more fully below.
Budget Authority and Other Budgetary Resources
Budget authority is the authority provided in law to
enter into legal obligations that will result in immediate
or future outlays of the Government. In other words, it is
the amount of money that agencies are allowed to commit
to be spent in current or future years. Government officials may obligate the Government to make outlays only
to the extent they have been granted budget authority.
The budget records new budget authority as a dollar
amount in the year when it first becomes available for obligation. When permitted by law, unobligated balances of
budget authority may be carried over and used in the next
year. The budget does not record these balances as budget
authority again. They do, however, constitute a budgetary
resource that is available for obligation. In some cases,

a provision of law (such as a limitation on obligations or
a benefit formula) precludes the obligation of funds that
would otherwise be available for obligation. In such cases,
the budget records budget authority equal to the amount
of obligations that can be incurred. A major exception to
this rule is for the highway and mass transit programs
financed by the Highway Trust Fund, where budget authority is measured as the amount of contract authority
(described later in this chapter) provided in authorizing
statutes, even though the obligation limitations enacted
in annual appropriations acts restrict the amount of contract authority that can be obligated.
In deciding the amount of budget authority to request
for a program, project, or activity, agency officials estimate
the total amount of obligations they will need to incur to
achieve desired goals and subtract the unobligated balances
available for these purposes. The amount of budget authority requested is influenced by the nature of the programs,
projects, or activities being financed. For current operating expenditures, the amount requested usually covers the
needs for the fiscal year. For major procurement programs
and construction projects, agencies generally must request
sufficient budget authority in the first year to fully fund an
economically useful segment of a procurement or project,
even though it may be obligated over several years. This
full funding policy is intended to ensure that the decisionmakers take into account all costs and benefits fully at the
time decisions are made to provide resources. It also avoids
sinking money into a procurement or project without being
certain if or when future funding will be available to complete the procurement or project.

88

ANALYTICAL PERSPECTIVES

Budget authority takes several forms:

• Appropriations,

provided in annual appropriations acts or authorizing laws, permit agencies to
incur obligations and make payment;

• Borrowing authority, usually provided in permanent laws, permits agencies to incur obligations but
requires them to borrow funds, usually from the general fund of the Treasury, to make payment;

• Contract authority, usually provided in permanent

law, permits agencies to incur obligations in advance
of a separate appropriation of the cash for payment
or in anticipation of the collection of receipts that
can be used for payment; and

• Spending authority from offsetting collections,
usually provided in permanent law, permits agencies to credit offsetting collections to an expenditure
account, incur obligations, and make payment using
the offsetting collections.

Because offsetting collections and offsetting receipts
are deducted from gross budget authority, they are referred to as negative budget authority for some purposes,
such as Congressional Budget Act provisions that pertain
to budget authority.
Authorizing statutes usually determine the form of
budget authority for a program. The authorizing statute
may authorize a particular type of budget authority to be
provided in annual appropriations acts, or it may provide
one of the forms of budget authority directly, without the
need for further appropriations.
An appropriation may make funds available from the
general fund, special funds, or trust funds, or authorize
the spending of offsetting collections credited to expenditure accounts, including revolving funds. Borrowing
authority is usually authorized for business-like activities
where the activity being financed is expected to produce
income over time with which to repay the borrowing with
interest. The use of contract authority is traditionally limited to transportation programs.
New budget authority for most Federal programs is normally provided in annual appropriations acts. However,
new budget authority is also made available through permanent appropriations under existing laws and does not
require current action by the Congress. Much of the permanent budget authority is for trust funds, interest on the
public debt, and the authority to spend offsetting collections credited to appropriation or fund accounts. For most
trust funds, the budget authority is appropriated automatically under existing law from the available balance of
the fund and equals the estimated annual obligations of
the funds. For interest on the public debt, budget authority
is provided automatically under a permanent appropriation enacted in 1847 and equals interest outlays.
Annual appropriations acts generally make budget authority available for obligation only during the fiscal year
to which the act applies. However, they frequently allow
budget authority for a particular purpose to remain avail-

able for obligation for a longer period or indefinitely (that
is, until expended or until the program objectives have
been attained). Typically, budget authority for current operations is made available for only one year, and budget
authority for construction and some research projects is
available for a specified number of years or indefinitely.
Most budget authority provided in authorizing statutes,
such as for most trust funds, is available indefinitely. If
budget authority is initially provided for a limited period
of availability, an extension of availability would require
enactment of another law (see “Reappropriation” later in
this chapter).
Budget authority that is available for more than one
year and not obligated in the year it becomes available is
carried forward for obligation in a following year. In some
cases, an account may carry forward unobligated budget
authority from more than one prior year. The sum of such
amounts constitutes the account’s unobligated balance.
Most of these balances had been provided for specific uses
such as the multi-year construction of a major project and
so are not available for new programs. A small part may
never be obligated or spent, primarily amounts provided
for contingencies that do not occur or reserves that never
have to be used.
Amounts of budget authority that have been obligated
but not yet paid constitute the account’s unpaid obligations. For example, in the case of salaries and wages, one
to three weeks elapse between the time of obligation and
the time of payment. In the case of major procurement and
construction, payments may occur over a period of several
years after the obligation is made. Unpaid obligations
(which are made up of accounts payable and undelivered
orders) net of the accounts receivable and unfilled customers’ orders are defined by law as the obligated balances.
Obligated balances of budget authority at the end of the
year are carried forward until the obligations are paid or
the balances are canceled. (A general law provides that
the obligated balances of budget authority that was made
available for a definite period is automatically cancelled
five years after the end of the period.) Due to such flows,
a change in the amount of budget authority available in
any one year may change the level of obligations and outlays for several years to come. Conversely, a change in the
amount of obligations incurred from one year to the next
does not necessarily result from an equal change in the
amount of budget authority available for that year and
will not necessarily result in an equal change in the level
of outlays in that year.
The Congress usually makes budget authority available
on the first day of the fiscal year for which the appropriations act is passed. Occasionally, the appropriations
language specifies a different timing. The language may
provide an advance appropriation—budget authority
that does not become available until one year or more
beyond the fiscal year for which the appropriations act
is passed. Forward funding is budget authority that is
made available for obligation beginning in the last quarter
of the fiscal year (beginning on July 1) for the financing of
ongoing grant programs during the next fiscal year. This
kind of funding is used mostly for education programs, so

89

8. Budget Concepts

that obligations for education grants can be made prior to
the beginning of the next school year. For certain benefit
programs funded by annual appropriations, the appropriation provides for advance funding—budget authority
that is to be charged to the appropriation in the succeeding year, but which authorizes obligations to be incurred
in the last quarter of the current fiscal year if necessary
to meet benefit payments in excess of the specific amount
appropriated for the year. When such authority is used,
an adjustment is made to increase the budget authority
for the fiscal year in which it is used and to reduce the
budget authority of the succeeding fiscal year.
Provisions of law that extend into a new fiscal year the
availability of unobligated amounts that have expired
or would otherwise expire are called reappropriations.
Reappropriations of expired balances that are newly
available for obligation in the current or budget year
count as new budget authority in the fiscal year in which
the balances become newly available. For example, if a
2017 appropriations act extends the availability of unobligated budget authority that expired at the end of 2016,
new budget authority would be recorded for 2017. This
scorekeeping is used because a reappropriation has exactly the same effect as allowing the earlier appropriation
to expire at the end of 2016 and enacting a new appropriation for 2017.
For purposes of BBEDCA and the Statutory Pay-AsYou-Go Act of 2010 (discussed earlier under “Budget
Enforcement’’), the budget classifies budget authority
as discretionary or mandatory. This classification indicates whether an appropriations act or authorizing
legislation controls the amount of budget authority that is
available. Generally, budget authority is discretionary if
provided in an annual appropriations act and mandatory
if provided in authorizing legislation. However, the budget authority provided in annual appropriations acts for
certain specifically identified programs is also classified
as mandatory by OMB and the congressional scorekeepers. This is because the authorizing legislation for these
programs entitles beneficiaries—persons, households, or
other levels of government—to receive payment, or otherwise legally obligates the Government to make payment
and thereby effectively determines the amount of budget
authority required, even though the payments are funded
by a subsequent appropriation.
Sometimes, budget authority is characterized as
current or permanent. Current authority requires the
Congress to act on the request for new budget authority for the year involved. Permanent authority becomes
available pursuant to standing provisions of law without appropriations action by the Congress for the year
involved. Generally, budget authority is current if an
annual appropriations act provides it and permanent
if authorizing legislation provides it. By and large, the
current/permanent distinction has been replaced by the
discretionary/mandatory distinction, which is similar
but not identical. Outlays are also classified as discretionary or mandatory according to the classification of
the budget authority from which they flow (see “Outlays’’
later in this chapter).

The amount of budget authority recorded in the budget
depends on whether the law provides a specific amount
or employs a variable factor that determines the amount.
It is considered definite if the law specifies a dollar
amount (which may be stated as an upper limit, for example, “shall not exceed …”). It is considered indefinite
if, instead of specifying an amount, the law permits the
amount to be determined by subsequent circumstances.
For example, indefinite budget authority is provided for
interest on the public debt, payment of claims and judgments awarded by the courts against the United States,
and many entitlement programs. Many of the laws that
authorize collections to be credited to revolving, special,
and trust funds make all of the collections available for
expenditure for the authorized purposes of the fund, and
such authority is considered to be indefinite budget authority because the amount of collections is not known in
advance of their collection.
Obligations
Following the enactment of budget authority and the
completion of required apportionment action, Government
agencies incur obligations to make payments (see earlier
discussion under “Budget Execution”). Agencies must record obligations when they enter into binding agreements
that will result in immediate or future outlays. Such obligations include the current liabilities for salaries, wages,
and interest; and contracts for the purchase of supplies
and equipment, construction, and the acquisition of office
space, buildings, and land. For Federal credit programs,
obligations are recorded in an amount equal to the estimated subsidy cost of direct loans and loan guarantees
(see “Federal Credit” later in this chapter).
Outlays
Outlays are the measure of Government spending.
They are payments that liquidate obligations (other than
most exchanges of financial instruments, of which the
repayment of debt is the prime example). The budget records outlays when obligations are paid, in the amount
that is paid.
Agency, function and subfunction, and Governmentwide outlay totals are stated net of offsetting collections
and offsetting receipts for most budget presentations.
(Offsetting receipts from a few sources do not offset any
specific function, subfunction, or agency, as explained previously, but only offset Government-wide totals.) Outlay
totals for accounts with offsetting collections are stated
both gross and net of the offsetting collections credited
to the account. However, the outlay totals for special and
trust funds with offsetting receipts are not stated net of
the offsetting receipts. In most cases, these receipts offset the agency, function, and subfunction totals but do
not offset account-level outlays. However, when general
fund payments are used to finance trust fund outlays to
the public, the associated trust fund receipts are netted
against the bureau totals to prevent double-counting budget authority and outlays at the bureau level.

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ANALYTICAL PERSPECTIVES

The Government usually makes outlays in the form
of cash (currency, checks, or electronic fund transfers).
However, in some cases agencies pay obligations without
disbursing cash, and the budget nevertheless records outlays for the equivalent method. For example, the budget
records outlays for the full amount of Federal employees’
salaries, even though the cash disbursed to employees is
net of Federal and State income taxes withheld, retirement contributions, life and health insurance premiums,
and other deductions. (The budget also records receipts
for the amounts withheld from Federal employee paychecks for Federal income taxes and other payments to
the Government.) When debt instruments (bonds, debentures, notes, or monetary credits) are used in place of cash
to pay obligations, the budget records outlays financed by
an increase in agency debt. For example, the budget records the acquisition of physical assets through certain
types of lease-purchase arrangements as though a cash
disbursement were made for an outright purchase. The
transaction creates a Government debt, and the cash
lease payments are treated as repayments of principal
and interest.
The budget records outlays for the interest on the public
issues of Treasury debt securities as the interest accrues,
not when the cash is paid. A small portion of Treasury
debt consists of inflation-indexed securities, which feature
monthly adjustments to principal for inflation and semi­
annual payments of interest on the inflation-adjusted
principal. As with fixed-rate securities, the budget records
interest outlays as the interest accrues. The monthly ad-

count is invested in Federal debt securities, the purchase
price is usually close or identical to the par (face) value of
the security. The budget generally records the investment
at par value and adjusts the interest paid by Treasury
and collected by the account by the difference between
purchase price and par, if any.
For Federal credit programs, outlays are equal to the
subsidy cost of direct loans and loan guarantees and
are recorded as the underlying loans are disbursed (see
“Federal Credit” later in this chapter).
The budget records refunds of receipts that result from
overpayments by the public (such as income taxes withheld in excess of tax liabilities) as reductions of receipts,
rather than as outlays. However, the budget records payments to taxpayers for refundable tax credits (such as
earned income tax credits) that exceed the taxpayer’s
tax liability as outlays. Similarly, when the Government
makes overpayments that are later returned to the
Government, those refunds to the Government are recorded as offsetting collections or offsetting receipts, not
as governmental receipts.
Not all of the new budget authority for 2019 will be
obligated or spent in 2019. Outlays during a fiscal year
may liquidate obligations incurred in the same year or in
prior years. Obligations, in turn, may be incurred against
budget authority provided in the same year or against unobligated balances of budget authority provided in prior
years. Outlays, therefore, flow in part from budget authority provided for the year in which the money is spent and
in part from budget authority provided for prior years.

Chart 8-1. Relationship of Budget Authority
to Outlays for 2019
(Billions of dollars)
New Authority
Recommended
for 2019
4,571

Unspent Authority
Enacted in
Prior Years
2,491

To be spent in 2019

Outlays in 2019

3,494
To b
e
in fu spent
ture
year
s
nt
pe
e s 19
b
0
To in 2

-4

4,407

913
1,0

77

Authority
written off,
expired, and adjusted
(net)

To be spent in
Future Years
1,574

justment to principal is recorded, simultaneously, as an
increase in debt outstanding and an outlay of interest.
Most Treasury debt securities held by trust funds and
other Government accounts are in the Government account series. The budget normally states the interest on
these securities on a cash basis. When a Government ac-

Unspent Authority
for Outlays in
Future Years
2,651

The ratio of a given year’s outlays resulting from budget
authority enacted in that or a prior year to the original
amount of that budget authority is referred to as the outlay rate for that year.
As shown in the accompanying chart, $3,494 billion
of outlays in 2019 (79 percent of the outlay total) will be

91

8. Budget Concepts

made from that year’s $4,571 billion total of proposed
new budget authority (a first-year outlay rate of 76 percent). Thus, the remaining $913 billion of outlays in 2019
(21 percent of the outlay total) will be made from budget
authority enacted in previous years. At the same time,
$1,077 billion of the new budget authority proposed for
2019 (24 percent of the total amount proposed) will not
lead to outlays until future years.
As described earlier, the budget classifies budget authority and outlays as discretionary or mandatory. This
classification of outlays measures the extent to which
actual spending is controlled through the annual appropriations process. About 30 percent of total outlays in 2017
($1,200 billion) were discretionary and the remaining 70
percent ($2,781 billion in 2017) were mandatory spending
and net interest. Such a large portion of total spending
is mandatory because authorizing rather than appropriations legislation determines net interest ($263 billion in

2017) and the spending for a few programs with large
amounts of spending each year, such as Social Security
($939 billion in 2017) and Medicare ($591 billion in 2017).
The bulk of mandatory outlays flow from budget authority recorded in the same fiscal year. This is not necessarily
the case for discretionary budget authority and outlays.
For most major construction and procurement projects
and long-term contracts, for example, the budget authority covers the entire cost estimated when the projects
are initiated even though the work will take place and
outlays will be made over a period extending beyond the
year for which the budget authority is enacted. Similarly,
discretionary budget authority for most education and job
training activities is appropriated for school or program
years that begin in the fourth quarter of the fiscal year.
Most of these funds result in outlays in the year after the
appropriation.

FEDERAL CREDIT
Some Government programs provide assistance
through direct loans or loan guarantees. A direct loan is
a disbursement of funds by the Government to a non-Federal borrower under a contract that requires repayment
of such funds with or without interest and includes economically equivalent transactions, such as the sale of
Federal assets on credit terms. A loan guarantee is any
guarantee, insurance, or other pledge with respect to the
payment of all or a part of the principal or interest on
any debt obligation of a non-Federal borrower to a nonFederal lender. The Federal Credit Reform Act of 1990, as
amended (FCRA), prescribes the budgetary treatment for
Federal credit programs. Under this treatment, the budget records obligations and outlays up front, for the net
cost to the Government (subsidy cost), rather than recording the cash flows year by year over the term of the loan.
FCRA treatment allows the comparison of direct loans
and loan guarantees to each other, and to other methods
of delivering assistance, such as grants.
The cost of direct loans and loan guarantees, sometimes
called the “subsidy cost,’’ is estimated as the present value of expected payments to and from the public over the
term of the loan, discounted using appropriate Treasury
interest rates.3 Similar to most other kinds of programs,
agencies can make loans or guarantee loans only if the
Congress has appropriated funds sufficient to cover the
subsidy costs, or provided a limitation in an appropriations act on the amount of direct loans or loan guarantees
that can be made.
The budget records the subsidy cost to the Government
arising from direct loans and loan guarantees—the budget authority and outlays—in credit program accounts.
When a Federal agency disburses a direct loan or when
a non-Federal lender disburses a loan guaranteed by a
Federal agency, the program account disburses or outlays
an amount equal to the estimated present value cost, or
3     Present value is a standard financial concept that considers the
time-value of money. That is, it accounts for the fact that a given sum of
money is worth more today than the same sum would be worth in the
future because interest can be earned.

subsidy, to a non-budgetary credit financing account.
The financing accounts record the actual transactions
with the public. For a few programs, the estimated subsidy cost is negative because the present value of expected
Government collections exceeds the present value of expected payments to the public over the term of the loan.
In such cases, the financing account pays the estimated
subsidy cost to the program’s negative subsidy receipt
account, where it is recorded as an offsetting receipt. In
a few cases, the offsetting receipts of credit accounts are
dedicated to a special fund established for the program
and are available for appropriation for the program.
The agencies responsible for credit programs must
reestimate the subsidy cost of the outstanding portfolio
of direct loans and loan guarantees each year. If the estimated cost increases, the program account makes an
additional payment to the financing account equal to
the change in cost. If the estimated cost decreases, the
financing account pays the difference to the program’s
downward reestimate receipt account, where it is recorded as an offsetting receipt. The FCRA provides permanent
indefinite appropriations to pay for upward reestimates.
If the Government modifies the terms of an outstanding direct loan or loan guarantee in a way that increases
the cost as the result of a law or the exercise of administrative discretion under existing law, the program account
records obligations for the increased cost and outlays the
amount to the financing account. As with the original subsidy cost, agencies may incur modification costs only if the
Congress has appropriated funds to cover them. A modification may also reduce costs, in which case the amounts
are generally returned to the general fund, as the financing account makes a payment to the program’s negative
subsidy receipt account.
Credit financing accounts record all cash flows arising
from direct loan obligations and loan guarantee commitments. Such cash flows include all cash flows to and from
the public, including direct loan disbursements and repayments, loan guarantee default payments, fees, and

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ANALYTICAL PERSPECTIVES

recoveries on defaults. Financing accounts also record
intragovernmental transactions, such as the receipt of
subsidy cost payments from program accounts, borrowing
and repayments of Treasury debt to finance program activities, and interest paid to or received from the Treasury.
The cash flows of direct loans and of loan guarantees are
recorded in separate financing accounts for programs that
provide both types of credit. The budget totals exclude the
transactions of the financing accounts because they are
not a cost to the Government. However, since financing
accounts record all credit cash flows to and from the public, they affect the means of financing a budget surplus or
deficit (see “Credit Financing Accounts” in the next section). The budget documents display the transactions of
the financing accounts, together with the related program
accounts, for information and analytical purposes.
The FCRA grandfathered the budgetary treatment of direct loan obligations and loan guarantee commitments made
prior to 1992. The budget records these on a cash basis in
credit liquidating accounts, the same as they were recorded before FCRA was enacted. However, this exception
ceases to apply if the direct loans or loan guarantees are
modified as described above. In that case, the budget records
the subsidy cost or savings of the modification, as appropriate, and begins to account for the associated transactions
under FCRA treatment for direct loan obligations and loan
guarantee commitments made in 1992 or later.
Under the authority provided in various acts, certain activities that do not meet the definition in FCRA

of a direct loan or loan guarantee are reflected pursuant to FCRA. For example, the Emergency Economic
Stabilization Act of 2008 (EESA) created the Troubled
Asset Relief Program (TARP) under the Department of
the Treasury, and authorized Treasury to purchase or
guarantee troubled assets until October 3, 2010. Under
the TARP, Treasury has purchased equity interests in
financial institutions. Section 123 of the EESA provides
the Administration the authority to treat these equity
investments on a FCRA basis, recording outlays for the
subsidy as is done for direct loans and loan guarantees.
The budget reflects the cost to the Government of TARP
direct loans, loan guarantees, and equity investments
consistent with the FCRA and Section 123 of EESA,
which requires an adjustment to the FCRA discount rate
for market risks. Treasury equity purchases under the
Small Business Lending Fund are treated pursuant to
the FCRA, as provided by the Small Business Jobs Act of
2010.The 2009 increases to the International Monetary
Fund (IMF) quota and New Arrangements to Borrow
(NAB) enacted in the Supplemental Appropriations Act
of 2009 were treated on a FCRA basis through 2015, with
a risk adjustment to the discount rate, as directed in that
Act. However, pursuant to Title IX of the Department
of State, Foreign Operations, and Related Programs
Appropriations Act, 2016, these transactions have been
restated on a present value basis with a risk adjustment
to the discount rate, and the associated FCRA accounts
have been closed.

BUDGET DEFICIT OR SURPLUS AND MEANS OF FINANCING
When outlays exceed receipts, the difference is a deficit,
which the Government finances primarily by borrowing.
When receipts exceed outlays, the difference is a surplus,
and the Government automatically uses the surplus primarily to reduce debt. The Federal debt held by the public
is approximately the cumulative amount of borrowing to
finance deficits, less repayments from surpluses, over the
Nation’s history.
Borrowing is not exactly equal to the deficit, and
debt repayment is not exactly equal to the surplus,
because of the other transactions affecting borrowing
from the public, or other means of financing, such as
those discussed in this section. The factors included in
the other means of financing can either increase or decrease the Government’s borrowing needs (or decrease
or increase its ability to repay debt). For example, the
change in the Treasury operating cash balance is a
factor included in other means of financing. Holding
receipts and outlays constant, increases in the cash
balance increase the Government’s need to borrow or
reduce the Government’s ability to repay debt, and
decreases in the cash balance decrease the need to borrow or increase the ability to repay debt. In some years,
the net effect of the other means of financing is minor
relative to the borrowing or debt repayment; in other
years, the net effect may be significant.

Borrowing and Debt Repayment
The budget treats borrowing and debt repayment as
a means of financing, not as receipts and outlays. If borrowing were defined as receipts and debt repayment as
outlays, the budget would always be virtually balanced by
definition. This rule applies both to borrowing in the form
of Treasury securities and to specialized borrowing in the
form of agency securities. The rule reflects the commonsense understanding that lending or borrowing is just
an exchange of financial assets of equal value—cash for
Treasury securities—and so is fundamentally different
from, say, paying taxes, which involve a net transfer of
financial assets from taxpayers to the Government.
In 2017, the Government borrowed $498 billion from
the public, bringing debt held by the public to $14,665 billion. This borrowing financed the $665 billion deficit in
that year, partly offset by the net impacts of the other
means of financing, such as changes in cash balances and
other accounts discussed below.
In addition to selling debt to the public, the Treasury
Department issues debt to Government accounts, primarily
trust funds that are required by law to invest in Treasury
securities. Issuing and redeeming this debt does not affect
the means of financing, because these transactions occur
between one Government account and another and thus do
not raise or use any cash for the Government as a whole.

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8. Budget Concepts

(See Chapter 4 of this volume, “Federal Borrowing and
Debt,” for a fuller discussion of this topic.)
Exercise of Monetary Power
Seigniorage is the profit from coining money. It is the
difference between the value of coins as money and their
cost of production. Seigniorage reduces the Government’s
need to borrow. Unlike the payment of taxes or other receipts, it does not involve a transfer of financial assets
from the public. Instead, it arises from the exercise of the
Government’s power to create money and the public’s desire to hold financial assets in the form of coins. Therefore,
the budget excludes seigniorage from receipts and treats
it as a means of financing other than borrowing from the
public. The budget also treats proceeds from the sale of
gold as a means of financing, since the value of gold is
determined by its value as a monetary asset rather than
as a commodity.
Credit Financing Accounts
The budget records the net cash flows of credit programs
in credit financing accounts. These accounts include the
transactions for direct loan and loan guarantee programs,
as well as the equity purchase programs under TARP that
are recorded on a credit basis consistent with Section 123
of EESA. Financing accounts also record equity purchases under the Small Business Lending Fund consistent
with the Small Business Jobs Act of 2010. Credit financing accounts are excluded from the budget because they
are not allocations of resources by the Government (see
“Federal Credit” earlier in this chapter). However, even
though they do not affect the surplus or deficit, they can
either increase or decrease the Government’s need to borrow. Therefore, they are recorded as a means of financing.
Financing account disbursements to the public increase
the requirement for Treasury borrowing in the same way
as an increase in budget outlays. Financing account receipts from the public can be used to finance the payment
of the Government’s obligations and therefore reduce the
requirement for Treasury borrowing from the public in
the same way as an increase in budget receipts.
Deposit Fund Account Balances
The Treasury uses non-budgetary accounts, called
deposit funds, to record cash held temporarily until ownership is determined (for example, earnest money paid by
bidders for mineral leases) or cash held by the Government
as agent for others (for example, State and local income
taxes withheld from Federal employees’ salaries and not
yet paid to the State or local government or amounts held
in the Thrift Savings Fund, a defined contribution pension fund held and managed in a fiduciary capacity by
the Government). Deposit fund balances may be held in
the form of either invested or uninvested balances. To the

extent that they are not invested, changes in the balances
are available to finance expenditures without a change in
borrowing and are recorded as a means of financing other
than borrowing from the public. To the extent that they
are invested in Federal debt, changes in the balances are
reflected as borrowing from the public (in lieu of borrowing from other parts of the public) and are not reflected as
a separate means of financing.
United States Quota Subscriptions to the
International Monetary Fund (IMF)
The United States participates in the IMF through a
quota subscription. Financial transactions with the IMF
are exchanges of monetary assets. When the IMF temporarily draws dollars from the U.S. quota, the United
States simultaneously receives an equal, offsetting, interest-bearing, Special Drawing Right (SDR)-denominated
claim in the form of an increase in the U.S. reserve position in the IMF. The U.S. reserve position in the IMF
increases when the United States makes deposits in its
account at the IMF when the IMF temporarily uses members’ quota resources to make loans and decreases when
the IMF returns funds to the United States as borrowing
countries repay the IMF (and the cash flows from the reserve position to the Treasury letter of credit).
Other exchanges of monetary assets, such as deposits
of cash in Treasury accounts at commercial banks, are not
included in the Budget. However, Congress has historically expressed interest in showing some kind of budgetary
effect for U.S. transactions with the IMF.4 Most recently,
Title IX of the Department of State, Foreign Operations,
and Related Programs Appropriations Act, 2016, required
the estimated cost of the 2009 and 2016 quota increases
and the partial rescission of the new arrangements to
borrow (NAB) authorized by the Act to be recorded on
a present value basis with a fair value premium added
to the Treasury discount rate.5 As a result, the Budget
records budget authority and outlays equal to the estimated present value, including the fair value adjustment
to the discount rate, in the year that the quota increase is
enacted, i.e., 2016. All concurrent and subsequent transactions between the Treasury and the IMF are treated as
a non-budgetary means of financing, which do not directly
affect receipts, outlays, or deficits. The only exception is
that interest earnings on U.S. deposits in its IMF account
are recorded as offsetting receipts. For transparency and
to support future decisions concerning the U.S. level of
4 For a more detailed discussion of the history of the budgetary treatment of U.S. participation in the quota and new arrangements to borrow
(NAB), see pages 139-141 in the Analytical Perspectives volume of the
2016 Budget. As discussed in that volume, the budgetary treatment of
the U.S. participation in the NAB is similar to the quota.
5 See pages 85-86 of the Analytical Perspectives volume of the 2018
Budget for a more complete discussion of the changes made to the budgetary presentation of quota increases due to Title IX of the Department
of State, Foreign Operations, and Related Programs Appropriations Act,
2016.

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ANALYTICAL PERSPECTIVES

participation in the IMF quota and the NAB, the Budget
Appendix shows supplementary “below-the-lines” information about dollar value of the IMF quota, divided
between the portion that is held in a Treasury letter
of credit and the amount deposited in the U.S. reserve

tranche at the IMF and the NAB. The actual amounts
are updated in the Budget to reflect changes in the dollar
value of Special Drawing Rights that serve as the unit of
measure for countries’ level of participation.

FEDERAL EMPLOYMENT
The budget includes information on civilian and military employment. It also includes information on related
personnel compensation and benefits and on staffing requirements at overseas missions. Chapter 7 of this volume,
“Strengthening the Federal Workforce,’’ provides employ-

ment levels measured in full-time equivalents (FTE).
Agency FTEs are the measure of total hours worked by an
agency’s Federal employees divided by the total number
of one person’s compensable work hours in a fiscal year.

BASIS FOR BUDGET FIGURES
Data for the Past Year
The past year column (2017) generally presents the
actual transactions and balances as recorded in agency
accounts and as summarized in the central financial reports prepared by the Treasury Department for the most
recently completed fiscal year. Occasionally, the budget reports corrections to data reported erroneously to Treasury
but not discovered in time to be reflected in Treasury’s
published data. In addition, in certain cases the Budget
has a broader scope and includes financial transactions
that are not reported to Treasury (see Chapter 24 of this
volume, “Comparison of Actual to Estimated Totals,” for a
summary of these differences).

transmittal and the related outlays separately. Estimates
of the total requirements for the budget year include both
the amounts requested with the transmittal of the budget
and the amounts planned for later transmittal.
Data for the Outyears
The budget presents estimates for each of the nine
years beyond the budget year (2020 through 2028) in order to reflect the effect of budget decisions on objectives
and plans over a longer period.
Allowances

The current year column (2018) includes estimates of
transactions and balances based on the amounts of budgetary resources that were available when the budget
was prepared. In cases where the budget proposes policy
changes effective in the current year, the data will also
reflect the budgetary effect of those proposed changes.

The budget may include lump-sum allowances to cover
certain transactions that are expected to increase or decrease budget authority, outlays, or receipts but are not,
for various reasons, reflected in the program details. For
example, the budget might include an allowance to show
the effect on the budget totals of a proposal that would affect many accounts by relatively small amounts, in order
to avoid unnecessary detail in the presentations for the
individual accounts.

Data for the Budget Year

Baseline

The budget year column (2019) includes estimates
of transactions and balances based on the amounts of
budgetary resources that are estimated to be available,
including new budget authority requested under current
authorizing legislation, and amounts estimated to result
from changes in authorizing legislation and tax laws.
The budget Appendix generally includes the appropriations language for the amounts proposed to be
appropriated under current authorizing legislation. In
a few cases, this language is transmitted later because
the exact requirements are unknown when the budget
is transmitted. The Appendix generally does not include
appropriations language for the amounts that will be
requested under proposed legislation; that language is
usually transmitted later, after the legislation is enacted. Some tables in the budget identify the items for later

The budget baseline is an estimate of the receipts,
outlays, and deficits or surpluses that would occur if no
changes were made to current laws and policies during
the period covered by the budget. The baseline assumes
that receipts and mandatory spending, which generally
are authorized on a permanent basis, will continue in
the future consistent with current law and policy. The
baseline assumes that the future funding for most discretionary programs, which generally are funded annually,
will equal the most recently enacted appropriation, adjusted for inflation.
Baseline outlays represent the amount of resources
that would be used by the Government over the period
covered by the budget on the basis of laws currently
enacted.

Data for the Current Year

95

8. Budget Concepts

The baseline serves several useful purposes:

• It may warn of future problems, either for Govern-

ment fiscal policy as a whole or for individual tax
and spending programs.

• It may provide a starting point for formulating the
President’s Budget.

• It may provide a “policy-neutral’’ benchmark against

which the President’s Budget and alternative pro-

posals can be compared to assess the magnitude of
proposed changes.
The baseline rules in BBEDCA provide that funding
for discretionary programs is inflated from the most recent enacted appropriations using specified inflation
rates. Because the resulting funding would exceed the
discretionary caps, the Administration’s baseline includes
adjustments that reduce overall discretionary funding to
levels consistent with the caps. (Chapter 22 of this volume,
“Current Services Estimates,” provides more information
on the baseline.)

PRINCIPAL BUDGET LAWS
The Budget and Accounting Act of 1921 created the core
of the current Federal budget process. Before enactment
of this law, there was no annual centralized budgeting in
the Executive Branch. Federal Government agencies usually sent budget requests independently to congressional
committees with no coordination of the various requests
in formulating the Federal Government’s budget. The
Budget and Accounting Act required the President to coordinate the budget requests for all Government agencies
and to send a comprehensive budget to the Congress. The
Congress has amended the requirements many times and
portions of the Act are codified in Title 31, United States
Code. The major laws that govern the budget process are
as follows:
Article 1, section 8, clause 1 of the Constitution,
which empowers the Congress to collect taxes.
Article 1, section 9, clause 7 of the Constitution,
which requires appropriations in law before money may
be spent from the Treasury and the publication of a regular statement of the receipts and expenditures of all
public money.
Antideficiency Act (codified in Chapters 13 and 15
of Title 31, United States Code), which prescribes rules
and procedures for budget execution.
Balanced Budget and Emergency Deficit Control
Act of 1985, as amended, which establishes limits on
discretionary spending and provides mechanisms for enforcing discretionary spending limits.
Chapter 11 of Title 31, United States Code, which
prescribes procedures for submission of the President’s
budget and information to be contained in it.

Congressional Budget and Impoundment Control
Act of 1974 (Public Law 93–344), as amended. This Act
comprises the:

• Congressional Budget Act of 1974, as amended,
which prescribes the congressional budget process;
and

• Impoundment

Control Act of 1974, which controls certain aspects of budget execution.

• Federal Credit Reform Act of 1990, as amended

(2 USC 661–661f), which the Budget Enforcement
Act of 1990 included as an amendment to the Congressional Budget Act to prescribe the budget treatment for Federal credit programs.

Chapter 31 of Title 31, United States Code, which
provides the authority for the Secretary of the Treasury
to issue debt to finance the deficit and establishes a statutory limit on the level of the debt.
Chapter 33 of Title 31, United States Code, which
establishes the Department of the Treasury as the authority for making disbursements of public funds, with the
authority to delegate that authority to executive agencies
in the interests of economy and efficiency.
Government Performance and Results Act of 1993
(Public Law 103–62, as amended) which emphasizes
managing for results. It requires agencies to prepare
strategic plans, annual performance plans, and annual
performance reports.
Statutory Pay-As-You-Go Act of 2010, which establishes a budget enforcement mechanism generally
requiring that direct spending and revenue legislation
enacted into law not increase the deficit.

GLOSSARY OF BUDGET TERMS
Account refers to a separate financial reporting unit
used by the Federal Government to record budget authority, outlays and income for budgeting or management
information purposes as well as for accounting purposes.
All budget (and off-budget) accounts are classified as being either expenditure or receipt accounts and by fund
group. Budget (and off-budget) transactions fall within

either of two fund group: (1) Federal funds and (2) trust
funds. (Cf. Federal funds group and trust funds group.)
Accrual method of measuring cost means an accounting method that records cost when the liability is
incurred. As applied to Federal employee retirement benefits, accrual costs are recorded when the benefits are
earned rather than when they are paid at some time in
the future. The accrual method is used in part to provide

96
data that assists in agency policymaking, but not used
in presenting the overall budget of the United States
Government.
Advance appropriation means appropriations of
new budget authority that become available one or more
fiscal years beyond the fiscal year for which the appropriation act was passed.
Advance funding means appropriations of budget authority provided in an appropriations act to be used, if
necessary, to cover obligations incurred late in the fiscal
year for benefit payments in excess of the amount specifically appropriated in the act for that year, where the
budget authority is charged to the appropriation for the
program for the fiscal year following the fiscal year for
which the appropriations act is passed.
Agency means a department or other establishment of
the Government.
Allowance means a lump-sum included in the budget
to represent certain transactions that are expected to increase or decrease budget authority, outlays, or receipts
but that are not, for various reasons, reflected in the program details.
Balanced Budget and Emergency Deficit Control
Act of 1985 (BBEDCA) refers to legislation that altered
the budget process, primarily by replacing the earlier fixed
targets for annual deficits with a Pay-As-You-Go requirement for new tax or mandatory spending legislation and
with caps on annual discretionary funding. The Statutory
Pay-As-You-Go Act of 2010, which is a standalone piece of
legislation that did not directly amend the BBEDCA, reinstated a statutory pay-as-you-go rule for revenues and
mandatory spending legislation, and the Budget Control
Act of 2011, which did amend BBEDCA, reinstated discretionary caps on budget authority.
Balances of budget authority means the amounts of
budget authority provided in previous years that have not
been outlayed.
Baseline means a projection of the estimated receipts,
outlays, and deficit or surplus that would result from continuing current law or current policies through the period
covered by the budget.
Budget means the Budget of the United States
Government, which sets forth the President’s comprehensive financial plan for allocating resources and indicates
the President’s priorities for the Federal Government.
Budget authority (BA) means the authority provided
by law to incur financial obligations that will result in
outlays. (For a description of the several forms of budget
authority, see “Budget Authority and Other Budgetary
Resources’’ earlier in this chapter.)
Budget Control Act of 2011 refers to legislation that,
among other things, amended BBEDCA to reinstate discretionary spending limits on budget authority through
2021 and restored the process for enforcing those spending limits. The legislation also increased the statutory
debt ceiling; created a Joint Select Committee on Deficit
Reduction that was instructed to develop a bill to reduce
the Federal deficit by at least $1.5 trillion over a 10-year
period; and provided a process to implement alternative
spending reductions in the event that legislation achiev-

ANALYTICAL PERSPECTIVES

ing at least $1.2 trillion of deficit reduction was not
enacted.
Budget resolution—see concurrent resolution on the
budget.
Budget totals mean the totals included in the budget for budget authority, outlays, receipts, and the surplus
or deficit. Some presentations in the budget distinguish
on-budget totals from off-budget totals. On-budget totals
reflect the transactions of all Federal Government entities except those excluded from the budget totals by law.
Off-budget totals reflect the transactions of Government
entities that are excluded from the on-budget totals by
law. Under current law, the off-budget totals include
the Social Security trust funds (Federal Old-Age and
Survivors Insurance and Federal Disability Insurance
Trust Funds) and the Postal Service Fund. The budget
combines the on- and off-budget totals to derive unified
(i.e. consolidated) totals for Federal activity.
Budget year refers to the fiscal year for which the budget is being considered, that is, with respect to a session
of Congress, the fiscal year of the government that starts
on October 1 of the calendar year in which that session of
Congress begins.
Budgetary resources mean amounts available to incur obligations in a given year. The term comprises new
budget authority and unobligated balances of budget authority provided in previous years.
Cap means the legal limits for each fiscal year under
BBEDCA on the budget authority and outlays (only if applicable) provided by discretionary appropriations.
Cap adjustment means either an increase or a decrease that is permitted to the statutory cap limits for
each fiscal year under BBEDCA on the budget authority
and outlays (only if applicable) provided by discretionary appropriations only if certain conditions are met.
These conditions may include providing for a base level
of funding, a designation of the increase or decrease by
the Congress, (and in some circumstances, the President)
pursuant to a section of the BBEDCA, or a change in concepts and definitions of funding under the cap. Changes
in concepts and definitions require consultation with the
Congressional Appropriations and Budget Committees.
Cash equivalent transaction means a transaction
in which the Government makes outlays or receives collections in a form other than cash or the cash does not
accurately measure the cost of the transaction. (For examples, see the section on “Outlays’’ earlier in this chapter.)
Collections mean money collected by the Government
that the budget records as a governmental receipt, an offsetting collection, or an offsetting receipt.
Concurrent resolution on the budget refers to the
concurrent resolution adopted by the Congress to set budgetary targets for appropriations, mandatory spending
legislation, and tax legislation. These concurrent resolutions are required by the Congressional Budget Act of
1974, and are generally adopted annually.
Continuing resolution means an appropriations act
that provides for the ongoing operation of the Government
in the absence of enacted appropriations.

8. Budget Concepts

Cost refers to legislation or administrative actions that
increase outlays or decrease receipts. (Cf. savings.)
Credit program account means a budget account
that receives and obligates appropriations to cover the
subsidy cost of a direct loan or loan guarantee and disburses the subsidy cost to a financing account.
Current services estimate—see Baseline.
Debt held by the public means the cumulative
amount of money the Federal Government has borrowed
from the public and not repaid.
Debt held by the public net of financial assets
means the cumulative amount of money the Federal
Government has borrowed from the public and not repaid,
minus the current value of financial assets such as loan
assets, bank deposits, or private-sector securities or equities held by the Government and plus the current value of
financial liabilities other than debt.
Debt held by Government accounts means the debt
the Treasury Department owes to accounts within the
Federal Government. Most of it results from the surpluses of the Social Security and other trust funds, which are
required by law to be invested in Federal securities.
Debt limit means the maximum amount of Federal
debt that may legally be outstanding at any time. It includes both the debt held by the public and the debt held
by Government accounts, but without accounting for offsetting financial assets. When the debt limit is reached,
the Government cannot borrow more money until the
Congress has enacted a law to increase the limit.
Deficit means the amount by which outlays exceed
receipts in a fiscal year. It may refer to the on-budget, offbudget, or unified budget deficit.
Direct loan means a disbursement of funds by the
Government to a non-Federal borrower under a contract that requires the repayment of such funds with or
without interest. The term includes the purchase of, or
participation in, a loan made by another lender. The term
also includes the sale of a Government asset on credit
terms of more than 90 days duration as well as financing
arrangements for other transactions that defer payment
for more than 90 days. It also includes loans financed by
the Federal Financing Bank (FFB) pursuant to agency
loan guarantee authority. The term does not include the
acquisition of a federally guaranteed loan in satisfaction
of default or other guarantee claims or the price support
“loans” of the Commodity Credit Corporation. (Cf. loan
guarantee.)
Direct spending—see mandatory spending.
Disaster funding means a discretionary appropriation that is enacted that the Congress designates as being
for disaster relief. Such amounts are a cap adjustment to
the limits on discretionary spending under BBEDCA. The
total adjustment for this purpose cannot exceed a ceiling
for a particular year that is defined as the total of the
average funding provided for disaster relief over the previous 10 years (excluding the highest and lowest years)
and the unused amount of the prior year’s ceiling (excluding the portion of the prior year’s ceiling that was itself
due to any unused amount from the year before). Disaster
relief is defined as activities carried out pursuant to a de-

97
termination under section 102(2) of the Robert T. Stafford
Disaster Relief and Emergency Assistance Act.
Discretionary spending means budgetary resources
(except those provided to fund mandatory spending programs) provided in appropriations acts. (Cf. mandatory
spending.)
Emergency requirement means an amount that the
Congress has designated as an emergency requirement.
Such amounts are not included in the estimated budgetary effects of PAYGO legislation under the requirements
of the Statutory Pay-As-You-Go Act of 2010, if they are
mandatory or receipts. Such a discretionary appropriation that is subsequently designated by the President as
an emergency requirement results in a cap adjustment to
the limits on discretionary spending under BBEDCA.
Entitlement refers to a program in which the Federal
Government is legally obligated to make payments or provide aid to any person who, or State or local government
that, meets the legal criteria for eligibility. Examples
include Social Security, Medicare, Medicaid, and the
Supplemental Nutrition Assistance Program (formerly
Food Stamps).
Federal funds group refers to the moneys collected and spent by the Government through accounts
other than those designated as trust funds. Federal funds
include general, special, public enterprise, and intragovernmental funds. (Cf. trust funds group.)
Financing account means a non-budgetary account
(an account whose transactions are excluded from the
budget totals) that records all of the cash flows resulting
from post-1991 direct loan obligations or loan guarantee
commitments. At least one financing account is associated with each credit program account. For programs
that make both direct loans and loan guarantees, separate financing accounts are required for direct loan cash
flows and for loan guarantee cash flows. (Cf. liquidating
account.)
Fiscal year means the Government’s accounting period. It begins on October 1st and ends on September 30th,
and is designated by the calendar year in which it ends.
Forward funding means appropriations of budget
authority that are made for obligation starting in the
last quarter of the fiscal year for the financing of ongoing
grant programs during the next fiscal year.
General fund means the accounts in which are recorded governmental receipts not earmarked by law for
a specific purpose, the proceeds of general borrowing, and
the expenditure of these moneys.
Government sponsored enterprises mean private
enterprises that were established and chartered by the
Federal Government for public policy purposes. They
are classified as non-budgetary and not included in the
Federal budget because they are private companies, and
their securities are not backed by the full faith and credit
of the Federal Government. However, the budget presents
statements of financial condition for certain Government
sponsored enterprises such as the Federal National
Mortgage Association. (Cf. off-budget.)
Intragovernmental fund—see Revolving fund.

98
Liquidating account means a budget account that records all cash flows to and from the Government resulting
from pre-1992 direct loan obligations or loan guarantee
commitments. (Cf. financing account.)
Loan guarantee means any guarantee, insurance,
or other pledge with respect to the payment of all or a
part of the principal or interest on any debt obligation
of a non-Federal borrower to a non-Federal lender. The
term does not include the insurance of deposits, shares,
or other withdrawable accounts in financial institutions.
(Cf. direct loan.)
Mandatory spending means spending controlled by
laws other than appropriations acts (including spending for entitlement programs) and spending for the
Supplemental Nutrition Assistance Program, formerly
food stamps. Although the Statutory Pay-As-You-Go
Act of 2010 uses the term direct spending to mean this,
mandatory spending is commonly used instead. (Cf. discretionary spending.)
Means of financing refers to borrowing, the change
in cash balances, and certain other transactions involved
in financing a deficit. The term is also used to refer to the
debt repayment, the change in cash balances, and certain
other transactions involved in using a surplus. By definition, the means of financing are not treated as receipts or
outlays and so are non-budgetary.
Obligated balance means the cumulative amount of
budget authority that has been obligated but not yet outlayed. (Cf. unobligated balance.)
Obligation means a binding agreement that will result in outlays, immediately or in the future. Budgetary
resources must be available before obligations can be incurred legally.
Off-budget refers to transactions of the Federal
Government that would be treated as budgetary had the
Congress not designated them by statute as “off-budget.”
Currently, transactions of the Social Security trust funds
and the Postal Service are the only sets of transactions
that are so designated. The term is sometimes used more
broadly to refer to the transactions of private enterprises
that were established and sponsored by the Government,
most especially “Government sponsored enterprises” such
as the Federal Home Loan Banks. (Cf. budget totals.)
Offsetting collections mean collections that, by law,
are credited directly to expenditure accounts and deducted
from gross budget authority and outlays of the expenditure account, rather than added to receipts. Usually, they
are authorized to be spent for the purposes of the account
without further action by the Congress. They result from
business-like transactions with the public, including payments from the public in exchange for goods and services,
reimbursements for damages, and gifts or donations of
money to the Government and from intragovernmental
transactions with other Government accounts. The authority to spend offsetting collections is a form of budget
authority. (Cf. receipts and offsetting receipts.)
Offsetting receipts mean collections that are credited to offsetting receipt accounts and deducted from
gross budget authority and outlays, rather than added
to receipts. They are not authorized to be credited to ex-

ANALYTICAL PERSPECTIVES

penditure accounts. The legislation that authorizes the
offsetting receipts may earmark them for a specific purpose and either appropriate them for expenditure for that
purpose or require them to be appropriated in annual appropriation acts before they can be spent. Like offsetting
collections, they result from business-like transactions or
market-oriented activities with the public, including payments from the public in exchange for goods and services,
reimbursements for damages, and gifts or donations of
money to the Government and from intragovernmental
transactions with other Government accounts. (Cf. receipts, undistributed offsetting receipts, and offsetting
collections.)
On-budget refers to all budgetary transactions other
than those designated by statute as off-budget. (Cf. budget totals.)
Outlay means a payment to liquidate an obligation
(other than the repayment of debt principal or other disbursements that are “means of financing” transactions).
Outlays generally are equal to cash disbursements, but
also are recorded for cash-equivalent transactions, such
as the issuance of debentures to pay insurance claims,
and in a few cases are recorded on an accrual basis such
as interest on public issues of the public debt. Outlays are
the measure of Government spending.
Outyear estimates mean estimates presented in the
budget for the years beyond the budget year of budget authority, outlays, receipts, and other items (such as debt).
Overseas Contingency Operations/Global War
on Terrorism (OCO/GWOT) means a discretionary
appropriation that is enacted that the Congress and, subsequently, the President have so designated on an account
by account basis. Such a discretionary appropriation that
is designated as OCO/GWOT results in a cap adjustment
to the limits on discretionary spending under BBEDCA.
Funding for these purposes has most recently been associated with the wars in Iraq and Afghanistan.
Pay-as-you-go (PAYGO) refers to requirements of
the Statutory Pay-As-You-Go Act of 2010 that result in
a sequestration if the estimated combined result of new
legislation affecting direct spending or revenue increases
the on-budget deficit relative to the baseline, as of the end
of a congressional session.
Public enterprise fund—see Revolving fund.
Reappropriation means a provision of law that extends into a new fiscal year the availability of unobligated
amounts that have expired or would otherwise expire.
Receipts mean collections that result from the
Government’s exercise of its sovereign power to tax or
otherwise compel payment. They are compared to outlays
in calculating a surplus or deficit. (Cf. offsetting collections and offsetting receipts.)
Revolving fund means a fund that conducts continuing cycles of business-like activity, in which the
fund charges for the sale of products or services and
uses the proceeds to finance its spending, usually without requirement for annual appropriations. There are
two types of revolving funds: Public enterprise funds,
which conduct business-like operations mainly with
the public, and intragovernmental revolving funds,

8. Budget Concepts

which conduct business-like operations mainly within
and between Government agencies. (Cf. special fund
and trust fund.)
Savings refers to legislation or administrative actions
that decrease outlays or increase receipts. (Cf. cost.)
Scorekeeping means measuring the budget effects
of legislation, generally in terms of budget authority,
receipts, and outlays, for purposes of measuring adherence to the Budget or to budget targets established by the
Congress, as through agreement to a Budget Resolution.
Sequestration means the cancellation of budgetary
resources. The Statutory Pay-As-You-Go Act of 2010 requires such cancellations if revenue or direct spending
legislation is enacted that, in total, increases projected
deficits or reduces projected surpluses relative to the
baseline. The Balanced Budget and Emergency Deficit
Control Act of 1985, as amended, requires such cancellations if discretionary appropriations exceed the statutory
limits on discretionary spending.
Special fund means a Federal fund account for
receipts or offsetting receipts earmarked for specific purposes and the expenditure of these receipts. (Cf. revolving
fund and trust fund.)
Statutory Pay-As-You-Go Act of 2010 refers to
legislation that reinstated a statutory pay-as-you-go requirement for new tax or mandatory spending legislation.
The law is a standalone piece of legislation that crossreferences BBEDCA but does not directly amend that
legislation. This is a permanent law and does not expire.
Subsidy means the estimated long-term cost to the
Government of a direct loan or loan guarantee, calculated
on a net present value basis, excluding administrative
costs and any incidental effects on governmental receipts
or outlays.
Surplus means the amount by which receipts exceed
outlays in a fiscal year. It may refer to the on-budget, offbudget, or unified budget surplus.

99
Supplemental appropriation means an appropriation enacted subsequent to a regular annual
appropriations act, when the need for additional funds is
too urgent to be postponed until the next regular annual
appropriations act.
Trust fund refers to a type of account, designated by
law as a trust fund, for receipts or offsetting receipts dedicated to specific purposes and the expenditure of these
receipts. Some revolving funds are designated as trust
funds, and these are called trust revolving funds. (Cf. special fund and revolving fund.)
Trust funds group refers to the moneys collected and
spent by the Government through trust fund accounts.
(Cf. Federal funds group.)
Undistributed offsetting receipts mean offsetting
receipts that are deducted from the Government-wide
totals for budget authority and outlays instead of being
offset against a specific agency and function. (Cf. offsetting receipts.)
Unified budget includes receipts from all sources and
outlays for all programs of the Federal Government, including both on- and off-budget programs. It is the most
comprehensive measure of the Government’s annual
finances.
Unobligated balance means the cumulative amount
of budget authority that remains available for obligation
under law in unexpired accounts. The term “expired balances available for adjustment only” refers to unobligated
amounts in expired accounts.
User charges are charges assessed for the provision of
Government services and for the sale or use of Government
goods or resources. The payers of the user charge must
be limited in the authorizing legislation to those receiving special benefits from, or subject to regulation by, the
program or activity beyond the benefits received by the
general public or broad segments of the public (such as
those who pay income taxes or custom duties).

9. COVERAGE OF THE BUDGET

The Federal budget is the central instrument of national policy making. It is the Government’s financial plan
for proposing and deciding the allocation of resources to
serve national objectives. The budget provides information on the cost and scope of Federal activities to inform
decisions and to serve as a means to control the allocation
of resources. When enacted, it establishes the level of public goods and services provided by the Government.
Federal Government activities can be either “budgetary” or “non-budgetary.” Those activities that involve
direct and measurable allocation of Federal resources are
budgetary. The payments to and from the public resulting
from budgetary activities are included in the budget’s accounting of outlays and receipts. Federal activities that
do not involve direct and measurable allocation of Federal
resources are non-budgetary and are not included in the
budget’s accounting of outlays and receipts. More detailed
information about outlays and receipts may be found in
Chapter 8, “Budget Concepts,” of this volume.
The budget documents include information on some
non-budgetary activities because they can be important
instruments of Federal policy and provide insight into
the scope and nature of Federal activities. For example,
the budget documents show the transactions of the Thrift
Savings Program (TSP), a collection of investment funds
managed by the Federal Retirement Thrift Investment
Board (FRTIB). Despite the fact that the FRTIB is budgetary and one of the TSP funds is invested entirely in
Federal securities, the transactions of these funds are
non-budgetary because current and retired Federal employees own the funds. The Government manages these
funds only in a fiduciary capacity.
The budget also includes information on cash flows
that are a means of financing Federal activity, such as
for credit financing accounts. However, to avoid doublecounting, means of financing amounts are not included
in the estimates of outlays or receipts because the costs
of the underlying Federal activities are already reflected
in the deficit.1 This chapter provides details about the
budgetary and non-budgetary activities of the Federal
Government.
Budgetary Activities
The Federal Government has used the unified budget concept—which consolidates outlays and receipts
from Federal funds and trust funds, including the Social
Security trust funds—since 1968, starting with the 1969
Budget. The 1967 President’s Commission on Budget
Concepts (the Commission) recommended the change to
1   For more information on means of financing, see the “Budget Deficit
or Surplus and Means of Financing” section of Chapter 8, “Budget Concepts,” in this volume.

include the financial transactions of all of the Federal
Government’s programs and agencies. Thus, the budget
includes information on the financial transactions of all
15 Executive departments, all independent agencies (from
all three branches of Government), and all Government
corporations.2
The budget shows outlays and receipts for on-budget and
off-budget activities separately to reflect the legal distinction between the two. Although there is a legal distinction
between on-budget and off-budget activities, conceptually
there is no difference between them. Off-budget Federal
activities reflect the same kinds of governmental roles as
on-budget activities and result in outlays and receipts.
Like on-budget activities, the Government funds and controls off-budget activities. The “unified budget” reflects
the conceptual similarity between on-budget and off-budget activities by showing combined totals of outlays and
receipts for both.
Many Government corporations are entities with business-type operations that charge the public for services
at prices intended to allow the entity to be self-sustaining, although some operate at a loss in order to provide
subsidies to specific recipients. Often these entities are
more independent than other agencies and have limited
exemptions from certain Federal personnel requirements
to allow for flexibility.
All accounts in Table 26-1, “Federal Budget by Agency
and Account,” in the supplemental materials to this volume are budgetary.3 The majority of budgetary accounts
are associated with the departments or other entities
that are clearly Federal agencies. Some budgetary accounts reflect Government payments to entities that the
Government created or chartered as private or non-Federal entities. Some of these entities receive all or a majority
of their funding from the Government. These include the
Corporation for Public Broadcasting, Gallaudet University,
Howard University, the Legal Services Corporation, the
National Railroad Passenger Corporation (Amtrak), the
Smithsonian Institution, the State Justice Institute, and
the United States Institute of Peace. A related example
is the Standard Setting Board, which is not a Federally
created entity but since 2003 has received a majority of
2 Government corporations are Government entities that are defined
as corporations pursuant to the Government Corporation Control Act,
as amended (31 U.S.C. 9101), or elsewhere in law. Examples include the
Commodity Credit Corporation, the Export-Import Bank of the United
States, the Federal Crop Insurance Corporation, the Federal Deposit
Insurance Corporation, the Millennium Challenge Corporation, the
Overseas Private Investment Corporation, the Pension Benefit Guaranty
Corporation, the Tennessee Valley Authority, the African Development
Foundation (22 U.S.C. 290h-6), the Inter-American Foundation (22
U.S.C. 290f), the Presidio Trust (16 U.S.C. 460bb note), and the Valles
Caldera Trust (16 U.S.C. 698v-4).
3 Table 26-1 can be found at: https://www.whitehouse.gov/omb/
analytical-perspectives.

101

102

ANALYTICAL PERSPECTIVES

Table 9–1. COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS 1
(In billions of dollars)
Year

Receipts
Total

On-budget

Outlays
Off-budget

Total

On-budget

Surplus or deficit (–)
Off-budget

Total

On-budget

Off-budget

1981 �����������������������������������������������������������������������������
1982 �����������������������������������������������������������������������������
1983 �����������������������������������������������������������������������������
1984 �����������������������������������������������������������������������������

599.3
617.8
600.6
666.4

469.1
474.3
453.2
500.4

130.2
143.5
147.3
166.1

678.2
745.7
808.4
851.8

543.0
594.9
660.9
685.6

135.3
150.9
147.4
166.2

–79.0
–128.0
–207.8
–185.4

–73.9
–120.6
–207.7
–185.3

–5.1
–7.4
–0.1
–0.1

1985 �����������������������������������������������������������������������������
1986 �����������������������������������������������������������������������������
1987 �����������������������������������������������������������������������������
1988 �����������������������������������������������������������������������������
1989 �����������������������������������������������������������������������������

734.0
769.2
854.3
909.2
991.1

547.9
568.9
640.9
667.7
727.4

186.2
200.2
213.4
241.5
263.7

946.3
990.4
1,004.0
1,064.4
1,143.7

769.4
806.8
809.2
860.0
932.8

176.9
183.5
194.8
204.4
210.9

–212.3
–221.2
–149.7
–155.2
–152.6

–221.5
–237.9
–168.4
–192.3
–205.4

9.2
16.7
18.6
37.1
52.8

1990 �����������������������������������������������������������������������������
1991 �����������������������������������������������������������������������������
1992 �����������������������������������������������������������������������������
1993 �����������������������������������������������������������������������������
1994 �����������������������������������������������������������������������������

1,032.0
1,055.0
1,091.2
1,154.3
1,258.6

750.3
761.1
788.8
842.4
923.5

281.7
293.9
302.4
311.9
335.0

1,253.0
1,324.2
1,381.5
1,409.4
1,461.8

1,027.9
1,082.5
1,129.2
1,142.8
1,182.4

225.1
241.7
252.3
266.6
279.4

–221.0
–269.2
–290.3
–255.1
–203.2

–277.6
–321.4
–340.4
–300.4
–258.8

56.6
52.2
50.1
45.3
55.7

1995 �����������������������������������������������������������������������������
1996 �����������������������������������������������������������������������������
1997 �����������������������������������������������������������������������������
1998 �����������������������������������������������������������������������������
1999 �����������������������������������������������������������������������������

1,351.8
1,453.1
1,579.2
1,721.7
1,827.5

1,000.7
1,085.6
1,187.2
1,305.9
1,383.0

351.1
367.5
392.0
415.8
444.5

1,515.7
1,560.5
1,601.1
1,652.5
1,701.8

1,227.1
1,259.6
1,290.5
1,335.9
1,381.1

288.7
300.9
310.6
316.6
320.8

–164.0
–107.4
–21.9
69.3
125.6

–226.4
–174.0
–103.2
–29.9
1.9

62.4
66.6
81.4
99.2
123.7

2000 �����������������������������������������������������������������������������
2001 �����������������������������������������������������������������������������
2002 �����������������������������������������������������������������������������
2003 �����������������������������������������������������������������������������
2004 �����������������������������������������������������������������������������

2,025.2
1,991.1
1,853.1
1,782.3
1,880.1

1,544.6
1,483.6
1,337.8
1,258.5
1,345.4

480.6
507.5
515.3
523.8
534.7

1,789.0
1,862.8
2,010.9
2,159.9
2,292.8

1,458.2
1,516.0
1,655.2
1,796.9
1,913.3

330.8
346.8
355.7
363.0
379.5

236.2
128.2
–157.8
–377.6
–412.7

86.4
–32.4
–317.4
–538.4
–568.0

149.8
160.7
159.7
160.8
155.2

2005 �����������������������������������������������������������������������������
2006 �����������������������������������������������������������������������������
2007 �����������������������������������������������������������������������������
2008 �����������������������������������������������������������������������������
2009 �����������������������������������������������������������������������������

2,153.6
2,406.9
2,568.0
2,524.0
2,105.0

1,576.1
1,798.5
1,932.9
1,865.9
1,451.0

577.5
608.4
635.1
658.0
654.0

2,472.0
2,655.1
2,728.7
2,982.5
3,517.7

2,069.7
2,233.0
2,275.0
2,507.8
3,000.7

402.2
422.1
453.6
474.8
517.0

–318.3
–248.2
–160.7
–458.6
–1,412.7

–493.6
–434.5
–342.2
–641.8
–1,549.7

175.3
186.3
181.5
183.3
137.0

2010 �����������������������������������������������������������������������������
2011 �����������������������������������������������������������������������������
2012 �����������������������������������������������������������������������������
2013 �����������������������������������������������������������������������������
2014 �����������������������������������������������������������������������������

2,162.7
2,303.5
2,450.0
2,775.1
3,021.5

1,531.0
1,737.7
1,880.5
2,101.8
2,285.9

631.7
565.8
569.5
673.3
735.6

3,457.1
3,603.1
3,536.9
3,454.6
3,506.1

2,902.4
3,104.5
3,029.4
2,820.8
2,800.0

554.7
498.6
507.6
633.8
706.1

–1,294.4
–1,299.6
–1,087.0
–679.5
–484.6

–1,371.4
–1,366.8
–1,148.9
–719.0
–514.1

77.0
67.2
61.9
39.5
29.5

2015 �����������������������������������������������������������������������������
2016 �����������������������������������������������������������������������������
2017 �����������������������������������������������������������������������������

3,249.9
3,268.0
3,316.2

2,479.5
2,457.8
2,465.6

770.4
810.2
850.6

3,688.4
3,852.6
3,981.6

2,945.3
3,077.9
3,180.4

743.1
774.7
801.2

–438.5
–584.7
–665.4

–465.8
–620.2
–714.8

27.3
35.5
49.4

2018 estimate ���������������������������������������������������������������
3,340.4
2,488.1
852.3
2019 estimate ���������������������������������������������������������������
3,422.3
2,517.1
905.2
2020 estimate ���������������������������������������������������������������
3,608.9
2,667.6
941.4
2021 estimate ���������������������������������������������������������������
3,838.2
2,843.8
994.4
2022 estimate ���������������������������������������������������������������
4,088.7
3,039.8
1,048.9
2023 estimate ���������������������������������������������������������������
4,386.1
3,283.6
1,102.6
1 Off-budget transactions consist of the Social Security trust funds and the Postal Service Fund.

4,173.0
4,406.7
4,595.9
4,754.1
4,996.5
5,164.6

3,315.8
3,494.1
3,623.4
3,718.7
3,893.2
3,989.9

857.2
912.6
972.5
1,035.4
1,103.2
1,174.7

–832.6
–984.4
–986.9
–915.9
–907.8
–778.5

–827.7
–977.0
–955.8
–875.0
–853.4
–706.3

–4.9
–7.4
–31.1
–41.0
–54.4
–72.2

funding through a Federally mandated assessment on public companies under the Sarbanes-Oxley Act. Although the
Federal payments to these entities are budgetary, the entities themselves are non-budgetary.

Whether the Government created or chartered an entity does not alone determine its budgetary status. The
Commission recommended that the budget be comprehensive but it also recognized that proper budgetary

103

9. Coverage of the Budget

classification required weighing all relevant factors regarding establishment, ownership, and control of an
entity while erring on the side of inclusiveness. Generally,
entities that are primarily Government owned or controlled are classified as budgetary. OMB determines the
budgetary classification of entities in consultation with
the Congressional Budget Office (CBO) and the Budget
Committees of the Congress.
One recent example of a budgetary classification was
for the Puerto Rico Financial Oversight Board, created in
June 2016 by the Puerto Rico Oversight, Management,
and Economic Stability Act (PL 114-187). By statute, this
oversight board is not a department, agency, establishment, or instrumentality of the Federal Government, but
is an entity within the territorial government financed
entirely by the territorial government. Because the flow
of funds from the territory to the oversight board is mandated by Federal law, the budget reflects the allocation of
resources by the territorial government to the territorial
entity as a receipt from the territorial government and an
equal outlay to the oversight board, with net zero deficit
impact. Because the oversight board itself is not a Federal
entity, its operations are not included in the budget.
Another example involved the National Association of
Registered Agents and Brokers (NARAB). NARAB allows
for the adoption and application of insurance licensing,
continuing education, and other nonresident producer
qualification requirements on a multi-state basis. In
other words, NARAB streamlines the ability of a nonresident insurer to become a licensed agent in another
State. In exchange for providing enhanced market access,
NARAB collects fees from its members. The Terrorism
Risk Insurance Reauthorization Act of 2015 established
the association. In addition to being statutorily established—which in itself is an indication that the entity
is governmental—NARAB has a board of directors appointed by the President and confirmed by the Senate.
It must also submit bylaws and an annual report to the
Department of the Treasury and its primary function involves exercising a regulatory function.
Off-budget Federal activities.—Despite the Commission’s recommendation that the budget be comprehensive,
every year since 1971 at least one Federal program or
agency has been presented as off-budget because of a legal
requirement.4 The Government funds such off-budget Federal activities and administers them according to Federal
legal requirements. However, their net costs are excluded,
by law, from the rest of the budget totals, also known as the
“on-budget” totals.
Off-budget Federal activities currently consist of the
U.S. Postal Service and the two Social Security trust
funds: Old-Age and Survivors Insurance and Disability
Insurance. Social Security has been classified as off-budget since 1986 and the Postal Service has been classified as
off-budget since 1990.5 Other activities that had been des4 While the term “off-budget” is sometimes used colloquially to mean
non-budgetary, the term has a meaning distinct from non-budgetary.
Off-budget activities would be considered budgetary, absent legal
requirement to exclude these activities from the budget totals.
5 See 42 U.S.C. 911, and 39 U.S.C. 2009a, respectively. The off-budget
Postal Service accounts consist of the Postal Service Fund, which is

ignated in law as off-budget at various times before 1986
have been classified as on-budget by law since at least
1985 as a result of the Balanced Budget and Emergency
Deficit Control Act of 1985 (PL 99–177). Activities that
were off-budget at one time but that are now on-budget
are classified as on-budget for all years in historical budget data.
Social Security is the largest single program in the unified budget and it is classified by law as off-budget; as
a result, the off-budget accounts constitute a significant
part of total Federal spending and receipts. Table 9–1
divides total Federal Government outlays, receipts, and
the surplus or deficit between on-budget and off-budget
amounts. Within this table, the Social Security and Postal
Service transactions are classified as off-budget for all
years to provide a consistent comparison over time.
Non-Budgetary Activities
The Government characterizes some important
Government activities as non-budgetary because they do
not involve the direct allocation of resources.6 These activities can affect budget outlays or receipts even though
they have non-budgetary components.
Federal credit programs: budgetary and non-budgetary transactions.—Federal credit programs make
direct loans or guarantee private loans to non-Federal borrowers. The Federal Credit Reform Act of 1990 (FCRA), as
amended by the Balanced Budget Act of 1997, established
the current budgetary treatment for credit programs.
Under FCRA, the budgetary cost of a credit program,
known as the “subsidy cost,” is the estimated lifetime cost
to the Government of a loan or a loan guarantee on a net
present value basis, excluding administrative costs.
Outlays equal to the subsidy cost are recorded in the
budget up front, as they are incurred—for example, when
a loan is made or guaranteed. Credit program cash flows
to and from the public are recorded in non-budgetary
financing accounts and the information is included in
budget documents to provide insight into the program
size and costs. For more information about the mechanisms of credit programs, see Chapter 8 of this volume,
“Budget Concepts.” More detail on credit programs is in
Chapter 19 of this volume, “Credit and Insurance.”
classified as a mandatory account, and the Office of the Inspector
General and the Postal Regulatory Commission, both of which are
classified as discretionary accounts. The Postal Service Retiree Health
Benefits Fund is an on-budget mandatory account with the Office of
Personnel Management. The off-budget Social Security accounts consist
of the Federal Old-Age and Survivors Insurance trust fund and the
Federal Disability Insurance trust fund, both of which have mandatory
and discretionary funding.
6 Tax expenditures, which are discussed in Chapter 13 of this volume,
are an example of Government activities that could be characterized
as either budgetary or non-budgetary. Tax expenditures refer to the
reduction in tax receipts resulting from the special tax treatment
accorded certain private activities. Because tax expenditures reduce
tax receipts and receipts are budgetary, tax expenditures clearly have
budgetary effects. However, the size and composition of tax expenditures
are not explicitly recorded in the budget as outlays or as negative
receipts and, for this reason, tax expenditures might be considered a
special case of non-budgetary transactions.

104
Deposit funds.—Deposit funds are non-budgetary
accounts that record amounts held by the Government
temporarily until ownership is determined (such as earnest money paid by bidders for mineral leases) or held
by the Government as an agent for others (such as State
income taxes withheld from Federal employees’ salaries
and not yet paid to the States). The largest deposit fund is
the Government Securities Investment Fund, also known
as the G-Fund, which is part of the TSP, the Government’s defined contribution retirement plan. The Federal
Retirement Thrift Investment Board manages the fund’s
investment for Federal employees who participate in the
TSP (which is similar to private-sector 401(k) plans). The
Department of the Treasury holds the G-Fund assets,
which are the property of Federal employees, only in a
fiduciary capacity; the transactions of the Fund are not
resource allocations by the Government and are therefore
non-budgetary.7 For similar reasons, Native Americanowned funds that are held and managed in a fiduciary
capacity are also excluded from the budget.
Government-Sponsored Enterprises (GSEs).—
Government-Sponsored Enterprises are privately owned
and therefore distinct from government corporations. The
Federal Government has chartered GSEs such as the
Federal National Mortgage Association (Fannie Mae), the
Federal Home Loan Mortgage Corporation (Freddie Mac),
the Federal Home Loan Banks, the Farm Credit System,
and the Federal Agricultural Mortgage Corporation to
provide financial intermediation for specified public purposes. Although Federally chartered to serve public-policy
purposes, GSEs are classified as non-budgetary because
they are intended to be privately owned and controlled—
with any public benefits accruing indirectly from the
GSEs’ business transactions. Estimates of the GSEs’ activities can be found in a separate chapter of the Budget
Appendix, and their activities are discussed in Chapter 19
of this volume, “Credit and Insurance.”
In September 2008, in response to the financial market
crisis, the director of the Federal Housing Finance Agency
(FHFA)8 placed Fannie Mae and Freddie Mac into conservatorship for the purpose of preserving the assets and
restoring the solvency of these two GSEs. As conservator, FHFA has broad authority to direct the operations of
these GSEs. However, these GSEs remain private companies with board of directors and management responsible
for their day-to-day operations. The Budget continues to
treat these two GSEs as non-budgetary private entities
in conservatorship rather than as Government agencies.
By contrast, CBO treats these GSEs as budgetary Federal
agencies. Both treatments include budgetary and nonbudgetary amounts.
While OMB reflects all of the GSEs’ transactions with
the public as non-budgetary, the payments from the
Treasury to the GSEs are recorded as budgetary outlays
and dividends received by the Treasury are recorded as
7 The administrative functions of the Federal Retirement Thrift
Investment Board are carried out by Government employees and
included in the budget totals.
8 FHFA is the regulator of Fannie Mae, Freddie Mac, and the Federal
Home Loans Banks.

ANALYTICAL PERSPECTIVES

budgetary receipts. Under CBO’s approach, the subsidy
costs of Fannie Mae’s and Freddie Mac’s past credit activities are treated as having already been recorded in the
budget estimates; the subsidy costs of future credit activities will be recorded when the activities occur. Lending
and borrowing activities between the GSEs and the public
apart from the subsidy costs are treated as non-budgetary
by CBO, and Treasury payments to the GSEs are intragovernmental transfers (from Treasury to the GSEs) that
net to zero in CBO’s budget estimates.
Overall, both the budget’s accounting and CBO’s accounting present Fannie Mae’s and Freddie Mac’s gains
and losses as Government receipts and outlays—which
reduce or increase Government deficits. The two approaches, however, reflect the effect of the gains and losses
in the budget at different times.
Other Federally-created non-budgetary entities.—
In addition to the GSEs, the Federal Government has
created a number of other entities that are classified as
non-budgetary. These include Federally funded research
and development centers (FFRDCs), non-appropriated
fund instrumentalities (NAFIs), and other entities; some
of these are non-profit entities and some are for-profit
entities.9
FFRDCs are entities that conduct agency-specific research under contract or cooperative agreement.
Some FFRDCs were created to conduct research for the
Department of Defense but are administered by colleges, universities, or other non-profit entities. Despite this
non-budgetary classification, many FFRDCs receive direct resource allocation from the Government and are
included as budget lines in various agencies. Examples
of FFRDCs include the Center for Naval Analysis and the
Jet Propulsion Laboratory.10 Even though FFRDCs are
non-budgetary, Federal payments to the FFRDC are bud9 Although most entities created by the Federal Government are
budgetary, as discussed in this section, the GSEs and the Federal Reserve
System were created by the Federal Government, but are classified as
non-budgetary. In addition, Congress and the President have chartered,
but not necessarily created, approximately 100 non-profit entities that
are non-budgetary. These include patriotic, charitable, and educational
organizations under Title 36 of the U.S. Code and foundations and trusts
chartered under other titles of the Code. Title 36 corporations include
the American Legion, the American National Red Cross, Big Brothers—
Big Sisters of America, Boy Scouts of America, Future Farmers of
America, Girl Scouts of the United States of America, the National
Academy of Public Administration, the National Academy of Sciences,
and Veterans of Foreign Wars of the United States. Virtually all of the
non-profit entities chartered by the Government existed under State law
prior to the granting of a Government charter, making the Government
charter an honorary rather than governing charter. A major exception
to this is the American National Red Cross. Its Government charter
requires it to provide disaster relief and to ensure compliance with treaty
obligations under the Geneva Convention. Although any Government
payments (whether made as direct appropriations or through agency
appropriations) to these chartered non-profits, including the Red Cross,
would be budgetary, the non-profits themselves are classified as nonbudgetary. On April 29, 2015, the Subcommittee on Immigration and
Border Security of the Committee on the Judiciary in the U.S. House of
Representatives adopted a policy prohibiting Congress from granting
new Federal charters to private, non-profit organizations. This policy
has been adopted by every subcommittee with jurisdiction over charters
since the 101st Congress.
10 The National Science Foundation maintains a list of FFRDCs at
www.nsf.gov/statistics/ffrdc.

105

9. Coverage of the Budget

get outlays. In addition to Federal funding, FFRDCs may
receive funding from non-Federal sources.
Non-appropriated fund instrumentalities (NAFIs) are
entities that support an agency’s current and retired
personnel. Nearly all NAFIs are associated with the Departments of Defense, Homeland Security (Coast Guard),
and Veterans Affairs. Most NAFIs are located on military
bases and include the armed forces exchanges (which
sell goods to military personnel and their families), recreational facilities, and childcare centers. NAFIs are
financed by proceeds from the sale of goods or services
and do not receive direct appropriations; thus, they are
characterized as non-budgetary but any agency payments
to the NAFIs are recorded as budget outlays.
A number of entities created by the Government receive a significant amount of non-Federal funding.
Non-Federal individuals or organizations significantly
control some of these entities. These entities include
Gallaudet University, Howard University, Amtrak, and
the Universal Services Administrative Company, among
others.11 Most of these entities receive direct appropriations or other recurring payments from the Government.
The appropriations or other payments are budgetary and
included in Table 26-1. However, many of these entities
are themselves non-budgetary. Generally, entities that
receive a significant portion of funding from non-Federal sources but are not controlled by the Government are
non-budgetary.
Regulation.—Federal Government regulations often
require the private sector or other levels of government
to make expenditures for specified purposes that are intended to have public benefits, such as workplace safety
and pollution control. Although the budget reflects the
Government’s cost of conducting regulatory activities, the
costs imposed on the private sector as a result of regulation are treated as non-budgetary and not included in the
budget. The annual Regulatory Plan and the semi-annual
Unified Agenda of Federal Regulatory and Deregulatory
Actions describe the Government’s regulatory priorities
and plans.12 OMB has published the estimated costs and
benefits of Federal regulation annually since 1997.13
Monetary policy.— As a fiscal policy tool, the budget
is used by elected Government officials to promote eco11 Under section 415(b) of the Amtrak Reform and Accountability Act
of 1997, (49 U.S.C. 24304 and note), Amtrak was required to redeem all
of its outstanding common stock. Once all outstanding common stock is
redeemed, Amtrak will be wholly-owned by the Government and, at that
point, its non-budgetary status may need to be reassessed.
12 The most recent Regulatory Plan and introduction to the Unified
Agenda issued by the General Services Administration’s Regulatory Information Service Center are available at www.reginfo.gov and at www.
gpo.gov.
13 In the most recent draft report, OMB indicates that the estimated
annual benefits of Federal regulations it reviewed from October 1, 2005,
to September 30, 2015, range from $208 billion to $672 billion, while the
estimated annual costs range from $57 billion to $85 billion.

nomic growth and achieve other public policy objectives.
Monetary policy is another tool that governments use
to promote economic policy objectives. In the United
States, the Federal Reserve System—which is composed of a Board of Governors and 12 regional Federal
Reserve Banks—conducts monetary policy. The Federal
Reserve Act provides that the goal of monetary policy is
to “maintain long-run growth of the monetary and credit aggregates commensurate with the economy’s long
run potential to increase production, so as to promote
effectively the goals of maximum employment, stable
prices, and moderate long-term interest rates.”14 The
Full Employment and Balanced Growth Act of 1978, also
known as the Humphrey-Hawkins Act, reaffirmed the
dual goals of full employment and price stability.15
By law, the Federal Reserve System is a self-financing
entity that is independent of the Executive Branch and
subject only to broad oversight by the Congress. Consistent
with the recommendations of the Commission, the effects of monetary policy and the actions of the Federal
Reserve System are non-budgetary, with exceptions for
the transfer to the Treasury of excess income generated through its operations. The Federal Reserve System
earns income from a variety of sources including interest
on Government securities, foreign currency investments
and loans to depository institutions, and fees for services
(e.g., check clearing services) provided to depository institutions. The Federal Reserve System remits to Treasury
any excess income over expenses annually. For the fiscal
year ending September 2017, Treasury recorded $81.3
billion in receipts from the Federal Reserve System. In
addition to remitting excess income to Treasury, current
law requires the Federal Reserve to transfer a portion of
its excess earnings to the Consumer Financial Protection
Bureau (CFPB).16
The Board of Governors of the Federal Reserve is a
Federal Government agency, but because of its independent status, its budget is not subject to Executive Branch
review and is included in the Budget Appendix for informational purposes only. The Federal Reserve Banks
are subject to Board oversight and managed by boards
of directors chosen by the Board of Governors and member banks, which include all national banks and State
banks that choose to become members. The budgets of the
regional Banks are subject to approval by the Board of
Governors and are not included in the Budget Appendix.
14

See 12 U.S.C. 225a.
See 15 U.S.C. 3101 et seq.
16 See section 1011 of Public Law 111-203 (12 U.S.C. 5491), (2010).
The CFPB is an executive agency, led by a director appointed by the
President and reliant on Federal funding, that serves the governmental
function of regulating Federal consumer financial laws. Accordingly, it is
included in the Budget.
15

10. BUDGET PROCESS

This chapter addresses two broad categories of budget
reform. First, the chapter discusses proposals to improve
budgeting and fiscal sustainability with respect to individual programs as well as across Government. These
proposals include: an extension of the spending reductions required by the Joint Select Committee on Deficit
Reduction; various initiatives to reduce improper payments; funding requests for disaster relief and wildfire
suppression; limits on changes in mandatory programs
in appropriations Acts; limits on advance appropriations;
proposals for the Pell Grant program; changes to capital
budgeting for large Federal capital projects; and fast track
spending reduction powers. Second, the chapter describes
the 2019 Budget proposals for budget enforcement and
budget presentation. The budget enforcement proposals
include a discussion of the system under the Statutory
Pay-As-You-Go Act of 2010 (PAYGO) of scoring legislation

affecting receipts and mandatory spending; reforms to
account for debt service in cost estimates; administrative
PAYGO actions affecting mandatory spending; adjustments in the baseline for Highway Trust Fund spending
and the extension of certain expiring tax laws; discretionary spending caps; improvements to how Joint Committee
sequestration is shown in the Budget; the budgetary
treatment of the housing Government-sponsored enterprises and the United States Postal Service; and using
fair value as a method of scoring credit programs. These
reforms combine fiscal responsibility with measures to
provide citizens a more transparent, comprehensive, and
accurate measure of the reach of the Federal budget.
Together, the reforms and presentations discussed create
a budget more focused on core Government functions and
more accountable to the taxpayer.

I. BUDGET REFORM PROPOSALS
Joint Committee Enforcement
In August 2011, as part of the Budget Control Act of
2011 (BCA; Public Law 112-25), bipartisan majorities in
both the House and Senate voted to establish the Joint
Select Committee on Deficit Reduction to recommend legislation to achieve at least $1.5 trillion of deficit reduction
over the period of fiscal years 2012 through 2021. The
failure of the Congress to enact such comprehensive deficit reduction legislation to achieve the $1.5 trillion goal
triggered a sequestration of discretionary and mandatory
spending in 2013, led to reductions in the discretionary
caps for 2014 through 2019, and forced additional sequestrations of mandatory spending in each of fiscal years
2014 through 2018. A further sequestration of mandatory
spending is scheduled to take effect beginning on October
1 based on the order released with the 2019 Budget.
To date, various enacted legislation has changed the
annual reductions required to the discretionary spending
limits set in the BCA through 2017. The 2018 caps remain
at the levels set in the sequestration preview report that
was transmitted with the President’s 2018 Budget while
the sequestration preview report issued with this Budget
reduces the 2019 discretionary caps according to current law. Going forward, the reductions to discretionary
spending for fiscal years 2020 and 2021 are to be implemented in the sequestration preview report for each year
by reducing the discretionary caps. Future reductions to
mandatory programs are to be implemented by a sequestration of non-exempt mandatory budgetary resources in
each of fiscal years 2020 through 2025, which is triggered
by the transmittal of the President’s Budget for each year

and take effect on the first day of the fiscal year. The 2019
Budget proposes to continue mandatory sequestration
into 2026, 2027, and 2028 to generate an additional $73
billion in deficit reduction.
For discretionary programs, under current law, the
2018 caps remain at $549.1 billion for defense and
$515.7 billion for non-defense while, for 2019, the Joint
Committee procedures reduce the defense cap from $616
billion to $562.1 billion and the non-defense cap from
$566 billion to $530.3 billion. The 2019 Budget continues
to illustratively assume its proposed caps for 2018 of $603
billion for defense and $462 billion for non-defense. For
2019, the Budget cancels the Joint Committee reductions
made to the defense category and proposes a new defense
cap that will support the National Security Strategy goal
of preserving peace through strength with a substantial
investment that will protect America’s vital national interests. This increase is paid for by reducing the cap for
non-defense by roughly the same amount. This results in a
proposed defense cap of $627 billion for defense programs
and a non-defense cap of $465 billion for non-defense
programs. After 2019, the Budget sets aside the existing
Joint Committee procedures for discretionary programs
by proposing new caps for defense and non-defense programs through 2028. These funding levels will enhance
the country’s national security while maintaining fiscal
responsibility by rebalancing the non-defense mission to
focus on core Government responsibilities. See Table S–7
in the main Budget volume for the proposed annual discretionary caps.

107

108
Program Integrity Funding
All Federal programs must be run efficiently and effectively. Therefore, the Administration proposes to make
significant investments in activities to ensure that taxpayer dollars are spent correctly by expanding oversight
and enforcement activities in the largest benefit programs such as Social Security, Unemployment Insurance,
Medicare and Medicaid, and increasing investments in
tax compliance related to Internal Revenue Service tax
enforcement. In addition, the Administration supports a
number of legislative and administrative reforms in order
to reduce improper payments. Many of these proposals will yield savings to the Government and taxpayers,
and will support Government-wide efforts to improve the
management and oversight of Federal resources.
In addition to efforts outlined in the Budget, the
Administration will continue to identify areas where it
can work with the Congress to further prevent, reduce,
and recover improper payments and promote program integrity efforts.
Administrative Funding for Program Integrity.—
There is compelling evidence that investments in
administrative resources can significantly decrease the
rate of improper payments and recoup many times their
initial investment. The Social Security Administration
(SSA) estimates that continuing disability reviews conducted in 2019 will yield net Federal program savings
over the next 10 years of roughly $9 on average per $1
budgeted for dedicated program integrity funding, including the Old Age, Survivors, and Disability Insurance
Program (OASDI), Supplemental Security Income (SSI),
Medicare and Medicaid program effects. Similarly, for
Health Care Fraud and Abuse Control (HCFAC) program
integrity efforts, CMS actuaries conservatively estimate
approximately $2 is saved or averted for every additional
$1 spent.
Enacted Adjustments Pursuant to BBEDCA.—The
Balanced Budget and Emergency Deficit Control Act of
1985, as amended (BBEDCA), recognized that a multiyear strategy to reduce the rate of improper payments,
commensurate with the large and growing costs of the
programs administered by the SSA and the Department
of Health and Human Services, is a laudable goal. To
support the overall goal, BBEDCA provided for adjustments to the discretionary spending limits through 2021
to allow for additional funding for specific program integrity activities to reduce improper payments in the Social
Security programs and in the Medicare and Medicaid
programs. Because the additional funding is classified as
discretionary and the savings as mandatory, the savings
cannot be offset against the funding for budget enforcement purposes. These adjustments to the discretionary
caps are made only if appropriations bills increase funding for the specified program integrity purposes above
specified minimum, or base levels. This method ensures
that the additional funding provided in BBEDCA does not
supplant other Federal spending on these activities and
that such spending is not diverted to other purposes. The
Bipartisan Budget Act of 2015 (BBA) increased the level

ANALYTICAL PERSPECTIVES

of such adjustments for Social Security programs by a net
$484 million over the 2017-2021 period, and it expanded
the uses of cap adjustment funds to include cooperative
disability investigation (CDI) units, and special attorneys
for fraud prosecutions. To continue support to these important anti-fraud activities, the Budget request provides
for SSA to transfer up to $10 million to the SSA Inspector
General to fund CDI unit team leaders. This anti-fraud
activity is an authorized use of the cap adjustment.
The 2019 Budget supports full funding of the authorized cap adjustments for these programs through 2021
and proposes to extend the cap adjustments through 2028
at the rate of current services inflation assumed in the
Budget. The 2019 Budget shows the baseline and policy
levels at equivalent amounts. Accordingly, savings generated from such funding levels in the baseline for program
integrity activities are reflected in the baselines for Social
Security programs, Medicare, and Medicaid.
Social Security Administration Medical Continuing
Disability Reviews and Non-Medical Redeterminations of
SSI Eligibility.—For the Social Security Administration,
the Budget’s proposed $1,683 million, the amount authorized in BBEDCA for discretionary funding in 2019 ($273
million in base funding and $1,410 million in cap adjustment funding) will allow SSA to conduct 703,000 full
medical CDRs and approximately 2.8 million SSI nonmedical redeterminations of eligibility. Medical CDRs
are periodic reevaluations to determine whether disabled OASDI or SSI beneficiaries continue to meet SSA’s
standards for disability. As a result of the discretionary
funding requested in 2019, as well as the fully funded
base and cap adjustment amounts in 2020 through 2028,
the OASDI, SSI, Medicare and Medicaid programs would
recoup about $44 billion in gross Federal savings with
additional savings after the 10-year period, according
to estimates from SSA’s Office of the Chief Actuary and
the Centers for Medicare and Medicaid Services’ Office of
the Actuary. Access to increased cap adjustment amounts
and SSA’s commitment to fund the fully loaded costs of
performing the requested CDR and redetermination volumes would produce net deficit savings of approximately
$30 billion in the 10-year window, and additional savings
in the outyears. These costs and savings are reflected in
Table 10-1.
SSA is required by law to conduct medical CDRs for
all beneficiaries who are receiving disability benefits under the OASDI program, as well as all children under age
18 who are receiving SSI. SSI redeterminations are also
required by law. However, the frequency of CDRs and redeterminations is constrained by the availability of funds
to support these activities. The mandatory savings from
the base funding in every year and the enacted discretionary cap adjustment funding assumed for 2018 are
included in the BBEDCA baseline, consistent with the
levels amended by the BBA of 2015, because the baseline
assumes the continued funding of program integrity activities. The Budget shows the savings that would result
from the increase in CDRs and redeterminations made
possible by the discretionary cap adjustment funding requested in 2019 through 2028. With access to program

109

10. Budget Process

integrity cap adjustments, SSA is on track to remain current with program integrity workloads throughout the
budget window.
As stated above, current estimates indicate that CDRs
conducted in 2019 will yield a return on investment (ROI)
of about $9 on average in net Federal program savings
over 10 years per $1 budgeted for dedicated program
integrity funding, including OASDI, SSI, Medicare and
Medicaid program effects. Similarly, SSA estimates indicate that non-medical redeterminations conducted
in 2019 will yield a ROI of about $4 on average of net
Federal program savings over 10 years per $1 budgeted
for dedicated program integrity funding, including SSI
and Medicaid program effects. The Budget assumes the
full cost of performing CDRs to ensure that sufficient resources are available. Additionally, the Budget assumes
that SSA will expand how it charges for medical CDRs
beginning in 2019 to encompass workloads related to the
medical CDR process, as reflected in the annual CDR report to Congress. The savings from one year of program
integrity activities are realized over multiple years because some results find that beneficiaries are no longer
eligible to receive OASDI or SSI benefits.
Redeterminations are periodic reviews of non-medical
eligibility factors, such as income and resources, for the
means-tested SSI program and can result in a revision
of the individual’s benefit level. However, the schedule of
savings resulting from redeterminations will be different
for the base funding and the cap adjustment funding in
2019 through 2028. This is because redeterminations of
eligibility can uncover underpayment errors as well as
overpayment errors. SSI recipients are more likely to initiate a redetermination of eligibility if they believe there
are underpayments, and these recipient-initiated redeterminations are included in the base. The estimated savings
per dollar spent on CDRs and non-medical redeterminations in the baseline reflects an interaction with the state
option to expand Medicaid coverage for individuals under age 65 with income less than 133 percent of poverty.
As a result of this option, some SSI beneficiaries, who

would otherwise lose Medicaid coverage due to a medical
CDR or non-medical redetermination, would continue to
be covered. In addition, some of the coverage costs for
these individuals will be eligible for the enhanced Federal
matching rate, resulting in higher Federal Medicaid costs
in those states.
Health Care Fraud and Abuse Program.—The 2019
Budget proposes base and cap adjustment funding levels over the next 10 years and continues the program
integrity cap adjustment through 2028. In order to maintain level of effort, the base amount increases annually
over the 10-year period. The cap adjustment is set at the
levels specified under BBEDCA through 2021 and then
increases annually based on inflation from 2022 through
2028. The mandatory savings from both the base and cap
adjustment are included in the Medicare and Medicaid
baselines.
The discretionary base funding of $311 million plus
an additional $5 million adjustment for inflation and
cap adjustment of $454 million for HCFAC activities in
2019 are designed to reduce the Medicare improper payment rate, support the Health Care Fraud Prevention &
Enforcement Action Team (HEAT) initiative and reduce
Medicaid improper payment rates. The investment will
also allow CMS to deploy innovative efforts that focus on
improving the analysis and application of data, including
state-of-the-art predictive modeling capabilities, in order
to prevent potentially wasteful, abusive, or fraudulent
payments before they occur. The funding is to be allocated
among CMS, the Health and Human Services Office of
Inspector General, and the Department of Justice.
Over 2019 through 2028, as reflected in Table 10-1, this
$5.47 billion investment in HCFAC cap adjustment funding will generate approximately $11.6 billion in savings
to Medicare and Medicaid, for new net deficit reduction of
$6.1 billion over the 10-year period, reflecting prevention
and recoupment of improper payments made to providers, as well as recoveries related to civil and criminal
penalties.

Table 10–1. PROGRAM INTEGRITY DISCRETIONARY CAP ADJUSTMENTS, INCLUDING MANDATORY SAVINGS
(Budget authority and outlays in millions of dollars)

2019
Social Security Program Integrity:
Discretionary Budget Authority (non add)1 ��������������������������������
Discretionary Costs1 ������������������������������������������������������������������
Mandatory Savings2 �������������������������������������������������������������������
Net Savings �������������������������������������������������������������������������

1,410
1,019
–105
914

2020
1,309
1,339
–2,044
–705

2021
1,302
1,303
–3,092
–1,789

2022
1,351
1,335
–4,017
–2,682

2023
1,403
1,389
–4,452
–3,063

2024
1,456
1,441
–4,751
–3,310

2025
1,511
1,496
–5,534
–4,038

2026
1,569
1,553
–6,054
–4,501

2027
1,629
1,612
–6,580
–4,968

2028

10-year
total

1,690 14,630
1,672 14,159
–7,422 –44,051
–5,750 –29,892

Health Care Fraud and Abuse Control Program:
Discretionary Costs1 ������������������������������������������������������������������
454
475
496
515
534
555
576
598
620
644
5,467
Mandatory Savings3 �������������������������������������������������������������������
–910
–975 –1,041 –1,106 –1,146 –1,191 –1,236 –1,284 –1,331 –1,382 –11,602
Net Savings �������������������������������������������������������������������������
–456
–500
–545
–591
–612
–636
–660
–686
–711
–738 –6,135
1 The discretionary costs are equal to the outlays associated with the budget authority levels authorized in BBEDCA through 2021; the costs for each of 2022 through 2028 are equal to
the outlays associated with the budget authority levels inflated from the 2021 level, using the 2019 Budget assumptions. The levels in baseline are equal to the 2019 Budget policy. The
mandatory savings from the cap adjustment funding are included in the baselines for Social Security, Medicare, and Medicaid programs.
2 This is based on estimates of savings from the Office of the Chief Actuary at SSA and the Office of the Actuary at Centers for Medicare and Medicaid Services.
3 These savings are based on estimates from the HHS Office of the Actuary for ROI from program integrity activities.

110

ANALYTICAL PERSPECTIVES

Table 10–2. PROPOSED PROGRAM INTEGRITY CAP ADJUSTMENT FOR THE INTERNAL REVENUE SERVICE (IRS)
(Budget authority/outlays/receipts in millions of dollars)
2019
Proposed Adjustment Pursuant to the BBEDCA, as amended:
Enforcement Base (budget authority) ����������������������������������������
Cap Adjustment:
Budget Authority ������������������������������������������������������������������
Outlays ��������������������������������������������������������������������������������

2020

2021

2022

2023

2024

2025

2026

2027

2028

10-year
total

8,784

8,874

8,966

9,058

9,151

9,246

9,341

9,437

9,534

9,632

92,023

362
320

749
693

1,098
1,040

1,450
1,386

1,806
1,737

1,893
1,850

1,895
1,865

1,904
1,875

1,912
1,885

1,921
1,893

14,990
14,544

Receipt Increases from Discretionary Program Integrity Base
Funding and Cap Adjustments: 1
Enforcement Base 2 ������������������������������������������������������������������� –57,000 –57,000 –57,000 –57,000 –57,000 –57,000 –57,000 –57,000 –57,000 –57,000 –570,000
Cap Adjustment 3 �����������������������������������������������������������������������
–152
–787 –1,825 –3,033 –4,330 –5,554 –6,416 –6,931 –7,270 –7,505 –43,803
Net Savings from Proposed IRS Cap Adjustment: 1 �����������������
168
–94
–785 –1,647 –2,593 –3,704 –4,551 –5,056 –5,385 –5,612 –29,259
1 Savings for IRS are revenue increases rather than spending reductions. They are shown as negatives for presentation and netting against outlays.
2 No official estimate for FY 2019 enforcement revenue has been produced, so this figure is an approximation and included only for illustrative purposes.
3 The IRS cap adjustment funds increases for existing enforcement initiatives and activities and new initiatives.  The IRS enforcement program helps maintain the more than $3 trillion
in taxes paid each year without direct enforcement measures.  The cost increases will help maintain the base revenue while generating additional revenue through targeted program
investments. The activities and new initiatives funded out of the cap adjustment will yield more than $43.8 billion in savings over ten years.  Aside from direct enforcement revenue, the
deterrence impact of these activities suggests the potential for even greater savings.

Proposed Adjustment Pursuant to BBEDCA,
Internal Revenue Service (IRS) Program Integrity.—
The Budget proposes to establish and fund a new
adjustment to the discretionary caps for program integrity activities related to IRS program integrity operations
starting in 2019, as shown in Table 10-2. The IRS base
appropriation funds current tax administration activities,
including all tax enforcement and compliance program
activities, in the Enforcement and Operations Support
accounts. The additional $362 million cap adjustment in
2019 funds new and continuing investments in expanding and improving the effectiveness and efficiency of the
IRS’s tax enforcement program. The activities are estimated to generate $44 billion in additional revenue over
10 years and cost approximately $15 billion resulting in
an estimated net savings of $29 billion. Once the new enforcement staff are trained and become fully operational
these initiatives are expected to generate roughly $4 in
additional revenue for every $1 in IRS expenses. Notably,
the ROI is likely understated because it only includes
amounts received; it does not reflect the effect enhanced
enforcement has on deterring noncompliance. This indirect deterrence helps to ensure the continued payment of
over $3 trillion in taxes paid each year without direct enforcement measures.
Mandatory Program Integrity Initiatives.—The
mandatory and receipt savings from other program integrity initiatives that are included in the 2019 Budget,
beyond the expansion in resources resulting from the
increases in administrative funding discussed above are
shown in table 10-3. These savings total almost $158.4
billion over 10 years. These mandatory proposals to reduce improper payments reflect the importance of these
issues to the Administration. Through these and other
initiatives outlined in the Budget, the Administration
can improve management efforts across the Federal
Government.

Unemployment Insurance Program Integrity
Package.—The Budget includes proposals aimed at improving integrity in the Unemployment Insurance (UI)
program. The proposals would result in $49 million in
PAYGO savings over 10 years, and would result in more
than $1.8 billion in non-PAYGO savings, including an estimated $709 million reduction in State unemployment
taxes, which would reduce revenues from State accounts
within the Unemployment Insurance Fund. Included in
this package are proposals to: allow for data disclosure
to contractors for the Treasury Offset Program; expand
State use of the Separation Information Data Exchange
System (SIDES), which already improves program integrity by allowing States and employers to exchange
information on reasons for a claimant’s separation from
employment and thereby helping States to determine UI
eligibility; mandate the use of the National Directory of
New Hires to conduct cross-matches for program integrity purposes; allow the Secretary to set corrective action
measures for poor State performance; require States
to cross-match claimants against the Prisoner Update
Processing System (PUPS), which is currently used by
some States; and allow States to retain five percent of
overpayment and tax investigation recoveries to fund program integrity activities.
Reemployment
Services
and
Eligibility
Assessments (RESEA).—The Budget also includes a
mandatory proposal to fund RESEA for one-half of all UI
claimants profiled as most likely to exhaust benefits. The
related Reemployment and Eligibility Assessment initiative was begun in 2005 to finance in-person interviews at
American Job Centers (also known as “One-Stop Career
Centers”), to assess UI beneficiaries’ need for job finding services and their continued eligibility for benefits.
Research, including a random-assignment evaluation,
shows that a combination of eligibility reviews and reemployment services reduces the time on UI, increases
earnings, and reduces improper payments to claimants

111

10. Budget Process

Table 10–3. MANDATORY AND RECEIPT SAVINGS FROM OTHER PROGRAM INTEGRITY INITIATIVES
(Deficit increases (+) or decreases (-) in millions of dollars)
2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

10-year
total

Department of Health and Human Services:
Cut Waste, Fraud, and Abuse in Medicare, Medicaid, and the Children’s Health
Insurance Program ����������������������������������������������������������������������������������������

–42

–62

–79

–79

–99

–89

–100

–110

–120

–135

–915

Department of Labor:
Unemployment Insurance Program Integrity Package 1 �������������������������������������
PAYGO effects ������������������������������������������������������������������������������������������������
Non-PAYGO effects ����������������������������������������������������������������������������������������

–83
–11
–72

–188
–14
–174

–211
–6
–205

–211
–6
–205

–174
–3
–171

–195
–3
–192

–181
–2
–179

–229
–3
–226

–194
–4
–190

–216
3
–219

–1,882
–49
–1,833

Reemployment Services and Eligibility Assessments 1 ��������������������������������������
PAYGO effects ������������������������������������������������������������������������������������������������
Non-PAYGO effects ����������������������������������������������������������������������������������������

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

–73
232
–305

–465
241
–706

–440
251
–691

–417
260
–677

–445
270
–715

–413
280
–693

–346
289
–635

–413
299
–712

–277
310
–587

–3,289
2,432
–5,721

Department of the Treasury:
Increase oversight of paid tax return preparers 1 ������������������������������������������������
Provide more flexible authority for the IRS to address correctable errors 1 ��������

–22
–42

–31
–63

–36
–65

–39
–66

–43
–69

–47
–70

–52
–73

–57
–75

–63
–76

–67
–79

–457
–678

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

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

.........
–1

–1
–4

–1
–11

–1
–17

–1
–22

–1
–31

.........
–35

–1
–42

–6
–163

.........

.........

.........

–1

–2

–2

–3

–3

–4

–5

–20

–26
–11

–40
–72

–50
–91

–61
–102

–62
–124

–62
–148

–70
–167

–73
–219

–77
–233

–83
–231

–604
–1,398

–1
.........

–2
–347

–2
–86

–4
–68

–4
–50

–5
–29

–6
–18

–7
–6

–7
6

–7
19

–45
–579

18

28

24

–441 –1,058 –1,505 –1,618 –1,534 –1,442 –1,332

–8,860

.........
–20
–26
6

.........
–433
–387
–46

.........
–206
–137
–69

......... ......... ......... ......... ......... ......... .........
–682 –1,312 –1,769 –1,905 –1,874 –1,792 –1,682
–133
–123
–108
–110
–110
–106
–106
–549 –1,189 –1,661 –1,795 –1,764 –1,686 –1,576

.........
–11,675
–1,346
–10,329

Exclude SSA debts from discharge in bankruptcy ���������������������������������������������
PAYGO effects ������������������������������������������������������������������������������������������������
Non-PAYGO effects ����������������������������������������������������������������������������������������

–7
.........
–7

–15
–1
–14

–21
–2
–19

Government-wide:
Reduce Improper Payments Government-wide (non-PAYGO) ���������������������������

.........

Social Security Administration (SSA):
Preventing Improper Payments:
Hold Fraud Facilitators Liable for Overpayments (non-PAYGO) ���������������������
Government Wide Use of CBP Entry/Exit Data to Prevent Improper Payment ����
Government Wide Use of CBP Entry/Exit Data to Prevent Improper Payment
(non-PAYGO) ���������������������������������������������������������������������������������������������
Allow SSA to Use Commercial Databases to Verify Real Property Data in
the Supplemental Security Income (SSI) Program ������������������������������������
Increase the Overpayment Collection Threshold for OASDI (non-PAYGO) ����
Authorize SSA to Use All Collection Tools to Recover Funds in Certain
Scenarios (non-PAYGO) ����������������������������������������������������������������������������
Simplify the SSI ����������������������������������������������������������������������������������������������
Improve Collection of Pension Information from States and Localities (nonPAYGO) �����������������������������������������������������������������������������������������������������
Additional Debt Collection Authority for Civil and Monetary Penalties and
Assessments ���������������������������������������������������������������������������������������������
Total SSA, Preventing Improper Payment Effects (PAYGO plus non-PAYGO) �������
Subtotal, PAYGO effects ���������������������������������������������������������������������������������
Subtotal, Non-PAYGO effects �������������������������������������������������������������������������

–25
–2
–23

–30
–3
–27

–32
–3
–29

–34
–3
–31

–35
–3
–32

–37
–4
–33

–39
–3
–36

–275
–24
–251

–719 –1,482 –2,383 –4,288 –4,549 –9,652 –20,480 –38,024 –57,633 –139,210

Total, Mandatory and Receipt Savings �����������������������������������������������������������
–216 –1,584 –2,565 –3,925 –6,432 –7,196 –12,410 –23,206 –40,719 –60,128 –158,381
PAYGO Savings ����������������������������������������������������������������������������������������������
–143
–326
–84
–74
–80
–50
–60
–69
–74
–77
–458
Non-PAYGO Savings ��������������������������������������������������������������������������������������
–73 –1,258 –2,481 –3,851 –6,352 –7,146 –12,350 –23,137 –40,645 –60,051 –157,344
1 The estimate for this proposal includes effects on receipts in addition to changes in outlays; the net effect shown is a decrease in the deficit. Receipt effects by proposal can be seen
in table S-6, Mandatory and Receipt Proposals, in the main 2019 Budget volume.

who are not eligible for benefits. Based on this research,
the Budget proposes to expand funding for the RESEA
initiative to allow States to conduct robust reemployment
services along with RESEAs. These reemployment services may include the development of reemployment and
work search plans, provision of skills assessments, career
counseling, job matching and referrals, and referrals to
training as appropriate.
The Budget proposal includes $2.4 billion in PAYGO
spending for States to provide RESEA services to focus on

UI claimants identified as most likely to exhaust their UI
benefits and on newly separated veterans claiming unemployment compensation for ex-service members (UCX),
resulting in net non-PAYGO deficit reduction of $5.7 billion. These savings consist of reductions in UI benefit
payments of an estimated $7.3 billion, as well as a net
reduction in business taxes of $1.4 billion. In total, this
proposal is estimated to reduce the deficit by $3.3 billion
over 10 years.

112

ANALYTICAL PERSPECTIVES

Because most unemployment claims are now filed by
telephone or online, in-person assessments conducted in
the Centers can help determine the continued eligibility
for benefits and the adequacy of work search, verify the
identity of beneficiaries where there is suspicion of possible identity theft, and provide a referral to reemployment
assistance for those who need additional help. The benefit savings from this initiative are short-term because the
maximum UI benefit period is limited, typically 26 weeks
for regular State UI programs.
Preventing Improper Payments in Social
Security.—Overall, the Budget proposes legislation that
would avert close to $11.68 billion in improper payments
in Social Security over 10 years. While much of this savings is considered off-budget and would be non-PAYGO,
about $1.35 billion from various proposals would be
PAYGO savings.
• Hold Fraud Facilitators Liable for Overpayments. The Budget proposes to hold fraud facilitators liable for overpayments by allowing SSA to
recover the overpayment from a third party if the
third party was responsible for making fraudulent
statements or providing false evidence that allowed
the beneficiary to receive payments that should not
have been paid. This proposal would result in an estimated $6 million in savings over 10 years.

• Government-wide

Use of Custom and Border
Protection (CBP) Entry/Exit Data to Prevent
Improper Payments. The Budget proposes the use
of CBP Entry/Exit data to prevent improper OASDI
and Supplemental Security Insurance (SSI) payments. Generally, U.S. citizens can receive benefits
regardless of residence. Non-citizens may be subject
to additional residence requirements depending on
the country of residence and benefit type. However,
an SSI beneficiary who is outside the United States
for 30 consecutive days is not eligible for benefits for
that month. These data have the potential to be useful across the Government to prevent improper payments. This proposal would result in an estimated
$183 million in savings over 10 years.

• Allow

SSA to Use Commercial Databases to
Verify Real Property Data in the SSI Program.
The Budget proposes to reduce improper payments
and lessen recipients’ reporting burden by authorizing SSA to use private commercial databases to
check for ownership of real property (i.e. land and
buildings), which could affect SSI eligibility. Consent
to allow SSA to access these databases would be a
condition of benefit receipt for new beneficiaries and
current beneficiaries who complete a determination.
All other current due process and appeal rights
would be preserved. This proposal would result in
savings of $604 million over 10 years.

• Increase

the Overpayment Collection Threshold for OASDI. The Budget would change the minimum monthly withholding amount for recovery of
Social Security benefit overpayments to reflect the

increase in the average monthly benefit since the
Agency established the current minimum of $10 in
1960. By changing this amount from $10 to 10%
of the monthly benefit payable, SSA would recover
overpayments more quickly and better fulfill its
stewardship obligations to the combined Social Security Trust Funds. The SSI program already utilizes the 10% rule. Debtors could still pay less if the
negotiated amount would allow for repayment of the
debt in 36 months. If the beneficiary cannot afford
to have his or her full benefit payment withheld because he or she cannot meet ordinary and necessary
living expenses, the beneficiary may request partial
withholding. To determine a proper partial withholding amount, SSA negotiates (as well as re-negotiates
at the overpaid beneficiary’s request) a partial withholding rate. This proposal would result in savings
of almost $1.4 billion over 10 years.

• Authorize SSA to Use All Collection Tools to Re-

cover Funds in Certain Scenarios. The Budget
also proposes to allow SSA a broader range of collection tools when someone improperly receives a
benefit after the beneficiary has died. Currently, if a
spouse cashes a benefit payment (or does not return
a directly deposited benefit) for an individual who
has died and the spouse is also not receiving benefits on that individual’s record, SSA has more limited collection tools available than would be the case
if the spouse also receives benefits on the deceased
individual’s earning record. The Budget proposal
would end this disparate treatment of similar types
of improper payments and results in an estimated
$45 million in savings over 10 years.

• SSI Simplification. The Budget proposes changes

to simplify the SSI program by incentivizing support
from recipients’ family and friends, reducing SSA’s
administrative burden, and streamlining requirements for applicants. SSI benefits are reduced by the
amount of food and shelter, or in-kind support and
maintenance, a beneficiary receives. The policy is
burdensome to administer and is a leading source of
SSI improper payments. The Budget proposes to replace the complex calculation of in-kind support and
maintenance with a flat rate reduction for adults living with other adults to capture economies of scale.
The Budget also proposes to eliminate dedicated accounts for past due benefits and to eliminate the administratively burdensome consideration whether a
couple is holding themselves out as married. The
proposal saves $579 million over 10 years.

• Improve

Collection of Pension Information
from States and Localities. The Budget proposes
a data collection approach designed to provide seed
money to the States for them to develop systems
that will enable them to report pension payment information to SSA. The proposal would improve reporting for non-covered pensions by including up to
$70 million for administrative expenses, $50 million
of which would be available to the States, to develop

10. Budget Process

a mechanism so that the Social Security Administration can enforce the current law offsets for the
Windfall Elimination Provision and Government
Pension Offset, which are a major source of improper
payments. The proposal will save $8.86 billion over
10 years.

• Additional

Debt Collection Authority for SSA
Civil Monetary Penalties and Assessments. This
proposal would assist SSA with ensuring the integrity of its programs and increase SSA recoveries by
establishing statutory authority for the SSA to use
the same debt collection tools available for recovery
of delinquent overpayments toward recovery of delinquent CMP and assessments.

Cut Waste, Fraud, and Abuse in Medicare,
Medicaid, and the Children’s Health Insurance
Program.—The Budget includes a robust package of
Medicare and Medicaid program integrity proposals to help
prevent fraud and abuse before they occur; detect fraud
and abuse as early as possible; provide greater flexibility
to the Secretary of Health and Human Services to implement program integrity activities that allow for efficient
use of resources and achieve high return-on-investment;
and promote integrity in Federal-State financing. For example, the Budget proposes to strengthen tools available
to States and Territories that ensure providers who intend to engage in fraudulent or abusive activities do not
enroll in Medicare, Medicaid, or the Children’s Health
Insurance Program. The Budget also includes several
proposals aimed at strengthening the authorities and
tools that CMS has to ensure that the Medicare program
only pays those providers and suppliers who are eligible
and who furnish items and services that are medically
necessary to the care of beneficiaries. The package of program integrity proposals will help prevent inappropriate
payments, eliminate wasteful Federal and State spending, protect beneficiaries, and reduce time-consuming and
expensive “pay and chase” activities. Together, the CMS
program integrity authority would net approximately
$915 million in savings over 10 years. Additional information on the Medicare and Medicaid program integrity
proposals are found in the Major Savings and Reforms
volume.
Improving the Prevention of Improper Payments.—
The Budget prioritizes focusing on improper payments
that result in a monetary loss to the government.
Specifically, by 2028 the Budget proposes to increase the
prevention of improper payments through a series of
actions to improve payment accuracy and financial performance over the budget horizon. Overall, savings are
estimated to be approximately $139 billion over 10 years.
Other Program Integrity Initiatives.
Data Analytics to Improve Payment Accuracy.—At
the core of Government-wide data analytics to improve
payment accuracy is the Treasury Do Not Pay Business
Center which includes a system that provides agencies a
single-point of entry to access data and matching services

113
to help detect, prevent, and recover improper payments
during the award or payment lifecycle. Additional examples of agencies using data to improve payment accuracy
include the Centers for Medicare & Medicaid Services’
(CMS) Fraud Prevention System (FPS), a state-of-theart predictive analytics technology used to identify and
prevent fraud in the program; the Department of Defense
Business Activity Monitoring tool; and the Department of
Labor’s Unemployment Insurance (UI) Integrity Center
for Excellence, a Federal-State partnership which facilitates the development and implementation of integrity
tools that help detect and reduce improper payments in
state run programs.
The effective use of data analytics has provided insight
into methods of reducing costs and improving performance and decision-making capabilities. The Treasury
Do Not Pay Business Center has 56 agencies performing
matches against several databases (e.g., Death Master
File, System for Award Management, Treasury Debt
Check). In 2017, agencies screened over $1.3 trillion payments through the Do Not Pay Business Center using
their payment integration function. While the vast majority of these payments were determined to be proper,
the Office of Personnel Management alone, for example,
stopped over $25 million in improper payments using the
system. In addition to the Treasury Do Not Pay Business
Center, the agency-specific integrity centers have demonstrated solid returns. Currently, SSA has 23 computer
matching agreements that generate over $7 billion in annual savings. During 2016, the Department of Health and
Human Services took administrative action against 1,044
providers and suppliers as a result of the CMS FPS, resulting in an estimated $527 million in identified savings.
In 2017, DOD’s BAM tool prevented $1.4 billion in improper payments in the Department commercial payment
systems.
The Administration is continuing to pursue opportunities to improve information sharing by developing or
enhancing policy guidance, ensuring privacy protection,
and developing legislative proposals to leverage available information and technology in determining benefit
eligibility and other opportunities to prevent improper
payments.
Amend the Computer Matching Privacy Protection
Act for the Department of the Treasury.—Agencies
can experience significant bureaucratic challenges
when working to implement certain components of the
Computer Matching Act. For example, the process of signing an interagency computer matching agreement can
take as long as 14 months as multiple levels of leadership sign the agreement. These issues are costly both in
terms of improper payments that go undetected as well as
the staff time that is needed to resolve them. The Budget
proposes legislative changes to exempt the Do Not Pay
Business Center at the Department of Treasury from
components of the Computer Matching Act for activities
designed to help agencies identify, prevent, and reduce
improper payments. This proposal will protect citizen
privacy while also saving administrative costs and help

114
agencies to more readily leverage data-centric internal
controls.
Exclude SSA Debts from Discharge in
Bankruptcy.—Debts due to an overpayment of Social
Security benefits are generally dischargeable in bankruptcy. The Budget includes a proposal to exclude such
debts from discharge in bankruptcy, except when it would
result in an undue hardship. This proposal would help
ensure program integrity by increasing the amount of
overpayments SSA recovers and would save $275 million
over the 2019 through 2028 window.
Increase Oversight of Paid Tax Preparers.—This
proposal would give the IRS the statutory authority to increase its oversight of paid tax return preparers. As more
taxpayers use paid preparers, the quality of the preparers has a dramatic impact on whether taxpayers follow
tax laws. Increasing the quality of paid preparers lessens
the need for after-the-fact enforcement of tax laws and
increases the amount of revenue that the IRS can collect.
This proposal saves $457 million over the 2019 through
2028 period.
Provide the IRS with Greater Flexibility to
Address Correctable Errors.—The Budget proposes
to give the IRS expanded authority to correct errors on
taxpayer returns. Current law only allows the IRS to correct errors on returns in certain limited instances, such
as basic math errors or the failure to include the appropriate Social Security Number or Taxpayer Identification
Number. This proposal would expand the instances
in which the IRS could correct a taxpayer’s return. For
example, with this new authority, the IRS could deny a
tax credit that a taxpayer had claimed on a tax return if
the taxpayer did not include the required paperwork, or
where government databases showed that the taxpayerprovided information was incorrect. This proposal would
save $678 million over the 2019 through 2028 window.
Develop Accurate Cost Estimates.—OMB works
with Federal agencies and the Congressional Budget
Office (CBO) to develop PAYGO estimates for mandatory
programs. OMB has issued guidance to agencies for scoring legislation under the statutory PAYGO Act of 2010.
This guidance states that agencies must score the effects
of program legislation on other programs if the programs
are linked by statute. (For example, effects on Medicaid
spending that are due to statutory linkages in eligibility for Supplemental Security Income benefits must be
scored.) In addition, even when programs are not linked
by statute, agencies may score effects on other programs
if those effects are significant and well documented.
Specifically, the guidance states: “Under certain circumstances, estimates may also include effects in programs
not linked by statute where such effects are significant
and well documented. For example, such effects may be
estimated where rigorous experimental research or past
program experience has established a high probability that changes in eligibility or terms of one program
will have significant effects on participation in another
program.”

ANALYTICAL PERSPECTIVES

Disaster Relief Funding
Section 251(b)(2)(D) of BBEDCA includes a provision
to adjust the discretionary caps for appropriations that
the Congress designates in statute as provided for disaster relief. The law allows for a fiscal year’s discretionary
cap to be increased by no more than the average funding
provided for disaster relief over the previous 10 years, excluding the highest and lowest years. The ceiling for each
year’s adjustment (as determined by the 10-year average) is then increased by the unused amount of the prior
year’s ceiling (excluding the portion of the prior year’s
ceiling that was itself due to any unused amount from the
year before). Disaster relief is defined as activities carried out pursuant to a determination under section 102(2)
of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5122(2)) for major disasters declared by the President.
As required by law, OMB included in its Sequestration
Update Report for 2018 a preview estimate of the 2018
adjustment for disaster relief. The ceiling for the disaster relief adjustment in 2018 was calculated to be
$7,366 million. At the time the Budget was prepared, the
Government was operating under a continuing resolution
set in the Continuing Appropriations Act, 2018 (division
D of Public Law 115-56, as amended by division A of
Public Laws 115-90 and 115-96) (the “CR”). The CR had
provided for 2018 a continuing appropriation of $6,713
million for the Federal Emergency Management Agency’s
Disaster Relief Fund (DRF). If final 2018 appropriations
affirm this allocation with a final appropriation of $6,713
million for the DRF, this would fall $653 million below the
ceiling available in 2018. Table 10-4 shows the statutory
cap and the actual appropriations provided from 2012
through the current budget year, 2018.
OMB must include in its Sequestration Update Report
for 2019 a preview estimate of the ceiling on the adjustment for disaster relief funding for 2019. This estimate
will contain an average funding calculation that incorporates three years (2009 through 2011) using the definition
of disaster relief from OMB’s September 1, 2011 report
and seven years using the funding the Congress designated in 2012 through 2018 for disaster relief pursuant
to BBEDCA excluding the highest and lowest years. As
noted above, the 2018 appropriation may be $653 million
below the ceiling for 2018; therefore, this amount would be
carried forward from 2018 into the 2019 preview estimate
that will be included in OMB’s August 2018 Sequestration
Update Report for Fiscal Year 2019. Currently, based on
continuing appropriations, OMB estimates the total adjustment available for disaster funding for 2019 at $7,386
million. Any revisions necessary to account for final 2018
appropriations will be included in the 2019 Sequestration
Update Report.
At this time, the Administration is requesting $6,652
million in funding for FEMA’s DRF in 2019 to cover the
costs of Presidentially declared major disasters, including identified costs for previously declared catastrophic
events (defined by FEMA as events with expected costs
that total more than $500 million) and the predictable an-

115

10. Budget Process

Table 10–4. DISASTER RELIEF CAP ADJUSTMENT - HISTORICAL DATA AND CURRENT LAW
(Budget authority in millions of dollars)
2012

2013

2014

2015

2016

2017

2018

Total Possible Cap Adjustment (statutory cap) ����������������������������������������

11,252

11,779

12,143

18,430

14,125

8,129

7,366

Annual Appropriations* ������������������������������������������������������������������������������

10,453

11,779

5,626

6,529

7,643

8,129

6,713

Difference �����������������������������������������������������������������������������������������������������
*2018 amount under a Continuing Resolution

799

..........

6,517

11,901

6,482

.........

653

nual cost of non-catastrophic events expected to obligate
in 2019. For this program, the Budget requests funding
for both known needs based on expected costs of prior declared disasters and the typical average expenditures in
these programs. This is consistent with past practice of
requesting and funding these as part of regular appropriations bills. Also consistent with past practice, the 2019
request level does not seek to pre-fund anticipated needs
in other programs arising out of disasters that have yet
to occur, nor does the Budget seek funding for potential
catastrophic needs. As additional information about the
need to fund prior or future disasters becomes available,
additional requests, in the form of either 2018 supplemental appropriations (designated as either disaster
relief or emergency requirements pursuant to BBEDCA),
or amendments to the Budget, may be transmitted.
Under the principles outlined above, the Administration
does not have adequate information about known or future requirements necessary to estimate the total amount
that will be requested in future years as disaster relief.
Accordingly, the Budget does not explicitly request to use
the BBEDCA disaster designation in any year after the
budget year. Instead, a placeholder for disaster relief is
included in each of the outyears that is equal to the current 2019 request. This funding level does not reflect a
specific request but a placeholder amount that, along with
other outyear appropriations levels, will be decided on an
annual basis as part of the normal budget development
process. However, as is discussed below, notwithstanding
this placeholder, the Administration does propose to address the declining cap under which disaster relief funds
are requested.
Declining Disaster Relief Cap Adjustment
As is discussed under the Disaster Relief Funding section above, the Budget Control Act of 2011 established the
formula for calculating an annual allowance up to which
the discretionary spending limits could be adjusted for
disaster-related appropriations, commonly discussed as
the disaster cap adjustment. Since then, each Budget has
requested Congress provide resources adequate to fund
the budget year’s: (1) anticipated Federal obligations for
previously declared major disasters, (2) estimated obligations for non-catastrophic disasters, and (3) a limited
contingency amount in recognition of the risk of an aboveaverage year of disaster activity. During the same period,
the allowable adjustment for disaster relief appropriations has declined to levels that approximate the Federal
disaster assistance budget request. The annual disaster
cap adjustment will soon be insufficient to cover the pro-

jected costs of future major disasters. The decline in the
cap adjustment results from relatively modest annual disaster appropriations since 2011 coupled with high-cost
response and recovery efforts such as Hurricane Katrina
aging out of the rolling 10-year look-back window used in
the cap adjustment formula. The extraordinary levels of
funding provided for the catastrophic Atlantic hurricanes
in 2017 for example, do not contribute to an increase in
the cap adjustment under the formula. Inflation, urbanization, and other factors are expected to contribute to
increasing future response and recovery costs.
The Administration recommends amending the disaster cap adjustment formula to improve the annual
allowance by pegging disaster spending at levels that better reflect the unpredictable nature of disaster response
and recovery costs. These steps will ensure that the
Federal Government can mount a quick and sustained
response to catastrophic disasters while more extensive
deliberations over long-term recovery needs take place,
an effort that would be frustrated if the allowance falls
below projected costs as expected. Two changes will improve the allowance formula in future years: (1) adding
all unspent “carryover” balances currently excluded by
the formula to future annual cap adjustments until expended, and (2) adding to future annual cap adjustments
five percent of emergency appropriations provided for
Stafford Act-declared disasters since the creation of the
disaster cap formula.
Maintaining unused “carryover” balances would ensure that the annual allowance accurately reflects the
unpredictable nature of disasters. Since the pattern of
disaster activity is erratic, several years of disaster relief
appropriations that were below the calculated allowance have resulted in a drop in future years’ projected
cap adjustments, even without a reduction in the average magnitude of expected disaster costs. As a result, the
funding that will likely be required for future catastrophic disasters will exceed the amounts permitted as a cap
adjustment under the current law calculation.
Incorporating five percent of the total spending from
emergency supplemental appropriations provided above
the disaster cap would further improve the accuracy of
the formula by providing a countercyclical stabilizer
for the annual disaster cap adjustment. Emergency
supplemental appropriations are provided for Stafford
Act-declared disasters when the disaster cap adjustment
is not sufficient to address the response and recovery
needs of a catastrophic disaster. Even though these emergency supplemental appropriations are necessary to
address disaster response and recovery needs, under cur-

116

ANALYTICAL PERSPECTIVES

rent law they are excluded from the current disaster cap
adjustment formula. By adjusting the disaster cap formula to include five percent of emergency supplemental
appropriations, the result would better reflect the likely
requirements for future disaster response and recovery.

proposed cap adjustments, will be decided on an annual
basis as part of the normal budget process.
Limits on Changes in Mandatory Spending in
Appropriations Acts (CHIMPs)

Proposed Adjustments to the Discretionary
Spending Limits for Wildfire Suppression
Operations at the Departments of
Agriculture and the Interior

The discretionary spending caps in place since the
enactment of the BCA in 2011 have been circumvented annually in appropriations bills through the use of
changes in mandatory programs, or CHIMPs, that have
no net outlay savings to offset increases in discretionary
spending.
There can be programmatic reasons to make changes
to mandatory programs on annual basis in the annual appropriations bills. However, many enacted CHIMPs do not
result in actual spending reductions. In some cases, the
budget authority reduced in one year may become available again the following year, allowing the same reduction
to be taken year after year. In other cases, the reduction
comes from a program that never would have spent its
funding anyway. In both of these cases, under current
scoring rules, reductions in budget authority from such
CHIMPs can be used to offset appropriations in other
programs, which results in an overall increase in Federal
spending. In such cases, CHIMPs are used as a tool to
work around the constraints imposed by the discretionary
budget enforcement caps.
The Administration supports limiting and ultimately
phasing out the use of CHIMPs with no outlay savings.
Congress has started to reduce the reliance on such
CHIMPs by setting decreasing limits in the budget resolution of $17.0 billion in 2018, $15.0 billion in 2019, and
$15.0 billion in 2020. The Budget supports these efforts
and limits the use of CHIMPs with no outlay savings to
$13.3 billion in 2019.

Wildfires naturally occur on public lands throughout
the country. The cost of fighting wildfires has increased
due to landscape conditions resulting from drought, pest
and disease damage, overgrown forests, expanding residential and commercial development near the borders of
public lands, and program management decisions. When
these costs exceed the funds appropriated, the Federal
Government covers the shortfall through transfers from
other land management programs. For example, in 2017,
Forest Service wildfire suppression spending reached a
record $2.4 billion, necessitating transfers of $527 million
from other non-fire programs. Historically, these transfers
have been repaid in subsequent appropriations; however,
“fire borrowing” impedes the missions of land management agencies to reduce the risk of catastrophic fire and
restore and maintain healthy functioning ecosystems.
To resolve concerns about the sufficiency of funding wildfire suppression, the Budget provides funding
of $1,553 million under the 2019 discretionary cap to
responsibly fund 100 percent of the rolling 10-year average cost for these wildfire suppression activities in the
Departments of Agriculture and the Interior within the
discretionary budget caps. Similar to how unanticipated
funding needs for other natural disasters are addressed,
the Budget also proposes to amend BBEDCA and to establish a separate annual cap adjustment for wildfire
suppression operations. The Budget requests $1,519
million in additional appropriations from this cap adjustment in 2019 - the full amount that would be authorized
under the Administration’s proposal - to ensure that
adequate resources are available to fight wildland fires,
protect communities, and safeguard human life during
the most severe wildland fire season. Table 10-5 shows
the Administrations proposed statutory cap adjustment
of $2,068 million, phased in over nine years. For the years
after 2019, the Administration does not have sufficient
information about future wildfire suppression needs and,
therefore, includes a placeholder for wildfire suppression
in each of the outyears that is equal to the current 2019
request. Actual funding levels, up to but not exceeding the

Limit on Discretionary Advance Appropriations
An advance appropriation first becomes available for
obligation one or more fiscal years beyond the year for
which the appropriations act is passed. Budget authority is recorded in the year the funds become available for
obligation, not in the year the appropriation is enacted.
There are legitimate policy reasons to use advance
appropriations to fund programs. However, advance appropriations can also be used in situations that lack a
programmatic justification, as a gimmick to make room
for expanded funding within the discretionary spending limits on budget authority for a given year under
BBEDCA. For example, some education grants are for-

Table 10–5. PROPOSED WILDFIRE SUPPRESSION OPERATIONS FUND
UNITED STATES DEPARTMENTS OF AGRICULTURE AND THE INTERIOR
(Budget authority in millions of dollars)
2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

10-year
total

Proposed Adjustment Pursuant to the BBEDCA, as amended:
Authorized level, proposed ���������������������������������������������������������������������������

1,519

1,603

1,683

1,759

1,831

1,898

1,960

2,017

2,068

2,068

18,406

117

10. Budget Process

ward funded (available beginning July 1 of the fiscal year)
to provide certainty of funding for an entire school year,
since school years straddle Federal fiscal years. This funding is recorded in the budget year because the funding is
first legally available in that fiscal year. However, $22.6
billion of this funding is advance appropriated (available
beginning three months later, on October 1) rather than
forward funded. Prior Congresses increased advance
appropriations and decreased the amounts of forward
funding as a gimmick to free up room in the budget year
without affecting the total amount available for a coming
school year. This gimmick works because the advance appropriation is not recorded in the budget year but rather
the following fiscal year. However, it works only in the
year in which funds switch from forward funding to advance appropriations; that is, it works only in years in
which the amounts of advance appropriations for such
“straddle” programs are increased.
To curtail this gimmick, which allows over-budget funding in the budget year and exerts pressure for increased
funding in future years by committing upfront a portion
of the total budget authority limits under the discretionary caps in BBEDCA in those years, congressional budget
resolutions since 2001 have set limits on the amount of
advance appropriations. When the congressional limit
equals the amount that had been advance appropriated in
the most recent appropriations bill, there is no additional
room to switch forward funding to advance appropriations,
and so no room for this particular gimmick to operate in
that year’s budget.
The Budget includes $27,870 million in advance appropriations for 2020 and freezes them at this level in
subsequent years. In this way, the Budget does not employ
this potential gimmick. Moreover, the Administration
supports limiting advance appropriations to the proposed
level for 2020, below the limits included in sections 4101
and 5104 for the Senate and the House, respectively, of the
Concurrent Resolution on the Budget for Fiscal Year 2018
(H. Con. Res. 71). Those limits apply only to the accounts
explicitly specified in the joint explanatory statement of
managers accompanying H. Con. Res. 71.
In addition, the Administration would allow discretionary advance appropriations for veterans medical
care, as is required by the Veterans Health Care Budget
Reform and Transparency Act (P.L. 111-81). The veterans medical care accounts in the Department of Veterans
Affairs (VA) currently comprise Medical Services, Medical
Support and Compliance, Medical Facilities, and Medical
Community Care. The level of advance appropriations
funding for veterans medical care is largely determined
by the VA’s Enrollee Health Care Projection Model. This
actuarial model projects the funding requirement for over
90 types of health care services, including primary care,
specialty care, and mental health. The remaining funding requirement is estimated based on other models and
assumptions for services such as readjustment counseling
and special activities. VA has included detailed information in its Congressional Budget Justifications about the
overall 2020 veterans medical care funding request.

For a detailed table of accounts that have received discretionary and mandatory advance appropriations since
2017 or for which the Budget requests advance appropriations for 2020 and beyond, please refer to the Advance
Appropriations chapter in the Appendix.
Pell Grants
The Pell Grant program includes features that make
it unlike other discretionary programs including that
Pell Grants are awarded to all applicants who meet income and other eligibility criteria. This section provides
some background on the unique nature of the Pell Grant
program and explains how the Budget accommodates
changes in discretionary costs.
Under current law, the Pell program has several notable features:
• The Pell Grant program acts like an entitlement
program, such as the Supplemental Nutrition Assistance Program or Supplemental Security Income,
in which everyone who meets specific eligibility requirements and applies for the program receives
a benefit. Specifically, Pell Grant costs in a given
year are determined by the maximum award set in
statute, the number of eligible applicants, and the
award for which those applicants are eligible based
on their needs and costs of attendance. The maximum Pell award for the academic year 2017-2018
is $5,920, of which $4,860 was established in discretionary appropriations and the remaining $1,060 in
mandatory funding is provided automatically by the
College Cost Reduction and Access Act (CCRAA), as
amended. The maximum award for 2018-2019 will
be finalized when Congress enacts full year appropriations for 2018.

• The cost of each Pell Grant is funded by discretion-

ary budget authority provided in annual appropriations acts, along with mandatory budget authority
provided not only by the CCRAA, as amended, and
the BCA, but also by amendments to the Higher Education Act of 1965 contained in the 2011 and 2012
appropriations acts. There is no programmatic difference between the mandatory and discretionary
funding.

• If valid applicants are more numerous than expected,
or if these applicants are eligible for higher awards
than anticipated, the Pell Grant program will cost
more than the appropriations provided. If the costs
during one academic year are higher than provided
for in that year’s appropriation, the Department of
Education funds the extra costs with the subsequent
year’s appropriation.1

• To prevent deliberate underfunding of Pell costs, in
2006 the congressional and Executive Branch score-

1      This ability to “borrow” from a subsequent appropriation is unique
to the Pell program. It comes about for two reasons. First, like many
education programs, Pell is “forward-funded”—the budget authority
enacted in the fall of one year is intended for the subsequent academic
year, which begins in the following July. Second, even though the
amount of funding is predicated on the expected cost of Pell during one

118

ANALYTICAL PERSPECTIVES

keepers agreed to a special scorekeeping rule for
Pell. Under this rule, the annual appropriations bill
is charged with the full Congressional Budget Office estimated cost of the Pell Grant program for the
budget year, plus or minus any cumulative shortfalls
or surpluses from prior years. This scorekeeping
rule was adopted by the Congress as §406(b) of the
Concurrent Resolution on the Budget for Fiscal Year
2006 (H. Con. Res. 95, 109th Congress).
Given the nature of the program, it is reasonable to consider Pell Grants an individual entitlement for purposes of
budget analysis and enforcement. The discretionary portion of the award funded in annual appropriations Acts
counts against the discretionary spending caps pursuant
to section 251 of BBEDCA and appropriations allocations
established annually under §302 of the Congressional
Budget Act.
The total cost of Pell Grants can fluctuate from year
to year, even with no change in the maximum Pell Grant
award, because of changes in enrollment, college costs,
and student and family resources. In general, the demand for and costs of the program are countercyclical to
the economy; more people go to school during periods of
higher unemployment, but return to the workforce as the
economy improves. In fact, the program experienced a
spike in enrollment and costs during the most recent recession, reaching a peak of 9.4 million students in 2011.
academic year, the money is made legally available for the full 24-month
period covering the current fiscal year and the subsequent fiscal year.
This means that, if the funding for an academic year proves inadequate,
the following year’s appropriation will legally be available to cover the
funding shortage for the first academic year. The 2019 appropriation,
for instance, will support the 2019-2020 academic year beginning in
July 2019 but will become available in October 2018 and can therefore
help cover any shortages that may arise in funding for the 2018-2019
academic year.

This spike required temporary mandatory or emergency
appropriations to fund the program well above the level
that could have been provided as a practical matter by
the regular discretionary appropriation. Since 2011, enrollment and costs have continued to decline, and the
funding provided has lasted longer than anticipated. In
2018, the Budget proposed and Congress enacted YearRound Pell, which provides a third semester of Pell Grant
support to recipients who have exhausted their eligibility for the award year and wish to enroll in additional
coursework. The 2018 Budget projected that this provision would increase program costs by $1.5 billion in 2018.
Assuming no changes in current policy, the 2019 Budget
baseline expects program costs to stay within available
resources, which include the discretionary appropriation,
budget authority carried forward from the previous year,
and extra mandatory funds, until 2025 (see Table 10-6).
These estimates have changed significantly from year
to year, which illustrates continuing uncertainty about
Pell program costs, and the year in which a shortfall will
reemerge.
The 2019 Budget reflects the Administration’s commitment to ensuring students receive the maximum Pell
Grant for which they are eligible, and to expanding options available to pursuing postsecondary education and
training. First, the Budget provides sufficient resources to
fully fund Pell Grants in the award years covered by the
budget year, and subsequent years, including the funds
needed to continue support of year-round Pell grants.
The Budget provides $22.5 billion in discretionary budget
authority in 2019, the same as the 2017 enacted appropriation. Level-funding Pell in 2019, combined with
available budget authority from the previous year and
mandatory funding provided in previous legislation, provides $8.1 billion more than is needed to fully fund the
program in the 2019-20 award year.

Table 10–6. DISCRETIONARY PELL FUNDING NEEDS
(Dollars in billions)
Discretionary Pell Funding Needs (Baseline)
2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Estimated Program Cost for $4,860 Maximum Award ���
Cumulative Incoming Surplus 1 ��������������������������������������
Mandatory Budget Authority Available ���������������������������
Total Additional Budget Authority Needed ���������������������

24.0
8.2
1.4
14.4

24.3
.........
1.4
22.8

24.6
.........
1.1
23.4

25.0
.........
1.1
23.8

25.4
.........
1.1
24.2

25.7
.........
1.1
24.6

26.2
.........
1.1
25.0

26.6
.........
1.1
25.5

27.0
.........
1.1
25.9

27.4
.........
1.1
26.3

Fund Pell at 2017 Enacted Level �����������������������������������
Surplus/(Funding Gap) from Prior Year �������������������������
Cumulative Surplus/Discretionary Funding Gap (–) ������

22.5

22.5
8.1
7.8

22.5
7.8
6.8

22.5
6.8
5.5

22.5
5.5
3.7

22.5
3.7
1.6

22.5
1.6
–0.9

22.5
–0.9
–3.9

22.5
–3.9
–7.3

22.5
–7.3
–11.2

8.1

Effect of 2019 Budget Policies
Expand Pell to Short-Term Programs ����������������������������
–0.1
–0.1
–0.1
–0.2
–0.2
–0.2
–0.2
–0.2
–0.2
–0.2
Fund Iraq and Afghanistan Service Grants through Pell ����
.........
.........
–*
–*
–*
–*
–*
–*
–*
–*
Cancellation of Unobligated Balances ���������������������������
–1.6
.........
.........
.........
.........
.........
.........
.........
.........
.........
Mandatory Funding Shift 2 ���������������������������������������������
–*
–*
–*
–*
–*
–*
–*
–0.1
–0.1
–0.1
Surplus/Funding Gap from Prior Year ����������������������������
6.4
5.9
4.7
3.2
1.2
–1.2
–3.9
–7.2
–10.8
Cumulative Surplus/(Discretionary Funding Gap) ���������
6.4
5.9
4.7
3.2
1.2
–1.2
–3.9
–7.2
–10.8
–14.9
* Less than $50 million.
1 The 2019 incoming surplus assumes an annualized 2018 appropriation of $22.3 billion, as provided under the Continuing Appropriations Act of 2018.
2 Some budget authority, provided in previous legislation and classified as mandatory, but used to meet discretionary Pell grant program funding needs, will be shifted to instead fund
new costs associated with the mandatory add-on.

10. Budget Process

In light of these additional resources, the Budget proposes a cancellation of $1.6 billion from the unobligated
carryover from 2018. Then, with significant budget authority still available in the program, the Budget also proposes
legislative changes to provide more postsecondary pathways by expanding Pell Grant eligibility to high-quality
short-term training programs. This will help low-income
or out-of-work individuals access training programs that
can equip them with skills to secure well-paying jobs in
high-demand fields more quickly than traditional 2-year
or 4-year degree programs. The Budget also proposes
moving Iraq and Afghanistan Service Grants (IASG) into
the Pell program, which will exempt those awards from
cuts due to sequestration and also streamline the administration of the programs. The expansion of Pell Grants to
short-term programs and the costs of incorporating IASG
increases future discretionary Pell program costs by $1.7
billion over 10 years (see Table 10–6). With the proposed
cancellation and this increase, the Pell program still is
expected to have sufficient discretionary funds until 2024;
a cancellation of unobligated balances such as that proposed in the 2018 Budget could bring this date forward by
one to two years.
Federal Capital Revolving Fund
The structure of the Federal budget and budget enforcement requirements can create hurdles to funding
large-dollar capital investments that are handled differently at the States and local government levels.
Expenditures for capital investment are combined with
operating expenses in the Federal unified budget. Both
kinds of expenditures must compete for limited funding
within the discretionary caps. Large-dollar Federal capital investments can be squeezed out in this competition,
forcing agency managers to turn to operating leases to
meet long-term Federal requirements. These alternatives
are more expensive than ownership over the long-term
because: (1) Treasury can always borrow at lower interest rates; and (2) to avoid triggering scorekeeping and
recording requirements for capital leases, agencies sign
shorter-term consecutive leases of the same space. For
example, the cost of two consecutive 15-year leases for a
building can exceed its fair market value by close to 180
percent. Alternative financing proposals typically run up
against scorekeeping and recording rules that appropriately measure cost on the basis of the full amount of the
Government’s obligations under the contract, which further constrains the ability of agency managers to meet
capital needs.
In contrast, State and local governments separate capital investment from operating expenses. They are able
to evaluate, rank, and finance proposed capital investments in separate capital budgets, which avoids direct
competition between proposed capital acquisitions and
operating expenses. If capital purchases are financed by
borrowing, the associated debt service is an item in the
operating budget. This separation of capital spending
from operating expenses works well at the State and local government levels because of conditions that do not
exist at the Federal level. State and local governments

119
are required to balance their operating budgets, and their
ability to borrow to finance capital spending is subject
to the discipline of private credit markets that impose
higher interest rates for riskier investments. In addition,
State and local governments tend to own capital that they
finance. In contrast, the Federal Government does not
face a balanced budget requirement, and Treasury debt
has historically been considered the safest investment
regardless of the condition of the Federal balance sheet.
Also, the bulk of Federal funding for capital is in the form
of grants to lower levels of Government or to private entities, and it is difficult to see how non-Federally-owned
investment can be included in a capital budget.
To deal with the drawbacks of the current Federal
approach, the Budget proposes: (1) to create a Federal
Capital Revolving Fund (FCRF) to fund large-dollar,
Federally-owned, civilian real property capital projects;
and (2) provide specific budget enforcement rules for the
FCRF that would allow it to function, in effect, like State
and local government capital budgets. This proposal incorporates principles that are central to the success of
capital budgeting at the State and local level -- a limit on
total funding for capital investment, annual decisions on
the allocation of funding for capital projects, and spreading the acquisition cost over 15 years in the discretionary
operating budgets of agencies that purchase the assets.
As part of the overall 2019 Budget infrastructure initiative, the FCRF would be capitalized initially by a $10
billion mandatory appropriation, and scored with anticipated outlays over the 10-year window for the purposes of
pay-as-you-go budget enforcement rules. Balances in the
FCRF would be available for transfer to purchasing agencies to fund large-dollar capital acquisitions to the extent
projects are designated in advance in appropriations Acts
and the agency receives a discretionary appropriation for
the first of a maximum of 15 required annual repayments.
If these two conditions are met, the FCRF would transfer
funds to the purchasing agency to cover the full cost to acquire the capital asset. Annual discretionary repayments
by purchasing agencies would replenish the FCRF and
would become available to fund additional capital projects. Total annual capital purchases would be limited to
the lower of $2 billion or the balance in the FCRF.
The flow of funds for the purchase of an office building
costing $2.0 billion and the proposed scoring are illustrated in Chart 10–1. Current budget enforcement rules
would require the entire $2.0 billion to be scored as discretionary BA in the first year, which would negate the
benefit of the FCRF and leave agencies and policy makers facing the same trade-off constraints. As shown in
Chart 10–1, under this proposal, transfers from the FCRF
to agencies to fund purchases and the actual purchases
by agencies would be scored as direct spending (shown as
mandatory in Chart 10–1), while agencies would use discretionary appropriations to fund the annual repayments
to the FCRF. This proposed allocation of cost between
direct spending and discretionary spending would mean
that the up-front cost of capital investment would already
be reflected in the Budget as direct spending, and would
not have to compete with operating expenses in the an-

120

ANALYTICAL PERSPECTIVES

Chart 10-1. Illustrative Scoring of $2 Billion Purchase
using the Federal Capital Revolving Fund
Federal Capital Revolving Fund
Year 1

Mandatory:
Transfer to purchasing agency
to buy building…………...…….
Purchasing agency repayments....

2,000
-133

Purchasing Agency

Years 2-15

-1,867

Year 1

Mandatory:
Collection of transfer from Federal
Capital Revolving Fund……..……
Payment to buy building……….….

-2,000
2,000

Discretionary:
Repayments to Federal
Capital Revolving Fund…….…….

133

Total Government-Wide Deficit Impact
Year 1

Mandatory:
Purchase building……………………..………
Collections from purchasing agency…….…..
Discretionary:
Purchasing agency repayments…….….…….
Total Government-wide…………..…..………….

nual appropriations process. Instead, the trade off on the
discretionary side of the budget would be the incremental
annual cost of repaying the FCRF over 15-years. Knowing
that future discretionary appropriations will have to be
used to repay the FCRF would provide an incentive for
agencies, OMB, and the Congress to select projects with
the highest mission criticality and returns. OMB would
review agencies’ proposed projects for inclusion in the
President’s Budget, and the Appropriations Committees
would make final allocations by authorizing projects in
annual appropriations Acts and providing the first year
of repayment. This approach would allow for a more effective capital planning process, for the Government’s
largest projects, that is similar to capital budgets used by
private companies and State and local governments.
Fast Track Spending Reductions
The Executive Branch has a responsibility to review
Federal spending and make recommendations when it
is not in the best interest of taxpayers. The President’s
Budget proposes redirecting funding away from programs

Years 2-15

Years 2-15

1,867

Total

2,000
-133

-1,867

2,000
-2,000

133

1,867

2,000

2,000

---

2,000

where the goals have been met, or where funds are not being used efficiently to target higher priority needs. In the
Budget, the President proposes cancellations, or reductions in budgetary resources. Such cancellations are not
subject to the requirements of title X of the Impoundment
Control Act of 1974 (“ICA”; 2 U.S.C. 601-88). Amounts
proposed for cancellation may not be withheld from obligation pending enactment into law.
Alternatively, the President may propose permanent
rescissions of budgetary resources pursuant to the ICA.
In such cases, the ICA requires that the President transmit a special message to the Congress. Congress is not
required to act on rescissions proposed under the ICA,
however. The Administration is interested in working
with Congress to enhance the shared goal of reducing
Government spending where it no longer serves the interest of taxpayers. For example, the Administration would
consider legislative proposals that ease the President’s
ability to reduce unnecessary spending through expedited
rescission procedures.

II. BUDGET ENFORCEMENT AND BUDGET PRESENTATION
Statutory PAYGO
The Statutory Pay-As-You-Go Act of 2010 (the “PAYGO
Act”) requires that, subject to specific exceptions, all
legislation enacted during each session of the Congress

changing taxes or mandatory expenditures and collections not increase projected deficits.
The Act established 5- and 10-year scorecards to record the budgetary effects of legislation; these scorecards
are maintained by OMB and are published on the OMB

121

10. Budget Process

web site. The Act also established special scorekeeping
rules that affect whether all estimated budgetary effects
of PAYGO bills are entered on the scorecards. Changes
to off-budget programs (Social Security and the Postal
Service) do not have budgetary effects for the purposes
of PAYGO and are not counted. Provisions designated by
the Congress in law as emergencies appear on the scorecards, but the effects are subtracted before computing the
scorecard totals.
In addition to the exemptions in the PAYGO Act itself,
the Congress has enacted laws affecting revenues or direct
spending with a provision directing that the budgetary
effects of all or part of the law be held off of the PAYGO
scorecards. In the most recently completed Congressional
session, three pieces of legislation were enacted with such
a provision.
The requirement of budget neutrality is enforced by
an accompanying requirement of automatic across-theboard cuts in selected mandatory programs if enacted
legislation, taken as a whole, does not meet that standard. If the annual report filed by OMB after the end
of a Congressional session shows net costs—that is, more
costs than savings—in the budget-year column of either
the 5- or 10-year scorecard, OMB is required to prepare,
and the President is required to issue, a sequestration
order implementing across-the-board cuts to non-exempt
mandatory programs in an amount sufficient to offset the
net costs on the PAYGO scorecards. The list of exempt
programs and special sequestration rules for certain programs are contained in sections 255 and 256 of BBEDCA.
As was the case during an earlier PAYGO enforcement
regime in the 1990s, the PAYGO sequestration has not
been required since the PAYGO Act reinstated the statutory PAYGO requirement. Since PAYGO was reinstated,
OMB’s annual PAYGO reports showed net savings in the
budget year column of both the 5- and 10-year scorecards.
For the first session of the 115th Congress, the most recent session, enacted legislation placed costs of $1,089
million in each year of the 5-year scorecard and $653
million in each year of the 10-year scorecard. The new
costs lowered the balances of savings from prior sessions
of the Congress in the budget year column, and resulted
in total net savings of $2,490 million in the 2018 column
on the 5-year scorecard, and $13,815 million in the 2018
column on the 10-year scorecard, so no sequestration was
required.2
There are limitations to Statutory PAYGO’s usefulness
as a budget enforcement tool. The scorecards have carried
large surpluses from year to year, giving Congress little
incentive to limit costly spending. Some costs, such as
changes to the Postal Service or increases to debt service,
are ignored. The frequent exemption of budgetary effects
from the PAYGO scorecards by Congress also suggests the
PAYGO regime has been ineffective at controlling deficits.
In the coming year the Administration looks forward to
working with Congress to rein in the deficit by exploring
budget enforcement tools, including reforms to PAYGO.
2 OMB’s annual PAYGO reports and other explanatory material about
the PAYGO Act are available on OMB’s website at https://www.whitehouse.gov/omb/paygo/.

Estimating the Impacts of Debt Service
New legislation that affects direct spending and revenue will also indirectly affect interest payments on the
Federal debt. These effects on interest payments can
cause a significant budgetary impact; however, they are
not captured in cost estimates that are required under the
PAYGO Act, nor are they typically included in estimates
of new legislation that are produced by the Congressional
Budget Office. The Administration believes that cost
estimates of new legislation could be improved by incorporating information on the effects of interest payments
and looks forward to working with the Congress in making reforms in this area.
Administrative PAYGO
In addition to enforcing budget discipline on enacted
legislation, the Administration continues to review potential administrative actions by Executive Branch agencies
affecting entitlement programs, so that agencies administering these programs have a requirement to keep costs
low. This requirement was codified in a memorandum
issued on May 23, 2005, by the Director of the Office of
Management and Budget, “Budget Discipline for Agency
Administrative Actions.” This memo effectively established a PAYGO requirement for administrative actions
involving mandatory spending programs. Exceptions to
this requirement are only provided in extraordinary or
compelling circumstances.
Adjustments to BBEDCA Baseline: Extension of
Revenue Provisions and Transportation Spending
In order to provide a more realistic outlook for the
deficit under current policies, the Budget presents the
Administration’s budget proposals relative to a baseline
that makes certain adjustments to the statutory baseline
defined in BBEDCA. Section 257 of BBEDCA provides the
rules for constructing the baseline used by the Executive
and Legislative Branches for scoring and other legal purposes. The adjustments made by the Administration are
not intended to replace the BBEDCA baseline for these
purposes, but rather are intended to make the baseline a
more useful benchmark for assessing the deficit outlook
and the impact of budget proposals.
Revenue Provisions Extended in Adjusted
Baseline.—The Tax Cuts and Jobs Act provided comprehensive tax reform for individuals and corporations. The
Administration’s adjusted baseline assumes permanent
extension of the individual income tax and estate and gift
tax provisions enacted in that Act that are currently set to
expire at the end of 2025. These expirations were included
in the tax bill not because these provisions were intended
to be temporary, but in order to comply with reconciliation rules in the Senate. Assuming extension of these
provisions in the adjusted baseline presentation results
in reductions in governmental receipts and increases in
outlays for refundable tax credits of $568.9 billion over
the 2026-2028 period relative to the BBEDCA baseline.
This yields a more realistic depiction of the outlook for re-

122
ceipts and the deficit than a strictly current law baseline
in which these significant tax cuts expire.
Highway Trust Fund (HTF) Spending in the
Adjusted Baseline.—Under BBEDCA baseline rules,
the Budget shows outlays supported by HTF receipts
inflating at the current services level. However, that presentation masks the reality that the HTF has a structural
insolvency, one that all stakeholders are aware of, and the
source of which is described below. The BBEDCA baseline
results in a presentation that overestimates the amount of
HTF spending the Government could support. Therefore,
beginning in 2022, the Budget presents an adjusted baseline to account for the mismatch between baseline rules
that require assuming that spending continues at current
levels and the law limiting the spending from the HTF
to the level of available balances in the HTF. Under current law, DOT is unable to reimburse States and grantees
when the balances in the HTF, largely reflecting the
level of incoming receipts, are insufficient to meet their
requests. Relative to the BBEDCA baseline levels, reducing outlays from the HTF to the level of receipts in the
adjusted baseline presentation results in a reduction in
HTF outlays of $122.4 billion over the 2022-2028 window.
This adjustment makes the level of spending that could
be supported in the HTF absent reforms more apparent.
Surface Transportation Hybrid Budgetary Treatment.—
The Highway Revenue Act of 1956 (Public Law 84-627)
introduced the HTF to accelerate the development of the
Interstate Highway System. In the 1970s, the HTF’s scope
was expanded to include expenditures on mass transit. In
1982, a permanent Mass Transit Account with the HTF
was created. Highway Trust Fund (HTF) programs are
treated as hybrids for budget enforcement purposes: contract authority is classified as mandatory, while outlays
are controlled by obligation limitations in appropriations
acts and are therefore classified as discretionary. Broadly
speaking, this framework evolved as a mechanism to ensure that collections into the HTF (e.g., motor fuel taxes)
were used to pay only for programs that benefit surface
transportation users, and that funding for those programs would generally be commensurate with collections.
Deposits to the HTF through the 1990s were historically
more than sufficient to meet the surface transportation
funding needs.
However, by the 2000s, deposits into the HTF began to
level off as vehicle fuel efficiency continued to improve. At
the same time, the investment needs continued to rise as
the infrastructure, much of which was built in the 1960s
and 1970s, deteriorated and required recapitalization. The
cost of construction also generally increased. The Federal
motor fuel tax rates have stayed constant since 1993. By
2008, balances that had been building in the HTF were
spent down. The 2008-2009 recession and rising gasoline
prices had led to a reduction in the consumption of fuel
resulting in the HTF reaching the point of insolvency for
the first time. Congress responded by providing the first
in a series of General Fund transfers to the HTF to maintain solvency.
Fixing America’s Surface Transportation Act (FAST
Act).—The passage of the FAST Act (Public Law 114-94),

ANALYTICAL PERSPECTIVES

shored up the Highway Trust Fund and maintained the
hybrid budgetary treatment through 2020. The FAST
Act did not significantly amend transportation-related
taxes or HTF authorization provisions beyond extending
the authority to collect and spend revenue. Congress retained the Federal fuel tax rate at 18.4 cents per gallon
for gasoline and 24.4 cents for diesel. To maintain HTF
solvency, the FAST Act transferred $70 billion from the
General Fund into the HTF. Since 2008, HTF tax revenues have been supplemented by $140 billion in General
Fund transfers. For 2019, in policy, the Administration
is requesting obligation limitation levels for HTF programs equal to the contract authority levels provided in
the FAST Act. For the outyears, those levels are frozen at
the 2019 level through 2028. The Budget also reflects the
FAST Act contract authority levels for the remainder of
the Act, through 2020. Beyond 2020 contract authority
is frozen at the 2020 level. Outlays in policy are equal to
the adjusted baseline levels, reflecting the need for a longterm solution.
Long-Term Solution Needed.—The fact that the HTF
has required $140 billion in General Fund transfers to
stay solvent points to the need for a comprehensive reevaluation of the surface transportation funding regime.
The adjusted baseline presentation shows the level of
spending expected under current law, without assuming General Fund transfers. While Congress and past
Administrations have been unable to find a long-term
funding solution to the HTF, many States and localities
have raised new revenue sources to finance transportation expenditures. The Administration believes that the
Federal Government should incentivize more States and
localities to finance their own transportation needs, as
they are best equipped to know the right level and mix of
infrastructure investments.
Discretionary Spending Limits
The BBEDCA baseline extends enacted or continuing
appropriations at the account level assuming current services inflation but allowances are included to bring total
base discretionary funding in line with the BBEDCA caps
through 2021. Current law requires reductions to those
discretionary caps in accordance with Joint Committee enforcement procedures put in place by the BCA. For 2019,
the Budget supports maintaining the topline for base
discretionary programs at the Joint Committee-enforced
level but proposes rebalancing Federal responsibilities by
increasing the defense cap under current law by $65 billion while reducing the non-defense cap by about the same
amount. After 2019, the Budget proposes new caps that
shift resources from non-defense programs by further reducing the non-defense cap over the 2020–2028 window
by two percent per year (the “two-penny” plan) while
increasing the defense category by an average of three
percent per year through 2023 to resource the National
Security and National Defense Strategies followed in
2024 through 2028 with inflationary growth of about 2.1
percent per year. The discretionary cap policy levels are
reflected in Table S–7 of the main Budget volume.

123

10. Budget Process

Further adjustments to the proposed
discretionary caps
The discretionary non-defense caps proposed in the
2019 Budget are reduced further to account for proposals to remove the air traffic control programs from
discretionary spending because of privatization and
to reduce the contributions of Federal agencies to the
retirement plans of civilian employees. These cap reductions would prevent the savings achieved by these
reforms from being redirected to augment existing nondefense programs. Reforms to the retirement plans of
Federal civilian employees would also yield savings in
the defense category, but the defense caps are not reduced accordingly, in order to allow for those savings to
be redirected to critical national security investments
within the category.
Air Traffic Control Reform.—The Administration
proposes to shift the Federal Aviation Administration’s
(FAA) air traffic control function into a non-governmental entity beginning in 2022. This proposal reduces the
need for discretionary spending in the following FAA accounts: Facilities and Equipment; Research, Engineering,
and Development; and Trust Fund Share accounts. The
Budget reflects an annual reduction of $10.2 billion in
budget authority from 2022 to 2028; this level was determined by measuring the amount allocated as a placeholder
in the policy outyears to air traffic control activities under
the proposed non-defense category.
Employer-Employee Share of Federal Employee
Retirement.—The Budget proposes to reallocate the
costs of Federal employee retirement by charging equal
shares of employees’ accruing retirement costs to employees and employers. The Budget takes the estimated
reductions in the share of employee retirement paid by
Federal agencies out of the nondefense cap levels starting
in 2020. This proposal starts at a reduction of discretionary budget authority of $6.5 billion in 2019 and totals
$72.2 billion in reduced discretionary spending over the
2019 to 2028 period.
Gross versus net reductions in Joint Committee
sequestration
The net realized savings from Joint Committee mandatory sequestration are less than the intended savings
amounts as a result of peculiarities in the BBEDCA sequestration procedures. The 2019 Budget shows the
net effect of Joint Committee sequestration reductions
by accounting for reductions in 2019 that remain in the
sequestered account and become newly available for obligation in the year after sequestration, in accordance
with section 256(k)(6) of BBEDCA. The budget authority
and outlays from these “pop-up” resources are included
in the baseline and policy estimates and amount to a cost
of $2.3 billion in 2019. Additionally, the 2019 Budget accounts for $752 million in lost savings that results from
the sequestration of certain interfund payments, which
produces no net deficit reduction.

Fannie Mae and Freddie Mac
The Budget continues to present Fannie Mae and
Freddie Mac, the housing Government-sponsored enterprises (GSEs) currently in Federal conservatorship, as
non-Federal entities. However, Treasury equity investments in the GSEs are recorded as budgetary outlays,
and the dividends on those investments are recorded as
offsetting receipts. In addition, the budget estimates reflect collections from the 10 basis point increase in GSE
guarantee fees that was enacted under the Temporary
Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78).
The baseline also reflects collections from a 4.2 basis
point set-aside on each dollar of unpaid principal balance
of new business purchases authorized under the Housing
and Economic Recovery Act of 2008 (P.L. 111-289) to be
remitted to several Federal affordable housing programs;
the Budget proposes to eliminate the 4.2 basis point setaside and discontinue funding for these programs. The
GSEs are discussed in more detail in Chapter 20, “Credit
and Insurance.”
Postal Service Reforms
The Administration proposes reform of the Postal
Service, necessitated by the serious financial condition of
the Postal Service Fund. The proposals are discussed in
the Postal Service and Office of Personnel Management
sections of the Appendix.
The Postal Service is designated in statute as an offbudget independent establishment of the Executive
Branch. This designation and budgetary treatment was
most recently mandated in 1989, in part to reflect the
policy agreement that the Postal Service should pay for
its own costs through its own revenues and should operate more like an independent business entity. Statutory
requirements on Postal Service expenses and restrictions
that impede the Postal Service’s ability to adapt to the
ongoing evolution to paperless written communications
have made those goals increasingly difficult to achieve.
To address its current financial and structural challenges,
the Administration proposes reform measures to ensure
that the Postal Service funds existing commitments to
current and former employees from business revenues,
not taxpayer funds. To reflect the Postal Service’s practice since 2012 of using defaults to on-budget accounts to
continue operations, despite losses, the Administration’s
baseline now reflects probable defaults to on-budget accounts at the Office of Personnel Management (OPM). This
treatment allows for a clearer presentation of the Postal
Service’s likely actions in the absence of reform and more
realistic scoring of reform proposals, with improvements
in the Postal Service’s finances reflected through lower
defaults, and added costs for the Postal Service reflected
as higher defaults. Under current scoring rules, savings
from reform for the Postal Service affect the unified deficit
but do not affect the PAYGO scorecard. Savings to OPM
through lower projected defaults affect both the PAYGO
scorecard and the unified deficit.

124
Fair Value for Credit Programs
Fair value is an approach to measuring the cost of
Federal direct loan and loan guarantee programs that
would align budget estimates with the market value of
Federal assistance, typically by including risk premiums
observed in the market. Under current budget rules, the
cost of Federal credit programs is measured as the net
present value of the estimated future cash flows resulting
from a loan or loan guarantee discounted at Treasury interest rates. These rules are defined in law by the Federal
Credit Reform Act of 1990 (FCRA). In recent years, some
analysts have argued that fair value estimates would
better capture the true costs imposed on taxpayers from

ANALYTICAL PERSPECTIVES

Federal credit programs and would align with private sector standard practices for measuring the value of loans
and loan guarantees. The CBO, for instance, has stated
that fair value would be a more comprehensive measure
of the cost of Federal credit programs. The Concurrent
Resolution on the Budget for Fiscal Year 2018 (H. Con.
Res. 71) also included language requiring CBO to produce
fair value scores alongside FCRA scores upon request.
The Administration supports proposals to improve the
accuracy of cost estimates and is open to working with
Congress to address any conceptual and implementation
challenges necessary to implement fair value estimates
for Federal credit programs.

FEDERAL RECEIPTS

125

11. GOVERNMENTAL RECEIPTS

A simpler, fairer, and more efficient tax system is
critical to growing the economy and creating jobs. The enactment of the Tax Cuts and Jobs Act (Public Law 115–97)
in 2017 reformed the Nation’s outdated, overly complex,
and burdensome tax system to unleash America’s economy, and create millions of new, better-paying jobs that
enable American workers to meet their families’ needs.
This Act, which is the first comprehensive tax reform in

a generation, streamlines the tax system and ends special interest tax breaks and loopholes, ensuring that all
Americans will be treated fairly by the tax system, not
just the wealthy. This chapter presents the Budget’s estimates of taxes and governmental receipts including the
effects of the Act and other tax legislation enacted in 2017,
discusses the provisions of those enacted laws, and explains the Administration’s additional receipt proposals.

Table 11–1. RECEIPTS BY SOURCE—SUMMARY
(In billions of dollars)
2017
Actual

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Individual income taxes �������������������������������
1,587.1
1,660.1
1,687.7
1,790.6
1,918.7
2,052.9
2,201.7
2,353.1
2,510.6
2,707.0
2,890.2
3,069.7
Corporation income taxes ����������������������������
297.0
217.6
225.3
264.8
272.7
314.2
373.8
416.6
434.7
417.4
406.0
413.5
Social insurance and retirement receipts ����
1,161.9
1,169.7
1,237.6
1,288.5
1,362.8
1,439.0
1,513.7
1,596.3
1,680.7
1,774.1
1,863.4
1,974.7
(On-budget) ���������������������������������������������
(311.3)
(317.4)
(332.4)
(347.1)
(368.4)
(390.1)
(411.2)
(432.2)
(454.7)
(478.3)
(502.5)
(533.0)
(Off-budget) ���������������������������������������������
(850.6)
(852.3)
(905.2)
(941.4)
(994.4) (1,048.9) (1,102.6) (1,164.1) (1,226.1) (1,295.8) (1,360.9) (1,441.7)
Excise taxes ������������������������������������������������
83.8
108.2
108.4
112.4
118.9
106.3
108.7
111.3
114.2
117.4
121.2
125.5
Estate and gift taxes ������������������������������������
22.8
24.7
16.8
18.0
19.4
20.7
22.8
24.4
26.1
27.6
29.1
30.9
Customs duties ��������������������������������������������
34.6
40.4
43.9
46.7
47.8
49.6
50.6
51.5
52.7
54.2
56.0
58.0
Miscellaneous receipts ��������������������������������
129.0
119.7
106.0
96.4
100.3
108.8
117.7
125.2
130.5
136.8
143.4
149.3
Allowance for repeal and replacement of
Obamacare ���������������������������������������������
.........
.........
–3.5
–8.6
–2.5
–2.8
–2.9
–3.0
–3.2
–3.5
–3.7
–4.1
Total, receipts �����������������������������������������
3,316.2
3,340.4
3,422.3
3,608.9
3,838.2
4,088.7
4,386.1
4,675.5
4,946.3
5,231.1
5,505.6
5,817.5
(On-budget) ���������������������������������������� (2,465.6) (2,488.1) (2,517.1) (2,667.6) (2,843.8) (3,039.8) (3,283.6) (3,511.4) (3,720.2) (3,935.3) (4,144.7) (4,375.8)
(Off-budget) ����������������������������������������
(850.6)
(852.3)
(905.2)
(941.4)
(994.4) (1,048.9) (1,102.6) (1,164.1) (1,226.1) (1,295.8) (1,360.9) (1,441.7)
Total receipts as a percentage of GDP ����
17.3
16.7
16.3
16.4
16.5
16.8
17.1
17.4
17.5
17.6
17.7
17.8

ESTIMATES OF GOVERNMENTAL RECEIPTS
Governmental receipts are taxes and other collections
from the public that result from the exercise of the Federal
Government’s sovereign or governmental powers. The difference between governmental receipts and outlays is the
surplus or deficit.
The Federal Government also collects income from the
public from market-oriented activities. Collections from
these activities are subtracted from gross outlays, rather
than added to taxes and other governmental receipts, and
are discussed in Chapter 12, “Offsetting Collections and
Offsetting Receipts,” in this volume.
Total governmental receipts (hereafter referred to as
“receipts”) are estimated to be $3,340.4 billion in 2018,
an increase of $24.2 billion or 0.7 percent from 2017. The
estimated increase in 2018 is largely due to increases in
individual income taxes and excise taxes, partially offset

by decreases in taxes on corporate income. Receipts in
2018 are estimated to be 16.7 percent of Gross Domestic
Product (GDP), which is lower than in 2017, when receipts were 17.3 percent of GDP.
Receipts are estimated to rise to $3,422.3 billion in
2019, an increase of $81.9 billion or 2.5 percent relative
to 2018. Receipts are projected to grow at an average annual rate of 6.4 percent between 2019 and 2023, rising to
$4,386.1 billion. Receipts are projected to rise to $5,817.5
billion in 2028, growing at an average annual rate of 5.8
percent between 2023 and 2028. This growth is largely
due to assumed increases in incomes resulting from both
real economic growth and inflation.
As a share of GDP, receipts are projected to decrease
from 16.7 percent in 2018 to 16.3 percent in 2019, and to
steadily increase to 17.8 percent of GDP by 2028.

127

128

ANALYTICAL PERSPECTIVES

LEGISLATION ENACTED IN 2017 THAT AFFECTS GOVERNMENTAL RECEIPTS
In addition to the Tax Cuts and Jobs Act, two other
laws were enacted during 2017 that affect receipts. The
major provisions of these laws that have a significant impact on receipts are described below.1
DISASTER TAX RELIEF AND AIRPORT
AND AIRWAY EXTENSION ACT
OF 2017 (Public Law 115–63)
This Act, which was signed into law on September
29, 2017, extended through March 31, 2018, various
expiring authorities, programs, and activities of the
Federal Aviation Administration in the Department of
Transportation, including aviation-related taxes. The Act
also modified certain tax provisions for individuals living in areas impacted by Hurricanes Harvey, Irma, and
Maria, and tax provisions regarding charitable giving to
those areas.
Extend aviation taxes.—The Internal Revenue Code
imposes certain aviation-related taxes, including taxes on
aviation fuels and ticket taxes on transportation by air
of persons and property; and transfers to the Airport and
Airway Trust Fund amounts equivalent to the aviation
fuel taxes and air transportation ticket taxes received in
the Treasury. The Act extended these taxes at their current rates, and extended the exemption under current law
on commercial aviation taxes for certain fractional aircraft program flights, both through March 31, 2018.
Impose special disaster-related rules for use
of retirement funds.—The Act permits penalty-free
withdrawals from eligible retirement plans for individuals whose principal place of abode was located in the
Hurricane Harvey, Irma, or Maria disaster areas on the
date of disaster and who sustained an economic loss by
reason of the hurricane. Individuals can make withdrawals from eligible retirement plans limited to $100,000 over
the aggregate amounts treated as qualified hurricane distributions for that individual in all prior taxable years. In
addition, individuals who make withdrawals for qualified
hurricane relief can, within a three-year period starting
on the date of the withdrawal, make contributions back
to an eligible retirement plan, not to exceed the amount
withdrawn. To qualify, these distributions must be made
on or after August 23, 2017, for Hurricane Harvey individuals (September 1, 2017, and September 16, 2017, for
Hurricanes Irma and Maria individuals respectively) and
before January 1, 2019.
Provide tax credit for disaster-related employment.—The Act allows certain employers who were in
business in a Hurricane Harvey, Irma, or Maria disaster
zone on the date of the disaster, and before January 1,
2018, whose business is inoperable, to take a tax credit for
40 percent (up to $6,000 per employee) of wages paid during that period to each employee whose principal place
of employment with the employer was in a disaster zone.
1 In the discussions of enacted legislation, years referred to are calendar years, unless otherwise noted.

Temporarily suspend limitations on charitable
contributions.—Under current law, individuals and
corporations can take itemized deductions for charitable
contributions, subject to certain limitations. Individuals
may deduct charitable contributions up to 50 percent
of adjusted gross income (AGI), further limited by the
phase-out of itemized deductions. For corporations, the
total deductions for charitable contributions for any taxable year may not exceed 10 percent of a corporation’s
taxable income. Under the Act, these limitations do not
apply to corporate contributions for relief efforts related
to Hurricane Harvey, Irma, or Maria, or to any charitable
contributions paid by individuals during the period beginning on the date of disaster, and ending on December
31, 2017.
Implement special rules for qualified disaster-related personal casualty losses.—Currently, individual
taxpayers are generally allowed to deduct from income
any loss sustained during the taxable year and not
compensated for by insurance or otherwise. Losses of
non-business property may be deducted if they arise from
casualty (e.g., fire or storm) or theft. However, these losses are allowed only to the extent that the loss from each
casualty or theft exceeds $100. In addition, aggregate
net losses from casualties or theft are deductible only to
the extent that they exceed 10 percent of an individual
taxpayer’s AGI. This Act eliminated the 10 percent limitation for losses arising in the Hurricane Harvey, Irma, or
Maria disaster areas and attributable to the hurricane;
raised the $100 personal loss threshold to $500; and eliminated the requirement that individuals must itemize
deductions in order to access the personal casualty loss
deduction.
Special rule for determining earned income.—
Under current law, eligible taxpayers may receive an
earned income tax credit (EITC) and child credits. The
EITC is a refundable credit for low-income workers.
Taxpayers may claim a refundable child credit of $1,000
for each qualifying child if their AGI is below $75,000 for
single filers and $110,000 if married and filing jointly.
The Act allows these credits to be determined, at the election of the taxpayer, by substituting the earned income for
2016 for the earned income for 2017. This provision only
applies to individuals whose principal place of abode was
located, on the date of the disaster, in a Hurricane Harvey,
Irma, or Maria disaster zone; or Hurricane Harvey, Irma,
or Maria disaster area (but outside the disaster zone) and
was displaced due to the hurricane.
TSP MODERNIZATION ACT OF
2017 (Public Law 115–84)
This Act, which was signed into law on November 17,
2017, modifies the rules relating to withdrawals from
the Thrift Saving Plan (TSP) accounts of former Federal
employees and Members of Congress. Previously, such
employees and Members could make only one partial
withdrawal upon reaching age 59–1/2 while employed or

11. Governmental Receipts

one such withdrawal after retirement. The Act permits
an unlimited number of withdrawals. The Act also eliminates the withdrawal election deadline and the limitation
on age-based in-service withdrawals.
AN ACT TO PROVIDE FOR RECONCILIATION
PURSUANT TO TITLES II AND V OF THE
CONCURRENT RESOLUTION ON THE BUDGET
FOR FISCAL YEAR 2018 (Public Law 115–97)
This Act, also referred to as the Tax Cuts and Jobs
Act, which was signed into law on December 22, 2017,
provided comprehensive tax reform for individuals and
corporations, and repealed the individual mandate under
the Affordable Care Act. Significant provisions of this Act
are described in greater detail below.
Individual tax reform
Consolidate, simplify, and temporarily reduce income tax rates for individuals.—This Act temporarily
reduced the individual income tax rates and altered the
threshold at which each of the tax rates apply, effective
for taxable years beginning after December 31, 2017, and
before January 1, 2026. The individual tax rates were
reduced to 10 percent, 12 percent, 22 percent, 24 percent,
32 percent, 35 percent, and 37 percent, with the highest
rate applying to taxable income over $600,000 for married individuals filing jointly and over $500,000 for single
individuals.
Index tax brackets by the chained Consumer Price
Index (CPI).—Under prior law, the individual income
tax brackets and many other thresholds within the tax
code were indexed for inflation using the CPI for all urban
consumers, as produced by the Bureau of Labor Statistics
(BLS) within the Department of Commerce. This Act revised these indexation provisions to use the chained CPI,
an alternative measure of inflation produced by BLS that
more accurately measures inflation by better capturing
the effects of changes in purchasing patterns on consumer
price inflation.
Consolidate and temporarily reduce income tax
rates for estates and trusts.—The Act modified the
income tax rates for estates and trusts to 10 percent on
taxable income below $2,550; 24 percent on taxable income over $2,550 but below $9,150; 35 percent on taxable
income over $9,150 but below $12,500; and 37 percent on
taxable income over $12,500. The reduced rates apply to
taxable years beginning after December 31, 2017, and before January 1, 2026.
Increase the standard deduction.—Individuals
who do not elect to itemize deductions may reduce their
AGI by the amount of the applicable standard deduction
in arriving at their taxable income. The basic standard
deduction varies depending upon a taxpayer’s filing status. This Act increased the basic standard deduction for
individuals in 2018 to be $12,000 for single individuals
(from $6,350 in 2017) and $24,000 for married individuals filing a joint return (from $12,700 in 2017). These
amounts are indexed for inflation. The increase applies

129
to taxable years beginning after December 31, 2017, and
before January 1, 2026.
Repeal the deduction for personal exemptions.—
In determining taxable income, individuals reduce AGI by
any personal exemption deductions and either the applicable standard deduction or his or her itemized deductions.
Personal exemptions generally are allowed for taxpayers,
their spouses, and any dependents. The deduction for the
personal exemption is phased out for taxpayers with AGI
in excess of $313,800 for married individuals filing jointly
and $261,500 for single individuals. The Act repealed the
deduction for personal exemptions for tax years beginning
after December 31, 2017, through December 31, 2025.
Double the exemption amount for the estate and
gift tax.—The Act unified the estate and gift taxes such
that a single graduated rate schedule applies to cumulative taxable transfers made by a taxpayer during his or
her lifetime and at death. Additionally, in determining
one’s taxable estate, certain credits are subtracted to determine estate tax liability; the Act doubled the exclusions
for estate and gift taxes by increasing the basic exclusion
amount from $5 million to $10 million, indexed for inflation occurring after 2011, for tax years beginning after
December 31, 2017, through December 31, 2025.
Increase the child tax credit and require valid
Social Security number (SSN).—The Act increased the
child tax credit from $1,000 to $2,000 per qualifying child,
provided $500 for each dependent who does not qualify
for the child tax credit, and increased the maximum refundable child tax credit to $1,400 per qualifying child.
The Act also increased the threshold for phase-out of the
credit to $400,000 for married individuals filing a joint
return ($200,000 for all other taxpayers). In addition, the
Act required that a taxpayer claiming the child tax credit
must include a SSN for each qualifying child for whom
the credit is claimed. This additional requirement does
not apply to a non-child dependent for whom the $500
non-refundable credit is claimed. These modifications apply to taxable years beginning after December 31, 2017,
and before January 1, 2026.
Increase the alternative minimum tax exemption
amount and phase-out thresholds.—An alternative
minimum tax (AMT) is imposed on an individual, estate,
or trust in an amount by which the tentative minimum
tax exceeds the regular income tax for the taxable year.
If a taxpayer owes more under the AMT calculation than
under the regular income tax calculation, the taxpayer
must pay the higher amount. A certain amount of income is exempt from the AMT – the so-called “exemption
amount.” The Act increased the AMT exemption amounts
in 2018 to $109,400 for married taxpayers filling a joint
return and $70,300 for single filers for taxable years beginning after December 31, 2017, and before January 1,
2026. It also increased the threshold at which this exemption amount is phased out to $1 million for married
joint filers and $500,000 for single filers for taxable years
beginning after December 31, 2017, and before January 1,
2026. Those amounts are indexed for inflation.
Reduce the threshold for medical expense deduction.—Current law allows for an itemized deduction for

130
unreimbursed medical expenses in excess of 10 percent of
a taxpayer’s AGI. The Act reduced this floor to 7.5 percent
for taxable years beginning after December 31, 2016, and
ending before January 1, 2019. The Act made a similar
change in calculating the deduction for these expenses
under the AMT.
Decrease the mortgage interest deduction limitations.—Prior law allowed for a deduction for interest on
certain home mortgages, limited to interest on the first
million dollars of debt used for acquiring, constructing, or
substantially improving the residence. Prior law also allowed the deduction of interest on up to $100,000 of home
equity indebtedness. The Act reduced the limitation to interest on up to $750,000 of acquisition indebtedness and
eliminating the deduction for interest on home equity indebtedness for taxable years beginning after December
31, 2017, and before January 1, 2026. In the case of acquisition indebtedness incurred before December 15, 2017,
this limitation remains $1,000,000.
Limit State and local tax deduction.—Current
law allows for an itemized deduction for State and local
income taxes (or, at the taxpayer’s election, State and local sales taxes) and property taxes. The Act limited the
itemized deduction for State and local taxes to $10,000
for taxable years beginning after December 31, 2017, and
before January 1, 2026.
Repeal of deductions and exclusions for moving
expenses.—Prior law allowed above-the-line deductions for moving expenses paid by an employee and an
exclusion from income for moving expenses reimbursed
by an employer. The Act repealed the moving expense
deduction and the exclusion of employer-reimbursed
moving expense for taxpayers other than members of the
Armed Forces, effective for taxable years beginning after
December 31, 2017, and before January 1, 2026.
Repeal of deductions for alimony payments.—
Prior law allowed above-the-line deductions for payments
of alimony and provided that receipt of alimony payments
be included as income. Child support payments were
not treated as alimony. The Act repealed the alimony
deduction and the corresponding inclusion of alimony as
income, effective for any divorce or separation instrument
executed after December 31, 2018.
Repeal of deduction for personal casualty and
theft losses.—Prior law allowed a deduction for any
uncompensated loss sustained during the taxable year,
provided that the loss was incurred in a business or other
profit-seeking activity or arose from theft and certain other casualties. Losses were deductible only above a $100
threshold, and only to the extent that aggregate losses exceeded 10 percent of the taxpayer’s AGI. The Act limited
the deduction to losses attributable to a Presidentiallydeclared disaster declared under section 401 of the Robert
T. Stafford Disaster Relief and Emergency Assistance Act,
effective for losses incurred after December 31, 2017, and
before January 1, 2026.
Repeal itemized deductions subject to two percent floor.—Prior law allowed itemized deductions for a
number of miscellaneous expenses, as long as the total
of those expenses exceeded two percent of the taxpayer’s

ANALYTICAL PERSPECTIVES

AGI. Allowable expenses included certain expenses in
the production or collection of income, tax preparation expenses, and unreimbursed employee expenses. The Act
suspended those itemized deductions subject to the two
percent floor for taxable years beginning after December
31, 2017, and before January 1, 2026.
Increase percentage limit for cash contributions
to public charities.—Current law limits the deduction
of cash contributions to public charities and certain other
organizations to 50 percent of the taxpayer’s contribution
base, generally AGI. The Act increases the limit to 60 percent for taxable years beginning after December 31, 2017,
and before January 1, 2026.
Repeal limitation on itemized deductions.—Prior
law limited the total amount of most otherwise allowable
itemized deductions (other than the deductions for medical expenses, investment interest and casualty, theft or
gambling losses) for taxpayers with incomes above certain
thresholds. For 2017, the threshold amounts are $261,500
for single taxpayers; $287,650 for heads of household;
$313,800 for married couples filing jointly; and $156,900
for married taxpayers filing separately. The Act repealed
the limitation on itemized deductions for taxable years
beginning after December 31, 2017, and before January
1, 2026.
Allow deduction for certain pass-through income.—Under current law, businesses such as sole
proprietorships, partnerships, limited liability companies,
and S corporations, are considered to be “pass-through”
entities. Pass-through businesses are generally not treated as taxable entities for income tax purposes, but rather
income and expenses are passed through to their owners. Income earned by a pass-through entity (whether
distributed or not) is taxed to the owners at their own
tax rates along with income they may receive from other
sources. The Act allows an individual taxpayer to deduct
20 percent of domestic qualified business income from a
partnership, S corporation, or sole proprietorship, subject to certain limitations. This provision is effective for
tax years beginning after December 31, 2018, through
December 31, 2025.
Disallow active pass-through losses in excess
of threshold.—Under prior law, active owners of passthrough businesses may use business losses to offset
other ordinary income (e.g., wage income) without limit.
The Act prohibits taxpayers’ use of pass-through losses
in excess of certain threshold amounts. Any excess losses
that are disallowed are carried forward and can be used to
offset future income, subject to limitations. For 2018, the
thresholds are $500,000 for married couples filing jointly
and $250,000 for all other individuals. This provision is
effective for tax years beginning after December 31, 2017,
through December 31, 2025.
Business tax reform
Eliminate the corporate income tax graduated rate structure and decrease the corporate tax
rate.—Previously, corporate taxable income was subject
to tax under a four-step graduated rate structure. The
top corporate tax rate was 35 percent on taxable income

131

11. Governmental Receipts

in excess of $10 million. An additional five-percent tax
was imposed on a corporation’s taxable income in excess
of $100,000, with the maximum additional tax at $11,750.
A second additional three-percent tax was imposed on a
corporation’s taxable income in excess of $15 million. The
maximum second additional tax was $100,000. The Act
permanently applies a single rate of 21 percent to corporation taxable income, effective for tax years beginning
after December 31, 2017.
Repeal the corporate AMT.—Previously, an AMT
was imposed on a corporation to the extent the corporation’s tentative minimum tax exceeded its regular tax.
This tentative minimum tax was computed at the rate of
20 percent on the income covered by the AMT in excess of
a $40,000 exemption amount subject to a phase-out. The
income taxed under the AMT was the corporation’s regular taxable income increased by certain preference items
and adjustments. If a corporation was subject to AMT
in any year, the amount of AMT is allowed as an AMT
credit in any subsequent taxable year to the extent the
corporation’s regular tax liability exceeded its tentative
minimum tax in the subsequent year. The Act repealed
the corporate AMT and allowed AMT credits to offset regular tax liability, effective for tax years beginning after
December 31, 2017.
Extend, expand, and phase down bonus depreciation.—Businesses can generally recover the cost of
certain property over a predetermined period of years.
Businesses are allowed to take a first-year bonus depreciation deduction of an additional 50 percent of the cost of
assets acquired and placed into service before January 1,
2020, but may elect not to take this additional deduction
with respect to certain property. The 50-percent allowance is phased down for property placed in service after
December 31, 2017. This Act extends the additional firstyear depreciation deduction through December 31, 2026.
The 50-percent allowance is increased to 100 percent for
property placed in service after September 27, 2017, and
before January 1, 2023. The allowance then decreases by
20 percentage points each year before phasing out completely for property placed in service after December 31,
2026.
Limit net interest deduction to 30 percent of adjusted taxable income.—Previously, interest paid or
accrued by a business generally was deductible in the
computation of taxable income subject to a number of
limitations. The Act generally limits the deduction to 30
percent of the adjusted taxable income of the business, but
with an exception for certain small businesses. Adjusted
taxable income is not reduced for depreciation, amortization, or depletion deductions for taxable years beginning
after December 31, 2017, and before January 1, 2022. The
excess amount of interest may be carried forward indefinitely to future tax years.
Modify net operating loss deduction.—A net operating loss (NOL) generally means the amount by which
the deductions of a business exceed its gross income.
Previously, a NOL could be carried back two years and
carried forward over 20 years to offset taxable income in
such years. The Act limits NOL deductions to 80 percent

of taxable income and repeals the ability to carry back
NOLs two years, with exceptions for certain businesses.
This limitation applies to corporations as well as individuals with pass-through businesses.
Amortize research and experimentation expenditures.—Under current law, businesses may choose to
deduct certain research or experimentation expenditures
from current income, or to capitalize these expenditures
and deduct them over a longer period. The Act requires
that these expenditures paid or incurred in taxable
years beginning after December 31, 2021, be capitalized
and amortized ratably over a five-year period. Certain
expenditures which are attributable to research that is
conducted outside of the United States are required to
be capitalized and amortized ratably over a period of 15
years.
Repeal or limit business-related deductions.—The
Act permanently repeals or limits a number of deductions from business income, including eliminating the
deduction for income attributable to domestic production
activities and limiting the deduction for employee meal,
entertainment, and transportation expenses.
International tax reform
Allow deduction of dividends received by domestic
corporations from certain foreign corporations.—
The Act provides that in the case of any dividend received
from a specified 10-percent owned foreign corporation by a
domestic corporation which is a United States shareholder with respect to such foreign corporation, a deduction is
allowed in an amount equal to the foreign-source portion
of such dividend.
Treat deferred foreign income at two-tier rate.—
The Act requires that, for the last taxable year of a foreign
corporation beginning before January 1, 2018, all U.S.
shareholders of any controlled foreign corporation or other foreign corporation (CFC) that is at least 10-percent
U.S.-owned but not controlled, include in income their pro
rata shares of the accumulated post–1986 deferred foreign income that was not previously taxed. A portion of
that pro rata share of deferred foreign income is deductible resulting in a reduced rate of tax of 15.5 percent for
the included deferred foreign income held in liquid form
and 8 percent for the remaining deferred foreign income.
Include current year global intangible low-taxed
income.—The Act requires that U.S. shareholders of any
CFC include in gross income its global intangible lowtaxed income (GILTI) in a manner generally similar to
inclusions of subpart F income. GILTI means, with respect
to any U.S. shareholder for the shareholder’s taxable year,
the excess (if any) of the shareholder’s net CFC tested income over the shareholder’s net deemed tangible income
return. The shareholder’s net deemed tangible income return is an amount equal to 10 percent of the aggregate of
the shareholder’s pro rata share of the qualified business
asset investment of each CFC with respect to which it is
a U.S. shareholder. Domestic C corporations that are U.S.
shareholders of CFCs are given a deduction equal to 50
percent (decreasing to 37.5 percent in 2026) of the GILTI.
This results in a pre-credit U.S. effective tax rate on GILTI

132

ANALYTICAL PERSPECTIVES

income of 10.5 percent for 2018 through 2025, and 13.125
percent from 2026 onward. Foreign taxes paid that are attributable to the excess return are creditable against the
U.S. tax on GILTI, subject to a 20 percent reduction.
Establish deduction for foreign-derived intangible income.—The Act provides a deduction for domestic
corporations based on their foreign-derived intangible
income (FDII). FDII is the portion of a domestic corporation’s “intangible” income, determined on a formulaic
basis, attributable to serving foreign markets. For taxable years beginning after December 31, 2017, and before
January 1, 2026, the provision generally allows a deduction equal to 37.5 percent of the corporation’s FDII. This
deduction reduces the effective tax rate on FDII below the
statutory corporate tax rate of 21 percent; for example,
the deduction implies a 13.125 percent effective tax rate
for FDII in these years. For taxable years beginning after
December 31, 2025, the deduction for FDII is reduced to
21.875 percent.
Impose a base erosion and anti-abuse tax.—The
Act requires that certain taxpayers compute an alternative minimum tax called the base erosion anti-abuse
tax (BEAT). The BEAT is imposed on both domestic and
foreign companies with more than $500 million in average annual gross receipts and “base erosion payments”
greater than 3 percent of total deductions (2 percent in
the case of banks). Base erosion payments are non-cost of
goods sold deductible payments made to foreign related

parties. The BEAT is computed as the amount by which
a company’s taxable income computed without regard to
base erosion payments exceeds the company’s regular corporate tax liability minus certain tax credits. The BEAT
rate is 5 percent in 2018, rising to 10 percent in 2019
through 2025, and then to 12.5 percent starting in 2026.
Banks are subject to a BEAT rate that is 1 percent higher
that applies if the base erosion payments exceed 2 percent
of total deductions, but certain payments made with respect to derivatives are excluded from the BEAT.
Other
Permanently repeal the individual mandate tax
penalty.—Under the Patient Protection and Affordable
Care Act (Public Law 111–148), individuals are required
to be covered by a health plan that provides at least minimum essential coverage or be subject to a tax penalty
for failure to maintain the coverage (commonly referred
to as the “individual mandate”). The tax is imposed for
any month that the individual does not have the minimum essential coverage and is equal to the greater of a
flat dollar amount or a percentage of income in excess of
the filing threshold. This Act permanently repeals the
individual mandate tax penalty by decreasing both the
individual annual dollar amount and the percentage of
income to zero for health coverage in months beginning
after December 31, 2018.

Table 11–2. ADJUSTMENTS TO THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL
ACT (BBEDCA) BASELINE ESTIMATES OF GOVERNMENTAL RECEIPTS
(In billions of dollars)
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

BBEDCA baseline receipts ����������������������������� 3,340.5 3,424.3 3,613.3 3,832.9 4,094.7 4,388.9 4,677.8 4,947.7 5,346.1 5,716.9 6,040.3
Adjustments to BBEDCA baseline:
Extend individual income tax provisions 1 ������
Extend estate and gift tax provisions �������������
Total, adjustments to BBEDCA
baseline ���������������������������������������������

2019–2023 2019–2028
19,354.1

46,082.9

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

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

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

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

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

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

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

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

–112.7
.........

–194.9
–14.2

–204.7
–15.1

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

–512.4
–29.2

.........

.........

.........

.........

.........

.........

.........

.........

–112.7

–209.1

–219.8

.........

–541.6

Adjusted baseline receipts ����������������������������� 3,340.5 3,424.3 3,613.3 3,832.9 4,094.7 4,388.9 4,677.8 4,947.7 5,233.5 5,507.8 5,820.5
1 This provision affects both receipts and outlays. Only the receipt effect is shown here. The outlay effects are listed below:

19,354.1

45,541.4

2018
Extend individual income tax provisions ��������
Total, outlay effects of adjustments to
BBEDCA baseline ������������������������������

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2019–23

2019–28

.........

.........

.........

.........

.........

.........

.........

.........

–3.9

15.3

15.9

.........

27.3

.........

.........

.........

.........

.........

.........

.........

.........

–3.9

15.3

15.9

.........

27.3

ADJUSTMENTS TO THE BALANCED BUDGET AND EMERGENCY
DEFICIT CONTROL ACT (BBEDCA) BASELINE
An important step in addressing the Nation’s fiscal
problems is to be upfront about them and to establish a
baseline that provides a realistic measure of the deficit
outlook before new policies are enacted. This Budget does
so by adjusting the BBEDCA baseline to reflect the true
cost of extending major tax policies that are scheduled to
expire but that are likely to be extended. The BBEDCA

baseline, which is commonly used in budgeting and is
defined in statute, reflects, with some exceptions, the projected receipts level under current law.
However, current law includes a number of scheduled
tax changes that the Administration believes are unlikely
to occur and that prevent it from serving as a realistic
benchmark for judging the effect of new legislation. These

133

11. Governmental Receipts

tax changes include expiration in 2025 of the individual
income and estate and gift tax provisions enacted in the
Tax Cuts and Jobs Act. This Budget uses an adjusted
baseline that is intended to be more realistic by extending
those expiring provisions. This baseline does not reflect
the President’s policy proposals, but is rather a realistic
and fair benchmark from which to measure the effects of
those policies.

Extend individual income tax provisions.—The
Administration’s adjusted baseline projection permanently extends all expiring individual income tax provisions in
the Tax Cuts and Jobs Act that are currently set to expire
on December 31, 2025.
Extend estate and gift tax provisions.—The
Administration’s adjusted baseline projection reflects
permanent extension of the estate and gift tax parameters and provisions in effect for calendar year 2025.

BUDGET PROPOSALS
The 2019 Budget supports the extension of the individual and estate tax provisions of the Tax Cuts and Jobs
Act beyond their expiration in 2025, as described above,
to provide certainty for taxpayers and support continued
economic growth. The Budget’s additional proposals affecting governmental receipts are as follows:
Allow Medicare beneficiaries to contribute to
Health Savings Accounts (HSAs) and Medical
Savings Accounts (MSAs).—Under current law, workers
who are entitled to Medicare are not allowed to contribute to an HSA, even if they are working and are enrolled
in a qualifying health plan through their employer. The
Administration proposes to allow workers aged 65 or older who have a high-deductible health plan through their
employer to contribute to an HSA, even if they are entitled to Medicare. In addition, the Administration proposes
to allow beneficiaries enrolled in Medicare MSA Plans to
contribute to their MSAs, beginning in 2021, subject to
the annual HSA contribution limits as determined by the
Internal Revenue Service. Beneficiaries would also be allowed a one-time opportunity to roll over the funds from
their private HSAs to their Medicare MSAs. Beneficiaries
who elect this plan option would not be allowed to purchase Medigap or other supplemental insurance.
Extend Children’s Health Insurance Program
(CHIP) funding through 2019.—The Administration
proposes to extend CHIP funding through fiscal year
2019. As a result, on net, more children will be enrolled in
CHIP and fewer children will be enrolled in Marketplace
qualified health plans and employment-based health
insurance. This will increase tax revenues and reduce
outlays associated with the premium tax credit.
Reform medical liability.—The Administration
proposes to reform medical liability beginning in 2019.
This proposal has the potential to lower health insurance
premiums, increasing taxable income and payroll tax
receipts.
Reduce the grace period for Exchange premiums.—The Administration proposes to reduce the 90-day
grace period for individuals on Exchange plans to repay
any missed premium payments to 30 days. The proposal
would decrease premium tax credit outlays and increase
governmental receipts.
Provide tax exemption for Indian Health Service
(IHS) Health Professions scholarship and loan repayment programs in return for obligatory service
requirement.—The Administration proposes to allow
scholarship funds for qualified tuition and related expens-

es received under the IHS Health Professions scholarship
to be excluded from income. The Administration also
proposes to allow students to exclude from gross income student loan amounts forgiven by the IHS Loan
Repayment Program.
Under current law, National
Health Service Corps programs and Armed Forces Health
Professions Scholarships are provided an exception to
the general rule that scholarship amounts representing
payment for work are considered ordinary income and
therefore taxable. Furthermore, certain loans forgiven as
part of certain State and profession-based loan programs
are provided an exception from the general rule that loan
amounts paid on another’s behalf are taxable income.
Extending the exceptions to IHS programs would provide
the IHS programs with comparable treatment to similar
programs administered by the National Health Service
Corps, the Armed Forces, and certain State programs.
Eliminating the current tax burden on scholarship recipients would allow IHS to leverage another tool to bolster
its ongoing efforts to recruit and retain qualified healthcare providers.
Establish Electronic Visa Update System (EVUS)
user fee.—The Administration proposes to establish
a user fee for EVUS, a new U.S. Customs and Border
Protection (CBP) program to collect biographic and travel-related information from certain non-immigrant visa
holders prior to traveling to the United States. The user
fee would fund the costs of establishing, providing, and
administering the system.
Eliminate Corporation for Travel Promotion.—
The Administration proposes to eliminate funding for
the Corporation for Travel Promotion (also known as
Brand USA). The Budget extents the authorization for
the Electronic System for Travel Authorization (ESTA)
surcharge currently deposited in the Travel Promotion
Fund and redirects the surcharge to the ESTA account
at Customs and Border Protection with a portion to be
transferred to the International Trade Administration to
administer the Survey of International Air Travelers.
Establish an immigration services surcharge.—
The Administration proposes to add a 10 percent
surcharge on all requests received by U.S. Citizenship and
Immigration Services, including applications for citizenship, adjustment of status, and petitions for temporary
workers.
Increase worksite enforcement penalties.—The
Administration proposes to increase by 35 percent all penalty amounts against employers who violate Immigration

134
and Nationality Act provisions on the unlawful employment of aliens.
Reinstate the Oil Spill Liability Trust Fund excise
tax.—The Administration proposes to reinstate the Oil
Spill Liability Trust Fund excise tax, which expired on
December 31, 2017. The Trust Fund provides resources
for the Federal Government to respond and clean up incidents of oil spills.
Provide paid parental leave benefits.—The
Administration proposes establishing a new benefit within the Unemployment Insurance (UI) program to provide
up to six weeks paid leave to mothers, fathers, and adoptive parents. States are responsible for adjusting their
UI tax structures to maintain sufficient balances in their
Unemployment Trust Fund accounts.
Establish Unemployment Insurance (UI) solvency
standard.—The Administration proposes to set a minimum solvency standard to encourage States to maintain
sufficient balances in their UI trust funds. States that are
currently below this minimum standard are expected to
increase their State UI taxes to build up their trust fund
balances. States that do not build up sufficient reserves
will be subject to Federal Unemployment Tax Act credit
reductions, increasing Federal UI receipts.
Improve UI Insurance program integrity.—The
Administration proposes a package of reforms to the UI
program aimed at improving program integrity. These reforms are expected to reduce outlays in the UI program by
reducing improper payments. In general, reduced outlays
allow States to keep UI taxes lower, reducing overall receipts to the UI trust funds.
Provide for Reemployment Services and Eligibility
Assessments (RESEAs).—The Administration proposes
mandatory funding to provide RESEAs to the one-half of
UI claimants identified as most likely to exhaust benefits.
RESEAs have been shown to reduce improper payments
and to get claimants back to work more quickly, thereby
reducing UI benefit outlays. In general, reduced outlays
allow States to keep UI taxes lower, reducing overall receipts to the UI trust funds.
Reform the Essential Air Service (EAS).—The
Administration proposes to reform the EAS by reducing
discretionary funding and focusing on the remote airports
that are most in need of subsidized commercial air service.
The proposal will include a mix of reforms, including limits on per-passenger subsidies and higher average daily
enplanements. These reforms would affect governmental
receipts by reducing aviation overflight fees.
Enact Federal Aviation Administration (FAA) air
traffic control reform.—The Administration proposes
to shift the FAA’s air traffic control function into a nongovernmental entity beginning in 2022. This proposal
would reduce the collection of aviation excise taxes. The
estimates in the Budget are illustrative of the aviation
taxes that would be in place to fund the FAA’s Airport
Improvement Program.
Provide authority to purchase and construct a
new Bureau of Engraving and Printing facility.—
The Administration proposes to provide authority to the
Bureau of Engraving and Printing to construct a more

ANALYTICAL PERSPECTIVES

efficient production facility. This will reduce the cost incurred by the Federal Reserve for printing currency and
therefore increase governmental receipts via increased
deposits from the Federal Reserve to Treasury.
Subject Financial Research Fund (FRF) to appropriations with reforms to the Financial Stability
Oversight Council (FSOC) and Office of Financial
Research (OFR).—Expenses of the FSOC and OFR are
paid through the FRF, which is funded by assessments on
certain bank holding companies with total consolidated
assets of $50 billion or greater and nonbank financial
companies supervised by the Federal Reserve Board of
Governors. The FRF was established by the Dodd-Frank
Wall Street Reform and Consumer Protection Act (Public
Law 111–203) and is managed by the Department of the
Treasury. To improve their effectiveness and ensure greater accountability, the Budget proposes to subject activities
of the FSOC and OFR to the annual appropriations process. In so doing, currently authorized assessments would,
beginning in fiscal year 2020, be reauthorized as discretionary offsetting collections and set at a level determined
by the Congress. The Budget also reflects continued
reductions in OFR spending commensurate with the renewed fiscal discipline being applied across the Federal
Government.
Provide discretionary funding for Internal
Revenue Service (IRS) program integrity cap adjustment.—The Administration proposes to establish
and fund a new adjustment to the discretionary caps for
IRS program integrity activities starting in 2019. The
IRS base funding within the discretionary caps funds
current tax administration activities, including all tax
enforcement and compliance program activities, in the
Enforcement and Operations Support accounts at IRS.
The additional $362 million cap adjustment in 2019 will
fund new and continuing investments in expanding and
improving the effectiveness and efficiency of the IRS’s tax
enforcement program. The activities are estimated to generate $44 billion in additional revenue over 10 years and
cost approximately $15 billion, resulting in an estimated
net savings of $29 billion. Once the new staff are trained
and become fully operational these initiatives are expected to generate roughly $4 in additional revenue for every
$1 in IRS expenses. Notably, the return on investment is
likely understated because it only includes amounts received; it does not reflect the effect enhanced enforcement
has on deterring noncompliance. This indirect deterrence
helps to ensure the continued payment of over $3 trillion in taxes paid each year without direct enforcement
measures.
Increase oversight of paid tax return preparers.—
Paid tax return preparers have an important role in tax
administration because they assist taxpayers in complying with their obligations under the tax laws. Incompetent
and dishonest tax return preparers increase collection
costs, reduce revenues, disadvantage taxpayers by potentially subjecting them to penalties and interest as a result
of incorrect returns, and undermine confidence in the tax
system. To promote high quality services from paid tax
return preparers, the proposal would explicitly provide

135

11. Governmental Receipts

that the Secretary of the Treasury has the authority to
regulate all paid tax return preparers.
Provide the IRS with greater flexibility to address
correctable errors.—The Administration proposes to
expand IRS authority to correct errors on taxpayer returns. Current statute only allows the IRS to correct
errors on returns in certain limited instances, such as basic math errors or the failure to include the appropriate
social security number or taxpayer identification number. This proposal would expand the instances in which
the IRS could correct a taxpayer’s return including cases
where: (1) the information provided by the taxpayer does
not match the information contained in Government databases; (2) the taxpayer has exceeded the lifetime limit
for claiming a deduction or credit; or (3) the taxpayer has

failed to include with his or her return, certain documentation that is required by statute. The proposal would be
effective on the date of enactment.
Reform
inland
waterways
financing.—The
Administration proposes to reform the laws governing
the Inland Waterways Trust Fund, including establishing
a fee to increase the amount paid by commercial navigation users of the inland waterways. In 1986, the Congress
provided that commercial traffic on the inland waterways
would be responsible for 50 percent of the capital costs
of the locks, dams, and other features that make barge
transportation possible on the inland waterways. The additional revenue would help finance the users’ share of
future capital investments as well as 10 percent of the
cost of operation and maintenance activities in these wa-

Table 11-3. EFFECT OF BUDGET PROPOSALS
(In millions of dollars)
2018
Allow Medicare beneficiaries to contribute to Health Savings
Accounts (HSAs) and Medical Savings Accounts (MSAs) ��������
Extend Children’s Health Insurance Program (CHIP) funding
through 2019 �����������������������������������������������������������������������������
Reform medical liability �������������������������������������������������������������������
Reduce the grace period for Exchange premiums �������������������������
Provide tax exemption for Indian Health Service (IHS) Health
Professions scholarship and loan repayment programs in
return for obligatory service requirement �����������������������������������
Establish Electronic Visa Update System (EVUS) user fee ������������
Eliminate Corporation for Travel Promotion ������������������������������������
Establish an immigration services surcharge ���������������������������������
Increase worksite enforcement penalties ���������������������������������������
Reauthorize the Oil Spill Liability Trust Fund excise tax 1 ���������������
Provide paid parental leave benefits 1 ��������������������������������������������
Establish an Unemployment Insurance (UI) solvency standard 1 ���
Improve UI program integrity 1 ��������������������������������������������������������
Provide for Reemployment Services and Eligibility Assessments
(RESEAs) 1 ��������������������������������������������������������������������������������
Reform the Essential Air Service (EAS) �����������������������������������������
Enact Federal Aviation Administration (FAA) air traffic control
reform ����������������������������������������������������������������������������������������
Provide authority to purchase and construct a new Bureau of
Engraving and Printing facility ���������������������������������������������������
Subject Financial Research Fund (FRF) to appropriations with
reforms to the Financial Stability Oversight Council (FSOC)
and Office of Financial Research (OFR) 1 ���������������������������������
Provide discretionary funding for Internal Revenue Service (IRS)
program integrity cap adjustment ����������������������������������������������
Increase oversight of paid tax return preparers ������������������������������
Provide the IRS with greater flexibility to address correctable
errors �����������������������������������������������������������������������������������������
Reform inland waterways financing ������������������������������������������������
Reduce the Harbor Maintenance Tax 1 �������������������������������������������
Increase employee contributions to Federal Employee Retirement
System (FERS) ��������������������������������������������������������������������������
Eliminate allocations to the Housing Trust Fund and Capital
Magnet Fund �����������������������������������������������������������������������������
Improve clarity in worker classification and information reporting
requirements ������������������������������������������������������������������������������
Repeal and replace Obamacare �����������������������������������������������������
Offset overlapping unemployment and disability payments 1 ���������
Expand flexibility and broaden eligibility for Private Activity Bonds
(PABs) ����������������������������������������������������������������������������������������
Total, effect of budget proposals �������������������������������������������������
1 Net of income offsets.

2019

2020

2021

2022

2023

2024

2025

2026

2027

20192023

2028

20192028

.........

.........

.........

–610 –1,071 –1,285 –1,493 –1,599 –1,674 –1,746 –1,807 –2,966 –11,285

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

388
24
164

58
222
55

.........
548
.........

.........
987
.........

.........
1,476
.........

.........
2,067
.........

.........
2,687
.........

.........
3,079
.........

.........
3,290
.........

.........
3,475
.........

446
3,257
219

446
17,855
219

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

–5
25
.........
453
13
354
.........
.........
.........

–12
28
.........
465
14
466
.........
.........
–1

–13
31
171
479
15
473
.........
633
–9

–14
34
177
493
15
480
962
1,615
–21

–14
38
183
507
15
489
971
2,230
–72

–14
42
189
522
15
494
1,001
919
–66

–14
46
196
538
15
500
1,194
1,613
–98

–15
52
202
553
15
507
1,300
927
–69

–17
57
209
569
15
511
1,401
1,267
–127

–19
64
216
587
15
511
1,495
1,907
–105

–58
156
531
2,397
72
2,262
1,933
4,478
–103

–137
417
1,543
5,166
147
4,785
8,324
11,111
–568

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

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

–3
.........

–14
.........

–69
–152

–125
156

–128
–160

–199
–164

–307
–168

–287
–172

–469
–177

–211
–308

–1,601
–1,149

.........

.........

.........

......... –15,495 –16,241 –17,027 –17,870 –18,674 –19,497 –20,536 –31,736 –125,340

.........

12

32

3

–89

360

53

–20

3

222

3

318

579

.........

1

–50

–50

–50

–50

–50

–50

–50

–50

–50

–199

–449

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

152
17

787
18

1,825
21

3,033
23

4,330
25

5,554
28

6,416
31

6,931
34

7,270
38

7,505 10,127
41
104

43,803
276

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

7
178
–265

11
178
–281

12
178
–292

12
178
–299

13
178
–307

13
178
–314

14
178
–323

15
178
–333

15
178
–345

16
55
178
890
–359 –1,444

128
1,780
–3,118

.........

.........

2,267

4,602

6,442

8,068

9,441

9,456

9,470

9,480

9,479 21,379

68,705

.........

62

74

73

78

82

84

85

87

89

90

369

804

–100 –100
100 ......... ......... ......... ......... ......... .........
100
105 .........
205
......... –3,452 –8,617 –2,503 –2,829 –2,883 –2,959 –3,192 –3,473 –3,676 –4,092 –20,284 –37,676
......... ......... .........
–3
–6
–7
–14
–18
–25
–29
–31
–16
–133
.........
–31 –138
–100 –2,003 –4,327

–296 –457 –616 –753 –839 –893 –945 –992 –1,538 –5,960
5,274 –6,023 –2,791 –2,378 –1,417 –2,328 –2,180 –2,950 –9,870 –21,123

136
terways to support economic growth. The current excise
tax on diesel fuel used in inland waterways commerce will
not produce sufficient revenue to cover these costs.
Reduce
the
Harbor
Maintenance
Tax.—
The Administration proposes to reduce the Harbor
Maintenance Tax rate to better align estimated annual
receipts from this tax with recent appropriation levels for
eligible expenditures from the Harbor Maintenance Trust
Fund. Reducing this tax would provide greater flexibility
for individual ports to establish appropriate fee structures for services they provide, in order to help finance
their capital and operating expenses on their own.
Increase employee contributions to Federal
Employee
Retirement
System
(FERS).—The
Administration proposes to increase Federal employee
contributions to FERS, equalizing employee and employer contributions to FERS so that half of the normal
cost would be paid by each. For some specific occupations,
such as law enforcement officers and firefighters, the cost
of their retirement package necessitates a higher normal cost percentage. For those specific occupations, this
proposal would increase but not equalize employee contributions. This proposal brings Federal retirement benefits
more in line with the private sector. This adjustment will
reduce the long term cost to the Federal Government by
reducing the Government’s contribution rate. To lessen
the impact on employees this proposal will be phased
in, increasing employee contributions by one percentage
point per year until equalized.
Eliminate allocations to the Housing Trust Fund
and Capital Magnet Fund.—The Administration proposes to eliminate an assessment on Fannie Mae and
Freddie Mac that is used to fund the Housing Trust Fund
and Capital Magnet Fund, two Federal programs that
support affordable low-income housing. The resulting increase in taxable income at Fannie Mae and Freddie Mac
would impact governmental receipts.
Improve clarity in worker classification and information reporting requirements.—The Administration
proposes to: (1) establish a new safe harbor that allows

ANALYTICAL PERSPECTIVES

a service recipient to classify a service provider as an
independent contractor and requires withholding of individual income taxes to this independent contractor at a
rate of five percent on the first $20,000 of payments; and
(2) raises the reporting threshold for payments to all independent contractors from $600 to $1,000, and reduces
the reporting threshold for third-party settlement organizations from $20,000 and 200 transactions per payee to
$1,000 without regard to the number of transactions. The
proposal increases clarity in the tax code, reduces costly
litigation, and raises revenue.
Repeal
and
replace
Obamacare.—The
Administration is committed to rescuing Americans
from the failures of Obamacare. Repealing and replacing
Obamacare would affect governmental receipts by repealing the Premium Tax Credit, the medical device tax, and
the HSA tax, and making various other reforms to HSAs.
Offset overlapping unemployment and disability payments.—The Administration proposes to close a
loophole that allows individuals to receive both UI and
Disability Insurance (DI) benefits for the same period of
joblessness. The proposal would offset the DI benefit to
account for concurrent receipt of UI benefits. Offsetting
the overlapping benefits would discourage some individuals from applying for UI, reducing benefit outlays.
The reduction in benefit outlays is accompanied by a reduction in States’ UI tax receipts, which are held in the
Unemployment Trust Fund.
Expand flexibility and broaden eligibility for
private activity bonds (PABs).—As part of the
Administration’s infrastructure initiative, the Budget
proposes to expand flexibility and broaden eligibility
for private activity bonds. PABs eligible to finance this
broadened definition of “core public infrastructure projects” would not be subject to State volume caps. However,
the projects must be either Government-owned or privately-owned but subject to Government regulatory or
contractual control and approval such that the facilities
are available to the public.

137

11. Governmental Receipts

Table 11–4. RECEIPTS BY SOURCE
(In millions of dollars)
Source

2017
Actual

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Individual income taxes:
Federal funds ����������������������������������������� 1,587,120 1,660,063 1,687,042 1,789,704 1,917,184 2,050,498 2,197,899 2,347,934 2,504,331 2,700,016 2,882,828 3,062,139
Legislative proposal, not subject to
PAYGO ������������������������������������������
.........
.........
–14
–29
–65
–175
–206
–129
–175
–134
–156
–188
Legislative proposal, subject to
PAYGO ������������������������������������������
.........
.........
718
947
1,592
2,626
3,968
5,316
6,428
7,120
7,516
7,797
Total, Individual income taxes ������������������ 1,587,120 1,660,063 1,687,746 1,790,622 1,918,711 2,052,949 2,201,661 2,353,121 2,510,584 2,707,002 2,890,188 3,069,748
Corporation income taxes:
Federal funds �����������������������������������������
Legislative proposal, not subject to
PAYGO ������������������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������������
Total, Corporation income taxes ��������������
Social insurance and retirement receipts
(trust funds):
Employment and general retirement:
Old-age survivors insurance (offbudget) �����������������������������������������
Legislative proposal, not subject
to PAYGO ��������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Disability insurance (off-budget) ��������
Legislative proposal, not subject
to PAYGO ��������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Hospital Insurance �����������������������������
Legislative proposal, not subject
to PAYGO ��������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Railroad retirement:
Social security equivalent account ����
Rail pension & supplemental annuity 
Total, Employment and general
retirement �����������������������������������������
On-budget ������������������������������������������
Off-budget ������������������������������������������
Unemployment insurance:
Deposits by States 1 ���������������������������
Legislative proposal, not subject
to PAYGO ��������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Federal unemployment receipts 1 ������
Legislative proposal, subject to
PAYGO ������������������������������������
Railroad unemployment receipts 1 �����
Total, Unemployment insurance ������������
Other retirement:
Federal employees retirementemployee share ����������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Non-Federal employees retirement 2 ���
Total, Other retirement ���������������������������
Total, Social insurance and retirement
receipts (trust funds) ����������������������������
On-budget ����������������������������������������������

297,048

217,648

225,295

264,710

272,706

314,208

373,856

416,627

434,764

417,498

406,137

413,564

.........

.........

–3

10

10

11

11

10

11

11

11

12

.........
297,048

.........
217,648

52
225,344

40
264,760

7
272,723

–21
314,198

–48
373,819

–71
416,566

–85
434,690

–94
417,415

–102
406,046

–110
413,466

688,048

689,294

762,821

804,675

850,279

897,037

942,951

995,275 1,048,234 1,107,760 1,163,400 1,232,525

.........

.........

–8

–15

–95

–343

–411

–240

–344

–256

–307

–382

.........
162,570

–43
163,035

–80
142,464

58
136,643

–113
144,388

–97
152,328

–30
160,123

68
169,009

194
178,003

174
188,111

290
197,558

311
209,296

.........

.........

–1

–2

–16

–58

–70

–41

–58

–43

–52

–65

.........
255,930

–7
259,138

–14
275,214

10
286,994

–19
304,251

–17
321,942

–5
339,409

12
358,896

33
378,617

30
400,703

49
421,734

53
447,540

.........

.........

–2

–4

–26

–94

–113

–66

–93

–70

–84

–104

.........

–50

2

120

93

100

126

161

211

334

341

363

2,213
3,136

2,365
3,187

2,472
3,253

2,536
3,349

2,627
3,464

2,728
3,596

2,835
3,734

2,943
3,876

3,053
4,021

3,167
4,171

3,276
4,512

3,382
4,708

1,111,897 1,116,919 1,186,121 1,234,364 1,304,833 1,377,122 1,448,549 1,529,893 1,611,871 1,704,081 1,790,717 1,897,627
(261,279) (264,640) (280,939) (292,995) (310,409) (328,272) (345,991) (365,810) (385,809) (408,305) (429,779) (455,889)
(850,618) (852,279) (905,182) (941,369) (994,424) (1,048,850) (1,102,558) (1,164,083) (1,226,062) (1,295,776) (1,360,938) (1,441,738)
37,551

39,118

39,993

39,936

40,218

39,367

39,907

40,719

41,611

42,983

44,549

47,582

.........

.........

.........

–4

–27

–110

–238

–235

–361

–460

–504

–699

.........
8,131

.........
8,811

.........
6,383

.........
6,503

–4
6,629

1,591
6,760

2,172
6,892

1,741
7,037

2,374
7,187

1,950
7,339

1,979
7,499

2,116
7,669

.........
126
45,808

.........
135
48,064

.........
140
46,516

.........
146
46,581

791
141
47,748

1,621
119
49,348

1,814
116
50,663

633
138
50,033

1,100
145
52,056

791
138
52,741

1,305
138
54,966

2,078
151
58,897

4,158

4,681

4,952

5,258

5,623

6,011

6,421

6,850

7,294

7,754

8,233

8,701

.........
34
4,192

.........
37
4,718

.........
39
4,991

2,267
39
7,564

4,602
38
10,263

6,442
38
12,491

8,068
38
14,527

9,441
38
16,329

9,456
38
16,788

9,470
37
17,261

9,480
37
17,750

9,479
37
18,217

1,161,897 1,169,701 1,237,628 1,288,509 1,362,844 1,438,961 1,513,739 1,596,255 1,680,715 1,774,083 1,863,433 1,974,741
(311,279) (317,422) (332,446) (347,140) (368,420) (390,111) (411,181) (432,172) (454,653) (478,307) (502,495) (533,003)

138

ANALYTICAL PERSPECTIVES

Table 11–4. RECEIPTS BY SOURCE—Continued
(In millions of dollars)
Source

2017
Actual

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Off-budget ���������������������������������������������� (850,618) (852,279) (905,182) (941,369) (994,424) (1,048,850) (1,102,558) (1,164,083) (1,226,062) (1,295,776) (1,360,938) (1,441,738)
Excise taxes:
Federal funds:
Alcohol �����������������������������������������������
Tobacco ���������������������������������������������
Transportation fuels ���������������������������
Telephone and teletype services �������
High-cost health insurance coverage ���
Health insurance providers ����������������
Indoor tanning services ���������������������
Medical devices ���������������������������������
Other Federal fund excise taxes ��������
Legislative proposal, subject to
PAYGO ������������������������������������
Total, Federal funds �������������������������������
Trust funds:
Transportation ������������������������������������
Airport and airway �����������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Sport fish restoration and boating
safety ��������������������������������������������
Tobacco assessments �����������������������
Black lung disability insurance �����������
Inland waterway ���������������������������������
Oil spill liability �����������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Vaccine injury compensation �������������
Leaking underground storage tank ����
Supplementary medical insurance ����
Patient-centered outcomes research �
Total, Trust funds �����������������������������������
Total, Excise taxes �������������������������������������
Estate and gift taxes:
Federal funds �����������������������������������������
Total, Estate and gift taxes �����������������������
Customs duties and fees:
Federal funds �����������������������������������������
Trust funds:
Trust funds �����������������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Total, Trust funds �����������������������������������
Total, Customs duties and fees ����������������
Miscellaneous receipts:
Federal funds:
Miscellaneous taxes ��������������������������
Deposit of earnings, Federal Reserve
System ������������������������������������������
Legislative proposal, subject to
PAYGO ������������������������������������
Transfers from the Federal Reserve ��
Legislative proposal, subject to
PAYGO ������������������������������������
Fees for permits and regulatory and
judicial services ����������������������������

9,924
13,804
–3,400
558
.........
68
70
–202
369

10,208
13,669
–947
510
.........
14,281
68
1,572
3,159

10,377
13,534
–998
463
.........
15,026
67
2,309
3,283

10,466
13,398
–1,010
413
1,714
15,684
65
2,489
3,494

10,576
13,263
–1,013
361
5,981
16,480
63
2,640
3,635

10,683
13,128
–1,014
308
6,919
17,374
61
2,823
3,756

10,726
12,993
–1,014
254
8,000
18,225
59
2,992
3,872

10,833
12,857
–1,016
199
9,249
19,161
57
3,178
3,995

10,893
12,722
–1,015
143
10,671
20,149
55
3,360
4,133

10,978
12,587
–1,014
86
12,238
21,170
53
3,556
4,270

11,183
12,451
–1,015
44
14,044
22,253
51
3,761
4,418

11,515
12,316
–1,014
23
16,105
23,391
49
3,975
4,574

.........
21,191

.........
42,520

.........
44,061

.........
46,713

.........
51,986

–152
53,886

–156
55,951

–160
58,353

–164
60,947

–168
63,756

–172
67,018

–177
70,757

41,020
15,055

41,812
15,736

42,591
16,538

43,244
17,281

43,619
18,060

43,812
18,845

43,934
19,725

44,030
20,668

44,095
21,678

44,254
22,692

44,568
23,691

44,921
24,915

.........

.........

.........

.........

.........

–15,495

–16,241

–17,027

–17,870

–18,674

–19,497

–20,536

559
3
429
114
516

562
.........
473
105
137

565
.........
290
104
.........

569
.........
235
102
.........

573
.........
234
101
.........

577
.........
229
98
.........

583
.........
225
97
.........

587
.........
221
95
.........

592
.........
217
94
.........

597
.........
212
92
.........

602
.........
207
91
.........

611
.........
201
92
.........

.........
270
225
4,147
294
62,632
83,823

.........
296
215
5,997
329
65,662
108,182

465
303
218
2,826
434
64,334
108,395

612
308
218
2,800
366
65,735
112,448

621
305
219
2,800
382
66,914
118,900

630
308
217
2,800
400
52,421
106,307

641
312
214
2,800
418
52,708
108,659

649
317
212
2,800
437
52,989
111,342

657
316
212
2,800
455
53,246
114,193

666
319
210
2,800
475
53,643
117,399

670
324
208
2,800
495
54,159
121,177

670
329
208
2,800
518
54,729
125,486

22,768
22,768

24,650
24,650

16,824
16,824

18,042
18,042

19,429
19,429

20,651
20,651

22,848
22,848

24,364
24,364

26,091
26,091

27,635
27,635

29,092
29,092

30,891
30,891

33,097

38,749

42,368

45,150

46,206

47,932

48,852

49,783

50,933

52,360

54,120

56,147

1,477

1,688

1,831

1,943

2,018

2,067

2,118

2,165

2,223

2,292

2,292

2,292

.........
1,477
34,574

.........
1,688
40,437

–347
1,484
43,852

–369
1,574
46,724

–383
1,635
47,841

–393
1,674
49,606

–403
1,715
50,567

–412
1,753
51,536

–424
1,799
52,732

–437
1,855
54,215

–453
1,839
55,959

–471
1,821
57,968

593

543

544

598

598

599

599

599

599

600

600

600

81,287

72,097

55,102

48,588

52,228

59,130

66,905

72,662

77,280

81,780

86,336

90,854

.........
602

.........
575

159
632

679
647

665
662

588
677

1,054
694

763
710

707
727

747
744

983
761

782
779

.........

.........

–147

–647

–662

–677

–694

–710

–727

–744

–761

–779

23,911

22,694

22,053

23,258

24,013

25,392

25,955

27,713

27,978

29,372

30,799

31,952

139

11. Governmental Receipts

Table 11–4. RECEIPTS BY SOURCE—Continued
(In millions of dollars)
Source

2017
Actual

Estimate
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Legislative proposal, subject to
PAYGO ������������������������������������
.........
.........
478
425
613
636
660
685
712
739
767
799
Fines, penalties, and forfeitures ���������
20,984
22,266
25,236
20,785
20,193
20,462
20,760
21,084
21,435
21,785
22,035
22,417
Legislative proposal, subject to
PAYGO ������������������������������������
.........
.........
13
14
15
15
15
15
15
15
15
15
Refunds and recoveries ���������������������
–50
–50
–50
–50
–50
–50
–50
–50
–50
–50
–50
–50
Total, Federal funds ������������������������������� 127,327 118,125 104,020
94,297
98,275 106,772 115,898 123,471 128,676 134,988 141,485 147,369
Trust funds:
United Mine Workers of America,
combined benefit fund ������������������
81
17
16
14
13
12
11
10
9
8
7
7
Defense cooperation �������������������������
375
360
531
697
486
535
232
161
164
167
170
174
Inland waterways (Legislative
proposal, subject to PAYGO) ��������
.........
.........
178
178
178
178
178
178
178
178
178
178
Fines, penalties, and forfeitures ���������
1,169
1,177
1,219
1,259
1,300
1,342
1,383
1,424
1,464
1,505
1,545
1,587
Total, Trust funds �����������������������������������
1,625
1,554
1,944
2,148
1,977
2,067
1,804
1,773
1,815
1,858
1,900
1,946
Total, Miscellaneous receipts ������������������� 128,952 119,679 105,964
96,445 100,252 108,839 117,702 125,244 130,491 136,846 143,385 149,315
Allowance for repeal and replacement of
Obamacare ��������������������������������������������
.........
.........
–3,452
–8,617
–2,503
–2,829
–2,883
–2,959
–3,192
–3,473
–3,676
–4,092
Total, budget receipts �������������������������������� 3,316,182 3,340,360 3,422,301 3,608,933 3,838,197 4,088,682 4,386,112 4,675,469 4,946,304 5,231,122 5,505,604 5,817,523
On-budget .......................................... (2,465,564) (2,488,081) (2,517,119) (2,667,564) (2,843,773) (3,039,832) (3,283,554) (3,511,386) (3,720,242) (3,935,346) (4,144,666) (4,375,785)
Off-budget ������������������������������������������ (850,618) (852,279) (905,182) (941,369) (994,424) (1,048,850) (1,102,558) (1,164,083) (1,226,062) (1,295,776) (1,360,938) (1,441,738)
1 Deposits by States cover the benefit part of the program. Federal unemployment receipts cover administrative costs at both the Federal and State levels. Railroad unemployment
receipts cover both the benefits and administrative costs of the program for the railroads.
2 Represents employer and employee contributions to the civil service retirement and disability fund for covered employees of Government-sponsored, privately owned enterprises and
the District of Columbia municipal government.

12. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS
I. INTRODUCTION AND BACKGROUND
The Government records money collected in one of
two ways. It is either recorded as a governmental receipt
and included in the amount reported on the receipts
side of the budget or it is recorded as an offsetting collection or offsetting receipt, which reduces (or “offsets”)
the amount reported on the outlay side of the budget.
Governmental receipts are discussed in the previous
chapter, “Governmental Receipts.” The first section of
this chapter broadly discusses offsetting collections and
offsetting receipts. The second section discusses user
charges, which consist of a subset of offsetting collections
and offsetting receipts and a small share of governmental
receipts. The third section describes the user charge proposals in the 2019 Budget.
Offsetting collections and offsetting receipts are recorded as offsets to spending so that the budget totals
for receipts and (net) outlays reflect the amount of resources allocated by the Government through collective
political choice, rather than through the marketplace.1
This practice ensures that the budget totals measure
the transactions of the Government with the public, and
avoids the double counting that would otherwise result
when one account makes a payment to another account
and the receiving account then spends the proceeds.
Offsetting receipts and collections are recorded in the
budget in one of two ways, based on interpretation of laws
and longstanding budget concepts and practice. They are
offsetting collections when the collections are authorized
to be credited to expenditure accounts. Otherwise, they
are deposited in receipt accounts and called offsetting
receipts.
There are two sources of offsetting receipts and offsetting collections: from the public and from other budget
accounts. Like governmental receipts, offsetting receipts
and offsetting collections from the public reduce the deficit or increase the surplus. In contrast, offsetting receipts
and offsetting collections resulting from transactions
with other budget accounts, called intragovernmental
transactions, exactly offset the payments made by these
accounts, with no net impact on the deficit or surplus.2
In 2017, offsetting receipts and offsetting collections from
the public were $546 billion, while receipts and collections
from intragovernmental transactions were $1,098 billion,
for a total of $1,645 billion government-wide.
1 Showing collections from business-type transactions as offsets on
the spending side of the budget follows the concept recommended by the
Report of the President’s Commission on Budget Concepts in 1967 and
is discussed in Chapter 8 of this volume, “Budget Concepts.’’
2   For the purposes of this discussion, “collections from the public”
include collections from non-budgetary Government accounts, such as
credit financing accounts and deposit funds. For more information on
these non-budgetary accounts, see Chapter 9, “Coverage of the Budget.”

As described above, intragovernmental transactions
are responsible for the majority of offsetting collections
and offsetting receipts, when measured by the magnitude
of the dollars collected. Examples of intragovernmental
transactions include interest payments to funds that hold
Government securities (such as the Social Security trust
funds), general fund transfers to civilian and military retirement pension and health benefits funds, and agency
payments to funds for employee health insurance and retirement benefits. Although receipts and collections from
intragovernmental collections exactly offset the payments
themselves, with no effect on the deficit or surplus, it is important to record these transactions in the budget to show
how much the Government is allocating to fund various
programs. For example, in the case of civilian retirement
pensions, Government agencies make accrual payments
to the Civil Service Retirement and Disability Fund on
behalf of current employees to fund their future retirement benefits; the receipt of these payments to the Fund
is shown in a single receipt account. Recording the receipt
of these payments is important because it demonstrates
the total cost to the Government today of providing this
future benefit.
Offsetting receipts and collections from the public
comprise approximately 33 percent of total offsetting collections and offsetting receipts, when measured by the
magnitude of the dollars collected. Most of the funds collected through offsetting collections and offsetting receipts
from the public arise from business-like transactions with
the public. Unlike governmental receipts, which are derived from the Government’s exercise of its sovereign
power, these offsetting collections and offsetting receipts
arise primarily from voluntary payments from the public
for goods or services provided by the Government. They
are classified as offsets to outlays for the cost of producing
the goods or services for sale, rather than as governmental receipts. These activities include the sale of postage
stamps, land, timber, and electricity; charging fees for services provided to the public (e.g., admission to national
parks); and collecting premiums for health care benefits
(e.g., Medicare Parts B and D). As described above, treating offsetting collections and offsetting receipts as offsets
to outlays ensures the budgetary totals represent governmental rather than market activity.
A relatively small portion ($19.5 billion in 2017) of offsetting collections and offsetting receipts from the public
is derived from the Government’s exercise of its sovereign power. From a conceptual standpoint, these should
be classified as governmental receipts. However, they are
classified as offsetting rather than governmental receipts
either because this classification has been specified in law
or because these collections have traditionally been classi-

141

142

ANALYTICAL PERSPECTIVES

fied as offsets to outlays. Most of the offsetting collections
and offsetting receipts in this category derive from fees
from Government regulatory services or Government licenses, and include, for example, charges for regulating
the nuclear energy industry, bankruptcy filing fees, immigration fees, food inspection fees, passport fees, and
patent and trademark fees.3
3

This category of receipts is known as “offsetting governmental receipts.” Some argue that regulatory or licensing fees should be viewed
as payments for a particular service or for the right to engage in a particular type of business. However, these fees are conceptually much more
similar to taxes because they are compulsory, and they fund activities

The final source of offsetting collections and offsetting receipts from the public is gifts. Gifts are voluntary
contributions to the Government to support particular
purposes or reduce the amount of Government debt held
by the public.
that are intended to provide broadly dispersed benefits, such as protecting the health of the public. Reclassifying these fees as governmental
receipts could require a change in law, and because of conventions for
scoring appropriations bills, would make it impossible for fees that are
controlled through annual appropriations acts to be scored as offsets to
discretionary spending.

Table 12–1. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS FROM THE PUBLIC
(In billions of dollars)
Estimate

Actual
2017

2018

2019

Offsetting collections (credited to expenditure accounts):
User charges:
Postal Service stamps and other USPS fees (off-budget) ��������������������������������������������������������������������������������������������������������������
Defense Commissary Agency ��������������������������������������������������������������������������������������������������������������������������������������������������������
Employee contributions for employees and retired employees health benefits funds �������������������������������������������������������������������
Sale of energy:
Tennessee Valley Authority ��������������������������������������������������������������������������������������������������������������������������������������������������������
Bonneville Power Administration �����������������������������������������������������������������������������������������������������������������������������������������������
Pension Benefit Guaranty Corporation fund �����������������������������������������������������������������������������������������������������������������������������������
Deposit Insurance ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
All other user charges ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, user charges ��������������������������������������������������������������������������������������������������������������������������������������������������������������

68.7
4.9
15.7

69.4
5.0
16.7

72.7
5.2
17.7

47.0
3.4
10.8
12.4
47.1
210.1

46.4
3.9
11.4
13.7
49.1
215.5

46.7
3.9
12.1
16.0
44.8
219.0

Other collections credited to expenditure accounts:
Commodity Credit Corporation fund �����������������������������������������������������������������������������������������������������������������������������������������������
Supplemental Security Income (collections from the States) ���������������������������������������������������������������������������������������������������������
Other collections �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, other collections ���������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, offsetting collections ��������������������������������������������������������������������������������������������������������������������������������������������������������

7.5
2.6
36.9
47.0
257.2

9.0
2.8
7.8
19.5
235.1

8.8
2.8
7.7
19.3
238.3

User charges:
Medicare premiums ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Spectrum auction, relocation, and licenses ������������������������������������������������������������������������������������������������������������������������������������
Outer Continental Shelf rents, bonuses, and royalties �������������������������������������������������������������������������������������������������������������������
Immigration fees �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
All other user charges ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, user charges deposited in receipt accounts ��������������������������������������������������������������������������������������������������������������

89.0
.........
1.8
4.7
25.2
120.7

100.3
5.0
2.7
5.1
24.3
137.4

107.4
3.8
2.7
5.8
25.5
145.2

Other collections deposited in receipt accounts:
Military assistance program sales ��������������������������������������������������������������������������������������������������������������������������������������������������
Interest received from credit financing accounts ����������������������������������������������������������������������������������������������������������������������������
Proceeds, GSE equity related transactions ������������������������������������������������������������������������������������������������������������������������������������
Student loan receipt of negative subsidy and downward reestimates ��������������������������������������������������������������������������������������������
All other collections deposited in receipt accounts �������������������������������������������������������������������������������������������������������������������������
Subtotal, other collections deposited in receipt accounts ����������������������������������������������������������������������������������������������������������
Subtotal, offsetting receipts �����������������������������������������������������������������������������������������������������������������������������������������������������������������

31.9
41.6
25.3
19.2
50.5
168.6
289.2

42.0
49.0
6.1
27.1
45.5
169.7
307.1

44.0
51.1
18.7
13.0
42.2
169.1
314.3

Total, offsetting collections and offsetting receipts from the public ������������������������������������������������������������������������������������������������
Total, offsetting collections and offsetting receipts excluding off-budget �������������������������������������������������������������������������������������������������

546.4
477.5

542.2
472.7

552.6
479.9

ADDENDUM:
User charges that are offsetting collections and offsetting receipts 1 �������������������������������������������������������������������������������������������������
Other offsetting collections and offsetting receipts from the public �����������������������������������������������������������������������������������������������������
1 Excludes user charges that are classified on the receipts side of the budget. For total user charges, see Table 12–3.

330.8
215.6

353.0
189.2

364.2
188.4

Offsetting receipts (deposited in receipt accounts):

143

12. Offsetting Collections and Offsetting Receipts

Table 12–2. SUMMARY OF OFFSETTING RECEIPTS BY TYPE
(In millions of dollars)
Estimate

Actual
2017

Receipt Type

2018

2019

2020

2021

2022

2023

Intragovernmental �����������������������������������������������������������������������������

761,183

774,974

800,348

827,085

869,982

915,124

964,416

Receipts from non-Federal sources:
Proprietary ������������������������������������������������������������������������������������
Offsetting governmental ���������������������������������������������������������������
Total, receipts from non-Federal sources �������������������������������
Total Offsetting receipts ����������������������������������������������������������������

275,509
13,736
289,245
1,050,428

289,350
17,788
307,138
1,082,112

296,491
17,832
314,323
1,114,671

304,332
16,692
321,024
1,148,109

322,676
15,688
338,364
1,208,346

336,562
16,023
352,585
1,267,709

350,249
16,651
366,900
1,331,316

The spending associated with the activities that generate offsetting collections and offsetting receipts from the
public is included in total or “gross outlays.” Offsetting
collections and offsetting receipts from the public are subtracted from gross outlays to yield “net outlays,” which is
the most common measure of outlays cited and generally
referred to as simply “outlays.” For 2017, gross outlays
were $5,626 billion, or 29.3 percent of GDP and offsetting
collections and offsetting receipts were $1,645 billion, or
8.6 percent of GDP, resulting in net outlays of $3,982 billion or 20.8 percent of GDP. Government-wide net outlays
reflect the Government’s net disbursements to the public
and are subtracted from governmental receipts to derive
the Government’s deficit or surplus. For 2017, governmental receipts were $3,316 billion, or 17.3 percent of GDP,
and the deficit was $665 billion, or 3.5 percent of GDP.
Although both offsetting collections and offsetting receipts are subtracted from gross outlays to derive net
outlays, they are treated differently when it comes to accounting for specific programs and agencies. Offsetting
collections are usually authorized to be spent for the
purposes of an expenditure account and are generally
available for use when collected, without further action by
the Congress. Therefore, offsetting collections are recorded as offsets to spending within expenditure accounts, so
that the account total highlights the net flow of funds.
Like governmental receipts, offsetting receipts are
credited to receipt accounts, and any spending of the receipts is recorded in separate expenditure accounts. As a
Table 12–3. GROSS OUTLAYS, USER CHARGES,
OTHER OFFSETTING COLLECTIONS AND OFFSETTING
RECEIPTS FROM THE PUBLIC, AND NET OUTLAYS
(In billions of dollars)
Actual
2017
Gross outlays to the public ������������������������������������������������

Estimate
2018

4,528.0 4,715.2

2019
4,959.3

Offsetting collections and offsetting receipts from the
public:
User charges 1 ��������������������������������������������������������������
330.8
353.0
364.2
Other ������������������������������������������������������������������������������
215.6
189.2
188.4
Subtotal, offsetting collections and offsetting receipts from
the public ����������������������������������������������������������������������
546.4
542.2
552.6
Net outlays ������������������������������������������������������������������������� 3,981.6 4,173.0 4,406.7
1 $5.2 billion of the total user charges for 2017 were classified as governmental receipts,
and the remainder were classified as offsetting collections and offsetting receipts.  $5.5
billion and $5.7 billion of the total user charges for 2018 and 2019 are classified as
governmental receipts, respectively.

result, the budget separately displays the flow of funds
into and out of the Government. Offsetting receipts may
or may not be designated for a specific purpose, depending
on the legislation that authorizes their collection. If designated for a particular purpose, the offsetting receipts
may, in some cases, be spent without further action by the
Congress. When not designated for a particular purpose,
offsetting receipts are credited to the general fund, which
contains all funds not otherwise allocated and which is
used to finance Government spending that is not financed
out of dedicated funds. In some cases where the receipts
are designated for a particular purpose, offsetting receipts are reported in a particular agency and reduce or
offset the outlays reported for that agency. In other cases,
the offsetting receipts are “undistributed,” which means
they reduce total Government outlays, but not the outlays
of any particular agency.
Table 12–1 summarizes offsetting collections and offsetting receipts from the public. The amounts shown in
the table are not evident in the commonly cited budget
measure of outlays, which is already net of these collections and receipts. For 2019, the table shows that total
offsetting collections and offsetting receipts from the
public are estimated to be $552.6 billion or 2.6 percent of
GDP. Of these, an estimated $238.3 billion are offsetting
collections and an estimated $314.3 billion are offsetting
receipts. Table 12–1 also identifies those offsetting collections and offsetting receipts that are considered user
charges, as defined and discussed below.
As shown in the table, major offsetting collections from
the public include proceeds from Postal Service sales,
electrical power sales, loan repayments to the Commodity
Credit Corporation for loans made prior to enactment of
the Federal Credit Reform Act, and Federal employee payments for health insurance. As also shown in the table,
major offsetting receipts from the public include premiums for Medicare Parts B and D, proceeds from military
assistance program sales, rents and royalties from Outer
Continental Shelf oil extraction, proceeds from auctions
of the electromagnetic spectrum, dividends on holdings of
preferred stock of the Government-sponsored enterprises,
and interest income.
Tables 12–2 and 12–3 provide further detail about offsetting receipts, including both offsetting receipts from
the public (as summarized in Table 12–1) and intragovernmental transactions. Table 12–5, formerly printed in
this chapter, and Table 12–6. Offsetting Collections and

144

ANALYTICAL PERSPECTIVES

Offsetting Receipts, Detail—FY 2019 Budget, which is a
complete listing by account, are available on the Internet
at
https://www.whitehouse.gov/omb/analytical-perspectives/ and on the Budget CD-ROM. In total, offsetting
receipts are estimated to be $1,114.6 billion in 2019;
$800.3 billion are from intragovernmental transactions
and $314.3 billion are from the public. The offsetting
receipts from the public consist of proprietary receipts

($296.5 billion), which are those resulting from businesslike transactions such as the sale of goods or services,
and offsetting governmental receipts, which, as discussed
above, are derived from the exercise of the Government’s
sovereign power and, absent a specification in law or a
long-standing practice, would be classified on the receipts
side of the budget ($17.8 billion).

II. USER CHARGES
User charges or user fees4 refer generally to those
monies that the Government receives from the public for
market-oriented activities and regulatory activities. In
combination with budget concepts, laws that authorize
user charges determine whether a user charge is classified as an offsetting collection, an offsetting receipt, or a
governmental receipt. Almost all user charges, as defined
below, are classified as offsetting collections or offsetting
receipts; for 2019, only an estimated 1.4 percent of user
charges are classified as governmental receipts. As summarized in Table 12–3, total user charges for 2019 are
estimated to be $369.9 billion with $364.2 billion being
offsetting collections or offsetting receipts, and accounting for more than half of all offsetting collections and
offsetting receipts from the public.
Definition. In this chapter, user charges refer to fees,
charges, and assessments levied on individuals or organizations directly benefiting from or subject to regulation
by a Government program or activity, where the payers do
not represent a broad segment of the public such as those
who pay income taxes.
Examples of business-type or market-oriented user
charges and regulatory and licensing user charges include
those charges listed in Table 12–1 for offsetting collections
and offsetting receipts. User charges exclude certain offsetting collections and offsetting receipts from the public,
such as payments received from credit programs, interest,
and dividends, and also exclude payments from one part
of the Federal Government to another. In addition, user
charges do not include dedicated taxes (such as taxes paid
to social insurance programs or excise taxes on gasoline)
or customs duties, fines, penalties, or forfeitures.
Alternative definitions. The definition for user
charges used in this chapter follows the definition used in
OMB Circular No. A–25, “User Charges,’’ which provides
policy guidance to Executive Branch agencies on setting
the amount for user charges. Alternative definitions may
be used for other purposes. Much of the discussion of user
charges below—their purpose, when they should be levied, and how the amount should be set—applies to these
alternative definitions as well.

A narrower definition of user charges could be limited
to proceeds from the sale of goods and services, excluding
the proceeds from the sale of assets, and to proceeds that
are dedicated to financing the goods and services being
provided. This definition is similar to one the House of
Representatives uses as a guide for purposes of committee jurisdiction. (See the Congressional Record, January 3,
1991, p. H31, item 8.) The definition of user charges could
be even narrower by excluding regulatory fees and focusing solely on business-type transactions. Alternatively,
the user charge definition could be broader than the one
used in this chapter by including beneficiary- or liabilitybased excise taxes.5
What is the purpose of user charges? User charges
are intended to improve the efficiency and equity of financing certain Government activities. Charging users
for activities that benefit a relatively limited number of
people reduces the burden on the general taxpayer, as
does charging regulated parties for regulatory activities
in a particular sector.
User charges that are set to cover the costs of production
of goods and services can result in more efficient resource
allocation within the economy. When buyers are charged
the cost of providing goods and services, they make better
cost-benefit calculations regarding the size of their purchase, which in turn signals to the Government how much
of the goods or services it should provide. Prices in private, competitive markets serve the same purposes. User
charges for goods and services that do not have special
social or distributional benefits may also improve equity
or fairness by requiring those who benefit from an activity
to pay for it and by not requiring those who do not benefit
from an activity to pay for it.
When should the Government impose a charge?
Discussions of whether to finance spending with a tax or
a fee often focus on whether the benefits of the activity
accrue to the public in general or to a limited group of people. In general, if the benefits of spending accrue broadly
to the public or include special social or distributional
benefits, then the program should be financed by taxes
paid by the public. In contrast, if the benefits accrue to
a limited number of private individuals or organizations

4 In this chapter, the term “user charge” is generally used and has
the same meaning as the term “user fee.” The term “user charge” is
the one used in OMB Circular No. A–11, “Preparation, Submission, and
Execution of the Budget”; OMB Circular No. A–25, “User Charges”; and
Chapter 8 of this volume, “Budget Concepts.” In common usage, the
terms “user charge” and “user fee” are often used interchangeably, and in
A Glossary of Terms Used in the Federal Budget Process, GAO provides
the same definition for both terms.

5 Beneficiary- and liability-based taxes are terms taken from the Congressional Budget Office, The Growth of Federal User Charges, August
1993, and updated in October 1995. Gasoline taxes are an example of
beneficiary-based taxes. An example of a liability-based tax is the excise
tax that formerly helped fund the hazardous substance superfund in the
Environmental Protection Agency. This tax was paid by industry groups
to finance environmental cleanup activities related to the industry activity but not necessarily caused by the payer of the fee.

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12. Offsetting Collections and Offsetting Receipts

and do not include special social or distributional benefits,
then the program should be financed by charges paid by
the private beneficiaries. For Federal programs where
the benefits are entirely public or entirely private, applying this principle can be relatively easy. For example, the
benefits from national defense accrue to the public in general, and according to this principle should be (and are)
financed by taxes. In contrast, the benefits of electricity
sold by the Tennessee Valley Authority accrue primarily
to those using the electricity, and should be (and predominantly are) financed by user charges.
In many cases, however, an activity has benefits that
accrue to both public and private groups, and it may be
difficult to identify how much of the benefits accrue to
each. Because of this, it can be difficult to know how much
of the program should be financed by taxes and how much
by fees. For example, the benefits from recreation areas
are mixed. Fees for visitors to these areas are appropriate because the visitors benefit directly from their visit,
but the public in general also benefits because these areas protect the Nation’s natural and historic heritage now
and for posterity. For this reason, visitor recreation fees
generally cover only part of the cost to the Government of
maintaining the recreation property. Where a fee may be
appropriate to finance all or part of an activity, the extent
to which a fee can be easily administered must be considered. For example, if fees are charged for entering or
using Government-owned land then there must be clear
points of entry onto the land and attendants patrolling
and monitoring the land’s use.
What amount should be charged? When the
Government is acting in its capacity as sovereign and
where user charges are appropriate, such as for some
regulatory activities, current policy supports setting fees

equal to the full cost to the Government, including both
direct and indirect costs. When the Government is not
acting in its capacity as sovereign and engages in a purely business-type transaction (such as leasing or selling
goods, services, or resources), market price is generally
the basis for establishing the fee.6 If the Government is
engaged in a purely business-type transaction and economic resources are allocated efficiently, then this market
price should be equal to or greater than the Government’s
full cost of production.
Classification of user charges in the budget. As
shown in the note to Table 12–3, most user charges are
classified as offsets to outlays on the spending side of the
budget, but a few are classified on the receipts side of the
budget. An estimated $5.2 billion in 2019 of user charges
are classified on the receipts side and are included in the
governmental receipts totals described in the previous
chapter, “Governmental Receipts.’’ They are classified as
receipts because they are regulatory charges collected by
the Federal Government by the exercise of its sovereign
powers. Examples include filing fees in the United States
courts and agricultural quarantine inspection fees.
The remaining user charges, an estimated $359.0 billion in 2019, are classified as offsetting collections and
offsetting receipts on the spending side of the budget. As
discussed above in the context of all offsetting collections
and offsetting receipts, some of these user charges are collected by the Federal Government by the exercise of its
sovereign powers and conceptually should appear on the
receipts side of the budget, but they are required by law
or a long-standing practice to be classified on the spending side.
6 Policies for setting user charges are promulgated in OMB Circular
No. A–25: “User Charges’’ (July 8, 1993).

III. USER CHARGE PROPOSALS
As shown in Table 12–1, an estimated $219.0 billion
of user charges for 2019 will be credited directly to expenditure accounts and will generally be available for
expenditure when they are collected, without further action by the Congress. An estimated $145.2 billion of user
charges for 2019 will be deposited in offsetting receipt accounts and will be available to be spent only according to
the legislation that established the charges.
As shown in Table 12–4, the Administration is proposing new or increased user charges that would, in the
aggregate, increase collections by an estimated $2.4 billion
in 2019 and an average of $11.8 billion per year from 2020
through 2028. These estimates reflect only the amounts
to be collected; they do not include related spending. Each
proposal is classified as either discretionary or mandatory, as those terms are defined in the Balanced Budget
and Emergency Deficit Control Act of 1985, as amended.
“Discretionary’’ refers to user charges controlled through
annual appropriations acts and generally under the jurisdiction of the appropriations committees in the Congress.
“Mandatory’’ refers to user charges controlled by permanent laws and under the jurisdiction of the authorizing

committees. These and other terms are discussed further
in this volume in Chapter 8, “Budget Concepts.’’
A. Discretionary User Charge Proposals
1. Offsetting collections
Department of Agriculture
Establish Federal Grain Inspection Service fee. The
Administration proposes establishing a new discretionary
user fee to recover the full costs for programs under the
Federal Grain Inspection Service (FGIS). Entities that
receive marketing benefits from FGIS services should
pay for the costs of these programs. For example, grain
standards benefit and are used almost solely for the grain
industry, and because they facilitate the orderly marketing of grain products, it is industry that should bear the
cost.
Establish Agricultural Quarantine Inspection fee. The
Administration proposes establishing a new discretionary user fee for the Animal and Plant Health Inspection
Service (APHIS) Agricultural Quarantine Inspection

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(AQI) pre-departure program. The fees would recover the
full costs of APHIS’ inspections of passengers and cargo
traveling to the continental United States from Hawaii
and Puerto Rico to prevent the introduction of non-native
agricultural pests and diseases into the mainland.
Department of Health and Human Services
Food and Drug Administration (FDA): Reauthorize
Animal Drug User Fee Act. The Budget proposes to reauthorize the Animal Drug User Fee Act (ADUFA), which
expires on September 30, 2018. ADUFA fees support
FDA’s premarket review of new animal drugs.
FDA: Reauthorize Animal Generic Drug User Fee Act.
The Budget reauthorizes the Animal Generic Drug User
Fee Act (AGDUFA), which expires on September 30, 2018.
AGDUFA fees support FDA’s premarket review of generic
animal drugs.
FDA: Increase export certification user fee cap. Firms
exporting products from the United States are often asked
by foreign customers or foreign governments to supply a
“certificate” for products regulated by the FDA to document the product’s regulatory or marketing status. The
proposal increases the maximum user fee cap from $175
per export certification to $600 to meet FDA’s true cost of
issuing export certificates and to ensure better and faster
service for American companies that request the service.
FDA: Establish over-the-counter monograph user fee.
FDA currently regulates over-the-counter (OTC) products through a three-phase public rulemaking process
to establish standards or drug monographs for an OTC
therapeutic drug class. The proposal would provide additional resources and authorities to FDA to bring new OTC
products into the market faster so that Americans will
have greater access to a wider range of safe and effective
OTC products.
Centers for Medicare and Medicaid Services (CMS):
Establish survey and certification revisit fee. The Budget
proposes a revisit user fee to provide CMS with a greater
ability to revisit poorly performing health care facilities
and build greater accountability by creating an incentive
for facilities to correct deficiencies and ensure quality of
care.
Health Resources and Services Administration: 340B
Program user fee: To improve the administration and
oversight of the 340B Drug Discount Program, the Budget
includes a new user charge to those covered entities participating in the program.
Department of Homeland Security
Transportation Security Administration (TSA):
Increase aviation passenger security fee. Pursuant to the
Bipartisan Budget Act (BBA) of 2013, the passenger security fee is $5.60 per one-way trip. The BBA also allocated
a portion of the fee revenue to deficit reduction. The 2019
Budget proposes to increase the passenger security fee
from $5.60 to $6.60 in FY 2019, and from $6.60 to $8.25
starting in FY 2020 in order to recover the full cost of
aviation security from the traveling public. This proposal
will increase offsetting collections by an estimated $20.14
billion between 2019 and 2028.

ANALYTICAL PERSPECTIVES

Department of Housing and Urban Development
Federal Housing Administration (FHA): Establish
Information technology (IT) fee. The Budget requests
authority to charge lenders using FHA mortgage insurance an IT fee, which would generate, through 2022, an
estimated $20 million annually in offsetting collections.
These additional collections will offset the cost of modernizing FHA’s aging IT systems.
Department of State
Establish Diplomacy Center rental fee. This new user
fee will enable the Department of State to provide support, on a cost-recovery basis, to outside organizations
for programs and conference activities held at the U.S.
Diplomacy Center.
Department of Transportation
Federal Railroad Administration (FRA): Establish
Railroad Safety Inspection fee. The FRA establishes and
enforces safety standards for U.S. railroads. FRA’s rail
safety inspectors work in the field and oversee railroads’
operating and management practices. The Administration
is proposing that, starting in 2019, the railroads contribute to partially cover the cost of FRA’s field inspections
because railroads benefit directly from Government efforts to maintain high safety standards. The proposed fee
would be similar to existing charges collected from other
industries regulated by Federal safety programs.
Department of the Treasury
Subject Financial Research Fund (FRF) fee to annual
appropriations action. Expenses of the Financial Stability
Oversight Council (FSOC) and the Office of Financial
Research (OFR) are paid through the FRF, which is funded by assessments on certain bank holding companies
with total consolidated assets of $50 billion or greater and
nonbank financial companies supervised by the Federal
Reserve Board of Governors. The FRF was established by
the Dodd-Frank Act and is managed by the Department
of the Treasury. To improve their effectiveness and ensure
greater accountability, the Budget proposes to subject
activities of the FSOC and OFR to the appropriations
process. In so doing, currently authorized assessments
would, beginning in 2020, be reclassified as discretionary
offsetting collections and set at a level determined by the
Congress. The Budget also reflects continued reductions
in OFR spending commensurate with the renewed fiscal
discipline being applied across the Federal Government.
Environmental Protection Agency (EPA)
Establish ENERGY STAR fee. The Administration proposes to collect fees to fund EPA’s administration of the
ENERGY STAR program. Product manufacturers who
seek to label their products under the program would pay
a modest fee that would recover the full costs of EPA’s
work to set voluntary energy efficiency standards and to
process applications. Fee collections will begin after EPA
undertakes a rulemaking process to determine which
products would be covered by fees and the level of fees,

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12. Offsetting Collections and Offsetting Receipts

and to ensure that a fee system would not discourage
manufacturers from participating in the program or result in a loss of environmental benefits.
Establish oil and chemical facility compliance assistance fees. The Administration proposes to provide
an optional service to oil and chemical facilities to help
these facilities identify actions to comply with certain
environmental laws and regulations. Upon payment of
a fee, EPA would conduct an on-site walk-through of a
facility and provide recommendations and best practices
regarding how to comply with certain regulations under
the Clean Air Act and the Federal Water Pollution Control
Act. This service would initially be available to facilities
that are responsible for preparing and implementing a
Risk Management Plan, Spill Prevention Control and
Countermeasure Plan, and/or Facility Response Plan.
Facilities choosing to utilize this service would pay a modest fee that would recover the full costs of EPA’s work in
providing this compliance assistance service to that facility. Fee collections and program implementation will begin
after EPA issues procedures for applying for the service
and the collection and use of such fees.

B. Mandatory User Charge Proposals
1. Offsetting collections
Department of Labor

Establish CFTC user fee. The Budget proposes an
amendment to the Commodity Exchange Act authorizing
the CFTC to collect user fees to fund the Commission’s
activities, like other Federal financial and banking regulators. Fee funding would shift the costs of services provided
by the CFTC from the general taxpayer to the primary
beneficiaries of CFTC oversight. Contingent upon enactment of legislation authorizing the CFTC to collect fees,
the Administration proposes that collections begin in 2019
to offset a portion of the CFTC’s annual appropriation.

Improve Pension Benefit Guaranty Corporation (PBGC)
solvency. PBGC acts as a backstop to protect pension payments for workers whose companies have failed. Currently,
PBGC’s pension insurance programs are underfunded,
and its liabilities far exceed its assets. PBGC receives
no taxpayer funds and its premiums are currently much
lower than what a private financial institution would
charge for insuring the same risk. PBGC’s multiemployer
program, which insures the pension benefits of 10 million
workers, is at risk of insolvency by 2025. As an important step to protect the pensions of these hardworking
Americans, the Budget proposes to create a variable-rate
premium (VRP) and exit premium in the multiemployer
program. A multiemployer VRP would require plans to
pay additional premiums based on their level of underfunding, up to a cap, as is done in the single-employer
program. An exit premium, equal to ten times the VRP
cap, would be assessed on employers that withdraw from
the system. PBGC would have limited authority to design
waivers for some or all of the newly assessed premiums
if there is a substantial risk that the payment of premiums will accelerate plan insolvency, resulting in earlier
financial assistance to the plan. This proposal would raise
approximately $16 billion in premiums over the ten-year
window. At this level of receipts, the program is more
likely than not to remain solvent over the next 20 years,
helping to ensure that there is a safety net available to
workers whose multiemployer plans fail.

2. Offsetting receipts

2. Offsetting receipts

Department of State

Department of Agriculture

Western Hemisphere Travel Initiative surcharge extension. The Administration proposes to permanently extend
the authority for the Department of State to collect the
Western Hemisphere Travel Initiative surcharge. The
surcharge was initially enacted by the Passport Services
Enhancement Act of 2005 (P.L. 109–167) to cover the
Department’s costs of meeting increased demand for
passports, which resulted from the implementation of the
Western Hemisphere Travel Initiative.
Border Crossing Card (BCC) fee increase. The Budget
includes a proposal to allow the fee charged for BCC minor applicants to be set administratively, rather than
statutorily, at one-half the fee charged for processing an
adult border crossing card. Administrative fee setting will
allow the fee to better reflect the associated cost of service,
consistent with other fees charged for consular services.
As a result of this change, annual BCC fee collections beginning in 2019 are projected to increase by $13 million
(from $3 million to $16 million).

Establish Food Safety and Inspection Service (FSIS)
user fee. The Administration proposes establishing a Food
Safety and Inspection Service (FSIS) user fee to cover
the costs of all domestic inspection activity and import
re-inspection and most of the central operations costs for
Federal, State, and international inspection programs
for meat, poultry, and eggs. FSIS inspections benefit the
meat, poultry, and egg industries. FSIS personnel are
continuously present for all egg processing and domestic
slaughter operations, inspect each livestock and poultry carcass, and inspect operations at meat and poultry
processing establishments at least once per shift. The
inspections cover microbiological and chemical testing
as well as cleanliness and cosmetic product defects. The
“inspected by USDA” stamp on meat and poultry labels
increases consumer confidence in the product which may
increase sales. The user fee would not cover Federal functions such as investigation, enforcement, risk analysis,
and emergency response. The Administration estimates
this fee would increase the cost of meat, poultry, and eggs
for consumers by less than one cent per pound.

Commodity Futures Trading Commission (CFTC)

148
Establish Packers and Stockyards Program user fee.
The Administration proposes establishing a Packers and
Stockyards user fee. This would recover the costs of the
Packers and Stockyards Program (P&SP) through a licensing fee. The P&SP benefits the livestock, meat, and
poultry industries by promoting fair business practices
and competitive market environments.
Establish Animal and Plant Health Inspection Service
(APHIS) user fee. The Administration proposes establishing three new Animal and Plant Health Inspection Service
(APHIS) mandatory user fees to offset costs related to 1)
enforcement of the Animal Welfare Act, 2) regulation of
biotechnology derived products, and 3) regulation of veterinary biologics products.
Establish Agricultural Marketing Service (AMS)
user fee. The Administration proposes establishing an
Agricultural Marketing Service (AMS) user fee to cover
the full costs of the agency’s oversight of Marketing Orders
and Agreements. Marketing Orders and Agreements are
initiated by industry to help provide stable markets, and
are tailored to the specific industry’s needs. The industries
that substantially benefit from Marketing Orders and
Agreements should pay for the oversight of these programs.
Department of Commerce
Lease Shared Secondary Licenses. To promote efficient
use of the electromagnetic spectrum, the Administration
proposes to require the leasing of Federal spectrum through
secondary licenses. Under this proposal, the National
Telecommunications and Information Administration
(NTIA) would be granted authority to lease access to
Federal spectrum for commercial use on a non-interference basis with Federal primary users. Working with
other Federal agencies, NTIA would negotiate sharing
arrangements on behalf of the Federal Government and
would seek to increase the efficiency of spectrum when
possible without causing harmful interference to Federal
users authorized to operate in the negotiated bands. In
addition to Federal spectrum auctions, leases will provide another option for maximizing the economic value
of this scarce spectrum resource. Significant resources
will be required by NTIA and other Federal agencies to
negotiate and manage these spectrum leases. The cost of
administering the program will be offset by a portion of
the lease revenue. Therefore the proposal is conservatively estimated to generate approximately $700 million in
net deficit reduction for taxpayers.
Department of Energy
Reform Power Marketing Administration (PMA) power
rates. The PMAs sell wholesale electricity generated at
dams owned and operated by the Army Corps of Engineers
or the Bureau of Reclamation. The Flood Control Act of
1944 requires the PMAs to generate revenues to recover
all costs, including annual operating and maintenance
costs and the taxpayers’ investment in the power portions
of dams and in transmission lines. The PMAs recover these
costs by establishing rates, charged to utility customers,
based on the cost of providing this electricity. These rates
are limited to recovering costs and there is limited regu-

ANALYTICAL PERSPECTIVES

latory or state regulatory oversight to ensure these rates
are efficient and justified. Current law permits the PMAs
to defer repayment of prior capital investment by the
taxpayers and creates economic inefficiencies. The vast
majority of the Nation’s electricity needs are met through
for-profit Investor Owned Utilities, which are subject to
state and/or Federal regulatory oversight in the establishment of rates. This proposal would change the statutory
requirement that the PMA rates be based on recovering
costs to a rate structure that could allow for faster recoupment of taxpayer investment and consideration of rates
charged by comparable utilities.
Department of Health and Human Services
Require clearinghouses and billing agents acting on behalf of Medicare providers and suppliers to enroll in the
program. The Budget proposes to establish an enrollment
and registration process for clearinghouses and billing
agents who act on behalf of Medicare providers and suppliers, introducing an application fee to be consistent with
program integrity safeguards in place for institutional
and individual providers.
Department of Homeland Security
Extend expiring Customs and Border Protection (CBP)
fees. The Budget proposes to extend the Merchandise
Processing Fee beyond its current expiration date of
January 14, 2026 to January 14, 2031. It also proposes to extend COBRA fees (statutorily set under the
Consolidated Omnibus Budget Reconciliation Act of 1985)
and the Express Consignment Courier Facilities (ECCF)
fee created under the Trade Act of 2002 beyond their current expiration date of September 30, 2025 to September
30, 2030.
Increase customs user fees. The Budget proposes to increase COBRA and ECCF fees created under the Trade
Act of 2002. COBRA created a series of user fees for air
and sea passengers, commercial trucks, railroad cars, private aircraft and vessels, commercial vessels, dutiable
mail packages, broker permits, barges and bulk carriers
from Canada and Mexico, cruise vessel passengers, and
ferry vessel passengers. This proposal would increase
the customs inspection fee by $2.10 for certain air and
sea passengers and increase other COBRA fees by proportional amounts. The additional revenue raised from
increasing the user fees will allow CBP to recover more
costs associated with customs related inspections, and
reduce waiting times by helping to support the hiring of
840 new CBP Officers. This fee was last adjusted in April
2007, yet international travel volumes have grown since
that time and CBP costs for customs inspections continue
to increase. As a result, CBP relies on its annually appropriated funds to support the difference between fee
collections and the costs of providing customs inspectional services. The Government Accountability Office’s most
recent review of these COBRA user fees (July 2016) identified that CBP collected $686 million in COBRA/ECCF
fees compared to $870 million in operating costs, exhibiting a recovery rate of 78 percent.7 With the fee increase,
7

GAO–16–443, Enhanced Oversight Could Better Ensure Programs

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12. Offsetting Collections and Offsetting Receipts

CBP would potentially collect the same amount it incurs
in COBRA/ECCF eligible costs in FY 2019. The proposed
legislation will close the gap between costs and collections, enabling CBP to provide improved inspectional
services to those who pay this user fee.
Increase immigration user fees. This proposal will increase the Immigration Inspection User Fee (IUF) by $2
and eliminate a partial fee exemption for sea passengers arriving from the United States, Canada, Mexico,
or adjacent islands. These two adjustments will result
in a total fee of $9 for all passengers, regardless of mode
of transportation or point of departure. This fee is paid
by passengers and is used to recover some of the costs
related to determining the admissibility of passengers
entering the U.S. Specifically, the fees collected support
immigration inspections, the maintenance and updating
of systems to track criminal and illegal aliens in areas
with high apprehensions, asylum hearings, and the repair
and maintenance of equipment. This fee was last adjusted
in November 2001, yet international travel volumes have
grown significantly since that time and CBP costs for immigration inspections continue to increase. As a result,
CBP relies on annually appropriated funds to support the
difference between fee collections and the costs of providing immigration inspection services. The Government
Accountability Office’s most recent review of IUF (July
2016) identified that CBP collected $728 million in IUF
fees compared to $1,003 million in operating costs, exhibiting a recovery rate of 73 percent.8 To prevent this gap
from widening again in the future, the proposal will authorize CBP to adjust the fee without further statutory
changes. CBP estimates raising the fee and lifting the exemption could offset the cost of an estimated 1,230 CBP
Officers.
Department of the Interior
Reauthorize the Federal Land Transaction Facilitation
Act (FLTFA). The Budget proposes to reauthorize the
FLTFA, which expired in July 2011, and allow lands identified as suitable for disposal in recent land use plans to
be sold using the FLTFA authority. The FLTFA sales revenues would continue to be used to fund the acquisition of
environmentally sensitive lands and to cover BLM’s administrative costs associated with conducting sales.
Department of Labor
Expand Foreign Labor Certification fees. The Budget
proposes authorizing legislation to establish and retain
fees to cover the costs of operating the foreign labor certification programs, which ensure that employers proposing
to bring in immigrant workers have checked to ensure
that American workers cannot meet their needs and that
immigrant workers are being compensated appropriately
and not disadvantaging American workers. The ability to
charge fees for these programs would give the Department
Receiving Fees and Other Collections Use Funds Efficiently, http://
www.gao.gov/products/GAO–16–443
8 GAO–16–443, Enhanced Oversight Could Better Ensure Programs
Receiving Fees and Other Collections Use Funds Efficiently, http://
www.gao.gov/products/GAO–16–443

of Labor (DOL) a more reliable, workload-based source of
funding for this function (as the Department of Homeland
Security has), and would ultimately eliminate the need
for discretionary appropriations. The proposal includes
the following: 1) charge employer fees for its prevailing
wage determinations; 2) charge employer fees for its permanent labor certification program; 3) charge employer
fees for H–2B non-agricultural workers; and 4) retain
and adjust the H–2A agricultural worker application fees
currently deposited into the General Fund. The fee levels
would be set via regulation to ensure that the amounts
are subject to review. Given the DOL Inspector General’s
important role in investigating fraud and abuse, the proposal also includes a mechanism to provide funding for
the Inspector General’s work to oversee foreign labor certification programs.
Department of the Treasury
Increase and extend guarantee fee charged by GSEs.
The Temporary Payroll Tax Cut Continuation Act of
2011 (Public Law 112–78) required that Fannie Mae and
Freddie Mac increase their credit guarantee fees on single-family mortgage acquisitions between 2012 and 2021
by an average of at least 0.10 percentage points. Revenues
generated by this fee increase are remitted directly to the
Treasury for deficit reduction. The Budget proposes to
increase this fee by 0.10 percentage points for single-family mortgage acquisitions from 2019 through 2021, and
then extend the 0.20 percentage point fee for acquisitions
through 2023.
Allow District of Columbia Courts to retain bar exam
and application fees. Under the 1997 National Capital
Revitalization and Self-Government Improvement Act
of 1997, all fees collected by the DC courts are deposited
into the DC Crime Victims Compensation Fund. Among
the various fees collected by the DC courts are bar examination and application fees. Since adopting the Uniform
Bar Examination in 2016, DC has seen the number of
bar examinees increase by 214%. However, because the
associated fees are deposited into the DC Crime Victims
Compensation Fund, there has been no correlated increase in the resources available to process the increased
number of applications. The proposal would allow the DC
courts to retain the bar examination and application fees
as offsetting receipts to pay for the processing of exams
and applications.
Federal Communications Commission (FCC)
Enact Spectrum License User Fee. To promote efficient
use of the electromagnetic spectrum, the Administration
proposes to provide the FCC with new authority to use
other economic mechanisms, such as fees, as a spectrum
management tool. The FCC would be authorized to set
charges for unauctioned spectrum licenses based on
spectrum-management principles. Fees would be phased
in over time as part of an ongoing rulemaking process to
determine the appropriate application and level for fees.

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ANALYTICAL PERSPECTIVES

C. User Charge Proposals that are
Governmental Receipts
Department of Homeland Security
CBP: Establish user fee for Electronic Visa Update
System. The Budget proposes to establish a user fee for
the Electronic Visa Update System (EVUS), a new CBP
program to collect biographic and travel-related information from certain non-immigrant visa holders prior to
traveling to the United States. This process will complement the existing visa application process and enhance
CBP’s ability to make pre-travel admissibility and risk
determinations. CBP proposes to establish a user fee to
fund the costs of establishing, providing, and administering the system.
Eliminate BrandUSA; make revenue available to CBP.
The Administration proposes to eliminate funding for the
Corporation for Travel Promotion (also known as Brand
USA) as part of the Administration’s plans to move the
Nation towards fiscal responsibility and to redefine the
proper role of the Federal Government. The Budget redirects the Electronic System for Travel Authorization
(ESTA) surcharge currently deposited in the Travel
Promotion Fund to the ESTA account at Customs and
Border Protection with a portion to be transferred to the
International Trade Administration.
Make full Electronic System for Travel Authorization
(ESTA) receipts available to CBP. The Budget proposes to
permanently extend the ESTA receipts and eliminate the
$100 million limitation on ESTA receipt transfers from
the General Fund, and provide all collections made to
CBP’s ESTA account. CBP intends to use these resources
to support traveler processing, including entry and exit
process re-engineering and modernization, staffing and
overtime processing of arrivals and departures from the
United States, and any other CBP activities related to the
processing of passengers including, but not limited to, activities of CBP’s National Targeting Center.

Department of the Treasury
Subject Financial Research Fund (FRF) fee to annual
appropriations action. As explained above in the section of
discretionary use charge proposals, the Budget proposes
to subject activities of the Financial Stability Oversight
Council (FSOC) and the Office of Financial Research
(OFR) to the appropriations process in order to improve
their effectiveness and ensure greater accountability. As
part of the proposal, currently authorized assessments
would be reclassified as discretionary offsetting collections, resulting in a reduction in governmental receipts
and an increase in discretionary offsetting collections.
Corps of Engineers—Civil Works
Reform inland waterways funding. The Administration
proposes to reform the laws governing the Inland
Waterways Trust Fund, including establishing an annual
fee to increase the amount paid by commercial navigation
users of the inland waterways. In 1986, Congress provided
that commercial traffic on the inland waterways would be
responsible for 50 percent of the capital costs of the locks,
dams, and other features that make barge transportation
possible on the inland waterways. The additional revenue
would help finance future capital investments, as well as
10 percent of the operation and maintenance cost, in these
waterways to support economic growth. The current excise
tax on diesel fuel used in inland waterways commerce will
not produce the revenue needed to cover these costs.
Reduce harbor maintenance tax. The Administration
proposes to reduce the Harbor Maintenance Tax rate to
better align estimated annual receipts from this tax with
recent appropriation levels for eligible expenditures from
the Harbor Maintenance Trust Fund. Reducing this tax
would provide greater flexibility for individual ports to
establish appropriate fee structures for services they provide, in order to help finance their capital and operating
expenses on their own.

151

12. Offsetting Collections and Offsetting Receipts

Table 12–4. USER CHARGE PROPOSALS IN THE FY 2019 BUDGET 1
(Estimated collections in millions of dollars)
2018 2019

2020

2021

2022

2023

2024

2025

2026

2027

2019–
2023

2028

2019–
2028

OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS
DISCRETIONARY:
Offsetting collections
Department of Agriculture
Establish Federal Grain Inspection Service fee ������������������������������������� .........
Establish Agricultural Quarantine Inspection fee ����������������������������������� .........

20
29

20
30

20
31

20
31

20
32

20
33

20
34

20
35

20
35

20
36

100
153

200
326

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

25
13
4
22

26
14
4
22

28
14
4
25

29
15
4
31

31
16
5
34

32
17
5
36

34
18
5
37

35
18
5
39

37
19
5
41

39
20
5
43

139
72
21
134

316
164
46
330

.........

14

17

28

29

29

30

31

31

32

32

117

273

.........

16

16

16

16

16

16

16

16

16

16

80

160

Department of Homeland Security
Transportation Security Administration: Increase aviation passenger
security fee ��������������������������������������������������������������������������������������� .........

557

2,008

2,048

2,088

2,130

2,173

2,216

2,261

2,306

2,353

8,831

20,140

Department of Housing and Urban Development
Federal Housing Administration: Establish Information Technology (IT)
fee ����������������������������������������������������������������������������������������������������� .........

20

20

20

20

.........

.........

.........

.........

.........

.........

80

80

Department of State
Establish Diplomacy Center Rental Fee ������������������������������������������������ .........

*

*

*

*

*

*

*

*

*

*

*

*

Department of Transportation
Federal Railroad Administration: Establish Railroad Safety Inspection
fee ����������������������������������������������������������������������������������������������������� .........

50

50

50

50

50

50

50

50

50

50

250

500

Department of the Treasury
Subject Financial Research Fund fee to annual appropriations action�� ......... .........

68

68

68

68

68

68

68

68

68

272

612

Environmental Protection Agency
Establish ENERGY STAR fee ���������������������������������������������������������������� .........
Establish chemical facility compliance assistance fee ��������������������������� .........
Establish oil facility compliance assistance fee ������������������������������������� .........

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

46
20
10

230
100
50

460
200
100

Commodity Futures Trading Commission (CFTC)
Establish CFTC user fee ����������������������������������������������������������������������� .........

32

32

32

32

32

32

32

32

32

32

160

320

Department of State
Extend Western Hemisphere Travel Initiative surcharge ����������������������� ......... 465
Increase Border Crossing Card Fee ������������������������������������������������������ .........
13
Subtotal, discretionary user charge proposals ���������������������������� ......... 1,356

465
13
2,881

465
13
2,938

465
13
2,987

465
13
3,017

465
13
3,066

465
13
3,115

465
13
3,164

465
13
3,215

465
13
3,268

2,325
65
13,179

4,650
130
29,007

Department of Labor
Improve Pension Benefit Guaranty Corporation solvency���������������������� ......... ......... 1,583

1,670

1,729

1,788

1,821

1,057

2,635

1,875

1,894

6,769

16,051

Department of Health and Human Services
Food and Drug Administration (FDA): Reauthorize Animal Drug User
Fee Act ���������������������������������������������������������������������������������������������
FDA: Reauthorize Animal Generic Drug User Fee Act ��������������������������
FDA: Increase export certification user fee cap �������������������������������������
FDA: Establish over-the-counter monograph user fee ��������������������������
Centers for Medicare and Medicaid Services: Establish survey and
certification revisit fee �����������������������������������������������������������������������
Health Resources and Services Administration: Establish 340B
Program user fee ������������������������������������������������������������������������������

Offsetting receipts

MANDATORY:
Offsetting collections

152

ANALYTICAL PERSPECTIVES

Table 12–4. USER CHARGE PROPOSALS IN THE FY 2019 BUDGET 1 —Continued
(Estimated collections in millions of dollars)
2018 2019

2020

2021

2022

2023

2024

2025

2026

2027

2019–
2023

2028

2019–
2028

Offsetting receipts
Department of Agriculture
Establish Food Safety and Inspection Service user fee�������������������������
Establish Packers and Stockyards Program user fee ����������������������������
Establish Animal and Plant Health Inspection Service user fee ������������
Establish Agricultural Marketing Service (AMS) user fee ���������������������

......... .........
.........
23
.........
23
.........
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

660
23
23
20

2,640
115
115
100

5,940
230
230
200

Department of Commerce
Lease Shared Secondary Licenses ������������������������������������������������������� .........

50

55

55

60

65

70

70

80

80

85

285

670

Department of Energy
Reform Power Marketing Administration power rates ���������������������������� .........

162

169

173

182

188

192

199

206

211

217

874

1,899

Department of Health and Human Services
Require clearinghouses and billing agents acting on behalf of
Medicare providers and suppliers to enroll in the program ��������������� .........

15

15

16

16

16

17

17

17

18

18

78

165

Department of Homeland Security
Extend expiring Customs and Border Protection (CBP) fees ���������������� ......... .........
Increase customs user fees ������������������������������������������������������������������� ......... 312
Increase immigration user fees ������������������������������������������������������������� ......... 316

.........
350
328

.........
368
375

.........
388
387

.........
410
478

.........
432
494

......... 4,159
456
480
593
614

5,334
506
679

5,601
507
702

.........
1,829
1,884

15,095
4,210
4,966

Department of the Interior
Reauthorize the Federal Land Transaction Facilitation Act �������������������� .........

5

10

19

29

29

29

29

29

29

29

92

237

Department of Labor
Expand Foreign Labor Certification fees ����������������������������������������������� .........

1

37

76

79

83

88

92

97

102

108

276

763

212

967

1699

2350

3475

4258

4034

3398

2858

2401

8,703

25,652

*

*

*

*

*

*

*

*

*

*

2

4

Federal Communications Commission
Enact Spectrum License User Fee ������������������������������������������������������ .........
50
Subtotal, mandatory user charge proposals �������������������������������� ......... 1,189
Subtotal, user charge proposals that are offsetting collections and
offsetting receipts ����������������������������������������������������������������������� ......... 2,545

150
4,390

300
5,477

450
6,396

500
7,758

500
8,627

500
500
500
500
7,773 12,941 12,918 12,788

1,450
25,210

3,950
80,257

7,271

8,415

9,383 10,775 11,693 10,888 16,105 16,133 16,056

28
.........

31
.........

34
.........

38
.........

42
.........

46
.........

52
.........

57
.........

64
.........

156
.........

417
.........

.........

171

177

183

189

196

202

209

216

531

1,543

Department of the Treasury
Subject Financial Research Fund fee to annual appropriations action����� ......... .........

–68

–68

–68

–68

–68

–68

–68

–68

–68

–272

–612

Corps of Engineers - Civil Works
Reform inland waterways funding ���������������������������������������������������������� ......... 178
Reduce harbor maintenance fee ����������������������������������������������������������� ......... –347
Subtotal, governmental receipts user charge proposals ����������������� ......... –144

178
–369
–231

178
–383
–71

178
–393
–72

178
–403
–72

178
–412
–71

178
–424
–72

178
–437
–73

178
–453
–77

178
–471
–81

890
–1,895
–590

1,780
–4,092
–964

7,040

8,344

9,311 10,703 11,622 10,816 16,032 16,056 15,975

Department of the Treasury
Increase and extend guarantee fee charged by GSEs �������������������������� .........
Allow District of Columbia Courts to retain bar exam and application
fees ��������������������������������������������������������������������������������������������������� .........

38,389 109,264

GOVERNMENTAL RECEIPTS
Department of Homeland Security
CBP: Establish user fee for Electronic Visa Update System ������������������ .........
25
Eliminate BrandUSA; make revenue available to CBP �������������������������� ......... .........
Make full Electronic System for Travel Authorization receipts available
to CBP ���������������������������������������������������������������������������������������������� ......... .........

Total, user charge proposals ������������������������������������������������������������������ ......... 2,401
1 A positive sign indicates an increase in collections.
* $500,000 or less

37,799 108,300

13. TAX EXPENDITURES

The Congressional Budget Act of 1974 (Public Law 93–
344) requires that a list of “tax expenditures’’ be included
in the budget. Tax expenditures are defined in the law as
“revenue losses attributable to provisions of the Federal
tax laws which allow a special exclusion, exemption, or
deduction from gross income or which provide a special
credit, a preferential rate of tax, or a deferral of tax liability.’’ These exceptions may be viewed as alternatives to
other policy instruments, such as spending or regulatory
programs.
Identification and measurement of tax expenditures depends crucially on the baseline tax system against which
the actual tax system is compared. The tax expenditure
estimates presented in this document are patterned on a
comprehensive income tax, which defines income as the
sum of consumption and the change in net wealth in a
given period of time.

An important assumption underlying each tax expenditure estimate reported below is that other parts of the
Tax Code remain unchanged. The estimates would be different if tax expenditures were changed simultaneously
because of potential interactions among provisions. For
that reason, this document does not present a grand total
for the estimated tax expenditures.
Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2017–2027
using two methods of accounting: current revenue effects
and present value effects. The present value approach
provides estimates of the revenue effects for tax expenditures that generally involve deferrals of tax payments
into the future.

TAX EXPENDITURES IN THE INCOME TAX
Tax Expenditure Estimates
All tax expenditure estimates and descriptions presented here are based upon current tax law enacted as of July
1, 2017 and reflect the economic assumptions from the
Mid-Session Review of the 2017 Budget. In some cases,
expired or repealed provisions are listed if their revenue
effects occur in fiscal year 2017 or later.
The total revenue effects for tax expenditures for fiscal
years 2017–2027 are displayed according to the Budget’s
functional categories in Table 1. Descriptions of the specific tax expenditure provisions follow the discussion of
general features of the tax expenditure concept.
Two baseline concepts—the normal tax baseline and
the reference tax law baseline—are used to identify and
estimate tax expenditures.1 For the most part, the two
concepts coincide. However, items treated as tax expenditures under the normal tax baseline, but not the reference
tax law baseline, are indicated by the designation “normal
tax method’’ in the tables. The revenue effects for these
items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail below.
Tables 2A and 2B report separately the respective
portions of the total revenue effects that arise under the
individual and corporate income taxes. The location of
the estimates under the individual and corporate headings does not imply that these categories of filers benefit
1 These baseline concepts are thoroughly discussed in Special Analysis G of the 1985 Budget, where the former is referred to as the pre-1983
method and the latter the post-1982 method.

from the special tax provisions in proportion to the respective tax expenditure amounts shown. Rather, these
breakdowns show the form of tax liability that the various
provisions affect. The ultimate beneficiaries of corporate tax expenditures could be shareholders, employees,
customers, or other providers of capital, depending on economic forces.
Table 3 ranks the major tax expenditures by the size of
their 2018–2027 revenue effect. The first column provides
the number of the provision in order to cross reference
this table to Tables 1, 2A, and 2B, as well as to the descriptions below.
Interpreting Tax Expenditure Estimates
The estimates shown for individual tax expenditures in
Tables 1 through 3 do not necessarily equal the increase
in Federal revenues (or the change in the budget balance)
that would result from repealing these special provisions,
for the following reasons.
First, eliminating a tax expenditure may have incentive effects that alter economic behavior. These incentives
can affect the resulting magnitudes of the activity or of
other tax provisions or Government programs. For example, if capital gains were taxed at ordinary rates, capital
gain realizations would be expected to decline, resulting
in lower tax receipts. Such behavioral effects are not reflected in the estimates.
Second, tax expenditures are interdependent even
without incentive effects. Repeal of a tax expenditure
provision can increase or decrease the tax revenues associated with other provisions. For example, even if behavior

153

154

ANALYTICAL PERSPECTIVES

does not change, repeal of an itemized deduction could increase the revenue costs from other deductions because
some taxpayers would be moved into higher tax brackets.
Alternatively, repeal of an itemized deduction could lower
the revenue cost from other deductions if taxpayers are
led to claim the standard deduction instead of itemizing.
Similarly, if two provisions were repealed simultaneously,
the increase in tax liability could be greater or less than
the sum of the two separate tax expenditures, because
each is estimated assuming that the other remains in
force. In addition, the estimates reported in Table 1 are
the totals of individual and corporate income tax revenue
effects reported in Tables 2A and 2B, and do not reflect
any possible interactions between individual and corporate income tax receipts. For this reason, the estimates in
Table 1 should be regarded as approximations.
Present-Value Estimates
The annual value of tax expenditures for tax deferrals
is reported on a cash basis in all tables except Table 4.
Cash-based estimates reflect the difference between taxes
deferred in the current year and incoming revenues that
are received due to deferrals of taxes from prior years.
Although such estimates are useful as a measure of cash
flows into the Government, they do not accurately reflect
the true economic cost of these provisions. For example,
for a provision where activity levels have changed over
time, so that incoming tax receipts from past deferrals are
greater than deferred receipts from new activity, the cashbasis tax expenditure estimate can be negative, despite
the fact that in present-value terms current deferrals
have a real cost to the Government. Alternatively, in the
case of a newly enacted deferral provision, a cash-based
estimate can overstate the real effect on receipts to the
Government because the newly deferred taxes will ultimately be received.
Discounted present-value estimates of revenue effects
are presented in Table 4 for certain provisions that involve tax deferrals or other long-term revenue effects.
These estimates complement the cash-based tax expenditure estimates presented in the other tables.
The present-value estimates represent the revenue effects, net of future tax payments that follow from activities
undertaken during calendar year 2017 which cause the
deferrals or other long-term revenue effects. For instance,
a pension contribution in 2017 would cause a deferral of
tax payments on wages in 2017 and on pension fund earnings on this contribution (e.g., interest) in later years. In
some future year, however, the 2017 pension contribution
and accrued earnings will be paid out and taxes will be
due; these receipts are included in the present-value estimate. In general, this conceptual approach is similar to
the one used for reporting the budgetary effects of credit
programs, where direct loans and guarantees in a given
year affect future cash flows.

Tax Expenditure Baselines
A tax expenditure is an exception to baseline provisions
of the tax structure that usually results in a reduction in
the amount of tax owed. The 1974 Congressional Budget
Act, which mandated the tax expenditure budget, did not
specify the baseline provisions of the tax law. As noted
previously, deciding whether provisions are exceptions,
therefore, is a matter of judgment. As in prior years, most
of this year’s tax expenditure estimates are presented
using two baselines: the normal tax baseline and the
reference tax law baseline. Tax expenditures may take
the form of credits, deductions, special exceptions and
allowances.
The normal tax baseline is patterned on a practical
variant of a comprehensive income tax, which defines income as the sum of consumption and the change in net
wealth in a given period of time. The normal tax baseline
allows personal exemptions, a standard deduction, and
deduction of expenses incurred in earning income. It is
not limited to a particular structure of tax rates, or by a
specific definition of the taxpaying unit.
The reference tax law baseline is also patterned on
a comprehensive income tax, but it is closer to existing
law. Reference law tax expenditures are limited to special
exceptions from a generally provided tax rule that serve
programmatic functions in a way that is analogous to
spending programs. Provisions under the reference law
baseline are generally tax expenditures under the normal
tax baseline, but the reverse is not always true.
Both the normal and reference tax baselines allow several major departures from a pure comprehensive income
tax. For example, under the normal and reference tax
baselines:
• Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded as a tax expenditure. Accrued income would be taxed under a comprehensive
income tax.

• There is a separate corporate income tax.
• Tax rates on noncorporate business income vary by
level of income.

• Individual

tax rates, including brackets, standard
deduction, and personal exemptions, are allowed to
vary with marital status.

• Values of assets and debt are not generally adjust-

ed for inflation. A comprehensive income tax would
adjust the cost basis of capital assets and debt for
changes in the general price level. Thus, under a
comprehensive income tax baseline, the failure to
take account of inflation in measuring depreciation,
capital gains, and interest income would be regarded
as a negative tax expenditure (i.e., a tax penalty),
and failure to take account of inflation in measuring

155

13. Tax Expenditures

interest costs would be regarded as a positive tax
expenditure (i.e., a tax subsidy).
Although the reference law and normal tax baselines
are generally similar, areas of difference include:
Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law
baseline. Thus, corporate tax rates below the maximum
statutory rate do not give rise to a tax expenditure. The
normal tax baseline is similar, except that, by convention,
it specifies the current maximum rate as the baseline for
the corporate income tax. The lower tax rates applied to
the first $10 million of corporate income are thus regarded
as a tax expenditure under the normal tax. By convention, the Alternative Minimum Tax is treated as part of
the baseline rate structure under both the reference and
normal tax methods.
Income subject to the tax. Income subject to tax is
defined as gross income less the costs of earning that income. Under the reference tax rules, gross income does
not include gifts defined as receipts of money or property that are not consideration in an exchange nor does
gross income include most transfer payments from the
Government.2 The normal tax baseline also excludes gifts
between individuals from gross income. Under the normal tax baseline, however, all cash transfer payments
from the Government to private individuals are counted
in gross income, and exemptions of such transfers from
tax are identified as tax expenditures. The costs of earning income are generally deductible in determining
taxable income under both the reference and normal tax
baselines.3
Capital recovery. Under the reference tax law baseline
no tax expenditures arise from accelerated depreciation.
Under the normal tax baseline, the depreciation allowance for property is computed using estimates of economic
depreciation.
Treatment of foreign income. Both the normal and reference tax baselines allow a tax credit for foreign income
taxes paid (up to the amount of U.S. income taxes that
would otherwise be due), which prevents double taxation
of income earned abroad. Under the normal tax method,
however, controlled foreign corporations (CFCs) are not
regarded as entities separate from their controlling U.S.
shareholders. Thus, the deferral of tax on income received by CFCs is regarded as a tax expenditure under
this method. In contrast, except for tax haven activities,
the reference law baseline follows current law in treat2 Gross income does, however, include transfer payments associated
with past employment, such as Social Security benefits.
3 In the case of individuals who hold “passive’’ equity interests in
businesses, the pro-rata shares of sales and expense deductions reportable in a year are limited. A passive business activity is defined generally to be one in which the holder of the interest, usually a partnership
interest, does not actively perform managerial or other participatory
functions. The taxpayer may generally report no larger deductions for a
year than will reduce taxable income from such activities to zero. Deductions in excess of the limitation may be taken in subsequent years, or
when the interest is liquidated. In addition, costs of earning income may
be limited under the Alternative Minimum Tax.

ing CFCs as separate taxable entities whose income is
not subject to U.S. tax until distributed to U.S. taxpayers.
Under this baseline, deferral of tax on CFC income is not
a tax expenditure because U.S. taxpayers generally are
not taxed on accrued, but unrealized, income.
As illustrated in the Fiscal year 2004 Tax expenditure
Budget, provisions defined as tax expenditures in this
Budget would be different if a pure comprehensive income tax were employed as the baseline. Similarly, they
would also look quite different if a consumption tax were
employed; the current income tax can be considered as
a hybrid tax with income and consumption tax features.
Comprehensive income, also called Haig-Simons income,
is the real, inflation adjusted, accretions to wealth, accrued or realized. Using a comprehensive income tax
baseline, the tax base can be larger than that considered
here. A broad-based consumption tax is a combination
of an income tax plus a deduction for net saving, or just
consumption plus the change in net worth. Under this
baseline, some of the current tax provisions would no
longer be considered as tax expenditures (e.g. retirement
savings). Because of the dramatic changes in the tax system introduced by the Tax Cuts and Jobs Act of 2017, the
Fiscal Year 2020 Budget will update the earlier analysis
of 2004 using the new law with its modified tax base and
new tax rate structure.
Descriptions of Income Tax Provisions
Descriptions of the individual and corporate income
tax expenditures reported on in this document follow.
These descriptions relate to current law as of July 1,
2017. The estimates provided below do not reflect the effect of changes introduced by the Tax Cuts and Jobs Act
(TCJA), signed into law on December 22, 2017. Given its
late date of enactment, these effects will be reflected in
the estimates reported in the FY 2020 Budget. Under the
Act, a number of provisions were scaled back, expanded,
and repealed, or newly introduced. Provisions otherwise
untouched directly by the Act were also affected by the
modification of the individual tax rate schedule and reduction of corporate tax rates. Below is a brief summary
of how TCJA affected tax expenditure provisions, with
the Receipts Chapter providing an expanded listing and
description.
For individuals, the Act expanded the child tax credit,
the deduction for charitable contributions and certain tax
preferences for education. It scaled back the deduction for
state and local taxes, the mortgage interest deduction,
and certain fringe benefits. It also repealed the moving
expense deduction and exclusion for non-military taxpayers. For businesses, the Act expanded depreciation
allowances and scaled back on the benefit of deferral of
gains in like-kind exchanges. It also altered the tax treatment of foreign earnings of US multinational corporations
by switching from a global to a territorial tax system. The
Act also scaled back the benefit extended to municipal
bonds by disallowing advanced refunding, as well as repealing tax credit bonds.

156

ANALYTICAL PERSPECTIVES

Table 13–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027
(In millions of dollars)
Total from corporations and individuals

National Defense:
1 Exclusion of benefits and allowances to armed forces
personnel ��������������������������������������������������������������������

2018–
2027

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

12,400

12,830

11,640

11,680

12,040

12,520

13,040

13,590

14,190

14,820

15,490

International affairs:
2 Exclusion of income earned abroad by U.S. citizens �������
6,600
6,930
7,280
7,640
8,020
8,420
8,840
9,290
9,750 10,240 10,750
3 Exclusion of certain allowances for Federal employees
abroad ������������������������������������������������������������������������
1,370
1,430
1,510
1,580
1,660
1,740
1,830
1,920
2,020
2,120
2,230
4 Inventory property sales source rules exception �������������
3,320
3,570
3,840
4,170
4,480
4,760
5,070
5,410
5,780
6,180
6,640
5 Deferral of income from controlled foreign corporations
(normal tax method) ��������������������������������������������������� 107,200 112,560 118,190 124,100 130,310 136,820 143,660 150,850 158,390 166,310 174,620
6 Deferred taxes for financial firms on certain income
earned overseas ��������������������������������������������������������� 16,080 16,880 17,730 18,620 19,550 20,520 21,550 22,630 23,760 24,950 26,190
General science, space, and technology:
7 Expensing of research and experimentation
expenditures (normal tax method) ������������������������������
8 Credit for increasing research activities ���������������������������
Energy:
9 Expensing of exploration and development costs, fuels ��
10 Excess of percentage over cost depletion, fuels �������������
11 Exception from passive loss limitation for working
interests in oil and gas properties �������������������������������
12 Capital gains treatment of royalties on coal ���������������������
13 Exclusion of interest on energy facility bonds ������������������
14 Enhanced oil recovery credit �������������������������������������������
15 Energy production credit 1 �����������������������������������������������
16 Marginal wells credit ��������������������������������������������������������
17 Energy investment credit 1 �����������������������������������������������
18 Alcohol fuel credits 2 ��������������������������������������������������������
19 Bio-Diesel and small agri-biodiesel producer tax credits 3 ������
20 Tax credits for clean-fuel burning vehicles and refueling
property ����������������������������������������������������������������������
21 Exclusion of utility conservation subsidies �����������������������
22 Credit for holding clean renewable energy bonds 4 ���������
23 Deferral of gain from dispositions of transmission
property to implement FERC restructuring policy �������
24 Credit for investment in clean coal facilities ���������������������
25 Temporary 50% expensing for equipment used in the
refining of liquid fuels ��������������������������������������������������
26 Natural gas distribution pipelines treated as 15-year
property ����������������������������������������������������������������������
27 Amortize all geological and geophysical expenditures
over 2 years ����������������������������������������������������������������
28 Allowance of deduction for certain energy efficient
commercial building property ��������������������������������������
29 Credit for construction of new energy efficient homes �����
30 Credit for energy efficiency improvements to existing
homes �������������������������������������������������������������������������
31 Credit for residential energy efficient property �����������������
32 Qualified energy conservation bonds 5 ����������������������������
33 Advanced Energy Property Credit �����������������������������������
34 Advanced nuclear power production credit ����������������������
35 Reduced tax rate for nuclear decommissioning funds �����
Natural resources and environment:
36 Expensing of exploration and development costs,
nonfuel minerals ���������������������������������������������������������
37 Excess of percentage over cost depletion, nonfuel
minerals ����������������������������������������������������������������������
38 Exclusion of interest on bonds for water, sewage, and
hazardous waste facilities �������������������������������������������

131,840
87,160
18,040
49,900
1,415,810
212,380

8,330
11,500

8,340
12,250

9,140
13,010

10,100
13,820

10,910
14,680

11,640
15,600

12,310
16,580

13,040
17,630

13,820
18,730

14,660
19,900

15,540
21,140

119,500
163,340

–650
440

–290
550

–30
600

120
640

200
700

260
830

290
990

290
1,110

300
1,210

350
1,360

370
1,510

1,860
9,500

20
140
10
270
1,590
70
1,850
20
40

20
160
10
350
2,230
110
3,410
0
0

20
150
10
400
2,870
70
3,470
0
0

20
140
10
450
3,430
30
3,330
0
0

20
150
10
440
3,880
30
3,330
0
0

30
150
10
460
4,280
40
2,710
0
0

30
160
10
500
4,600
100
1,630
0
0

30
160
30
530
4,790
140
670
0
0

30
170
30
510
4,850
180
80
0
0

30
180
30
490
4,750
210
–120
0
0

30
190
30
440
4,440
230
–150
0
0

260
1,610
180
4,570
40,120
1,140
18,360
0
0

590
470
70

680
490
70

670
520
70

490
540
70

360
570
70

330
590
70

280
620
70

240
650
70

180
680
70

130
710
70

100
750
70

3,460
6,120
700

–190
140

–270
110

–210
100

–190
250

–150
320

–120
190

–70
20

–20
–20

0
–10

0
–10

0
–10

–1,030
940

–1,380

–1,140

–930

–740

–560

–370

–180

–40

0

0

0

–3,960

140

150

150

150

120

60

–20

–100

–190

–270

–320

–270

70

60

70

70

70

80

70

60

40

40

50

610

30
170

–10
70

–30
10

–30
0

–30
0

–30
0

–30
0

–30
0

–30
0

–30
0

–30
0

–280
80

290
1,430
30
50
0
210

0
1,380
30
0
0
230

0
1,360
30
–20
170
240

0
1,250
30
–20
440
260

0
1,060
30
–10
550
270

0
530
30
–10
550
280

0
120
30
0
550
290

0
20
30
0
550
310

0
0
30
0
550
320

0
0
30
0
550
340

0
0
30
0
550
350

0
5,720
300
–60
4,460
2,890

40

50

50

50

50

50

50

50

50

50

50

500

140

140

150

150

150

150

150

150

140

140

140

1,460

420

410

420

420

450

500

540

580

610

650

680

5,260

157

13. Tax Expenditures

Table 13–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017–2027—Continued
(In millions of dollars)
Total from corporations and individuals
2017
39
40
41
42
43

Capital gains treatment of certain timber income ������������
Expensing of multiperiod timber growing costs ���������������
Tax incentives for preservation of historic structures �������
Industrial CO2 capture and sequestration tax credit ��������
Deduction for endangered species recovery
expenditures ���������������������������������������������������������������

Agriculture:
44 Expensing of certain capital outlays ��������������������������������
45 Expensing of certain multiperiod production costs ����������
46 Treatment of loans forgiven for solvent farmers ���������������
47 Capital gains treatment of certain income �����������������������
48 Income averaging for farmers ������������������������������������������
49 Deferral of gain on sale of farm refiners ��������������������������
50 Expensing of reforestation expenditures �������������������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2018–
2027

140
340
500
190

160
350
510
200

150
350
520
200

140
360
530
0

150
370
540
0

150
400
550
0

160
400
560
0

160
410
570
0

170
410
590
0

180
420
600
0

190
420
610
0

1,610
3,890
5,580
400

30

30

30

40

50

50

50

50

70

70

80

520

190
310
40
1,360
140
20
60

200
320
50
1,550
150
20
50

210
330
50
1,470
160
20
60

220
340
50
1,450
170
20
60

240
350
50
1,480
180
20
60

250
370
50
1,520
180
20
70

260
390
60
1,580
190
20
70

270
410
60
1,640
200
20
80

280
420
60
1,720
210
20
80

290
440
60
1,800
220
30
80

300
450
70
1,890
230
30
80

2,520
3,820
560
16,100
1,890
220
690

2,918
14,750

2,901
15,450

3,053
16,290

3,113
17,210

3,246
18,500

3,450
19,810

3,648
20,970

3,839
22,070

3,967
23,220

4,170
24,420

4,372
25,560

35,759
203,500

50

50

60

60

60

60

70

70

80

80

80

670

720
30
160

750
30
240

790
30
280

840
30
290

890
40
300

920
40
310

950
40
320

980
40
330

1,000
40
340

1,030
40
350

1,060
50
360

9,210
380
3,120

Commerce and housing:
Financial institutions and insurance:
51 Exemption of credit union income �����������������������������������
52 Exclusion of life insurance death benefits �����������������������
53 Exemption or special alternative tax for small property
and casualty insurance companies ����������������������������
54 Tax exemption of insurance income earned by taxexempt organizations ��������������������������������������������������
55 Small life insurance company deduction �������������������������
56 Exclusion of interest spread of financial institutions ��������

Housing:
57 Exclusion of interest on owner-occupied mortgage
subsidy bonds �������������������������������������������������������������
1,150
1,120
1,150
1,160
1,230
1,360
1,490
1,620
1,710
1,790
1,860
58 Exclusion of interest on rental housing bonds �����������������
1,060
1,040
1,070
1,080
1,140
1,260
1,370
1,490
1,580
1,650
1,710
59 Deductibility of mortgage interest on owner-occupied
homes ������������������������������������������������������������������������� 65,600 69,130 74,510 81,330 89,030 96,840 104,490 111,810 118,900 125,560 131,630
60 Deductibility of State and local property tax on owneroccupied homes ��������������������������������������������������������� 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680
61 Deferral of income from installment sales �����������������������
1,590
1,760
1,700
1,690
1,730
1,770
1,830
1,900
1,970
2,050
2,140
62 Capital gains exclusion on home sales ��������������������������� 43,220 43,870 44,550 45,380 46,160 46,870 47,710 48,630 49,500 50,370 51,280
63 Exclusion of net imputed rental income ��������������������������� 121,350 126,000 131,110 136,680 142,590 148,830 155,330 162,180 169,480 177,100 185,370
64 Exception from passive loss rules for $25,000 of rental
loss �����������������������������������������������������������������������������
7,410
7,710
8,060
8,390
8,730
9,080
9,440
9,750 10,100 10,490 10,860
65 Credit for low-income housing investments ���������������������
8,310
8,410
8,960
9,090
9,270
9,480
9,720
9,990 10,270 10,600 10,920
66 Accelerated depreciation on rental housing (normal tax
method) ����������������������������������������������������������������������
2,090
2,680
3,510
4,370
5,050
5,860
6,660
7,410
8,130
8,810
9,470
67 Discharge of mortgage indebtedness ������������������������������
310
0
0
0
0
0
0
0
0
0
0
68
69
70
71
72
73
74
75
76
77
78
79

Commerce:
Discharge of business indebtedness �������������������������������
–70
0
10
0
10
30
40
40
40
40
50
Exceptions from imputed interest rules ���������������������������
60
60
60
70
70
80
80
80
90
90
100
Treatment of qualified dividends �������������������������������������� 27,550 29,130 30,700 32,460 34,420 36,580 38,940 41,500 44,310 47,290 50,440
Capital gains (except agriculture, timber, iron ore, and
coal) ���������������������������������������������������������������������������� 101,510 115,910 109,880 107,970 110,230 113,500 117,650 122,620 128,280 134,450 141,100
Capital gains exclusion of small corporation stock ����������
790
1,020
1,240
1,400
1,520
1,630
1,730
1,830
1,900
1,980
2,050
Step-up basis of capital gains at death ���������������������������� 37,910 38,710 39,560 40,160 40,560 41,240 41,860 42,620 43,230 43,820 44,540
Carryover basis of capital gains on gifts ��������������������������
5,190
4,840
4,670
4,560
4,530
4,530
4,560
4,640
4,700
4,730
4,780
Ordinary income treatment of loss from small business
corporation stock sale �������������������������������������������������
70
80
80
80
80
80
90
90
90
100
100
Deferral of gains from like-kind exchanges ����������������������
7,690
8,080
8,500
8,920
9,360
9,830 10,320 10,840 11,380 11,940 12,490
Depreciation of buildings other than rental housing
(normal tax method) ��������������������������������������������������� –8,800 –8,970 –9,570 –10,250 –10,770 –11,360 –11,990 –12,690 –13,130 –13,510 –13,980
Accelerated depreciation of machinery and equipment
(normal tax method) ��������������������������������������������������� 44,300 36,740 26,380 –9,310 –9,550
5,100 14,730 23,590 31,120 37,050 42,050
Expensing of certain small investments (normal tax
method) ����������������������������������������������������������������������
3,410
3,400
3,710
7,540
7,910
6,970
6,740
6,700
6,770
7,020
7,230

14,490
13,390
1,003,230
485,350
18,540
474,320
1,534,670
92,610
96,710
61,950
0
260
780
385,770
1,201,590
16,300
416,300
46,540
870
101,660
–116,220
197,900
63,990

158

ANALYTICAL PERSPECTIVES

Table 13–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017–2027—Continued
(In millions of dollars)
Total from corporations and individuals

80 Graduated corporation income tax rate (normal tax
method) ����������������������������������������������������������������������
81 Exclusion of interest on small issue bonds ����������������������
82 Deduction for US production activities �����������������������������
83 Special rules for certain film and TV production ��������������
Transportation:
84 Tonnage tax ���������������������������������������������������������������������
85 Deferral of tax on shipping companies ����������������������������
86 Exclusion of reimbursed employee parking expenses �����
87 Exclusion for employer-provided transit passes ��������������
88 Tax credit for certain expenditures for maintaining
railroad tracks �������������������������������������������������������������
89 Exclusion of interest on bonds for Highway Projects and
rail-truck transfer facilities �������������������������������������������
Community and regional development:
90 Investment credit for rehabilitation of structures (other
than historic) ���������������������������������������������������������������
91 Exclusion of interest for airport, dock, and similar bonds 
92 Exemption of certain mutuals’ and cooperatives’ income 
93 Empowerment zones �������������������������������������������������������
94 New markets tax credit ����������������������������������������������������
95 Credit to holders of Gulf Tax Credit Bonds. ����������������������
96 Recovery Zone Bonds 6 ���������������������������������������������������
97 Tribal Economic Development Bonds ������������������������������

2018–
2027

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

1,550
140
13,520
200

1,510
150
14,150
110

1,440
140
14,790
60

1,430
140
15,500
30

1,350
160
16,280
0

1,330
180
17,090
0

1,280
190
17,950
0

1,250
200
18,850
0

1,180
220
19,790
0

1,180
220
20,790
0

1,150
240
21,830
0

13,100
1,840
177,020
200

80
20
3,202
1,123

80
20
3,319
1,192

90
20
3,452
1,270

90
20
3,582
1,355

90
20
3,731
1,446

100
20
3,862
1,532

100
20
3,971
1,613

110
20
4,117
1,719

110
20
4,257
1,819

120
20
4,404
1,934

130
20
4,571
2,054

1,020
200
39,266
15,934

60

0

0

0

0

0

0

0

0

0

0

0

200

190

170

170

160

160

140

140

130

130

120

1,510

20
660
150
110
1,460
240
130
40

20
650
150
50
1,410
250
140
40

20
660
150
30
1,320
270
150
40

20
680
160
30
1,280
300
160
50

20
720
160
10
1,210
320
180
50

20
790
160
10
1,090
350
190
60

20
860
170
10
880
380
210
60

20
930
170
0
570
400
220
70

20
990
180
0
290
420
230
70

20
1,040
180
0
80
430
240
70

20
1,080
190
0
–120
440
250
80

200
8,400
1,670
140
8,010
3,560
1,970
590

3,410

3,490

3,650

3,800

3,970

4,140

4,310

4,500

4,690

4,890

40,850

16,360
30
2,360
2,140
370

16,320
40
2,390
2,330
370

16,310
40
2,500
2,530
380

16,290
40
2,510
2,730
400

16,190
40
2,520
2,940
440

16,180
40
2,610
3,150
480

16,170
40
2,610
3,380
520

16,120
30
2,630
3,600
550

16,020
30
2,650
3,830
580

15,980
30
2,670
4,070
600

161,940
360
25,450
30,700
4,690

2,200
180

2,260
170

2,280
150

2,410
130

2,660
110

2,900
90

3,160
80

3,330
60

3,510
50

3,640
50

28,350
1,070

30
9,500
5,890
940
210
100
650

30
9,490
6,330
990
200
100
650

30
9,500
6,730
1,040
210
110
650

40
9,540
7,100
1,100
250
110
650

40
9,590
7,490
1,150
250
110
650

40
9,630
7,860
1,210
250
110
650

40
9,670
8,250
1,270
260
120
650

50
9,700
8,630
1,340
260
120
650

50
9,770
9,000
1,400
260
120
650

50
9,940
9,370
1,480
270
120
650

400
96,330
76,650
11,920
2,420
1,120
6,500

1,320
900
10
590
620

1,340
900
10
620
620

1,370
940
10
660
650

990
970
10
690
620

490
1,000
10
730
640

310
1,030
10
780
690

230
1,060
10
820
690

180
1,100
10
860
710

130
1,140
10
910
690

100
1,180
10
950
710

70
1,220
10
1,000
720

5,210
10,540
100
8,020
6,740

4,830
4,600
10

4,990
4,690
10

5,150
4,790
10

5,290
4,890
10

5,440
4,960
10

5,590
5,060
10

5,750
5,140
10

5,910
5,220
10

6,060
5,300
10

6,220
5,370
10

6,380
5,440
10

56,780
50,860
100

47,760
490

51,720
510

55,030
530

58,590
550

61,930
570

65,250
590

68,510
610

71,820
620

75,090
640

78,270
660

81,870
680

668,080
5,960

Education, training, employment, and social services:
Education:
98 Exclusion of scholarship and fellowship income (normal
tax method) �����������������������������������������������������������������
3,300
99 Tax credits and deductions for postsecondary education
expenses 7 ������������������������������������������������������������������ 16,460
100 Education Individual Retirement Accounts ����������������������
30
101 Deductibility of student-loan interest ��������������������������������
2,340
102 Qualified tuition programs ������������������������������������������������
1,950
103 Exclusion of interest on student-loan bonds ��������������������
370
104 Exclusion of interest on bonds for private nonprofit
educational facilities ���������������������������������������������������
2,250
105 Credit for holders of zone academy bonds 8 ��������������������
170
106 Exclusion of interest on savings bonds redeemed to
finance educational expenses ������������������������������������
30
107 Parental personal exemption for students age 19 or over  9,600
108 Deductibility of charitable contributions (education) ��������
5,480
109 Exclusion of employer-provided educational assistance ����
900
110 Special deduction for teacher expenses ��������������������������
200
111 Discharge of student loan indebtedness �������������������������
100
112 Qualified school construction bonds 9 ������������������������������
650
113
114
115
116
117
118
119
120
121
122

Training, employment, and social services:
Work opportunity tax credit ����������������������������������������������
Employer provided child care exclusion ��������������������������
Employer-provided child care credit ��������������������������������
Assistance for adopted foster children �����������������������������
Adoption credit and exclusion ������������������������������������������
Exclusion of employee meals and lodging (other than
military) �����������������������������������������������������������������������
Credit for child and dependent care expenses ����������������
Credit for disabled access expenditures ��������������������������
Deductibility of charitable contributions, other than
education and health ��������������������������������������������������
Exclusion of certain foster care payments �����������������������

159

13. Tax Expenditures

Table 13–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017–2027—Continued
(In millions of dollars)
Total from corporations and individuals
2017
123 Exclusion of parsonage allowances ��������������������������������
124 Indian employment credit ������������������������������������������������
125 Credit for employer differential wage payments ���������������

920
40
0

2018
970
20
0

2019
1,021
20
10

2020
1,075
20
10

2021
1,132
20
10

2022
1,192
10
20

2023
1,255
10
20

2024
1,322
10
20

2025
1,392
10
20

2026
1,465
10
20

2027
1,543
10
20

Health:
126 Exclusion of employer contributions for medical
insurance premiums and medical care 10 ������������������� 214,280 227,880 242,880 257,390 273,180 291,180 309,500 328,620 349,300 370,360 393,430
127 Self-employed medical insurance premiums �������������������
8,140
8,170
7,750
8,010
8,460
8,830
9,220
9,640 10,110 10,610 11,170
128 Medical Savings Accounts / Health Savings Accounts ����
8,240
9,400 10,650 11,730 12,750 13,820 14,830 15,770 16,720 17,700 18,730
129 Deductibility of medical expenses �����������������������������������
9,720 10,030 10,870 11,850 12,840 13,790 14,790 15,830 16,910 18,090 19,400
130 Exclusion of interest on hospital construction bonds �������
3,380
3,310
3,400
3,430
3,630
4,000
4,370
4,740
5,010
5,260
5,470
131 Refundable Premium Assistance Tax Credit 11 ����������������
5,630
6,310
7,100
7,740
8,380
8,910
9,370 10,040 10,590 11,390 12,140
132 Credit for employee health insurance expenses of small
business 12 ������������������������������������������������������������������
90
80
70
50
30
20
10
10
10
10
10
133 Deductibility of charitable contributions (health) ��������������
5,120
5,530
5,960
6,350
6,710
7,080
7,430
7,790
8,150
8,500
8,860
134 Tax credit for orphan drug research ��������������������������������
2,280
2,760
3,340
4,030
4,880
5,900
7,140
8,630 10,450 12,630 15,290
135 Special Blue Cross/Blue Shield tax benefits ��������������������
590
610
630
670
700
740
780
820
870
910
960
136 Tax credit for health insurance purchased by certain
displaced and retired individuals 13 �����������������������������
30
20
10
0
0
0
0
0
0
0
0
137 Distributions from retirement plans for premiums for
health and long-term care insurance ��������������������������
460
480
500
520
540
560
580
600
620
650
670
Income security:
138 Child credit 14 �������������������������������������������������������������������
139 Exclusion of railroad retirement (Social Security
equivalent) benefits ����������������������������������������������������
140 Exclusion of workers’ compensation benefits ������������������
141 Exclusion of public assistance benefits (normal tax
method) ����������������������������������������������������������������������
142 Exclusion of special benefits for disabled coal miners �����
143 Exclusion of military disability pensions ��������������������������
144
145
146
147
148

Net exclusion of pension contributions and earnings:
Defined benefit employer plans ���������������������������������������
Defined contribution employer plans �������������������������������
Individual Retirement Accounts ���������������������������������������
Low and moderate income savers credit �������������������������
Self-Employed plans ��������������������������������������������������������

Exclusion of other employee benefits:
149 Premiums on group term life insurance ���������������������������
150 Premiums on accident and disability insurance ���������������
151 Income of trusts to finance supplementary
unemployment benefits ����������������������������������������������
152 Income of trusts to finance voluntary employee benefits
associations ����������������������������������������������������������������
153 Special ESOP rules ���������������������������������������������������������
154 Additional deduction for the blind ������������������������������������
155 Additional deduction for the elderly ���������������������������������
156 Tax credit for the elderly and disabled �����������������������������
157 Deductibility of casualty losses ����������������������������������������
158 Earned income tax credit 15 ���������������������������������������������

2018–
2027
12,367
140
150

3,043,720
91,970
142,100
144,400
42,620
91,970
300
72,360
75,050
7,690
30
5,720

24,340

24,270

23,960

23,580

23,140

22,690

22,270

21,860

21,410

20,980

20,610

224,770

290
9,970

280
10,040

280
10,110

270
10,180

260
10,250

250
10,320

240
10,390

220
10,470

210
10,540

190
10,610

170
10,690

2,370
103,600

590
20
170

600
20
180

620
20
180

640
20
190

670
20
190

680
10
200

700
10
200

730
10
210

740
10
210

750
10
220

660
10
220

6,790
140
2,000

76,091
69,440
17,320
1,440
28,460

76,998
71,270
19,110
1,470
26,980

77,341
80,480
20,630
1,470
30,010

78,453
87,010
22,180
1,460
33,390

77,081
89,310
23,790
1,440
36,930

75,678 73,516 71,376 68,657 65,592 61,673
95,400 112,200 122,030 126,140 130,240 137,820
25,460 27,100 28,150 29,080 29,880 30,640
1,440
1,440
1,440
1,420
1,450
1,430
40,280 44,000 48,070 52,400 57,060 62,170

726,365
1,051,900
256,020
14,460
431,290

3,350
330

3,140
330

3,250
330

3,370
330

3,500
340

3,630
340

3,770
340

3,910
350

4,070
350

4,230
350

4,390
350

37,260
3,410

20

30

40

40

50

50

50

50

60

60

60

490

1,180
2,080
30
3,470
10
330
1,760

1,240
2,140
30
3,770
10
350
1,810

1,290
2,210
30
4,050
10
380
3,960

1,350
2,280
30
4,380
0
400
4,100

1,420
2,360
40
4,780
0
430
2,060

1,480
2,430
40
5,090
0
460
2,150

1,550
2,510
40
5,470
0
500
2,250

1,630
2,580
50
5,850
0
530
2,370

1,710
2,660
50
6,290
0
560
2,500

1,780
2,740
60
6,810
0
590
2,570

1,860
2,820
60
7,380
0
630
2,700

15,310
24,730
430
53,870
20
4,830
26,470

34,500

36,110

37,660

39,430

41,430

43,840

46,830

48,780

50,130

53,690

57,850

455,750

1,040

1,080

1,130

1,190

1,250

1,310

1,380

1,440

1,520

1,590

1,680

13,570

7,920
480

8,620
510

9,190
540

9,560
560

9,910
580

10,290
610

10,680
630

11,090
660

11,520
690

11,960
720

12,440
750

105,260
6,250

Social Security:
Exclusion of social security benefits:
159 Social Security benefits for retired and disabled workers
and spouses, dependents and survivors ��������������������
160 Credit for certain employer contributions to social
security �����������������������������������������������������������������������
Veterans benefits and services:
161 Exclusion of veterans death benefits and disability
compensation �������������������������������������������������������������
162 Exclusion of veterans pensions ���������������������������������������

160

ANALYTICAL PERSPECTIVES

Table 13–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017–2027—Continued
(In millions of dollars)
Total from corporations and individuals
2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2018–
2027

163 Exclusion of GI bill benefits ���������������������������������������������
164 Exclusion of interest on veterans housing bonds ������������

1,740
10

1,830
10

1,910
10

2,010
10

2,110
10

2,220
10

2,330
10

2,440
30

2,570
30

2,700
30

2,840
30

22,960
180

General purpose fiscal assistance:
165 Exclusion of interest on public purpose State and local
bonds ��������������������������������������������������������������������������
166 Build America Bonds 16 ���������������������������������������������������
167 Deductibility of nonbusiness State and local taxes other
than on owner-occupied homes ���������������������������������

28,560
0

27,920
0

28,650
0

28,950
0

30,680
0

33,830
0

36,880
0

40,060
0

42,290
0

44,470
0

46,160
0

359,890
0

70,420

74,980

80,190

86,220

91,900

97,460 103,350 109,610 116,020 122,310 128,980

1,011,020

960

950

940

930

930

920

910

900

890

880

890

9,140

33,710

35,790

38,190

40,920

43,750

46,600

49,550

52,700

55,940

59,230

62,680

485,350

70,420

74,980

80,190

86,220

91,900

97,460 103,350 109,610 116,020 122,310 128,980

1,011,020

Interest:
168 Deferral of interest on U.S. savings bonds �����������������������
Addendum: Aid to State and local governments:
Deductibility of:
Property taxes on owner-occupied homes ����������������������
Nonbusiness State and local taxes other than on owneroccupied homes ���������������������������������������������������������

Exclusion of interest on State and local bonds for:
Public purposes ��������������������������������������������������������������� 28,560 27,920 28,650 28,950 30,680 33,830 36,880 40,060 42,290 44,470 46,160
359,890
Energy facilities ���������������������������������������������������������������
10
10
10
10
10
10
10
30
30
30
30
180
Water, sewage, and hazardous waste disposal facilities �
420
410
420
420
450
500
540
580
610
650
680
5,260
Small-issues ��������������������������������������������������������������������
140
150
140
140
160
180
190
200
220
220
240
1,840
Owner-occupied mortgage subsidies ������������������������������
1,150
1,120
1,150
1,160
1,230
1,360
1,490
1,620
1,710
1,790
1,860
14,490
Rental housing �����������������������������������������������������������������
1,060
1,040
1,070
1,080
1,140
1,260
1,370
1,490
1,580
1,650
1,710
13,390
Airports, docks, and similar facilities ��������������������������������
660
650
660
680
720
790
860
930
990
1,040
1,080
8,400
Student loans �������������������������������������������������������������������
370
370
370
380
400
440
480
520
550
580
600
4,690
Private nonprofit educational facilities �����������������������������
2,250
2,200
2,260
2,280
2,410
2,660
2,900
3,160
3,330
3,510
3,640
28,350
Hospital construction �������������������������������������������������������
3,380
3,310
3,400
3,430
3,630
4,000
4,370
4,740
5,010
5,260
5,470
42,620
Veterans’ housing ������������������������������������������������������������
10
10
10
10
10
10
10
30
30
30
30
180
1 Firms can take an energy grant in lieu of the energy production credit or the energy investment credit for facilities whose construction began in 2009, 2010, or 2011. The effect of the
grant on outlays (in millions of dollars) is as follows: 2017 $1,100; 2018 $50; and $0 thereafter.
2 The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2017 $420 and $0 thereafter.
3 In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2017 $2,090 and $0 thereafter.
4 In addition, the credit for holding clean renewable energy bonds has outlay effects of (in millions of dollars) : 2017 $40; 2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40;
2024 $40; 2025, $40; 2026 $40; and 2027 $40.
5 In addition, the qualified energy conservation bonds have outlay effects of (in millions of dollars): 2017 $40; 2018 $40; 2019 $40; 2020 $40; 2021 $40; 2022 $40; 2023 $40; 2024 $40;
2025, $40; 2026 $40; and 2027 $40.
6 In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows: 2017 $290; 2018 $290; 2019 $290; 2020 $290; 2021 $290; 2022 $290; 2023 $290; 2024 $290;
2025, $290; 2026 $290; and 202 $290.
7 In addition, the tax credits and deductions for postsecondary education expenses have outlay effects of (in millions of dollars): 2017 $5,770; 2018 $5,690; 2019 $5,570; 2020 $5,520;
2021 $5,460; 2022 $5,410; 2023 $5,360; 2024 $5,310; 2025 $5,240; 2026 $5,170; and 2027 $5,100.
8 In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars) : 2017 $60; 2018 $60; 2019 $60; 2020 $60; 2021 $60; 2022 $60; 2023 $60; 2024
$60; 2025 $60; 2026 $60; and 2027 $60.
9 In addition, the provision for school construction bonds has outlay effects of (in millions of dollars) : 2017 $740; 2018 $795; 2019 $795; 2020 $795; 2021 $795; 2022 $795; 2023 $795;
2024 $795; 2025 $795; 2026 $795; and 2027 $795.
10 In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2017 $127,140; 2018 $133,530; 2019 $140,060;
2020 $146,970; 2021 $155,010; 2022 $164,100; 2023 $173,140; 2024 $182,640; 2025 $192,960; 2026 $203,240; and 2027 $214,700.
11 In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows : 2017 $29,730; 2018 $31,890; 2019 $33,840; 2020 $35,720; 2021 $37,770;
2022 $40,010; 2023 $42,110; 2024 $44,400; 2025 $46,790; 2026 $49,340; and 2027 $51,980.
12 In addition, the small business credit provision has outlay effects (in millions of dollars) as follows : 2017 $20; 2018 $20; 2019 $10; 2020 $10; 2021 $10; 2022 $10; and $0 thereafter.
13 In addition, the effect of the health coverage tax credit on receipts has outlay effects of (in millions of dollars)
2017 $20; 2018 $30; 2019 $30; 2020 $10; and $0 thereafter.
14 In addition, the effect of the child tax credit on receipts has outlay effects of (in millions of dollars) : 2017 $29,980; 2018 $30,000; 2019 $30,010; 2020 $30,010; 2021 $30,270; 2022
$30,390; 2023 $30,540; 2024 $30,680; 2025 $30,840; 2026 $31,040; and 2027 $31,150.
15 In addition, the earned income tax credit on receipts has outlay effects of (in millions of dollars) : 2017 $62,070; 2018 $67,870; 2019 $ 67,120; 2020 $68,500; 2021 $72,630; 2022
$74,420; 2023 $76,390; 2024 $78,260; 2025 $80,240; 2026 $82,240; and 2027 $84,150.
16 In addition, the Build America Bonds have outlay effects of (in millions of dollars) : 2017 $3,610; 2018 $3,610; 2019 $3,610; 2020 $3,610; 2021 $3,610; 2022 $3,610; 2023 $3,610;
2024 $3,610; 2025, $3,610; 2026 $3,610; and 2027 $3,610.
Note: Provisions with estimates denoted normal tax method have no revenue loss under the reference tax law method.
All estimates have been rounded to the nearest $10 million. Provisions with estimates that rounded to zero in each year are not included in the table.

161

13. Tax Expenditures

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027
(In millions of dollars)
Total from corporations
2017
National Defense:
1 Exclusion of benefits and allowances to
armed forces personnel ����������������������
International affairs:
2 Exclusion of income earned abroad by
U.S. citizens ����������������������������������������
3 Exclusion of certain allowances for
Federal employees abroad �����������������
4 Inventory property sales source rules
exception ��������������������������������������������
5 Deferral of income from controlled foreign
corporations (normal tax method) ������
6 Deferred taxes for financial firms on
certain income earned overseas ��������
General science, space, and technology:
7 Expensing of research and
experimentation expenditures (normal
tax method) �����������������������������������������
8 Credit for increasing research activities ���
Energy:
9 Expensing of exploration and
development costs,fuels ���������������������
10 Excess of percentage over cost
depletion, fuels �����������������������������������
11 Exception from passive loss limitation
for working interests in oil and gas
properties �������������������������������������������
12 Capital gains treatment of royalties on
coal �����������������������������������������������������
13 Exclusion of interest on energy facility
bonds ��������������������������������������������������
14 Enhanced oil recovery credit �������������������
15 Energy production credit 1 �����������������������
16 Marginal wells credit ��������������������������������
17 Energy investment credit 1 �����������������������
18 Alcohol fuel credits 2 ��������������������������������
19 Bio-Diesel and small agri-biodiesel
producer tax credits 3 ��������������������������
20 Tax credits for clean-fuel burning vehicles
and refueling property ������������������������
21 Exclusion of utility conservation subsidies
�������������������������������������������������������������
22 Credit for holding clean renewable energy
bonds 4 ������������������������������������������������
23 Deferral of gain from dispositions of
transmission property to implement
FERC restructuring policy ������������������
24 Credit for investment in clean coal
facilities �����������������������������������������������
25 Temporary 50% expensing for equipment
used in the refining of liquid fuels �������
26 Natural gas distribution pipelines treated
as 15-year property ����������������������������
27 Amortize all geological and geophysical
expenditures over 2 years ������������������
28 Allowance of deduction for certain energy
efficient commercial building property ����
29 Credit for construction of new energy
efficient homes �����������������������������������
30 Credit for energy efficiency improvements
to existing homes ��������������������������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

3,320

3,570

3,840

4,170

4,480

4,760

5,070

5,410

5,780

6,180

6,640

49,900

107,200

112,560

118,190

124,100

130,310

136,820

143,660

150,850

158,390

166,310

174,620

1,415,810

16,080

16,880

17,730

18,620

19,550

20,520

21,550

22,630

23,760

24,950

26,190

212,380

7,620
10,520

7,640
11,160

8,420
11,840

9,290
12,560

10,040
13,330

10,700
14,140

11,320
15,010

11,990
15,940

12,710
16,910

13,480
17,940

14,290
19,020

109,880
147,850

–470

–210

–20

90

150

190

210

210

220

260

270

1,370

350

440

480

510

560

660

790

890

970

1,090

1,210

7,600

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
220
1,190
20
1,390
0

0
280
1,670
30
2,560
0

0
320
2,150
20
2,600
0

0
360
2,570
10
2,500
0

0
350
2,910
10
2,500
0

0
370
3,210
10
2,030
0

0
400
3,450
30
1,220
0

10
420
3,590
40
500
0

10
410
3,640
50
60
0

10
390
3,560
60
–90
0

10
350
3,330
70
–110
0

40
3,650
30,080
330
13,770
0

10

0

0

0

0

0

0

0

0

0

0

0

190

210

180

120

90

80

60

40

30

10

10

830

30

30

30

30

30

30

30

30

30

30

30

300

20

20

20

20

20

20

20

20

20

20

20

200

–190

–270

–210

–190

–150

–120

–70

–20

0

0

0

–1,030

130

100

90

230

290

170

20

–20

–10

–10

–10

850

–1,380

–1,140

–930

–740

–560

–370

–180

–40

0

0

0

–3,960

140

150

150

150

120

60

–20

–100

–190

–270

–320

–270

50

40

50

50

50

60

50

40

30

30

40

440

10

0

–10

–10

–10

–10

–10

–10

–10

–10

–10

–90

50

20

0

0

0

0

0

0

0

0

0

20

0

0

0

0

0

0

0

0

0

0

0

0

162

ANALYTICAL PERSPECTIVES

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from corporations
2017
31 Credit for residential energy efficient
property ����������������������������������������������
32 Qualified energy conservation bonds 5 ����
33 Advanced Energy Property Credit �����������
34 Advanced nuclear power production
credit ���������������������������������������������������
35 Reduced tax rate for nuclear
decommissioning funds ����������������������
Natural resources and environment:
36 Expensing of exploration and development
costs, nonfuel minerals ������������������������
37 Excess of percentage over cost
depletion, nonfuel minerals �����������������
38 Exclusion of interest on bonds for water,
sewage, and hazardous waste
facilities �����������������������������������������������
39 Capital gains treatment of certain timber
income ������������������������������������������������
40 Expensing of multiperiod timber growing
costs ���������������������������������������������������
41 Tax incentives for preservation of historic
structures ��������������������������������������������
42 Industrial CO2 capture and sequestration
tax credit ���������������������������������������������
43 Deduction for endangered species
recovery expenditures ������������������������
Agriculture:
44 Expensing of certain capital outlays ��������
45 Expensing of certain multiperiod
production costs ���������������������������������
46 Treatment of loans forgiven for solvent
farmers �����������������������������������������������
47 Capital gains treatment of certain income
�������������������������������������������������������������
48 Income averaging for farmers ������������������
49 Deferral of gain on sale of farm refiners ����
50 Expensing of reforestation expenditures ���

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0
10
40

0
10
0

0
10
–20

0
10
–20

0
10
–10

0
10
–10

0
10
0

0
10
0

0
10
0

0
10
0

0
10
0

0
100
–60

0

0

170

440

550

550

550

550

550

550

550

4,460

210

230

240

260

270

280

290

310

320

340

350

2,890

40

50

50

50

50

50

50

50

50

50

50

500

120

120

130

130

130

130

130

130

120

120

120

1,260

130

130

130

120

130

140

140

140

140

150

170

1,390

0

0

0

0

0

0

0

0

0

0

0

0

210

220

220

230

230

240

240

250

250

260

260

2,400

430

440

450

460

470

480

490

500

510

520

530

4,850

190

200

200

0

0

0

0

0

0

0

0

400

10

10

10

20

20

20

20

20

30

30

30

210

10

10

10

10

20

20

20

20

20

20

20

170

20

20

20

20

20

20

30

30

30

30

30

250

0

0

0

0

0

0

0

0

0

0

0

0

0
0
20
20

0
0
20
20

0
0
20
20

0
0
20
20

0
0
20
20

0
0
20
30

0
0
20
30

0
0
20
30

0
0
20
30

0
0
30
30

0
0
30
30

0
0
220
260

2,918
2,870

2,901
2,990

3,053
3,130

3,113
3,280

3,246
3,450

3,450
3,620

3,648
3,810

3,839
4,000

3,967
4,200

4,170
4,420

4,372
4,640

35,759
37,540

50

50

60

60

60

60

70

70

80

80

80

670

720
30

750
30

790
30

840
30

890
40

920
40

950
40

980
40

1,000
40

1,030
40

1,060
50

9,210
380

0

0

0

0

0

0

0

0

0

0

0

0

350

360

350

340

350

380

380

400

400

420

460

3,840

320

340

330

320

330

350

350

370

370

390

420

3,570

0

0

0

0

0

0

0

0

0

0

0

0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

0
0
0
0

Commerce and housing:
Financial institutions and insurance:
51 Exemption of credit union income �����������
52 Exclusion of life insurance death benefits 
53 Exemption or special alternative tax for
small property and casualty insurance
companies ������������������������������������������
54 Tax exemption of insurance income
earned by tax-exempt organizations ���
55 Small life insurance company deduction ���
56 Exclusion of interest spread of financial
institutions �������������������������������������������
57
58
59
60
61
62
63

Housing:
Exclusion of interest on owner-occupied
mortgage subsidy bonds ��������������������
Exclusion of interest on rental housing
bonds ��������������������������������������������������
Deductibility of mortgage interest on
owner-occupied homes ����������������������
Deductibility of State and local property
tax on owner-occupied homes ������������
Deferral of income from installment sales 
Capital gains exclusion on home sales ���
Exclusion of net imputed rental income ���

163

13. Tax Expenditures

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from corporations
2017
64 Exception from passive loss rules for
$25,000 of rental loss �������������������������
65 Credit for low-income housing
investments �����������������������������������������
66 Accelerated depreciation on rental
housing (normal tax method) ��������������
67 Discharge of mortgage indebtedness ������
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83

Commerce:
Discharge of business indebtedness �������
Exceptions from imputed interest rules ���
Treatment of qualified dividends ��������������
Capital gains (except agriculture, timber,
iron ore, and coal) �������������������������������
Capital gains exclusion of small
corporation stock ��������������������������������
Step-up basis of capital gains at death ����
Carryover basis of capital gains on gifts ����
Ordinary income treatment of loss from
small business corporation stock sale ���
Deferral of gains from like-kind
exchanges ������������������������������������������
Depreciation of buildings other than
rental housing (normal tax method) ����
Accelerated depreciation of machinery
and equipment (normal tax method) ��
Expensing of certain small investments
(normal tax method) ���������������������������
Graduated corporation income tax rate
(normal tax method) ���������������������������
Exclusion of interest on small issue
bonds ��������������������������������������������������
Deduction for US production activities �����
Special rules for certain film and TV
production �������������������������������������������

Transportation:
84 Tonnage tax ���������������������������������������������
85 Deferral of tax on shipping companies ����
86 Exclusion of reimbursed employee
parking expenses �������������������������������
87 Exclusion for employer-provided transit
passes ������������������������������������������������
88 Tax credit for certain expenditures for
maintaining railroad tracks ������������������
89 Exclusion of interest on bonds for
Highway Projects and rail-truck
transfer facilities ����������������������������������
Community and regional development:
90 Investment credit for rehabilitation of
structures (other than historic) ������������
91 Exclusion of interest for airport, dock, and
similar bonds ��������������������������������������
92 Exemption of certain mutuals’ and
cooperatives’income ���������������������������
93 Empowerment zones �������������������������������
94 New markets tax credit ����������������������������
95 Credit to holders of Gulf Tax Credit
Bonds. �������������������������������������������������
96 Recovery Zone Bonds 6 ���������������������������
97 Tribal Economic Development Bonds ������
Education, training, employment, and
social services:

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0

0

0

0

0

0

0

0

0

0

0

0

7,890

7,990

8,510

8,640

8,810

9,010

9,230

9,490

9,760

10,070

10,370

91,880

360

470

580

700

840

990

1,120

1,230

1,350

1,460

1,570

10,310
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0

0

0

0

0

0

0

0

0

0

0

0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0

0

0

0

0

0

0

0

0

0

0

0

6,000

6,310

6,630

6,960

7,300

7,670

8,050

8,460

8,880

9,320

9,750

79,330

–3,860

–3,960

–4,150

–4,400

–4,660

–4,920

–5,190

–5,480

–5,670

–5,820

–6,020

–50,270

28,810

24,120

17,490

–3,510

–3,390

5,540

11,460

16,960

21,650

25,380

28,500

144,200

290

280

290

1,040

1,120

890

790

730

700

710

710

7,260

1,550

1,510

1,440

1,430

1,350

1,330

1,280

1,250

1,180

1,180

1,150

13,100

40
9,930

50
10,400

40
10,870

40
11,390

50
11,960

50
12,550

50
13,180

50
13,840

50
14,530

50
15,260

60
16,020

490
130,000

160

90

50

20

0

0

0

0

0

0

0

160

80
20

80
20

90
20

90
20

90
20

100
20

100
20

110
20

110
20

120
20

130
20

1,020
200

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

50

0

0

0

0

0

0

0

0

0

0

0

50

50

40

40

40

40

30

30

30

30

30

360

10

10

10

10

10

10

10

10

10

10

10

100

200

210

200

200

210

220

220

230

230

250

270

2,240

150
50
1,430

150
20
1,380

150
10
1,290

160
10
1,250

160
0
1,180

160
0
1,070

170
0
860

170
0
550

180
0
280

180
0
70

190
0
–120

1,670
40
7,810

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

70
40
10

700
400
100

164

ANALYTICAL PERSPECTIVES

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from corporations
2017
Education:
98 Exclusion of scholarship and fellowship
income (normal tax method) ���������������
99 Tax credits and deductions for
postsecondary education expenses 7 ����
100 Education Individual Retirement
Accounts ���������������������������������������������
101 Deductibility of student-loan interest ��������
102 Qualified tuition programs ������������������������
103 Exclusion of interest on student-loan
bonds ��������������������������������������������������
104 Exclusion of interest on bonds for private
nonprofit educational facilities ������������
105 Credit for holders of zone academy
bonds 8 ������������������������������������������������
106 Exclusion of interest on savings bonds
redeemed to finance educational
expenses ��������������������������������������������
107 Parental personal exemption for students
age 19 or over �������������������������������������
108 Deductibility of charitable contributions
(education) ������������������������������������������
109 Exclusion of employer-provided
educational assistance �����������������������
110 Special deduction for teacher expenses ���
111 Discharge of student loan indebtedness ���
112 Qualified school construction bonds 9 ������

113
114
115
116
117
118
119
120
121
122
123
124
125

Training, employment, and social
services:
Work opportunity tax credit ����������������������
Employer provided child care exclusion ��
Employer-provided child care credit ��������
Assistance for adopted foster children �����
Adoption credit and exclusion ������������������
Exclusion of employee meals and lodging
(other than military) ����������������������������
Credit for child and dependent care
expenses ��������������������������������������������
Credit for disabled access expenditures ����
Deductibility of charitable contributions,
other than education and health ���������
Exclusion of certain foster care payments
�������������������������������������������������������������
Exclusion of parsonage allowances ��������
Indian employment credit ������������������������
Credit for employer differential wage
payments ��������������������������������������������

Health:
126 Exclusion of employer contributions for
medical insurance premiums and
medical care 10 ������������������������������������
127 Self-employed medical insurance
premiums ��������������������������������������������
128 Medical Savings Accounts / Health
Savings Accounts �������������������������������
129 Deductibility of medical expenses �����������
130 Exclusion of interest on hospital
construction bonds �����������������������������
131 Refundable Premium Assistance Tax
Credit 11 ����������������������������������������������
132 Credit for employee health insurance
expenses of small business 12 ������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

110

120

110

110

110

120

120

130

130

140

150

1,240

690

710

690

670

690

740

740

780

780

830

900

7,530

170

180

170

150

130

110

90

80

60

50

50

1,070

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

860

900

950

1,000

1,040

1,100

1,150

1,210

1,270

1,330

1,390

11,340

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
160

0
0
0
1,600

1,000
0
10
0
0

1,020
0
10
0
0

1,050
0
10
0
0

730
0
10
0
0

380
0
10
0
0

250
0
10
0
0

190
0
10
0
0

150
0
10
0
0

110
0
10
0
0

80
0
10
0
0

60
0
10
0
0

4,020
0
100
0
0

0

0

0

0

0

0

0

0

0

0

0

0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

1,800

1,900

1,930

2,010

2,090

2,170

2,250

2,340

2,430

2,530

2,630

22,280

0
0
20

0
0
10

0
0
10

0
0
10

0
0
10

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
40

0

0

10

10

10

10

10

10

10

10

10

90

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

1,030

1,070

1,040

1,010

1,040

1,110

1,120

1,170

1,170

1,240

1,350

11,320

0

0

0

0

0

0

0

0

0

0

0

0

10

10

10

10

0

0

0

0

0

0

0

30

165

13. Tax Expenditures

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from corporations
2017
133 Deductibility of charitable contributions
(health) �����������������������������������������������
134 Tax credit for orphan drug research ��������
135 Special Blue Cross/Blue Shield tax
benefits �����������������������������������������������
136 Tax credit for health insurance purchased
by certain displaced and retired
individuals 13 ���������������������������������������
137 Distributions from retirement plans for
premiums for health and long-term
care insurance ������������������������������������
Income security:
138 Child credit 14 �������������������������������������������
139 Exclusion of railroad retirement (Social
Security equivalent) benefits ��������������
140 Exclusion of workers’ compensation
benefits �����������������������������������������������
141 Exclusion of public assistance benefits
(normal tax method) ���������������������������
142 Exclusion of special benefits for disabled
coal miners �����������������������������������������
143 Exclusion of military disability pensions ����

144
145
146
147
148

Net exclusion of pension contributions
and earnings:
Defined benefit employer plans ���������������
Defined contribution employer plans �������
Individual Retirement Accounts ���������������
Low and moderate income savers credit ���
Self-Employed plans ��������������������������������

Exclusion of other employee benefits:
149 Premiums on group term life insurance ���
150 Premiums on accident and disability
insurance ��������������������������������������������
151 Income of trusts to finance
supplementary unemployment
benefits �����������������������������������������������
152 Income of trusts to finance voluntary
employee benefits associations ����������
153 Special ESOP rules ���������������������������������
154 Additional deduction for the blind ������������
155 Additional deduction for the elderly ���������
156 Tax credit for the elderly and disabled �����
157 Deductibility of casualty losses ����������������
158 Earned income tax credit 15 ���������������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0
2,240

0
2,710

0
3,280

0
3,960

0
4,790

0
5,800

0
7,020

0
8,490

0
10,280

0
12,440

0
15,060

0
73,830

590

610

630

670

700

740

780

820

870

910

960

7,690

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0
0
0
0
0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0
1,960
0
0
0
0
0

0
2,020
0
0
0
0
0

0
2,080
0
0
0
0
0

0
2,150
0
0
0
0
0

0
2,220
0
0
0
0
0

0
2,290
0
0
0
0
0

0
2,360
0
0
0
0
0

0
2,430
0
0
0
0
0

0
2,510
0
0
0
0
0

0
2,580
0
0
0
0
0

0
2,660
0
0
0
0
0

0
23,300
0
0
0
0
0

0

0

0

0

0

0

0

0

0

0

0

0

490

510

530

560

590

620

650

680

720

750

790

6,400

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0

0

0

0

0

0

0

10

10

10

10

40

8,710

9,020

8,740

8,530

8,800

9,410

9,450

9,900

9,900

10,510

11,370

95,630

Social Security:
Exclusion of social security benefits:
159 Social Security benefits for retired and
disabled workers and spouses,
dependents and survivors ������������������
160 Credit for certain employer contributions
to social security ���������������������������������
Veterans benefits and services:
161 Exclusion of veterans death benefits and
disability compensation ����������������������
162 Exclusion of veterans pensions ���������������
163 Exclusion of GI bill benefits ���������������������
164 Exclusion of interest on veterans housing
bonds ��������������������������������������������������
General purpose fiscal assistance:
165 Exclusion of interest on public purpose
State and local bonds �������������������������

166

ANALYTICAL PERSPECTIVES

Table 13–2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from corporations
2017
166 Build America Bonds 16 ���������������������������
167 Deductibility of nonbusiness State and
local taxes other than on owneroccupied homes ���������������������������������
Interest:
168 Deferral of interest on U.S. savings bonds
�������������������������������������������������������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

9,020
0

8,740
0

8,530
0

8,800
0

9,410
0

9,450
0

9,900
10

9,900
10

10,510
10

11,370
10

95,630
40

130
50
360
340
210
120
710
1,070
0

130
40
350
330
200
110
690
1,040
0

120
40
340
320
200
110
670
1,010
0

130
50
350
330
210
110
690
1,040
0

140
50
380
350
220
120
740
1,110
0

140
50
380
350
220
120
740
1,120
0

140
50
400
370
230
130
780
1,170
10

140
50
400
370
230
130
780
1,170
10

150
50
420
390
250
140
830
1,240
10

170
60
460
420
270
150
900
1,350
10

1,390
490
3,840
3,570
2,240
1,240
7,530
11,320
40

Addendum: Aid to State and local
governments:
Deductibility of:
Property taxes on owner-occupied homes
�������������������������������������������������������������
Nonbusiness State and local taxes other
than on owner-occupied homes ���������

Exclusion of interest on State and local
bonds for:
Public purposes ���������������������������������������
8,710
Energy facilities ���������������������������������������
0
Water, sewage, and hazardous waste
disposal facilities ���������������������������������
130
Small-issues ��������������������������������������������
40
Owner-occupied mortgage subsidies ������
350
Rental housing �����������������������������������������
320
Airports, docks, and similar facilities ��������
200
Student loans �������������������������������������������
110
Private nonprofit educational facilities �����
690
Hospital construction �������������������������������
1,030
Veterans’ housing ������������������������������������
0
See Table 1 footnotes for specific table information

167

13. Tax Expenditures

Table 13–2B. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027
(In millions of dollars)
Total from individuals

National Defense:
1 Exclusion of benefits and allowances to armed forces
personnel ����������������������������������������������������������������
International affairs:
2 Exclusion of income earned abroad by U.S. citizens ���
3 Exclusion of certain allowances for Federal
employees abroad ��������������������������������������������������
4 Inventory property sales source rules exception ���������
5 Deferral of income from controlled foreign
corporations (normal tax method) ��������������������������
6 Deferred taxes for financial firms on certain income
earned overseas �����������������������������������������������������
General science, space, and technology:
7 Expensing of research and experimentation
expenditures (normal tax method) ��������������������������
8 Credit for increasing research activities �����������������������
Energy:
9 Expensing of exploration and development costs,fuels
���������������������������������������������������������������������������������
10 Excess of percentage over cost depletion, fuels ���������
11 Exception from passive loss limitation for working
interests in oil and gas properties ���������������������������
12 Capital gains treatment of royalties on coal �����������������
13 Exclusion of interest on energy facility bonds ��������������
14 Enhanced oil recovery credit ���������������������������������������
15 Energy production credit 1 �������������������������������������������
16 Marginal wells credit ����������������������������������������������������
17 Energy investment credit 1 �������������������������������������������
18 Alcohol fuel credits 2 ����������������������������������������������������
19 Bio-Diesel and small agri-biodiesel producer tax
credits 3 �������������������������������������������������������������������
20 Tax credits for clean-fuel burning vehicles and
refueling property ���������������������������������������������������
21 Exclusion of utility conservation subsidies �������������������
22 Credit for holding clean renewable energy bonds 4 �����
23 Deferral of gain from dispositions of transmission
property to implement FERC restructuring policy ���
24 Credit for investment in clean coal facilities �����������������
25 Temporary 50% expensing for equipment used in the
refining of liquid fuels ����������������������������������������������
26 Natural gas distribution pipelines treated as 15-year
property ������������������������������������������������������������������
27 Amortize all geological and geophysical expenditures
over 2 years ������������������������������������������������������������
28 Allowance of deduction for certain energy efficient
commercial building property ����������������������������������
29 Credit for construction of new energy efficient homes ���
30 Credit for energy efficiency improvements to existing
homes ���������������������������������������������������������������������
31 Credit for residential energy efficient property �������������
32 Qualified energy conservation bonds 5 ������������������������
33 Advanced Energy Property Credit �������������������������������
34 Advanced nuclear power production credit ������������������
35 Reduced tax rate for nuclear decommissioning funds ���
Natural resources and environment:
36 Expensing of exploration and development costs,
nonfuel minerals �����������������������������������������������������
37 Excess of percentage over cost depletion, nonfuel
minerals ������������������������������������������������������������������

2018–
2027

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

12,400

12,830

11,640

11,680

12,040

12,520

13,040

13,590

14,190

14,820

15,490

131,840

6,600

6,930

7,280

7,640

8,020

8,420

8,840

9,290

9,750

10,240

10,750

87,160

1,370
0

1,430
0

1,510
0

1,580
0

1,660
0

1,740
0

1,830
0

1,920
0

2,020
0

2,120
0

2,230
0

18,040
0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

710
980

700
1,090

720
1,170

810
1,260

870
1,350

940
1,460

990
1,570

1,050
1,690

1,110
1,820

1,180
1,960

1,250
2,120

9,620
15,490

–180
90

–80
110

–10
120

30
130

50
140

70
170

80
200

80
220

80
240

90
270

100
300

490
1,900

20
140
10
50
400
50
460
20

20
160
10
70
560
80
850
0

20
150
10
80
720
50
870
0

20
140
10
90
860
20
830
0

20
150
10
90
970
20
830
0

30
150
10
90
1,070
30
680
0

30
160
10
100
1,150
70
410
0

30
160
20
110
1,200
100
170
0

30
170
20
100
1,210
130
20
0

30
180
20
100
1,190
150
–30
0

30
190
20
90
1,110
160
–40
0

260
1,610
140
920
10,040
810
4,590
0

30

0

0

0

0

0

0

0

0

0

0

0

400
440
50

470
460
50

490
490
50

370
510
50

270
540
50

250
560
50

220
590
50

200
620
50

150
650
50

120
680
50

90
720
50

2,630
5,820
500

0
10

0
10

0
10

0
20

0
30

0
20

0
0

0
0

0
0

0
0

0
0

0
90

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

20

20

20

20

20

20

20

20

10

10

10

170

20
120

–10
50

–20
10

–20
0

–20
0

–20
0

–20
0

–20
0

–20
0

–20
0

–20
0

–190
60

290
1,430
20
10
0
0

0
1,380
20
0
0
0

0
1,360
20
0
0
0

0
1,250
20
0
0
0

0
1,060
20
0
0
0

0
530
20
0
0
0

0
120
20
0
0
0

0
20
20
0
0
0

0
0
20
0
0
0

0
0
20
0
0
0

0
0
20
0
0
0

0
5,720
200
0
0
0

0

0

0

0

0

0

0

0

0

0

0

0

20

20

20

20

20

20

20

20

20

20

20

200

168

ANALYTICAL PERSPECTIVES

Table 13–2B. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2017-2027—Continued
(In millions of dollars)
Total from individuals
2017
38 Exclusion of interest on bonds for water, sewage, and
hazardous waste facilities ���������������������������������������
39 Capital gains treatment of certain timber income ��������
40 Expensing of multiperiod timber growing costs �����������
41 Tax incentives for preservation of historic structures ���
42 Industrial CO2 capture and sequestration tax credit ����
43 Deduction for endangered species recovery
expenditures �����������������������������������������������������������
Agriculture:
44 Expensing of certain capital outlays ����������������������������
45 Expensing of certain multiperiod production costs ������
46 Treatment of loans forgiven for solvent farmers �����������
47 Capital gains treatment of certain income �������������������
48 Income averaging for farmers ��������������������������������������
49 Deferral of gain on sale of farm refiners ����������������������
50 Expensing of reforestation expenditures ���������������������

2018

2019

2020

2021

2022

2023

2024

2025

2026

2018–
2027

2027

290
140
130
70
0

280
160
130
70
0

290
150
130
70
0

300
140
130
70
0

320
150
140
70
0

360
150
160
70
0

400
160
160
70
0

440
160
160
70
0

470
170
160
80
0

500
180
160
80
0

510
190
160
80
0

3,870
1,610
1,490
730
0

20

20

20

20

30

30

30

30

40

40

50

310

180
290
40
1,360
140
0
40

190
300
50
1,550
150
0
30

200
310
50
1,470
160
0
40

210
320
50
1,450
170
0
40

220
330
50
1,480
180
0
40

230
350
50
1,520
180
0
40

240
360
60
1,580
190
0
40

250
380
60
1,640
200
0
50

260
390
60
1,720
210
0
50

270
410
60
1,800
220
0
50

280
420
70
1,890
230
0
50

2,350
3,570
560
16,100
1,890
0
430

0
11,880

0
12,460

0
13,160

0
13,930

0
15,050

0
16,190

0
17,160

0
18,070

0
19,020

0
20,000

0
20,920

0
165,960

0

0

0

0

0

0

0

0

0

0

0

0

0
0
160

0
0
240

0
0
280

0
0
290

0
0
300

0
0
310

0
0
320

0
0
330

0
0
340

0
0
350

0
0
360

0
0
3,120

Commerce and housing:
Financial institutions and insurance:
51 Exemption of credit union income �������������������������������
52 Exclusion of life insurance death benefits �������������������
53 Exemption or special alternative tax for small property
and casualty insurance companies ������������������������
54 Tax exemption of insurance income earned by taxexempt organizations ����������������������������������������������
55 Small life insurance company deduction ���������������������
56 Exclusion of interest spread of financial institutions ����

Housing:
57 Exclusion of interest on owner-occupied mortgage
subsidy bonds ���������������������������������������������������������
800
760
800
820
880
980
1,110
1,220
1,310
1,370
1,400
58 Exclusion of interest on rental housing bonds �������������
740
700
740
760
810
910
1,020
1,120
1,210
1,260
1,290
59 Deductibility of mortgage interest on owner-occupied
homes ��������������������������������������������������������������������� 65,600 69,130 74,510 81,330 89,030 96,840 104,490 111,810 118,900 125,560 131,630
60 Deductibility of State and local property tax on owneroccupied homes ����������������������������������������������������� 33,710 35,790 38,190 40,920 43,750 46,600 49,550 52,700 55,940 59,230 62,680
61 Deferral of income from installment sales �������������������
1,590
1,760
1,700
1,690
1,730
1,770
1,830
1,900
1,970
2,050
2,140
62 Capital gains exclusion on home sales ����������������������� 43,220 43,870 44,550 45,380 46,160 46,870 47,710 48,630 49,500 50,370 51,280
63 Exclusion of net imputed rental income ����������������������� 121,350 126,000 131,110 136,680 142,590 148,830 155,330 162,180 169,480 177,100 185,370
64 Exception from passive loss rules for $25,000 of
rental loss ���������������������������������������������������������������
7,410
7,710
8,060
8,390
8,730
9,080
9,440
9,750 10,100 10,490 10,860
65 Credit for low-income housing investments �����������������
420
420
450
450
460
470
490
500
510
530
550
66 Accelerated depreciation on rental housing (normal
tax method) �������������������������������������������������������������
1,730
2,210
2,930
3,670
4,210
4,870
5,540
6,180
6,780
7,350
7,900
67 Discharge of mortgage indebtedness ��������������������������
310
0
0
0
0
0
0
0
0
0
0
68