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SPECIAL
ANALYSES

BUDGET OF THE
UNITED STATES
GOVERNMENT
FISCAL YEAR

SPECIAL
ANALYSES

BUDGET OF THE
UNITED STATES
GOVERNMENT
FISCAL YEAR

1978
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THE BUDGET DOCUMENTS
Data and analyses relating to the budget for 1978 are published in
six documents:
The Budget of the United States Government, 1978 contains the information that most users of the budget would normally need, including
the Budget Message of the President. The Budget presents an overview
of the President's budget proposals and includes explanations of
spending programs and estimated receipts. This document also contains a description of the budget system and various summary tables
on the budget as a whole. (Price $3.45.)
The Budget of the United States Government, 1978—Appendix contains detailed information on the various appropriations and funds
that comprise the budget.
The Appendix contains more detailed information than any of the
other budget documents. It includes for each agency: the proposed
text of appropriation language, budget schedules for each account,
explanations of the work to be performed and the funds needed, proposed general provisions applicable to the appropriations of entire
agencies or groups of agencies, and schedules of permanent positions.
Supplemental and rescissions for the current year, and new legislative
proposals, are presented separately. Information is also provided on
certain activities whose outlays are not part of the budget totals.
(Price $13.00.)
Special Analyses, Budget of the United States Government, 1978
contains 17 special analyses that are designed to highlight specified
program areas or provide other significant presentations of Federal
budget data.
This document includes analytical information about: Government
finances and operations as a whole and how they affect the economy;
Government-wide program and financial information for Federal
education, training and employment, health, income security, civil
rights, and crime reduction programs; trends and developments in the
areas of Federal aid to State and local governments, research and development, and environmental protection. (Price $2.70.)
The United States Budget in Brief, 1978 provides a more concise, less
technical overview of the 1978 budget than the above volumes.
Summary and historical tables on the Federal budget and debt are
also provided, together with graphic displays. (Price $1.15.)
Issues '78 provides greater background information than any other
general Executive Branch document on major budget and program
decisions reflected in the President's Budget and on certain major
issues confronting the Nation this year and in the future. Published
for the first time with the 1977 budget (as "Seventy Issues"), this
document is intended for a general audience rather than for those with
particular interests. (Price not available at time of publication.)
The Budget of the United States Government, 1978—Supplement contains the President's recommendations on Executive, Legislative, and
Judicial salaries and is transmitted pursuant to section 225 of Public
Law 90-206 (2 U.S.C. 351 et seq.). (Price not available at time of
publication.)
GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Detail in the tables, text, and charts of this volume may not add
to the totals because of rounding.

TABLE OF CONTENTS
Page

PART 1. ECONOMIC AND FINANCIAL ANALYSES
A. Federal transactions in the national income accounts
B. Funds in the budget
C. Borrowing, debt, and investment
D. Investment, operating, and other budget outlays
E. Federal credit programs
F. Tax expenditures
G. Principal Federal statistical programs
H. Civilian employment in the executive branch
PART 2. FEDERAL SOCIAL PROGRAMS
I. Federal education programs
J. Federal training and employment programs
K. Federal health programs
L. Federal income security programs
M. Federal civil rights activities
N. Federal programs for the reduction of crime
PART 3. SPECIALIZED ASPECTS AND VIEWS OF FEDERAL
PROGRAMS
0 . Federal aid to State and local governments
P. Federal research and development programs
Q. Federal environmental programs
3

5
7
28
41
62
87
119
143
159
169
171
187
202
229
241
252
263
265
290
312

PART 1

ECONOMIC AND FINANCIAL
ANALYSES

INTRODUCTION
Part 1 provides analyses and tabulations that cover Government
finances and operations as a whole, and reflect the ways in which Government finances affect the economy. These special analyses encompass those designated A through H.
Special Analysis A presents the Federal budget estimates in terms
of the national income accounts. It is designed to explain the relationships of the unified budget of the Federal Government to the national
income accounts, which constitute the most widely used measure of
aggregate economic activity in the United States.
Special Analysis B classifies budget information by the groups of
funds (Federal and trust) that comprise the budget.
Special Analysis C describes current developments and trends in
Federal borrowing and debt, and the investment by Government
accounts in Federal securities. It summarizes Federal and federally
assisted borrowing from the public in order to display some measure
of the Government's impact on the credit markets.
Special Analysis D classifies budget outlays in terms of the duration
and nature of the benefits derived, distinguishing those of an investment or development type from those that primarily yield current
benefits. Apart from this analysis the U.S. budget, unlike those of
some other governments, includes outlays that are for "capital" or
investment-type activities in the same accounts in which "current"
activities and costs are shown.
Special Analysis E covers Federal credit programs—direct loans
guarantees of private loans, and loans of Government-sponsored enterprises. It includes estimates of loan subsidy costs, and provides
an aggregate measure of total credit supplied to the public under
Federal auspices.
Special Analysis F provides a discussion of revenue losses due
to provisions of the Federal income tax laws that allow a special exclusion, exemption, or deduction from gross income or that provide
a special credit, preferential rate of tax, or deferral of tax liability.
Special Analysis G reflects obligation levels for the principal programs of the Federal Government for collecting current statistics, and
current spending for periodic statistics obtained in census-type surveys
usually conducted every 5 or 10 years. Also included are staffing levels
for major statistical agencies.
Special Analysis H deals with the levels of civilian employment in
the executive branch. It also contains figures on total Federal personnel
costs (including military personnel).

SPECIAL ANALYSIS A
FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS

The budget is designed to serve several purposes:
• It is an economic document that reflects the taxing and spending
policies of the Government for promoting economic growth, high
employment, relative price stability, and a strong balance-ofpayments position.
• It proposes an allocation of resources between the private and
public sectors and within the public sector. Through its impact
on consumption and investment decisions and the distribution of
income it also affects allocation decisions within the private
sector.
• It sets forth the President's request to the Congress for appropriation action on existing or new programs and for changes in tax
legislation.
• It is a report to the Congress and the people on how the Government has spent the funds entrusted to it in past years.
No single budget concept can satisfy all these purposes fully. The
budget document and related Treasury reports provide detailed
information on the finances of the Federal Government and on the
tax and spending programs proposed by the President. For study of
aggregate economic activity, however, the national income accounts
(NIA) of the United States provide the most useful measures.
This special analysis shows the Federal budget as measured in the
national income accounts. The analysis is divided into three major
sections. The first shows the size, composition, and trends in Federal
sector receipts and expenditures. Additional details will be published
in the February 1977 issue of the Department of Commerce publication, Survey oj Current Business. The second section of this analysis
shows quarterly estimates of Federal sector receipts and expenditures
stated in seasonally adjusted annual rates, and the final section explains the major differences between the budget and the NIA concepts. A discussion of fiscal policy can be found in the Economic
Report oj the President.
FEDERAL SECTOR RECEIPTS AND EXPENDITURES

Table A-l shows Federal sector NIA receipts, expenditures, and
deficits for 1976-78, including the transition quarter (TQ).1
1
The transition quarter is the quarter from July 1 through Sept. 30, 1976. Starting in calendar
year 1976 the Federal fiscal year converted from a July 1 through June 30 basis to an Oct. 1 through
Sept. 30 basis. This 3-month period was required to make the conversion to a new fiscal year and is
being maintained as a separate accounting period.

THE BUDGET FOR FISCAL YEAR 1978
Table A-l. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL
INCOME ACCOUNTS (in billions of dollars)
Description

1976
actual

1978
stimate

1977

RECEIPTS
40.5
14.0
5.9
25.8

158.6
60.6
24.6
116.9

177.5
65.5
26.1
136.6

86.2

360.7

405.7

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

32.5
(21.7)
(10.8)
40.4
(39.6)
(.8)
15.4

6.8

144.8
(94.8)
(50.0)
171.0
(167.7)
(3.3)
68.0
28.8

160.0
(105.4)
(54.6)
179.4
(175.9)
(3.5)
69.6
30.0

5.8

1.6

7.3

8.1

373.0

96.7

419.9

447.1

-59.4

Total receipts

137.2
51.0
24.5
100.9
313.6

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

-10.5

-59.2

-41.4

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

Trends in Federal sector receipts.—Table A-l divides receipts
into four major categories, which are also illustrated in the chart on
the distribution of Federal sector receipts by category.
Personal tax and nontax receipts.—The largest receipt category—
personal tax and nontax receipts—is composed primarily of individual
income taxes but also includes estate and gift taxes and some miscellaneous receipts. Increases in income, because of both real growth
and inflation, automatically increase these receipts. Since personal
income taxes are progressive, these receipts normally grow at a faster
rate than personal income. However, tax reductions have been
enacted periodically over the past three decades that have offset
most of the increase in effective tax rates resulting from the progressive
tax structure. This is illustrated in table A-2, which shows Federal
sector receipts at 10-year intervals as a percent of the gross national
product (GNP).
Table A-2. FEDERAL SECTOR RECEIPTS AS A PERCENT OF GNP
Description

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

1948
actual

1958
actual

1968
actual

1978
estimate

8.2
4.6
3.2
1.9

8.2
4.0
2.6
2.8

8.6
4.0
2.1
4.6

8.7
3.2
1.3
6.7

17.8

17.7

19.3

19.9

SPECIAL ANALYSIS A

Distribution of Federal Sector Receipts by Category
Percent

100

Corporate profits tax accruals.—These tax accruals are volatile because corporate profits are among the most volatile components of
national income. The NIA corporate profits taxes generally differ from
the corresponding budget category primarily because: (1) The NIA
show the deposit of earnings by the Federal Reserve System as
corporate profit taxes, while the budget treats them as miscellaneous
receipts; and (2) the NIA record corporate profits taxes when the
profits are earned (that is, accrued), while the unified budget records
the cash receipts.
Estimates of corporate profits tax accruals are normally subject to
greater error than any other category of receipts. The NIA estimate is
derived from estimates of corporate profits before tax and effective
tax rates. These estimates are subject to significant revisions based on
later data. As is shown in table A-8, revised estimates of corporate
profits raised estimated corporate profits tax accruals for 1975 by $1.0
billion from the estimate of a year ago, even though both estimates
were for a period that had ended. There is about a 3-year lag between
initial estimates of corporate tax liability data; in the interim, successive estimates are made based on gradually improving data.
The secular decline in corporate profits tax receipts relative to GN.P
and to total receipts (as shown in the chart above) results mainly from
three factors: (1) a long-term decline in corporate profits relative to
GNP; (2) a narrowing of the corporate profits tax base resulting from
changes in the definition of corporate profits for tax purposes (largely

THE BUDGET FOR FISCAL YEAR 1978

increases in permissible depreciation allowances); and (3) the nearlyconstant nominal tax rate on taxable corporate profits. This decline
would be accelerated in future years by the proposed corporation
income tax rate reductions and the proposed integration of individual
and corporation income taxes.
Indirect business tax and nontax accruals.—These receipts are composed of excise taxes, customs duties, and various miscellaneous receipts such as rents and royalties. The import fees on crude oil and
petroleum products, most of which have been ended, are classified
as indirect business taxes. Over time, indirect business tax and nontax
accruals have become a much less important part of total Federal
sector receipts, partly because they normally do not rise in proportion
to the increase in the economy and partly because some of them, such
as the automobile and telephone excise taxes, have been repealed or
reduced.
Contributions for social insurance.—This group of receipts constitutes the second largest category of Federal sector receipts. The rapid
increase since World War II has been caused by the growth in the
labor force and in wage rates, the expanded coverage of existing
social insurance programs, the enactment of new ones, and the higher
taxable wage base and contribution rates needed to finance liberalization of benefits. As a result of the rapid rise in social insurance taxes
(mainly social security) and the passage of legislation reducing or
eliminating individual income taxes for many low- and moderateincome individuals and families, millions of Americans now pay
significantly higher social insurance taxes than income taxes.
Major tax changes.—Federal sector receipts in the budget reflect
both the impact of tax changes scheduled under current law and proposed tax legislation. The major changes in taxes reflected in the
budget are the following:
—-The recently enacted Tax Reform Act of 1976 extended temporary tax reductions that were scheduled to expire and enacted a
number of major tax reforms. Had the provision of the temporary
tax reductions previously in effect been permitted to expire,
personal taxes would have been increased nearly $13 billion and
corporate taxes by about $4 billion in 1977.
—Permanent individual and corporation income tax reductions are
proposed to become effective retroactive to January 1, 1977. In
comparison to current law, these reductions—which would include
replacement of some of the temporary provisions of the Tax
Reform Act (such as the $35 per capita credit)—would reduce
receipts by about $9 billion in 1977 and $27 billion in 1978. In
comparison to the receipts that would result from extending the
temporary provisions of the Tax Reform Act, the reductions are
the same in 1977 and about $13 billion in 1978.

SPECIAL ANALYSIS A

—Income earned by corporations is currently taxed twice: first as
corporation income and then as personal income when profits are
passed on to the shareholder. It is proposed that this double
taxation be eliminated in six annual phases, beginning in January 1978, through comprehensive corporation income tax
integration. This proposal reduces 1978 corporate profits tax
accruals by $1.9 billion.
—The social security tax base increased from $15,300 in 1976 to
$16,500 in calendar year 1977. Under existing law, the base will
increase further to $17,700 in calendar year 1978, and the combined employer-employee rate will rise from 11.7% to 12.1%. In
addition, a rate increase of 0.2 percentage points—to 12.3%—is
proposed for January 1978. This proposal would increase 1978
receipts by $1.4 billion.
—These estimates also reflect the Unemployment Compensation
Amendments of 1976, which increased the Federal unemployment
insurance tax rate (from 0.5% to 0.7% effective January 1, 1977)
and tax base (from $4,200 to $6,000 effective January 1, 1978).
These increases raise receipts by $0.3 billion in 1977 and $2.6
billion in 1978.
Part 4 of the budget discusses tax changes and proposed legislation
in greater detail.
Trends in Federal sector expenditures.—Federal sector expenditures are also divided into several major NIA categories. The primary
division is between purchases of goods and services (which are divided
between defense and nondefense purchases) and all other transactions.
Purchases are that portion of the Nation's output that is bought directly by the Federal Government and, therefore, included in GNP.
The other expenditure categories consist primarily of payments to
individuals and grants to State and local governments. These individuals and governments, in turn, can use the income to finance their
own consumption or purchases of goods and services, to save, and—
in the case of States and localities—to hold down taxes or make transfer payments.
A major shift in the composition of Federal sector expenditures has
been underway for years. As the chart on expenditures shows, defense
purchases of goods and services have been a declining share of Federal
spending since the Korean war. There has been a corresponding rise
in other components, especially grants-in-aid and domestic transfer
payments. While this shift has been underway for two decades, it was
accelerated in the past decade due to the sharp increases in Federal
transfer payments and grants, while defense purchases in current
prices dropped for several years in a row. In 1974 defense purchases
in current prices were still below the 1968 and 1969 levels. Real (i.e.,
deflated) spending for defense has decreased substantially during this
period.

THE BUDGET FOR FISCAL YEAR 19 78

Distribution of Federal Sector Expenditures by Category
5-Yeor Averoses

Interest and Other

1949-53

1954-58

1959-63

1964-68

1969-73

Fiscal Yeais

1974-78
Estimate

Table A-3 shows Federal sector expenditures by category as a
percent of GNP at 10-year intervals.
Table A-3. FEDERAL SECTOR EXPENDITURES AS A PERCENT OF GNP
_
. .
Description

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

1948
actual

1958
actual

1968
actual

1978
estimate

3.9
].5
3.5
1.1
.7
1.7
.2

10.1
1.5
4.0
.4
1.1
j.2
.5
—.1

9.0
2.4
5.1
.3
2.1
\.3
.5

5.2
2.7
8.6
.2
3.4
K5
.4

12.6

18.7

20.8

21.9

SPECIAL ANALYSIS A

Defense purchases and foreign transfer payments are largely
for the conduct of our national defense and foreign affairs.2 In 1948
defense purchases—reduced by receipts from large-scale sales of
World War II materials—were only 3.9% of GNP, while foreign
transfer payments were 1.1% of GNP. The total of these, 5.0%,
roughly reflects the cost of the conduct of external affairs. In 1958,
after the Korean war defense buildup, they totaled 10.5% of GNP;
by 1978 they will be back down to about 5.4% of GNP.
In contrast, spending on most other expenditure categories, especially nondefense purchases, domestic transfer payments, and grants-inaid, has risen dramatically. In 1948, NIA spending for everything
except defense purchases and foreign transfers was equal to 7.6% of
GNP; in 1978 it is estimated at 16.6% of GNP.
Defense purchases of goods and services.—Defense purchases consist

of all purchases of goods and services under programs included in the
national defense function in the budget. Almost all defense purchases
are made by the Department of Defense—Military, but this category
also includes defense-related purchases (related to atomic weapons)
by the Energy Research and Development Administration and other
accounts included in the defense function.
The 1978 budget calls for increases in defense purchases in 1977
and 1978. These increases more than offset the impact of inflation,
thus reversing the pattern of declining defense spending in real terms.
While NIA defense purchases are not estimated in constant prices
(the Department of Commerce is working on constant price defense
purchases, and according to current plans will publish estimates of
them in calendar year 1978), the budget includes constant price
estimates of outlays in the national defense function. There is sufficient similarity between this category and defense purchases in the
NIA that these figures give a rough approximation of the same transactions. The unified budget estimates of national defense outlays in
constant prices are as follows (in billions of fiscal year 1972 dollars):
1963
1968
1973
1976
1977 estimate
1978 estimate

- - 79.0
102.2
70.5
64.6
67.0
70.2

Nondejense purchases oj goods and services.—This category covers

the goods ancl services purchased by Federal nondefense agencies.
These include such programs as operation of national forest, park
and recreation areas; space exploration; promotion of commerce;
acquisition and disposal of agricultural commodities; construction of
flood control and navigation projects; operation of the Federal airway system; a wide variety of medical, energy, and other scientific
research; the capital outlay of Government enterprises; Federal
law enforcement; and operation of veterans hospitals. Table A-4
shows the composition of this spending by agency for the years 1975
through 1978.
3
However, in recent years a significant portion of foreign transfers arises from payments under
general domestic social programs; for example, payments to social security retirees living abroad.

T H E BUDGET FOR FISCAL YEAR

1978

Table A-4. NONDEFENSE PURCHASES OF GOODS AND SERVICES BY
AGENCY (in billions of dollars)
Description

Legislative branch
The Judiciary
Agriculture:
Commodity Credit Corporation (CCC)
Other
Commerce
Defense—Civil
Health, Education, and Welfare
Housing and Urban Development
I nter ior
Justice
Labor
State
Transportation
Treasury
Civil Service Commission
Energy Research and Development Administration
Environmental Protection Agency
Federal Energy Administration
General Services Administration
National Aeronautics and Space Administration
Postal Service 1
Tennessee Valley Authority
Veterans Administration
Allother 2
Total

1975
actual

1976
actual

1977
estimate

1978
estimate

0.7
.3

0.8
.3

1.0
.4

1.1
.4

.2
2.4
.9
2.1
5.3
.8
2.2
1.3
.7
.7
3.0
2.5
.8
1.4
.4
.1
.4
3.2
.7
1.0
4.1
2.8

.3
2.5
.9
2.2
5.9
1.2
2.3
1.4
.9
.8
3.2
2.8
1.0
1.8
.5
.1
*
3.6
.7
1.0
4.4
2.8

.6
3.3
1.2
2.5
6.3
1.1
3.4
1.7
1.1
1.1
3.6
3.0
1.3
3.0
.7
.5
.2
3.6
.6
1.4
5.2
3.2

.2
3.5
1.3
2.7
6.7
1.0
3.4
1.8
1.1
1.2
3.8
3.2
1.5
3.6
.7
1.2
.2
3.8
.6
1.5
5.5
4.6

38.0

41.4

50.0

54.6

"Less than $50 million.
1
Not included in budget outlays.
2
Includes allowances for civilian agency pay raises and contingencies.
Note.— Excludes the transition quarter. Data on the transition quarter are shown in Table A - l .

Nondefense purchases consist mainly of the cost of operating the
various nondefense agencies. In the case of Government enterprises
(including the CCC and the Postal Service), however, the purchases
figures represent net capital formation.
Domestic transfer payments.—This is now the largest category of
Federal sector expenditures. Spending for domestic transfers has
expanded rapidty in recent years, mainly because of more beneficiaries
and higher benefit pa}onents under the social insurance programs.
Table A-3 shows the growth in domestic transfer payments as a
percent of GNP at 10-year intervals, and the chart on the distribution
of Federal sector expenditures by categor}^ shows this growth trend
over time relative to total Federal sector expenditures. Table A-5
provides data on the composition of domestic transfer payments by
major program and by functional category. As can readily be seen,
spending on human resources programs—especially income security
programs—dominates domestic transfer payments. Under budget
proposals, this spending would continue tc rise in 1978, but at a much
slower rate than in most recent years. Program trends (on a unified
budget basis) are extensively discussed in Part 5 of the budget and
elsewhere in the budget documents.

Table A-5. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS
(In billions of dollars)
Actual

Description
HUMAN RESOURCES PROGRAMS
Income security:
Social security (OASDI)
Railroad retirement
Civil service retirement
Unemployment benefits
Benefits for coal miners
Supplemental security income
Food stamps
Special payments, Treasury !
Other
Subtotal, income security
Health:
Medicare
Other
Subtotal, health
See footnote at the end of table.

1969

1970

1971

Estimate
1976

1977

1978

70.3
3.4
8.2
18.3
1.0
4.5
4.9
.8
.5

80.7
3.7
9.6
15.3
.9
4.8
4.1
.8
.8

88.0
3.8
10.9
12.8
1.0
5.1
4.1

61.5
3.0
6.9
12.2
.9
4.2
4.1
1.7
.5

61.7

72.8

95.2

112.0

120.8

126.7

8.3
.4

9.0
.4

10.9
.4

14.0
.5

16.8
.5

20.8
.5

23.2
.5

8.8

9.4

11.3

14.5

17.4

21.3

23.7

1967

1968

1972

1973

1974

1975

20.5
1.2
1.9
2.1

22.5
1.4
2.1
2.2

25.8
1.5
2.4
2.2

28.6
1.6
2.7
3.0
*

34.0
1.9
3.2
5.6
.3

38.0
2.1
3.7
6.5
.4

46.6
2.4
4.5
4.8
.9

1.5

1.8

53.2
2.6
5.6
5.5
1.0
1.9
2.7

26.0

28.5

32.3

36.7

46.7

52.8

3.0
.3

5.0
.3

6.2
.3

6.7
.4

7.5
.4

3.3

5.4

6.6

7.2

7.9

1.0

Table A-5. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS—Continued
(In billions of dollars)
Actual
1967

1968

1969

1970

1971

Estimate
1972

1973

1974

1975

1976

1977

1978

HUMAN RESOURCES PROGRAMS—Con.

Education, training, employment, and social
services:
Education
Training and employment2

.4
.1

.7
.1

.9
.2

.9
.4

.9
.6

1.0
.5

1.5
.2

2.0
.3

2.5
.3

2.1
.3

Subtotal, education, training, employment, and social services

1.0

1.3

1.5

1.8

2.3

2.8

2.4

5.3

5.6

6.2

6.9

8.0

8.8

9.7

10.4

12.8

14.3

13.7

13.1

Total, human resources programs

35.1

40.4

45.9

51.8

64.0

71.9

82.4

96.0

124.3

145.9

158.7

165.8

ALL OTHER FUNCTIONS
National defense (military retired pay)
All other functions (includes allowance for
contingencies)

1.8

2.1

2.4

2.8

3.3

3.8

4.3

5.1

6.2

7.2

8.2

9.0

1.1

2.0

2.3

2.7

3.2

3.7

4.2

4.7

5.6

6.7

7.7

8.9

10.1

37.2

42.7

48.7

55.0

67.7

76.1

87.1

101.7

131.0

153.6

167.7

175.9

Veterans benefits and services

Total functions not included in human
resources grouping
Total domestic transfer payments

*Less than $50 million.
Includes the $50 tax rebate and the earned income credit to the extent that tax credits exceed tax liabilities otherwise owed.
Includes a relatively small amount classified as social services.
Note.— Excludes the transition quarter. Data on the transition quarter are shown in table A—1.

1
2

SPECIAL ANALYSIS A

Composition of Federal Sector Expenditures
S Bill.

240-

200
Grants-in-Aid and
Domestic Transfer Payments

160

120-

80 - "

All Other

1960
Fiscal Yeatj

1965

1970

1975

1978
Estimate

Grants-in-aid.—These expenditures help State and local governments to provide general public services or to finance programs for
the needy. There is a substantial degree of substitutability between
grants-in-aid and domestic transfer payments and—to a lesser
degree—nondefense purchases. For example, low-income veterans
could be eligible for free medical care under medicaid (grants), in
a veterans hospital (nondefense purchases), or, perhaps, under medicare (transfer payments). The supplemental security income transfer
payments have replaced the previous program of grants to States
for public assistance for the elderly and handicapped. (The State
and local spending of Federal grant money for public assistance
programs is classified as State and local government transfer payments.) In addition, there is significant substitutability between
different grant programs; for example, the substitution of block grants
and general revenue sharing for categorical grants can result in significant changes in administrative controls without changing the total
size of grants. In some cases a more meaningful picture of Federal
efforts to meet domestic needs through income transfers is obtained
by treating grants and domestic transfer payments together rather
than separately.

http://fraser.stlouisfed.org/77 - 2
240-700 O Federal Reserve Bank of St. Louis

Table A-6. FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID (in billions of dollars)
Actual

Esti mate

Description

1967
HUMAN RESOURCES PROGRAMS
Income security:
Public assistance cash benefits
Child nutrition and related programs
Administration of unemployment benefits
Other

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

2.7
.2
.2

3.2
.2
.2
.1

3.6
.3
.3
.1

4.1
.4
.3
.1

5.5
.6
.4
.1

6.6
.9
.4
.1

5.9
1.1
.5
.1

5.4
1.2
.5
.2

5.1
1.7
.6
.3

5.8
2.3
.9
.4

6.1
3.0
.9
.4

6.5
2.5
.9
.4

3.2

3.7

4.2

4.9

6.6

7.9

7.6

7.3

7.7

9.4

10.4

10.3

1.2

1.8

2.3

2.7

3.4

4.6

5.8

6.8

8.5

10.2

12.0

1.2

1.1

1.4

1.6

1.9

2.4

2.7

2.1

1.9

2.7

3.1

3.9

4.5

6.0

6.2

7.6

9.2

11.2

12.9

14.0

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

2.8
.3
.6

3.3
.5
.7

3.2
.5
.9

3.6
.5
1.1

3.9
.8
1.4

4.1
1.6
2.6

4.1
1.9
2.3

3.9
1.9
2.2

4.8
3.4
3.2

4.8
5.5
3.4

5.6
4.5
4.2

5.6
4.6
3.9

Subtotal, education, training, employment, and social services

3.7

4.5

5.2

6.1

8.2

8.4

8.1

11.4

13.7

14.3

14.1

8.8

10.9

11.9

14.0

17.2

22.2

22.3

23.0

28.3

34.4

37.8

38.5

.1
.1

.2
.1

.2
.2

.5
.2

.5
.3

.7
.3

1.6
.3

2.0
.4

2.5
.8

4.6
1.1

5.3
1.2

Subtotal, income security
Health:
Medicaid/General health financing assistance
Other (includes research, construction, services, and medical training)
Subtotal, health

Veterans benefits and services
Total human resources programs
ALL OTHER FUNCTIONS
Natural resources, environment, and energy:
Environment
Other

Subtotal, natural resources, environment,
andenergy
Community and regional development:
Urbanrenewal
Other HUD grants_
__-_
Area and regional development.
Other
_._
_

Subtotal, community and regional development.
Commerce and transportation:
Highways (including safety)._
Urban mass transit
.
Other (mainly airport construction)

Subtotal, commerce and transportation..
General science, space, and technology (mainly
research grants)
Law enforcement and justice
Revenue sharing and general purpose fiscal
assistance:
General revenue sharing
__
Other (includes antirecession financial assistance)

1.1

2.0

2.4

3.3

5.7

6.5

4
1
.1
3

.5
.1
.2
.4

.5
.2
.3
.3

1.0
.3
.3
.5

1.0
.5
.4
.4

1.2
.7
.4
.4

1.0
.9
.5
.5

1.2
.8
.5
.4

1.3
.7
.5
.4

1.2
1.3
.6
.5

1.0
2.5
1.4
.6

.7
3.1
1.4
.5

1.2

1.3

2.2

2.4

2.8

2.9

3.0

3.6

5.5

5.7

4.0
.1

4.2
*
.1

4.2
.1
.1

4.4
.1
.1

4.6
.2
.1

4.7
.3
.1

4.7
.4
.2

4.5
.5
.2

4.7
.8
.4

6.3
1.0
.4

5.9
1.6
.5

7.0
1.5
.8

4.1

4.3

4.4

4.6

4.9

5.1

5.3

5.9

7.7

8.0

9.3

.5
*

.6
*

.7
*

.6
.2

.6
.3

.6
.5

.7
.7

.6
.7

.6
.8

.8
.7

.7
.7

6.6

6.1

6.2

6.8

1.9

Subtotal, revenue sharing and general
purposefiscalassistance

7.0

6.5

6.7

8.7

7.7

All other functions (includes allowance for
contingencies)
_

Total functions not included in the human
resources grouping

6.0

6.9

7.3

8.6

9.6

10.4

18.1

18.6

20.0

23.2

30.2

31.1

14.8

17.8

19.2

22.6

26.8

32.6

40.4

41.6

48.3

57.5

68.0

69.6

Total grants-in-aid

*Lcss than $50 million.
Note.— Excludes the transition quarter. Data on the transition quarter are shown in table A-l.

THE BUDGET FOR FISCAL YEAR 19 78

The chart on the composition of Federal sector expenditures combines grants-in-aid and domestic transfer payments. Table A-6 shows
detail on grants-in-aid by budget function and major activity, and
table A-5 shows similar detail for domestic transfer payments.
A discussion of grant expenditures may be found in Special Analysis
O of this document. While the definition of Federal aid used in that
analysis differs somewhat from the NIA definition, the two sets of
data largely overlap. Special Analysis O explains the relationship
between the two data series.
Foreign transfer payments.—There are three major types of foreign
transfer payments: expenditure of dollars to assist foreign economic
development, grants to foreign governments of foreign currencies
that are earned from the sale of agricultural products, and payments under social security and similar programs to individuals living
abroad. Although payments to individuals are gradually rising
(roughly in proportion with the rise in GNP), total foreign transfer
payments have been stable (and a declining proportion of GNP) for
many years.
Net interest paid.—Net interest is highly dependent on the size of
Federal debt, loans outstanding, and the interest rates on both borrowing and lending. In the late 1940's, net interest paid amounted to
around 13% to 14% of total Federal sector NIA expenditures; but
since 1952 it has generally been between 6% and 7% of the total.
Subsidies less current surplus of Government enterprises.—Subsidies
less current surplus of Government enterprises consist of two elements: (1) Subsidy payments to resident businesses (including farms);
and (2) the "current surplus" or "deficit" of Government enterprises.
A subsidy is a monetary grant to a unit engaged in commercial activities. Examples are housing subsidies, payments to farmers for land
retirement, payments to air carriers, and the construction and operating differential subsidies paid to operators of U.S.-flag merchant ships.
"Government enterprise" is the term used in the NIA to designate
certain business-type operations of the Government (usually appearing in the budget as public enterprise revolving funds). The operating
costs of Government enterprises are, to a great extent, covered by the
sale of goods and services to the public, as distinguished from tax
receipts. The difference between the sales and the current operating
expenses of a Government enterprise constitutes its surplus or deficit.
The largest of these enterprises are the Commodity Credit Corporation, the Postal Service (which is currently not included in the budget
but is included in the NIA), and the Tennessee Valley Authority.
Table A-7 shows the composition of this aggregation by major
category.

Table A-7. SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES
(In billions of dollars)
Actual

Estimate

Description

Subsidies:
Commodity Credit Corporation
Maritime
Housing(HUD)
Railroad and mass transit
Small Business Administration
Other (mainly Agriculture)
Subtotal

3.1
.3
.3

2.6
.3
.3

3.0
.3
.4

3.1
.3
.5

3.6
.4
.8
*

3.0
.4
1.3
.1

_
.5

4.2

3.7

4.2

4.4

.7
1.0
-.1
—.2
—.1

.3
.9
-.1
—.2
-—.1

.5
.9
-.1
—.2
—.1

-.1
-.3

1.0

5.2

-._

Enterprise surpluses (—) or deficits:
Commodity Credit Corporation
PostalService
Tennessee Valley Authority..
Federal Housing Administration
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance Corporation^.
Another*
Subtotal

Total subsidies less current surplus..

2.4
.4
1.9
.1
*
.3

0.6
.5
2.2
.4

0.3
.5
2.4
1.2

0.4
.6
2.9
1.3

0.4
.6
3.6
1.3

4.0
.4
1.7
.1
.7
.4

5.2

7.3

5.2

4.2

4.7

5.5

6.2

.6
1.3
-.2
—.2
—.1

.6
2.0
-.2
—.3
—.1

.6
1.4
-.2
—.3
—.2

1.3
1.3
-.2
—.3
—.1

1.5
2.0
-.3
—.1
—.1

.3
2.2
-.3
—.2
—.2

.1
2.0
-.4
—.2
—.2

.6
2.1
-.4
—.3
—.2

.5
2.3
-.4
—.4
—.2

-.1
-.3

-.1
-.2

-.1
-.3

-.1
-*

-.1
.1

-.2
-.2

-.2
.1

-.2
.2

-.2
.3

1.1

1.6

1.8

2.7

1.5

1.2

1.8

1.9

4.1

4.6

5.4

6.8

6.4

9.1

7.9

5.7

5.8

7.3

8.1

_._

*Less than $50 million.
Includes impact of retroactive pay raises.
Note.— Excludes the transition quarter. Data on the transition quarter are shown in table A - l .

*
g

THE BUDGET FOR FISCAL YEAR 19 78

Wage disbursements less accruals.—This is an adjustment item
occasionally made in the NIA to take account of the fact that wages
and salaries are not always received at the same time as they are
earned. The national income component of wages and salaries is
counted in the GNP on an accrual basis; that is, when the income is
earned rather than when it is received. Personal income, however,
including wage and salary disbursements, is estimated on the basis
of when the cash is received.
Ordinarily, wage and salary payments disbursed in one period but
earned in the preceding period are approximately offset by payments
disbursed in the next period but earned in the current period, thus
making the adjustment between national income and personal income
small or zero.
Estimating errors.—The process of estimating NIA receipts and
expenditures is imprecise. Data are frequently not available when
needed and in the detail desired, yet it is important that the estimates be prepared in a timely manner. The budget piocess does
not generate all of the data needed to make precise NIA estimates, so
approximations are required in the NIA translation. Table A-8 provides some indication of the magnitudes of the estimating errors.
When the 1977 budget was issued, fiscal year 1975 had been over for
7 months, and the 1975 figures were labeled "actual"; yet, as table
A-8 shows, the current figures for 1975 are now significantly different.
These data, therefore, need to be recognized as approximations,
not precise figures.
Table A-8. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL
INCOME ACCOUNTS FOR 1975: COMPARISON OF JANUARY 1976 AND
CURRENT ESTIMATES (in billions of dollars)
Description

January
1976
"actuals"

Change

Current
"actuals"

RECEIPTS

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

0.9
1.0
—.3
.1

127.3
41.6
22.1
92.2

281.5

Total receipts

126.4
40.6
22.4
92.0

1.7

283.2

117.6
(80.3)
(37.3)
134.8
(131.7)
(3.1)
48.3
22.0
5.7
.4

1.4
(.7)
(.7)
—.7
(-.7)
(*)
*
-.1
—*
—*

119.0
(81.0)
(38.0)
134.1
(131.0)
(3.1)
48.3
21.9
5. 7
.4

EXPENDITURES

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

328.7

329.5

-47.2

Deficit ( - )

.7
1.0

-46.3

*Less than $50 million.

QUARTERLY ESTIMATES

Table A-9 presents quarterly NIA receipts and expenditures esti
mates (at seasonally adjusted annual rates) for the period covered by
http://fraser.stlouisfed.org/
the Bank of
Federal Reservebudget.St. Louis

Table A-9. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME ACCOUNTS, QUARTERLY, 1976-78
(In billions of dollars; seasonally adjusted at annual rates)
Actual
Description

JulySept.
1975

Oct.Dec.
1975

Mar.
1976

Estimated
AprJune
1976

JulySept.
1976

Oct.Dec.
1976 1

Jan.Mar.
1977

Apr.June
1977

JulySept.
1977

Oct.Dec.
1977

Mar.
1978

Apr.June
1978

JulySept.
1978

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

130.5
47.4

135.1
49.4

137.7
53.1

141.9
54.8

147.2
56.5

154.5
59.6

157.2
60.0

157.7
60.2

166.4
62.6

171.7
63.8

171.3
64.5

177.1
65.5

189.9
68.0

25.2
94.7

25.5
96.6

22.8
102.9

23.3
104.6

23.8
106.6

24.1
109.3

24.3
116.8

24.7
120.3

25.2
123.1

25.6
125.7

25.7
138.5

26.2
140.8

26.8
143.1

297.7

307.6

316.5

324.6

334.0

347.5

358.3

362.9

377.3

386.8

400.0

409.6

427.8

124.6
(84.6)
(40.0)
152.1
(149.2)
(2.9)

130.4
(87.1)
(43.2)
154.9
(151.8)
(3.2)

129.2
(86.2)
(42.9)
160.3
(157.2)
(3.1)

131.2
(86.9)
(44.2)
158.7
(155.6)
(3.1)

134.5
(88.5)
(46.0)
163.1
(159.8)
(3.4)

138.9
(91.3)
(47.6)
166.5
(163.3)
(3.2)

141.8
(92.8)
(49.0)
169.7
(166.4)
(3.3)

146.5
(95.7)
(50.8)
172.0
(168.7)
(3.3)

151.8
(99.3)
(52.5)
175.7
(172.3)
(3.4)

157.2
(103.6)
(53.6)
176.7
(173.3)
(3.4)

159.2
(105.1)
(54.1)
177.8
(174.3)
(3.5)

56.8
23.6

58.0
25.6

58.8
26.6

56.3
27.4

60.1
27.7

65.5
28.4

66.3
28.6

69.3
28.9

70.2
29.3

69.6
29.6

69.5
29.9

69.9
30.2

69.3
30.3

6.7

7.1

5.4

5.2

5.6

6.3

7.2

7.8

8.3

8.2

8.3

8.1

363.7

376.0

380.3

378.7

391.1

405.6

413.6

424.5

435.3

441.4

444.6

448.4

454.1

-66.0

-69.4

-63.8

-54.1

-57.1

-58.1

-55.3

-61.6

-58.0

-54.6

-44.6

-38.8

-26.3

EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign,Grants-in-aid to State and local
governments
Net interest paid
Subsidies less current surplus Government enterprises
Total expenditures
Deficit ( - )
1

160.8 162.7
(106.0) (106.9)
(54.8) (55.8)
179.2 183.7
(175.7) (180.1)
(3.5)
(3.6)

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

THE BUDGET FOR FISCAL YEAR 1978

The translation of the budget into national income accounts
categories is necessarily inexact. The budget itself is a mixture of a
forecast of what receipts and outlays are expected to be for some items
under current law, and a Presidential request for congressional approval of proposed amounts for others. For this special analysis, each
budget receipt and outlay is analyzed and translated into NIA
categories. Imprecision and possible error are inevitable even when
the translation is made using annual data. One can anticipate revisions
similar to those shown in table A-8 for the "actuals" each year. The
margin of error for the estimate years (1977 and 1978 in this budget) is
inevitably even greater, since they involve estimating errors and differences between proposals and what is realized in the basic unified
budget, as well as errors in translating unified budget transactions into
NIA terms. When these annual estimates are converted into quarterly
estimates seasonally adjusted at annual rates, the imprecision is
further increased. The data presented in table A-9 are the best available estimates of the quarterly NIA receipts and expenditures consistent with the 1978 budget, but should be used with clear recognition
of their limitations.
RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR OF THE
NATIONAL INCOME ACCOUNTS

Table A-10 shows the major differences between the budget and the
Federal sector of the NIA. These differences are explained below.
Table A-10. RELATIONSHIP OF THE BUDGET T O THE FEDERAL SECTOR,
NIA (in billions of dollars)
Description

1976

actual

1977

estimate

1978
estimate

RECEIPTS
Total budget receipts

Government contribution for employee retirement
(grossing)
Other netting and grossing
Adjustment to accruals
_
Other
Federal sector, NIA receipts

300.0

81.8

354.0

393.0

6.0
2.3
6.0
-.8

1.6
.6
2.3
-.2

6.8
2.7
-1.8
-1.1

7.5
3.0
3.2
-1.0

313.6

86.2

360.7

405.7

366.5

94.7

411.2

440.0

-4.8

-1.3

-3.2

-3.8

6.0
2.3
2.6
2.1
-).7

1.6
.6
.8
1.1
-.9

6.8
2.7
2.0
1.9
-1.5

7.5
3.0
1.0
2.3
-2.8

373.0

96.7

419.9 447.1

EXPENDITURES
Total budget outlays

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

SPECIAL ANALYSIS A

Lending and financial transactions.—Conceptually, the national
income accounts measure the Nation's current income and production,
and therefore do not include transactions, such as loans, that are an
exchange of assets and liabilities rather than current income or production. Loan transactions have a significant economic impact,
affecting income and output, but they are analyzed more appropriately
within a financial market framework such as provided by the flow-offunds data of the Federal Keserve Board. Special Analysis C (Borrowing, Debt, and Investment) and Special Analysis E (Federal Credit
Programs) both contain information on the financial market implications of the budget.
Most of the lending and financial transactions contained in table
A-10 are shown in Special Analysis E. However, this total differs
from the total for direct loans shown in Special Analysis E because:
(a) The NIA records nonrecourse agricultural commodity loans as
purchases rather than loans; (b) capital contributions to international
financial institutions, while not technically loans, are financial transactions and, therefore, are excluded from the NIA; and (c) Special
Analysis E shows separately the credit transactions of off-budget
Federal entities, which do not require reconciliation with the NIA
because the}^ are also not included in the budget.
Government contribution for employee retirement.—The contributions
of Government agencies to the retirement trust funds of their employees are not included in the budget totals. While the outlays are
recorded in each agency's budget, they are offset by an intragovernmental deduction. However, the NIA counts Government payments
for employee retirement as part of the compensation paid to Government employees and, therefore, as Government expenditures; this
treatment maintains comparability with the treatment of employee
retirement contributions in the rest of the economy. This category
includes contributions by Government enterprises such as the
Postal Service; Government enterprise contributions increase the
current deficit of enterprises rather than nondefense purchases, as do
the contributions of the agencies. The receipt of these retirement contributions is treated in the NIA as contributions for social insurance.
Since receipts and expenditures are increased by identical amounts,
this treatment has no effect on the surplus or deficit. About 75% of
these payments go to the Civil service retirement fund, while most of
the remainder is for Federal employees insured under social security.
Other netting and grossing.—The budget normally counts as receipts
only income from taxation or similar sources that arises from the exercise of governmental power to compel payment. Money received in the
course of business-type transactions, therefore, is normally shown as
offsets against expenditures. For instance, receipts from two major
insurance programs operated by the Veterans Administration (National Service Life Insurance and U.S. Government Life Insurance)

THE BUDGET FOR FISCAL YEAR 1978

are netted against expenditures in the budget since these programs are
voluntary, commercial-type activities. However, in the NIA these
insurance premiums are treated as social insurance receipts just as are
receipts from compulsory Government programs. Adjustments of
this type affect total receipts and expenditures identically and, thus,
do not alter the surplus or deficit of either the budget or the Federal
sector, NIA. Other netting and grossing also includes some imputed
contributions for social insurance for unemployment compensation
and workmen's compensation for Federal employees.
Timing adjustments.—The budget records receipts at the time the
cash is collected regardless of when the income is earned, while outlays
(except interest) are generally recorded at the time the checks are
issued. The NIA attempt to record most receipts from the business
sector in the period in which the income is earned rather than when
taxes are actually paid, while personal income taxes and social insurance contributions are recorded at the time of payment by the individual taxpayer rather than when the liability is accrued or the cash
is received by the Treasury.
The principal timing adjustment to expenditures is for defense
purchases. The major defense timing adjustment normally involves
procurement items (such as missiles or airplanes) purchased under
most fixed-price contracts. These items are recorded in the Federal
sector NIA as defense purchases at the time of delivery to the Federal
Government, rather than when the payment is made (as the budget
does) or when they are fabricated. Work in progress is counted as
part of private business inventories until the goods are completed and
delivered to the Government. An additional defense timing adjustment is made to convert foreign military sales, which are recorded on
a cash basis in the unified budget, to a basis consistent with net
exports in the NIA. In both the budget and the NIA accounts, public
debt interest to the public is recorded when it accrues.
Bonuses on Outer Continental Shelj land leases.—In recent years
bonuses paid on the Outer Continental Shelf oil leases have become a
significant reconciliation item between the unified budget and the
NIA. The budget records these bonuses as proprietary receipts and,
therefore, deducts them from budget outlays. The NIA excludes these
transactions as being a transfer of assets, because the payments generally are not included in expenses in calculating book profits under
current corporate accounting practice.
Other.—This category includes some miscellaneous adjustments,
largely for certain specialized aspects of the national income accounts,
such as the purchase and sale of land and geographical exclusions
arising out of transactions with Puerto Rico, the Virgin Islands, and
other U.S. territories. Certain nondefense timing adjustments—for
example, the difference between State withdrawals of unemployment
benefits and actual payments to individuals—are included here
because of the difficulty in separating them from other adjustment
categories. This category includes adjustments for certain foreign
currency transactions that are not included in the budget, and transactions of Federal entities or activities that are excluded from the
budget but included in the Federal sector NIA.

Table A—11. FEDERAL TRANSACTIONS IN T H E NATIONAL INCOME ACCOUNTS, 1967-78
(In billions of dollars)
Actual

Description
1967

1968

1969

Estimate

1970

1971

1972

1973

1974

1975

1976

1977

1978

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

64.4
30.3
15.8
35.5

71.4
33.2
17.1
38.4

90.0
37.0
18.6
44.5

93.6
33.0
19.2
49.2

87.5
32.0
20.0
52.9

100.3
34.2
19.9
59.1

107.3
41.0
20.7
71.5

122.6
43.8
21.4
84.1

127.3
41.6
22.1
92.2

137.2
51.0
24.5
100.9

158.6
60.6
24.6
116.9

177.5
65.5
26.1
136.6

146.0

160.0

190.1

194.9

192.5

213.5

240.4

271.9

283.2

313.6

360.7

405.7

86.0
(67.0)
(19.0)
39.3
(37.2)
(2.2)
14.8
9.6

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

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

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

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

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

101.7
104.8
119.0
127.2
144.8
160.0
(73.3) (74.2) (81.0) (85.8) (94.8) (105.4)
(28.4) (30.6) (38.0) (41.4) (50.0) (54.6)
89.7
104.7
134.1
156.7
171.0
179.4
(87.1) (101.7) (131.0) (153.6) (167.7) (175.9)
(2.7)
(3.0)
(3.1)
(3.3)
(3.5)
(3.1)
40.4
41.6
48.3
57.5
68.0
69.6
25.8
30.0
19.8
15.9
21.9
28.8

5.2

4.1

4.6

5.4
—.1

6.8

6.4

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

7.9
.2

5.7
.4

5.8

7.3

8.1

Total expenditures, national income
basis

154.9

172.2

184.7

195.6

212.7

232.9

256.2

278.9

329.5

373.0

419.9

447.1

Excess of receipts ( + ) or expenditures (—),
national income basis

—8.9

—12.2

+5.4

—.6

-20.2

-19.5

-15.7

-7.1

-46.3

-59.4

-59.2

-41.4

Note.— Excludes the transition quarter. Data on the transition quarter are shown in table A—I.

SPECIAL ANALYSIS B
FUNDS IN THE BUDGET

This analysis classifies budget information by the groups of funds
that comprise the budget. It also presents information on the nature of
receipts and outlays for the largest trust funds.
DISTRIBUTION OF TOTALS, BY FUND GROUPS

Table B-l shows the distribution of total budget receipts and outlays between the Federal funds and the trust funds. The two groups
together, after deducting for transactions that flow between them,
make up the budget totals.
Table B-1. BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(In millions of dollars)
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

209,248
-1,473
—5,767

57,291
-438
—2,414

247,715
-1,828
—6,427

271,057
-1,955
—7,404

-909

-354

-2,054

-2,772

201,099

54,085

237,405

258,926

144,078
-1,244
-8,131
-1,009

35,025
-2
-2,857
-95

165,788
-1,330
- 9 , 715
-1,185

183,051
-1,578
-9,845
-1,113

133,695

32,071

153,558

170,515

-4,383 -36,918

-36,425

RECEIPTS

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

-34,789

Total budget receipts.....

300,005 " 8 1 7 7 3

354,045

393,017

278,119
-1,473
-5,767
-909

68,312
-438
-2,414
-354

313,445
-1,828
-6,427
-2,054

331,466
-1,955
-7,404
-2,772

269,969

65,106

303,136

319,335

141,669
-1,244
-8,131
-1,009

36,977
-2
-2,857
-95

157,256
-1,330
-9,715
-1,185

169,593
-1,578
-9,845
-1,113

131,286

34,023

145,026

157,057

-4,383 -36,918

-36,425

OUTLAYS

Federal funds:
Total in fund accounts
Intrafund transactions
_
Proprietary receipts from the public
Receipts from off-budget Federal entities
Outlays, Federalfunds

__.

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

-34,789
._..

366,466
-66,461

94,746

411,243

439,967

-12,973 -57,198

-46,950

SPECIAL ANALYSIS B

FEDERAL FUNDS

The Federal funds are derived mainly from taxes and borrowing,
and are used for the general purposes of the Government. There are
four types of Federal fund accounts—general funds, special funds,
public enterprise (revolving) funds, and intragovernmental revolving
and mangement funds.
Table B-2. FEDERAL FUND RECEIPTS AND OUTLAYS (in millions of dollars)
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

RECEIPTS BY SOURCE

Individual income taxes
Corporation income taxes
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts

Total receipts, Federal funds

131,603
41,409
10,612
5,216
4,074
8,185

38,801
8,460
2,520
1,455
1,212
1,637

153,097
56,604
10,075
5,907
4,713
7,009

171,217
58,910
10,385
5,806
5,262
7,346

201,099

54,085

237,405

258,926

OUTLAYS BY AGENCY
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Other
Agriculture
Commerce
Defense-Military i
Defense-Civil
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice..
Labor
State
Transportation
Treasury
Energy Research and Development Administration...
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies
..
Undistributed offsetting receipts: Rents and royalties
on the Outer Continental Shelf
Allowances2
Total outlays, Federal funds
Excess of outlays (-)___

773
324
79

223
85
16

1,013
428
81

1,101
439
72

3,515
610
12,759
2,036
88,054
2,106
42,465
7,079
2,374
2,242
15,681
1,049
4,867
44,632
3,759
3,118
—92
3,668
18,211
13,323

1,813
135
3,862
531
21,390
578
10,658
1,397
781
551
2,985
300
1,154
9,829
1,051
1,108
4
951
3,962
2,512

4,031
901
13,756
3,030
98,072
2,460
49,525
7, 673
3,587
2,436
11,916
1,219
5,873
50,057
5,375
5,295
176
3,704
18,226
16,901

4,080
1,069
12,772
2,921
109,526
2,613
52,119
8,722
3,577
2,445
8,115
1,272
6,345
50,204
6,458
6,006
263
3,901
18,100
17,665

-2,662

-1,311

-2,600

-3,100
2,651

269,969

65,106

303,136

319,335

-68,870 -11,021 -65,730 -60,409

1 Includes allowances for civilian and military pay raises for Department of Defense.
2
Includes allowances for civilian agency pay raises and contingencies.

THE BUDGET FOR FISCAL YEAR 1978

Budget receipts and outlays.—The receipts of the general and special
funds in 1978 are estimated at $258.9 billion. Outlays of all the Federal
funds are estimated at $319.3 billion. The distribution of receipts by
source, and outlays by agency, is shown in table B-2. The proprietary
receipts of the general fund and special funds, the Federal intrafund
receipts and the collections credited to public enterprise and intragovernmental funds, have all been offset in arriving at the outlays for
each agency.
Obligations.—The obligations (net) for Federal funds are estimated
at $353.1 billion for 1978, as set forth in table B-3. These transactions
largely flow from budget authority for Federal funds of $349.1 billion
for the year, although in part the obligations were authorized by
prior years' budget authority.
Table B-3. OBLIGATIONS INCURRED, NET, IN FEDERAL FUNDS
(In millions of dollars)
Department or other unit

1976
actual

TQ
actual

1977
estimate

1978
estimate

Legislative branch
957
229 1,001
1,089
The Judiciary
327
91
425
442
Executive Office of the President
66
18
75
72
Funds appropriated to the President:
International Security Assistance
1,907
962
2,382
2,116
International Development Assistance. __
727
574
2,445
2,673
Other
479
198
1,431
673
Agriculture
13,736
4,440
14,670
12,114
Commerce
2,161
478
4,166
2,079
Defense—Military!
88,295
24,837 111,928 119,099
Defense-Civil
—_
2,141
617
2,565
2,743
Health, Education, and Welfare
40,230
15,092
51,841
52,616
Housing and Urban Development....
27,554
]5,059
28,879
27,983
Interior
_
2,411
968
3,816
3,769
Justice
2,155
577
2,361
2,352
Labor
15,367
3,100 11,190
8,049
State
1,004
372
1,254
1,345
Transportation
5,054
1,195
7,481 7,421
Treasury..
44,604
9,928
50,063
50,140
Energy Research and Development Administration. _ _
4,233
1, 198
7,050
7,939
Environmental Protection Agency
4,835
983
7,416 6,148
General Services Administration
15
—21
224
267
National Aeronautics and Space Administration.
3,591
945
4,063
4,018
Veterans Administration
18,542
4,076
18,380
18,256
Civil Service Commission
5,212
130
7,862
7,540
Export-Import Bank
728
384
1,274
1,602
Federal Home Loan Bank Board
-51
-171 -1,422
-438
U.S. Postal Service
1,708
934
2,272
1,472
Railroad Retirement Board
251
9
290
300
Other independent agencies
6,399
1,384
7,279
8,386
Undistributed offsetting receipts: Rents and royalties
on the Outer Continental Shelf
- 2 , 6 6 2 -1,311 - 2 , 6 0 0
-3,100
Allowances:
Civilian agency pay raises
\ t(\
Contingencies for other requirements
1,750
Total....
1

291,975

87,274

350,059

Includes allowances for civilian and military pay raises for Department of Defense.

353,112

SPECIAL ANALYSIS B

Balances of prior authority.—Table B-4 shows the balances of budget
authority carried forward in Federal funds at the end of each fiscal
year. To the extent that valid Government obligations have been
incurred and remain unpaid, amounts sufficient to pay them may be
carried over into the next year. Unobligated balances may be carried
forward in accordance with specific provisions of law, usually in order
to permit completion of projects as contemplated at the time the
appropriations were first made, but also to provide funding for activities of a continuing nature (such as research and development)
or for standby emergency purposes (such as backup financing for
insurance of the Federal Deposit Insurance Corporation).
PUBLIC ENTERPRISE FUNDS

The public enterprise funds are a subgroup of Federal funds. They
carry on a cycle of business-type operations, primarily with the
public, on behalf of the Government. Some are incorporated enterprises; others are unincorporated. Ths general fund usually supplies
them with capital, although in a few cases they may borrow from the
public. In those cases most agencies borrow through the Federal
Financing Bank. Data on public enterprise funds are included on a net
outlay basis in tables B-2 through B-4. Gross outlays and applicable
receipts are shown in table B-5.
Offsetting collections and outlays.—Collections of public enterprise
funds are estimate^ at $28.1 billion in 1978, and gross outlays are
planned to total $36.8 billion, resulting in net outlays of $8.6 billion.
TRUST FUNDS

The trust funds are collected and used for specific purposes; in this
sense they are administered in a fiduciary capacity by the Government. They include trust revolving funds, which, like the public
enterprise funds, carry on a cycle of business-type operations and are
normally stated net of collections by the funds.
Cash operations.—Trust fund receipts are estimated at $170.5 billion
in 1978, with outlays planned at $157.1 billion, as shown in table B-6.
The transactions of the Federal old-age and survivors and disability
insurance funds are far larger than any other trust fund.
In fiscal periods 1976-78, this group of funds has excesses of receipts,
except for the transition quarter,1 of the following amounts (in
millions of dollars):
1976
actual

Total receipts, trust funds
Total outlays, trust funds
Excess of receipts or outlays ( - ) , trust funds-

TQ
actual

1977
esti~

1978
esti-

133,695
131,286

32,071
34,023

153! 558
145,026

170,515
157,057

2,410

-1,952

8,532

13,459

Budget receipts by funds.—Table B-7 presents information classifying the trust fund receipts by major fund, and by source for each such
fund.
Budget outlays by funds.—Corresponding information on trust fund
outlays, classifying the data for the larger funds, is found in table B-8.
1
Outlays exceed receipts primarily because Federal payments to the trust funds for retirement
benefits occur in fiscal year 1977.

Table B-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY (In millions of dollars)
Department or unit

Legislative branch
The Tudiciarv
Executive Office of the President
Funds appropriated to the President:
International security assistance
International development assistance
Other
_ _ -.
Agriculture
_
_ _ _ _.
Commerce
Defense—Military *
Defense—Civil
Health Education, and Welfare
Housing and Urban Development
Interior
_ _ _ __
Justice
Labor
State
_
Transportation. _
Treasury
_
Energy Research and Development Agency
Environmental Protection Agency. __
General Services Administration
National Aeronautics and Space Administration
Veterans Administration. _
Civil Service Commission
_
Export-Import Bank
Federal Deposit Insurance Corporation
_ _ .
Federal Home Loan Bank Board._
_ _ __
U.S. Postal Service
Railroad Retirement Board
Other independent agencies
Allowances ^
Total

Start 1976

End 1976

Unobli-

Obli-

-15
29

E n d TQ

Unobligated

Obli-

E n d 1977

Unobligated

Obligated

E n d 1978

Unobligated

Obligated

Unobligated

279
13
1

168
32
12

225
30
4

174
38
14

214
12

162
35
7

159
6

150
38
7

93
3

14,164
106,265
1,366
1,235
2,474

16
10,371
461
12,530
624
16,691
155
2,251
59,778
2,107
172
7,049

3,102
3,701
1,017
5,249
1,790
27,609
618
11,872
126,740
1,391
1,146
2,152

885
11,423
574
13,677
714
23,993
194
3,952
48,395
2,022
192
3,692

2,818
3,722
1,070
5,814
1,727
30,354
657
16,360
140.411
1,578
1,172
2,173

228

235

2,980
4,396
1,513
6,727
2,863
44,201
763
18,673
161,617
1,806
1,097
1,438

250

12
10,553
16
10,108
564
16,936
142
1,259
20,735
2,219
110
2,805

3,050
5,075
1,038
6,068
2,021
53,772
892
19,170
180,878
1,998
1,005
1,373

9
11,059
6
10,164
390
19,471
30
1,076
7,788
1,834
103

182

124
10,875
327
12,086
698
20,966
227
1,865
32,105
2,004
143
1,444

278

350

2,838

1,323

12,822
133
412
11,719
47
462
1,983

3,021
269
2,265
9,626
317
819
1,641

12,633
2,489
694
7,656
193
422
2,546

3,057
308
2,412
9,499
292
814
1,754

12,360
2,714
759
6,857
200
406
2,946

4,664
314
4,087
11,620
341
1,173
1,907

9,237
2,411
99
1,301
96
66
3,038

5,741
1,250
5,568
11,762
345
1,289
2,063

27
2,994
4,695
1,292
4,329
1,658
27,238

583

307
1,791
7,909

208
897

7,508

7,637

7,619

5
*
6,679
142
456
62
66
2,340

8,632

7,994

9,271

7,322

7,492

8,914

9,352

2,892

2,823

*
3,917

11,606

3,956

11,942

4,238

9,536

4,816
298

8,000

194,369

152,413

216,190

155,604

238,078

128,819

284,928

100,341

318,665

79,133

-10

* Less than $500 thousand.
1
Includes balances of allowances for civilian and military pay raises for Department of Defense.
2
Includes balances of allowances for civilian agency pay raises and contingencies.

Obligated

Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in millions of dollars)

1976

Funds appropriated to the President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporation1
Farmers Home Administration
Federal Grain Inspection Service
Federal Crop Insurance Corporation
Commerce
Defense:
Military
Civil (Panama Canal Company)
Health, Education, and Welfare
Housing and Urban Development:
Government National Mortgage Association
Urban renewal fund
Low-rent public housing fund
Federal Housing Administration
Other
Interior:
Bonneville Power Administration fund
Bureau of Reclamation
Other
Transportation
Treasury
Environmental Protection Agency
General Services Administration
Veterans Administration
See footnotes at end of table.

Gross outlays

Applicable collections

Description

1977

1978

1976

165
*

37
0
1

3,388
6, 680

39
*
675
1,509
*
18

4,992
8,386
4
8
92
7
8

4,103
7,054

74
68

4,510
9,636
1
3
92
7
7

6
250
122

1
65
25

6
29
8
15
7

6
31
1
28
3

8
28
4
20
7

2
3
1
6
4
11
2

8,239
362
271
1,232
265

1,791
93
34
346
67

2,380
23
3
68
0
1,188
25
7

3,018
25
5
68
0
1,368
25
8

8,836
1,550
29
7
2,423
42
6

338
90
13
62
1,261
1
2
970

99
22
2
13
1,075
*
1
264

36
5
16
0
1
4
4
5
2,051
1
2
1.200

30
4
11
1
1
6
4
9
91
5
*
3
90
6

24
8
11
3
1
8
1,382
1,261
*
2
87
7

7
8
2
5

1977
stimate

1978
estimate

17
8
2

13
4
2

6,314
8,933
2
1
14
5
8
8

5,978
9,033
4
8
9
9
15
1

1
2
21
9
37
8

1
1
31
1
66
6

1,556
48
0
4
5
36
8
14
6

1,989
1,208
68
0
2,215
75
5

2,702
95
0
68
0
2,313
65
0

6
3
4
0
4
36
0
1,075
*
1
23
1

38
2
22
5
3
5
1,911
2,051
1
1
91
2

34
8
22
5
3
9
2,256
91
5
*
2
96
6

10
3
*
1,360
1,865

Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in millions of dollars)—Continued
Applicable collections
Description

1976

Offsetting collections from the public
Offsetting collections from other accounts

1977

Gross outlays
1978

1976

1977

1978

d
§

Other independent agencies:
Emergency Loan Guarantee Board
Export-Import Bank
Farm Credit Administration
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolving fund
National Credit Union Administration.
Small Business Administration
_
Tennessee Valley Authority
Total

7
1,906
7

_
_
.__

2,017
9

2,319
10

*
2,762
8

—
724
2

486
77
37
690
1,757

148
53
10
135
514

563
1,157
46
741
2,079

564
70
53
567
2,355

118
364
17
1,093
2,738

28,829

2
451
2

2
*
2,916
9

*
3,284
10

13
9
14
207
746

252
45
19
1,206
3,282

163
47
22
1,037
3,827

7,453

29,958

28,139

36,698

9,520

36,394

36,777

(26,159)
(2,670)

(6,816)
(637)

(27,097)
(2,861)

(25,373)
(2,766)

* $500 thousand or less.
Collections include advances from foreign assistance and special export programs of $1,090 million in 1976, $146 million in the TQ, $1,169 million in 1977, and $923
million in 1978.
1

$
P

Table B-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS (in millions of dollars)
Description

Outlays
1976
actual

TQ
actual

Receipts

1977
estimate

1978
estimate

1976
actual

TQ
actual

1977
estimate

1978
estimate

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

73,903
17,779
6,243
17,920
3,475
8,352
547
6,521
6,657
704
547
-978

19,763
4,805
1,588
3,544
921
2,284
92
1,758
1,813
148
200
62

84,669
21,773
6,776
15,400
3,727
9,855
849
6,053
8,335
696
533
-1,409

92,374
24,297
6,814
13,300
3,896
11,276
1,088
7,165
8,800
759
708
-884

70,682
18,525
6,355
16,215
3,253
13,197
1,084
6,000
7,257
889
622

18,358
4,937
1,664
3,378
337
1,486
278
1,689
2,539
157
201

81,005
22,998
6,655
15,700
3,664
16,665
1,371
7,265
8,800
964
702

90,172
28,583
6,855
17,200
3,919
16,646
1,491
7,520
8,800
1,031
835
_.

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

141,669
-1,244
-8,131
-1,009

36,977
-2
-2,857
-95

157,256
-1,330
-9,715
-1,185

169,593
-1,578
-9,845
-1,113

144,078
-1,244
-8,131
-1,009

35,025
-2
-2,857
-95

165,788
-1,330
-9,715
-1,185

183,051
-1,578
-9,845
-1,113

131,286

34,023

145,026

157,057

133,695

32,071

153,558

170,515

Total

THE BUDGET FOR FISCAL YEAR 1978
Table B-7. TRUST FUND RECEIPTS (in million, of dollars)
[Amounts under proposed legislation are shown separately]
Description

1976
actual

Federal old-age, survivors, and disability insurance
trust funds:
Social insurance taxes and contributions.
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments).
Proposed legislation
_

TQ
actual

1977
estimate

1978
estimate

66,389
2,813

18,016
93

76,579
2,704

84,599
2,392

963
517

249
*

992
730

1,066
741
1,374

70,682

18,358

81,005

90,172

13,932
811

3,997
9

15,930
893

20,208
999

175
3,606

45
885

178
5,992
5

228
7,224
—76

18,525

4,937

22,998

28,583

6,355

1,664

1,664
4,991

6,855

6,355

1,664

6,655

6.855

Unemployment trust fund:
Social insurance taxes and contributions
Interest on Federal securities
Advances from general fund

8.054
283
7,878

2,698
55
625

11,514
335
3,851

15,046
354
1,800

Subtotal Unemployment trust fund

16,215

3,378

15,700

17,200

Railroad employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
Receipts from other trust funds
Other (mainly receipts of special Federal payments).
Proposed legislation

1,525
246
1,239
243

328
16
—7

1,860
235
1,319
250

1,855
235
1,577
240
'2

Subtotal Railroad employees retirement funds..

3,253

337

3,664

3,919

2,811
2,474

720
72

2,994
2,771

3,UU/
3.193

6,900
1,009
4

598
95
1

9,419
1,185
ooi
286

9,332
1.113

13,197

1,486

16,665

16,646

Subtotal Federal old-age, survivors, and disability insurance trust funds
_.._
Health insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments).
Proposed legislation
Subtotal Health insurance trust funds
State and local government fiscal assistance trust fund:
Deposits for general revenue sharing
Supplemental now requested
Subtotal State and local government fiscal assistance trust fund

Federal employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
_Federal payment as employer for employee retirement (including payment on prior year liabiliEntities included in budget
Entities excluded from budget
Other receipts
Supplemental now requested.__

Subtotal Federal employees retirement funds...
See footnote at end of table.

SPECIAL ANALYSIS B
Table B-7. TRUST FUND RECEIPTS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
Description

1976
actual

Airport and airway trust funds:
Excise taxes..
Interest on Federal securities

TQ
actual

1977
estimate

1978
estimate

938
146

Foreign military sales trust fund

1,371

1,491

1,676
13

6,660
605

6,857
663

1,689

7,265

7,520

7,257

Subtotal, Highway trust funds

278

6,000

Highway trust funds:
Excise taxes
Interest on Federal securities
Other receipts

1,271
220

1,084

1,191
180

5,413
587
*

Subtotal, Airport and airway trust funds

277
1

2,539

8,800

Veterans life insurance trust funds:
Interest on Federal securities

429

464

508

460

149

500

523

Subtotal, Veterans life insurance trust funds. _.

889

157

964

1,031

622

201

702

835

144,078
-1,244
-8,131
-1,009
133,695

35,025
-2
-2,857
-95
32,071

165,788
-1,330
-9,715
-1,185
153,558

183,051
-1,578
-9,845
-1,113
170,515

Other receipts

Other trust funds (nonrevolving)
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
Total receipts
•Less than $500 thousand.

Balances of the trust funds.—The balances of the trust funds continue to increase, as shown in the following end-of-year figures (in
millions of dollars):
1975
actual

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

1976
actual

TQ
actual

1977
estimate

1978
estimate

5,288

6,337

6,988

7,475

7,655

135,939
1,340

137,300
1,340

134,697
1,340

142,867
1,215

156,145
1,215

142,567

144,977

143,025

151,557

165,015

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

THE BUDGET FOR FISCAL YEAR

1978

Table B-8. TRUST FUND OUTLAYS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
1976
actual

Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation
_

73,903

19,763

84,669

92,374

4,583
222

21,174
817
-218

25,139
942
-1,784

4,805

21,773

24,297

6,243

1,588

3,449
3,327

5,150
1,664

6,243

1,588

6,776

6,814

3,152
392

13,863
1,537

11,687
1,613

3,544

15,400

13,300

913
7

3,694
33

3,863
33

3,475

921

3,727

3,896

8,142
193
17

2,209
71
4

9,609
227
19

10,967
287
22

8,352

Unemployment trust fund:
Withdrawals for benefit payments
Administrative expenses and other
Subtotal Unemployment trust fund
Railroad employees retirement funds:
Benefit payments and claims
Administrative expenses and other
Subtotal Railroad employees retirement fundsFederal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Subtotal Federal employees retirement

90,307
1,577
1,488
-998

3,448
27

Subtotal State and local government fiscal
assistance trust fund
_.

Total outlays

81,951
1,319
1,442
-43

17,920

State and local government fiscal assistance trust fund:
Payments for general revenue sharing
Supplemental now requested.
_

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

TQ
actual

2,284

9,855

11,276

547
6,521
6,657
704
547
-978

92
1,758
1.813
148
200
62

849
6,053
8,335
696
533
-1,409

1,088
7,165
8,800
759
708
-884

141,669
-1,244
-8,131
-1,009

36,977
-2
-2,857
-95

157,256
-1,330
-9,715
-1,185

169,593
-1,578
-9,845
-1,113

131,286

34,023

145,026

157,057

__.

Subtotal Health insurance trust funds.

Airport and airway trust funds
_
_._
Highway trust funds (mainly grants to States)
Foreign military sales trust fund
Veterans life insurance trust funds
Other trust funds (nonrevolving)
Trust revolving funds
___

71,363
19,431
1,239 _
1,301
332

16,631
1,290

Subtotal Federal old-age, survivors, and disability insurance trust funds

1978
estimate

17,779

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

1977
estimate

16,938
841

Description

SPECIAL ANALYSIS B

Table B-9. T R U S T FUND BALANCES
(in millions of dollars)
Description

As of Sept. 30

As of June 30

Total

1976
actual

TQ
actual

48,153
11,294

44,933
12,040

43,528
12,172

39,864
13,397

37,663
17,683

1,674
7,412
4,275
38,821
2,013
9,597
2,081
7,651
717
8,879

1,786
5,706
4,053
43,666
2,550
9,077
2,681
7,836
792
9,857

1,862
5,540
3,470
42,868
2,736
9,009
3,407
7,844
793
9,795

1,741
5,840
3,407
49,678
3,258
10,221
3,872
8,112
962
11,204

1,782
9,740
3,429
55,048
3,661
10,576
3,872
8,384
1,089
12.088

142,567

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

1977
estimate

1978
estimate

1975
actual

144,977

143,025

151,557

165,015

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

basis

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

1975

1976

166,311

Balance available on an authorization

172,448

171,154

160,390

1977

171,133

-514
-19,180
-15,046
-7

-135
-17,280
-20,473
-3

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

-697
-16,226
-3,755
_

-917
-16,987
-1,872
_.

94
1,426
9,443

92
1,976
8,749
1
6

93
2,467
9,266

92
1,823
8,444
1
6

95
3,094
10,451
2
6

142,567

144,977

143,025

151,557

165,015

1978

Balance available on a cash
basis

For 1978 the largest net investments are expected to be those of the
trust funds established by the Social Security Act as amended and by
the Federal employees retirement fund.
Trust revolving funds.—The activities of the trust revolving fund
subgroup are shown in table B-10. The largest of these funds are
those used by the Civil Service Commission to buy insurance for
Government employees.

THE BUDGET FOR FISCAL YEAR

1978

Table B-10. TRUST REVOLVING FUND TRANSACTIONS (in millions of dollars)
Description

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

Offsetting collections
1976

Gross outlays

1977

1978

1976

1977

1978

3,085

801

3,753

4,116

2,657

763

3,298

3,667

1,201

244

883

1,005

722

377

626

314

413

399

243

320

343

4,600

1,130

5,049

5,520

3,622

1,193

3,640

4,636

Receipts from the p u b l i c . (2,771)
Receipts from other accounts
(1,829)
1

(675) (2^809) (3,050)
(455) (2,241) (2,470)

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

SPECIAL ANALYSIS C
BORROWING, DEBT, AND INVESTMENT
The major fiscal operations of the Federal Government include not
only taxation and expenditure but also:
• The borrowing of cash to meet current requirements not covered
by receipts and to refinance maturing debt;
• The investment of balances that trust funds and other Government accounts do not currently need for outlays; and
• The provision of assistance, including Government guarantees,
for certain non-Federal borrowing.
This analysis summarizes current developments in Federal borrowing. It also discusses the size and growth of the Federal debt and the
interest on the Federal debt, agency borrowing, agency investment
in U.S. Government securities, the statutory debt limit, and borrowing by Government-sponsored enterprises. The analysis concludes
with a brief discussion of the trend in Federal and federally assisted
borrowing and the relationship of this trend to the total funds raised
by the non-financial sectors in the economy. Excluded from this
analysis are other types of Federal liabilities, which include accounts
payable, obligations for undelivered orders, long-term contracts,
insurance commitments, and the obligation for such future payments
as social security, employee retirement, and veterans compensation.1
Special Analysis E examines the related subject of Federal credit
programs, which include direct loans, Government-guaranteed loans,
and loans by Government-sponsored enterprises. The factors discussed in both Special Analyses C and E are significant in appraising
the impact on financial markets of the programs contained in the
1978 Federal budget.
BORROWING AND REPAYING DEBT

The Federal Government borrows from two principal sources.
First, it sells debt to the public, including the Federal Reserve System,
primarily in order to finance Federal deficits. Second, it sells debt to
the Government agencies that accumulate surpluses in separate funds,
primarily trust funds, required by law to be invested in Federal
securities. Most Federal debt has been issued by the Treasury and is
called "public debt'7 but a small portion has been issued by other
Government agencies and is called "agency debt." 2
Borrowing from the public—whether by the Treasury or by an
agency—has a significant impact on financial markets and the rest
of the economy, and it is consequently an important concern of
1
Information on many of these liabilities is contained in Department of the Treasury, Bureau of
Government Financial Operations, "Statement of Liabilities and Other Financial Commitments of
the United States Government."
2
The term "agency debt" is defined more narrowly in the budget than in the securities market,
where it may include not only the debt of the Government agencies listed in table C 5 but also the
—
debt of the Government-sponsored enterprises listed in table C-8 and certain Government-guaranteed
securities.

THE BUDGET FOR FISCAL YEAR

1977

Federal fiscal policy. For most purposes, borrowing from the Federal
Reserve System should be distinguished from borrowing from the rest
of the public. Federal Reserve purchases of debt are undertaken to
carry out monetary policy, not to earn income, and affect the economy
by expanding bank reserves and the money stock. They thus have a
markedly different motivation and effect on financial markets than
do purchases by other sectors of the public. The debt held outside the
Federal Reserve System, in contrast, enters into investment portfolios
of businesses and individuals and by this means affects interest rates,
other financial conditions, and the size and composition of private
assets. Almost all interest received by the Federal Reserve System is
returned to the Treasury as receipts, called deposits of earnings, so
the net cost to the Government of Federal Reserve holdings of debt
is very small. The estimates in this analysis for the current and future
years do not divide the debt held by the public between the Federal
Reserve System and the rest of the public, despite the significance of
this division, because the Federal Reserve's open market operations
depend on future economic developments and on policy decisions not
yet made.
Table C-l summarizes Federal borrowing from 1976 through 1978.
In 1976 the total Federal borrowing (net of the refunding of securities)—i.e., the rise in gross Federal debt—was $87.3 billion. The
borrowing from Government agencies was $4.3 billion, and the
borrowing from the public was $82.9 billion. Of the amount borrowed
from the public, $9.7 billion was borrowed from the Federal Reserve
System and $73.2 billion from the rest of the public—commercial
banks, foreign central banks, other financial institutions and businesses,
and individuals.
Table C-1. FEDERAL BORROWING
(in millions of dollars)

Description

Gross Federal debt:
Treasury debt
Agency debt 1
Gross Federal debt i
Less debt held by Government agencies:
Treasury debt
Agency debt
Debt held by Government agencies___
Total, debt held by the public i
Composed of:
Debt held by the Federal Reserve System.
Debt held by others

Borrowing or repayment ( —) of debt
1976
actual

TQ
actual

1977
1978
estimate estimate

87,244
19

14,269 71,734
244 -1,388

87,263

14,513

4,328 -3,506

Debt outstanding
end 1978
estimate

69,642
-1,394

776,078
8,895

70,346

68,248

784,973

8,511

12,819

167,435

-7

-165

-71

1,712

4,341 -3,514

8,346

12,748

169,146

82,922 ~1M27 62,000

55,500

615,827

NA
NA

9,721
73,202

1,988
16,039

NA
NA

NA=Not available.
1
Agency borrowing, gross Federal borrowing, and borrowing from the public in 1976 exclude the
retroactive rcclassification as of July 1, 1975, of $471 million of Export-Import Bank certificates of
beneficial interest from loan asset sales to debt.

SPECIAL ANALYSIS C

Borrowing from the public—after rising from $3.0 billion in 1974
to $50.9 billion in 1975 and $82.9 billion in 1976—is estimated to
decline to $62.0 billion in 1977 and $55.5 billion in 1978. The exceptionally large borrowing in 1975 and 1976 occurred primarily because
the recession automatically reduced tax receipts and raised unemployment benefits and because tax reductions and some expenditure
programs were enacted to stimulate the economy. The estimated
decline in borrowing in 1977 and 1978 is primarily due to the economic
recovery. By the end of 1978 gross Federal debt is expected to be
$785.0 billion, with 78% held by the public (including the Federal
Reserve System) and the remainder by the agencies. Almost all of the
gross Federal debt will have been issued by the Treasury.
Until a few years ago the Federal debt was held almost entirely by
individuals and institutions in the United States. After World War
II the debt held in foreign balances and international accounts tended
to.grow gradually and at the end of 1969 amounted to $10 billion.3
However, due to international monetary developments, the foreign
and international holdings began to grow much faster in 1970, and
by the end of the transition quarter they had risen to $75 billion.
Most of the Treasury debt held abroad is owned by foreign central
banks. The annual borrowing from abroad since 1971 is shown below
in comparison with the annual borrowing from the domestic public,
exclusive of the Federal Reserve System (in billions of dollars):
1970

Foreign and international
Domestic (excluding Federal
System)

1971

1972

1973

1974

1975

3.7 17.9 17.3 10.2 - 2 . 5 9.1

1976

3.8 4.8

Reserve

Total borrowing from the public (excluding Federal Reserve System) _

- 3 . 5 - 6 . 3 - 3 . 8 5.3

* 37.4 69.4 11.2

.2 11.6 13.5 15.5 - 2 . 5 46.5 73.2 16.0

"Less than $50 million.

Whereas before 1970 total borrowing from the public was nearly the
same as borrowing from the domestic public, the table shows that
since that time they have sometimes been quite different. During 197073, $49 billion was borrowed from abroad while $8 billion of debt held
by the domestic public (exclusive of the Federal Reserve System) was
redeemed. Borrowing from abroad since 1973 has remained significant
but not predominant, primarily because of the large size of the
Government deficit.
BORROWING AND GOVERNMENT DEFICITS

Table C-2 shows how borrowing from the public is related to the
Federal deficit. Until recent years the budget deficit constituted practically the entire deficit of the Federal Government, but the deficit of
the off-budget Federal entities has now become significant. These
entities are parts of the Federal Government that have been removed
from the budget under provisions of law.
3
The estimates of Federal debt held in foreign balances and international accounts do not include
agency debt, the holdings of which are believed to be small. The data were adjusted to exclude the
special non-interest-bearing notes issued to the International Monetary Fund and international
lending agencies. These notes are not part of gross Federal debt.

THE BUDGET FOR FISCAL YEAR 1977
Table C-2. MEANS OF FINANCING THE FEDERAL DEFICIT
(In millions of dollars)
Description

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

1976
actual

TQ
actual

1977
estimate

1978
estimate

-66,461
-7,196

-12,973 -57,198
-1,767 -10,785

-46,950
-9,156

-73,657

-14,740

-56,107

-7,964

-2,860

117
-42
531

-3,287

5,983

607

Total, requirements for borrowing from the
public
-82,922 -18,027
Reclassification of securities 3
—471

-62,000

-55,500

Change in debt held by the public

-9,265

83,393

-546
20
99

5,714
-26
-153
448

Total, means of financing other than borrowing
from the public

-951
-1,099
747

-67,983

18,027

62,000

55,500

1
The off-budget Federal entities consist of the Rural Electrification and Telephone revolving fund,
Rural Telephone Bank, Housing for the Elderly or Handicapped fund. Pension Benefit Guaranty
Corporation, Exchange Stabilization fund, Federal Financing Bank, Postal Service, certain activities
of the United States Railway Association, and Energy Independence Authority.
2
Besides checks outstanding, includes military payment certificates, accrued interest (less unamortized discount) payable on Treasury debt, and, as an offsetting change in assets, certain collections
in transit.
3
As of July 1, 1975, Federal debt held by the public increased by $471 million due to a retroactive
reclassification of Export-Import Bank certificates of beneficial interest from loan asset sales to debt.

The Government deficit is financed either by borrowing from the
public or by several other means. These other means of financing the
deficit may be either positive, in which case they contribute to the
financing of the deficit; or negative, in which case they, like the deficit,
must themselves be financed by borrowing from the public. In 1976
the Government borrowed $82.9 billion from the public. The major
part, $73.7 billion, was used to finance the Government deficit. The
remainder was used to finance the other means of financing the deficit,
which had a negative total amount. These other means were unusually large in absolute terms due to a sizeable accumulation of Treasury
cash balances during the year. This accumulation of cash balances
continued in the transition quarter but is planned to be reversed in
1977.

SPECIAL ANALYSIS C

The means of financing a deficit other than borrowing from the
public are:
• A decrease in cash or monetary assets;
• An increase in monetary liabilities for checks outstanding, etc.;
• An increase in deposit fund balances, which include amounts held
by the Government as an agent for others (such as State income
taxes withheld from Federal employees' salaries and not yet paid
to the State) or amounts held in suspense temporarily before
being refunded or paid into some other fund; and
• Seigniorage, which is the face value of minted coins less the cost
of their production.
As the figures in table C-2 suggest, the extent to which a large
deficit can be financed by means other than borrowing from the public
is very limited. Consequently, the total Government deficit and the
borrowing from the public tend to be closely related.
Borrowing from the agencies largely depends on the surpluses of the
trust funds, which own 93% of the Federal debt held by Government
agencies. Agency investment in Federal securities and the total trust
fund surplus during 1975-78 are compared in the table below (in
billions of dollars):
Agency investment in Federal debt
Total trust fund surplus or deficit ( - )

1975
actual
7.0
7.4

1976
actual
4.3
2.4

TQ
actual
-3.5
—2.0

1977
estimate
8.3
8.5

1978
estimate
12.7
13.5

As the table shows, the agency investment in Federal securities is
similar in size to the total trust fund surplus throughout the period.
The differences are accounted for by two factors. Certain agencies
other than trust funds buy and sell Federal debt, as shown in table
C-6, and the trust funds may increase or decrease their open book
balances.4
SIZE AND GROWTH OF FEDERAL DEBT

Gross Federal debt has risen substantially over most of the past
half century, from $16 billion in 1929 to $646.4 billion at the end of the
transition quarter. Table C-3 presents the detail of Federal debt
since 1954 and shows that a sizable part of the increase is held in
Federal Government accounts (primarily trust funds) rather than
being owed to the public. From the end of 1954 to the end of the
transition quarter, gross Federal debt rose by 139% while Federal
debt held by the public rose by 122%. Federal debt held by the public
apart from the Federal Reserve System rose still less, by 101%—an
annual compound rate of growth of 3.2% over the 22 years—because
during this period the Federal Reserve System bought a large quantity
of Federal debt in the market, thereby expanding the reserves of the
banking system and providing for growth in the Nation's money
stock.
* Open book balances comprise cash assets not currently invested. As shown in Special Analysis B.
they are very small relative to trust fund holdings of Federal debt.

T H E BUDGET FOR FISCAL YEAR

1978

Table C-3. COMPARISON OF T R E N D S IN FEDERAL DEBT AND GROSS
NATIONAL PRODUCT (in billions of dollars)
Debt outstanding, end of year
Held by
Fiscal year

Gross
Federal
debt

Federal
Government
accounts

GNP

The public
Total

Federal
Reserve
System

Other

Debt held
by public
as percent
of GNP

1954
1955
1956
1957
1958
1959

270.8
274.4
272.8
272.4
279.7
287.8

46.3
47.8
50.5
52.9
53.3
52.8

224.5
226.6
222.2
219.4
226.4
235.0

25.0
23.6
23.8
23.0
25.4
26.0

199.5
203.0
198.5
196.4
200.9
209.0

363.6
380.0
411.0
432.7
442.1
473.3

61.7
59.6
54.1
50.7
51.2
49.7

1960
1961
1962
1963 _
1964 _ _
1965
1966
1967
1968
1969 1

290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1

53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7

237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5

26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1

210.7
211.4
218.7
222.4
222.8
222.5
222.5
220.8
238.4
225.4

497.3
508.3
546.9
576.3
616.2
657.1
721.2
774.4
829.9
903.7

47.7
46.9
45.4
44.2
41.8
39.8
36.7
34.5
35.0
30.9

19702

382.6
409.5
437.3
468.4
486.2
544.1
631.9
646.4
716.7
785.0

97.7
105.1
113.6
125.4
140.2
147.2
151.6
148.1
156.4
169.1

284.9
304.3
323.8
343.0
346.1
396.9
480.3
498.3
560.3
615.8

57.7
65.5
71.4
75.2
80.6
85.0
94.7
96.7
NA

227.2
238.8
252.3
267.9
265.4
311.9
385.6
401.6
NA
NA

959.0
,019.3
,110.5
,237.5
,360.9
, 450.6
,609.5
,709.8
,827.6
:2,038.4

29.7
29.9
29.2
27.7
25.4
27.4
29.8
29.1
30.7
30.2

1971
1972
1973 3_
1974

1975
19764
TQ
1977 estimate
1978 estimate

During the depression of the 1930's and during World War II,
Federal debt held by the public increased greatly, not only in absolute
amount but also, as shown in the following chart, as a proportion of
total net indebtedness: Federal, State and local, and private. Whereas
Federal debt held by the public was only 9% of total net debt at the
end of calendar year 1929, it had risen to 62% by the end of calendar
year 1945. Federal borrowing was large during these years, particularly to finance World War II, and borrowing by other sectors was
restricted by low incomes and poor credit-worthiness during the
depression and by controls and scarcities during the war.

SPECIAL ANALYSIS C

Percent Distribution of Net Indebtedness1
Percent
100

Percent

100

1930
1940
End of Coiendar Year
1

1950

I960

1970

1975

Federal net indebf.dncn a ihe F«d«ml debt held by t h . public (Including ilxt F.d.rol Rewrv. Syitim). Pii'alt n«i indebtedness includes thedebt of tk« Go»ernmefit-sponsoredenterpriie>,whichaiel«d«nilly ettoblilhed and chartered but ptivotely owned

From 1945 to 1974, however, private debt increased as a proportion
of total debt in every year, and in every year the Federal debt held by
the public decreased as a proportion of the total. This uninterrupted
trend ended in calendar year 1975 because of the large Federal deficit
caused by the recession. Federal debt held by the public rose as a
percentage of total debt, and private debt fell. Complete data are not
yet available for calendar year 1976, but it is likely that the large
Federal deficit again caused Federal debt held by the public to rise as
a percentage of total debt. As the chart shows, the recent rise in the
proportion of Federal debt does not appreciably affect the comparison
of trends over the last three decades. From the end of calendar year
1955 to the end of 1975, for example, Federal debt held by the public
rose 94%, whereas State and local government debt rose 438% and
private debt rose 491%. By the end of calendar year 1975, Federal
debt held by the public was only 15% of total debt. As a result of these
trends, Federal debt and borrowing, although still important, have
become relatively much smaller influences in the financial markets.
During the same period Federal debt has decreased relative to gross
national product. As shown in table C-3, debt held by the public
equaled 62% of gross national product at the end of 1954 but declined
steadily to 25% by the end of 1974. In 1975, however, debt held by
the public rose as a percentage of gross national product, and it rose

THE BUDGET FOR FISCAL YEAR 1978

further in 1976 and the transition quarter. The percentage is expected
to rise further this year before starting to fall again in 1978.
The interest cost of the debt may be more significant than the
amount of the debt for some types of comparison designed to measure
the importance of Federal indebtedness. Interest on the debt held by
the public has risen much faster than the debt itself, due to a strong
upward trend since World War II in the interest rates that must be
paid on new borrowings and on refunded debt. Between 1954 and
1976 the Federal debt held by the public doubled, but, as shown in
table C-4, the interest paid to the public increased more than five
times. For this period as a whole, interest payments to the public
grew faster than gross national product. In the first 5 years, 1954-58,
interest was equal to 1.39% of gross national product, whereas by the
last 5 years, 1972-76, the proportion had risen moderately to 1.63%.
On the other hand, the proportion of budget outla3rs devoted to paying
interest on the debt held by the public did not show any trend over the
period as a whole. It ranged between 7.0% and 8.7% with an average of
7.7%. Interest as a percentage of both gross national product and
budget outlays—assuming continuation of current market interest
rates—remains about the same in 1977 and 1978 as in 1976.
Since the end of World War II the composition of the Federal debt
has changed, with an increasingly large proportion of Federal securities
having a relatively short maturity. One contributing factor is the
statutor}^ ceiling of 4%% that has been maintained since 1918 on the
interest rate that could be paid on Treasury bonds. Because long-term
market rates exceeded 4%% after 1965, the ceiling eventually prevented the Treasury from selling long-term obligations. Since 1965
the average maturity of Treasury marketable debt has declined from
about 5 years to less than 3 years. During the past year the average
maturity stopped declining, however, and even lengthened slightly,
due to exemptions from the statutory ceiling.
This restriction on Treasury borrowing has been relaxed in two
ways. One method has been to increase the maximum maturity of
notes, which are not subject to the interest rate ceiling. The maximum
maturity was raised by law from 5 years to 7 years in 1967 and to 10
years in March 1976. As of November 1976, the amount of notes
outstanding with a maturity more than 5 years was $98.5 billion, of
which $14.7 billion had a maturity more than 7 years. The other
method of relaxing the restriction has been to make exceptions to the
interest rate ceiling on bonds. In 1971 Treasury was allowed by law
to issue up to $10 billion of bonds at interest rates above 4%%. In 1973
those bonds held by Government accounts and the Federal Reserve
System were exempted from the interest rate limit, and in March and
June 1976 the amount of the exception was raised in two steps to
$17 billion. As of November 1976, $22.8 billion of bonds outstanding
had been sold since the change of law in 1971, including bonds held by
Government accounts and the Federal Reserve System. The effective
interest rates have ranged from 6.1% to 8.4% with an average of 7.5%.

SPECIAL ANALYSIS C

Table C-4. COMPARISON OF T R E N D S IN INTEREST ON FEDERAL
DEBT (in billions of dollars)
Interest on the gross Federal debt
Interest on debt
held by the public
as a percent of

Pai d to

Fiscal year

Total

Federal
Government
accounts

The public
Total

Federal
Reserve
System 1

Other

GNP

Budget
outlays 2

1954
1955
1956
1957
1958
1959

6.4
6.4
6.8
7.3

1.3
.2
.3
4

5.2
5.2
5.6
5.9

0.5
.4
.5
.7

4.7
4.8
5.1
5.3

1.42
.36
.35
37

7.8
7.8

4
4

6.3
6.4

.7
.8

5.6
5.6

43
35

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

9.5

8.1

1.0

7.1

9.3
9.5
10.3
11.0
11.8
12.6
14.2
15.6
17.6

.5
.6
6
8
2.0
2.1
2.6
3.0
3.5

7.8
7.9
8.7

.0
.0
1

6.8
6.9
7.6

.53
.45
50

20.0
21.6
22.5
24.8
30.0
33.5
37.7

4.4

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

8.3
42.7
45.2

5.3
5.8
6.3

7.7
8.8
9.0
.6
9.5
10.1

9.2

8.0

9.8
10.4
11.6
12.6
14.1

.4
7
2.0
2.4
2.9

8.4
8.7
9.6
10.2
11.2

.49
.45
.50
.52
%

15.6
16.3
16.6
18.5
22.4
24.7
28.7

3.5

12.2
12.6
12.9
14.2
16.9
18.6
23.0

.60
.50
.50
1.64
1.70

7.6
33.2
35.2

3.7
3.7
4.3

5.5
6.1
5.7
NA
NA
NA

NA
NA
NA

.63

79
79
87,
73

7.29
7.56
7.90
7.73
7.68
6.96
8.73
7.96
7.40
7.78
7.80
8.29
7.75
7.36
7.07
7.66
7.95
7.73
7.16
7.49
8.29
7.56
7.84
8.07
8.07
7.99

NA = Not available.
Estimated as the average of calendar year figures. The 1976 estimate is tentative.
Budget outlays for 1954-78 are given in the Budget, Part 9, table 23.

BORROWING BY FEDERAL AGENCIES

A few Government agencies are authorized to sell their own debt
instruments to the public and to other Government agencies and
funds. This agency borrowing is part of the gross Federal debt. For
those agencies included in the budget, the authorization to borrow is
budget authority and the disbursement of such borrowed money is a
budget outlay. Agency debt includes the borrowings of off-budget
Federal entities, which are Government owned and controlled but
whose transactions have been excluded from the budget totals under
provisions of law.
Agency borrowing was shown in total in table C-l and is shown by
agency in table C-5. In 1976, the repayment of agency debt was
approximately the same as new agency borrowing. In 1977 and 1978,
repayments are expected to exceed new borrowing by small amounts.
The agency debt outstanding on September 30, 1978, is estimated to
be $8.9 billion, which is about 1% of gross Federal debt.
O - 77 - 4
240-700

THE BUDGET FOR FISCAL YEAR 1978
Table C-5. AGENCY BORROWING 1 (in millions of dollars)
Debt
outstanding,
end 1978
estimate

Borrowing or repayment (—) of debt

Description

1976

Borrowing from the public:
Agriculture: Farmers Home Administration 2
Defense
Health, Education, and Welfare 2
Housing and Urban Development:
College housing loans 2 3
Federal Housing Administration
Housing for elderly or handicapped 2
Government National Mortgage Association 2
Revolving fund (liquidating programs) 2 3
Veterans Administration 2
Export-Import Bank 4
Postal Service __
Small Business Administration 2
Tennessee Valley Authority
All other

-21
-91
-4

-76
-93
-9

219
812
116

50
4

569
60

-106

-286

249

-3
-54
-931

4
-158
-724

-88

-32

-2

-1
40

-41

-19

-39
109

-16
421

-53

-19

-100
*

387
397
1,936
250
210
1,975
2

252

-1,223

-1,323

7,184

-3

-20
-22
-4

-58
-23
-6

99
97
59

-8

-2
-3

-57

117

564

-3

-3
-79

207
470

-51

-14

Total, borrowing from the public __
Borrowing from other funds:
Agriculture: Farmers Home Administration 2
Defense
Health, Education, and Welfare2
Housing and Urban Development:
College housing loans 2 3
Federal Housing Administration
Housing for elderly or handicapped 2__
Government National Mortgage Association2
Revolving fund (liquidating programs) 2 3
Veterans Administration 2
Export-Import Bank
Small Business Administration 2

] 978
imate

1977

-16

-1

-4

Total, borrowing from other funds __

-7

-165

-71

1,712

Total, agency borrowing included in
gross Federal debt4

244

-1,388

-1,394

8,895

936
745

-216

1,884
1,100

1,623
1,450

8,276
5,285
4,276

MEMORANDUM
Borrowing from Federal Financing Bank:
Export-Import Bank
Tennessee Valley Authority
Postal Service,
U.S. Railway Association
Total, agency borrowing
Federal Financing Bank

555
500
11

2,980

850

1,248

133
298

895

395

from
3,415

3,968

18,231

•Less than $500 thousand.
1
Excludes agency borrowing from Treasury.
2
Certificates of participation in loans issued by the Government National Mortgage Association
on3 behalf of several agencies.
The debt of the College housing fund ($465 million) is scheduled to be transferred to the Revolving fund (liquidating programs) on Oct. 1, 1977.
4
Borrowing in 1976 does not include the retroactive reclassification as of July 1. 1975, of $471
million of Export-Import Bank certificates of beneficial interest as debt instead of loan asset sales.

SPECIAL ANALYSIS C

Agency debt was retroactively increased by $471 million as of July 1,
1975, due to reclassifying as Federal debt the certificates of beneficial
interest in pools of loans issued by the Export-Import Bank and
formerly classified as loan asset sales. Since this is a reclassification
of existing securities, it does not constitute new Federal borrowing.
Therefore agency borrowing, borrowing from the public, and gross
Federal borrowing in 1976 are $471 million less than the change in
recorded debt from the end of 1975 to the end of 1976. Certificates
redeemed after the reclassification show as repayment of ExportImport Bank debt in table C-5. The issuance of new certificates after
the reclassification shows as borrowing, but the amount is small. The
Export-Import Bank has not made new contracts to sell certificates
of beneficial interest.
The retroactive reclassification took place in October 1976. At the
same time, the Export-Import Bank's borrowings of $150 million
from Pefco (Private Export Funding Corporation) were also retroactively reclassified from loan asset sales to debt. Since the borrowing
from Pefco was entirely during 1976 and the transition quarter,
which are covered by the reclassification, the debt figures published
in this budget are all consistent with the new classification.
A further adjustment within table C-5 arises from the transfer of all
assets and liabilities of certain expiring funds to the Revolving fund
(liquidating programs) in the Department of Housing and Urban
Development. Debt of $465 million is scheduled to be transferred
from the College housing fund on October 1, 1977. This transfer does
not constitute borrowing by the Revolving fund (liquidating programs) or repayment of debt by the fund that expires.
The Federal Financing Bank (FFB) was created in December 1973
under the Treasury Department as an off^budget Federal entity and
began financial operations in May 1974. Its purposes were to assist
and coordinate agency borrowing and Government-guaranteed
borrowing and to reduce the cost to the Government of some of its
borrowing activities. It was given the authority to purchase agency
debt and Government-guaranteed obligations and, in turn, to finance
these transactions by borrowing from the Treasury. With the approval
of the Secretary of the Treasury, the FFB is authorized to borrow
from the Treasury without a statutory limitation on the amount.5
Since the FFB can borrow from the Treasury at lower interest rates
than other agencies would have to pay in the market, this procedure
reduces the cost of agency borrowing. The FFB thus serves as a conduit for agency borrowing, and Treasury securities replace the securities of other agencies in the market. Agency borrowing from the
FFB is not included in gross Federal debt. It would be triple counting
to add together the agency borrowing from the FFB, the FFB borrowing from Treasury, and the Treasury borrowing from the public
that was necessary to provide the FFB with funds to lend to the
agencies.
As shown in the memorandum section of table C-5, the FFB is
having a profound effect on agency borrowing.6 Four agencies that
5
The FFB also is authorized to have outstanding up to $15 billion of publicly issued debt, which
Treasury classifies as public debt. The FFB borrowed $1.5 billion in 8-month bills from the public in
July 1974. All of its other borrowing has been from Treasury, because Treasury can borrow from the
public at slightly lower interest rates than FFB would have to pay. No further FFB borrowing from
the public is planned.
8
FFB purchases of Government-guaranteed obligations are shown in table C-9.

THE BUDGET FOR FISCAL YEAR 1978

would otherwise borrow mostly in the market borrowed $3.0 billion
from the FFB in 1976 and are expected to borrow $3.4 billion in
1977 and $4.0 billion in 1978. The only appreciable borrowing in the
market by these agencies has arisen from special arrangements made
by the Export-Import Bank. Because of this shift in the source of
borrowing, very little new agency borrowing in the market took
place in the last 2 years or is scheduled to take place in the future.
The change in agency debt outstanding is thus determined almost
solely by the repayment of maturing debt and consequently is very
small or negative throughout the period. If FFB did not exist and if
agency borrowing were the same, the agency component of gross
Federal debt would be about $16 billion higher at the end of 1978
than is now estimated and the Treasury component would be correspondingly lower.
By the end of 1978, $4.2 billion of agency debt, or almost half
of the total, will be obligations of the four agencies listed in table
C-5 that plan to borrow in the future almost exclusively from the
FFB. A total of $3.2 billion, or a third of all agency debt, will consist of certificates of participation in pools of loans issued by the
Government National Mortgage Association as trustee on behalf
of several agencies, which are identified in table C-5. These certificates were not issued after 1968. A further $0.9 billion of agency
debt will be family housing mortgages assumed a number of years
ago by the Department of Defense. The remaining agency debt,
which is mostly for programs that will continue to borrow from
the public, will constitute only 7% of the total—$658 million of
Federal Housing Administration debentures issued in payment of
insurance claims for defaulted loans, and $5 million of other obligations.
The Treasury provides capital to business-type Government enterprises both in the form of capital stock and in the form of debt. The
provision of debt is shown as "borrowing from Treasury77 on the statements of financial condition for enterprises in the Budget Appendix.
However, the equity and the debt instruments are the same in substance; and it would be double counting to add together the agency
borrowing from the Treasury and the Treasury borrowing from the
public that was necessary to provide the agencies with this capital.
Therefore, agency borrowing from Treasury is excluded from figures
on agency borrowing and debt in all other parts of the budget
documents.
AGENCY INVESTMENT IN FEDERAL SECURITIES

Trust funds and some public enterprise funds accumulate cash in
excess of current requirements in order to meet future claims and
demands. Such cash surpluses are invested mostly in Treasury debt
and, to a very small extent, in agency debt. Purchases of these securities are not counted as budget outlays, and redemptions are not
counted as budget receipts.
Net investment by trust funds and other Federal agencies declined
from $7.0 billion in 1975 to $4.3 billion in 1976. As shown in table
C-6, this decline is expected to be reversed in 1977, with agency
investment rising to $8.3 billion in that year and $12.7 billion in
1978.

SPECIAL ANALYSIS C

Agency investment in 1975, 1976, and the transition quarter was
less than in the preceding years. The major cause of this decrease
was the large rise in unemployment, which substantially increased
the benefit payments of the unemployment trust fund and to some
lesser extent reduced the employment tax receipts of the social
security trust funds. Disinvestment by the unemployment trust
fund was limited in 1976, because some State funds had disinvested
entirely and the Labor Department advanced $7.9 billion to the
trust fund. However, at the same time, the old age, survivors, and
disability insurance trust funds had a large shift from investment to
disinvestment. The expected rise in agency investment in 1977 is
caused in large measure by continued economic recovery, which reduces unemployment benefits and raises trust fund tax receipts.
Recently enacted legislation increases taxes for the unemployment
trust fund by $1.4 billion in 1978 and $3.9 billion in 1979; proposals
in this budget would increase social security taxes by $1.3 billion
in 1978 and $6.4 billion in 1979.
The face value of Treasury debt held in several Government accounts was reduced by $184 million in the transition quarter due to the
redemption of $1.1 billion of "flower bonds." These are bonds with
which individuals can pay estate taxes at par value, even though the
market value of the bonds is well below par because interest rates
are now much higher than when the bonds were issued. The Secretary
of the Treasmy may designate new issues of bonds as flower bonds
but since 1963 has not done so. In earlier years not all bonds were
flower bonds, but the bonds from that period still outstanding were
all so designated. The flower bond provision is valuable to individuals
and so reduces the market yield of these securities but is, of course,
worth nothing for Government accounts. The purpose of the redemption was to increase the long-run income of these accounts. The bonds
were redeemed at market value and replaced by bonds that had a
face value that was $184 million less but yield higher income.
Since Federal debt is measured at par value, this transaction reduced
gross Federal debt, debt held in Government accounts, and debt
subject to the statutory limit by $184 million. The transaction increased outlays of the respective Government accounts by an identical
$184 million, because the difference between the par value and the
market value of the bonds was treated as a loss. Outlays for the
interest on the public debt were decreased by an equal amount (less
the very small unamortized discount), which represented the "gain"
from redeeming bonds at less than the par value at which they would
otherwise have been redeemed eventually. Thus, budget outlays and
the deficit were virtually unchanged. Government accounts still
hold $4.4 billion of flower bonds, and Treasury is considering further
redemptions.
Total agency holdings of Federal securities will reach an estimated
$169.1 billion'by September 30, 1978. This will constitute 22% of
the gross Federal debt. Two major groups of trust funds—the social
security funds and the Civil Service Commission funds—will account
for 66% of total agency holdings, and all the trust funds together
will account for 93%. Almost all of the holdings will be Treasury
debt, and the holdings of agency debt will continue to decline by
small amounts each year.

THE BUDGET FOR FISCAL YEAR 1978
Table C-6. AGENCY INVESTMENT IN FEDERAL SECURITIES
(In millions of dollars)
Holdings,
end of
1978
estimate

Increase or decrease
Description

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

TQ
actual

1976
actual

1978
estimate

1977
estimate

-1,925
-1.227
1,181

-913
-477
67

-1.738
-1,936
111

-2,268
66
3,222

32,494
4,583
14.408

-148

892

1,064

3.200

118

-13

151

160

1.823

261

-107

-357

1.140

190

-2,373

104

300

3.900

9,114

-505
593
60

-79
183
18

1,218
522

356
403

10,526
3,637
1,529

9
33

-3
4

371
21
26

303
20
26

7,630
1,084

4,828

-770

6,702

5,304

426

480

449

54.296
3.400

470

-128
-1.712
38
135
603
-660
18
7
-1

883

371

7,861

1.712
96
368
125
-246
64
146
19

29
320
-151
100
128
50
13

59
447
-920
23
66
101
16

212
4,870
360
3,426
486

4,328

-3.506

8,511

12,819

167,435

-6

215

-6

406

670
89

555
50
*

192

-3

-24

-19

196

-75

235
375

SPECIAL ANALYSIS C

Table C-6. AGENCY INVESTMENT IN FEDERAL SECURITIES—Continued
(In millions of dollars)
Increase or decrease ( —) in holdings
1977
estimate

1978
estimate

Holdings,
end of
1978
estimate

-10

-46

-71

1,712

12,748

169,146

316
13,278
-846

9,596
157,360
2,190

Description
1976
actual

Federal Home Loan Bank Board: FSLIC.
Postal Service
Railroad Retirement Board: Trust fund__

TQ
actual

—4
—50

Total, investment in agency debt...

-7

Total, agency investment in Federal
debt

4,341

-3,514

2,680
1,361
300

-1,555
-2,603
644

-165
8,346

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

410
8,044
-109

* Less than $500 thousand.
1
The change in holdings is not estimated due to the uncertainties in foreign exchange, and the
estimated 1978 year-end holdings are taken to be the actual holdings at the end of TQ.

LIMITATIONS ON FEDERAL DEBT

Statutory limitations have customarily been placed on Federal debt.
Beginning with the enactment of the Second Liberty Bond Act in
1917, the limitation on the amount of debt developed in several
steps from being an authorization of an amount for each specific
issue to being an overall ceiling on the total amount of most outstanding Federal debt. The latter type of limitation has been in effect since
1917. The limit currently applies to the total of:
• Almost all public debt issued by the Treasury since September
1917, whether held by the public or by the Government;
• Agency debt in the form of participation certificates issued during
1968 under the Participation Sales Act of 1966; and
• Other debt issued by Federal agencies (and the District of
Columbia Armory Board) that, according to explicit statute, is
fully guaranteed as to principal and interest by the United States.
The debt subject to statutory limit includes virtually all Treasury
debt and excludes the major part of agency debt. The small amount
of Treasury debt not subject to statutory limit is shown in table C-7.
Under proposed legislation the amount would be reduced during 1977
by writing off $211 million of discontinued currencies, mostly silver
certificates, that would be declared to have been destroyed or irretrievably lost. These currencies were included in Treasury debt when
they were discontinued, and writing them off would be treated as a
budget receipt.
Agency debt subject to this general statutory limit is now comprised exclusively of debentures issued by the Federal Housing Administration and participation certificates sold in 1968. These two
categories together make up only about one-seventh of total agency
debt. However, most other agency debt is subject to special statutory

THE BUDGET FOR FISCAL YEAR 1978

limits. For example, the Postal Service is limited to $2 billion of annual
borrowing and $10 billion of outstanding bonds.
All of the debt subject to the statutory limit is Federal debt except
the small issue of District of Columbia Armory Board bonds. Until
recently the debt subject to limit also included special non-interestbearing notes issued by the Treasury to the International Monetary
Fund or to various international lending organizations. These notes
have all been redeemed and replaced by other instruments in accordance with a recommendation of the President's Commission on Budget
Concepts. The Commission viewed these transactions as representing
an exchange of assets (in the case of the International Monetary Fund)
or an unpaid obligation or contingent liability (in the case of the
international lending organizations) rather than a payment that had
been made and that in turn had increased the Government's debt.7
The statutory limit on the Federal debt was $577 billion from
June 30, 1975, to November 13, 1975. This limit consisted of a permanent limit of $400 billion and a temporary increase to that limit of
$177 billion. The statutory limit was increased to $595 billion on
November 14, 1975, and to $627 billion on March 15, 1976. On
June 30, 1976, new legislation provided that the debt limit would be
increased successively to three temporary levels: $636 billion on
July 1, 1976; $682 billion on October 1, 1976; and $700 billion on
April 1, 1977. The temporary increase to $700 billion expires on September 30, 1977. According to the estimates in this budget, a further
increase will be needed before then to permit the Federal Government
to meet its obligations.
7
Report of the President's Commission on Budget Concepts (Washington: U.S. Government
Printing Office. 1967), pp. 31-32 and 59.

Table C-7. DEBT SUBJECT TO STATUTORY LIMIT (in millions of dollars)
End of year
Description
1976
actual

Federal debt held by the public
Federal debt held by Government agencies
Total, gross Federal debt
Deduct:
Treasury debt not subject to limit
Agency debt not subject to general limitation:
Department of Defense
Export-Import Bank
Tennessee Valley Authority
Postal Service
Participation certificates1
CoastGuard
Total, Federal debt not subject to limit

TQ
actual

1977
estimate

1978
estimate

480,300
151,566

498,327
148,052

560,327
156, 398

615,827
169, 146

631,866

646,379

716, 725

784,973

613

402

1,171
3,174
2,075
250
3,045
2

1,136
3,591
1,975
20
5
3,010
2

1,024
2,661
1,975
20
5
2,633
2

99
0
1,936
1,975
20
5
2,031
2

10,578

8,947

7,505

10,330

Federal debt subject to statutory limit
District of Columbia Armory Board bonds

621,535
20

635,802 707,779 777,469
2
0
2
0
2
0

Total, debt subject to statutory limit

621,555

635,822

707,799

777,489

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

SPECIAL ANALYSIS C

The outstanding debt subject to limit is shown in table C-7 and
compared with the gross Federal debt and the Federal debt held by
the public. The debt subject to limit was $621.6 billion at the end of
1976 and is expected to rise to $707.8 billion and $777.5 billion at the
end of 1977 and 1978, respectively. These amounts are far more than
the permanent debt limit of $400 billion. The debt subject to limit
equals about 99% of the gross Federal debt. As table C-7 shows,
almost all of the difference is accounted for by agency debt notsubject to the general limitation. Since the debt subject to limit is
almost as large as gross Federal debt, it is much larger than the debt
held by the public.
The debt subject to statutory limit is expected to increase more than
the debt held by the public in both 1977 and 1978: $72.0 billion compared to $62.0 billion in 1977, and $69.7 billion compared to $55.5
billion in 1978. The slower growth in the debt held by the public is
due primarily to the surpluses of certain funds in the Federal budget—
principally the trust funds. These surpluses are largely invested in
Federal debt, most of which is subject to the statutory debt limit.
Agency investment in Federal debt thus reduces the growth in debt
held by the public to an amount that is smaller than the growth in
gross Federal debt; but it does not reduce the growth in debt subject
to limit. The growth in debt subject to limit is about equal to the
growth in gross Federal debt. Therefore, agency investment in Federal
debt reduces the growth in debt held by the public to an amount that
is smaller than the growth in debt subject to the statutory limit.
FEDERALLY ASSISTED BORROWING

The effect of the Government on borrowing includes not only its
own borrowing to finance Federal operations but also its assistance to
certain borrowing by the public. Federally assisted borrowing is of
two types: borrowing by Government-sponsored enterprises, and
Government-guaranteed borrowing by non-Federal borrowers.
The Government-sponsored enterprises were established and chartered by the Federal Government to perform specialized credit functions, but they are now entirely privately owned. The rule governing
the budget treatment of these enterprises was established in 1967 in
accordance with a recommendation by the President's Commission on
Budget Concepts. The Commission, whose report led to the adoption
of the unified budget, recommended that the budget exclude those
Government-sponsored enterprises that are entirely privately owned.8
Therefore the transactions of these enterprises are not included within
the Federal budget, and their debt is not part of gross Federal debt.
The seven Government-sponsored enterprises are essentially financial intermediaries, borrowing in the securities market and lending
their borrowed funds for specifically authorized purposes either directly or by purchasing loans originated by the private group that
they were established to assist. The borrowing programs of these
enterprises are subject to Federal supervision. In addition, they all
consult the Treasury Department, either by law or by custom, in
planning their market offerings. The Student Loan Marketing Assos Ibid., pp. 29-30.

THE BUDGET FOR FISCAL YEAR 1978

ciation borrows exclusively from the Federal Financing Bank.9 The
Federal National Mortgage Association and the Federal home loan
banks are required to obtain Treasury approval of the terms and
timing of specific offerings. In addition to their Federal sponsorship,
all of the enterprises have a history of successful financial performance.
Hence, despite the absence of Federal guarantees, the obligations of
these enterprises are sold at interest rates only moderately higher than
the rates on comparable Treasury issues.
As shown in table C-8, the borrowing of the Government-sponsored
enterprises was $5.3 billion in 1976 and is expected to be $8.3 billion
in 1977 and $12.9 billion in 197S. In order to show the borrowing by
this sector as a whole from the rest of the market, these figures are
calculated net of the borrowing by one Government-sponsored enterprise from another. This type of transaction consists primarily of the
Federal Home Loan Mortgage Corporation borrowing from the Federal home loan banks or repaying its debt. During 1976-77 less of the
borrowing than usual is due to support for the housing market from
the Federal home loan banks, Federal National Mortgage Association,
and Federal Home Loan Mortgage Corporation. This is primarily
because the advances provided by the Federal home loan banks to
their member savings institutions were less than repayments in 1976
and, though rising sharply, will exceed repayments only moderately
in 1977. Three-fifths of the debt outstanding at the end of 1978 will
have been issued by these enterprises. Special Analysis E discusses
lending by the Government-sponsored enterprises.
9
The securities of the other Government-sponsored enterprises are not guaranteed by the Federal Government and therefore cannot be bought by the FFB.

Table C-8. BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES
(in millions of dollars)
Increase or decrease ( —)
Description

Health, Education, and Welfare: Student
Loan Marketing Association
Housing and Urban Development: Federal
National Mortgage Association
Farm Credit Administration:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corporation 1
Total
Less increase in holdings of debt issued by
Government-sponsored enterprises

1976
actual

TQ
actual

1977
estimate

1978
estimate

Debt
outstanding
end 1978
estimate

160

110

600

1,626

823

1,764

1,875

34,324

1,007
1,054
2,121

-60
433
569

618
1,447
2,649

534
1,617
2,795

5,266
14,131
22,298

-1,975
—1,975

-101

-89

3,877

22,356

1,355

-81

11
5

1,690

9,416

5,348

1,588

6,625

12,497

108,391

-89

-1,694

-363

1,974

5,302

1,677

8,319

12,860

106,416

Total, borrowing by Government-

sponsored enterprises
1

Figures include the sale of participation certificates.

SPECIAL ANALYSIS C

The other type of federally assisted borrowing, Governmentguaranteed borrowing, consists of loans for which the Federal Government guarantees the payment of the principal and/or interest in whole
or in part. Guaranteed (or insured) loans have diverse characteristics.
The loans may be made to individuals, businesses, State and local
governments, or foreign governments. The guaranteed obligation may
be a loan made by a bank or other institutional lender, it may be a
security sold in the capital market, or it may be a security sold to the
Federal Financing Bank. Government-guaranteed borrowing is the
same as Government-guaranteed lending.
Guaranteed loans include most loan assets sold by Federal agencies.
Loan asset sales occur when an agency makes a direct loan and then
sells it. A guarantee is usually attached. In some cases the agency sells
the direct loans themselves, and in other cases the agency sells securities (sometimes called participation certificates or certificates of
beneficial ownership) that are backed by loans that the agency continues to hold and service. Loan asset sales are offsets to the outlays
of the agency that sells them, so they reduce the amount by which
the direct loans of Federal agencies add to budget outlays. The
certificates of beneficial ownership sold by the Farmers Home Administration and Rural electrification and telephone revolving fund
are a type of loan asset and would be classified as Federal debt instead
of guaranteed loans according to the recommendations of the President's Commission on Budget Concepts.10 However, according to
statute the sale of these certificates is required to be treated as the
sale of Joan assets instead of Federal borrowing.
Loan guarantees are designed to allocate economic resources toward
particular uses by providing credit at more favorable terms than
would otherwise be available in the private market. The major use of
guaranteed loans is to support housing, but in recent years guarantees
have increasingly been used for other purposes. As shown in table C-9,
Government-guaranteed borrowing net of repayments was $16.2
billion in 1976 and. is estimated as $20.3 billion in 1977 and $28.4
billion in 1978. Special Analysis E presents detailed data on guaranteed
loans and loan asset sales.
TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING

Table C-9 summarizes Federal and federally assisted borrowing
from the public. For the purposes of this table, Government-sponsored
enterprises are excluded from the public and defined in the same sector
as the Federal Government. Federal borrowing from the public is
presented in total. Borrowing by Government-sponsored enterprises
and Government-guaranteed borrowing are presented both in total
and as net amounts, the latter having been adjusted in order to
remove double counting in the derivation of total Federal and federally
assisted borrowing from the public. Double counting would otherwise
occur when a Federal agency or a Government-sponsored enterprise
bought or sold Federal or federally assisted debt.
io Ibid., pp. 8. 47-48, and 54-55.

THE BUDGET FOR FISCAL YEAR

1978

Table C-9. NET BORROWING FROM THE PUBLIC BY GOVERNMENT,
GOVERNMENT-SPONSORED ENTERPRISES, AND GOVERNMENTGUARANTEED BORROWERS (in billions of dollars)
Borrowing or repayment ( —)
1976
actual

Federal borrowing from the public! 2
3

Borrowing by Government-sponsored enterprises
Less increase in holdings of Federal debt
Less increase in Government-sponsored debt held by
Federal agencies:
Federal Home Loan Bank Board
Federal Financing Bank
Net Government-sponsored borrowing from the
public

TQ
actual

1977
est.

1978
est.

Debt outstanding
end 1978
estimate

82.9

Description

18.0

62.0

55.5

615.8

5.3
.2

1.7
8.3
.5 —1.1

12.9
—.1

106.4
2.5

.3
.2

- * -1.1
*
.1

-*
.1

.4
.6

4.7

1.2

10.5

12.8

103.0

16.2

2.7

20.3

28.4

268.6

6.1
—1.0

2.6
.3

8.7
—.7

6.0
—.3

29.8
3.3

.2
.8
-*
—.2

—*
-.1
*
—*

.1
1.0
-*
—.1

.1
1.5
*
—.1

.6
31.1
.1
1.4

Net Government-guaranteed borrowing from
thepublic

10.3

-.1

11.3

21.2

202.3

Total, Federal and federally assisted borrowing from the public

97.9

19.1

83.8

89.6

921.1

Government-guaranteed borrowing
Less increase in Government-guaranteed loans held
by:
Federal agencies:
Federal Financing Bank
.
Government National Mortgage Corporation
Government-sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation

*Less than $50 million.
1 See table C-1.
Borrowing in 1976 excludes the retroactive reclassification as of July 1, 1975, of $0.5 billion of
Export-Import Bank certificates of beneficial interest from loan asset sales to debt.
3 See table C-8.
4
The same as Government-guaranteed lending. See table E-7.
2

Federal and federally assisted borrowing from the public during
1976-78 is made up predominantly of Federal borrowing to finance the
large budget deficits. Federal borrowing also finances the Federal
Financing Bank's purchases of guaranteed obligations (net of repayments), which are one-third of the total increase in guaranteed obligations outstanding. Since the FFB finances these acquisitions by borrowing from the Treasury, which in turn borrows from the public,
these transactions substitute Federal borrowing for guaranteed
borrowing in the market. As shown in table E-6 of Special Analysis E,
the FFB expects to buy a smaller share, about one-sixth, of the gross
new loans guaranteed (before repayments) in these years.
The following chart depicts the trends in Federal and federally
assisted borrowing from the public between 1966 and 1978. The series
is volatile, and the recent and expected fluctuations are dominated by
the Federal deficit. Total Federal and federally assisted borrowing fell
to $24.1 billion in 1974 because of a sharp drop in the Federal deficit
and rose dramatically to $64.7 billion in 1975 and to $97.9 billion in
1976 because of large and rising deficits in these years. The total is

SPECIAL ANALYSIS C

expected to be a little less in 1977 and 1978 because of the falling
Federal deficit. The size of federally assisted borrowing—both relative
to Federal borrowing and in absolute size—is expected to rise in
both these years.

Federal and Federally Assisted Borrowing
$ Billion*

100-

60-

40-

1966 '67

'68

al Y«a*

'69

*70

*72

'73

'75

'76

Estimat*

As the chart shows, Federal and federally assisted borrowing is now
substantially higher than a decade ago. Much of the increase parallels
the growth in the economy and in the total funds raised by the nonfinancial sector through the sale of debt securities and other forms of
borrowing and through the sale of corporate equities. However,
although the existence of trends is difficult to discern because of the
volatility of the series, to some extent the total Federal and federally
assisted borrowing from the public seems to have increased as a proportion of the total funds raised. This proportion increased from 12%
during 1960-67 to 21% during 1968-74 and to 38% during 1975-76.
Thus, Government programs since 1968 have influenced the allocation of funds raised in financial markets more than they did in the
immediately preceding years. In 1975 and 1976 the Government
impact was unusually large, and the estimated totals for Federal and
federally assisted borrowing imply that it will remain large relative to
most years in 1977 and 1978. Since the rest of the economy will be
expanding, however, Federal and federally assisted borrowing will
probably be a declining proportion of total funds raised in both these
years.

SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
This analysis divides outlays between those that are of an investment or "capital" nature and those directed to operating or "current1'
purposes. Budget outlays are classified into three categories: investment, current, and other. Each of the major classifications is further
subdivided so that civil and national defense outlays can be separately
analyzed. The national defense category uses the same definitions as
the national defense function in the budget; the civil grouping includes
all other functions.
Investment-type outlays.—These outlays yield benefits over several
years: purchases of Federal physicial assets, loans (both domestic and
foreign); State, local, and private physicial assets; and developmental
expenditures that add to the Nation's capacity for better education,
technical innovation, and health services.
Current outlays.—These outlays provide benefits in the year that
they are made. Included are aid and special services to agriculture,
business, labor, homeowners, tenants, and veterans; payments to other
nations; and Federal welfare payments, whether directly or through
State and local governments. Also included are: payments for retirement and social insurance trust funds established to provide an
assured income to contributors or their families in the event of unemployment, retirement, disabilit}^ or death; and other services and
current operating expenses. Finally, this category includes transactions
such as: operation and administration of Federal departments and
agencies; repair, maintenance, and operation of physical assets;
regulatory and control activities; and interest.
Other outlays.—These outlays cannot be precisely classified in either
of the above two categories and are placed in this residual classification. Included are: allowances for contingencies, and certain financial
adjustments that cannot be distributed—such as proprietary receipts
and the employer share of employee retirement.
These three categories of outlays are summarized in table D-l for
for 1976-78.
62

SPECIAL ANALYSIS D
Table D-1. SUMMARY OF INVESTMENT, OPERATING, AND OTHER
BUDGET OUTLAYS (in billions of dollars)
1976
actual

TQ
actual

1977
estimate

1978
estimate

INVESTMENT-TYPE OUTLAYS
Additions to Federal assets:

Civil:
Loans and other financial investments
Physical assets:
Public works
Major commodity inventories
Major equipment and other physical assets
National defense

4.7

1.6

3.4

4.4

4.5
.2
.8
19.5

1.2
—.1
.2
4.5

6.6
*
1.3
22.3

6.7
1.4
1.4
27.4

12.3
.1

3.5
*

15.4
*

17.2
*

35.5
9.8

9.6
2.5

40.6
11.0

41.9
12.4

Subtotal, investment-type outlays:
Civil
National defense

58.1
29.4

16.0
6.9

67.3
33.3

73.1
39.8

Total

87.5

23.0

100.6

112.9

64.2
7.7

16.0
2.9

68.4
9.4

66.7
9.7

118.4

31.1

132.3

141.0

26.8
19.0
60.7

7.0
5.4
15.4

29.8
24.3
66.8

31.1
25.1
69.9
2.3

Subtotal, current outlays:
Civil
National defense

228.3
68.4

59.6
18.3

254.7
76.2

263.9
82.0

Total

296.7

77.8

330.9

345.8

Additions to State, local, and private assets:

Civil
National defense
Developmental outlays:

Civil
National defense

CURRENT OUTLAYS
Current expenses for aids and special services:

Civil
National defense
Retirement and social insurance benefits—civil
Other services and current operating expenses:

Civil:
Interest
Other
National defense
Allowances, Department of Defense

OTHER
Allowances for:
Civilian agency pay raises
Contingencies
Employer share, employee retirement (—)
Proprietary receipts from the public (—):
Civil
National defense

._
_.

—4.2

—1.0

—4.6

1.2
1.5
—4.7

-5.7
-7.8

-2.4
-2.7

-6.3
-9.4

-7.2
-9.6

-9.9
-7.8

-3.4
-2.7

-10.9
-9.4

-9.2
-9.6

-17.7

-6.1

-20.3

-18.8

Total budget, outlays:
Civil
.
National defense

276.5
90.0

72.2
22.5

311.1
100.1

327.8
112.2

Total

366.5

94.7

411.2

440.0

Subtotal, other outlays:
Civil
National defense
Total

*Less than $50 million.

THE BUDGET FOR FISCAL YEAR 1978

Table D-2 shows civil investments and current operating outlays
as a percentage of total budget outlays. Net civil outlays are estimated
to be 73.5% of total budget outlays in 1977 and 72.4% in 1978. Investment-type outlays are projected to increase from 16.4% of total budget
outlays in 1977 to 16.6% in 1978, while current outlays drop from
61.9% in 1977 to 60.0% in 1978.
Table D-2. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS
(Percent of total budget outlays)
1974
actual

1975
actual

1976
actual

TQ
actual

1977
estimate

1978
estimate

INVESTMENT-TYPE OUTLAYS
Additions to Federal assets:

Loans
Other financial investments
Public works—sites and direct
construction
Major commodity inventories
Major equipment
Other physical assets—acquisition
and improvement

0.7
.2

1.3
.2

1.0
.2

1.3
.4

0.6
.2

0.8
.2

1.3
—.1
.1

1.3
.1
.1

\.2
.1
.1

1.3
—.1
.1

1.6
*
.1

1.5
.3
.1

2.3

3. 1

2.8

3.2

1.1

3.2

3.0
.3

2. 7
3

3.1
.3

3.4
.3

3.5
.3

3.7
.2

3.3

3. 1

3.4

3.6

3.7

3.9

Education, training, and health
Research and development
Engineering and natural resource
surveys

6.0
3.0

6.3
2.7

6.8
2.8

7.1
2.9

6.9
2.8

6.5
2.9

-1

Subtotal, developmental outlays

9.0

9.1

9.7

10.1

9.9

9.5

Total investment-type outlays. _

14.6

15.2

15.8

16.9

16.4

16.6

Subtotal, additions to Federal
assets
Additions to State, local, and private
assets:

State and local assets
Private assets
Subtotal, additions to State,
local and private assets
Developmental outlays:

CURRENT OUTLAYS
Current expenses for aids and special
services:
Agriculture
Business
Labor
Homeowners and tenants
Veterans
International aids
Welfare aids
Other aids and special services

1.2
1.5
.6
.6
5.0
.5
5.8
2. 4

.5
].2
.6
.6
5.1
.7
6.5
2.2

.3
1.2
.8
.8
5.1
.7
6.8
2.0

.4
1.0
.7
.8
4.2
.5
6.4
2.8

.5
1.2
.6
.8
4.6
.7
6.4
1.9

.5
1.1
.7
.9
4.2
.6
5.5
1.7

Subtotal, current expenses for
aids and special services

17.6

17.1

17.5

16.9

16.6

15.2

SPECIAL ANALYSIS D

Table D-2. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS
(Percent of total budget outlays)—Continued
1974
actual
CURRENT

1975
actual

1976
actual

TQ
actual

1977
estimate

1978
estimate

OUTLAYS—CON.

Retirement
and social
insurance
benefits:
Insurance benefits
Unemployment benefits
Other retirement and social insurance benefits

25.1
1.9

25.1
3.9

25.1
4.7

26.4
3.8

26.0
3.6

26.5
2.7

2.1

2.4

2.5

2.6

2.8

Subtotal, retirement and social
insurance benefits

29.1

31.3

32.3

32.8

32.2

32.0

Other services and current operating
expenses:
Repair, maintenance and operation
of physical assets
(excluding
special services)
Regulation and control
Other operation and administration.
Netinterest

.6
1.1
4.4
8.0

.4
1.2
3.8
7.2

.4
1.2
3. 6
7.3

.3
1.2
4.2
7.4

.4
1.2
4.3
7.2

.5
1.2
4.1
7.1

Subtotal, other services and
current operating expenses

14.1

12. 5

12.5

13.1

13.2

12.8

Total current outlays

60.8

61. 0

62.3

62.9

61.9

60.0

75.4
-4.7

76. 2
2 9

78.2
-4.8

79.8
-6.3

78.3
-4.9

76.6
-4.2

70.7

73.3

73.4

73.5

72.4

Total civil investments
operating outlays
Civil other
Net civil outlays

and current

"Less than .05%.
OUTLAYS OF AN INVESTMENT NATURE

Outlays of an investment nature are divided into three categories:
(1) additions to Federal assets; (2) additions to State, local, and
private assets; and (3) development outlays. Civil investment outlays
are estimated to be $73.1 billion, 16.6% of total outlays, while defense
investment outlays are estimated to be $39.8 billion, 9.0% of the 1978
total.
Additions to Federal assets.—This category comprises additions
to both financial and physical assets of the Federal Government.
Investment in Federal civil assets in 1978 is projected to be $13.9
billion, increasing by $2.6 billion, or 18.9% from such investment in
1977. Investment in defense assets in 1978 is estimated to be $27.4
billion, an increase of $5.1 billion, or 22.9%, over investment in 1977.
Financial assets are primarily direct loans; for example, loans to finance
private housing construction and encourage homeownership, to help
small businesses, and to promote economic development abroad.
Federal financial assets include both loans and other financial investments. Other financial investments include the capital provided for
certain international organizations such as the World Bank.
O - 77 - 5
240-700

THE BUDGET FOR FISCAL YEAR 1978

Civil loans and financial investments are estimated to be $4.4
billion, an increase of $1.0 billion from 1977. Civil loans are expected to increase by $0.8 billion. Special Analysis E ("Federal
Credit Programs") discusses financial investments in greater detail.
Additions to physical assets include outlays for public works, such as
dam construction, flood control projects, Federal power systems,
changes in major commodity inventories, and outlays for major equipment (including military equipment), and for the acquisition and improvements of real property and other physical assets.
Additions to civil physical assets are estimated to be $3.5 billion
in 1978, as compared to additions of $8.0 billion in 1977. Public works
investments, the largest part of this total, are estimated to be $6.7
billion in 1978 as compared to $6.6 billion in 1977.
Additions to State, local, and private assets.—Federal outlays
in this category add to State, local, and private assets. Grants that
add to the physical assets of State and local governments are primarily for the construction of highways (mainly through the highway
trust fund), mass transit, airports, waste-treatment plants, watershed
protection projects, schools in federally affected areas, and public
facilities under economic development programs for depressed regions.
Outlays that increase the value of privately owned assets are largely
for the conservation and improvement of private farmland and water
resources, for grants for construction of private, nonprofit hospitals
and other health facilities, and for construction subsidies to the merchant fleet.
Civil additions to State, local, and private assets in 1978 are estimated to be $17.2 billion, an increase of $1.8 billion more than in
1977. The major area of increased spending is in the Federal highway
trust fund and Environmental Protection Agency grants for construction of local sewage treatment plants.
Developmental outlays.—Federal outlays of this type are principally for research and development, education and health, and other
programs that improve the knowledge, technical skills, and physical
vigor of America. The Federal outlays shown in this category do not
fully reflect the Government's contribution to the productivity of the
economy. Certain other programs that further this end are classified
in accordance with their principal purpose; thus, veterans educational
benefits are listed as current expenses for veterans aid rather than as
developmental outlays. Similarly, the training of military personnel
and other Government employees is treated as an operating expense
and not as part of the Government's education and training programs.
Civil developmental outlays are projected to be $41.9 billion,
an increase of $1.1 billion from 1977. This includes increases for
the financial assistance for health care, Energy Research and Development Administration (ERDA), the Airport and airway trust fund,
and the National Aeronautics and Space Administration (NASA).
Civil developmental outlays for education, training, and health are
projected to be $28.8 billion in 1978, or 6.5% of total outlays.
Civil outlays for research and development are projected to be $12.6
billion in 1978, an increase of $1.0 billion from 1977. The bulk of
this increase is: $.5 billion for energy research, $.5 billion for
health research, and $.2 billion for NASA.

SPECIAL ANALYSIS D

OUTLAYS OF A CURRENT NATURE

Outlays of a current nature are divided into the following categories:
(1) current expenses for aids and special services; (2) retirement and
social insurance benefits; and (3) other services and current operating
expenses.
Current outlays for civil functions are estimated to be $263.9 billion
in 1978, an increase of $9.1 billion from 1977. The rate of increase
will drop from 6.9% in 1977 to 3.6% in 1978. Current outlays for
defense functions are estimated to be $82.0 billion, an increase of
$5.8 billion from 1977.
Current expenses for aids and special services.—Outlays classified under this heading provide aicls or special services to certain
groups, mainly in the year in which the outlays are made. In addition
to such items as outlays for the farm programs of the Commodity
Credit Corporation (CCC), maritime operating subsidies, veterans
pensions, and grants to foreign nations for economic and military
assistance, this category includes: (1) administrative and other
operating expenses attributable to investment-type programs that
benefit specific groups; and (2) the costs of maintaining the physical
assets related to those programs.
Only part of the Federal Government's aid to special groups is
reflected in this classification, which is limited by definition to current
expenses. For example, subsidies for the construction of private
merchant ships are classified as additions to private assets. Similarly,
outlays for which the Federal Government increases its holdings of
assets for collateral (as the acquisition of farm commodities by the
CCC) are treated as additions to Federal assets. Many indirect
Government aids are excluded from this classification because they
either are not reflected in outlays or cannot be readily measured.
Examples of such indirect benefits are loan guarantees, a subject
discussed in Special Analysis E.
Although outlays in this category essentially provide a direct
aid or special service yielding immediate benefits, some of the items
included contribute indirectly to the Nation's future development.
Among these are grants for several community development purposes.
Aids to agriculture are expected to increase slightly, reaching
$2.3 billion in 1978, an increase of $0.3 billion from 1977. Federal
aid to labor will increase $0.3 billion, reaching $3.0 billion in 1978.
Aid to homeowners and tenants is expected to be $3.9 billion in 1978,
an increase of almost $0.7 million over 1977.
Retirement
and social insurance benefits.—This category
applies only to trust funds. It covers benefit programs that are financed
from special taxes or contributions and private insurance against the
loss of income due to unemployment, retirement, disability, or death.
It does not include outlays for Government employees' health and
life insurance programs, which are in the form of premium payments
to approved companies and are included with "other services and
current operating outlays."
The growth in retirement and social insurance benefits is the result
of both a growing number of recipients. Outlays for these benefits

THE BUDGET FOR FISCAL YEAR 1978

are expected to increase 6.6% in 1978, to $141.0 billion, and will be
32.0% of total outlays in 1978. A large part of this increase, $10.0
billion, is estimated to come from the increase in social security,
railroad retirement, and medicare payments.
Other services and current operating outlays.—The outlays
reported under this heading support a wide range of activities. They
consist mainly of: pay and subsistence of military personnel; repair,
maintenance, and operation of physical assets of the national military
establishment and general-purpose public buildings; conduct of
foreign affairs; tax collection; interest on the public debt; and operation and administration of other direct Federal programs not elsewhere classified.
These outlays are expected to increase by $7.5 billion and to be
$128.4 billion in 1978. Net interest accounts for $1.3 billion and
national defense accounts for $5.4 billion of this increase. Defense
costs will rise primarily due to pay and price increases.
OTHER OUTLAYS

Certain outlay estimates cannot be classified precisely into any of
the categories described above and allowances are provided for them.
These include allowances for contingencies and for future pay increases of Government workers.
Intragovernmental receipts arise as a result of transactions between
Government agencies or funds. These transactions occur entirely
within Government accounts and are deducted from outlays to avoid
double counting. In order to provide a measure of outlays by category,
most intragovernmental receipts are allocated to a particular category
whenever possible. Government agency contributions for employee
retirement, which help to finance retirement benefits, cannot be and
are deducted a lump-sum amount.
Proprietary receipts from the public, arising from business-type
activities of the Government, are also offset against total outlays.
RELATIONSHIP TO CAPITAL BUDGET

The U.S. Government does not produce a capital budget in the
sense of a long-range program for the acquisition of assets, with
separate financing of capital outlays. Some foreign governments and
some State and local governments fund a portion of their capital
expenditures by separate borrowing. They exclude most or all such
expenditures from the computation of budget totals, except for annual
charges to amortize these capital outlays over a number of years. The
U.S. Government does not.
While this analysis does not provide a precise measure of the difference between capital and current items, it does indicate useful general
magnitudes. It does not make any allowance for depreciation and
obsolescence on existing physical assets, anticipated losses on loan
programs, or profit or loss on sales of assets at figures different from
their book value. Agencies record such allowances for transactions only
where the data will serve program and management needs, as in the

SPECIAL ANALYSIS D

case of the public enterprise funds. As a result, this analysis does not
estimate the net addition to the value of federally owned assets.
Recoverability
of outlays.—In general, Government outlays for assets are not expected to be recovered by specific revenues.
However, most loans, investment in commodity inventories, the
construction of powerplants, and outlays for range and forest improvements on public domain and national forest lands are offset in whole
or in part by receipts to the Treasury through repayments and sales,
specific charges, or recoveries. Where activities are carried on through
revolving funds, such as in the case of most loan programs, receipts
are credited directly against disbursements and only the difference is
included in the total of outlays in the budget and in this analysis. All
other receipts from the public arising from market-oriented or businesstype activities of the Government are offset against total outlays.
Whether recovered by specific receipts or not, investment and
developmental outlays for both physical and human capital add to
the wealth and income of the Nation, and by helping to expand the
tax base, augment the Government's potential future receipts. However, this analysis does not attempt to measure the degree of recoverability of developmental outlays, the potential gain in public
receipts that will be forthcoming, or the duration of fviture benefits
and their discounted present value.
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays

ADDITIONS TO FEDERAL ASSETS
Loans:

Civil:
To domestic and private borrowers:
Department of Agriculture:
Commodity Credit Corporation: Price support and related programs
Farmers Home Administration:
Rural housing insurance
Agricultural credit insurance
Other agriculture l
Department of Health, Education, and Welfare:
Office of Education:
Higher education
Student loan insurance
Other health, education, and welfare
Department of Housing and Urban Development:
Federal Housing Administration fund and
other housing programs
Government National Mortgage Association:
Special assistance functions and other
Rehabilitation loans and new communities
fund
Department of Transportation: Railroad rehabilitation and improvement financing and
other
See footnotes at end of table.

178

447

964

-13

—152
189
33

536
-165
-13

-746
-459
-26

-20
-55
1

286
128
44

65
57
23

261
150
20

159
4

900

—90

615

566

—44

—480

—748

—743

126

THE BUDGET FOR FISCAL YEAR 1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued
ADDITIONS TO FEDERAL ASSETS—Continued
Loans—Continued
Civil—Continued
To domestic and private borrowers—Continued
Veterans Administration:
Loan guaranty revolving fund
Direct loans
Other 1
Federal Home Loan Bank Board:
Federal Home Loan Bank Board revolving
fund
Federal Savings and Loan Insurance Corporation
Small Business Administration: Business loans
and investments and disaster loans
United States Railway Association: Payment
for the purchase of ConRail securities
Other agencies
Total to domestic and private borrowers
To State and local governments:
Department of Commerce: Coastal energy
impact fund and other
Department of Housing and Urban Development: Community planning and development
and housing programs
Department of Transportation: Federal Highway Administration and other
District of Columbia
Other agencies
Total to State and local governments
To foreign borrowers:
Funds appropriated to the President:
International security assistance
International development assistance
Balance of payments loan for Portugal
Department of Agriculture: Public Law 480
credit sales
Export-Import Bank of the United States
Other agencies
Total to foreign borrowers
National defense:
T o domestic and private borrowers: Department
of Defense-Military
To foreign borrowers: Funds appropraited to the
President: International security assistance
Total loans
See footnotes at end of table.

-76
-32
18

-38
-12
8

-76
-224
24

16
-54
12

26
8

-43

-1,112

-23

-18

-23

-8

-3

-4

4
2

19
5

24
3

309
17

1
7

600
60

500
46

2,102

370

—387

766

—6

—14

—51

113
156
16

46
95
15

76
216
39

—27
176
5

283

182

374

186

37
423

18
114

140
429
300

150
361
130

496
474
-8

297
262
-5

679
1,022
-10

659
1,097
-10

1,421

686

2,561

2,387

363

4,168

1.239

2,595

3,361

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Other financial investments—civil:

Investments in quasi-public institutions, trust funds
and international institutions: Funds appropriated
to the President: International financial institutions
Public works—sites and direct construction:
Civil:
Legislative branch: Architect of the Capitol and
other
Department of Agriculture:
Agricultural Research Service
Forest Service:
Forest roads and trails
Other 1
__
Department of Defense—Civil:
Corps of Engineers:
Construction, generaL
....
Flood control, Mississippi River and tributaries
Trust funds
Other 1
Department of Health, Education, and Welfare:
Indian health facilities and other health services.
National Institutes of Health biomedical research and buildings and facilities
Other 1
.
Department of the Interior:
Bureau of Reclamation:
Construction and rehabilitation
Colorado River Basin project
Upper Colorado River storage project and
other 1
National Park Service x
Bonneville Power Administration
Bureau of Indian Affairs: Construction of schools
and roads
Other
Department of State
Department of Transportation:
Coast Guard: Acquisition, construction, and
improvements
Federal Aviation Administration: Airway system investment and development (Airport
and airway trust fund) and other
Other 1
-----Energy Research and Development Administration: Plant and capital equipment
National Aeronautics and Space Administration:
Construction of facilities
__
Veterans Administration: Hospitals and other
Federal Energy Administration: Strategic petroleum reserve
Tennessee Valley Authority
Other agencies
See footnotes at end of table.

902

345

868

1,059

1
3

1
1

88
43

15
5
40

18
0
13
4

1,136

311

1,329

1,391

154
41
19

53
13
3

180
33
18

156
39
18

7
1

1
8

52
10

35
20

65
41

69
39

318
26

120
6

680
71

399
91

41
109
119

29
23
24

123
140
112

93
161
139

120
37
17

40
5
3

162
63
20

164
68
55

201
8

49
2

234
21

220
12

670

909

404
121
188

26
43

125
295

132
350

1,045
48

3
247
9

253
1,417
57

19
2
1,528
99

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description
Investment-type

1976
actual

TQ
actual

1977
estimate

1978
estimate

outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Public works—sites and direct construction—Continued

National defense:
Department of Defense—Military:
Military construction
Family housing
Energy Research and Development Administration: Plant and capital equipment

1,897
312

Major commodity inventories:
Civil:
Funds appropriated to the President: Petroleum
reserves
_
Department of Agriculture: Commodity Credit
Corporation: Agricultural commodities
Federal Energy Administration: Strategic petroleum reserve
Other agencies
___
National defense:
Other agencies
Intragovernmental transactions (—)
Total major commodity inventories

1,991
340

1,945
212

180

Total public works—sites and direct construction

349
64
45

226

316

1,695

9,108

9,216

502

—51

—5

144

6.888

.__
242

—

3
_

781
2

—1
—2

28
*

237

—24

1,429

175

117
85

44
-9

204
84

15,964

3.766

155
85
18,710

2
0

14
1

16,311

3,845

19,113

24,363

18
8

15
1

10
6

24
5

15
1

30
3

33
3

113
39

42
15

271
43

314
60

-66
16
18

-13
5
-14

133
69
27

-40
46
34

Major equipment:

Civil:
Department of Transportation: Coast Guard and
other
Energy Research and Development Administration
Other agencies__
National defense:
Department of Defense—Military: Procurement. _
Energy Research and Development Administration. _
Total major equipment.

8
7

23,786

Other physical assets—acquisition and improvement:

Civil:
Department of Agriculture: Reforestation and
other
_
Department of Housing and Urban Development:
Federal Housing Administration and other
Department of the Interior:
Land and water conservation
Other
Energy Research and Development Administration
Tennessee Valley Authority
Other agencies
See footnotes at end of table.

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Other physical assets—acquisition and improvementContinued
National defense: Energy Research and Development Administration

751

207

873

1,032

Total other physical assets—acquisition and improvement

1,314

393

1,860

1,938

29,820

7,493

33,586

41,366

253

246

243

184

220

127

128

103

168

144
791
19

157
802
20

361
44

64
15

304
39

107
37

136

140

156
69
25

43
17
7

180
81
52

200
93
47

269

308

548

6,117
29
799

1,595
13
213

5,589
124
1,151

6,721
170
1,353

2,429
170
11
60

919
52
7
9

4,430
315
26
30

5,160
179
63
26

11,392

3,189

14,335

16,346

Total additions to Federal assets

ADDITIONS TO STATE, LOCAL, AND PRIVATE
ASSETS
State and local assets:
Civil:
Funds appropriated to the President: Appalachian
regional development programs, and other
Department of Agriculture:
Rural water and waste disposal grants, and other
rural development
Watershed and flood prevention operations and
other conservation
Department of Commerce:
Economic Development Administration:
Economic development assistance programs._
Local public works program
Regional Action Planning Commissions
Department of Health, Education, and Welfare:
Health resources
Education and other
Department of Housing and Urban Development:
Housing programs
Department of the Interior:
Land and water conservation
U.S. Fish and Wildlife Service
Other
...
Department of Justice: Law enforcement assistance
Department of Transportation:
Federal Aviation Administration: Grants-in-aid
for airports (Airport and airway trust fund) _
Federal Highway Administration:
Federal-aid highways (trust fund)
Other i
Urban mass transportation
National Highway Traffic Safety Administration
Environmental Protection Agency: Construction
grants
Washington Metropolitan Area Transit Authority.
Other agencies !
National defense: Department of Defense—Military.
Total State and local assets
See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued
ADDITIONS TO STATE, LOCAL, AND PRIVATE
ASSETS—Continued
Private assets—civil:
Department of Agriculture:
Agricultural conservation program
Other stabilization and conservation
Commodity Credit Corporation: Conservation
loans
_
Conservation operations
Watershed and flood prevention operations
Other
_._
Department of Commerce: Ship construction
Department of Health, Education, and Welfare:
Health resources and other
Other agencies1
Total private assets
Total additions to State, local, and private assets

118
59

121
7

137
57

219
37

50
207
53
34
203

-50
57
23
13
42

50
221
124
42
236

-50
227
77
38
205

215
31

55
7

159
59

110
37

970

275

1,086

899

12,362

3,464

15,421

17,245

235

275

261

283

146

900
272
137
196
730
334

143
75
27
45
212
125

852
341
145
155
606
344

339
358
56
149
543
319
12,302
198

2,167
576
213
183
700
2,149
144
5
181
8,670
32
152
111
500

707
66
55
53
84
523
17
1
85
2,258
2
56
24
135

2, 239
825
271
306
665
2,801
172
*
257
10,374
20
133
128
495

336
2,433
476
273
369
637
2,336
162
223
288
132
11
160
142
518

OTHER DEVELOPMENTAL EXPENDITURES
Education, training, and health:
Civil:
Funds appropriated to the President: Appalachian
regional development programs
Department of Agriculture: Extension Service and
other
Department of Commerce: Job opportunities program and other
Department of Health, Education, and Welfare:
Health services
Indian health services
Preventive health services
Biomedical research
Alcohol, drug abuse, and mental health
Health resources and other
Financial assistance for health care
Other health services 1
Financial assistance for elementary and secondary education
Elementary and secondary education
School assistance in federally affected areas
Emergency school aid
Education for the handicapped
Occupational, vocational, and adult education._
Higher education
Library resources
Student loan insurance
Other education
Public assistance
Other social and rehabilitation service
Social Security Administration l
Howard University and other special institutions
Human development
See footnotes at end of table.

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued
OTHER DEVELOPMENTAL EXPENDITURES—Continued
Education, training, and health—Continued
Civil—Continued
Department of the Interior: Operation of Indian
programs
Department of Justice:
Federal Prison System
Law enforcement assistance
Department of Labor:
Program administration
Employment and training assistance
Community service employment for older
Americans
Temporary employment assistance
Veterans Administration: Medical care and other_
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities
National Science Foundation
Smithsonian Institution
Other agencies
National defense: Department of Health, Education,
and Welfare
Total, education, training, and health
Research and development:
Civil:
Funds appropriated to the President: Functional
development assistance
Department of Agriculture:
Agricultural Research Service 1
Cooperative State Research Service
Forest Service and other agriculture l
Department of Commerce:
National Oceanic and Atmospheric Administration
Science and technical research
Other
Department of Health, Education, and Welfare:
Health services
Preventive health services
Biomedical research and other National
Institutes of Health
Alcohol, drug abuse, and mental health
Health resources and Assistant Secretary for
Health
Education
Human development and other 1
Department of Housing and Urban Development:
Research and technology and other
Department of the Interior: Geological surveys,
mines and minerals and other *
See footnotes at end of table.

228

256

259

35
87
61
3,113

13
15

42
93

47
93

14
1,046

70
3,170

73
3,099

46
1,887
225
70

11
519
60
26

64
2,358
lib
103

91
1,000
301
107

152
61
67
68

44
5
18
50

308
46
72
93

351
51
79
145

25,045

6,742

28,579

28,785

242
105
115

58
29
24

295
132
121

301
140
129

129
49
43

39
13
10

148
55
40

154
58
42

10
35

\\
18

63
76

40
23

2,098
145

548
41

1,958
140

1,859
123

4
126
136

60
23
119

55
180
318

538
226
149

1
2

6
3

6
0

308

7
3

35
5

32
7

THE BUDGET FOR FISCAL YEAR 1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Investment-type outlays—Continued

OTHER DEVELOPMENTAL EXPENDITURES—
Continued
Research and development—Continued
Civil—Continued
Department of Transportation:
Federal Aviation Administration
Federal Highway Administration *
Other i
Energy Research and Development Administration
Environmental Protection Agency
National Aeronautics and Space Administration. _
Veterans Administration
National Science Foundation J
Other agencies *
National defense:
Department of Defense—Military:
Military personnel
Research, development, test, and evaluation. _ _
Special foreign currency program
Energy Research and Development Administration
Total research and development

106
52
171

26
33
41

109
60
162

124
65
164

1,540
229
3,551
96
623
160

543
68
928
25
194
49

2,437
290
3,582
109
654
187

2,932
256
3,770
112
728
168

413
8,923
5

105
2, 206
1

422
9,993
3

426
11,350
3

478

143

541

588

19,988

5,200

22,586

24,958

Engineering and natural resources surveys—civil:
Funds appropriated to the President: Petroleum
reserves
_.
Department of Defense—Civil: Corps of Engineers.
Department of the Interior:
Geological Survey
Other i
Other agencies!
Intragovernmental transactions (—)

98
62

210
67

115
62
51
—3

29
17
13
—1

142
71
67
—5

148
89
42
—7

Total engineering and natural resources surveys

282

434

548

Total other developmental expenditures

45,315

12,015

51,599

54,291

Total investment-type outlays

87,497

22,971

100,606

112,902

162
15
101

37
5
293

158
74
774

161
19
904

Current outlays
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES
Agriculture—civil:
Department of AgricultureDepartmental administration
Agricultural Stabilization and Conservation
Service
Federal Crop Insurance Corporation
Commodity Credit Corporation
See footnotes at end of table.

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued

CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES— Continued
Agriculture—civil—Continued

Department of Agriculture—Continued
Farmers Home Administration:
Salaries and expenses
Rural housing insurance
Agricultural credit insurance
Rural development insurance
Other
Agricultural Marketing Service
Other 1
Other agencies
Total agriculture
Business:
Civil:
Department of Commerce:
Bureau of the Census
Domestic and international business 1
Minority business development
Patent and Trademark Office
Maritime operating-differential subsidies and
other 1
Other 1
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
Department of Transportation:
Office of the Secretary
Coast Guard navigation aids and other !
Federal Aviation Administration operations and
other 1
Federal Railroad Administration:
Rail service assistance and other
Northeast Corridor improvement program
Grants to National Railroad Passenger
Corporation
Civil Aeronautics Board: Payments to air carriers..
Small Business Administration:
Business loans and investments
Disaster loans
Other
Other agencies
Intragovernmental transactions (—)
National defense: General Services Administration._
Total business

18
4
13
5
16
0
43
1
80
95
12

37
-22
6
1
2
3
17
25
6

180
305
16
4
73
3
83
112
1
3

180
417
197
105
3
82
118

966

426

1,974

2,253

49
62
53
84

I
i
1
4
1
4
20

6
1
59
54
90

7
1
52
54
90

304
75

86
23

31
9
92

372
97

338
-23

100
-7

390
-26

460
-26

1
642

2
178

745

-2
71
8

1,439

335

1,619

1,680

385

6
*

87
85

86
180

354
7
1

117
1
7

752
77

617
69

303
96
54
5
1
-19
*

28
3
9
1
1
-6
*

16
7
19
1
57
74
-20

128
98
67
76
-21

4,319

984

4,880

4,930

200

238

15
0

i
i

Labor—civil:

Department of Health, Education, and Welfare:
Work incentives
Department of the Interior: Mining enforcement and
safety x
See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ,

1978

1977

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Labor—civil—Continued
Department of Labor:
Employment and Training Administration:
Federal unemployment benefits and allowances.
Grants to States for unemployment insurance
and employment services
Unemployment trust fund
Other 1
Employment Standards Administration 1
Occupational Safety and Health Administration. _
Bureau of Labor Statistics x
Departmental management
Equal Employment Opportunity Commission
Occupational Safety and Health Review Commission. __
Railroad Retirement Board: Regional rail transportation protective account
Intragovernmental transactions (—)
Total labor
Homeowners and tenants—civil:
Department of Housing and Urban Development:
Housing programs:
Housing payments
Payments for operation of low-income housing
projects
Federal Housing Administration
Other
Government National Mortgage Association:
Special assistance functions and other
Federal Insurance Administration: National flood
insurance and national insurance development. _
Other
Federal Home Loan Bank Board
Other agencies
Total homeowners and tenants
Veterans -civil:
Department of Health, Education, and Welfare: Payments to social security trust funds
Veterans Administration:
Compensation and pensions
Readjustment benefits
Medical care
General operating expenses
Supply fund
National service life insurance
U.S. Government life insurance
Veterans special life insurance
Other 1
See footnotes at end of table.

420

981

640
54
1,612
33
132
19
2
82
58
72

12
8
1,289
34
99
16
0
56
34
59

-26
31
9
3
25
3
1
1
6
1
6

99
1,536
34
127
15
2
72
5
1
68

1
-250 _

40
-250

50
-250

2,876

644

2,666

2,962

2,264

516

2,378

3,063

178
1
7
-23

128
10
-3

507
92
-23

560
45
-13

653

238

368

432

95
-6
-340
1

2
1
-1
-106
*

11
8
-4
-299
10

205
3
-397
7

2,840

804

3,210

3,906

622

656

8,983
4,130
4,127
526
9
623
70
-54
4
1

9,030
3,358
4,319
556
10
680
74
-55
59

1
4

295
8, 178
5,527
3,493
476
75
624
76
—48
10

,088
783
899
14
1
-12
130
1
3
-6
1
3

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES— Continued
Veterans—civil—Continued
Railroad Retirement Board: Payments to railroad
retirement trust fund
Other agencies!
Intragovernmental transactions (—)
Total veterans
International aids:
Civil:
Funds appropriated to the President:
International security assistance
Indochina postwar reconstruction assistance
International development assistance:
International organizations and programs
Functional development assistance program._
International disaster assistance
Operating expenses of the Agency for International Development
Other i
Other
Department of Agriculture: Foreign assistance
programs and special export programs: Public
Law 480 donations of agricultural commodities.
ACTION^
Export-Import Bank of the United States
Other agencies i
Intragovernmental transactions (—)
National defense:
Funds appropriated to the President: International security assistance i
Department of Defense—Military:
Military
construction.
Total international aids
Welfare aids—civil:
Funds appropriated to the President: Disaster relief.
Department of Agriculture:
Commodity Credit Corporation: Price support and
related programs
Funds for strengthening markets, income, and
supply (section 32) and other marketing services.
Food stamp program
Special milk program
Child nutrition programs
Special supplemental food program (WIC)
Child nutrition reform
Other
Department of Health, Education, and Welfare:
Public assistance
Work incentives
See footnotes at end of table.

250
11
—297

3
—1

250
13
—624

250
14
—658

18,668

4,025

18,716

18,293

564
65

266
—3

1,317
11

1,281

144
408
26

85
—43
8

207
370
78

223
455
63

196
71
15

202
49
121

219
69
94

—151
23
11
13
—20

490
87
-124
54
—20

263
71
-132
38
—20

2,837

9,315

9,665

15
51
80

594
69
382
61
—20

7,614

10,124

3,328

12,233

12,370

291

300

150

143

283
5,632
89
1,802
143

63
1,325
47
346
41

38
4,754
181
2,842
276

4
4,712
18
153
47
2,000
98

8,000
107

2,139
32

8,883
127

8,944
106

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
De.cription

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Welfare aids—civil—Continued
Department of Health, Education, and Welfare— Continued
Program administration. _
_
Special assistance to refugees from Cambodia,
Vietnam, and Laos in the United States
Cuban refugee assistance.
Other social and rehabilitation service L .
_
Payments to social security trust funds
Special benefits for disabled coal miners
Supplemental security income program
Human development.
Departmental management
Department of the Interior: Operation of Indian
programs
Department of State: Special assistance to refugees
from Cambodia and Vietnam
Department of the Treasury: Payment where credit
exceeds liability for tax
Total welfare aids
Other aids and special services—civil:
Department of Commerce:
Bureau of the Census
Economic Development Administration
Regional Action Planning Commissions *
Department of Health, Education, and Welfare:
Health services
Alcohol, drug abuse, and mental health
Health resources
Office of Assistant Secretary for Health l
Social Security Administration:
Payments to social security trust funds
Federal old-age and survivors insurance trust
fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust
fund
Other.._
Human development
Departmental management
Department of Housing and Urban Development:
Community planning and development:
Comprehensive planning grants
Miscellaneous appropriations
Urban renewal programs
Departmental management and other
Department of the Interior:
Operation of Indian programs
Miscellaneous permanent appropriations and
other Indian affairs *
Other Interior
See footnotes at end of table.

38
69

18
14

10
58
*

3
973
5,003
1,032
__.

1
237
1,263
286

110
75
*
*
938
5,324
1,220
5

958
5,578
1,232
43

205

808

856

24,744

6,070

26,158

24,251

24
78
95

6
29
29

33
117
87

39
76
91

195
60
175
44

36
15
21
11

210
64
199
52

63
5
104
275

3,818

878

6,092

7,162

932
264
303

219
69
83

942
377
303

1,009
369
342

524
26
43
28

123
4
11
9

500
14
49
33

584
8
50
35

92
136
1.166
182

20
9
294
36

98
62
1,000
227

63
700
262

238

298

301

247

136
8

250
*

354
8

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Other aids and special services—civil—Continued
Department of Transportation:
Federal-aid highways (trust fund) and other highway programs
National highway traffic safety *
Urban mass transportation
Other transportation
Department of the Treasury: Taxable municipal
bond option and other
ACTION
Community Services Administration l
Federal Deposit Insurance Corporation
Legal Services Corporation
Postal Service
Other agencies >
Intragovernmental transactions (-)
Total other aids and special services
Total current expenses and aids and special
services

162
111
473
33

55
28
68
20

209
156
638
44

213
187
723
48

*
108
457
-478
85
1,720
126
-4,139

1
25
117
133
52
938
27
-928

1
110
516
-861
125
2,272
172
-6,447

46
97
443
-379
90
1,472
155
-7,543

7,333

2,626

7,949

7,448

71,870

18,906

77,787

76,413

62,140
9,222
12,267

16,876
2,555
3,314

70,979
10,929
15,030

77,015
12,294
16,099

4,671
218
17
3,448

1,275
47
—1
913

5,926
173

7,256
165

3,694

3,863

91,983

24,979

106,731

116,692

911

440

560

7,883
16,414
-7,878

1,111
3,106
-625

4,509
13,691
-3,851

1,800
11,524
-1,800

17,330

3,644

14,789

12,084

227

307

292

105

166

189

RETIREMENT AND SOCIAL INSURANCE
BENEFITS
General retirement and health insurance benefits—civil:
Department of Health, Education, and Welfare:
Federal old-age and survivors insurance trust fund.
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust
fund
Department of Labor: Unemployment trust fund
Department of the Treasury
Railroad Retirement Board
Total general retirement and health insurance
benefits
Unemployment benefits—civil:
Department of Labor:
Federal unemployment benefits and allowances
Advances to the unemployment trust fund and
other funds..
__ _.
Unemployment trust fund
Intragovsrnmental transactions ( - )
Total unemployment benefits
Other retirement and social insurance benefits:
Civil:
Department of Labor: Special benefits
Department of State: Foreign Service retirement
and disability
See footnotes at end of table.

O - 77 - 6
240-700

THE BUDGET FOR FISCAL YEAR 1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976

1977

1978

Current outlays—Continued
RETIREMENT AND SOCIAL INSURANCE
BENEFITS—Continued
Other retirement and social insurance benefits—
Continued
Civil—Continued
Department of Transportation: Coast Guard retired pay
...
Civil Service Commission:
Government payment for annuitants, employees
health benefits
_
__
Payment to Civil Service retirement and disability
Other agencies 1
_
Intragovernmental transactions (—)
National defense: Central Intelligence Agency

122

140

155

346

452

506

13,035
21
—4,809

2,265
2
—4

17,058
58
—7,479
28

18,099
29
—7,085
35

Total other retirement and social insurance
benefits

9,046

2,481

10,731

12,222

Total retirement and social insurance benefits..

118,359

31,104

132,251

140,997

445

172

186
655

297
439

OTHER SERVICES AND CURRENT OPERATING
EXPENSES
Repair, maintenance, and operation of physical assets:
Civil:
Legislative branch: Architect of the Capitol
Funds appropriated to the President: Petroleum
reserves
Department of Agriculture: Forest Service l
Department of Defense—Civil:
Corps of Engineers
Miscellaneous accounts
Department of the Interior:
Bureau cf Land Management 1
Bureau of Reclamation
U.S. Fish and Wildlife Service
National Park Service i
Bonneville Power Administration
Other
Energy Research and Development Administration * _
_ ..
Tennessee Valley Authority
Other agencies!
National defense:
Department of Defense—Military:
Operation and maintenance
Family housing
......
Energy Research and Development Administration
General Services Administration
Total repair, maintenance, and operation of
physical assets
See footnotes at end of table.

260

81
1

313
*

330
1

169
138
33
250
—183
6

50
35
10
78
—62
2

228
171
49
300
— 148
11

227
185
53
313
— 102
11

191
-170
117

-40
-50
33

142
-427
157

278
-247
175

27,831
S27

7,244
228

31,055
1,049

33,457
1,260

69
*

92
*

112

30,029

7,814

33,892

36,846

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
al

1978
stimate

1977

Current outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Regulation and control—civil:

The Judiciary l
Department of Agriculture: Animal and Plant Health
Inspection Service and other 1
Department of Defense—Civil: Corps of Engineers.Department of Health, Education, and Welfare:
Food and Drug Administration and other
Department of Justice:
General administration
Legal activities
Federal Bureau of Investigation
Immigration and Naturalization Service
Drug Enforcement Administration
Federal prison system l
Law Enforcement Assistance Administration
Department of Labor: Labor-Management Services
Administration
Department of Transportation:
Coast Guard
Federal Aviation Administration
Other
Department of the Treasury:
Bureau of Alcohol, Tobacco and Firearms
Customs Service 1
Internal Revenue Service
Secret Service
Other 1
Environmental Protection Agency:
Abatement and control
Enforcement and other 1
Federal Communications Commission
Federal Trade Commission
Interstate Commerce Commission
National Labor Relations Board
Nuclear Regulatory Commission
Securities and Exchange Commission
Other agencies 1
Total regulation and control

Other operation and administration:
Civil:
International activities:
Department of State:
Administration of foreign affairs 1
International organizations and conferences 1.
Educational exchange l
Other
Board for International Broadcasting
United States Information Agency 1
Other agencies J
Intragovernmental transactions (—)
Total international activities
See footnotes at end of table.

325

398

440

31
9
3
5

10
0
9

46
4
4
7

454
5
4

16
9

24
1

27
4

2
1
25
4
48
6
21
0
14
4
11
7
78
2

5
6
5
10
3
5
9
4
1
4
5
14
5

2
3
24
8
54
1
21
4
11
7
27
0
61
8

2
5
29
9
58
2
22
5
19
7
20
2
66
4

3
7

4
6

5
1

12
0
94
2
3

3
0
2
2
6

19
2
12
0
2
8

15
3
15
0
3
1

13
0
8
2
5
1
12
0
1
4

11
24
1
2
2
9
-20

12
2
9
0
6
2
17
1
1
2

15
3
97
58
12
2
1
2

20
7
3
9
5
1
44
5
2
6
8
10
8
5
1
18
4

7
7
9
1
2
1
1
1
3
1
6
4
6
1
2
4
9

4,435

1,127

35
7
4
3
5
5
54
6
1
8
2
26
3
58
14
8
5,081

30
7
5
8
5
8
58
63
88
21
7
58
12
7
5,286

56
7
39
8
6
7
3
5
5
25
6
1
2
-1
1,368

61
1
38
7
7
7
5
59
277
1
3
-1
1,420

39
7
24
9
6
5
2
5
9
25
5
1
0
-18

80
17
7
2
1

1,065

34
7

2
1
7
2
2
_*

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Other operation and administration—Continued
Civil—Continued
Federal financial activities:
Legislative branch: General Accounting Office
and other
Department of Health, Education, and Welfare:
Supplemental security income program
Department of the Treasury:
Bureau of Government Financial Operations _
Customs Service
Bureau of the Public Debt
Internal Revenue Service
Other
Other agencies
Total Federalfinancialactivities
Other direct Federal programs:
Legislative branch l
Executive Office of the President
Department of Commerce: National Oceanic and
Atmospheric Administration and other 1
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
Department of Health, Education, and Welfare:
General departmental management
Department of the Interior: Surveys, investigations and research and other 1
Department of the Treasury: Bureau of Government Financial Operations and other *
Environmental Protection Agency
General Services Administration l
Civil Service Commission:
Salaries and expenses and other *
Employees life insurance fund (trust revolving
fund)
.....
Federal Energy Administration
l
Other agencies
Intragovernmental transactions (—)
Total other direct Federal programs
Shared revenues and grants-in-aid:
Department of Agriculture: Forest Service
Department of Housing and Urban Development : Community development grants
Department of the Interior: Land management,
territorial affairs, and other
Department of the Treasury:
Office of Revenue Sharing 1
Customs Service
Internal Revenue Service
District of Columbia
See footnotes at end of table.

140

3
5

11
7
7

17
7
5
9

131
261
97
1,631
71
8

3
3
6
5
26
32
7
1
6
2

15
5
22
8
11
2
1,739
77
-2

17
7
31
0
15
7
1,826
7
6
1

2,342

545

2,549

2,792

574
70

173
16

717
76

777
70

333

7
9

36
8

38
8

100
55

26
14

118
66

133
71

10
0

136

18
4

10
5

170
136
85

52
31
75

303
147
303

228
152
329

1
6

9
9

-402
102
58
—6

-444
174
68
-4

-425
131
85
-5

1,582

-29
19
23
_*
_
56
5

2,186

2,252

10
1

11
9

983

49
3

2,262

3,112

289

16
7

39
4

45
6

6,243
187
139
226

1,588
39
29
89

8,026
200
120
280

6,814
204
122
290

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Other operation and administration—Continued
Civil—Continued
Shared resources a-d grants-in-aid—Continued
Tennessee Valley Authority
Other agencies
Total shared revenues and grants-in-aid
Total other operation and administration—
civil
National defense:
Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Family housing
Civil defense
Revolving and management funds
Trustfunds
General Services Administration: Preparedness
activities
Other agencies l
Intragovernmental transactions (—)

48
55

20
9

68
64

81
82

8,259

2,497

11,418

11,360

13,248

3,973

17,522

17,823

24,650
7,296
70
53
71
— 240
-11

6.253
1,947
17
5
16
— 306
-2

25,790
8,234
91
53
69
335
-16

25,579
9,035
82
46
86
6
4

15
44
—7

4
5
—3

17
27
—7

235
23
—7

Total other operation and administration,
national defense

31,942

7,936

34,593

35,089

Total other operation and administration

45,190

11,909

52,115

52,913

37,063

8,102

42,000

44,600

295
7
*

102
2
*

280
8

300
8

302

104

288

308

—1,431
-7,800

—411
-270

—1,787
-8,201

—1,912
- 8 , 659

—909
-437

—354
-195

—2,054
-460

—2, 772
-489

26,789

6,975

29,785

31,076

106,442

27,825

120,873

126,120

Interest:
On the public debt
Other interest:
On refunds: Department of the Treasury
On uninvested funds: Department of the Treasury _
Intragovernmental transactions (—)
Total other interest
Intragovernmental transactions [—]:
Interest on Government capital in enterprises [—]_
Interest received by trust funds [ - ]
Receipts from off-budget Federal agencies: Interest
on Government capital in enterprises [—]
Proprietary receipts from the public [ - ]
Total net interest
Total other services and current operating expenses
See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR

1978

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1976
actual

TQ
actual

1977
estimate

1978
estimate

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued

National defense allowances:
Department of Defense—Military: Allowances:
Civilian and military pay raises

2,257

Other legislation

Total national defense allowances
Total current outlays
OTHER

Allowances for:
Civilian agency pay raises
Contingencies
Employer share, employee retirement:
Interfund transactions ( - )
Receipts from off-budget Federal agencies ( - )
Proprietary receipts from the public (—):
Civil
National defense
Total budget outlays
*Less than $0.5 million.
Includes both Federal funds and trust funds.

__
296,671

77,836

2,315
330,911

_.„
-3,233
-1,009

-890
-95

345,845

1,151
1,500

-3,407
-1,185

-3,557
-1,113

-5,675
-7,786

-2,367
-2,709

-6,275
-9,407

-7,189
-9,571

366,466

94,746

411,243

439,967

SPECIAL ANALYSIS E
FEDERAL CREDIT PROGRAMS

Federal credit programs play a significant role in allocating our
Nation's economic resources. These programs have one principal
objective: To encourage certain types of economic activity by providing individuals, businesses and government bodies with credit at more
favorable terms than would otherwise be available in the private
market. Frequently, this credit assistance is designed to counteract
rationing in private credit markets and to provide loans at longer
maturities and higher loan-to-value ratios, but most often its purpose
is to reallocate resources by offering a lending rate that is lower than
the rate available on comparable private loans.
Federal credit assistance is provided to borrowers in a number of
ways. Federal Government agencies make direct loans and also guarantee or insure the payment of principal and interest on loans supplied by
private lenders. Direct loans are also made by Government-sponsored,
privately owned credit enterprises that are regulated by the Federal
Government. Because of the complex institutional arrangements that
have evolved, several of these forms of credit assistance are frequently
combined in a single program; and sometimes a single transaction is
aided by two or more programs.
When a credit program is directly aimed at lowering interest rates
to specific borrowers, the interest subsidy may be explicit, as in the
case of direct loans where legislation provides for interest rates that
are less than market rates; or it may be implicit, as in the case of
guaranteed loans where the Government assumes the lender's risk.
Moreover, the interest rate on guaranteed loans is sometimes further
reduced by explicit interest rate subsidies. Also, Government assistance in the development of secondary markets can achieve lower
interest rates by providing greater liquidity. For example, Government guarantees of some residential mortgages and the direct and
indirect lines or credit to federally sponsored enterprises such as the
Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation have contributed to the creation of a
well-organized secondary market for residential mortgages. Another
implicit interest rate subsidy results from the tax exemption of interest
on securities issued by State and local governments.1
This analysis is intended to be a basic factual resource rather than
an evaluation of programs and policies. The chapter highlights major
trends in the credit activity of the Federal Government and its
sponsored agencies over the last 10 years, and presents the details of
direct loans and loan guarantees by major program category from
1976 to 1978. Because interest rate subsidies are an important element
in Federal credit assistance, a special section is devoted to measuring
1
The credit subsidy effects of the tax-exempt status of State and local borrowing is not considered
in this analysis. However, see Special Analysis F: Tax Expenditures, p. 136.

THE BUDGET FOR FISCAL YEAR 1978

the value of the support provided by the expected volume of direct
loans and guarantees in 1978 for each major program. The chapter
concludes with a summary of proposed and recently enacted legislation that will affect the future course of Federal credit activities.
Questions of great analytical difficulty remain unanswered about the
impact and the distribution of the benefits and costs of credit assistance. It is not possible to determine the degree to which federally
assisted credit substitutes for private credit transactions that would
have taken place without Government assistance or the extent to
which Government credit support for some borrowers may reduce the
amount of credit available to the unassisted sectors of the economy.
In addition, to the extent that credit is reallocated by these programs,
it is not at all clear what effect this allocation has on important aggregate economic variables such as employment, production, and
economic growth.
The limited space in this analysis requires that the information on
budget accounts and programs be consolidated into agency and major
functional totals. Additional detail is available elsewhere. The Treasury
Bulletin provides data on outstanding direct and guaranteed loans in
the most recently completed year or quarter for both accounts and
X^rograms within accounts.2
TRENDS AND DIRECTIONS

The total amount of credit provided under Federal auspices has
risen rapidly during the past decade, due to both the expansion of
existing programs and the initiation of new ones. Table E - l summarizes data on Federal participation in domestic credit markets over
the last decade.
The amount of credit advanced under Federal auspices (direct and
guaranteed loans) has increased each year from 1967 to the
present. However, with the exception of 1967, 1970, and 1976 Federal
and federally assisted advances have been within the narrow range of
13 to 16% of all funds advanced in U.S. credit markets. In 1975, the
Federal participation rate increased to 14.7% as a result of reduced
private credit demands and expanded Federal mortgage credit programs that were intended to increase housing production. As a result
of the steady decline in interest rates and increases in the flow of
funds to depository institutions, the components of Federal participation caused by mortgage credit programs have decreased, and the
proportion of credit advanced under Federal auspices has fallen to
11.1% of all credit.
Changes in credit activities aimed at housing have had similar
impacts in the past: The relatively low proportion of funds advanced
under Federal auspices in 1967 was due largely to a repayment of
funds advanced by the Federal home loan banks to savings and loan
associations the previous year in support of the mortgage market.
Similarly, the dramatic increase in the Federal participation during
1970 reflected greater support of the mortgage market by the Federal
home loan banks and the Federal National Mortgage Association.
Federal support of mortgage credit also increased in 1973 and 1974
2 See table GA 11-2. Treasury Bulletin.

Table E - 1 . FEDERAL PARTICIPATION IN DOMESTIC CREDIT MARKETS (dollars in billions)
Actual
1967

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

1968

1969

1970

60.8
5.8

97.0
14.9

96.7
15.0

93.6
17.4

5.3

8.0

4.5
2.3
10.6
18.6
93.6
16.4
3.8
2.3
10.3
17.5

2.1
-1.9
9.5

5.6
1.3
15.4

2.9
_.__
7.8
4.3
15.5

60.8
1.1
2.8
2.1
-3.8
1.8

97.0
31.3
23.1
5.6
2.6
32.3

96.7
11.3
-1.0
7.8
4.5
11.7

1
Nonfinancial sectors. Source: Federal Reserve Board Flow of Funds Accounts.
3 Estimates from table E-10.
3
Not estimated.

1971

Estimates

1972

1973

1974

1975

1976

1977

124.4
16.5

161.5
22.8

202.1
26.7

191.4
26.6

183.3
26.9

239.4
26.6

60.7
6.5

(3)
35.6

(3)
45.5

3.0

.3
.7
14.0
11.6
13.2

2.2
2.2
6.2
16.3
13.9

4.3
8.5
5.7
8.5
14.7

4.2
6.7

1.1
2.6
-.1
2.9

2.0
10.1
11.2
12.3

2.8
7.2

12.2
1.3
13.3

2.7
.2
15.6
4.3
14.1

124.4
32.3
19.4
12.2
.6
26.0

161.5
39.7
19.4
15.6
4.7
24.6

202.1
46.4
19.3
14.0
13.2
23.0

191.4
24.1
3.0
6.2
14.8
12.6

183.3
64.7
50.9
5.7
8.2
35.3

10.3

5.4
11.1

60.7
19.1

82.9
10.3
4.3

18.0

83.8
62.0
11.2

\.2
31.5

10.6

21.2
14.3

10.7

239.4
97.5

1978

40.7

(3)

84.6
55.5
21.2
12.9

THE BUDGET FOR FISCAL YEAR 1978

but was not readily apparent in the Federal participation rate because
of the sizable increase in all lending that occurred during those 2 years.
The Federal participation rate for borrowing has been higher and
more variable than that for lending, fluctuating in a range of 2 to
41% of funds raised in U.S. credit markets. The difference between
the Federal proportion of borrowing and lending is primarily due to
the surplus or deficit in the Federal budget. The budget deficits in
1975 and 1976 increased Federal borrowing significantly as taxes
were cut and expenditures increased in order to stimulate the economy. The 1977 deficit, which is now expected to be $57. 2 billion,
will result in continued high Federal credit demands.
The Federal Financing Bank (FFB), which began operating in
May 1974, continues to be the most significant recent development in
the organization of Federal credit. The bank, an entity within the U.S.
Treasury, was created to provide more efficient financing for obligations issued, sold, or guaranteed by Federal agencies, thereby reducing
costs to the Government and the assisted borrowers. The Treasury
may require Federal agencies authorized to borrow from the public
to borrow from the FFB instead. Similarly, agency sales of loan assets
may be directed to the FFB. The FFB is also authorized to purchase
the securities and loans of private borrowers and Government corporations when Federal agencies provide a guarantee. The FFB's authority
to borrow from the Treasury at the Treasury's own borrowing rate
enables it to charge lower interest rates than would be available
to the borrowing agency if that agency were to borrow directly
in private capital markets. Although this support involves no direct
cost to the Government, the assisted borrowers receive substantial
implicit subsidies in the form of lower interest rates. Because the
FFB is outside the budget by law, loans bought by the FFB are not
counted as budget outlays. Transactions of the FFB are summarized
in table E-2. As the table indicates, the FFB now holds a large volume
of debt incurred by private individuals, federally sponsored enterprises, and Federal agencies.
The credit component of the budget is not a useful indicator of
Federal credit activities because a relatively small share of Federal
credit assistance is in the form of on-budget direct loans. A large
portion of Federal credit assistance is not included in the budget
because of the utilization of loan guarantee programs instead of
direct loan programs; sales of loan assets from Federal agency portfolios to the public or the FFB; the creation of enterprises that are
Government sponsored but privately owned; and the legislated
removal of some Government programs and agencies from the budget.
[Recently, both the Congress and the Administration have expressed concern that Federal credit programs are not subject to the
degree of control and evaluation consistent with their importance as
a Federal policy tool for reallocating resources. While most direct
Federal outlays are subject to periodic review in both the executive
branch and the congressional budget process, several direct lending
programs and all loan guarantees are not included in the budget. As a
result, the budget understates the extent to which the Government is
involved in redirecting the resources of the Nation.
The different treatment of budget outlays and most credit assistance
creates a number of problems in developing policies of effective resource use to meet national objectives.

Table E-2a. FFB ACQUISITIONS OF AGENCY OBLIGATIONS (in millions
Agency or prof (ram

Guaranteed loans:
Purchased from direct loan portfolios:
USDA: Farmers Home Administration—CBO's _
USDA: REA-CBO's
HEW: Medical facilities and HMO loans
Treasury: NYC seasonal financing issues
SBA: Development company loans
Guaranteed FFB originations:
Intn'l Security Assist, loans (via DOD)
USDA: REA
HEW: Guarantees of SLMA obligations
DOT:
Amtrak guarantees
Other rail loans
WMATA guarantees
EPA: Water treatment bonds
GSA: Public building CBI's
SBA: SBIC debentures
Other loans and adjustments

N e w acquisitions

New commitments
1976

1977

1978

3,800

166
57

850
187
7

6,234

1,260

1,075

2,050

173

48
92

1976
actual

4,599

500
127
955

150

88
190
175

800
750
118

1,000

100
6

651
50

249
62

24
24
13

7
20
-70

75
48
331

200
64

Total, all guaranteed loans.

13,130

2,635

Agency debt issues:
U.S. Postal Service
Tennessee Valley Authority, _
Export-Import Bank
U.S. Railway Association

2,000
3,145
2,285
636

Total, all FFB holdings

1977

3,800

166
57

850
187
7

6,234

1,260

1,075

2,050

179

2,500
3,698
415

Total debt issues.

of dollars)

1,000
400
145

48
92

1978

4,599

500
127
950

150

1,411 484
212
693
5
160

1,425
1,053
85

1,695
576
110

227

36
6

204
50

301
62

7
20
-30

75
48
-151

200
64

-137

24
24
875

-920

11,397

8,164

8,876

2,859

11,363

8,264

500
1,370
120

1,133
5,290
3,234

895
5,440
3,035

2,000
3,145
2,285

636

500
1,370
120
11

1,133 895
5,290
5,440
3,234
3,035
301
*

8,066

2,002

9,958

9,370

8,066

2,002

9,958

9,370

21,196

4,637

21,355

17,534

16,943

4,061

21,322

17,635

301

Table E-2b. FFB ACQUISITIONS OF AGENCY OBLIGATIONS (in millions of dollars)
Net change
Agency or program

Guaranteed loans:
Purchased from direct loan portfolios:
USDA:
Farmers Home Administration—Certificates
REA—Certificates
HEW: Medical facilities and HMO loans
Treasury: NYC seasonal financing issues
SBA: Development company loans
Guaranteed FFB originations:
International Security Assistance loans (via DOD) _
USDA:REA
HEW: Guarantees of SLMA obligations
DOT:
Amtrak guarantees
Other rail loans
WMATA guarantees
EPA: Water treatment bonds
...
GSA: Public building certificates
SBA: SBIC debentures
_.
Other loans and adjustments *
_

1976
actual

3,800
166
57

TQ
ictual

Outstanding

1977
estimate

1978
estimate

1976
actual

TQ
actual

6,234
48
72
-125
120

4,599
500
100
-950
-30

8,800
166
119

117

850
W
7
,075
-4

787
693
160

208
212
5

870
990
85

250

35
6

24
71
6

6
20
16

Total, all guaranteed loans.

6,131

Agency debt issues:
U.S. Postal Service
Tennessee Valley Authority. _
Export-Import Bank
U.S. Railway Association

1977
estimate

1978
estimate

164

9,650
354
126
1,075
160

15,884
402
198
950
280

"""250

850
528
110

889
948
400

1,106
1,160
405

1,976
2,150
490

2,826
2,678
600

17
50

240
62

568
.......

602
6
177

75
48

200
64

255

859
118
177
lib
187
91
26

2,623

1,248
745
936
51

Total debt issues.
Total, all FFB holdings.

20,483
902
298

-279

69
71
33

75
91
50

619
56
177
75
123
91
305

8,739

5,994

12,414

15,036

23,776

29,770

500
555
-216
11

133
1,100
1,884
298

895
1,450
1,623

2,748
2,180
4,985
85

3,248
2,735
4,768
97

3,381
3,835
6,652
395

4,276
5,285
8,276
395

2,980

853

3,415

3,968

9,998

10,848

14,263

18,231

9,111

3,476

12,154

9,963

22,411

25,885

38,039

48,002

1
Applies to both guaranteed originations and purchases from agency portfolios; reflects adjustments for variations in accounting treatment, timing of transaction recording,
and some differences between agency budget plans and those of FFB.

SPECIAL ANALYSIS E

First, although some new lending of off-budget Federal entities,
such as that of the Rural electrification and telephone revolving fund,
is subject to normal Presidential review, the level of credit assistance
in many programs is not subject to the usual budget process. As a
result, important policy issues such as the distribution of credit between private and public sectors and the coordination of credit policy
with macroeconomic policy instruments are not subject to the same
intense scrutiny applied to issues arising from programs that are in the
budget.
Second, because credit programs are often not included in the
budget and thereby do not immediately affect the budget, there is
the temptation to choose credit assistance over a budget outlay or a
loan guarantee over an on-budget direct loan because they appear
to be an almost costless approach in terms of budget outlays. As a
result, there may be greater reliance upon credit programs than is
desirable.
And third, there has not been sufficient analysis of which type of
credit assistance—direct loans, guarantees, and/or interest rate subsidies—is best suited to attaining specific credit objectives. This problem is further complicated by the increased purchases by the FFB of
guaranteed loans and securities, a process that converts guaranteed
loans into direct loans from the Federal Government but leaves them
outside the budget. These issues of credit control are now being
studied by Congress and the administration, and are proving difficult
to resolve.
An important first step in gaining control over federally assisted
lending is embodied in the administration's proposal to include within
the budget the outlays of the off-budget Federal entities, which are
now excluded from budget totals by provisions of law. Several of
these entities carry out direct loan programs; Rural Electrification
Administration, Rural Telephone Bank, HUD housing programs for
the elderly, United States Railway Association, and Federal Financing Bank. However, the problem of devising improved control
mechanisms for guarantees remains unresolved and deserves further
attention.]
DIRECT LOANS

Direct loans are made by both on- and off-budget Federal agencies,
and are financed by Treasury or agency borrowing, loan repayments,
and other fiscal resources such as taxes. The major Federal programs
that provide direct loans are identified in tables E-3 and E-4.
Table E-3 reports loan commitments and gross disbursements for
1976-78. Commitments to make direct loans tend to forecast future
financial flows because commitments are often made in advance of the
time when funds are actually disbursed. An apparent anomaly occurs
in the relationship between commitments and disbursements for a
few programs such as low-rent public housing and urban renewal
notes. Disbursements are higher than commitments because they
include short-term interim construction financing notes which are
"rolled over" several times, while commitments are counted only once.
Table E-4 shows net outlays of direct loan programs and outstanding loan levels for 1976-78. Net loan outlays of on-budget Federal
agencies are counted in budget outlays, and thus are reflected in the
budget surplus or deficit. However, in recent years legislation has been
enacted which places a number of direct-lending agencies or programs

Table E-3. DIRECT LOAN COMMITMENTS AND GROSS DISBURSEMENTS (in millions of dollars)
New commitments
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance
Other international
Agriculture: Farmers Home Administration
Commodity Credit Corporation
Public Law 480 long-term export credit
Commerce: Economic Development Administration
Coastal energy impact fund
Health, Education, and Welfare: Health programs
Claims on insured student loans
Other education programs
Housing and Urban Development:
Low-rent public housing—interim financing
Federal Housing Administration—insurance claims
Government National Mortgage Association:
FHA/VA tandem plan..
Conventional tandem plan
Other
Community Development Loans
Othercredit
Interior
_.
._
Justice: LEAA loans
Transportation
_

1976
actual

TQ
actual

780
460
4,594
1,754
615
53

New loans
1978
estimate

1976
actual

1,145
464
130
5,086
2,968
768
42
86
286
29

5,302
1,754
615
30

60
117
2
1,476
675
318
9

70
1
-10

1,199
567
300
5,266
3,218
772
52
66
121
2
2

112
140
290

44
20

293
144

68
139

3,112
2,000

176

34
26
21
43
1

*
6
9
21
24

__
18
38
41
105

2,422
83
192
54
46
75

484
555

TQ
actual

68
60

..__

1,420
675
318
20

98
1
320

__._

684
96

1977
estimate

1978
estimate

35
62
66

246
449
324
6,884
3,218
772
47
51
127
162
266

225
378
160
6,597
2,968
768
57
82
134
183
-4

278
1,073

50
70

600
1,014

600
1,186

3,556
4,040
*
422
38
24
39
113

594
584

600
500

1,760

138
26
9
17
46

258
211
56
46
132

200
185
38
41
119

Treasury:
New York City seasonal
Liquidating programs
GSA: Property disposal credit sales
Veterans Administration:
Housing loans and guarantee claims
Insurance policy loans
District of Columbia
Export-Import Bank2
Federal Deposit Insurance Corporation3
Federal Home Loan Bank Board
Small Business Administration:
Business and investment loans
Disaster loans .
.
_
United States Railway Association4
Other agencies and programs

financing

1,260

1,075

2,050

950

1,075

2,050

950

448

414
118
142
3,200

447
118
176
4,175

399
132
156
2,206

102
35
95
528

418
118
216
2,256

451
118
176
2,521

338

328

234
177
309
11

55
110

285
150
500
34

474
191
309
12

118
46

370
140
600
22

552
187
600
23

469
124
500
9

20,654

5,413

21,957

18,254

24,335

6,366

22,412

21,000

1,000
180
*
375
13,130

250
27

1,000
190
750

11
2,859

975
120
274
298
11,363

1,000
130
750

8,164
3,000

816
113
*
375
8,876

208
18

11
2,635

1,000
180
1,496
298
11,398
--

Total off-budget agencies

14,685

2,923

14,372

13,104

10,181

3,097

13,030

10,794

Grandtotal

35,339

8,335

36,329

31,358

34,516

9,463

35,442

31,794

Total budget agencies

393
132
266
3,492

1,260

101
35

OFF-BUDGET DIRECT LOANS
Rural electrification and telephone revolving fund
Rural Telephone Bank
HUD: Housing for the elderly or handicapped«
United States Railway Association
Federal Financing Bank
Energy Independence Authority

8,264
650

* Less than $0.5 million.
1
New loans in this year's analysis are denned to include actual disbursements for primary loans, disbursements for guarantee claims, and extension of sales credits.
In2 previous analyses these were included net of writeoffs, foregivness credits and ther accounting adjustments.
Returned to on-budget status by statute effective Oct. 1, 1976, with outstanding loans of $11,247 million.
3
Represents a special loan to the new owners of the Franklin National Bank. Note: loan assets acquired from banks in liquidation have not been reported for the credit
analysis.
* Includes both debentures and repayable preferred stock of ConRail.
5
Transferred off-budget effective Aug. 31, 1974, with outstanding loan balance of $519 million.

Table E-4. NET DIRECT LOAN OUTLAYS AND LOANS OUTSTANDING (in millions of dollars)
Net loan outlays

Agency or program

1976

Funds appropriated to the President:
International security assistance
International Development Assistance
Other international
Agriculture: Farmers Home Administration
Commodity Credit Corporation
Public Law 480 long term export credit
Commerce: Economic Development Administration
Coastal energy impact fund
Health, Education, and Welfare: Health programs
Claims on insured student loans
Other education programs
Housing and Urban Development:
Low-rent public housing—interim financing
Federal Housing Administration—insurance claims
Government National Mortgage Association:
FHA/VA tandem plan
Conventional tandem plan
Other
Community development loans
Other credit
Interior
Justice: LEAA loans
Transportation

1977

71
178
496
2

-42
65
2
357
447
297
1

53
128
276

34
57
64

-1
16
9
324
-1,231
964
679
29
5
1
3
1
11
3
250

12
920

1
6
-86

606

-806
995
-233
50
-48
18
10
113

369
-818
-31
4
1
7
7
1
4
46

-613
-35
-100
1
2
15
1
48
6
13
2

276
348

Outstanding
1978

1976

TQ i

1977

1978

2,545
11,547
486
945
2,838
6,085
560
12
3
61
1
760
3,681

1,893
1,440
4,449
493

2,568
11,245
2
2,250
1,887
4,746
493

542
408
3,378

576
465
3,442

2,567
11,441
326
1,020
2,851
5,425
522
5
1
607
615
3,693

566

42
3,248

58
3,162

58
3,768

58
4,334

-219
-431
-94
-50
64
30
-5
59

1,337
1,417
2,687
31
5
3,692
285
150
300

1,706
599
2,657
392
3,699
292
14
6
345

1,093
564
2,556
404
3,815
340
11
7
468

874
13
3
2,463
354
4,204
370
16
6
527

-22
16
0
10
6
-75
-13
659
38
8
1
3
15
4
-12

2,610
11,181

Treasury:
New York City seasonal financing
Liquidating programs
GSA. Property disposal credit sales
Veterans' Administration:
Housing loans and guarantee claims x__
Insurance policy loans
District of Columbia
Export-Import Bank 2
Federal Deposit Insurance Corporation 3_
Federal Home Loan Bank Board.
Small Business Administration:
Business and investment loans
Disaster loans
United States Railway Association 4
Other agencies and programs
Total budget agencies -

-138
-13

-29
—4

-117
-12

-120
-12

4,126
61

4,096
57

3,980
45

3,860
33

-108
13
104
945

-50

-301

269

-66

-1,120

-26

1,681
1,142
1,117
10,830
100
1,638

1,631
1,149

141
1,022

-38
13
138

1,331

7
80
262

1,293
1,172
1,476
13,212
100
426

-38
34
309
-20

39
3

211
-15
600

260
-21
500
-19

1,680
1,392

1,081

2,003

2,764

64,233

65,314

67,317

409
109
-5
52

-38
17
-1
11

184
125
743

8,256
383
509
85

6,131

2,623

643
116
267
298
8,739

12,413

8,218
399
507
97
15,036

8,861
9,045
516
640
774 1,518
394
394
23,776 29,770
150

6,696

2,612 10,063

7,197 21,646

24,528

34,321

41,518

3,693

9,961 85,879

89,572

101,638

111,599

4,215

-7

1,097

309
255

1,197
11,093
100

1,572
1,718
1,395
309
248

1,159
1,338
12,115
100

452
1,930
1,380

909
243

2,190
1,359
1,409
224
70,081

OFF-BUDGET DIRECT LOANS
Rural electrification and telephone revolving fund
Rural Telephone Bank
HUD: Housing for the elderly or handicapped 5
United States Railway Association
Federal Financing Bank
Energy Indepencence Authority
Total off-budget agencies .
Grand total _

10,911

12,066

5,994
150

1
Claims paid under insurance and guarantee programs become classified as direct loans until acquired loans or collateral are paid off or liquidated. Proceeds of liquidaacq
tions 2 are classified as repayments and realized losses then become writeoffs.
iified
Returned to on-budget status by statute effective Oct. 1, 1976, with outstanding loans of $11,
ed
$11,247 million.
3
Represents a special loan to the new owners of the Franklin National Bank. Note: loan ass<
;nts
assets acquired from banks in liquidation have not been reported for the
credit analysis.
4
Includes both debentures and repayable preferred stock of ConR-il.
5
Transferred off-budget effective Aug. 31, 1974, with outstanding loan balance of $519 million

THE BUDGET FOR FISCAL YEAR

1978

outside of the budget. Because their economic effects are identical to
those of direct loan programs included in the budget, they are also
presented in tables E-3 and E-4 with a separate heading.
Repayments of outstanding loans are not classified as budget receipts, but are offset against new loan disbursements in the case of
loan revolving accounts, and against general outlays in the case of
nonrevolving accounts. For this reason, net outlays for loan programs
on table E-4 are net of repayments and therefore understate the level
of new lending. New loans, which are shown in table E-3, provide a
more comprehensive measure of program activity.3
The high direct lending in 1976 was part of the Federal effort
to promote economic recovery. A large portion of the total was focused
on housing, with the Farmers Home Administration, Department of
Housing and Urban Development, and Veterans Administration
housing programs making up 43% of all direct lending in 1976.
The continuing rapid recovery in residential construction will permit
a reduction in direct lending under housing programs in 1977 and
1978.
The net loan outlays presented in table E-4 are the difference
between the volume of loans outstanding at the beginning of the year
and the outstanding volume at the end of the year. This year-to-year
net change in loan outlays is equal to the total of gross loan disbursements during the year (new loan disbursements, disbursements
for guarantee claims and purchases of existing loans) less repayments
and prepayments of loans, proceeds of collateral liquidation and sales
of loan assets to the public, the FFB, and federally sponsored
enterprises.
Loan asset sales by agencies occur for two major reasons. First,
the agency selling the loan may have been established specifically
to perform a brokerage and servicing role rather than that of a
financial intermediary. In such cases, the agency originates loans and
temporarily holds them for later sale to permanent investors. The
operations of the Farmers Home Administration are typical of this
process in terms of budget definitions. However, there are strong
elements of intermediation involved in that the loan assets sold are
really certificates of beneficial ownership in a pool of mortgages.
Second, the selling agenc}^ may have been established to perform an
intermediation function for countercyclical purposes, buying and
holding loans during periods of restrictive financial conditions and
selling them to the public or a federally sponsored enterprise when
credit conditions are more favorable. The mortgage lending of the
GNMA conforms to this pattern.
Table E-5 provides the repayment totals and identifies the major
loan asset sales. Note that 75% of the loan asset sales are by the
FmHA and the GNMA.
3
Some guaranteed loans are ultimately supported by direct loans as a result of claims paid under
guarantee programs when the Government receives either the original loan or the collateral.

SPECIAL ANALYSIS E

Table E-5. DIRECT LOAN ASSET SALES AND REPAYMENTS
(In millions of dollars)
1976
actual

Loan sales:
Agriculture, Farmers Home Administration:
Agricultural credit insurance fund
Rural housing insurance fund
Rural development insurance fund
Health, Education, and Welfare:
Health maintenance organization loans
Medical facilities loans
Housing and Urban Development:
FHAfund
Treasury: New York City seasonal financing loan_ _
Veterans Administration:
Direct loan revolving fund
Loan guaranty revolving fund
Small Business Administration
Subtotal, budget agency loan sales excluding
tandem plans
Housing and Urban Development (GNMA):
FHA/VA tandem plan
Conventional tandem plan
Subtotal, budget account loan sales
Sales from off-budget accounts:
Agriculture, REA
Energy Independence Authority
Total-All loan sales *
Memos:
Sales to FFB included above *
Sales to the public 3
Farmers Home repurchases
Loan repayments other than loan sales 4 (for budget
agencies, ex-tandem plans)
Ratio of loan sales to other repayments (percent).

TQ
actual

826
2,829
592

1977
estimate

400
256
215

291
191

1,075
96

1,270
4,541
807

949
3,100
820

62
30

55
9
1,260

1978
estimate

99
28

2,050

115
950

181
343
150

42
269

6,053

2,042

9,434

6,372

4,243
3,016

203
1,389

1 136
,
515

1,914
424

13,312

3,634

1,
1 085

8,710

166

187

500
500

13,478

3,821

11,133

9,710

5,461
8,017
668

2,126
1,695
404

8,844
2,289
1,539

6,091
3,619
1,270

6,480
93

1,427
143

9,097
104

9,285
69

1
All loans sold, except conventional tandem plans, are guaranteed upon sale, and are reflected
in guaranteed loan totals in tables E-6 and E-7.
2
See table E-2 for detail of FFB purchases.
3
"Public" includes sponsored agencies such as FNMA and FHLMC who are among principal
purchasers of HUD and VA mortgages.
4
Excludes proceeds of collateral liquidation, and adjustments to loan balances.

100

THE BUDGET FOR FISCAL YEAR 1978
GUARANTEED LOANS

Guaranteed loans 4 are loans made to private borrowers, State and
local governments, foreign governments, and Government corporations where the Federal Government assumes responsibility for payment of some portion of principal and interest in the event that the
borrower defaults on his obligation. Included are transactions where
the Government guarantees marketable securities when the size,
maturity, or other special features make the loan unsuitable for
financing by individual financial institutions. In the case of fully
guaranteed loans, the Government guarantees the repayment of all
principal and interest if the borrower defaults. Guaranteed loans also
include loans on which the Government pays a share of the interest,
even though principal repayments are not assured. In other cases, the
Government may guarantee a portion of the outstanding principal.
Federal long-term direct leases and guarantees of private leases are
also classed as guarantees of the underlying credit that was used to
finance the facilities being leased.5
The major agencies and programs making loan guarantees are
shown in tables E-6 and E-7. The tables reflect the full principal
amount of guaranteed loans, although in some cases the Government
guarantees less than 100% of the principal. The presentation in
tables E-6 and E-7 is comparable to tables E-3 and E-4 for
direct loans. In addition, adjustments to eliminate double counting
have been made in tables E-6 and E-7 to make possible the aggregation of guaranteed loans with other forms of Federal credit assistance.
These adjustments are required when the same credit extension is
guaranteed twice, as in the case of GNMA's guarantee of passthrough
securities that are backed by FHA-insured and VA-guaranteed mortgages. Guaranteed loans that are converted to direct loans when
purchased b}^ a Federal agency must also be deducted because they
have been already included in tables E-3 and E-4. Additional adjustments are made for double counting in tables E-8 and E-9 for Government-sponsored credit enterprises. These adjustments are also reflected
in the aggregate totals in table E—1.
Table E-7 summarizes the net changes in guaranteed loans and the
total dollar value of guaranteed loans outstanding at the end of
1976-78 by agency and program. Outstanding guaranteed loans are
expected to grow at a rapid pace, up to almost $313.4 billion in 1978.
Prior to 1975, guaranteed loans and securities were typically held by
private investors. However, the FFB has since become a major
purchaser of guaranteed obligations, thereby converting; them into
direct loans. After adjustment for double counting and FFB purchases,
the total of outstanding guaranteed loans falls to $202.3 billion in 1978.
Guaranteed loans, like off-budget direct loans, are not reflected in
the budget at the time credit is extended. Budget impacts from loan
guarantee programs, excepting explicit subsidies and administrative
4
5

As used here, guaranteed loans include those designated as "insured."
Not included in this analysis are leases by the U.S. Postal Service and lease guarantees by the
SBA. They will be included in next year's Special Analysis E,

SPECIAL ANALYSIS E

101

costs, occur only when defaults require the Federal Government to pay
lenders' claims. Losses for the older guaranteed loan programs have
been relatively low, partly because most of the loans under these programs were protected with liens on marketable property. However,
loans made under some newer housing subsidy programs have had
very high default loss rates in spite of the security of real property.
Other recent programs have high risks because they require little or no
collateral and, as a result, these programs are experiencing much higher
losses.
GOVERNMENT-SPONSORED CREDIT ENTERPRISES OUTSIDE THE BUDGET

Several major Government-sponsored credit enterprises were created
to facilitate the financing of selected kinds of economic activity.
Although they are privately owned and managed, all are chartered
by the Government, are subject to some form of Federal supervision,
and consult the Treasury Department in planning the marketing of
their debt obligations. The enterprises included in this category are
the Federal Home Loan Bank System, the three components of the
Farm Credit System, the Federal National Mortgage Association,
and the Student Loan Marketing Association.
These enterprises differ from other private institutions in that they
have been given special preferences, including rights to assess their
constituents, certain tax exemptions and preferences, and preferential
eligibility for investment in their securities by federally regulated institutions and other fiduciaries. These advantages, together with the
enterprises' Federal relationship, give their security obligations a
preferred position in the securities market. This enables them to borrow
at interest rates below the rates on the best grade corporate securities,
and only moderately above the Government's own rates.
All Government-sponsored credit enterprises are essentially financial
intermediaries, channeling funds from one sector of the capital market
to another. They borrow mainly in the "agency sector" of the bond
market, and disburse these funds for specifically authorized purposes,
either directly to lenders or by purchasing loans originated by them.6
Some of the agencies also serve as reserve facilities or provide secondary
marketing functions, furnishing liquidity for constituent lenders by
making temporary advances or buying portfolio loans for resale.
Funds lent by Government-sponsored credit enterprises are obtained
mostly from borrowings in the capital markets. Sale of capital stock
and retained earnings provide a small portion of resources used for
lending. The timing of borrowing and lending varies from year to
year. The lending of FNMA and FHLBS largely depends on conditions
in the mortgage credit market and is thus highly volatile. Tables
E-8 and E-9 show both the lending and borrowing of these credit
institutions. Totals have been adjusted to avoid double counting that
would otherwise result from loans between agencies.
6
The program of the Government National Mortgage Association (a budget agency in HUD) to
guarantee mortgage-backed securities achieves a very similar "intemediation" result. GNMA guarantees securities issued against privately held pools of federally guaranteed or insured mortgages.
The FRB flow-of-funds data, for example, include this GNMA program within the definition of
Government-sponsored credit enterprises. GNMA data appear in memorandum entries of tables
E-6 and E-7.

Table E-6. LOAN GUARANTEE COMMITMENTS AND LOANS GUARANTEED (in millions of dollars)
Commitments
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance.
Agriculture:
Farmers Home Administration
Rural Electrification Administration..
Commerce:
Maritime Administration.
Coastal zone guarantees
Economic development assistance
Defense: Tanker charters
Health, Education, and Welfare:
Medical facilities guarantees
Health programs
Student loan insurance fund
Guarantees of SLMA obligations
College facilities: subsidized loans
Housing and Urban Development:
Low-rent public housing
Federal Housing Administration
Community development loans
New communities fund
GNMA: Mortgage-backed securities._
Other mortgage credit
Interior:
Indian programs
Other.
Transportation:
Rail programs
WMATA bonds
Aircraft loans.
Treasury:
Guarantees of NYC issues sold to FFB.

1976

1977

1976

1978

1977

TQ,

1978

1,411
17

484

1,425
44

1,695
70

1,411
1

484
6

1,425
20

1,695
41

4,913
1,423

,116
416

7,827
3,720

6,383
3,940

4,391
860

1,151
399

7,416
1,101

6,263
1,076

89!

986
44
7

1,289
57
10

1,169

184

955

950
57
1

2
6
1,265
85

215

511
1,305
110

2,431
11,594
130

16,095
15

7,660
8,316
203
7

10,000

8,999

90
67

4
30

701

264

257

1,268
160

317
5

610
8,316
115

2,739
)7

271

889

2,600

29
281

604

1,260

1,075

2,050

1,043
160
194

36
274
5
8

237
68
1,041
85
36

59
610
1,074
110

950

1,839

9,000

2,739

11,594
200
5
10,000

10,500
16,095
70
4
10,000

90
67

4
30

364

553

""78

8,999

44
1

1,260

1,075

2,050

19
14

2,600

950

Taxable municipal bond option x
Energy Research and Development Administration:
Geothermal resources development
Envirnomental Protection Agency: Water treatment bonds
General Service Administration
_
NASA: Long-term lease
Veterans Administration: Housing loans..
Emergency Loan Guarantee Board
Energy Independence Authority
Export-Import Bank
Federal Deposit Insurance Corporation2
Small Business Administration:
Loan guaranteesPollution control bond guarantees
Other agencies and programs 3

3,700
200
125

300
250
24

10,868

—
2,930

79
11,412

167
12,828

10,250

8,507

1,595

10,549

6,000
13,148

2,057

481

2,450
80
\7

Total ( g r o s s ) . . . .
Less secondary guarantees:
GNMA guarantees of FHA-VA pools—.
HEW guarantees of SLMA insured student loan interest
DOT guarantees of USRA debt.

51,578

14,302

8,999
160
29

Total, primary guaranteesLess guaranteed loans acquired for direct loan portfolios:4
By budget agencies, GNMA
By off-budget Federal agencies: Federal Financing Bank
By federally sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan B a n k s . . . _
Federal Home Loan Mortgage Corporation
Total primary guaranteed loans (adjusted)

-_
__

3,700

2,718

200
75
48
79
11,018

300
200
64
167
12,436

5,147

851

5,731

1,700
6,589

2,206
200
15

1,768

460

2,008
40
\1

1,832
100
15

67,299

82,877

53,461

14,923

65,055

77,247

2,600
5
4

10,000
85
1

10,000
110
3

8,999
160
24

2,600
5
6

10,000
85
4

10,000
110
3

42,390

11,693

57,213

72,764

44,278

13,312

54,967

67,134

3,113
13,130

176
2,635

2,422
11,398

8,164

3,556
8,876

594
2,859

600
11,363

1,760
8,264

227
5,362
24
28

12
902
6
2

159
6,269

227
3,100
24
39

12
444
6
7

159
3,484

171
5,620
20
40

171
3,020
2Q
40

20,505

7,959

36,925

58,749

28,455

39,321

53,859

95
_

._.

8,390

1
Included here is the estimated principal amount of the taxable municipal bonds for which the administration is proposing to pay a portion of the interest. In the
event of default by the issuing government, the Treasury's obligation to the subsidy payment ceases. See Special Analysis F, p. 142, for further details on the proposal.
2
FDIC assumed liability For the New York Federal Reserve Bank's loan to Franklin National Bank in connection with its receivership.
3
Includes less active or expiring small programs. (SBA, NCUA, TV A, U.C. stadium bonds.)
4
Secondary guarantees are defined in this table to cover securities representing loans assets which are also guaranteed. Seconidary guarantees by Export-Import Bank
f the debt of the Private Export Finance Corporation have not been estimated and are excluded from both sections of the table.

Table E-7. NET GUARANTEED AND INSURED LOANS OUTSTANDING (in millions

of dollars)

in. guaranteed
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance.
Agriculture:
Farmers Home Administration
Rural Electrification Administration..
Commerce: Martime Administration
Coastal zone guarantees_
Economic development assistance
Defense: Tanker charters
Health, Education, and Welfare:
Medical facilities guarantees
Health programs
Student loan insurance fund
Guarantees of SLMA obligations
College facilities: subsidized loans
Housing and Urban Development:
Low-rent public housing
Federal Housing Administration
Community development loans
New communities fund
GNMA: Mortgage-backed securities __
Other mortgage credit
Interior:
Indian programs
Other.
Transportation:
Rail programs
WMATA bonds.
Aircraft loans

1976

1977

acT£

Outstanding
1978

1976

1977
e t m te

1978

1,298
-12

442
-4

1,305

1,563
20

2,345
157

2,787
153

4,091
160

5,654
180

2,980
860
1,065
2
4

566
399
160

5,002
1,101
844
44
25

4,407
1,076
825
57
26

17,847
1,114
3,431

18,413
1,514
3,591

160
180

181
180

23,415
2,615
4,435
44
206
180

20
1

230
6
47
85
18

49
511
109
110
-19

1,061

1,095

5,126
400
1,323

1,265
3,560
-800
-69
8,300

1,369
6,647
-885
-46
8,400
9

13,607
88,988
2,519
280
25,610
549
29

5,127
405
1,327
13,727
88,890
2,205
276
27,500
540
34

27,822
3,691
5,260
101
232
180
1,374
517
5,283
600
1,326

670
997
100

711
997
102

-230
160
178

2
1

454
2,338
-994
7
7,887
-30

5
4
120
-98
-314
-4
1,890
-9

79
67

-11
30

20
1

117

471

"28

-14

7
4

1,325
6
5,174
490
1,345

114
67

16,361
99,097
520
161
44,200
549
102
96

828
997
129

1,300
997
115

14,992
92,450
1,405
207
35,800
540

Treasury:
Guarantees of NYC issues sold to FFB
Taxable municipal bond option 1
Energy Research and Development Administration:
Geothermal resources development
Synthetic fuels demonstration guarantees
Environmental Protection Agency: Water treatment bonds
General Services Administration
NASA: Long-term lease
Veterans Administration: Housing loans
Emergency Loan Guarantee Board
Energy Independence Authority
Export-Import Bank
Federal Deposit Insurance Corporation 2
Small Business Administration:
Loan guarantees
Pollution control bond guarantees
Other agencies and programs 3

1,082

-126

-956
3,700

197
6

6,133
-35

646
-20

75
-10
79
6,059
-30

1,280
-320

-345
-148

739
-350

175
51
167
6,547
-135
1,700
850
-626

684

]\7

717
40
-11

Total (gross)
Less secondary guarantees: 4
GNMA guarantees of FHA/VA pools
HEW guarantees of SLMA insured student loan interest
DOT guarantees of USRA debt

24,272

4,602

7,887
160
24

Total, primary guarantees
Less guaranteed loans acquired for direct loan portfolios:
By budget agencies, GNMA
By Off-budget Federal agencies: Federal Financing Bank
By federally sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation

956
3,700

295

Total primary guaranteed loans (adjusted)

1,082

197

491
250
1,002
247
77,369

956

962

64,116
185

64,763
165

75
952
79
70,822
135

5,273
1, 144

4,927
996

5,666
646

1,700
6,516
20

362
100
23

4,979

5,096

5,812
40
60

6,174
140
83

28,641

36,955

243,213

247,816

276,456

313,419

1,890
5
6

8,300
85
2

8,400
110
1

25,610
400
33

27,500
405
39

35,800
490
41

44,200
600
42

16,202

2,701

20,254

28,444

217,170

219,872

240,125

268,570

-1,040
6,131

338
2,623

-714
8,739

-313
5,994

4,030
12,413

4,368
15,036

3,654
23,776

3,341
29,770

183
790
-10
-201

-7
-143
6
-46

94
1,006
-14
-130

110
1,516
20
-117

408
28,691
68
1,733

401
28,548
74
1,688

495
29,554
59
1,558

605
31,070
79
1,441

10,348

-70

11,273

21,233

169,828

169,757

181,872

202,264

*Less than $0.5 million.
Included here is the estimated principal amount of the taxable municipal bonds for which the administration is proposing to pay a portion of the interest. In the
event2 of default by the issuing government, the Treasury's obligation to the subsidy payment ceases. See Special Analysis F, p. 142, for further details on the proposal.
FDIC assumed liability for the New York Federal Reserve Bank's loan to Franklin National Bank in connection with its receivership.
3
Includes less active or expiring small programs (SBA, NCUA, TVA, D.C. stadium bonds).
4
Secondary guarantees are denned in this table to cover securities representing loan assets which are also guaranteed. Secondary guarantees by Export-Import Bank
of the debt of the Private Export Finance Corporation have not been estimated and are excluded from both sections of the tabl e.
1

Table E-8. LOAN COMMITMENTS AND GROSS DISBURSEMENTS OF FEDERALLY SPONSORED CREDIT INTERMEDIARIES
(In millions of dollars)
Commitments
1976
actual

Student Loan Marketing Association
._
Federal National Mortgage Association»
Farm Credit System:
Banks for cooperatives—
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:1
Corporation accounts
Participation certificate pool2

Total
Less secondary funds advanced from Federal sources:
SLMAfromFFB
FHLMCfromFHLBB
Total primary lending
1

227
6,419

TQ
actual

Gross disbursements

1977
estimate

1978
estimate

1976
actual

TQ
actual

1977
estimate

1978
estimate

12
1,529

159
8,065

171
6,806

227
4,274

12
1,580

159
4,413

171
4,310

10,012
6,475
4,439

2,773
1,608
1,024

11,967
7,712
4,968

13,294
8,806
5,578

10,012
6,475
4,438

2,773
1,608
1,024

11,967
7,712
4,968

13,294
8,806
5,578

7,547

2,656

12,498

17,810

7,091

3,033

12,600

17,900

1,745
(2,570)

2,375
(2,375)

10,348

43,563

52,435

110

10,343

43,478

52,325

1,154

320

2,000

2,800

1,184
(1,226)

36,273

9,923

47,368

55,265

33,702

160
36,113

5
9,918

85
47,283

110
55,155

160
386
33,156

316
(454)

Loans purchased at discount are recorded at acquisition cost.
Participation certificates (pass-through type) sold against mortgage pools are counted as sales of loan assets and are therefore not reflected on the Corporation s balance
sheet. Loan purchases in parentheses (—) are excluded from totals (interfund transfers).
2

SPECIAL ANALYSIS E

107

FUNCTIONAL AREAS SUPPORTED BY FEDERAL CREDIT ASSISTANCE

Table E-10 presents a functional distribution of direct loan disbursements and new federally guaranteed loans. From this distribution
it is clear that the most significant Federal credit programs are in
support of housing, international affairs (primarily the ExportImport Bank) and agriculture. Although credit assistance to energy
in 1976-77 is accounted for almost exclusively by the programs of the
Rural Electrification Administration, both proposed and recently
enacted legislation to encourage development of domestic energy
sources rely heavily upon direct loans and loan guarantees to private
industry. As a result of these new programs, credit assistance in the
area is expected to increase rapidly in future years.
SUMMARY OF FEDERAL AND FEDERALLY ASSISTED CREDIT
TRANSACTIONS

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

To achieve the objective of reallocating resources to specific areas of
the economy, most Federal credit programs, by using guarantees or
direct interest subsidies, provide credit to private borrowers and
Government corporations on more favorable terms than are available
in private markets. Most frequently the improved terms take the
form of an interest rate that is lower than the rate charged by private
lenders, although the maturity of the loan and the loan-to-value ratio
may also be higher. Other credit subsidies, not treated here, may result
from fees or premiums inadequate to cover costs of administration and
losses on credit guarantees and insurance programs, waivers of such
fees or premiums or forgiveness of part or all of the loan principal.
Furthermore, the analysis does not consider the direct grants and other
subsidies that may accompany Federal credit assistance.
This section estimates the value of the interest rate subsidy that
accrues to federally assisted borrowers. The interest subsidy is defined
as the difference between the present values of interest payments that
the borrower makes under Government assistance and the payment
that he would have to make for a comparable private loan. These
interest differentials arise for many reasons. In some direct loan programs the interest rates established by statute may be at rates below
those of the private market. In other direct loan programs the laws
provide for interest rates to be set to recover the costs of borrowing by
the Treasury, thereby providing loans to private borrowers at rates
otherwise available only to the U.S. Government. In guaranteed loan

Table E-9. NET CREDIT ADVANCED AND NET CREDIT RAISED BY FEDERALLY SPONSORED CREDIT

INTERMEDIARIES

(In millions of dollars)
Net change
1*976
actual

TO
actual

183
1,892

—7
933

94
1,797

1,041
1,171
2,573

54
390
598

-1,142

Outstanding

1977
1978
estimate estimate

T976
actual

TO
actual

1977
estimate

^978
estimate

110
2,087

408
30,984

401
31,917

495
33,714

605
35,801

637
1,599
2,944

610
1,737
3,092

4,412
11,192
18,010

4,466
11,582
18,607

5,104
13,182
21,550

5,714
14,919
24,642

744

1,292

4,612

19,198

19,942

21,234

25,846

—393
950

—266
362

—1,087
2,265

—253
1,955

4,421
2,163

4,155
2,525

3,068
4,790

2,815
6,744

Total lending (unadjusted)
Less loans between sponsored agencies:
FHL banks to FHLMC
Less loans from Federal agencies:
FFBtoSLMA._
FHLBB to FHL banks

6,275

2,810

9,540

13,950

90,788

93,598

103,138

117,088

386

-43

-1,746

-388

3,924

3,881

2,134

1,746

160
286

5
—43

85
—1,112

110
—23

400
1,534

405
1,490

490
378

600
1,200

Total primary lending
Memo: Federal Reserve banks 3

5,443
100

2,891
(4)

12,313
(4)

14,251
(4)

84,930
1,343

87,822
(4)

100,136
(4)

113,542
(4)

LENDING (Funds advanced)
Student Loan Marketing Association
Federal National Mortgage Association i
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation: 1
Corporation accounts
..
Participation certificate pool 2

BORROWING (Funds raised)
Student Loan Marketing Association
Federal National Mortgage Association
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:
Corporation accounts
Participation certificates2
Total borrowing (unadjusted)
Less: Borrowing from other sponsored agencies:
FHLB loans to FHLMC
Other
Less: Borrowing from Federal agencies:
FFB loans to SLMA
FHLBB loan to FHL banks
Less: Loans to Federal agencies:
Investments in Federal securities
Total borrowing (adjusted)

160
1, 626

5
823

85
1,764

110
1,875

400
29,862

405
30,685

490
32,449

600
34,324

1,007
1, 054
2, 121

-60
433
569

618
1,447
2,649

534
1,617
2,795

4,174
10,635
16,284

4,114
11,067
16,854

4,732
12,514
19,503

5,266
14,131
22,298

—1,974

-101

-89

3,877

18,669

18,568

18,478

22,355

405
950

-443

362

-2,114
2,264

-265
1,955

5,493
2,163

5,049
2,525

2,936
4,790

2,671
6,745

5, 348

1,588

6,625

12,497

87,680

89,268

95,894

108,391

386
13

-43
22

-1,790
10

-388

3,924
58

3,881

2,134
90

1,746
90

160
286

5
-43

85
-1,112

110
-23

400
1,534

405
1,491

490
379

600
356

1
>

181

524

-1,142

-63

3,142

3,666

2,524 2,461

4, 322

1,230

10,574

12,861

78,622

79,745

90,277

103,138

Table E-10. DIRECT LOAN DISBURSEMENTS AND NEW LOANS GUARANTEED BY FUNCTION (in millions of dollars)
Direct loan disbursements
Function

1976
actual

National defense:
Department of Defense—Military
Military assistance
Total
International affairs:
Foreign economic and financial assistance
International financial programs

TQ
actual

1977
estimate

424

Total
Natural resources, environment, and energy:
Water resources and power
Pollution control and abatement
Energy

1,232
2,206
3,438

1
11

424

New loans guaranteed

1978
estimate

1976
actual

TQ
actual

1977
estimate

1978
estimate

1,411

44
8

1,425

1,695

1
75
7
6

1,411

44
8

1,425

1,695

456
528

1,385
2,556

1,326
2,651

1
5,147

6
851

20
5,731

41
6,589

984

3,941

3,977

5,148

857

5,751

6^630

12
__
816

208

975

1,650

859

299

75
1,296

200
3,076

828

214

1,005

1,667

859

299

1,371

3,276

Agriculture: Farm income stabilization

3,417

1,037

3,797

4,847

929

552

1,399

1,423

Commerce and transportation:
Mortgage credit and thrift insurance
Advancement of commerce
Ground transportation.
Air transportation
Water transportation

11,998
259
797

2,169
62
57

6,870
321
1,030

7,640
238
619
___
4

11,151
1,772
667
78
1,169

2,997
462
53
3
184

16,590
19,851
2,060
1,942
622
596
41 __
955
950

13,055

2,288

8,225

8,501

14,837

3,699

20,268

Total

23,339

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

56
5
71
9
11
9

22
4
25
3
4
6

1,538

523

870

57
3
98
9
17
8

49
3
1.145
14
2

20
1
63
6
3

3
3
39
4
1

25
0
1,161

7
4
1,152

1,722

1,708

876

383

1,366

1,226

305

657

326

1,222

287

1,162

1,184

42
9
61

19
8
9

31
60
36

24
90
20

215

68
237

500
110
59

Income security: Public assistance (public housing project notes).

12
1
28
7

3
6
5
0

17
2
67
0

14
3
68
0

25
1
7,660

3
6
1,839

35
0
9,000

69
6
10,500

Veterans benefits and services:
Income security for veterans
Veterans housing

132
399

35
102

118
418

118
451

10,250

2,718

11,018

12,436

531

137

536

569

10,250

2,718

11,018

12.436

48
67

64
30

24 _
.
1,260
1,075

15
1
2,050

Total

Education, training, employment, and social services: Higher education.
Health:
Health education
Health care services
Health planning and construction
Total

Total

—

General government:
General property management
Other general government

*
1

Total
Revenue sharing and general purpose assistance: General purposefiscalassistance
Other programs
Grand total

_
2

1
13 0
,0

1,090

5_
2,090

90
5

25,832

6,722

22,771

23,405

9
4
90
5

79
44,691

12,236

167

55,309

63,589

*Less than $0.5 million.
See footnote 1, table E-3 for definition.
Off-budget accounts are included (except sponsored agencies); double counting is eliminated by excluding FFB from direct loans, and certain GNMA and SLMA
items from guarantees.
1
2

Table E-11. SUMMARY OF CREDIT ADVANCED AND CREDIT RAISED UNDER FEDERAL AUSPICES (in billions of dollars)
Net change
1976
actual

TQ
actual

Outstanding

1977
estimate

1978
estimate

1976
actual

TQ
actual

1977
estimate

1978
estimate

LENDING (Credit advanced)
Direct loans (from table E-4):
On-budget agencies
Off-budget agencies
Guaranteed loans (primary, adjusted, from table E-7)
Loans by federally sponsored credit intermediaries (from E-9)

4.2
6.7
10.3
5.4

Total, credit advanced to the public under Federal auspices [
Outside the budget

1.1
2.6
-.1
2.9

2.0
10.1
11.3
12.3

2.8
7.2
21.2
14.3

64.2
21.6
169.8
84.9

65.3
24.5
169.7
87.8

67.3
34.3
181.9
100.1

71.0
41.5
202.3
113.5

26.6
22.4

6.5
5.4

35.7
33.7

45.5
42.7

340.5
276.3

347.3
282.0

383.6
316.3

428.3
357.3

82.9
10.3
4.3

18.0
-.1
1.2

62.0
11.3

10.6

55.5
21.2
12.9

480.3
169.8
78.6

498.3
169.7
79.7

560.3
181.9
90.3

615.8
202.3
103.1

97.5
-70.9

19.1
-12.6

83.9
-48.2

89.6
-44.1

728.7

747.7

832.5

921.2

BORROWING (Credit raised)
Federal borrowing from the public (from table C-l)
Guaranteed borrowing (same as guaranteed loans, above).
Borrowing by federally sponsored credit intermediaries (net, from table E-9)__
Total, credit raised from the public under Federal auspices
Net credit advanced
1

Excludes Federal Reserve credit.

SPECIAL ANALYSIS E

113

programs, the guarantee itself provides an implicit subsidy because,
by eliminating the risk of loss through default, it allows the borrower
to pay an interest rate less than he would have been required to pay
on riskier unguaranteed loans for comparable purposes.
To determine the subsidies in loan programs, it is necessary to estimate the interest rate that the borrower would have had to pay in
private credit markets. For some loans, particularly those for housing,
private credit market rates are readily available, and could be used in
measuring the subsidy. But for other programs—student loans and
public housing, for example—no comparable private loans exist.
Because of the difficulty of determining what private, unassisted rates
would have been on a program-by-program basis, three rates have been
chosen—8, 10, and 12%—to represent alternative private sector
borrowing costs that might otherwise have been incurred by the assisted borrowers. The purpose of presenting alternative rates is to
illustrate the importance of interest rate differences to the value of
the subsidy. It should be noted that in some cases the relevant market
interest rate may exceed 12%, and in other cases there may not be
any market at all in the absence of Government assistance. Because
interest subsidies occur throughout the life of the loan, the measurement of interest subsidies requires the conversion of a stream of payments into a single "present-value." This capitalization is accomplished by discounting future subsidies before accumulating them
into a single amount.
Using this method of measurement, table E-12 presents the estimated value of Federal subsidies provided by new direct and guaranteed loan commitments. Because of space limitations, program
subsidy costs have been estimated only for commitments expected to
be made in 1978.
PROPOSED LEGISLATION

The administration has proposed legislation to create new credit
programs or substantially change existing ones.
Legislation has been proposed to establish an Energy Independence
Authority to provide up to $100 billion in loans and loan guarantees
for selected private sector energy projects during the next decade. The
administration will also be proposing specific projects for the Energy
Research and Development Administration that provide incentives
for the commercial demonstration of synthetic fuel production for coal,
oil shale, and other domestic resources. Some of these incentives are
expected to be in the form of credit assistance.
In another energy-related credit initiative, the administration has
proposed creation of a multinational financing facility to assist industrialized nations in meeting financial commitments resulting from
high oil prices. The U.S. contingent commitment to the fund is expected to be $7 billion.

240-700 O - 77 - 8

Table E l 2. ESTIMATED INTEREST SUBSIDY VALUES FOR 1978 DIRECT AND GUARANTEED LOAN COMMITMENTS
(Dollars in millions)

Agency and program

Borrower 1
loan
terms
Percent

Years

Volume
of commitments
made in
1978

Annual subsidy per $100 million
by alternative interest rates
8
percent

10
percent

12
percent

Present value of subsidy by
alternative interest rates
8
percent

10
percent

12
percent

DIRECT LOANS
Funds appropriated to the President:
International security assistance
International development assistance
Other international
Agriculture:
Price support and related programs
CCC: Public Law 480_____
Farmers Home Administration.
Rural Electrification Administration
Commerce: EDA
Coastal energy impact fund
Health, Education, and Welfare:
Health maintenance organizations
Health research and education
Medical facilities
Student loan funds
Housing and Urban Development:
Urban renewal notes
Low-rent public housing
FHA (defaulted multifamily projects)
Housing for elderly
Transportation: Rail rehabilitation
Treasury: N Y C seasonal financing

34
.
28
.
75
.
79
.
23
.
54
.
46
.
74
.
75
.
86
.
30
.
67
.
44
.

35.2
35.3
10.0

1,140
44
6
10
3

36
.
41
.
.
3

54
.
58
.
16
.

73
.
77
.
30
.

46
8
21
2
3

60
0
22
6
1
3

63
8
23
9
22

13
.
33.0
29.7
35.0
17.7
20.0
20.0
15.0
25.0
13.0

2,968
78
6
5,126
1,130
3
8
8
6

.
2
43
.
20
.
28
.
.
5
.
4

13
.
61
.
38
.
46
.
19
.
19
.

25
.
79
.
56
.
65
.
35
.
35
.

8
32
8
1,180
31
7
2
3

90
46
9
2,307
59
9
1
0
2
3

60
2
5
11
7
40

3~."2
10
.
23
.

11
.
46
.
27
.
37
.

28
.
61
.
44
.
51
.

7
1
9
7

47
48
4
1,824
53
0
6
1
4
6
9
4
2
1
1

58
.
0
90
.
70
.
82
.
70
.

.
7
41.5
38.0
40.0
75
.
.
5

20
0
6
8
10
3
70
5
10
0
90
5

53
.
78
.
.
9
27
.
11
.
44
.

7.7
97
.
28
.
46
.
24
.
74
.

6
5
2
1
2
21
0
6
20

9
5
4
3
0
28
8
1
2
3
2

28
.
59
.
~.~9
1."5

4
48
80
7

1
2
1
1
5
9
1
3

5.0
84
7.0
8,2
85
.
75
.

15.0
29.2
2.6
20.0
70
.
30.0

118
448
175
3,000
4,175
2,173

20
.
.
7

6.8
6.6

8.5
10.0

7.5
3.0

10.0
0

.
4

3.4
1.4
2.2
1.4
.
9
21
.

4.9
3.2
3.6
3.0 _
2.2 .
40
.

285
150

.8
.9

2.0
2.2

600
41 .

.
3

16
.

12
0

31
57
8
351
12
9
42
4

40
114
14
678
430
66
9

3.3
3.5

13
9

33
20

50
31

30
.

1
3

6
1

14
0

2,988

Veterans: Insurance policy loans
VA housing
DC Loans
Energy Independence Authority
Export-Import bank
FFB Originations of unsubsidized loans.
Small Business Administration:
Business and investment loans
Disaster loan fund
United States Railway Association:
Purchase of Conrail securities
Other agencies and programs

5,277

7,203

Total—Major subsidized direct loans

20
3

GUARANTEED LOANS
Health, Education, and Welfare: Student Loan insurance
Housing and Urban Development:
Urbanrenewal
Low-rent public housing....
Mortgage Insurance, subsidized2
Interior: Indian Loans

4.4

13.0

1,305

2.3

3.7

5.1

240

346

438

3.0
0

.7
41.5

70
888

5.9
5.9

8.3
7.8

10.7
9.7

33
632

3
678

5
711

8.0

1.2

2.5

Total-Major subsidized guaranteed loans

874

5.5

30.0

1,450

2.0

3.7

Postal Service

7.5

25.0

895

2.0

Total, enterprise debt subsidies

1,028

1,154

5.5

328

511

649

3.8

167

267

366

FFB FINANCING OF FEDERAL NON-CREDIT ENTERPRISES
(debt, net) 3
Tennessee Valley Authority

Grand total
* Less than $0.5 million.
1 If terms vary, these are estimated averages.
2
3 Incomplete data prevented estimation.
Interest savings are passed through to private users.

678

916

4,228

6,984

9,273

116

THE BUDGET FOR FISCAL YEAR 1978

In veterans affairs, the administration proposes to terminate the
Education loan fund, effective October 1977, and to terminate nondisabled veterans' entitlements for VA housing benefits for persons
entering the Armed Forces after September 1977.
Other proposals include: Removal of 5% interest rate ceilings on
certain FmHA loan programs in order to bring their lending rates in
line with actual Treasury borrowing costs; repeal of loan authorization
in the recently enacted National Land Policy Management Act of 1976
that would provide low-interest-rate loans to communities affected by
mineral development on Federal land; and lowering the down payments and increasing the mortgage limits on FHA-insured loans.
NEWLY ENACTED CREDIT LEGISLATION

This list summarizes legislation enacted during the last session of
Congress that authorizes new Federal credit programs or revises existing programs in major respects. It excludes simple extensions of
expiring laws and changes in funds for continuing programs.
Railroad Revitalization and Regulatory Reform Act of 1976—Public Law
94-210
Authorizes USRA to purchase $1.0 billion in debentures and $1.1
billion in preferred stock issued by Con Rail to finance the operations
of the restructured railway system in the Northwest and Midwest. It
also provides $230 million in loans from the FFB, through USRA, to
ConRail and other eligible railroads to pay preconveyance obligations
of the railroads in reorganization. Public Law 94-555 increases the
loan authority from $230 million to $350 million. The act further
authorizes the Department of Transportation to provide $1.0 billion
in loan guarantees to railroads and purchase $600 million of redeemable
preference shares for the purpose of rehabilitating the nationwide rail
freight system.
African Development Fund Act—Public Law 94-302
Title II authorizes a $25 million United States subscription to the
African Development Fund over a 3-year period. The Fund, in turn,
provides concessionary loans with a 50-year maturity to the poorest
African nations.
Small Business Act Amendments—Public Law 94-305
Authorizes the Small Business Administration to guarantee the
payments of rentals or other amounts due by small businesses for the
purpose of financing the installation of pollution control facilities,
including financing by means of State and local revenue bonds. It
establishes a revolving fund for payment of program operating
expenses and claims.
Coastal Zone Management Act Amendments of 1976—Public Law
94-370
Establishes an $800 million revolving loan fund in the Treasury to
finance loans and loan guarantees to coastal States and local units of
Government for the purpose of providing public facilities and services
required by coastal energy development.

SPECIAL ANALYSIS E

117

Energy Conservation and Production Act—Public Law 94-385
Authorizes the Department of Housing and Urban Development to
provide low-interest-rate loans, interest subsidies and loan guarantees
to demonstrate an energy conservation program for existing dwelling
units. Authorizes the Federal Energy Administration to guarantee
90% of the principal on loans and securities issued by businesses and
State and local governments to finance energy conservation measures
in any building or industrial plant. The total amount guaranteed
under this program is limited to $2 billion.
Financial Assistance for the Virgin Islands—Public law 94-392
Authorizes the Secretary of the Interior to guarantee up to $61
million in bonds issued by the government of the Virgin Islands to
finance capital improvements.
Financial Assistance for the Guam Power Authority—Public Law 94-395
Authorizes the Secretary of the Interior to guarantee up to $36
million in obligations issued by the Guam Power Authority to the
FFB.
Electric and Hybrid Vehicle Research, Development and Demonstration
Act of 1976—Public Law 94-413
Authorizes tbe Energy Research and Development Administration
to guarantee loans in order to encourage commercial production of
electric and hy brid \ ehicles. Limits total amount of loan guarantees
to $60 million and any one loan to $5 million.
Indian Health Care and Improvement Act—Public Law 94-437
Authorizes the Department of Health, Education, and Welfare,
through the Indian Health Service, to sign leases for a maximum term
of 20 years with federally recognized Indian tribes in order to assist
in the acquisition of construction financing for Indian health care
facilities.
Health Professions Educational Assistance Act of 1976—Public Law
94-484
Authorizes HEW to guarantee up to $1.5 billion over 3 years in
student loans for a new health professions student loan guarantee
program. Extends through 1980 the loan guarantee and interest
subsidy program for the construction of health teaching facilities as
well as the existing health professions student loan program, but
modifies this program to provide loans to exceptionally needy students.
Public Works and Economic Development Act Amendments of 1976—
Public Law 94-487
Appropriates funds to provide explicit interest rate subsidies of up
to 4 percentage points on guaranteed loans provided by some existing
programs and authorizes a $125 million direct loan fund to provide
interest free loans to any of the 1,600 qualified redevelopment areas
for activities related to economic development.
Rail Transportation Improvement Act—Public Law 94-555
Increases USRA's authority to make loans to ConRail and other
eligible railroads to cover preconveyance claims from $230 million to
$350 million. It also allows Amtrak to use its Federal capital grants to

118

THE BUDGET FOR FISCAL YEAR 1978

temporarily retire its outstanding loans guaranteed by the Federal
Government. The one time impact of this will increase outlays in 1977
by $127 million.
Federal Water Pollution Control Act Amendments—Public Law 94-558
Authorizes the Environmental Protection Agency to guarantee the
loans and obligations of State and local governments issued directly to
the FFB for the purpose of financing the 25% non-Federal shares of the
construction cost of municipal waste water treatment plants. Applies
only to those that have been unable to obtain credit through the
normal market mechanisms.
National Land Policy and Management Act of 1976—Public Law 94-579
Authorizes the Secretary of the Interior to make special 3 % loans to
States and localities in order to relieve social and economic impacts
arising from the development of federally owned minerals leased in
the State and locality.

SPECIAL ANALYSIS F
TAX EXPENDITURES

The Congressional Budget Act of 1974 requires a listing of tax expenditures in the budget. Tax expenditures are defined by that act as
"revenue losses attributable to provisions of the Federal tax laws
which allow a special exclusion, exemption, or deduction from gross
income or which provide a special credit, a preferential rate of tax, or a
deferral of tax liability." Tax expenditures are one means by which
the Federal Government pursues public policy objectives and, in
most cases, can be viewed as alternatives to budget outlays, credit
assistance, or other instruments of public policy.
Tax expenditures have varied objectives. Nearly all tax expenditures
are meant either to encourage certain economic activities or to reduce
income tax liabilities for taxpayers in special circumstances. Among
the economic activities encouraged by tax expenditures are investment,
exporting, petroleum exploration and development, spending by State
and local governments, and support of charitable institutions. The
deductibility of medical expenses, casualty losses, and personal exemptions for the aged and blind are examples of adjustments of tax
liabilities to meet special circumstances.
The benefits of tax expenditures designed to encourage certain types
of economic activity typically do not rest fully or even mostly with the
corporations or individuals whose taxes are initially affected. An initial
reduction in taxes tends to attract more resources to the preferred
activity thereby competing away some or all of the short-run advantage conferred to particular taxpayers by the tax expenditures.
Thus benefits often accrue to others in the form of lower prices for
particular goods or services, or in other ways become widely diffused.
For example, the deductibility of charitable contributions does not
merely lower individual or corporate liabilities; the institutions that
receive the contributions also benefit as do the beneficiaries of charitable institutions.
This special analysis provides measures of the quantitative importance of various tax expenditures but does not attempt to evaluate their effectiveness. It should be emphasized that the listing of
specific tax expenditure items does not imply either approval or disapproval of specific sections of the Internal Revenue Code any more
than the listing of outlay items in the budget implies approval or
disapproval.
Major changes in tax expenditures resulting from the Tax Reform
Act of 1976 are noted in the text. The analysis concludes with a
discussion of changes in tax expenditures resulting from the tax
proposals that are part of the 1978 budget.
DEFINING TAX EXPENDITURES

Income tax provisions resulting in tax expenditures are further
defined in the legislative history of the Congressional Budget Act as
119

120

THE BUDGET FOR FISCAL YEAR 1978

exceptions to the "normal structure" of the individual and corporation
income tax. They reduce tax liabilities for particular groups of taxpayers. Excluded from further discussion in this analysis are negative
tax expenditures or tax penalties; that is, exceptions to the normal
structure of income taxes that result in increased tax liabilities for
certain groups of taxpayers. There are only a few such exceptions; one
example is the nondeductibility of gambling losses in excess of gambling gains where gambling is engaged in for profit; another is limitations on the deductibility of capital losses. Two were added by the Tax
Reform Act of 1976: deductibility of the costs associated with the
demolition of certain historic buildings was disallowed; and certain
normal tax treatment was denied for taxpayers who cooperate with or
participate in an international boycott.
The "normal structure" is not defined in the tax code. The concept
has evolved in recent years from various congressional and public
reviews of the U.S. tax system focusing on the definition of the income
tax base and the rates applied to that base. Conceptually, it would be
more appealing to begin with a theoretically pure income tax base
and use for this purpose "economic income," defined as receipts
available to support consumption or additions to net wealth, the
imputed value of in-kind consumption, and imputed changes in net
wealth. Some tax expenditures, such as those resulting from exclusions
of certain types of income or special deductions, could then be identified
as the result of departures from a theoretically pure tax base. However,
this is not possible. The concept of the normal structure recognizes
that it is impractical to make the necessary imputations. Furthermore,
the normal structure includes the separate taxation of individual and
corporate incomes whereas a theoretically pure tax structure would
integrate these two taxes. Theoretically pure tax bases could also be
specified for other types of taxes, such as a progressive tax on consumption spending rather than on economic income.
Although a theoretically pure income tax base can be specified there
is no theoretical foundation upon which to support any particular
degree of progressivity in the individual income tax rate structure or
any particular corporate income tax rate. For purposes of identifying
tax expenditures, such as those resulting from special tax rates or tax
credits, the current law structure of progressive rates and provisions
that exclude low-income persons from tax liability are deemed a part
of the normal tax structure. If a set of tax rates could be agreed to on
normative grounds, it would then be possible to identify both positive
and negative tax expenditures against such a norm.
When the rate structure and threshold levels for tax liability are
changed, for whatever reason, the new rates and threshold levels become part of the normal structure used in the analysis of tax expenditures. The Tax Reduction and Revenue Adjustment Acts of 1975 increased the low-income allowance (minimum standard deduction) and
introduced a tax credit for each personal exemption claimed by a taxpayer (or optionally a 2% tax credit based on the first $9,000 of taxable
income), thus altering the normal tax structure. Those alterations,
which were made permanent or extended by the Tax Reform Act of
1976, reduced the estimated revenue losses associated with many tax

SPECIAL ANALYSIS F

121

expenditure items primarily because fewer taxpayers will itemize their
deductions. The President's proposal to increase personal exemptions
and the low-income allowance and to alter tax rates will have a similar
impact on tax expenditures.
The existing rate structure for individuals, ranging from 14% to
70%, and the 48% corporate tax rate cannot be presumed to exist
independently from current tax expenditures. If major tax expenditure items were deleted and budget outlays remained constant, tax
rates would undoubtedly be set at lower levels so as to maintain an
appropriate fiscal policy. Moreover, because tax expenditures tend to
reduce the effective progressivity of the tax structure, it is quite likely
that a less progressive set of statutory tax rates would be established
if tax expenditures were eliminated.
Some of the more technical issues and ambiguities involved in
distinguishing between the normal structure of the income tax system
and tax expenditure provisions are discussed in the following paragraphs. In a few cases the conceptual ambiguities are quite serious and
necessitate making essentially arbitrary distinctions.
• Separate rate schedules for single and married taxpayers, married
taxpayers filing separately, and heads of households.—Existing provisions regarding the definition of taxpaying units are accepted as
part of the normal tax structure.
• Threshold levels for tax liability.—Tax code provisions that
determine threshold levels of income below which no tax liability is imposed for the different types and sizes of taxpaying
units are part of the normal structure. Personal exemptions and
the low-income allowance have traditionally determined these
thresholds. Legislation enacted during 1975 and 1976, temporarily
added a per exemption credit and a credit based upon taxable
income to these provisions. However, deductions for additional
personal exemptions for those over 65 and for the blind do
result in tax expenditures because they depend upon more
special circumstances. The percentage standard deduction, to the
extent it exceeds the low income allowance, also results in a tax
expenditure because it substitutes for itemized deductions that
are tax expenditure items.
• The progressive rate schedules for the individual income tax.—No tax
expenditure results because some income is taxed at lower rates
than other income when progressive rate schedules are applied to
all taxable income. The income averaging provision of the
code is a part of the normal structure since it limits the impact of
progressive rates when income increases significantly. The maximum tax of 50% on earned income could be viewed as part of the
normal structure of the individual income tax, and higher marginal rates on unearned income considered as resulting in negative
tax expenditures, but is treated as a tax expenditure in this
nalysis because it fits the definitional term "preferential rate
of tax."
• Imputed income from owner-occupied housing and other sources.—A
theoretically pure income tax would include in its base an imputation for the income received in kind from the occupancy of a

122

THE BUDGET FOR FISCAL YEAR 1978

home owned by the taxpayer and imputations for in-kind income
from the ownership of other durable assets. Because such imputations are difficult to make and are contrary to usual concepts of
income, they are not considered in the computation of tax
expenditures even though such exclusions of imputed income
affect the allocation of the economy's resources, particularly by
providing a stimulus to owner-occupied housing. If income on
owner-occupied housing were imputed, deductions for mortgage
interest and property taxes would be appropriate in order to
measure the amount of net income that would be included in the
tax base. Without the imputation, those two deductions result
in tax expenditures.
The value of Government services received by

individuals.—The

exclusion from gross income of direct cash payments to individuals
by the Government, such as social security payments, does
result in a tax expenditure. Other Government programs extend
benefits in kind to individuals. Examples are medicare and public
education. Since these benefits are received in kind they cannot
be used, like cash, for purposes fully consistent with the recipient's preferences. The exclusion of such imputed values from
income subject to tax does not result in tax expenditures. The
dividing line between nontaxable Government benefits that do
result in tax expenditures and those that do not is essentially
arbitrary. The most ambiguous case is the bonus value of food
stamps. It is so nearly the equivalent of cash that its exclusion
from income subject to tax might be considered to result in a
tax expenditure, but this is not done in the analysis which follows.
Capital gains and losses.—Although the base of a theoretically
pure income tax would include net capital gains on an accrual
basis, practical problems prevent identifying and taxing unrealized
capital gains for many types of assets, and hence the normal
structure taxes only wealth accruals when "realized." The
exclusion from taxable income of one-half of realized capital
gains, and the option of having up to $50,000 of realized capital
gains taxed at a 25% rate, clearly results in a tax expenditure.
At death, an individual may hold assets which have appreciated
or depreciated in value. No gain or loss is realized as income
because of the decedent's death. The failure to impute any such
gain or loss is not considered for purposes of this analysis to
result in a tax expenditure, since it is not clear how such gains
would be taxed, if at all, under a normal tax structure. Prior to
the enactment of the Tax Reform Act of 1976, as assets passed to
the estate, an heir, or other beneficiary, that new holder would
take the market value of the assets at the date the estate was
valued as the basis against which to measure any realized gain or
loss. Under the 1976 Act, the estate or beneficiaries are, after a
transition period, to carry over the decedent's basis and thus be
subject to tax on gains which accrued during the lifetime of the
decedent as well as gains which accrued subsequent to inheritance.
Gifts and bequests.—The tax system subjects gifts and bequests,
which are usually made within a family, to taxes separate from
the income tax and therefore their exclusion from taxable income

SPECIAL ANALYSIS F

123

under the individual income tax does not result in a tax expenditure. Another set of tax expenditures could be defined for departures from a "normal structure" for gift and estate taxes, although
to do so would be beyond the scope of this analysis.
Treatment of individuals and corporations as separate taxpaying
entities.—A theoretically pure income tax would integrate the
taxation of individual and corporate income so as to avoid multiple
taxation of any particular type of income. Only individuals would
be taxed; corporate income would be taxed to shareholders,
whether or not it was distributed in the form of dividends. However, for practical reasons, separate taxation is accepted as part
of the normal tax structure for purposes of this analysis.
Forms of business organization.—The tax law recognizes different
forms of business organization including corporations, partnerships, small corporations treated in a manner similar to partnerships, cooperatives, mutual insurance companies, and individual
proprietorships. The provisions of the tax law that accommodate
different forms of business organization do not generally result in
tax expenditures so long as income is subject to tax at either the
business entity or individual level.
Deduction of business expenses.—The deduction of business expenses is necessary to determine taxable income. Tax expenditures do not ordinarily result from applying the definitions of
business expenses prescribed by the Internal Revenue Code and
Internal Revenue Service interpretative regulations. Tax expenditures do occur when the tax code permits business or investment
expenditures that are capital outlays in economic terms to be
treated as current expenses. In the case of depreciation the Internal Revenue Code allows as a deduction "a reasonable allowance
for the exhaustion, wear and tear (including a reasonable allowance for obsolescence)" on property used in a trade or business or
for the production of income. To avoid judging every taxpayer's
depreciation deductions against a standard of reasonableness, the
code permits standard depreciation techniques and useful lives to
be used. In some cases, tax expenditures result because the permitted technique clearly results in excess depreciation being
claimed. In other cases, tax expenditures result because the useful
life is artificially short. With respect to machinery and equipment,
the asset depreciation range (ADR) system, which became
effective in 1971, defines a band within which estimates of useful
life are deemed to be "reasonable." That band is determined by
reference to broad classes of property and ranges 20% up and
20% down from a published figure designated as the "asset
guideline period." This analysis treats the ADR system as a
mechanism to arrive at a "reasonable allowance" and hence no
tax expenditure is listed in table F - l . The ADR system has been
included as a tax expenditure item in lists published by congressional committees with estimates of $1,825 million for corporations and $195 million for individuals in 1978.
Foreign tax credits.—To avoid the double taxation of income
earned abroad, and thus accommodate the U.S. tax system to
international norms, the normal structure of income taxes includes tax credits for foreign taxes paid.

124

THE BUDGET FOR FISCAL YEAR 1978

• Income of controlled foreign corporations.—The income of foreign
corporations controlled by U.S. corporations or citizens is
generally not subject to U.S. tax until that income is repatriated.
This feature of the normal tax structure allows such corporations
to be taxed like other corporations doing business in the same
foreign countries and is in accord with international norms of
taxation. Consequently, this is not listed as a tax expenditure in
table F - l . There are certain exceptions to this general feature of
the tax law in order to avoid abuse in tax-haven countries, thus
making the concept of normal tax treatment somewhat
ambiguous. The deferral of income of controlled foreign corporations has been included as a tax expenditure item in lists published by congressional committees with an estimated $365
million for corporations in 1978.
The above discussion does not exhaust the definitional complexities
inherent in the tax expenditure concept nor does this analysis consider
all special tax provisions. Some items have not been considered
because the issues have not been fully studied or because there is
insufficient information available on which to base a sound estimate.
Some items are omitted because of their relatively small quantitative
importance (less than a $5 million revenue loss).
The distinction between the normal tax structure and those exceptions leading to tax expenditures does not imply that the features of
the normal tax system should be exempt from periodic analysis and
review. Like tax expenditures, many features of the normal tax
structure have major effects upon the level and composition of
economic activity and the distribution of income; some features
affect the everyday activities of corporations, trusts, and partnerships.
Budget outlays, or other policy instruments, are alternative means to
achieve the objectives of some of the features of the normal tax
structures just as they are often a potential substitute for tax
expenditures.
MEASURING TAX EXPENDITURES

The tax expenditure estimates reported below in table F - l have
been prepared by the Treasury Department and are based upon tax
law as of December 31, 1976. For fiscal years the estimates show the
loss of budget receipts resulting from each of these particular features
of the tax system. For those tax expenditures resulting from the
exclusions from taxable income of Federal Government payments to
individuals, the underlying estimates of payments upon which the tax
expenditure estimates are based are those shown elsewhere in the
budget; hence they reflect any proposed changes in those programs.
No separate estimates can reasonably be made for the transition
quarter.
Each estimate is based upon three major assumptions. The first is
that only the tax provision in question is deleted and all other features
of the tax system, including the structure of rates, remain unchanged.
In most cases, the hypothetical deletion of the special tax provision
increases the estimated taxable income for corporations or individuals;
the existing marginal tax rates are then applied to the change in
taxable income, thereby giving the estimated tax expenditure. For

SPECIAL ANALYSIS F

125

each itemized nonbusiness deduction for individuals, the estimated
revenue loss is based upon the amount by which the standard deduction is exceeded. Tax expenditures resulting from credits are simply
equal to the estimated credits claimed by all taxpayers. If, however,
major tax expenditures were in fact deleted, as was noted earlier,
some features of the normal income tax, such as rate structures or
personal exemptions, would probably be changed so that the marginal
rates used in making the estimates would no longer apply.
The second major assumption used to make the estimates is that
economic conditions remain unchanged in response to the hypothetical
change in the tax laws. The general economic conditions assumed are
those upon which the whole budget is based. (See Part 3 of the Budget.)
A tax expenditure is, however, only the revenue gain directly associated
with a hypothetical repeal of the provision in question and does not
reflect any revenue loss due to a decline in economic activity which
might arguably result from repeal of that tax provision. No "second
order" effect is included in the estimate because it is assumed that
some offsetting fiscal action would be taken to keep economic aggregates on the same path that underlies all budget estimates.
The third assumption is that taxpayer behavior remains unchanged
in response to the hypothetical repeal of a tax expenditure provision.
In many cases this assumption is unrealistic. To the extent that tax
expenditures intended to encourage certain economic activities have
been successful, their elimination would presumably change taxpayer behavior. This would alter the mix of economic activity within
the assumed, constant economic aggregates. Any change in receipts
due to a different mix of activity is not reflected in the estimates.
Whenever possible, sample data from tax returns have been used to
estimate tax expenditures. These data are not, however, available for
the years presented in this analysis, as these returns have not yet been
filed or tabulated. Consequently, the estimates must be made by
extrapolating sample tax return data from past years by means of
other, more current information including the economic forecast used
in estimating budget receipts and outlays. Moreover, many tax
expenditures result from excluded income, not reported on tax returns.
In these cases estimates must be based upon other data sources. Any
changes scheduled by existing law, such as the phasing in or out of
specific provisions, are accounted for in the estimates.
The estimates of tax expenditures presented in this analysis are
reduced by any minimum tax liabilities associated with particular
items. The minimum tax for tax preferences was introduced at a 10%
rate by the Tax Reform Act of 1969 in an attempt to insure that
individuals and corporations receiving tax preferences do not escape
bearing a share of the tax burden. Among the tax expenditure items
initially included in the base of the minimum tax were accelerated
depreciation on real property, excess reserves of financial institutions
for losses on bad debts, percentage depletion in excess of cost depletion,
and—by far the largest item—the excluded half of net long-term
capital gains. The Tax Reform Act of 1976 added to the base of the
minimum tax for individuals the following items: (1) itemized deductions (other than medical and casualty loss deductions) in excess of
60% of adjusted gross income; (2) intangible drilling costs in excess of

126

THE BUDGET FOR FISCAL YEAR 1978

the amount that would be deductible if they were capitalized and
amortized over 10 years or if they were deducted pursuant to a cost
depletion method; and (3) accelerated depreciation on all personal
property subject to a lease. The act also increased the minimum tax
rate to 15%. For individuals the exemption level was reduced from
the greater of $30,000 or regular taxes paid to the greater of $10,000
or one-half regular taxes paid. For corporations the exemption level
was reduced from the greater of $30,000 cr regular taxes paid to the
greater of $10,000 or regular taxes paid. No new items were added to
the base of the minimum tax for corporations.
Some tax expenditure items affect the timing of deductions or the
receipt of taxable income. Examples are depreciation in excess of
straight line for buildings and rental housing and the deferral of income
by domestic international sales corporations (DISCs). These provisions create a permanent tax expenditure even though for a particular
taxpayer, transaction, or asset the special provision may defer a tax
rather than eliminate it. However, for a stable or growing business
with an indefinite life, the deferral of taxes continues forever under
most of these provisions. Furthermore, as the economy grows, these
amounts increase over time. Estimates for these items attempt to
show the difference between budget receipts under current law and
budget receipts if a different law had always been in effect. These
figures therefore generally show more than the revenue that could be
obtained in the first years of a transition from one tax law to another.
They are long-run estimates at the levels of economic activity assumed
for the years in question.
Tax expenditure estimates cannot be simply added together to form
totals for functional areas or a grand total. In some cases the revenue
gain resulting from the deletion of two tax expenditure items would be
greater than the sum of the individual estimates. For example, if
interest income from State and local government securities were made
taxable and capital gains were taxed at ordinary rates, many more individuals would be pushed into higher tax brackets than if just one of
these sources of income became fully taxable; the combined effect on
revenue would be greater than the sum of the two separate estimates.
In other cases, the revenue gain from the deletion of two items would
be smaller than the sum of the individual estimates. For example, if
the deductibility of mortgage interest payments and homeowner
property taxes were both repealed, and the standard deduction
unchanged, many individuals who now itemize their deductions would
opt for the standard deduction, thus limiting the revenue gain. In
general, elimination of multiple items that are personal deductions
would increase revenue by less than the simple sum of the revenue
gains from eliminating each item measured separately since many
taxpayers would switch to using the standard deduction. Conversely,
elimination of multiple items that are exclusions from adjusted gross
income would increase revenue by more than the sum of the individual
gains as taxpayers would be pushed into higher tax brackets. Moreover, if several major tax expenditure items were eliminated, the
assumptions of no changes in economic behavior and conditions or in
other features of the tax system would have little validity.
To illustrate the severity of the aggregation problem, a special
calculation was made of the revenue gain resulting from a hypothetical

SPECIAL ANALYSIS F

127

repeal of all itemized deductions resulting in tax expenditures. This
hypothetical revenue gain would be $21.2 billion in 1978, whereas the
simple sum of the tax expenditures for each separate item is $31.3
billion. The estimate for the combined effect of all such deductions
was derived from a model of the tax system that accounts for the
interaction between tax expenditure provisions and the provisions
of the normal structure. In particular the model provides that individuals would take the standard deduction if itemized deductions
were repealed. No comparable estimate can reasonably be made for
the combined effect of a hypothetical repeal of all exclusion provisions.
A few aggregations of related tax expenditure items are presented
and discussed in the next section. These aggregates have been specially
estimated so as to account for the interactions referred to above but
do not consider the effect of changes in behavior. Where tax expenditures for both individuals and corporations result from the same tax
code provision, such as the investment tax credit, the two estimates
may appropriately be added together.
TAX EXPENDITURES BY FUNCTION

Estimates of tax expenditures are grouped together by functional
category and presented in table F - l . The estimates are shown separately for individuals and corporations. Wherever possible, particular
tax expenditures have been classified according to the functional categories used for budget outlays. Many tax expenditures do not, however, fit into these categories and for this reason three special functional
categories have been added: business investment; personal investment;
and other tax expenditures.
A brief description of each of the special tax provisions for which a
tax expenditure estimate is shown in table F - l follows.
National defense.—The supplements to salaries of military personnel,
including provision of quarters and meals on military bases and
quarters allowances for military families, and virtually all salary payments and reenlistment bonuses to military personnel serving in combat zones, are excluded from tax. Disability-related military pensions
received by current retirees are largely excluded from taxable income.
The Tax Reform Act of 1976 terminated the exclusion of noncombat
related disability pensions for those who entered the armed services
after September 24, 1975.
International affairs.—Prior to 1976, a U.S. citizen was generally
able to exclude up to $20,000 a year of foreign earnings if the taxpayer
were a bona fide resident of a foreign country. After 3 years of foreign residence a taxpayer could exclude up to $25,000 a tax year of
foreign earnings. The Tax Reform Act of 1976 modified these provisions, limiting the exclusion to $20,000 only for employees of U.S.
charitable organizations and reducing it to $15,000 for all others,
denying tax credits for foreign taxes paid on excluded income, and
taxing income beyond the amount eligible for exclusion at the higher
bracket rates which would apply if the excluded income were also
subject to tax. The estimates also reflect the tax-exempt status of
certain allowances received by Federal employees working abroad.

128

THE BUDGET FOR FISCAL YEAR 1978
Table F-1. TAX EXPENDITURE ESTIMATES BY FUNCTION1
(In millions of dollars)
Corporations
Description

1976

1977

Individuals

1978

1976

National defense:
Exclusion of benefits and allowances to Armed
Forces personnel
Exclusion of military disability pensions

1977

1,020 1,095
90
105

1978

1,260
115

International affairs:

Exclusion of gross-up on dividends of LDC corporations
Exclusion of income earned abroad by U.S. citizens,
Deferral of income of domestic international sales
corporations (DISC)
Special rate for Western Hemisphere trade corporations

40
145
1,220

1,030
35
80
10

70
15

455
315

370
330

440
350

100

160
285

105
275

150
300

85
10

135

1,190

120

Agriculture:

Expensing of certain capital outlays
Capital gain treatment of certain income
Natural resources, environment, and energy:

Exclusion of interest on State and local government pollution control bonds.
...
110
170
220
Exclusion of payments in aid of construction:
Water and sewage utilities
15
10
Expensing of exploration and development costs_._
640
610
600
Excess of percentage over cost depletion
1,010 1,035 1,060
Pollution control: 5-year amortization. __
___
10 —80 —130
Capital gain treatment of royalties on coal and iron
15
20
20
ore
:-:- — Capital gain treatment of certain timber income. __
290
300
325

100

Commerce and transportation:

Exemption of credit unions
145
165
185
Exclusion of certain income of cooperatives
410
455
490 -155 - 1 6 5
Corporate surtax exemption
4,170 4,650 4,250
Deferral of tax on shipping companies
110
90
70
Railroad rolling stock: 5-year amortization
—25 —35 —40 ___
__
Financial institutions: Excess bad debt reserves—
485
560
645
Deductibility of nonbusiness State gasoline taxes
710
795

-170

880

Community and regional development:

Housing rehabilitation: 5-year amortization
Education, training, employment, and social services:
Exclusion of scholarships and fellowships
Parental personal exemptions for students, ages
handover
Deductibility of contributions to educational
institutions
Deductibility of and credit for child and dependent
care expenses
.. — .
Credit for employing AFDC and public assistance
recipients
Health:
Exclusion of employer contributions to medical
insurance premiums and medical care
Expensing of removal of architectural barriers to
the handicapped
DeductibiHty of medical expenses
Income security:
Exclusion of social security benefits:
Disability insurance benefits
OASI benefits for aged
Benefits for dependents and survivors
See footnote at end of table.

250

285

750

770

510

540

565

840

870

_
5

290

240

720
215

25
195

190

4,490 5,195 5,840
10
2,315 2,585

___

2,870

330
380
430
2,725 3,125 3,460
645
730
795

SPECIAL ANALYSIS F

129

Table F-l. TAX EXPENDITURE ESTIMATES BY FUNCTION i—Continued
(In millions of dollars)
Corporations
Description

1976

1977

1978

Individuals
1976

Income security—Continued
Exclusion of railroad retirement system benefits__
190
Exclusion of sick pay
195
Exclusion of unemployment benefits
3,335
Exclusion of workmen's compensation benefits
590
Exclusion of public assistance benefits
95
Exclusion of special benefits for disabled coal
miners
_
50
Net exclusion of pension contributions and earnings:
Employer plans
7,290
Plans for self-employed and others
1,060
Exclusion of other employee benefits:
Premiums on group-t*rm life insurance
765
Premiums of accident and accidental death
insurance
65
Income of trusts tofinancesupplementary unemployment benefits
10
Meals and lodging (other than military)
310
Employer contributions to prepaid legal expense
plans
Employee stock ownership plans (ESOP) funded
through investment tax credits
25
245
255
Exclusion of capital gain on home sales if over 65 _
40
Excess of percentage standard deduction over lowincome allowance
1,140
Additional exemption for the blind
20
Additional exemption for over 65
1,145
Retireme t income credit and credit for the elderly.
110
Earned income credit
220
Veterans benefits and services:
Exclusion of veterans disability compensation
595
Exclusion of veterans pensions
30
Exclusion of GI bill benefits
305
General government: Credits and deductions for political contributions
35
Revenue sharing and general purpose fiscal assistance:
Exclusion of interest on general purpose State and
local debt
2,845 3,105 3,470 1,520
Credit for corporations in U.S. possessions
240
285
310
Deductibility of nonbusiness State and local taxes
(other than on owner-occupied homes and gasoline)
7,255
Interest: Deferral of interest on savings bonds
550
Business investment:
Exclusion of interest on State and local industrial
development bonds
150
195
235
75
Excess first-year depreciation
40
45
45
140
Depreciation on buildings in excess of straight line:
Rental housing. _
100
100
100
405
Other
225
210
200
200
Expensing of research and development expenditures.
1,325 1,395 1,450
25
Expensing of construction period interest and
taxes___:
.
415
475
500
215
Capital gain: Corporate (other than farming and
timber)
.
545
555
550
Investment credit
_.__
_ 7.685 8,640 9,670 1,810
See footnote at end of table.

http://fraser.stlouisfed.org/ - <
240-700 O - 77
Federal Reserve Bank of St. Louis

1977

1978

200
205
50
55
2,745 2,445
705
810
100
105
50

8,715
1,305

9,940
1,535

800

835

10
330

10
350

1,285
20
1,220
495
215

1,410
20
1,280
440
205

655
30
255

690
35
200

1,680

1,880

8,095 8,990
565
625
90
135

110
145

405
180

425
175

150

140

1,970

2.205

130

THE BUDGET FOR FISCAL YEAR

1978

Table F-1 TAX EXPENDITURE ESTIMATES BY FUNCTION-Continued
(In millions of dollars)
Corporations
Description
Personal investment:
Dividend exclusion
__
Capital gain: Individual (other than farming and
timber)._..
___._
Exclusion of interest on life insurance savings. _
Deferral of capital gain on home sales
Deductibility of mortgage interest on owneroccupied homes
Deductibility of property taxes on owner-occupied
homes
Deductibility of casualty losses
Credit for purchase of new home
Other tax expenditures:
Deductibility of charitable contributions (other
than education)
Deductibility of interest on consumer credit
Maximum tax on earned income

1976

1977

Individuals
1978

1976
430

1977 1978
455

7,320 7,030 7,360
1,655 1,815 1,995
845
890 935

4,870 5,435 6,030
4,030 4,500 4,995
310
345 380
650
100

350

400

445 4,360 4,900 5,475
2,105 2,310 2,565
605
730 855

MEMORANDUM
Combined effect of provisions disaggregated above:
Capital gains
.
865
885
905 7,770 7,500
Exclusion of Interest on State and local debt
3,110 3,475 3,925 1,645 1,850
Deductibility of State and local nonbusiness taxes10,865 12,125
Deductibility of charitable contributions
540
620
685 4,870 5,440
1

480

7,860
2,090
13,460
6,040

All estimates are based on the t a x code as of D e c . 3 1 , 1976.

The 1976 Act repealed a special provision for U.S. firms operating in
a less developed country (LDC). When a foreign subsidiary of a U.S.
corporation operating in a LDC repatriated dividends to its parent
corporation, that income could, under prior law, be reported net of
foreign income taxes paid. U.S. tax liability was then calculated on
that net amount and the foreign tax taken as a credit. For non-LDC
corporations, foreign source income must now be "grossed up" by
adding back in an amount equal to foreign taxes paid. Under prior
law the failure to "gross up" dividends by the amount of the foreign
taxes paid to LDCs resulted in a tax expenditure.
The profits of a domestic international sales corporation (DISC)
are not taxed to the DISC but instead are taxed to the shareholders
when distributed to them. This deferral was available for 50% of the
export income of a DISC prior to 1976. The Tax Reform Act of 1976
permits DISC benefits to the extent that current export gross receipts
exceed 67% of the DISC's average for a 4-year moving base period
(initially 1972-75) which will move forward year-by-year after 1979.
DISCs with less than $150,000 of taxable income are exempt from the
incremental rule. The Tax Reduction Act of 1975 denied DISC
benefits to exporters of energy products and the 1976 Act terminated
DISC benefits for 50% of military sales.
The 1976 Act phases out the 14-percentage-point tax rate reduction
provided under prior law for domestic corporations qualifying as
Western Hemisphere trade corporations.

SPECIAL ANALYSIS F

131

Agriculture.—Prior to the Tax Reform Act of 1976, farmers, including corporations engaged in agriculture, were allowed to deduct
certain costs as current expenses even though these expenditures were
for inventories on hand at the end of the year or for capital improvements. The Tax Reform Act of 1976 generally denies these favorable
forms of tax treatment to large corporations by requiring them to use
accrual accounting. Syndicated partnerships engaged in various
agricultural activities are also required to capitalize preproduction
costs.
Capital gains treatment generally applies to the sale of livestock,
orchards, vineyards, and comparable agricultural activities.
Natural resources, environment, and energy.—The interest income on
State and local government bonds issued to finance the pollution
control facilities of private firms is exempt from Federal income tax.
The volume of outstanding bonds issued for this purpose has been
growing rapidly in recent years.
The Tax Reform Act of 1976 provides that certain payments made
by customers to water and sewage disposal utilities for the purpose
of aiding the construction of new facilities be treated as contributions
to capital rather than income.
Certain capital costs necessary to bring a mineral deposit into
production may be deducted as current expenses rather than spread
over the useful life of the property. Included in this category are the
intangible drilling costs of oil such as the wages of drilling crews, and
the cost of developing other mineral deposits, such as expenditures
for mine shafts, tunnels, and stripping. The Tax Reform Act requires
amounts deducted for intangible drilling expenses on oil and gas
wells to be recaptured upon sale or other disposition of the oil or gas
property by treating those amounts as ordinary income to the extent
that they exceed the amounts which would be allowed if the intangible
expenses were capitalized and amortized over the useful life of the
the well. The Act also added to the base of the minimum tax intangible
drilling costs in excess of the amount that would be deductible if
capitalized and amortized over 10 years or if deducted pursuant to a
cost depletion method.
Extractive industries may generally choose between cost depletion
and percentage depletion. Under cost depletion, actual outlays, to the
extent not immediately expensible, may be deducted over the productive life of the property, much as other businesses may take deductions
for the depreciation of capital goods. Under percentage depletion,
businesses in the extractive industries may deduct a prescribed
percentage of gross income (at rates ranging from 22% for oil and gas
to 5% for certain minerals, but not more than 50% of net income or
65% of net income in the case of oil and gas). Percentage depletion is
not limited to the cost of the investment as is cost depletion. The
basis for "cost depletion" is reduced to the extent certain costs are
recovered through expensing of exploration and discovery costs and
intangible drilling costs. There is no comparable reduction in "percentage depletion" for costs which are allowed as expenses. A tax
expenditure estimated on the assumption that both percentage
depletion and expensing of intangible drilling costs were eliminated
would be significantly smaller than the sum of the two separate items

132

THE BUDGET FOR FISCAL YEAR 1978

because percentage depletion would exceed cost depletion by a lesser
amount if the basis for cost depletion were increased by depreciating
exploration, discovery, and intangible drilling costs that are currently
expensed. The Tax Reduction Act of 1975 limited the application of
percentage depletion to independent oil and gas producers and royalty
owners and to specific quantities of output. The act phased the
percentage depletion rate for oil and gas down from 22% through 1980
to 15% in 1984 and thereafter.
Royalties from coal or iron ore deposits are treated as capital gains,
rather than ordinary income.
The gain on the cutting of timber is taxed at rates applicable to
long-term capital gains, rather than at ordinary income rates. The
revisions to the minimum tax made by the Tax Reform Act of 1976
do not apply to capital gains income from timber.
From 1969 through 1975 a taxpayer could elect 5-year amortization
of certified pollution control facilities installed in connection with a
plant that was in operation before 1969. The taxes previously deferred
under this provision are now being paid and as a result negative
numbers appear in table F - l for 1977 and 1978. In these years greater
amounts of tax will be paid than if this provision had not been enacted.
The Tax Reform Act of 1976 extended the 5-year amortization provision to pollution control facilities installed in connection with
plants in operation before 1977. Under prior law, if taxpayers elected
the 5-year amortization they could not claim the investment tax
credit on the capital cost of the facility. The 1976 act provides that
one-half of the investment tax credit can be claimed for such facilities.
Revenue losses will result from these new provisions in years after
1978.
Commerce and transportation.—Credit unions are exempt from
Federal income tax.
Cooperatives may deduct cash and noncash patronage dividends
based on net income earned on business done with patrons provided
that 20% of the total dividend is paid in cash and the patron has
agreed to take the entire dividend into his income. Per-unit retains,
that is, amounts retained from the value of products marketed for
patrons, may be deducted by the cooperative if patrons agree to take
the face amounts into current income. Agricultural cooperatives
meeting certain requirements are permitted to deduct dividends on
capital stock and payments to patrons from nonpatronage income.
Rural electric and telephone cooperatives may deduct noncash
patronage dividends and patrons generally need not take such dividends into income. The tax expenditures result from the deductibility of noncash patronage dividends, retains, dividends on capital
stock, and payments to patrons out of nonpatronage income. If noncash patronage dividends and retains were not deductible by cooperatives, they would no longer be taken into current income by patrons
and hence individual income taxes would be lower.
Under the permanent tax code, corporations pay income tax at the
rate of 22% on all taxable income plus a surtax of 26% on taxable
income in excess of $25,000. Each corporation therefore receives a
surtax exemption of $25,000. This exemption is intended to encourage
small or new business. For 1975 only, the Tax Reduction Act of 1975
provided that the tax rate on the first $25,000 of taxable income be

SPECIAL ANALYSIS F

133

reduced to 20% and that the surtax exemption extend to the second
$25,000 of taxable income. This temporary provision was extended to
December 31, 1977, by the Tax Reform Act of 1976.
Certain companies which operate U.S.-flag vessels on foreign trade
routes receive an indefinite deferral of income taxes on that portion
of their net income which is used for shipping purposes, primarily
construction, modernization, and major repairs of ships. The Tax Reform Act of 1976 provides for an investment credit of one-half the
regular credit on the tax-deferred amounts withdrawn from capital
construction funds.
Specified classes of railroad rolling stock are eligible for amortization over a 5-year period whether owned by railroad companies or by
lessors, rather than their longer, expected useful life. If 5-year amortization is elected the investment tax credit cannot be claimed. This
provision applies only to rolling stock placed in service before 1976.
Greater amounts of tax are currently paid than if this provision had
not been enacted because in most cases the 5-year amortization period
has expired; hence the negative figures in table F - l . Tax liabilities are
now greater because no depreciation can be claimed.
Commercial banks, mutual savings banks, and savings and loan
associations are permitted to deduct and set aside additions to bad
debt reserves in excess of actual loss experience and reasonable expectations as to future losses. Commercial banks may maintain a
reserve of 1.2% of uninsured loans. The ratio will phase down to 0.6%
in calendar year 1981. Mutual savings banks and savings and loan
associations may deduct 42% of income in calendar year 1977, provided they maintain stipulated fractions of their assets in "qualifying
assets/' primarily residential mortgages. Under current law their maximum deduction will phase down to 40% in 1979 and thereafter.
Individuals who itemize their deductions may deduct State and
local gasoline excise taxes paid. The deduction of excise taxes on gasoline used for business purposes does not result in a tax expenditure
since they would in any case be deductible as a business expense.
Community and regional development.—The Tax Reform Act of 1976
extended until January 1, 1978, provisions whereby taxpayers may,
under certain conditions, elect to depreciate rehabilitation expenditures for low- and moderate-income rental housing over a 5-year
period. Qualified rehabilitation expenditures may not exceed $20,000
per dwelling unit and must exceed $3,000.
Education, training, employment, and social service.—Recipients of
scholarships and fellowships may exclude such amounts from taxable
income, subject to certain limitations. The exclusion of educational
benefits 7 under the GI bill is included in the "Veterans benefits and
services ' function.
Taxpayers may claim personal exemptions, and the related $35
credit, for dependent children 19 or over who receive income of $750
or more per year only if the children are full-time students. The student
may also claim an exemption on his or her own tax return, in effect
providing a double exemption, one on the parents' return and one on
the student's.
Contributions to nonprofit educational institutions are allowed as a
deduction for individuals and corporations. (See the discussion of
other charitable contributions under "Other tax expenditures.")

134

THE BUDGET FOR FISCAL YEAR 1978

The Tax Reform Act of 1976 substantially modified the tax treatment of child and dependent care expenses. Under prior law such
expenses, incurred to enable both spouses to work, could be taken as
an itemized deduction up to a maximum of $400 per month. The
deduction was reduced by 50 cents for each dollar of adjusted gross
income in excess of $18,000 per year. The new act substitutes a tax
credit of 20% of eligible expenditures up to a maximum of $2,000 for
one dependent and $4,000 for two or more. The act extends the
credit to married couples when one spouse works part-time or is a
student and to a divorced or separated parent who has custody of a
child. It also eliminates the income limit.
A credit is allowed against income tax liability equal to 20% of
first-year wages and salaries of employees who were placed in employment under the work incentive program or were previously AFDC
recipients. The credit for a taxable year cannot exceed $50,000 plus
50% of the excess over that amount.
Health.—Payments by employers for health insurance premiums
and other medical expenses are deducted as business expenses by
employers and excluded from income by employees. The exclusion from
employees' income gives rise to the tax expenditure.
Medical expenses in excess of 3 % of adjusted gross income, including
expenditures for prescribed drugs and medicines in excess of 1% of
adjusted gross income, may be deducted by individuals as itemized
nonbusiness deductions. Individuals may also deduct half of the
premiums they pay for medical care insurance up to a maximum
deduction of $150 per year, without regard to the 3 % limitation.
Income security.—Most forms of government transfer payments to
individuals, such as social security and unemployment benefits, are
excluded from taxable income. If the taxpayer had no other source of
income, these payments, even if taxable, would not generally be sufficient to result in any tax liability, given personal exemptions and
minimum standard deductions. Since some recipients have property
income, receive earnings (in some instances for only part of a year), or
may file jointly with working spouses, tax expenditures result from
these exclusions.
Under prior law, certain payments, up to $100 per week, financed by
an employer in lieu of wages during periods of employee injury or sickness were excluded from the employee's taxable income. The Tax
Reform Act of 1976 repealed the sick pay exclusion except for persons
under the age of 65 who are permanently and totally disabled. For
these individuals the exclusion is reduced dollar for dollar for adjusted
gross income (including disability income) in excess of $15,000.
Certain contributions to pension plans paid by employers, and
amounts set aside by the self-employed and employees not covered
by an employer's plan, are excluded from the individual's gross income
in the year of contribution. The investment income earned by pension
funds is not taxable currently. The resulting tax expenditures are
composed of two elements: lower effective tax rates after retirement,
due to lower incomes and special tax provisions enjoyed by the aged;
and the excess of aggregate current contributions and investment
earnings over aggregate amounts paid out in benefits. Self-employed
persons can make deductible contributions to their own retirement

SPECIAL ANALYSIS F

135

plans equal to 15% of their income, up to a maximum of $7,500 per
year. Employees not covered by an employer's plan may deduct annual
contributions of 15% of compensation, up to a maximum of $1,500, or,
under the terms of the 1976 Act, $1,750 if the retirement account is
owned jointly by a husband and wife.
In addition to pension plans, many employers provide other employee benefits that are excluded from employee income. The employer's share of these benefits are deductible business expenses.
Included in the meals and lodging item is the exclusion of housing
allowances and the rental value of parsonages from the taxable income
of ministers.
The Tax Reform Act of 1976 temporarily added two items to the
list of employee fringe benefits eligible for special tax treatment:
prepaid legal services plans and employee stock ownership plans
(ESOP). Under prior law an employee had to include in taxable
income either his share of employer contributions to a prepaid legal
services plan or the value of legal services received under the plan.
The act excludes from employee income both employer contributions
and the value of benefits received under such a plan. The act also
provides that, through 1980, a corporation may claim an additional 1%
investment tax credit if an equivalent amount of its common stock
is set aside in an ESOP. This provision of the 1976 act extended a
provision of the Tax Reduction Act of 1975. Under the 1976 act a
further one-half of 1% investment tax credit may be claimed if the
resulting addition to an ESOP is matched by employee or employer
contributions. Employees aie generally prohibited from withdrawing
their share of an ESOP for 7 years. The tax expenditures resulting
from additional investment tax credits claimed under the ESOP provisions are listed in the income security function because the provisions primarily benefit employees rather than the corporations which
claim the tax credit.
A taxpayer 65 or older may exclude from gross income any capital
gain allocated to the first $35,000 of the adjusted sales price on a sale
of a personal residence. This once-in-a-lifetime exclusion was increased
from $20,000 by the Tax Reform Act of 1976.
The percentage standard deduction limits the tax liability for
many taxpayers, predominately in the middle-income range, and for
that reason is classified under income security. For calendar year 1975
only, the Tax Reduction Act of 1975 provided a percentage standard
deduction of 16% of adjusted gross income up to a limit of $2,600
for married persons filing joint returns and $2,300 for single persons.
The Tax Reform Act of 1976 made the 16% rate permanent and set
limits of $2,800 for joint returns and $2,400 for singles. The percentage standard deduction is a substitute for itemizing personal deductions; the estimates shown are for the amount by which the percentage standard deduction exceeds the low-income allowance or the
itemized deductions that would be taken in the absence of this provision, whichever is greater. This provision also encourages taxpayers to
use the simplified short form 1040A.
Additional personal exemptions of $750 may be deducted by taxpayers who are over 65 or who are blind. These additional exemptions
may not be claimed for a taxpayer's dependents.
The retirement income tax credit was substantially changed by the
Tax Reform Act of 1976 and renamed the "credit for the elderly."

136

THE BUDGET FOR FISCAL YEAR 1978

Under prior law, individuals who were over age 65 could claim a
tax credit of 15% of retirement income from all sources except social
security, railroad retirement, and other tax-exempt benefits. The
maximum amount of retirement income to which the 15% credit
applied was $1,524 for a single person and $2,286 for a married couple
where one spouse had worked prior to retirement and $3,048 if both had
worked. The provision was designed to provide taxpayers with taxable
retirement income a tax benefit approximately comparable to that
accorded recipients of social security and similar tax-exempt benefit
payments. The 1976 act simplified eligibility rules and increased the
maximum base for the credit to $2,500 for a single person and to $3,750
for a married couple. It also eliminated the parallel to social security by making the credit available for earned income as well
as retirement income. Under the new act the base upon which the
credit is calculated continues to be reduced by tax-exempt social
security and retirement income, and the credit is phased out at levels of
adjusted gross income above $7,500 for a single person and $10,000
for a married couple.
The aggregate effect of excluding social security and railroad retirement benefits for retirees, the additional exemption for persons
over 65, and the credit for the elderly are revenue losses of $4,585
million in 1976, $5,545 million in 1977, and $5,925 million in 1978.
These aggregates are greater than the sum of the individual estimates
because more elderly persons would be pushed to taxpaying levels
of income or into higher tax brackets if all of these items were deleted from the tax code.
The Tax Reduction Act of 1975 established, on a temporary basis,
an earned income credit for low-income workers with children. The
maximum credit is 10% of a worker's first $4,000 of earned income
and phases out at $8,000 of earned income or adjusted gross income,
whichever is greater. To the extent that the credit reduces or eliminates tax liabilities it results in a tax expenditure. Credits in excess
of tax liabilities are paid to individuals. These payments are treated
as budget outlays and are estimated to be $856 million in 1977.
The Tax Reform Act of 1976 extended the earned income credit
through calendar year 1977.
Veteran benefits and services.—All compensation due to death or
disability and pensions paid by the Veterans Administration are
excluded from taxable income. GI bill benefits are also excluded.
General government.—Political contributions up to a maximum of
$100 ($200 in the case of joint returns) may be deducted, or tax
credits may be taken up to one-half of contributions but limited to
$25 ($50 on joint returns).
Revenue sharing and general purpose fiscal assistance.—The interest
on State and local government debt is excluded from Federal taxation.
Both corporations, mainly commercial banks, and individuals receive
this tax-exempt income. As a result, these governments are able to
sell debt obligations at a lower interest cost than would be possible
if such interest were subject to tax. The exclusion of interest on State
and local government industrial development bonds and securities
issued to finance pollution control facilities are classified elsewhere;
only the effect of excluding interest on general purpose obligations and

SPECIAL ANALYSIS F

137

revenue bonds for public purposes such as toll roads is estimated for
this function. The estimated revenue loss from all tax-exempt bonds
is $6.0 billion for 1978.
Under prior law, U.S. corporations receiving income from sources
in a U.S. possession could, under certain conditions, exclude all
foreign source income from tax. The Tax Reform Act of 1976 repealed
this provision and introduced instead a special credit equal to the
U.S. tax, but only on income from sources in a U.S. possession.
The deducibility of nonbusiness State and local taxes provides
indirect assistance to these governments. The deducibility of property
taxes on owner-occupied homes and excise taxes on gasoline are classified elsewhere. The estimates shown here are primarily for the deducibility of State and local income and sales taxes. The Reductibility of all
State and local taxes resulted in an estimated tax expenditure of $13.5
billion in 1976.
Interest—Holders of U.S. sayings bonds are not required to include
the interest on these securities in their taxable income until the bonds
are redeemed, thereby deferring tax liabilities.
Business investment.—The interest on certain industrial development
bonds issued by State and local governments is excluded from taxable
income. The proceeds of these bonds are used to finance private investment in manufacturing plants and other facilities. For that reason
this item is classified as business investment rather than under revenue
sharing and general purpose fiscal assistance to State and local
governments.
To the extent that allowable depreciation for tax purposes exceeds
the rate at which assets actually depreciate, business tax liabilities
are deferred. Businesses may employ a variety of depreciation schedules for tax purposes, some of which cause a much larger part of asset
values to be written off in early years of the asset's useful life than do
others. An extra first-year depreciation deduction of 20% may be
claimed for $10,000 of tangible personal property ($20,000 on a joint
return) having a useful life of at least 6 years. The revenue costs of
allowing buildings and rental housing to be depreciated for tax purposes by methods that reduce asset value more rapidly than straightline depreciation (the method typically used in financial statements)
are shown.
Research and development expenditures typically result in new
products or processes, cost reductions, or other outcomes the benefits
from which will, in nearly all cases, continue into the future. For tax
purposes businesses may deduct all research and development expenditures in the year during which they are incurred rather than
amortizing them over a number of years. The tax expenditure is
estimated as if such expenditures were amortized over a 5-year period.
Under prior law taxpayers could deduct on a current basis interest
and property tax payments made during the period when a building
was under construction rather than include such costs of construction,
along with other costs, in the value of the completed structure, which
would then be depreciated over its useful life. The Tax Reform Act
of 1976 reduced this tax expenditure by providing that, for noncorporate taxpayers, construction period interest and taxes be capitalized

138

THE BUDGET FOR FISCAL YEAR 1978

and amortized over a 10-year period. The new provision is to be phased
in over a 7-year period with more generous transition rules for Government-subsidized housing projects.
Corporations may elect a 30% alternative tax rate on capital gains.
The tax expenditure is estimated on the assumption that these gains
would otherwise be taxed at 48%.
The investment tax credit was temporarily increased from 7% to
10% (from 4% to 10% in the case of public utilities) by the Tax
Reduction Act of 1975. The higher rate was extended through 1980
by the Tax Reform Act of 1976. The percentage is applied to the cost
of qualifying property (generally, tangible personal property used in
a trade or business) having a useful life of over 7 years. The investment
tax credit cannot be claimed for investments in land or buildings or
for property used abroad. Lower rates apply to property with useful
lives of 3 to 7 years. The investment tax credit may be claimed as
progress payments are made on property that takes 2 or more years
to construct. The maximum credit which may be offset directly against
income tax liability in a taxable year is generally limited to $25,000
plus one-half of the excess of tax liability over $25,000. Excess credits
may generally be carried back 3 taxable years and forward 7 taxable
years, after which they expire if still unused. The 1975 Act provided
a temporary increase in maximum credits that can be claimed by
public utilities. The 1976 Act extended similar treatment to railroads
and airlines.
Personal investment.—Grouped together in this category are a
number of tax expenditure items that affect individuals as investors
and holders of real and financial assets.
The first $100 ($100 per taxpayer on a joint return) of dividend
income may be excluded from taxable income.
Half of the long-term gains from the sale of capital assets is excluded
from income and up to $25,000 of included gains may be taxed at a
rate of 50%. The excluded half of net long-term capital gains is
included in the base of the minimum tax. Capital losses may be
deducted from gains but only a limited amount of net losses may be
deducted in any 1 year from ordinary income. The Tax Reform Act of
1976 lengthened the holding period over which capital assets must be
held to qualify as long-term gains and losses from 6 months to 9 months
in 1977 and to 12 months in 1978 and thereafter. The act also
increased the amount of ordinary income against which net capital
losses may be offset in any 1 year from $1,000 to $2,000 in 1977 and
to $3,000 in 1978 and thereafter.
Life insurance policies, other than term policies, generally have a
saving element in them. Savings in the form of policyholder reserves
are accumulated from premium payments, and interest is earned on
the reserves. Such interest income is taxable neither as it accrues
nor when received by beneficiaries.
Capital gains on the sale of a home are recognized only to the extent
that the "adjusted sales price" exceeds the cost of a new home purchased and occupied within 18 months before or after the sale (if a
new house is constructed it must be occupied within 2 years after the
sale). The "adjusted sales price" is the amount realized (gross proceeds less selling expenses) minus qualified "fixing up" expenses. A

SPECIAL ANALYSIS F

139

loss on a sale of a home is not deductible. To the extent the gain on
the sale of a home is not recognized, the basis of the home purchased
is reduced thereby resulting in a deferral of the gain.
Owner-occupants of homes may deduct mortgage interest and
property taxes (but not maintenance outlays or depreciation because
the in-kind income from homeownership is not recognized) as itemized
nonbusiness deductions. The tax expenditure from these two items
combined is $10.2 billion for 1978. This is less than the sum of the
two separately because if both were deleted more taxpayers would
save by using the standard deduction.
Taxpayers may deduct as an itemized nonbusiness deduction the
amount in excess of $100 for each loss due to fire, theft, or other
casualty to the extent not compensated by insurance or other payments.
The Tax Reduction Act of 1975 provided, for part of calendar year
1975 only and subject to certain conditions, a tax credit equal to 5%
of the purchase price of a new home, up to a maximum credit of
$2,000. In a few cases taxpayers will not be able to claim the credit
until they file their 1976 returns during fiscal year 1977.
Other tax expenditures.—Interest paid on consumer credit for any
purpose is allowed as an itemized nonbusiness deduction for individuals.
Contributions to charitable, religious, and certain other nonprofit
organizations are allowed as an itemized deduction for individuals,
generally up to 50% of adjusted gross income. Taxpayers whose contributions to charitable or educational organizations are in the form of
capital assets, usually securities, which have appreciated in value
above their cost, obtain a deduction for the contribution at the appreciated value of the asset without taxation on the appreciation in
value. Contributions to educational institutions are reported under
"Education, training, and employment, and social services."
Corporations may deduct charitable contributions (including those
made to educational institutions, which are separately reported) up
to 5% of their income. In the absence of this provision of the tax
code some of these contributions might be deductible as business
expenses. The estimates are based on all reported contributions. The
Tax Reform Act of 1976 liberalized the provision for deductibility of
contributions of inventories to charitable organizations.
The Tax Reform Act of 1969 introduced a maximum marginal tax
rate of 50% on earned income. Under the act, the amount of earned
income eligible for the maximum tax was reduced by tax preferences
in excess of $30,000. The 1976 act extended the maximum tax to
certain pensions, annuities, and deferred compensation, but eliminated
the $30,000 exemption to the offset for tax preferences and added to
that offset the new preference items which were included by the act
in the base of the minimum tax.
PROPOSED CHANGES IN TAX EXPENDITURES

The tax proposals that are a part of the 1978 budget would slightly
reduce almost every estimated tax expenditure for 1978 presented
in table F - l . The normal structure of the individual income tax
would be changed by increasing the personal exemption from $750 to

140

THE BUDGET FOR FISCAL YEAR 1978

$1,000, increasing the low-income allowance from $1,700 to $1,800
for single returns and from $2,100 to $2,500 for joint returns, and
reducing lower bracket tax rates. As a part of these changes, the
temporary earned income credit would be repealed as would the
temporary credit of $35 per exemption or 2% of taxable income credit
which are not tax expenditure provisions. The impact of these changes
on budget receipts is discussed in Part 4 of the budget. The proposed
changes would reduce the number of taxpayers who itemize their
deductions and would alter marginal tax rates for almost every taxpayer. The proposed reduction in the basic corporate tax rate from
48% to 46% would reduce the tax expenditures associated with the
corporate income tax. Reestimates reflecting the impact of these proposals have not been made.
Several proposals affect particular tax expenditures more directly
and these will be briefly discussed. The estimates for these specific
changes are shown in table F-2.
Table F-2. ESTIMATES OF PROPOSED CHANGES IN TAX EXPENDITURES
(In millions of dollars)
Corporations
Description

Additional exemption for over 65
Additional exemption for the blind__
__
Parental personal exemptions for students, ages 19 and over_
Excess of percentage standard deduction over low-income
allowance.Earned income credit
Exclusion of employee benefits: Employee stock ownership
plans (ESOP) funded through investment tax credits
Deductibility of charitable contributions
Credit for home insulation
Corporate surtax exemption
Accelerated depreciation in high unemployment areas
Expensing of geothermal research and development
Exclusion of interest on State and local debt

1977

1978

Individuals
1977

1978

290
5
175
-396
—105

425
5
255
-605
—205

—255
55
195

1,045
175
*

30
—5

"Less than $5 million.

Existing tax expenditures items significantly affected by proposed
individual income tax cuts.—The additional personal exemption for
taxpayers who are over 65 or blind would be increased from $750 to
$1,000. Parents of students would also benefit from the increase. The
excess of the percentage standard deduction over the low-income
allowance would be reduced since the low-income allowance is increased. The package of individual income tax cuts includes repeal
of the earned income credit. In addition to reducing tax expenditures, its repeal would also reduce budget outlays by $835 million in
1978.
Employee stock ownership plans (ESOP). Repeal is proposed of the
provisions of the Tax Reform Act of 1976 that allow ESOPs to be
funded through extra investment tax credits. The tax receipts foregone as a result of these provisions are used to acquire stock in the
corporations eligible for the tax credit. The stock is held in trust for

SPECIAL ANALYSIS F

141

employees of those corporations at little or no cost to the employees;
an employee can sell his or her portion of the employer's stock after 7
years or upon retirement or other termination of employment. Repeal
is urged on equity grounds. Only employees of taxable corporations
are benefited. As among such employees, those who benefit the most
work for firms eligible for investment credits which are large relative
to the number of their employees. Moreover, individual employees
benefit in proportion to their compensation so that the highly paid
are the most favored. These provisions may also lead workers to
depend upon the fortunes of a single firm for their income security
during retirement years rather than upon a more diversified investment
portfolio.
Charitable contributions.—The Tax Reform Act of 1976 included in
the base of the minimum tax itemized deductions (with the exception
of medical expenses and casualty losses) in excess of 60% of adjusted
gross income. The proposal is to exclude charitable contributions from
the calculation of excess itemized deductions so as to remove any
possible disincentive to charitable giving.
Home insulation.—A tax credit of 15% of a homeowner's expenditures for energy-saving improvements such as insulation and storm
windows is proposed. The credit would be based upon expenditures of
up to $1,000 for such purposes during the calendar years 1977, 1978,
and 1979. Total credits claimed by any tax-filing unit during the
3-year period could not exceed $150.
Corporate surtax exemption.—The provisions of the Tax Reform Act
of 1976 that lower the tax on the first $50,000 of corporate income are
proposed to be made permanent. These provisions would otherwise
expire on December 31,1977.
Accelerated depreciation for investment in areas of high

unemploy-

ment.—A tax incentive is also proposed to encourage private-sector jobs
and construction of new facilities or expansion of old facilities in labor
market areas where unemployment is 7% or higher. This will be
accomplished by allowing very rapid amortization for nonresidential
buildings and capital equipment. Buildings will be amortized over a
period equal to one-half their useful life. Capital equipment put in
place in new or expanded facilities will be amortized over 5 years; the
full investment tax credit can be claimed on such capital equipment.
This incentive will apply to projects begun during calendar year 1977
and completed within 36 months.
Expensing

of geothermal research and development.—New

domestic

energy supplies may be achieved through the development of geothermal resources. To encourage the discovery and development of such
resources it is proposed that certain costs associated with projects
approved during the next 10 years by the Energy Research and
Development Administration be treated for tax purposes as research
and development expenditures. These expenditures would thus be
expensed rather than treated as capital outlays and depreciated over a
normal useful life.

142

THE BUDGET FOR FISCAL YEAR 1978

Taxable municipal bond option.—Legislation is proposed authorizing
the payment of Federal interest subsidies to State and local governments which choose to issue taxable bonds rather than bonds on which
interest payments are exempt from Federal income taxes. The subsidy
would be 30% cf the first 12% of net interest expense. Municipal
bonds for industrial development purposes and those issued with a
Federal guarantee or other subsidy would be denied tax-exempt
status. Industrial development bonds, including pollution control
bonds, currently eligible for tax exemption would be required to be
issued in taxable form with a 20% interest subsidy. The proposal
would improve the efficiency of the municipal bond market by reducing the gap between costs to the Federal Government and interest
savings to State and local governments. The proposal would also
prevent the tax-exempt market from being overloaded with industrial
development bonds, which are in essence private demands for credit.
Such overloading has tended to drive up the cost of borrowing for
public purposes by State and local governments and has increased
revenue losses to the Federal Government.

SPECIAL ANALYSIS G
PRINCIPAL FEDERAL STATISTICAL PROGRAMS
INTRODUCTION

This special analysis presents an overview of the major statistica
programs of the Federal Government, as reflected in the 1978 budget
It includes the entire budgets of four bureaus (the Statistical Reporting Service, the Bureau of Economic Analysis, the Bureau of the
Census, and the Bureau of Labor Statistics) and obligations for statistical programs in an additional 54 bureaus or agencies. In addition to
employment and budget obligations, the tables show budget totals
for all current and periodic programs and for broad subject matter
areas. These tables indicate the level of resources presently available
and those proposed in 1978 for statistical programs throughout the
Federal Government.
Over the years this analysis has been made more comprehensive
and more useful by inclusion of information on additional statistical
activities and refinement of the guidelines for determining which
Federal programs should be included in the analysis. Because it has
become more comprehensive, it is appropriate to provide clarification
concerning the character and limitations of the analysis.
Statistica] activities include: Plamrng for statistical programs,
project design, questionnaire or form design, instructional materials,
training of interviewers, data collection, training of processing personnel, processing, primary analysis, dissemination, and publication;
classification; preparation of estimates and projections; statistical
manipulation of data collected by others; statistical methodology
and research; and management and coordination of statistical
operations.
The summary tables concerning Federal statistical programs do not
represent a unified budget total that has been allocated among the
various programs. Rather this budget is a compilation of the budgets
for statistical programs and represents the amounts that were individually derived in relation to the specific needs for each program.
Hence, funds removed from the budget of one statistical program
during either the executive or the congressional budget review process
do not necessarily become available for allocation to another statistical
program, even within the same agency. They may be used to help
reduce the budget total or to help finance other statistical or nonstatistical activities.
Furthermore, this analysis of statistical resources by broad subject
area is not intended to represent a statement of priorities among
these areas. The tables do, however, reflect a process that attempts
to analyze statistical needs within the subject matter areas, to provide funding for the most clearly established needs, and to eliminate
or reduce resources for programs where the need is no longer evident.
Also, the budget recommendations are coordinated in the sense that,

143

144

THE BUDGET FOR FISCAL YEAR

1978

in selecting projects for inclusion in the budget of one agency, account is taken of related projects in other agencies. In addition,
consideration may be given to more than one agency as the appropriate location of project funds and required personnel.
Moreover, as the title "Principal Federal Statistical Programs"
suggests, the analysis does not include all Federal statistics. For
example, agencies or bureaus with less than $300 thousand of obligations for statistical programs are not included. In addition, data
collection and analysis that relate to internal departmental management are not included unless they have multipurpose or national
policy significance. Scientific and research data are also generally
excluded except in cases where such data are basic components of the
multipurpose data base for a given subject area. For example, the
analysis for both energy and environmental statistics includes scientific data in these fields. However, most management, scientific, and
research data are not included.
In this context, total obligations for current statistical programs
will increase by $97.9 million or 16.5% over 1977. Periodic programs
will increase by $8.1 million or 12.5% over 1977, primarily because of
accelerated planning for and preparation of the 1980 decennial census.
Total obligations for all principal Federal statistical programs will
increase by $106.0 million or 16.1% over 1977.
PERSONNEL REQUIREMENTS

The quality, timeliness, and integrity of Federal statistics are the
product of the staff engaged in production and analysis of these series.
Information on the full-time permanent positions proposed for major
statistical agencies is presented in table G-l. In addition to these
positions in major statistical agencies, there are many statisticians
working in smaller statistical units in other agencies and departments.
The figures in table G-l do not include part-time or temporary positions because the only consistently defined figures that are currently
available are those on full-time permanent positions.
Table G-l. FULL-TIME PERMANENT POSITIONS BY AGENCY
1976
actual

Department of Agriculture:
Statistical Reporting Service
Department of Commerce:
Bureau of Economic Analysis
Bureau of the Census
Department of Health, Education, and Welfare:
National Center for Education Statistics
National Center for Health Statistics
Department of Labor:
Bureau of Labor Statistics
Total for six agencies reporting
1
2

1977
1978
estimate estimate

1,238

1,289

1,303

509
4,059

540
4,084

560
4,091

191
522

1
179
i 542

1,774

2 2,500

8,293

9,134

191
* 542

2, 372
9,059

These estimated figures are subject to further departmental review.
Over the last several years the Bureau of Labor Statistics has been reporting employees working
on programs financed by other agencies as temporary, in the expectation that the programs would
remain temporary. However, the programs have proved to be ongoing and the positions occupied
fit the definition of permanent since in actuality they are occupied for more than 1 year. The
reporting of these employees, therefore, is changed in 1977.

SPECIAL ANALYSIS G

145

The variations in staff levels relative to the program sizes are
partially explained by the different natures of the various agency
programs. For example, the Bureau of the Census does a great deal
of work for other agencies on a reimbursable basis for which no funds
are included in the Census Bureau's budget although the work is
performed by Census personnel. The National Center for Education
Statistics, on the other hand, has proportionately more work done
under contract using the contractor's personnel. The decrease in
the personnel level for the Bureau of Labor Statistics is because of
the completion of the Consumer Price Index revision program in 1977.
STATISTICAL COORDINATION

Since the budgets for statistical programs are determined by
relating the needs for information to the specific program requirements
of the statistics-producing agencies, it is essential to have an ongoing
mechanism for coordinating the needs of the various users. For
example, many Federal programs allocate funding based upon total
population or some specific subgroup of the population. An analysis
of Federal programs for 1975 revealed that $33 billion of Federal
grants to States and units of local government were affected by
formulas that used population as one of the variables. Under the
Budget and Accounting Procedures Act of 1950, the Office of Management and Budget (OMB) has broad authority for the coordination
of statistical programs and, pursuant to this authority, sets forth
statistical standards in OMB Circular A-46. To emphasize the need
for coordination in the use of population statistics, OMB recently
amended Circular A-46 to require that all agencies use the same
population series in the administration of Federal programs.
The wide use of population statistics for Federal policymaking has
long been recognized. In fact, the needs of Federal users of these
statistics have been coordinated formally since the late 1940's, in
conjunction with the 1950 decennial census. This process is continuing.
An interagency group—the Federal Agency Council on the 1980
Census, comprised of representatives from more than 90 Federal
agencies—was organized in 1974 to advise on the content of the
1980 decennial census. Nine subject matter committees of the Council
consider policy data needs and content for the 1980 census. The
Council will continue to review tabulation plans, geographic area
data requirements, and reliability requirements for the various
agencies.
Economic statistics, which are of central importance in Federal
policymaking, are the subject of considerable attention now. An
intensive review of the basic data requirements for the national income
accounts was initiated in 1973, and the findings of the Advisory
Committee on Gross National Product (GNP) Data Improvement
influenced budget recommendations for 1977 as well as 1978. Following public review of the Committee's work in 1977, additional
improvements are likely to be reflected in future budgets.
An extensive review of the entire range of Federal statistics will
become the subject of public review in 1977 with the distribution of
draft materials for "A Framework for Planning U.S. Federal Statistics,
1978-1989," an overall interagency planning effort, coordinated by
OMB. The framework contains a discussion of the organization of
O - 77 - 10
240-700

146

THE BUDGET FOR FISCAL YEAR 1978

U.S. Federal statistics, including the roles and missions of the major
statistical agencies, a discussion of 16 different broad subject areas,
and a discussion of a variety of specific crosscutting issues affecting the
Federal statistical system, such as confidentiality, professional staff
training, reporting burden, interagency (reimbursable) funding, and
Federal-State cooperative programs.
Table G-2. OBLIGATIONS FOR PRINCIPAL CURRENT STATISTICAL
PROGRAMS, BY BROAD SUBJECT AREA i
(In millions of dollars)
1976
actual

Prices and price indexes
Labor statistics
Production and distribution statistics
Agriculture statistics
Transportation statistics
Housing and construction statistics
Economic and businessfinancialaccounts
Energy statistics
Environmental statistics
Health statistics
Education statistics
Income maintenance and welfare statistics
Population statistics
Criminal justice statistics
Total, principal current programs
1

14.0
76.8
36.6
39.4
19. 3
20.8
38.3
65. 6
40. 7
94.5
25. 1
24.7
6.2
36.0
537.9

1977
estimate

1978
estimate

20.4
81.7
39.4
47.4
25.9
22.0
41.7
100.6
35.8
103.4
15.0
25.8
6.8
27.2

29.7
88.5
40.1
49.8
27.4
24.4
43.6
146.2
43.4
114.4
17.5
28.9
8.2
28.9

593.1

691.0

Classifications are based on primary use of statistics.

CURRENT PROGRAMS
PRICES AND PRICE INDEXES

Continuing consumer expenditure survey ($6.6 million).—The 1978
budget for the Bureau of Labor Statistics (BLS) provides for a
continuing survey of consumer expenditures. The survey will: (1)
Produce selected data on an annual basis on consumer income and
expenditures classified by family size and other demographic and
socioeconomic characteristics, (2) permit publication of a subset of
the data on a quarterly basis, (3) provide a data base that can be
used for the revision of the BLS family budget program, and (4)
provide current data for future revisions of the Consumer Price Index.
Industrial price program ($0.9 million).—An increase is provided
for the industrial price program (previously the wholesale price
program) for the beginning of a major overhaul of the program that
produces the wholesale, industry sector, and stage of processing
indexes. The revised program, which will be implemented in incremental steps to cover additional groups of industries over a number of
years, will, when completed, provide a complete system of price
measures consisting of: (1) Input and output price indexes at the
four-digit industry (Standard Industrial Classification (SIC)) level,

SPECIAL ANALYSIS G

147

(2) detailed commodity and service indexes, and (3) improved stage of
processing indexes. The revision program being started in 1978 will
result in indexes based on improved statistical techniques and samples.
The data collected will be based on specification pricing techniques.
International price program ($0.3 million).—The expansion of the
BLS international price program is being continued in 1978 by adding
coverage for an additional 10% of the value of both U.S. exports and
imports. This increment will, by 1979, raise the value of the categories
covered by the indexes to 65% of U.S. exports and 50% of the value
of products imported into the United States.
LABOR STATISTICS

Public sector bargaining agreements ($0.3 million).—BLS will
conduct a program of industrial relations research and data collection
to provide for the development of data on public sector bargaining
settlements. The data on the amount and nature of changes in wages
and related benefits and estimates of overall costs of the settlement
package are expected to permit comparison of settlements between
the public and private sectors. The public sector program covered by
this increment will initially provide information on approximately 300
collective bargaining units with 1,000 or more employee? in State and
local jurisdictions.
PRODUCTION AND DISTRIBUTION STATISTICS

Inventory statistics ($0.5 million).—In recent years the Subcommittee
on Economic Statistics of the Economic Policy Board has expressed its
concern about the adequacy of Federal statistics on business inventories. Two new Census Bureau programs will make significant
improvements in the measurement of change in inventories. Design
of these surveys has benefited from recommendations of the National
Bureau of Economic Research under contract to the Census Bureau.
A survey of the largest, most complex companies in manufacturing,
retail trade, and wholesale trade will produce inventory data for
company divisions. These reports will be combined with data
collected from the smaller companies in order to produce an overall
report. For manufacturers, another Census Bureau program will: (1)
Provide disaggregated inventory totals classified by type of accounting
methodology, (2) study the implications of timing and accounting
problems, (3) reconcile the monthly and annual figures, and (4) continue research into inventory data collection methods.
Automated minerals availability system ($0.5 million).—The Bureau of
Mines, Department of the Interior, will automate the minerals availability system. This activity will assimilate already collected data
from various surveys and other sources into a computer system that
will facilitate access to these data for purposes of research and analysis.
Ocean minerals ($0.3 million).—The Bureau of Mines will conduct
studies related to ocean mining of minerals. Studies will include the
minerals potential from ocean mining, the capital and operating

148

THE BUDGET FOR FISCAL YEAR 1978

costs of ocean mining, the influence that possible Law of the Sea
provisions will have on ocean mineral development, and the possible
impact ocean mining could have on land-based mining industries.
Critical minerals ($0.3 million).—Additional funds allow expansion
of the Bureau of Mines program that provides assessments of domestic
and foreign resources of "critical" minerals that now are primarity
imported.
AGRICULTURE STATISTICS

Agricultural statistics are shown as a separate category this year for
the first time. In previous years the bulk of such activities were included in the production and distribution category ($40.7 million in
1977). Programs dealing with agricultural prices were included under
price statistics ($4.7 million in 1977), and other programs were classified in the labor statistics, economic and business financial accounts,
and population statistics categories. Almost all these statistical programs are conducted by the Department of Agriculture (USDA).
The censuses of agriculture are not included in this category because
they are shown separately as periodic programs. These statistical
programs are now reported in one place to coincide with U subject
the
matter contained in the agricultural statistics chapter of A Framework for Planning U.S. Federal Statistics, 1978-1989" referred to
above.
Statistics on rural credit ($0.3 million).—One of USDA's responsibilities involves the design and implementation of Federal credit
programs affecting rural areas. Capital investment is needed in
increasing amounts for sophisticated equipment, increased irrigation,
better environmental protection measures, development of nonfarm
activities in rural areas, and housing. The Economic Research Service
in USDA will undertake a study of the adequacy of capital in rural
areas, access to national and regional capital markets, and practices
of lending institutions to help evaluate the adequacy and effectiveness
of ongoing USDA credit activities.
Prices received by farmers ($0.5 million).—The Statistical Reporting
Service (SRS), USDA, will improve the statistics on prices received
by farmers by instituting a nationwide point-of-sale survey. This
survey will provide SRS with information needed to select an efficient
sample of outlets from which to collect data on the prices farmers
received for their agricultural products and will also permit accurate
weighting of sample survey responses to estimate aggregate totals.
TRANSPORTATION STATISTICS

Transportation statistics are also shown as a separate category this
year. In previous years the activities were included in the production
and distribution category ($25.9 million in 1977). These programs
are largely conducted by the Department of Transportation but also
include statistical activities of the Army Corps of Engineers, the
Civil Aeronautics Board, and the Interstate Commerce Commission.
Excluded, however, are the transportation surveys conducted by the

SPECIAL ANALYSIS G

149

Bureau of the Census as a part of the economic censuses, which are
included under periodic programs. Transportation statistics are being
reported separately to coincide with the subject matter contained in
the transportation statistics chapter of "A Framework for Planning
U.S. Federal Statistics, 1978-1989."
HOUSING AND CONSTRUCTION STATISTICS

Housing market statistics {$2.2 million).—The largest part of this
increase will be used for the Annual Housing Survey to provide for
increased costs of personal interviewing, to improve control over new
additions to the inventory, and to test improvements to the questionnaire ($1.3 million). The remaining increase will be allocated to the
surveys of mortgage lenders, absorption of new rental units, sales and
completions of new homes, and mobile home placement.
Community planning and development statistics ($0.7 million).—The
increase in this program will provide for improved monitoring and
evaluation of the Department of Housing and Urban Development
block grant program and testing of alternative approaches to the
allocation of block grant funds.
Surveys oj residential alterations and repairs (—$0.4 million).—The
Census Bureau's survey of residential alterations and repairs will be
converted from a quarterly to an annual basis. This survey, which
provides estimates of expenditures for alterations and additions to
existing houses, is used primarily for GNP estimates, and the
magnitude of change in this component is such that quarterly measurement is of marginal valueECONOMIC AND BUSINESS FINANCIAL ACCOUNTS

Quarterly survey of State and local governmentfinances($0.2 million).—
Until now the financial information collected from State and local
governments, except for data on tax revenues, has been collected
on an annual basis. The 1978 budget provides an increase for the
Bureau of the Census to survey a sample of State and local governments concerning finance and employment on a quarterly basis. This
action will improve the national economic accounts and provide more
timely information on the financial conditions of individual governments. These data will be used to develop national estimates of intergovernmental transfer payments and purchases of goods and services
for each of several functions of government such as education, highway
construction, and welfare, and to secure data on government revenues
from user charges, interest earnings, tuition fees, and similar nontax
sources.
Commodity classification ($0.8^ million).—The Census Bureau will
implement a commodity classification structured to improve the
comparability in statistics of imports, exports, and domestic production as required by the Trade Act of 1974. This program will improve
the Government's ability to evaluate both the country's international
trade position and the effect of international trade on domestic product markets and on employment.

150

THE BUDGET FOR FISCAL YEAR 1978

Foreign trade data {—$0.2 million).—The Census Bureau will discontinue the bilateral reconciliation of statistics on U.S. foreign trade with
Canada. This program, which has been conducted in recent years, has
accomplished most of its goals.
Balance of payments statistics ($0.1 million).—In 1978, the Bureau of
Economic Analysis (BEA) will begin work required to publish an upto-date methodology manual describing how the balance of payments
accounts are constructed. This manual will be published in 1979 and an
historical data supplement will be published in 1981. It has been nearly
25 years since the last manual was published describing how the
balance of payments accounts are constructed and more than 13 years
since a comprehensive statistical supplement containing comparable
historical balance of payments statistics has been published.
ENERGY STATISTICS

The statistical programs of the Energy Research and Development
Administration (ERDA) and the Geological Survey are shown for the
first time this year in the special analysis. As a consequence the funding
levels for energy statistics are substantially higher than those which
have been shown in previous special analyses.
Energy resource assessments ($26.2 million).—Major increases are
requested for uranium, geothermal, solar and environmental resources
assessments by ERDA. The increases reflect project phasing of the
individual assessments.
Improvements in energy consumption data ($0.9 million).—There is a
need for improved energy consumption data. This budget includes
supplementary funding ($0.6 million) in 1977 and a further increase of
$0.3 million in 1978 that will enable the Federal Energy Administration (FEA) to improve further its efforts to measure residential, commercial, and industrial consumption of energ}^ and to assess the impacts of various policy or legislative proposals on energy consuming
sectors of the economy.
Energy modeling and forecasting ($1.7 million).—Because of the close
relationship of energy forecasting to formulation of energy policy, high
priority has been attached to improving the quality of energy forecasts over various time periods extending to the year 2000. An increase
of $1.8 million over current 1977 appropriation levels is requested to
enable FEA to work toward development of a single model producing
domestic energy supply and demand forecasts. Funds are eliminated
for Bureau of Mines energy model development ( — $0.1 million) since
this duplicates work already being done by FEA.
Energy data validation ($0.9 million).—Data validation, including
review of computational procedures and checks on respondent accuracy, is an essential component of a well balanced statistical program.
Supplemental funding in 1977 and an additional $0.9 million in 1978
are provided to enable FEA to mount a program with the objective of
validating major energy- data s ^
A

SPECIAL ANALYSIS G

151

Oil and gas reserves study {$2.1 million).—FEA will conduct an
overall survey of U.S. reserves of oil and natural gas. This program is
being developed by an ad hoc inter agency planning group chaired by
OMB, which has received additional comments from industry and
other experts. The data, which will be collected and audited on a
sample basis for accuracy, will be designed to serve the analytical
needs of several agencies, Congress, and the public. In the past, the
Government has relied primarily on estimates published by the
American Petroleum Institute and the American Gas Association.
Comprehensive review of energy data.—In October 1976 FEA initiated
a joint interagency project to conduct a detailed review of all energy
information-gathering activities of Federal agencies. The review will
be completed by June 1978 and will have each agency report detailed
information on each of its energy data s}^stems covering purpose,
operating costs, number of respondents, measurement and validation
techniques, and other technical items.
ENVIRONMENTAL STATISTICS

Pollution abatement and control expenditures ($0.3 million).—The
1978 budget for BEA's environmental studies program provides for an
expansion of estimates of pollution abatement and control expenditures by: (1) Providing regional and industry detail for those expenditures, (2) developing constant-dollar estimates at the national
level, and (3) estimating the physical units of pollutants emitted per
dollar of output for each of the major polluting industries at the
national level and relating those data to the pollution abatement
expenditures by those industries. These data will improve the basis
for understanding the regional and industry environmental implications of different economic growth goals.
Environmental planning ($1.0 million).—As a complement to energy
models of ERDA, an increase is requested for development of environmental data and planning methods. The increase reflects a buildup of
this activity to a proposed operational level.
Health effects oj air pollution ($4-6 million).—An increase in the
statistical program of the Environmental Protection Agency (EPA)
is to be directed toward the conduct of studies of air carcinogens that
will permit an assessment of the contribution of environmental agents
to the cancer incidence and mortality of the general population. The
utilization of a multisite epidemiologic program on sulfate and sulfuric acid exposure will also be initiated. Analyses of data collected
through the community health air monitoring program will assist in
the quantification of short-term exposure levels to various air
pollutants.
Central statistical unit in EPA.—In 1978 EPA will establish a
central statistical unit with responsibility for the development and
coordination of the agency's statistical policies. The unit will review
and insure the quality of project design and data development throughout EPA and will facilitate interagency communication about statistical activities.

152

THE BUDGET FOR FISCAL YEAR 1978
HEALTH STATISTICS

The 1978 funding level of $33.6 million for the National Center for
Health Statistics (NCHS) represents a $6.0 million increase from the
1977 level. This increase is provided for expansion of the Center's
Federal-State-local cooperative health statistics system (CHSS). During 1978, CHSS will expand its activities into all 50 States, with particular emphasis on vital statistics, health manpower, and health
facilities statistics. NCHS will maintain its existing program, and will
continue its expanded role as the focal point for Federal health statistics, reflected by the increased number of statistical activities it performs on a reimbursable basis for other Federal agencies in 1977 and
1978.
Other changes in health statistics activities outside of NCHS are
limited to areas in which Federal programs or responsibilities have
been expanding:
Medical care expenditures ($1.4- million).—The Health Resources
Administration's National Center for Health Services Research will
use these funds to complete the nationwide panel study of medical
care expenditures begun in 1976.
Health manpower statistics (—$0.7 million).—The funding for the
Bureau of Health Manpower's statistical activities will decrease by
$1.2 million in 1977 and by $0.7 million in 1978. In effect, all health
manpower statistical activities in 1978 will be conducted by NCHS
within its ongoing program.
Biomedical research statistics ($0.8 million).—A $0.5 million increase
will be used for collection of data on the etiology of cancer in man.
A $0.3 million increase will be provided for the initiation of an epidemiology program within the National Institute of Environmental
Health Sciences.
Drug abuse statistics ($0.5 million).—The Drug Enforcement Administration (DEA) in the Department of Justice will receive an increase
of $0.3 million in 1978 for the drug abuse warning network (DAWN)
project, which is cofunded by the National Institute on Drug Abuse
(NIDA) in the Department of Health, Education, and Welfare. The
additional funds are DEA's share of a program to make the DAWN
system a better source of national indicators of drug abuse. As a followup to NIDA's ongoing drug abuse treatment data systems, NIDA
will receive an increase of $0.2 million in 1978 to continue the assessment of drug abuse treatment effectiveness started in 1977.
Occupational health surveillance ($0.5 million).—The 1978 budget
provides funds for the Department of Health, Education, and Welfare's National Institute for Occupational Safety and Health to
conduct periodic medical examinations of coal miners, collect epidemiological data by location of underground mine, and carry out
statistical analyses including correlation of medical findings with data
from the Bureau of Mines, Department of the Interior.

SPECIAL ANALYSIS G

153

Health insurance related statistics {$2.2 million).—The Social Security
Administration will continue to develop and maintain a standardized
statistical reporting system for the medicare program, expand its
health insurance research program, continue evaluation of the medicare
program, and improve the current medicare survey.
Disability data ($1.2 million).—This increase will allow the Social
Security Administration to reinterview a large sample of the disabled
population to determine the effects of the new supplemental security
income program on this population.
Veterans Administration patient data ($0.3 million).—Additional
funds are provided to maintain the Veterans Administration's patientoriented discharge data system, which includes all episodes in Veterans
Administration-sponsored hospitals, nursing homes or domiciliary care
facilities.
EDUCATION STATISTICS

The 1978 budget for the National Center for Education Statistics
(NCES) is $15.9 million. This represents an increase of $3.0 million
over the 1977 level for the base program and a decrease of $0.2 million
for studies mandated by law. The decrease is due to a shift from the
developmental to the operational phases for three major mandated
studies. NCES will concentrate on improving statistical services by
stimulating increased data comparability, completing further analyses
of existing data bases, and coordinating and disseminating more
widely information for users.
Assistance to States ($0.8 million).—NCES will assist States in their
efforts to build compatible statistical systems and to use standard
definitions for reporting by developing reporting manuals and conducting training sessions. A personnel exchange, jointly supported by
NCES and the States, will allow the States to capitalize on expertise
in counterpart agencies.
Analysis ($1.0 million).—NCES will analyze existing data bases
from the survey of income and education, the national longitudinal
study, the current population survey, and the national assessment
of educational progress to examine the interrelationships among lowincome, bilingual and handicapped students; the impact of vocational
training on job experiences; utilization of Federal aid in 4- and 5-year
degree programs; and the relationships between background variables
and individuals' achievements.
Dissemination ($0.8 million).—The NCES dissemination system will
be restructured to permit NCES to respond more directly to the need
for timeliness of data. The new strategy will accelerate the availability
of the data in forms requested by users by providing preliminary and
updated data tapes, microfiche, and special tabulations. Concentration
of staff effort will be shifted toward analytic monographs and other
forms of presentation highlighting data useful to policymakers.

154

THE BUDGET FOR FISCAL YEAR 1978

Collection ($0.4 million).—The program of data collection for 1978
includes some reductions in scope of effort as well as new initiatives.
There will be a shift in emphasis from data describing educational
institutions to data describing student characteristics, backgrounds,
and outcomes. This emphasis relates to concerns about the match
between student needs and educational services, acceptable standards
of student performance, and the transition of persons from programs
of formal education to work.
INCOME MAINTENANCE AND WELFARE STATISTICS

Increases for income maintenance statistics reflect continuation of
efforts to improve the data available for analysis of the costs of
income maintenance programs and impact on beneficiaries.
Survey of income and program participation ($2.2 million).—1978
will be the second year of a planned 4-year developmental effort
coordinated by the Office of the Assistant Secretary for Planning
and Evaluation in the Department of Health, Education, and Welfare.
This increase will provide for: Testing of alternative approaches to
obtaining through household interviews information on in-kind benefits
and assets; exploring ways to approximate the eligibility requirements
for Federal programs; developing jointly with BLS a short battery of
consumer expenditure questions; and field testing of alternative design
features for multiple frame sampling.
Welfare statistics ($0.6 million).—General statistical support will be
increased as efforts continue to improve the timeliness of reports
while reducing the reporting burden on the States ($0.4 million). A
refocusing of the statistical activities of the Social and Rehabilitation
Service (SRS) is anticipated in 1978, with the aid of a study to be
completed in 1977 of the functions of the National Center for Social
Statistics. Further strengthening of the quality control program to
reduce payment errors in the program of aid to families with dependent children is planned during 1978 ($0.3 million). Implementation
on a State-by-State basis of a prototype system for the collection of
data on all recipients of benefits under SRS programs will reduce
the reporting burden on welfare recipients and agencies while providing rapid access to data on recipient characteristics.
Social security statistics ($0.3 million).—Analysis of beneficiary
roles will be continued and expanded through the preparation of
special reports on the relationships between race, economic status
and social security benefits, and analysis of private and public retirement payments in relation to social security benefits ($0.6 million). A
modest expansion in actuarial statistics will support the preparation
of alternative proposals for coping with the projected depletion of the
trust fund by 1979 ($0.2 million). Increases in outlays will be partially
offset by a reduction for the retirement history study during 1978,
upon completion of field work for the fifth phase data collection
(—$0.5 million).

SPECIAL ANALYSIS G

155

POPULATION STATISTICS

Methods test panel ($0.5 million).—The 1978 budget provides an
increase for the Census Bureau to establish a methods test panel to
investigate and develop new approaches and concepts in household
surveys to obtain demographic and labor force statistics. The panel
will be used to test procedural changes recommended by the National
tt
Commission on Employment and Unemployment Statistics.
Statistic
CRIMINAL JUSTICE STATISTICS

The criminal justice statistics program of the National Criminal
Justice Information and Statistics Service in the Law Enforcement
Assistance Administration, although showing a decrease in funding
in 1977 and an increase in 1978, will be essentially unaffected because
of multiyear funding.
PERIODIC PROGRAMS

1977 Census of Governments.—There are four major parts of the
census of governments: Governmental organization, governmental
finance, public employment, and taxable property values. Most data
are collected by mail from more than 78,000 units of State and local
government, but field enumeration is used to gather part of the data
on taxable property values. Funds requested for this program in 1978
show a decrease because the data collection and processing for the
survey of taxable property values will be largely completed in 1977.
1977 economic censuses.—Funds provided in 1978 for the censuses
of business, manufactures, mineral industries, and transportation will
permit the Census Bureau to complete the preparation and mailing of
the report forms, to begin the review of collected data, to gather and
process administrative records for small firms in lieu of direct data
collection, and to expand the coverage of service industries. Published results from the national travel and the truck inventory and use
segments of the transportation census will also be permitted with
these funds.
1978 Census oj Agriculture.—In 1978 the Census Bureau will continue its planning for this census, including consulting with data users
on the content of the questionnaire, exploring the possible use of
sampling techniques, and planning for specialized follow-on surveys
(for instance, on horticulture and farm finances) that have been conducted in connection with past censuses. The largest share of 1978
funding is for the collection and processing of the basic census information. This and the next census will be taken after a shorter
interval (4 years after the preceding one), so that by 1982 the census
of agriculture will refer to the same year as the economic censuses.
This change in reference date will facilitate closer coordination of
benchmark economic data.
1980 Census of Population and Housing.—In 1978 the Bureau of the
Census will continue planning for the 1980 decennial census. The year

156

THE BUDGET FOR FISCAL YEAR 1978

will be a critical one in that the content of the census will be conclusively decided as will be the various procedures involved for an
enumeration of the entire Nation. In April 1978 a "dress rehearsal"
will provide a final test of the procedures. During the year extensive
geographic work will involve the identification and coding of boundary
changes. Other activity will include completion of master address
registers, preparation for timely release of data for Congressional
reapportionment, and continued close communication with hard-toenumerate minority groups. Work will also proceed on the census
evaluation program and the completion of quality control techniques.
In addition to preparation for the massive data collection associated
with the April 1980 census enumeration, the Bureau of the Census
will begin planning for follow-on and adjunct surveys which will
provide detailed information for samples of the population and the
housing inventory. One or more follow-on studies will use information
obtained from the 1980 census questionnaires for defining particular
universes for which additional, more detailed information will be
collected shortly thereafter. One or more adjunct studies, on the other
hand, will be conducted after 1980 to gather more detailed information
on samples of the entire population. The topics to be covered in the
follow-on and adjunct surveys will be determined in consultation
with other Federal agencies and may include topics such as residential
finance, disability, and characteristics of the occupants of mobile homes.
The planning effort for follow-on surveys will also provide an opportunity for the Bureau of the Census to begin to examine the
technology and logistics of "nested" surveys in preparation for the
recently authorized mid-decade census program. "Nested" surveys
cover different subject matter areas of concern, in addition to a core
set of questions, in different but equivalent subsamples of the same
universe. The data from these various surveys can be consolidated
at the processing stage to obtain a more complete set of statistical
measures. Support for these activities is included in the general
funding for the 1980 census.
Registration and voting surveys.—Work on the November 1976 survey
will be completed in 1977. Legislation is being proposed to provide for
conducting this survey on a quadrennial rather than a biennial basis.
The next survey would be in 1980.
Revision of the Consumer Price Index.—The decrease in this Bureau
of Labor Statistics program reflects the completion of the revision of
the Consumer Price Index during 1977.

157

SPECIAL ANALYSIS G

Table G-3. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in millions of dollars)
1976
actual

TQ
actual

1977
estimate

1978
estimate

CURRENT PROGRAMS

Department of Agriculture:
Agricultural Research Service
Economic Research Service
Office of the General Sales Manager
Statistical Reporting Service 1
Department of Commerce:
Bureau of Economic Analysis l
Bureau of the Census l
Domestic and International Business Administration.
Economic Development Administration
National Bureau of Fire Prevention
National Oceanic and Atmospheric Administration.. _
Department of Defense:
Corps of Engineers
Department of Health, Education, and Welfare:
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
Food and Drug Administration
Health Resources Administration:
National Center for Health Statistics
Other Health Resources Administration
Health Services Administration
National Center for Education Statistics
National Institutes of Health
Office of the Assistant Secretary for Human Development
Office of Assistant Secretary for Planning and Evaluation
Office of Education
Social and Rehabilitation Service
Social Security Administration
Department of Housing and Urban Development:
Community Planning and Development
Housing
Policy Development and Research
Department of the Interior:
Bureau of Mines. _
_
__
Fish and Wildlife Service
Geological Survey
Mining Enforcement and Safety Administration
Department of Justice:
Drug Enforcement Administration
Federal Bureau of Investigation
Law Enforcement Assistance Administration
Department of Labor:
Bureau of Labor Statistics *
Employment and Training Administration
Employment Standards Administration
Occupational Safety and Health Administration
Department of Transportation:
Office of the Secretary
Federal Highway Administration
Federal Railroad Administration
National Highway Traffic Safety Administration
Urban Mass Transportation Administration
See footnotes at end of table.

0.3
7.2
0.5
31.2

2.1
1.8
0.1
8.2

4.1
7.2
0.5
35.3

4.1
7.3
0.5
37.5

11.7
41.0
3. 3
1.0
0. 8
2.6

3.1
11.3
0.6
0.1
0.2
0.7

12.8
44.9
2.8
0.3
1.2
4.0

13.9
46.1
2.0
0.4
1.7
4.0

1.8

0.4

2.0

2.2

6.8
2. 5
1.6

1.3
0.5
0.3

7.8
3.2
1.7

8.1
3.7
1.8

25.0
7.0
2.4
10.5
23.4

7.4
0.3
1.7
4.7
5.3

27.6
1.0
3.3
13.1
29.4

4.9

1.0

4.6

3.2

5.9
14.6
6.3
22. 2

1.1
7.8
1.6
13.5

3.7
1.8
7.6
28.8

5.6
1.5
8.2
32.7

1.0
2.6
9. 7

0.2
0.6
2.6

1.6
2.2
9.3

2.3
1.9
11.5

13.0
6.7
3.5
1.7

3.4
1.4
1.0
0.4

13.7
7.0
4.3
1.6

14.8
6.9
4.3
1.6

1.1
1.7
34.0

0.1
0.4
11.3

1.1
2.1
24.8

1.4
2.2
26.4

54.2
26.3
0.5
5.4

16.2
5.5
0.1
1.5

68.0
23.0
0.5
6.2

82.9
24.2
0.5
6.2

3.1
3.3
1.0
6.8
0.1

0.7
1.9
0.2
2.4
0.3

1.3
4.9
1.3
11.9
0.9

1.4
5.1
0.8
13.3
0.8

33.6
1.7
3.3
15.9
30.3

158

THE BUDGET FOR FISCAL YEAR 1978

Table G-3. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in millions of dollars)—Continued
1976

1977

1978
stimatc

CURRENT PROGRAMS—Continued
Department of the Treasury:
Office of the Secretary
Customs Service
Internal Revenue Service
Civil Aeronautics Board
Consumer Product Safety Commission
Energy Research and Development Administration.
Environmental Protection Agency.
Federal Energy Administration
Federal Home Loan Bank Board
Federal Power Commission
Federal Trade Commission
Interstate Commerce Commission
National Science Foundation
Securities and Exchange Commission
Veterans Administration
Total, current programs

0.1
3.3
12.7
2.2
2.3
26.3
33.1
22.5
2.6
9.4
1.1
1.1
2.1
0.7
8.2

0.9
3.1
0.6
0.8
8.5
12.7
6.5
0.7
2.9
0.4
0.3
0.6
0.2
1.9

0.2
3.5
13.0
2.4
2.8
52.4
26.9
28.4
3.1
12.2
1.6
1.2
2.3
0.8
7.9

0.1
3.5
13.6
2.5
2.8
89.8
32.8
38.9
3.2
11.5
1.8
1.2
2.3
0.8
8.4

537.9

165.4

593.1

691.0

0.8
2.1
0.4
7.9

0.1
0.9
0.2
1.8
0.1

0.1
7.8
3.8
3.3
3.9

16.0
1.0

0.2
4.6
7.0
0.1
2.3
2.7
2.9

2.1
0.4
0.4
0.5
0.6
1.2

17.6
2.0
4.3
3.2
7.2
4.2

6.9
0.4

1.8
1.2

5.8
1.5

1.5

38.3

11.3

64.7

72.8

576.2

176.7

657.8

763.8

PERIODIC PROGRAMS
Department of Commerce: Bureau of the Census:
1972 economic censuses
1977 economic censuses
1977 Census of Governments
1974 Census of Agriculture
1978 Census of Agriculture
1970 Census of Population and Housing
1980 Census of Population and Housing
Intercensal demographic estimates
Registration and voting surveys
Periodic programs geographic support
Data processing equipment 3
General administration and other 4
Department of Labor: Bureau of Labor Statistics:
Revision of Consumer Price Index
Standard industrial classification revision program.
Total, periodic programs
Total, principal statistical programs

1 Includes entire budget for this agency.

2
3 Includes both direct program funds and "Salaries and
4 Includes capital outlays for large-scale data processing

8.7
30.6
1.9
3.0
7.9
2.2

expenses," Assistant Secretary for Health.
equipment acquisitions.
Includes depreciation, other capital outlays, and changes in selected resources.

SPECIAL ANALYSIS H
CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH

As of June 30, 1976, total Federal civilian employment in the
executive branch was 2,832,462. Excluding Postal Service employment, which by law is not subject to Presidential control, and excluding other employment exempted from ceilings, the total was
2,114,411. On this basis, total employment is estimated to increase by
17,100 from June 30, 1976, to September 30, 1977. A further increase
of about 11,800 is estimated for September 30, 1978.
FULL-TIME PERMANENT CIVILIAN EMPLOYMENT

Full-time permanent employment as of June 30, 1976, was 2,448,348.
Excluding the Postal Service, executive branch full-time permanent
employment was 1,906,849, or about 10,500 below the June 30, 1975,
level.
Despite necessary increases in a number of agencies, the overall
planned increase for the executive branch (excluding the Postal
Service) from 1977 to 1978 is a relatively modest 6,500, or about
three-tenths of one percent. A decrease in the Department of Defense
partially offsets increases primarily in the Departments of Housing
and Urban Development, Interior, Justice, and Transportation, and
the Veterans Administration.
Table H-l displays yearend full-time permanent employment in
the major executive branch agencies, as well as planned changes
between September 30, 1977, and September 30, 1978.
159

160

THE BUDGET FOR FISCAL YEAR 1978
Table H-l. SUMMARY OF FULL-TIME PERMANENT CIVILIAN
EMPLOYMENT IN THE EXECUTIVE BRANCH *
June 30
1976
actual

Agency

Agriculture
Commerce
Defense—military functions
Defense—civil functions
Health, Education, and Welfare
Housing and Urban Development...
Interior
Justice
Labor...
State
-.
Transportation
Treasury
_.....
Energy Research and Development Administration .
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration. _
Veterans Administration
Other:
Agency for International Development
Civil Service Commission
Federal Energy Administration
Nuclear Regulatory Commission
Panama Canal
Small Business Administration
Tennessee Valley Authority
United States Information Agency
Miscellaneous
Subtotal
Contingencies K
Subtotal
Postal Service
Total

Sept. 30
1977
estimate

1978
estimate

Change
1977-78

80,413
28,823
922,386
28,648
136,462
14,942
59,130
51,201
14,471
22,634
71,593
107,877

83,500
29,500
928,000
29,000
142,300
15,600
62,000
52,400
16,200
22,800
72,800
112,100

84,200
29,400
921,200
28,900
142,400
16,500
62,400
53,800
16,200
22,900
74,000
112,600

700
-100
-6,800
-100
100
900
400
1,400
100
100
1,200
500

8,283
9,481
35,679
24,039
192,453

8,700
9,700
36,000
23,800
201,700

9,000
9,700
36,200
23,700
205,500

300

5,751
6,740
3,349
2,289
12,978
4,136
15,100
8,559
39,432

6,100
7,000
3,900
2,500
13,500
4,400
17,400
8,700
41,700

6,100
7,100
3,700
2,700
13,500
4,600
17,900
8,700
41,900

200
-100
3,800
100
-200
200
200
500
200

1,906,849 1,951,300 1,954,800
2,000
5,000
.

3,500
3,000

1,906,849 1,953,300 1,959,800
541,499
536,400
540,000

6,500
3,600

2,448,348 2,489,700 2,499,800

10,100

1
Excludes developmental positions under the worker trainee opportunity program (WTOP) as
well as certain statutory exemptions.
2 Subject to later distribution.

The projected increase in full-time permanent employment in the
executive branch (excluding the Postal Service and other employment
exempted from ceilings) from June 30, 1976 to September 30, 1978
is about 53,000.
Actual employment on this basis on June 30, 1976 was about 25,000
below the estimate for 1976 in the 1977 budget. This shortfall took
place primarily because two agencies, the Department of Defense and
the General Services Administration, were able to achieve planned
reductions earlier than anticipated and because several larger agencies
were unable to achieve planned increases in the time available.
Furthermore, normal personnel turnover and processing procedures
frequently prevent agencies from hiring up to their planned personnel
totals.

SPECIAL ANALYSIS H

161

Growth in population (in either the U.S. population as a whole or in
the size of a specific group being served) has added workload demands
requiring additional personnel—even after productivity increases
have been taken into account. For example, as more citizens become
eligible for social security benefits, more employees are needed to
handle claims for these benefits. These population related increases
alone account for more than 4,200 added positions in 1977 and
3,500 in 1978. Other increases are primarily due to programmatic
considerations, but include elements related to population (e.g.,
increases for the National Park Service).
Some increases, particularly for 1977, are attributable to actions
of the Congress. New programs were approved at levels higher than
originally requested by the administration, and in some instances
specific employment increases were mandated legislatively. Collectively, congressional actions last year resulted in increasing Federal
employment by about 14,000 in 1977 and a further 1,000 in 1978.
The major employment changes between the end of 1976 and the
end of 1978 will occur in the following agencies:
• Department of Agriculture.—Increases for grain inspections
(2,080), for timber access roads in the Forest Service (225),
in the Soil Conservation Service (425), and in the Farmers
Home Administration (400) are due to congressional actions.
These increases have been partially offset by decreases in other
areas. Increases also occur in such areas as the Animal and Plant
Health Inspection Service (200) and research (60).
• Department of Defense.—The increase between 1976 and 1977 is
attributable to the reclassification of 4,300 Army employees
in Germany from temporary to a valid identification as permanent
employees. Also, some 8,000 schoolteachers in overseas dependent
schools are included in the estimates for September 1977 and
1978 but were not on the rolls in June 1976. This change results
from a change in the fiscal year ending on June 30 to a year ending
on September 30. Thus, the apparent increase in 1977 is actually
a decrease of almost 7,000 when the numbers are adjusted for
comparability. For 1978, employment decreases of about
7,000 are due to productivity savings and the replacement of
about 2,500 full-time commissary personnel by part-time workers.
• Department of Health, Education, and Welfare.—Increases in
education (130), the Food and Drug Administration (300), and
Indian Health Service (400) reflect funds added by Congress for
these purposes. In addition, other health programs, including
St. Elizabeths Hospital and the National Institutes of Health
have been increased by about 800 positions. Changes due to
workload increases will add some 2,300 positions in the Social
Security Administration. Most of the latter increases relate to a
rise in the number of eligible persons receiving benefits. This
special analysis does not include proposed position decreases due
to legislation recommended in the 1978 budget. For 1978, the
health block grant legislative proposal would permit a decrease
of employment by 2,900 while the proposal to close or transfer to
community use the eight Public Health Service hospitals would
permit employment reductions of another 2,900.

240-700 O - 77
http://fraser.stlouisfed.org/- 11
Federal Reserve Bank of St. Louis

162

THE BUDGET FOR FISCAL YEAR 1978

• Department of Housing and Urban Development.—Congressional
actions have necessitated the addition of about 180 positions in
connection with the rehabilitation loan program and the FHA's
program to compensate insured mortgagors for housing defects.
Workload increases in other housing programs will add nearly
1,250 positions. However, these are partially offset by workload
decreases in community development programs and staff savings
stemming from Federal Housing Administration reforms.
• Department of the Interior.—Congressional actions have added
about 900 positions, primarily in the National Park Service and
the Fish and Wildlife Service. In addition, Presidential initiatives
and workload changes will add 1,500 positions for the Bicentennial land heritage program, 100 positions for mine health and
safety, and 130 positions in the Bureau of Land Management.
Other workload increases will add 600 positions throughout the
Department.
• Department of Justice.—Congressional actions will require 420
additional positions in the Immigration and Naturalization
Service to reduce workload backlogs. An increase in the U.S.
Attorneys7 Offices of 250 positions is related to the provisions of
the Speedy Trial Act. The FBI will add 200 positions to meet
requirements of the Freedom of Information Act. Workload
increases in such areas as drug law enforcement (230), FBI
automation development (450), INS inspection, detention,
deportation and service programs (320), and litigative activites
(185) are partially offset by productivity improvements in the
FBI (—250) and by decreases in the FBI's investigative program (—640). Finally, the Department will add more than
600 positions in connection with the activation of prison facilities
and for protection of U.S. courts and prisoners.
• Department of Labor.—More than 260 positions will be added
because of congressional actions relating to occupational safety
and health inspections, processing workers' compensation cases,
monitoring prime sponsors (Comprehensive Employment and
Training Act), and unemployment insurance fraud control.
Almost 900 employees will be added for workload increases in
the handling of terminated insured pension plans, issuance of
occupational safety and health standards, minimum wage and
overtime complaints, pension plan investigations, and for other
areas of the Department. Finally, 620 Bureau of Labor Statistics
employees, previously classified as temporary, will be reclassified
as full-time permanent employees in 1977 because of the continuing nature of the work involved.
• Department of Transportation.—To meet the expected growth of
aviation activity and the forecasted expansion of airway facilities,
the Federal Aviation Administration will add 1,200 positions for
air traffic control operations and 400 more technicians for system
maintenance. Expansion of marine activities is reflected by an
additional 254 positions for Coast Guard operations.
• Department of the Treasury.—The Department will increase by
more than 4,200 positions, of which 1,850 relate to the recent
enactment of the Tax Reform Act. Administration initiatives

SPECIAL ANALYSIS H

163

will add nearly 1,200 positions in such areas as drug enforcement
and firearms enforcement. Rising workload in such bureaus as the
Customs Service, Secret Service, and Public Debt, require increases in personnel. These workload increases are partially
offset by decreases due to productivity improvements in the
Internal Revenue Service and in other bureaus.
• Environmental Protection Agency.—In 1977, 130 new positions
have been provided to begin implementation of both the Toxic
Substances Control Act and the Resource Recovery and Conservation Act. In addition, several programmatic measures are
planned in 1977 and 1978 to ensure adequate staff support for
EPA's most critical regulatory actions.
• Veterans Administration.—A net increase of about 2,600 positions
relates largely to congressional action for medical program additions. The President's medical "Quality of Care" program will
add another 1,800 positions. Increases for new medical facility
activations, medical program expansions, new special medical
programs, and general workload increases will add an additional
8,600 positions. A significant portion of the latter group relates to
services to an increased number of veterans.
• Tennessee Valley Authority.—An overall increase of nearly 2,800
positions relates to increased construction and operation requirements of TVA's power program.
TOTAL FEDERAL GOVERNMENT EMPLOYMENT

In 1978, full-time permanent employment will comprise slightly
more than 88% of all civilian employees in the executive branch
(including the Postal Service). The balance, nearly 12% is made up
of part-time employees, intermittent employees (those employed on
an irregular basis), and full-time temporary employees (those in positions occupied for less than 1 year). Table H-2, "Total Federal
Employment," includes civilian employees of the executive branch
(as described above), employees of the legislative and judical branches,
and military personnel. A separate entry is also included to cover
those categories of employees specifically exempted from employment controls, for example, certain employees under the worker
trainee opportunity program; disadvantaged and part-time workers
under such Civil Service Commission programs as summer aides,
stay-in-school, and junior fellowship; and certain statutory exemptions.
The Department of Defense component of total executive branch
employment (civilian and military) has declined from 74% in 1968
to 62% in 1978. The Postal Service makes up 14% of the total work
force, the Veterans Administration 5% and the balance of the executive branch (all other departments and agencies) accounts for the
remaining 19%.

164

THE BUDGET FOR FISCAL YEAR 1978
Table H-2. TOTAL FEDERAL EMPLOYMENT
Description

Civilian employment in the executive branch:
Full-time permanent
Other than full-time permanent
Subtotal

June 30
1976
actual

September 30
1977
estimate

1978
estimate

1,906,849 1,953,300 1,959,800
207,562
178,200
183,500
2,114,411 2,131,500 2,143,300

Postal Service:
Full-time permanent
Other than full-time permanent

541,499
133,671

536,400
134,500

540,000
135,000

Subtotal

675,170

670,900

675,000

Exempt from ceilings *

42,881

23,000

20,000

Subtotal, executive branch civilian employment
Military personnel on active duty: 2
Department of Defense
Department of Transportation (Coast Guard)
Subtotal, military personnel
Total, executive branch employment
Legislative and judicial personnel:3
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches
Grand total

2,832,462 2,825,400 2,838,300
2,080,997 2,088,000 2,090,000
37,812

38,500

38,800

2,118,809 2,126,500 2,128,800
4,951,271 4,951, 900 4,967,100
30,691
19,787
50,478
5,001,749

1
Developmental positions under the worker-trainee opportunity program; disadvantaged
summer and part-time workers under such Civil Service Commission programs as summer aides,
stay-in-school, and junior fellowship; and certain statutory exemptions. Decrease from 1976 to 1977
reflects seasonal differences.
2
Excludes reserve components.
3 1977 and 1978 estimates are not available.

PERSONNEL COMPENSATION AND BENEFITS

Direct compensation of the Federal work force includes regular
pay, premium pay for overtime, Sunday and holiday pay, differentials
for night work and overseas duty, and flight and other hazardous
duty pay. Related compensation in the form of personnel benefits
consists primarily of the Government's share (as employer) of health
insurance, term life insurance, and Federal retirement and old-age
survivors' disability insurance. Retirement costs include the direct
Treasury transfers to the Civil Service retirement trust fund to cover
the interest on the unfunded retirement liability (the excess of the
present value of the anticipated benefits payable from the fund over
the present value of fund assets and anticipated receipts) and payments to amortize increments of unfunded liability that result from
pay or benefit increases.
Additional benefits include uniform allowances (when paid in cash),
cost-of-living and overseas quarters allowances, and, in the case of
uniformed military personnel, reenlistment bonuses.

SPECIAL ANALYSIS H

165

Obligations for civilian personnel compensation and benefits in
1978 are projected to reach $48.2 billion, excluding the Postal
Service. The increase in obligations is due to pay adjustments, increased employment, and increased interest payments to the Civil
Service retirement trust fund. The estimated costs for civilian and
military pay increases for 1978 are covered by lump sum allowances
in the 1978 budget.
Under the Federal Pay Comparability Act, salary rates for Federal
employees under the "General Schedule'7 and most other statutory
pay systems are adjusted periodically so as to relate to rates p&id
for the same work levels in the private sector. The bases for these
adjustments are annual surveys conducted on a nationwide basis by
the Bureau of Labor Statistics. Under the act, the President may
propose an alternative pay plan if he considers the comparability pay
adjustments inappropriate because of a national emergency or economic conditions affecting the general welfare. The pay raise estimates
in the budget and in table H-3 project a 6.5% pay increase for
October 1977.
As required by law, the Commission on Executive, Legislative, and
Judicial Salaries has submitted recommendations to the President on
salaries for senators, representatives, Federal judges, cabinet officers
and other agency heads, and certain other officials in the executive,
legislative, and judicial branches. The statute requires the President
to set forth, in the budget next submitted by him after receipt of the
report of the Commission, his recommendations for adjustment of
these salaries. The President has included his recommendations in a
separate budget document.

166

THE BUDGET FOR FISCAL YEAR 1978
Table H-3. PERSONNEL COMPENSATION AND BENEFITS

(In millions of dollars)
Description

1976
actual

Civilian personnel costs:
Executive branch: !
Direct compensation
Personnel benefits
Retirement liability interest payment

TQ
actual

1977
estimate

31,555
8,072
(3,233) (

Legislative and judiciary:
Direct compensation
Personnel benefits

8,184
892
)

34,330
10,690
(4,180)

34,840
10,660
(5,180)

39,627

Subtotal

9,076

45,020

45,500

508
49

133
13

590
60

630
60

557

Subtotal

146

650

690

Allowance for civilian pay raise

2,020

Total, civilian personnel costs
Military personnel costs:
Direct compensation
Personnel benefits

1978
estimate

40,184

9,222

45,670

48,210

21,622

5,557

22,570

22,600

1,825

Subtotal
Allowance for military pay raise

23,447
_

_ _
_

485
6,042

1,820
24,390

_
_

1,840
24,440
1,390

Total, military pay costs

23,447

6,042

24,390

25,830

Grand total, personnel costs

63,631

15,264

70,060

74,040

Excludes the Postal Service, reflecting conversion to independent status, consistent with the
Postal Service Reorganization Act of 1970.
2
Excludes members and officers of Congress.
3
Excludes Reserve components
* Excludes payments to current military retirees which amounted to $7,422 million in 1 976 and
$1,978 million in the transition quarter, and are estimated to be $8,378 million in 1977 and $9,157
million in 1978.

GOVERNMENT EMPLOYMENT AND POPULATION COMPARISONS

Federal civilian employment as a percentage of the total employed
labor force is projected at 3% for 1978. Employment for all governmental units has been steadily rising due to significant increases in
State and local government employment.
The proportion of Federal civilian employment relative to total
employment of all governmental units (Federal, State, and local) is
projected at 17.8% for 1978. As illustrated in the following chart,
and in table H-4, the Federal segment of all governmental employment has declined significantly over the last three decades from 35%
in 1948 to the aforementioned 17.8% in 1978.

167

SPECIAL ANALYSIS H
Government Civilian Employment
Millions of Employees

82%

1948 1950
End of Fiscal Y . a r

1955

I960

1965

1970

1975

'78
Estimate

168

THE BUDGET FOR FISCAL YEAR 1978

Table H-4. GOVERNMENT EMPLOYMENT AND POPULATION, 1948-78
Government employment
Fiscal year

1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
19602
19612
1962 3
19633
1964
1965
1966
1967
1968 4
19692
19702
1971
1972
1973
1974
1975
1976
1977 (est.).
1978(est.)_

Federal
executive
branch *
(thousands)

State and
local governments
(thousands)

2,044
2,075
1,934
2,456
2,574
2,532
2,382
2,371
2,372
2,391
2,355
2,355
2,371
2,407
2,485
2,490
2,469
2,496
2,664
2,877
2,951
2,980
2,944
2,883
2,823
2,775
2,847
2,848
2,832
2,825
2,838

All governmental
units
(thousands)

3,776
3,906
4,078
4,031
4,134
4,282
4,552
4,728
5,064
5,380
5,630
5,806
6,073
6,295
6,533
6,834
7,236
7,683
8,259
8,730
9,141
9,496
9,869
10,257
10,640
11,065
11,463
12,025
12,410
(5)
*
()

5,820
5,981
6,012
6,487
6,708
6,814
6,934
7,099
7,436
7,771
7,985
8,161
8,444
8,702
9,018
9,324
9,705
10,179
10,923
11,607
12,092
12,476
12,813
13,140
13,463
13,840
14,310
14,873
15,242

Population
Federal as
percent of
all governmental
units

Total
United
States
(thousands)

35.1
34.7
32.2
37.9
38.4
37.2
34.4
33.4
31.9
30.8
29.5
28.8
28.1
27.7
27.6
26.7
25.4
24.5
24.4
24.8
24.4
23.9
23.0
21.9
21.0
20.0
19.9
19.1
18.6
18.1
17.8

147,208
149,767
152,271
154,878
157,553
160,184
163,026
165,931
168,903
171,984
174,882
177,830
180,671
183,691
186,538
189,242
191,889
194,303
196,560
198,712
200,706
202,677
204,875
207,045
208,842
210,396
211,909
213,450
215,074
216,814
218,678

Federal
employment per
1,000
population

13.9
13.9
12.7
15.9
16.3
15.8
14.6
14.3
14.0
13.9
13.5
13.2
13.1
13.1
13.3
13.2
12.9
12.8
13.6
14.5
14.7
14.7
14.4
13.9
13.5
13.2
13.4
13.3
13.2
13.0
13.0

1
Covers total end-of-year employment in full-time permanent, temporary, part-time, and intermittent employees in the executive branch, including the Postal Service, and, beginning in 1970,
includes various disadvantaged youth and worker-trainee programs.
2
Includes temporary employees for the decennial census.
3
Excludes 7,41 1 project employees in 1963 and 406 project employees in 1964 for the public works
acceleration program.
4
On Jan. 1, 1969, 42,000 civilian technicians of the Army and Air Force National Guard converted by law from State to Federal employment status. They are included in the Federal employment figures in this table after and including 1969.
6
An official projection of State and local government employment is not available. The percentages shown for these years are consistent with a range of reasonable estimates based on recent trends
in population and State and local government activity.

When compared to total U.S. population, the ratio of Federal
civilian employment is estimated to be 13.0 per thousand in 1978—a
ratio that is equal to or lower than all but 4 of the 31 years displayed
in table H-4.

PART 2

FEDERAL SOCIAL PROGRAMS

169

INTRODUCTION
Part 2 furnishes Government-wide program and financial information in six social program areas—education, training and employment,
health, income security, civil rights, and crime reduction. It includes
the special analyses designated I through N.
The figures used in these analyses differ from the data shown under
somewhat similarly titled categories of the functional classification
used in Part 5 of the Budget and elsewhere. In the functional classification, each activity is categorized according to its major purpose;
thus all the military spending of the Department of Defense falls into
the functional category, National defense. In these special analyses,
however, all spending for education, health, etc., is included, even if
the activity has a different primary purpose. Thus the tabulations
here are more comprehensive with regard to these particular types of
social programs.
Special Analysis I discusses education-related programs, including
direct Federal activities, and programs that provide aid to States and
localities, to institutions of higher education, and to individuals.
Special Analysis J identifies the Federal programs designed to increase the skills and employment opportunities of persons already in
the work force and of persons who desire to join the work force but
lack vocational preparation or face other employment barriers.
Special Analysis K summarizes Federal spending for health and
health-related activities.
Special Analysis L discusses Federal benefits to maintain or supplement income of persons and families whose capacity for self-support
is reduced by old age, disability, illness, unemployment, poverty, or
death of the primary wage earner.
Special Analysis M summarizes Federal spending for civil rights
activities, concentrating on enforcement efforts.
Special Analysis N discusses Federal crime reduction programs,
including financial and technical assistance to States and localities,
crime and criminal justice research and development, and operation of
the Federal criminal justice system.
170

SPECIAL ANALYSIS I
FEDERAL EDUCATION PROGRAMS

Federal support of education related programs are estimated to be
$19.6 billion in 1978. This support includes programs that provide
aid to State and local education agencies, to institutions of higher
education, to individuals, and direct Federal activities.
The expenditure estimate includes those programs that support
student-teacher relationships for the transmission of organized knowledge, or provide services to the community-at-large aimed at expanding individuals' opportunities for professional or career advancement.
The analysis is further organized by level of education and type of
support. As in previous years, all Federal programs directly supporting
educational activities or involving the use of educational resources to
achieve other purposes are included. Amounts for noneducational
research conducted at academic institutions not falling within the
above purposes are excluded. For comparability with the analyses
that accompanied the 1973 and earlier budgets, these amounts are
shown at the bottom of table 1-1.
OVERVIEW:

1978

Total Federal education outlays are estimated at $19.6 billion in
1978. The total is composed of three principal components:
—$11.3 billion for programs whose primary purpose is education;
—$8.0 billion for programs that are beneficial to the interests of
education but are not primarily educational in purpose;
—$0.3 billion for salary supplements in the form of educational
allowances.
In addition, four tax expenditures ranging in size from $200 million
to $805 million each will also support higher education in 1978.

171

172

THE BUDGET FOR FISCAL YEAR 1978
Table 1-1. FEDERAL OUTLAYS FOR EDUCATION
Outlays (millions)

Purpose and program
1976
actual

Office of Education:
Financial Assistance for Elementary and Secondary
Education Act
Educationally deprived children
Support innovation consolidation
Emergency school aid
Federally affected areas
Other ESEA
Salaries and expenses
Basic opportunity grants
Other higher education student support (OE)
Other higher education (OE)
Student loan insurance fund
Occupational, vocational, adult
Educational development
Education for the handicapped
.....
Library and instructional resources consolidation
Other Office of Education
National Institute of Education
Special institutions
Student grants (OASDI)
Office of Human Development
Other HEW
Other
Subtotal, programs
educational

TQ
estimate

548
50
55
75
108
25
219
322
53
89
90

9,692

which

1,758
192
213
599
218
115
905
1,244
306
120
748
9
191
152
44
69
127
1,352
495
273
562

2,544

55
18
28
14
31
343
139
70
212

1977
estimate

1978
estimate

1,845
178
271
847
216
119
1,522
1,285
280
157
726
3
319
175
100
89
155
1,602
512
302
721

336
1,998
184
273
496
251
126
1,686
439
240
389
744
2
380
163
124
94
170
1,570
518
301
773

11,424

11,257

are primarily

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

666
5,227
965
1,890
1,397

189
721
282
393
399

549
3,873
1,083
3,023
1,387

372
3,128
1,159
2,172
1,227

Subtotal, education support for other purposes.
Federal outlays—salary supplements

10,145
236

1,984
90

9,915
261

8,058
318

Total, education outlays
Amounts previously carried for academic research not
directed toward educational objectives

20,073

4,618

21,600

19,633

2,676

669

2,622

2,936

REFORM AND RENEWAL

The provision of educational services is primarily the responsibility
of State and local educational agencies. The Federal role is one that
strives to stimulate and encourage improvements in the educational
process through reform, innovation, capacity building and research,
and assuring equal educational opportunity for all citizens.
Federal initiatives in 1978 propose to:
• Consolidate 23 categorical programs under the Financial Assistance for Elementary and Secondary Education Act (see below).
• Provide aid to school districts facing problems in eliminating
discrimination.

SPECIAL ANALYSIS I

173

• Reform the impact aid program.
• Fully fund basic educational opportunity grants for all eligible
undergraduate, postsecondary students up to $1,400 per year.
Financial Assistance jor Elementary and Secondary Education Act.—
Legislation is proposed with an authorization level of $3,775,528.
It will include the following programs: Education of the disadvantaged; support and innovation; education for the handicapped; occupational, vocational, and adult education; and library resources.
This proposal is designed to provide States with more flexibility in
determining their own educational priorities and funding needs and to
eliminate any unnecessary administrative requirements.
Impact aid.—In 1978, reform of this program is proposed. Specifically, funds would be targeted toward those districts that have
enrollments of children whose parents both live and work on Federal
property. The revised impact aid program would also provide support
for construction of school facilities in districts heavily impacted by
Federal activity or Federal bases, and local educational agencies that
experience sudden, unpredictable changes in Federal activities and
payments to other Federal agencies for the education of Federal
employees' dependents. This proposal supports the policy of providing
support only for those districts that are truly adversely affected by
Federal activities.
Emergency school aid.—In 1978, support for this activity will continue to be provided to those school districts that are in the process of
desegregating. Support will also be provided for title IV of the Civil
Rights Act of 1964, which provides advisory support and technical
assistance to help educational agencies and institutions move toward
achieving equality of educational opportunity.
Basic opportunity grants.—The $1,844 million requested for basic
grants is expected to provide awards averaging $889 for 2.1 million
full- and part-time undergraduate students in academic year 1978-79.
Grants will range from $200 to a maximum of $1,400. The size of the
giant is determined on the basis of the expected family and student
contribution, specified by the needs analysis system approved annually
by Congress, up to a maximum of one-half of the student's need.
Recent legislation increased the basic grant maximum award from
$1,400 to $1,800. The budget proposes to substitute a modified formula
for the present distribution formula to alter the distribution of awards
when appropriations are not sufficient to fully fund the program at
the $1,800 maximum grant level. The budget proposes sufficient
funding for a maximum grant award of $1,400. This modification,
combined with the proposed funding level, will concentrate funds on
low-income students.
Education and work.—Improving the connections between education and the world of work will continue to be addressed by the Office
of Education, the Fund for the Improvement of Postsecondary Education, and the National Institute of Education. These agencies
provide educators with information and technical assistance concerning the transition from school to work.

174

THE BUDGET FOR FISCAL YEAR 1978

National Institute of Education.—The Institute (NIE) will continue
as the focal point for the conduct of educational research and development. Emphasis will be placed on career education, school finance,
productivity, local educational agency problem solving, the dissemination of research products, educational technology, and basic skills.
The 1978 outlays for the NIE will total $94 million.
OTHER PROGRAM DEVELOPMENTS

Health professions training support.—Legislation enacted by Congress emphasizes support to medical and dental schools that agree to
address speciality distribution of health professionals. Student
assistance programs will continue to emphasize scholarships that
require service commitments. A new federally insured loan program
with loan guarantee authority of up to $500 million will allow institutions to set tuition at rates that cover more of the costs of education
and allow health professions students with their high-income potential
to borrow the necessary funds. Special project support would accordingly be reduced.
Veterans benefits.—In 1978, 1.7 million GI bill beneficiaries are
expected to enroll in education courses covered by this special analysis
at an average cost of $1,898, up from $1,877 in i977.
Child nutrition.—The administration is proposing a single block
grant to states to help feed needy children. The new program will
provide greater funds to feed needy children than are now available
under existing law, and will permit states to design programs that
reflect local conditions and needs, and result in substantial Federal
savings by the elimination of subsidies for the nonpoor.
PROGRAMS THAT ARE PRIMARILY EDUCATIONAL

Programs whose primary purpose is education are estimated to
account for $11.3 billion of educational expenditures in 1978. Elementary and secondary levels will receive $5.8 billion of this amount.
Higher education will receive an estimated $4.3 billion and the remaining $1.2 billion will be directed toward adult and continuing education,
libraries, research, and cultural activities. Approximately 76% of Federal elementary and secondary school funds are administered by the
Education Division of the Department of Health, Education, and
Welfare. In 1978, the U.S. Office of Education will administer $4.4
billion. Other HEW programs account for another $1.2 billion.
The Office of Child Development will provide $493 million in 1978
for elementary and secondary education, principally in the Head Start
program.
Under the social security system (OASDI), survivors of insured
workers between the ages of 18 and 22 who are still in school receive
benefits, while those not in school do not. Legislation is proposed to
phase out over a 4-year period this educational benefit for those
becoming eligible in the future. In 1978, an estimated $354 million of
social security payments will be made to high school students.

175

SPECIAL ANALYSIS I
Table 1-2. FEDERAL OUTLAYS FOR PROGRAMS WHICH ARE
PRIMARILY EDUCATIONAL BY LEVELS
Outlays (millions)

Purpose and program

1976
actual

Elementary and secondary:
Office of Education:
Financial Assistance for Elementary and Secondary
Education Act
Educationally deprived children (ESEA)
Support-innovation consolidation
OtherESEA
Federally affected areas
Emergency school aid
Library resources consolidation
Education for the handicapped
Occupational and vocational education
Office of Child Development
Student grants ( O A S D I ) .
Other H E W
Bureau of Indian Affairs
Other

1,758
192
199
599
213
70
191
423
476
255
201
174
36

Subtotal, elementary and secondary
Higher education:
Office of Education:
Basic opportunity grants
Work-study, supplementary grants and student
supplementary incentive grants
__
Guaranteed student loans.__.
Direct student loans
Vocational education.....
Student loan insurance fund
Disadvantaged students and developing institutions
Other Office of Education
Special institutions
Student grants (OASDI)
Other H E W
National Science Foundation
Other
_
_

4,787

Subtotal, higher e d u c a t i o n . . . .
Adult and continuing education:
Office of Education:
Occupational and adult education
Public libraries
Social Security Administration.
Library of C o n g r e s s . . . . .
Other....
_

3,946

Total..„

___
548
50
101
75
55
6
55
49
134
64
58
43
H_
1,249

1977
estimate

1978
estimate

1,845
178
191
847
271
96
318
409
489
303
282
198
35

336
1,998
184
217
496
273
99
378
421
493
354
307
199
40

5,462

5,795

905

219

1,522

1,686

646
266
301
163
52

158
64
87
18
72

653
278
320
153
85

345
15
174
362

224
102
84
998
109
53
43_

45
11
16
254
40
12
20_

199
100
94
1,181
120
49
49^

215
54
114
1,078
123
54
53

1,016

4,803

4,273

142
57
99
117
40

Subtotal, adult and continuing education
Other:
Office of Education:
Salaries and expenses
Guaranteed student loans
_
Student loan insurance fund
National Institute of Education
Special institutions
Smithsonian Institution
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities....
__
Other
_
Subtotal o t h e r . . .

TQ
estimate

21
8
25
27
13

137
63
118
145
49

127
53
138
170
45

455

94^

512

533

115
31
68
35
28
56
70

25
13
17
8
9
15
26

119
35
72
48
36
58
103

126
82
24
47
30
60
107

21
80

7
65

20
156

30
150

504

185

647

656

~ 9,692

2,544

11,424

11,257

176

THE BUDGET FOR FISCAL YEAR

1978

The Federal Government additionally aids or directly provides
education for certain groups including Indians, Cuban refugees, and
residents of Pacific territories. The National Science Foundation and
National Foundation on the Arts and the Humanities also provide
some support to elementary and secondary school levels.
An estimated $4.3 billion will be spent in 1978 for higher education,
a decrease of $530 million from the 1977 level. Expenditures for
higher education are 38% of total Federal outlays for education.
The Office of Education will provide $2.9 billion of the total amount
for higher education.
The majority of the funds for educational purposes at the higher
education level is for student support. In 1972, the year in which
Congress enacted higher education amendments, $933 million for
Office of Education student support programs (work-study, supplementary grants, guaranteed student loans and direct student loans)
constituted 43% of the total. In 1978, under administration proposals, Office of Education student aid expenditures will reach $2,046
million, more than twice the 1972 level. Social security benefits to
students at institutions of higher education will provide an additional
$1,078 million of student support in 1978, a decrease of $103 million
from the 1977 level as this benefit is phased out over a 4-year period.
The focus of higher education aid will continue to shift from institutional support to direct student support with the full funding of basic
opportunity grants.
Adult and continuing education will be provided $533 million in
1978, a 4% increase over 1977. The Library of Congress and the
Smithsonian Institution are among the activities included in this
category.
EDUCATIONAL SUPPORT FOR OTHER PURPOSES

Almost half the expenditures for education is in programs directed
toward multiple purposes.
The largest single program in this category is veterans readjustment
benefits (the GI bill). Veterans readjustment is designed primarily to
compensate veterans for opportunities lost while they were in the
service. Expenditures reflect estimated use of program benefits by
veterans, active duty personnel and other beneficiaries. Outlays for
those education activities covered by this analysis peaked in 1976 at
$5.2 billion. The 1978 expenditures of $3.1 billion reflect a decreasing
number of persons eligible to receive benefits. School lunch, breakfast,
milk, and other feeding programs provided $3.0 billion in benefits
for nutrition in 1977. The administration's child nutrition reform
proposal would replace the existing fragmented, overlapping, and
administratively complex programs for needy children. The administration's initiative will provide $2.2 billion in 1978 for needy children including nearly 700,000 needy children who are not currently
receiving benefits.
The GI bill and child nutrition programs will comprise 66% of the
educational outlays from noneducational programs in 1978. The
largest training program is for defense personnel. The Department of
Defense trains inservice personnel and educates future service personnel through the service academies and Reserve Officer Training

177

SPECIAL ANALYSIS I

Corps. Outlays for training will total $376 million in 1978, a 6%
increase over 1977.
Table 1-3. FEDERAL OUTLAYS FOR OTHER BASIC PURPOSES BY LEVEL
Outlays (millions)

Level and program

1976

Elementary and secondary:
Child nutrition
Forest Service
Community planning and development
Veterans readjustment
Other...

1978

_
_

4,301
29
4
10
9
18
5
63
6
10
7
9
5
19
2

53
9
67
60
43
18
8
40
3
1
44

3.186
274
19
9
17
5
548
10
3
48
15
3

2,573
294
214
15
5
31
7
18
4
69
9
5

1,066

4.677

3.919

57
108
11

241
583
118

240
471
137

12
9

92
4

848

82
6

330
25

351
25

36
0

35
5

36
7

33
400
43
114

8
13
0
6
30

3
5
460
59
14
1

37
25
3
72
15
2

17
4

68
6

49
6

10,145

Other:
Department of State
Public service jobs
__
International development assistance
Other.

2.446

590

Subtotal, training of Federal military employees.

3.273

283
23

Training of Federal military employees:
Defense
Coast Guard _

41
9

1.095

Subtotal, adult and continuing education

2.172
6
5
3
5
84
90

219
786
90

Adult and continuing education:
Agriculture Extension Service_.
Veterans readjustment
_
Other

3.023
1
8
37
14
0
9
1

5,955

Subtotal, higher education

33
9
5
5
7
1
9
1
7

2.199

Higher education:
Veterans readjustment
Military service academies
Reserve Officers Training Corps
Other DOD...
Health professions training
Research training (NIH)
Alcohol, Drug, and Mental Health Administration. _
Other

Total

1977

1.890
44
32
10
4
93

Subtotal, elementary and secondary

Subtotal, other

1,984

9,915 8,058

SALARY SUPPLEMENTS

Salary supplements in the form of educational allowances or direct
provision of education for Federal employees or for their dependents
will reach an estimated $318 million in 1978, a 22% increase over
1977. These supplements consist almost entirely of Defense Department expenditures for overseas dependents education and for off-duty
education of military personnel. The two programs account for $303
million in 1978.

240-700 O - 77
http://fraser.stlouisfed.org/ - 12
Federal Reserve Bank of St. Louis

178

THE BUDGET FOR FISCAL YEAR 1978

Table 1-4. FEDERAL EDUCATION OUTLAYS FOR SALARY SUPPLEMENTS
Outlays (millions)

Level and program
1976
actual

Total, salary supplements

TQ
estimate

236

Elementary and secondary
Higher education
Adult education
Other

231
__ ._
_
5

Defense: Overseas dependents education
Other
__

224
12

86
4

1977
estimate

261

318

255
1

311
1
1
5

247
14

303
15

_
_
1

1978
estimate

EDUCATIONAL PERSONNEL TRAINING AND RESEARCH

Educational personnel training and research is funded under many
programs already identified as directed toward education goals. They
account for $811 million in 1978 or 4% of total educational expenditures. Training funds ($231 million) increase in 1978 by $9 million
over 1977 levels. Educational research, estimated at $580 million in
1978, will be $254 million above the 1976 and $118 million above
the 1977 levels.
The largest contributors to these categories are the Office of Education (73% of training funds) and the HEW Education Division (85%
of research funds).
Table 1-5. FEDERAL OUTLAYS FOR PERSONNEL TRAINING AND
RESEARCH IN EDUCATION
Program

Outlays (millions)

Subtotal* education personnel training
Education research:
Elementary and secondary education
Education for the handicapped
_
Occupational, vocational, and adult education
Special projects for training
_
Assistant Secretary for Education
National Institute of Education
_
National Foundation on the Arts and Humanities
National Science Foundation
Other
_

1977

1978

actual

Education personnel training:
Occupational, adult and vocational...
Emergency school assistance
Education for the handicapped
Elementary and secondary educationNational Science Foundation
Other

1976

estimate

4
9
4
1
3
9
1
8
4
2
5

9
1
2
1
7
1
4
1
1
1

4
6
70
3
7
1
6
4
49

3
5
72
3
4
28
8
54

16
7

22
2

21
3

8
8
42
46

56
1
2
6
6
1
4
5
1
4
5

11
2
6
9
62
3
6
1
3
8
9
2
2
3
2
1
8

13
5
7
0
19
0
54
1
3
94
3
3
39
1
5

1
0
6
9
22
3
1
1
8

Subtotal, educational research

36
2

18
1

42
6

50
8

Total

52
0

12
8

64
8

81
1

SPECIAL ANALYSIS I

179

EDUCATIONAL SPENDING BY PURPOSE AND LEVEL

The table that follows (1-6) displays educational support funding
by purpose and level.
Table 1-6. FEDERAL OUTLAYS FOR EDUCATION BY PURPOSE AND LEVEL
Outlays (millions)
^976
actual
Elementary and secondary:
Education
Other basic purposes
Salary supplements

Total, elementary and secondary

._._
___

Higher education:
Education
Other basic purposes
Salary supplements

7,217

11977
estimate

1,249
491
89

5,462
3,273
255

1,829

8,990

\9U
estimate
5,795
2,446
311
8,552

3,946
5,955

Total, outlays for education

8,193

94
192
_

512
942
1

533
848
1

286

1,455

1,382

185
235
1

647
1,023
5

656
845
5

421

1,675

1,506

20,073

Total, other

9,480

1,405

2,082

504
896
5

4,273
3,919
1

1,550

Total, adult and continuing education

4,803
4,677

455
1,095

Adult and continuing education:
Education
Other basic purposes
Salary supplements

1,016
1,066

9,901

Total, higher education

Other:
Education....
Other basic purposes
Salary supplements

4,787
2,199
231

TQ
estimate

4,618

21,600

19,633

Table 1-7. FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
EDUCATION BY SUBLEVEL AND T Y P E OF SUPPORT
Outlays (millions)

Su&level and type of support

Total, elementary and secondary
Early childhood
Elementary and secondary
Supporting services
Current operations
_
Facilities and equipment
Student support
Education personnel training
Educational research

1976
actual

TQ
estimate

1977
estimate

1978
estimate

7,217

1,829

8,990

8,552

713
6,199
305

201
1,502
126

768
7,831
391

2,772
5,312
468

6,287
164
429
156
181

1,563
31
92
58
85

7,894
182
441
190
283

7,318
196
470
199
369

180

THE BUDGET FOR FISCAL YEAR 1978

Elementary and secondary education support is provided primarily
through grants to State and local educational agencies. Higher education support is not channeled generally through State and local government. Grants or loans are provided to an educational institution or to
a student who then selects an institution to attend. Federal support for
higher education continues to shift from institutional to student
assistance. In 1978 an estimated $6.7 billion or 82% of total higher
education outlays will be direct grants or subsidies via loans to students. Another $1.4 billion will go to institutions for current operations or facilities and equipment. This amount is essentially the same
as the 1977 level.
The Federal Government also aids education through four tax
expenditures whose benefits are predominantly at the higher education
level. The exclusion from taxable income of veterans readjustment
benefits (the GI bill) is estimated to reduce Federal revenues by $200
million in 1978. The similar exclusion for other scholarships and fellowships results in a revenue loss of $285 million in 1978. Parents may
claim a personal exemption for full-time students over 18, even if the
students have incomes of their own. This tax expenditure of $375
million in 1978 aids families with older children in school. Finally, the
deductibility of contributions by both individuals and corporations to
educational institutions is estimated to reduce Federal receipts by
$805 million in 1978.

SPECIAL ANALYSIS I

181

Table 1-8. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF
INSTITUTION AND TYPE OF SUPPORT
Outlays (millions)
1976
actual

2-year institutions
Other undergraduate
Graduate and professional
Current operations
Facilities and equipment
Student support
Education personnel training
Educational research

2.082

9,480

8,193

3.473
4.766
1.662

54
7
1.146
32
6

3.274
4,899
1,307

2,868
4,139
1.186

1,381
26
7
8,178
1
8
4
8

1977
estimate

9.901

Total, higher education

TQ
estimate

1978
estimate

35
3
7
9
1.647
6
1
5

1.308
10
9
7,886
3
4
6
2

1,201
16
6
6,704
3
6
86

The reduction in student support in 1978 (approximately $1.2
billion below the 1977 level) is attributable principally to the decline
in total veterans benefits as the eligible veterans population declines.
Student support continues to be the predominant higher education
expenditure. Outlays for 2- and 4-year institutions in 1978 decrease by
approximately 14% below the 1977 level.
STUDENT SUPPORT

An estimated $6.7 billion will be available for student support in
1978, 87% of which is for undergraduate student assistance. The GI
bill will provide 38% of the total for all student assistance. The Office
of Education will spend another 36% or about $2.4 billion to support
various grant and loan programs.
The Office of Education estimates that about 2.9 million student
grants and loans will be made in 1978 under its programs. Students
receiving aid under more than one program account for at least onethird of this total.

Table 1-9. STUDENT SUPPORT BY AGENCY: FEDERAL OUTLAYS AND NUMBER OF STUDENTS
Outlays (millions)
1976

Undergraduate:
Health, Education, and Welfare:
Officeof Education
Social Security Administration
Health agencies and other
Veterans Administration
Defense
Justice..
Other
Subtotal, undergraduate
Graduate:
Health, Education, and Welfare:
National Institutes of Health
Office of Education
Other HEW
Veterans Administration
National Science Foundation
Defense
Other
Subtotal, graduate
Total
1
2

1977

1978

1976

1977

1978

2,030
967
28
3,806
183
39
46

531
246
19
525
56
21
16

2,680
1,144
26
2,820
183
46
45

2,236
1,035
21
2,277
192
41
60

2,750
535
43
1,810
36
22
22

3,290
637
39
1,418
34
93
24

2,510
697
26
1,242
33
79
24

7,099

1,414

6,944

5,862

5,218

5,535

4,611

112
158
169
495
19
117
9

27
41
56
68
2
36
3

85
172
169
367
16
126
7

96
168
135
296
14
125
8

10
450
100
203
2
434
9

10
375
81
163
2
588
9

9
400
60
143
2
613
8

1,079

233

942

842

1,208

1,228

1,235

8,178

1,647

7,886

6,704

Fiscal year student totals correspond to relevant academic years such as 1976 reflects the 1975—76 school year.
Student totals not shown because some students receive awards under more than one program.

Student (thousands)

SPECIAL ANALYSIS I

183

OUTLAYS B Y EDUCATIONAL SUBLEVEL

In order to provide data in a form comparable with earlier education
special analyses, the following tables are provided which display
program and agency outlays by education sublevels in 1976, the
transition quarter, 1977 and 1978.
Table 1 1 . FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
—0
EDUCATION BY AGENCY
Outlays (millions)

Sublevel, agency and program
1976
actual

Early childhood:
Office of Education:
Elementary and secondary_._
Education for the handicapped
Appalachian regional development
Child development....
Other.._
_
Child nutrition

Subtotal supporting services
Totil

1978
estimate

46
9
1
134
11

151
54
22
489
52

179
65
22
493
44
1,969

713

Elementary and secondary:
Food and Nutrition Service
Defense
Office of Education:
Financial Assistance for Elementary and Secondary Education Act
_
Educationally deprived children
_
Other ESEA
_
Federally affected areas
Emergency school aid
Education for the handicapped
_. _
Occupational and vocational education
Library resources and library consolidation
_
Other, Office of Education
Student grants (OASDI).
OtherHEW
Bureau of Indian Affairs
Community planning and development
Veterans readjustment...
_
Other
_

Supporting services:
Office of Education:
Elementary and secondary education
Emergency school aid
Education for the handicapped
Innovative and experimental programs
National Institute of Education
National Science Foundation
Other

1977
estimate

143
31
19
476
44

Subtotal, early childhood..

Subtotal, elementary and secondary

TQ
estimate

201

768

2,772

1,890
236

393
91

3,023
258

203
314

1,565
269
599
209
87
406
70
25
255
133
166
22
140
127

486
92
75
53
18
46
6
14
64
29
42
3
19
71

1,641
237
847
241
186
392
96
35
303
160
190
18
104
100

336
1,755
227
496
238
246
413
99
38
354
159
192
13
84
145

6,199

1,502

7,831

5,312

174
4
73
30
7
17

76
2
28
4
5
5
6

188
30
77
32
36
6
22

239
34
68
53
43
8
23

305

126

391

468

7V217

8,990

8,552

THE! BUDGET FOR FISCAL YEAR

184

1978

Table 1-11. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY AGENCY
Outlays (millions)

Sublevcl, agency and program

1976

2-year institutions:
Office of Education:
Basic opportunity grants
_._
Other higher education
__
Occupational and vocational education
Student grants (OASDI)
Health Resources Administration
Veterans readjustment
_
Other
Subtotal, 2-year institutions

Graduate and professional:
Health Services Administration
Research training (NIH)
_
ADAMHA
Health Resources Administration
Higher education (Office of Education)
Student grants (OASDI)
Special institutions
Veterans readjustment
Department of Defense
National Science Foundation
Other
_

452
302
154
237
60

110
37
16
60
27
300
24

3,473

761
312
145
284
65

837
183
164
262
44

1,611

1,301

574

3,274

2,868

249
190
96

67
60
31

274
199
70

294
214
62

452
460
84
217

110
130
36
93

761
445

849
204

260

338

177
111
731
43
65
27
25

154
250
860
94
68
42
30

170

27
64

37
81
186
16
28
6
11
225
7
22

4,766

34
170
88
507
49
31
41
494
137
24
87

2,174

1978

1977

_
_
__

Other undergraduate:
Military service academies
Reserve Officers Training Corps
Health Resources Administration
Office of Education:
Basic opportunity grants
Work-study and supplementary grants
Guaranteed student loans
Other higher education
Disadvantaged students and developing institutions
Direct student loans
Student grants (OASDI)
_...
Special institutions
Office of the Secretary
Other Office of Education and HEW
Bureau of Indian Affairs
Veterans readjustment
„
National Science Foundation
_._
Other
Subtotal, other undergraduate

1,632

20
68

773
62
68
16
30
976
25
58

1,146

4,899

4,139

9
40
29
130
9
8

28
130
43
395

5
147
64
271

68
42
5
22

366
147
25
93

43
52
296
147
26
81

1,209

Subtotal, graduate and professional

1,662

362

1,307

1,186

Total.....

9,901

2,082

9,480

8,193

185

SPECIAL ANALYSIS I

Table 1-12. FEDERAL OUTLAYS FOR ADULT EDUCATION AND OTHER
ACTIVITIES BY AGENCY
Outlays (millions)

Sublcvcl, agency and program

1976

Adult basic and extension:
Agriculture extension service
Offite of Education. _
Social Security Administration
Veterans readjustment
Department of Defense
Other

1977

1978

29
1
11
2
9
9
76
8
5
9
24

57
24
2
5
18
0
22
5

21
4
16
3
18
1
53
8
97
2
1

20
4
10
3
18
3
41
7
17
1
1
8

1.308

21
4

1.196

1.114

117
57
68

27
8
10

145
63
51

170
53
45

Subtotal, public and national library services.._

242

4
5

29
5

28
6

Training of Federal, State, and local civilian employees:
Justice
Federal Aviation Administration
Commerce Department
Department of the Treasury
Other

15
14
10
12
20

4
4
3
3
5

16
16
14
18
22

15
16
14
28
20

Subtotal, training of public civilian employees. -

9
3

283
23

82
6

330
25

351
25

35
5

36
7

34
57
3

35
70
4

19
0

Subtotal, adult basic and extension
Public and national library services:
Library of Congress
Library resources (Office of Education)
Other

Training of Federal military employees:
Defense
Coast Guard, _
Subtotal, training of Federal military employees.
Foreign educational activities:
State
International development assistance
Department of Defense __
Subtotal, foreign educational activities
Other:
Office of Education:
Salaries and expenses
Educationally deprived children
National Institute of Education
Office of the Secretary, HEW
National Institutes of Health
Smithsonian Institution
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities. _
Public service jobs
Housing and Urban Development
Other

Subtotal, other
Total

306

32
42
2
76

6
1
15

115
139
35
40
26
56
70
21
400
—31
81

25
35
8
8
6
15
26
7
103
45
21

119
156
48
26
25
58
103
20
460
40
85

126
152
47
26
29
60
107
30
235
32
84

29
9

1,140

98
2

77
0

3,130

2,888

952
2,955

186

THE BUDGET FOR FISCAL YEAR 1978
Table 1-13. FEDERAL AID FOR EDUCATION BY AGENCY
Agency

Legislative branch:
Library of Congress
Funds appropriated to the President:
International Development Assistance
Appalachian Regional Commission
Agriculture
Commerce
Defense—Military
Defense—Civil.
Health, Education, and Welfare:
Office of Education
Other HEW
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Energy Research and Development Administration
.
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration..
Veterans Administration
Other independent agencies:
ACTION
Corporation for Public Broadcasting
National Foundation on the Arts and
Humanities
National Science Foundation
Smithsonian Institution
United States Information Agency
Other
Total

Outlays (millions)
1976
actual

TQ
1977
1978
estimate estimate estimate

Budget
authority
(million)
1978

117

145

170

178

43
66
2,159
15
1,190
8

6
7
506
4
368
2

59
58
3,289
19
1,329
10

72
54
2,484
17
1,462
11

102
29
2,414
19
1,479
17

6,814
3,369
13
228
63
400
39
38
13

1,735
888
52
63
27
103
11
10
3

8,044
3,497
84
257
71
460
44
42
18

7,830
3,316
69
259
66
235
46
43
28

7,573
2,882
32
266
55
400
49
45
9

6
7
14

2
2
5

9
5
15

17
5
15

17
2
15

5
5,227

1
721

5
3,873

5
3,128

5
3,055

7
70

2
26

7
103

5
107

4
107

36
65
56
4
1

10
18
15
2
2

35
60
58
4

53
69
60
4
3

131
76
61
4
1

20,073

4,618

21,600

19,633

19,027

SPECIAL ANALYSIS J
FEDERAL TRAINING AND EMPLOYMENT PROGRAMS
SCOPE OF T H I S ANALYSIS

Federal training and employment programs aim to increase the skills
and employment opportunities of individuals already in the work
force and of persons who desire to join the work force but lack vocational preparation or face other employment barriers. The programs
provide skill training, rehabilitation, transitional employment experience, job placement assistance, and related child care and support
services.
These programs are distinguished from regular educational programs
by their operating characteristics. Generally, they: (1) Operate outside the normal educational process, (2) provide skill training for
nonprofessional jobs, (3) provide services for less than 1 year, and (4)
target on the disadvantaged or unemployed.
This analysis covers all programs classified as training and employment services in the functional classification of the budget. It also includes programs directed toward similar objectives from other functional classifications such as income security, and veterans benefits and
services.
Not included in this analysis are programs of vocational and technical education and paraprofessional training such as are authorized
by the Vocational Education Act, Adult Education Act, and Elementary and Secondary Education Act. Since these programs operate
within the normal educational process they are covered in Special
Analysis I, Federal Education Programs.
Outlays in 1978 are expected to be $7.8 billion, about $1.5 billion
less than 1977 due almost entirely to the reduced need for subsidized
public service jobs in 1978 as the economy and the employment situation improve.
TAX EXPENDITURES

Certain provisions of the personal and corporate income tax that
are designed to achieve particular economic and social objectives give
rise to revenue losses that are called tax expenditures. This concept
is discussed more fully in Special Analysis F. Two tax expenditures
are specifically related to employment and training. Since they do not
result in obligation, workload, or outlay figures comparable to the
other activities, amounts for each tax expenditure are noted here but
not included in the tables in the body of the special analysis.
Child and dependent care expenses.—A 20% tax credit for child and
dependent care expenses incurred to permit a taxpayer and spouse
to work (or a single worker with dependents) may be taken up to a
maximum credit of $400 for one child and $800 for two or more. These
provisions of the Tax Reform Act of 1976 replaced a deduction for
child and dependent care expenses which phased out at high income
levels.
WIN/AFDC tax credit.—Employers may take an income tax credit
equal to 20% of the first-year wages and salaries of employees placed
in employment under the work incentive program. Beyond $50,000
187

188

THE BUDGET FOR FISCAL YEAR

1978

a year, the credit is allowable only at half this rate. The Department
of Labor estimates that credits for some 26,100 WIN recipients were
taken in 1976. The Tax Keduction Act of 1975 and Tax Reform Act
of 1976 extended a similar credit for all AFDC recipients and made
the credit applicable to private employers of domestics. However, in
the case of domestics, the maximum amount of wages on which credit
may be taken is $5 thousand. Estimates of the tax receipts lost due
to these provisions are:
(In millions of dollars)
1976
estimate

Child and dependent care
WIN/AFDC

1977
estimate

1978
estimate

290
10

840
15

870
15

YOUTH EMPLOYMENT PROGRAMS

Many programs provide work experience or training to youth under
22. Because the problems of youth are complex and the approaches to
them varied, the Federal effort involves many agencies and activities.
In 1976, approximately 4.4 million youth were served, at a cost of
$3,146 million (see table below). Of these youth, 33% participated in
programs specifically designed to assist young people. As a comparison,
an average of about 1.7 million teenagers were unemployed during
1976.
Disadvantaged youth are the focus of the Federal summer emplo}^
ment program, and the President's stay-in-school program, both
administered by the U.S. Civil Service Commission. (An additional
31,100 summer jobs are filled by young people without regard to
income via competitive staffing procedures.) The Job Corps (CETA,
Title IV), administered by the Department of Labor, and the high
school work study program, administered under the direction of the
Department of Health, Education, and Welfare, provide skill training
and work experience to youth with limited financial resources. Summer
work experience for low-income youth is furnished by the CETA
summer program, which is funded through grants to State and local
prime sponsors by the Department of Labor. The Youth Conservation
Corps, run under the auspices of the Departments of Agriculture and
Interior, employs youth for the summer on public lands.
Another sixteen programs in six agencies (see chart) serve youth
participants. These programs provide assistance to young persons
in the areas of skill training, job referral and placement, work experience, public service employment, and vocational rehabilitation.
In addition, youth receive direct placement assistance from the U.S.
Employment Service under its regular programs and the food stamp
program. During 1976, the Employment Service, through its regular
activities, placed in jobs 1,281,600 individuals age 21 and under, and
an additional 67,300 referred to it through the food stamp mandatory
registration program.
Improving the understanding of youth labor force problems is the
principal focus of a range of research and demonstration efforts in
several agencies. For example, one demonstration project will study
the cost and effectiveness of providing a transitional supported work
environment for traditionally hard to employ persons, including unemployed youth, ex-offenders, and female welfare heads of households.

SPECIAL ANALYSIS J

189

I n another study, the n a t u r e of the dropouts' employment experience
is being researched with the goal of improving the transition between
school and work.
Development of Federal y o u t h employment strategies has been
undertaken by a secretarial level coordinating group t h a t includes
DOL, H E W , and Commerce.
EMPLOYMENT AND TRAINING PROGRAMS SERVING YOUTH IN FISCAL YEAR 1976
[Individuals in thousands, outlays in millions]
Ncwi
enrollees
Program

Only for youth:
CETA summer
Youth Conservation Corps
Job Corps-CETA title IV
High school work study
Federal summer aid
Stay-in school

Total*
participants

Outlays
(est.)

888.1
23.0
44.0
15.0
30.0
4.1

1,131.6
23.0
64.7
42.0
30.0
18.3

459.4
17.4
180.6
10.8
42.0
57.5

1,004.2

1,309.6

767.7

1,184.1
15.2
7.9
3.2
6.0
88.3
718.5
3.7

1,596.4
19.8
10.1
10.6
8.7
283.0
1,137.3
11.0

1,746.9
35.6
18.9
17.5
19.0
173.3
355.4
12.1

2,026.9 3,076.9

2,378.7

_
_

Subtotal
2

Serving youth and others:
CETA-Title I, II, III (except summer), and VI
WIN
HUD—community development
Veterans Administration programs
Bureau of Indian Affairs programs
HEW -vocational rehabilitation
HEW-social services.__________
Community Services Administration
Subtotal

Total
1
2

___

3,031.1

4,386.5

3,146.4

Youth only.
Outlays for these programs are prorated based on the percentage of youth participants.

COUNTERCYCLICAL PROGRAMS

Several programs intended to address cyclically high unemployment
were enacted in the recent downturn. These measures were undertaken
in addition to the fiscal policies which are the principal strategies for
restoring the health of the economy. The impact of the countercyclical
employment measures on the unemployment rate is limited. Not only
are the Federal funds used for activities which States and localities
might otherwise have funded themselves, but the existence of the
programs attracts people into the labor force who might not otherwise
seek employment. These programs have made funds available to
States and localities for use in providing services and facilities, and
some of those employed would otherwise have had difficulty in finding
jobs.
Unemployment
compensation.—Unemployment
compensation
is the most important means of aiding the unemployed. It provides
substantial income replacement for unemployed workers while they
search for jobs. Unemployment compensation was extended to up to
65 weeks for workers covered by the regular State programs, and provided for up to 39 weeks for other workers under the special unemploy-

190

THE BUDGET FOR FISCAL YEAR 1978

ment assistance (SUA) program. The 1976 amendments to the unemployment insurance laws have brought the coverage in the regular
unemployment insurance program to 97% of wage and salaried employment, effective in 1978. (See Special Analysis L.)
Subsidized
employment
programs.—The
following three
programs were intended to increase employment during the economic
downturn. As the economy recovers, the temporary programs will
phase out.
Temporary employment assistance.—Under Title VI of the Comprehensive Employment and Training Act, grants were provided
to States, localities and Indian tribes to support about 260,000
temporary public service jobs. This program is being maintained at
this level in 1977 and then phased out in 1978.
Public works employment.—Under the Public Works Employment
Act of 1976, $3.7 billion was provided, as follows:
—$2.0 billion to the Department of Commerce for various State
and local public works projects;
—$1.25 billion to the Department of Treasury for "countercyclical"
revenue sharing assistance to State and local governments.
—$480 million to the Environmental Protection Agency for additional grants for construction of waste treatment works.
These funds are expected to create 160,000 years of employment
over 5 or more years.
Job opportunities program.—This program was enacted as part of
the Emergency Jobs and Unemployment Assistance Act of 1974
(Public Law 93-567). In 1975 and 1976, funds were made available
to the Department of Commerce, which reviewed and provided
financial assistance for project proposals from other Federal agencies.
Although a broad range of services, construction and other activity
was financed, the principal purpose of all projects w a s to create employment. For the purposes of this special analysis, therefore, the
entire activity is classified under "public service employment."
Approximately 99,400 individuals are expected to have been employed
in this program over a 3-year period ending in 1977.
YOUTH CONSERVATION CORPS

The Youth Conservation Corps is included for the first time in this
year's special analysis. It is authorized under the Youth Conservation
Corps Act of 1970 as amended, Public Law 91-378. The purpose of
the Youth Conservation Corps is to further the development and
maintenance of the Nation's national resources by providing gainful
employment of youth aged 15 through 18 on Federal lands and improving the environmental understanding of youth. It serves some
low-income youth, but by law it cannot be targeted to those in
need. Thirty percent of appropriations are provided to States to
operate similar programs on non-Federal public lands.
FOOD STAMP PROGRAM

The Food Stamp Act of 1964 was amended in January 1971 to
include a work requirement. Regulations effective in September
1976 provide that any employment offered shall be accepted unless

SPECIAL ANALYSIS J

191

the registrant is physically or mentally unfit, the job involves unreasonable risk to health and safety, or the distance to the job is
excessive. The State Employment Service refers food stamp registrants to job openings and assists them in job search activities.
HIGH SCHOOL WORK STUDY

States and localities can fund high school work study programs in
1977 and 1978 but the extent to which they do fund them is discretionary. For the purposes of this special analysis, it is assumed that the 1976
level will be maintained by the States in 1977 and 1978.
HEW—SOCIAL SERVICES

Under amendments to Title XX of the Social Security Act, a new
reporting system was instituted in 1975 to develop information on
State plans for services. Prior to this system (before fiscal year 1976),
HEW estimated services provided on the basis of partial surveys. The
difference between the levels of service projected from the survey
estimates and the levels projected from the new reporting system is
substantial. Data before 1976 are not comparable to the current data
and therefore this program has been excluded from calculations in
Tables J-9 and J-10. The sharp break from prior year reporting is,
however, reflected in the institutional training portions of the charts
below.
PROGRAM APPROACHES

Employment and training programs are classified into majbr
approaches as follows:
—On-the-job training—provides training for regular job vacancies
generally by reimbursing employers for the added costs of hiring
disadvantaged individuals. Employers are expected to retain
the individual once reimbursement ends.
—Institutional training—provides instruction in vocational skills
and job related remedial education in a classroom setting.
—Vocational rehabilitation—helps individuals overcome physical
and mental handicaps to employment, through skill training,
counseling, allowances and supportive services.
—Work experience—provides temporary employment experience,
generally part time, primarily for youth and older workers.
—Public service employments—provides employment, generally
intended to be transitional, in public sector jobs for individuals
who need to acquire work discipline and skills to compete for
nonsubsidized jobs, or who have difficulty obtaining regular
employment.
—Labor market services—encompasses services to assist individuals
in obtaining employment, including (a) job placement assistance,
(b) collection and analysis of labor market information, (c) equal
employment opportunity activities (excluding individual agency
civil rights activities other than contract compliance—see Special
Analysis M), and (d) other miscellaneous activities.
—Federal program support—includes research, development and
evaluation activities as well as planning, technical assistance and
program direction.
Some programs can be classified entirely under one approach. Others,
such as the work incentive program (WIN) and Comprehensive Em

$UO

9161

1161

8161

9161

1161

8161

S161

K6I

£161

5161

(161

0161

6961

8961

S16I

H6I

£161

5161

1161

0161

6961

8961

!H!W

3HJL

193

SPECIAL ANALYSIS J

Outlays
$ Billions

$ Bilh,

8.0-

-8.0

6.0 —

6.0

4.0 —

2.0-

1964
fiscal Years

1966

1968

J970

f972

1974

1976

J978
Estimate

ployment and Training Act programs (employment and training
assistance—ETA) offer a range of work and training services, and
thus are divided among several approaches.
Estimates by approach for State and local programs under ETA,
are based on projections from 1976 program operating plans of prime
sponsors. Approaches actually funded are those which local sponsors
determine are most appropriate to the individuals they choose to
serve and to the characteristics of the local labor market. The actual
1977 and 1978 uses may therefore vary considerably from these
projections. The comparable situation exists for the HUD community
development activity.
PROGRAM MEASURES

The three principal measures used to summarize the level of program services are:
—Years of service, which measures the average year round
enrollment;
—New enrollees, which counts the number of individuals entering
the activity during the year; and
—Outlays, which measures the level of spending during the year.

240-700 O - 77
http://fraser.stlouisfed.org/ - 13
Federal Reserve Bank of St. Louis

194

THE BUDGET FOR FISCAL YEAR

1978

Table J-1. PERCENT DISTRIBUTION BY APPROACH
Outlays
1976
actual
Public service employment—
Work experience
On-the-job training___
I nstitutional training
Rehabilitation
_
Labor market services
_

1977
est.

32
19
6
19
11
13

30
21
5
20
1
1
14

Years of service
1978 1976
est. actual
21
20
6
23
13
17

8
17
4
45
25

1977
est.

New enrollees

1978 1976
est. actual

9
17
3
48
23

5
17
3
50
24

14
35
5
39
8

1977 1978
est. est.
8
37

7
37
5
42
8

5
44
7

PROGRAMS BY APPROACH

The following tables show activity of major programs by approach.
Narratives with each table reference only significant changes and
include brief program descriptions if necessary. More complete
program descriptions may be found under the appropriate account
title in the Budget Appendix.
On-the-job-training (OJT).— The decline in outlays for veterans
is a result of a large group of veterans reaching the end of their GI
bill eligibility. The increase in new enrollment in 1978 for veterans
reflects the Veterans Administration's intention to increase veteran
participation in on-the-job training programs.
Table J - 2 . O N - T H E - J O B T R A I N I N G (outlays in millions, individuals in thousands)
Individuals served

1976

Employment and training
assistance..
WIN
On-the-job
training
for
veterans
Other
Total

1977

New enrollees

Years of service

Outlays
1978

1976

1977

1978

1976

1977

1978

177
91

186
98

185
91

43
10

48
10

45
10

164
27

196
26

18?,
76

198
22

145
36

135
41

85
5

56
9

51
9

35
14

29
20

31
14

487

465

452

143

123

116

240

271

253

Institutional training.—Included in this approach under ETA is
the Job Corps, a specialized program conducted in a residential
setting for youth aged 14 to 21, for which an outlay of $212.9 million
is expected in 1978.
The entry for social services includes programs operated by State
agencies for public assistance recipients but is exclusive of service to
WIN participants. The social services program increased in 1977 as a
result of a nonrecurring increase in amounts available for supportive
day care services.
Other institutional training includes programs for Indians, prisoners
preparing for employment after release, and others.

SPECIAL ANALYSIS J

195

Table J-3. INSTITUTIONAL TRAINING (outlays in millions, individuals in thousands)
Individuals served
Years of service

Outlays
1976

Employment and training
assistance
WIN
Social services training
Other
Total

822
42
712
44

1977

876
45
860
61

1978

1976

1977

1978

New enrollees
1976

1977

1978

875 189 199 189 583 706 659
42
13
10
10
34
23
23
800 1.342 1.596 1,566 1.437 1,816 1.458
66
17
21
2\
28
26
26

1,619 1,842 1,783 1,561 1,826 1,786 2,082 2,571 2,167
Table J-4. VOCATIONAL REHABILITATION
(Outlays in millions, individuals in thousands)
Individuals served
Outlays
1976
act.

HEW vocational rehabilitation
Veterans vocational rehabilitation
Total

1977
est.

Years of service

New enrollees

1978
est.

1976
act.

1977
est.

1978
est.

1976
act.

1977
est.

1978
est.

847

897

920

838

844

395

397

399

110

113

939 1,007 1,034

852

857

858

412

416

417

Work experience.—Estimates for ETA include in-school, out-ofschool, and summer youth activity, as well as non-youth activity.
The decline in 1978 new enrollees in ETA is due principally to the
decline in the preliminary estimate of need for subsidized summer jobs
for youth, in line with the anticipated improvement in the employment
situation generally. Final budget estimates for this summer youth
program are made in March of each year.
Table J-5. WORK EXPERIENCE (outlays in millions, individuals in thousands)
Individuals served
Outlays
1976
act.

1977
est.

Years of service
1978
est.

Employment and training
assistance
1,214 1,381 1,306
Temporary
employment
assistance
237 309
30
Federal
agency
youth
programs
100 105 107

1976
act.

1977
est.

458

504

20
59
3
68

655

WIN

Other

130

143

44
4
61

1,648 1,937 1,597

595

Total

New enrollees

1978
est.

1976
act.

1977
est.

1978
est.

462 1,674

1,956

1,769

126

61
3
74

34
17
49

46
14
58

48
14
50

610 1,849 2,201 1,901

196

THE BUDGET FOR FISCAL YEAR

1978

Public service employment.—ETA includes authority for public
employment under regular prime sponsor grants (title I), special
grants in areas with an unemployment rate of 6.5% or more for 3
consecutive months (title II) and national programs (title III). The
reduction in 1978 levels is due to the phase out of the temporary
employment assistance program consistent with the expected overall
improvement in the economy.
Table J-6. PUBLIC SERVICE EMPLOYMENT
(Outlays in millions, individuals in thousands)
Individuals served
Outlays
1976
act.

1977
est.

1978
est.

New enrollees

1976
act.

1977
est.

1978
est.

589

298

970
62
0

198
4
INA

260
5
INA

120
5
INA

419
9
INA

2,725 2,828 1,621

299

336

194

727

Employment and training
assistance
752
590
Temporary employment assistance
1,645 2,042
WIN
58
67
Job opportunities program..
269
129
Total

Years of service

1976
act.

WH
est.

1978
est.

164

158

270 215
11
11
INA INA
444

384

Labor market services.—Job placement assistance.—The State
Employment Service (ES), is the major federally financed deliverer
of job placement assistance for the general labor force, and for the
disadvantaged. In cooperation with welfare agencies, ES also provides
placement services to WIN and food stamp recipients. Other specialized placement assistance is provided by the Veterans Administration and the Bureau of Indian Affairs.
Labor market information.—Activities are those of the Department
of Labor's Employment and Training Administration and Bureau of
Labor Statistics.
Table J-7. JOB PLACEMENT ASSISTANCE, LABOR MARKET INFORMATION
AND EQUAL EMPLOYMENT OPPORTUNITY (in millions of dollars)
Outlays
1976
actual

Job placement assistance:
Employment service
Work incentive program
Food stamp recipient services
Other placement assistance
Labor market information
Equal employment opportunity
Total

1977
estimate

1978
estimate

513
43
26
52
45
105

599
76
29
55
55
118

655
71
31
54
58
122

785

933

991

SPECIAL ANALYSIS J

197

Equal employment opportunity.—Includes the Equal Employment
Opportunity Commission, the Employment Standards Administration of the Department of Labor (including the Office of Federal
Contract Compliance Programs (OFCCP), and the equal pay and age
discrimination programs), and contract compliance activities within
other agencies conducted under OFCCP aegis.
Table J-8. PERCENT OF PROGRAM COSTS USED FOR SUPPORTIVE
SERVICES FOR SELECTED PROGRAMS
1975
actual

12
1
33
59
5
16

CETAtitlel
CETA title II
Work incentive program
HEW Vocational rehabilitation
Veterans program (VA)
Indian programs (Interior)

1976
actual

12
1
35
50
5
13

Unit costs by approach.—Costs include the various labor market
and supportive services usually provided to supplement the indicated
training or work program, as well as administrative costs. Cost
changes frequently reflect minimum wage increases and other general
economic factors rather than substantive program change.
Table J-9. UNITS COSTS BY APPROACH, 1975 AND 1976
Average
duration of
enrollment
(years)

Participant
unit cost
(dollars)

1975

On-the-job training
Institutional training
Vocational rehabilitation
Work experience
Public service employment

Year of
service unit
cost (dollars)

1976

1975

0.77
.30
1.32
.32
.70

0.60
.35
1.48
.33
.53

3,102
3,934
1,337
2,451
8,220

1976

3,492
4,210
1,296
2,926
8,335

2,376
1,161
1,759
786
5,793

1976

2,115
1,466
1,921
961
4,431

People served.—Most Federal employment and training programs
focus on low-income individuals and others with severe barriers to
employment as they are least likely to be able to improve their employment opportunities without assistance. Changes over time in
characteristics of participants frequently result from programmatic
or statutory changes rather than shifts within the general population
served. For example, change in the proportion of those with less than
a high school education is largely due to the fact that public service
jobs programs, which by law have not been targeted to the disadvantaged, increased substantially in 1976 as a proportion of total
program resources.

198

THE BUDGET FOR FISCAL YEAR 1978

Other employment and training programs generally target by statute
on the poor, the unemployed, the less educated, members of minorities,
youth, and welfare recipients.
Table J—10. CHARACTERISTICS OF UNEMPLOYED WORKERS, ADULT
POVERTY POPULATION AND PROGRAM PARTICIPANTS (in percent)
Unemployed
workers (age 16
and above) civilian
noninstitutional
1972

1974 19761

Average number (in millions)
4.8 5.1 7.3
Percent:
Age21orless
38 39 34
Male
54 53 54
Less than high school education.
48 47 42
Poor....
21 20 17
Welfare recipient
NA NA NA
Minority 5
_ 20 20 20

Poverty population
Employment and
(age 14 and above)
training program
civilian
participants
noninstitutional 2 (age 14 and above) 3
1972

1974 1976*

1972

17.2 15.4 17.3

1974 1976

2.3 2.1 2.3

23 25 27
38 37 38
70 67 68
100 100 100
NA NA NA
27 30 28

3
1
4
8
4
7
7
5
4
3
4
0

3
1
4
4
4
3
6
7
4
2
3
5

4
2
5
7
4
7
6
8
2
5
4
6

1
2
3

Represents 11-month average.
Data collected in March of year shown represents income of the prior year.
Excludes in-school programs.
* Census Population Survey revised methodology.
5
Data for poverty population does not include Spanish speaking.
NA—Data not available.

Table J—11. CHARACTERISTICS OF ENROLLEES IN SELECTED
PROGRAMS, 1974, 1975, 1976 (in percent)
Poor

21 or younger

Less than high
school education

1974 1975 1976 1974 1975 1976 1974 1975

CETAtitlel
CETA title I I . .
TEA
Job Corps
WIN
HEW vocational rehabilitation...
Indian OJT
Veterans OJT

1976

NA 77 76
NA 48 75
NA 44 44
100 100 100
90 100 100
62 67 60
100 100 65
15 15 15

54
54
26
92
60
38
41
15

Male
1974

CETAtitlel
__ ~NA
CETA title II
NA
TEA.
NA
Job Corps
74
WIN
28
HEW vocational rehabilitation-__
54
Indian OJT
49
Veterans OJT.
99

Minority race

1975 1976

54
66
70
75
25
57
45
99

NA 62 57
NA 24 56
NA 21 22
100 100 100
16 19 18
25 27 22
10 20 47
6
6
6

54
54
65
72
27
49
47
99

1974

1975 1976

NA 56 57
NA 43 56
NA 39 31
63 71 73
44 46 45
22 24 21
100 100 100
8
8
8

NA
NA
NA
90
60
43
65
15

61
28
27
89
59
43
65
15

Welfare recipients
1974

1975 1976

NA 27 26
NA 16 26
NA 14 13
37 35 41
100 100 100
17 19 17
25 25 18
NA NA NA

SPECIAL ANALYSIS J

199

IMPACT OF EMPLOYMENT AND TRAINING PROGRAMS

There are significant limitations to the ability to discern the impact
that employment and training programs exert on national economic
conditions. This constrains assumptions of the value of program change
as a means of altering basic economic conditions. For example, the
potential impact for one of the largest approaches, public service
employment, is diluted by substitution effects. Analysis indicates that
a substantial portion of funds for programs financing transitional
public service employment do not create new jobs. Instead, sponsors
tend to substitute Federal funding for jobs that would otherwise be
funded by States and localities. The degree of substitution tends to
increase substantially the longer a public jobs program is in place.
A major evaluation study now underway may, for the first time,
begin to provide sound information on the impact of the CETA
programs. Initial findings should be available in 1977.
In addition, experience has shown that it is extremely difficult
from the national level to target program effects properly on the
particular problems of workers in each labor market. The goal of
decentralized block grant programs is to enable more direct response
to local needs in accord with broad national direction.
SELECTED PROGRAM ACCOMPLISHMENTS IN

1976

—380,400 individuals placed in jobs through ETA training programs
—186,100 WIN participants found full-time jobs; an additional
17,300 found part-time employment.
—Assistance provided to programs serving 390,000 apprentices.
—2.8 million individuals placed in 4-day or longer jobs by the employment service.
—321,300 persons rehabilitated by HEW vocational rehabilitation
programs, including 144,300 who were severely disabled.
FUNDS BY AGENCY

The following table shows obligations and outlays by administerim:
agency and major program or account. Two agencies—the ITepirt»
ments of Labor, and Health, Education, and Welfare will account I'o1
about 9 1 % of all employment and training outlays in 1977.

Table J-12. FEDERAL FUNDS FOR TRAINING AND EMPLOYMENT PROGRAMS BY ADMINISTERING AGENCY
(In millions of dollars)
Outia)rs

Obligations
Agency and program

Department of Agriculture: Youth conservation corps
Department of Commerce: Job opportunities program
Community Services Administration
Department of Health, Education, and Welfare:
Social Services
Vocational rehabilitation
High school work study
CETA support
Subtotal, HEW_
Department of Housing and Urban DevelopmentDepartment of Justice: Prisoner training
Department of the Interior: Indian programs

1976
actual
24
455
41
712
913
10
2 .

1977

1976

1978

175
232
3

1978

1977

17
269
41

18
79
23

34
129
46

860
925
10
2

800
928
10
2

712
847
11
2

175
271
2

860
897
10
2

800
920
10
2

1.636

410

1,,796

1,740

1,571

448

1,769

1.732

82
5
47

22
1
16

118
6
51

115
6
45

46
5
43

16
1
19

87
6
49

104
6
47

Department of Labor:
Employment and training assistance
Temporary employment assistance
Work incentive program
Food stamp recipient services
Older Americans community service employment
Employment service
Labor market information
Equal employment opportunity
Program administration
Subtotal, Labor

___
__

Veterans Administration:
On-the-job training for veterans
Veterans vocational rehabilitation
Veterans assistance centers
Subtotal, VA
Equal Employment Opportunity Commission: Equal employment opportunity. _
Other Federal agencies:
Disadvantaged youth programs
Federal contract compliance
Total

2,946
1,810
356
26
85
532
22
12
88

628
997
11
1
9
1
164
6
3
22

3,412
1.404
370
29
9
1
614
3
1
14
9
1

3,142
1,000
365
3
1
23
670
32
1
4
93

3.158
1.887
307
26
47
526
2
1
12
85

1.058
519
87
9
1
1
144
6
3
20

3,212
2,358
365
29
65
614
3
1
1
4
96

3,141
1.000
344
3
1
9
1
670
32
1
4
98

5.876

1,941

6,056

5,370

6.069

1,856

6,782

5,420

203
95
8

4
1
23
2

144
19
0
8

134
13
1
8

198
92
7

40
22
2

15
4
10
1
8

15
3
13
1
8

306

262

255

297

262

256

1
9

7
1

1
6

100
35

52
8

15
0
36

107
36

100
35

52
8

15
0
36

107
36

8,670

2,573

8,577

7,785

8,553

2,600

9,374

7,822

SPECIAL ANALYSIS K
HEALTH SPECIAL ANALYSIS

FEDERAL HEALTH PROGRAMS

Overview.—Federal spending for health programs will total $56
billion in 1978, an increase of $4.6 billion or 9% over 1977. The share
of the Federal budget spent on health will rise to 12.7% in 1978, as
shown on Table K-l.
Table K-1. FEDERAL HEALTH SPENDING COMPARED TO THE TOTAL
FEDERAL BUDGET (outlays in billions)
Actual
1970

Total Federal outlays
Federal health outlays
Health as percent of total outlays

1972

Estimated
1974

1976

1977

1978

_. $196.6 $231.9 $268.4 $366.5 $411.2 $440.0
$18.1 $24.5 $29.2 $43.6 $51.4 $56.0
9.2 10.6 10.9 11.9 12.5 12.7

Table K-2 summarizes Federal health spending by major category
for 1976, 1977, and 1978. The largest category of expenditures is for
health services, which will amount to $47.6 billion in 1978 and will be
provided mainly through medicare and the proposed "Financial
Assistance for Health Care" block grant to the States.
Table K-2. FEDERAL HEALTH SPENDING BY CATEGORY OF ACTIVITY
(In millions of dollars)
Outlays
1976
actual

Development of health resources, total
_
Health research
Training and education
Construction
Health planning and statistics
_
Provision of health services, total
Direct Federal services
Indirect services
Prevention and control of health problems, total
Total, health programs
202

___

1977
estimate

1978
estimate

6,069
3,095
1,476
1,243
256
36,039
5,884
30,155
1,505

6,621
3,301
1,353
1,613
354
43,129
6,686
36,443
1,682

6,609
3,592
1,387
1,321
308
47,604
6,902
40,703
1,789

43,613

51,432

56,001

203

SPECIAL ANALYSIS K
NATIONAL HEALTH CARE TRENDS

There have been four major trends in health care in the United
States in the last quarter century: a dramatic increase in overall
spending for health, particularly Federal health spending; a sharp
rise in the supply of health resources; a gradual increase in the rate of
utilization of health services by individuals; and a gradual rise in
average life expectancy.
Increased national spending.—Total national expenditures for
health rose from $12 billion in 1950 to $139 billion in 1976—more
than an elevenfold increase. Per capita expenditures grew from $78 to
$638 over the same period. The percentage of the U.S. gross national
product (GNP) spent on health has almost doubled in the last quarter
century, from 4.6% in 1950 to 8.6% in 1976. If the rate of increase in
recent years continues, the proportion of GNP spent on health will
double again to 17% by the year 2000.
Increased Federal spending.—The amount spent on health by the
private sector and Federal, State, and local governments has risen
substantially since 1950. As Chart K-3 indicates, however, the Federal
Government's share of total health spending has more than doubled
since 1965. The share of State and local government expenditures
has remained about the same, while the share of private health
spending has declined by 17%.
Public and Private Health Expenditures

K-3

PUBLIC

Fiscal Year

1950
$12.0 Billion

Fiscal Year

1976
$(39.3 Billion

Fiscal Year

1965
$38 9 Billion

204

THE BUDGET FOR FISCAL YEAR 1978

The Federal Government now pays almost one-third of all health
expenditures in the country. That includes more than 60% of the
costs for medical research, 45% for health facilities, 40% for medical
education, and 30% for health services.
Increased health resources.—Factors that have contributed to
the enormous growth in national health spending include increased
public demand for health services, payment mechanisms that reduce
out-of-pocket expenditures by individuals, development of improved
and more expensive medical technology, and expansion of health
resources.
The supply of health resources—which includes physicians and
other health professionals, health researchers, hospitals, nursing homes,
and other health facilities—has increased substantially in the last 25
years. The number of hospital beds in the country, for example, has
grown from a half million in 1950 to more than 1 million in 1975, or
from about three to five beds per 1,000 population. The number of
active physicians has increased from 220,000 in 1950 to 363,000 in
1975, and the number of active registered nurses has grown from
401,000 in 1953 to 961,000 in 1976. Presently, more than 4.5 million
persons are employed in health-related careers—a little over 6% of the
civilian labor force. Health workers are the third largest occupational
group in the United States.
Chart K-4 illustrates the overall increase in the supply of physicians
since 1950 and projections for that supply through 1990. The chart
also illustrates the increased proportion of physicians who are trained
abroad.

205

SPECIAL ANALYSIS K
Active Physicians, Domestic and Foreisn Trained

Thousands AeHve M.D.'s and D.O.'s

Thousands Active M.D.'s and D.O.'s

594

600

r—600

Foreisn Trained Physicians
27.6%;

U.S. Trained Physicians

500

— 500
447

•26.6%;

400

25.1%
363

323

19.4%

300 —

r-300
272
72.4%
220

73.4%

200

74.9%
80.6%
81.4%

100 —

100

1950

1963

J970

I98OJ

1975

Calendar Year

1990'
Projected

Chott shows total pljysicians only. The mitnber of foreign trained physi

I 1950 it

Impact of the recently enacted Health Professions Education AMtrtaw
Irain«d physicians from these ptoiecfions.

<ll 1976 i

ihn tiumbcf of fotci^n

Increased utilization.—During
1974 and 1975, there were
over 1 billion visits to physicians, 34 million hospital admissions, and
1.2 billion prescription drugs acquired each year in the United States.
The average number of days Americans are hospitalized per year
grew 6% between 1965 and 1975, or from 1,180 to 1,255 days per
1,000 population. The average number of doctor visits per person each
year rose almost 9% from 1964 to 1974, as shown in Table K-5.

206

THE BUDGET FOR FISCAL YEAR 1978

Table K-5. ANNUAL DOCTOR VISITS PER PERSON IN U.S., 1964 AND 1974
1964
Poor

All ages
Under 17 years
17 to 44 years
45 to 64 years
65 years and over

4.3
2.3
4.1
5.1
6.0

Nonpoor

4.6
4.0
4.7
5.1
7.3

1974
All

persons

4.5
3.7
4.6
5.0
6.7

Poor

5.4
3.6
5.5
6.3
6.4

Nonpoor

4.9
4.3
4.7
5.4
7.3

All
persons

49
4.1
4.8
5.5
6.7

Utilization rates for health services reflect Federal health spending
patterns—in particular, Federal expenditures for low-income persons
and the aged. Prior to the enactment of medicaid in 1965, the poor
utilized health services at a lower rate than the nonpoor. That trend
has now been reversed and, on the average, the poor use more health
services than the nonpoor, as indicated in Table K-5.
Utilization of health services by the aged has also increased substantially since medicare was enacted. The average number of days
hospitalized per year for those over 65 rose more than 20% between
1965 and 1975, and the number of nursing home beds in the country
increased over 100% from 568,560 in 1963 to 1,327,704 in 1973.
Federal medicare spending accounts somewhat for the fact that
older Americans use far more health services than other age groups.
Chart K-6 shows that the Federal Government pays a much larger
share of the health expenses of those 65 and over than of other age
groups. The chart also shows that annual health expenses for the
aged are almost 3 times as high as for other adults and 6 times as high
as for children. Another important reason the aged and poor utilize
more health services is that they generally have more illnesses and
poorer health than other population groups, as indicated by HEW
surveys.

SPECIAL ANALYSIS K

207

Personal Health Care Expenditures Per Capita
Dollars

$1,360

1400
FISCAL YEAR 1975

1200—1

1000

800

600
$472
400
$212
200

Under
19 Y«a»

19-64
Year*

65 Year*
and Over

Health cost inflation.—More than half the increase in health
spending since 1965 resulted from health cost inflation. The rise of
medical prices has far outstripped that of all other prices in the
economy—except energy prices—in the past decade.
As Chart K-7 illustrates, health costs have risen an average of
6.9% per year since 1967, as compared to 5.6% for the entire Consumer Price Index. Hospital costs have been the fastest growing segment of health costs, as is also shown on the chart.

208

T H E BUDGET FOR FISCAL YEAR

1978

Increases in the Consumer Price Index and Health Care Prices, 1960-1976 K-7
Percent

Percent

18Hospital Semi-Private
Room Charges

SI V^.

—15

3—

1960

'62

Fiscal Y e a n

KKJ ol Health Was* ftfc? Central

Estimate

Health costs began to escalate sharply after 1966, the 3-ear in which
medicare and medicaid were implemented. The infusion of Federal
dollars since 1966 has undoubtedly helped to stimulate the increase
in medical prices.
Improvements in health status.—The average life expectancy of
Americans has increased significantly since the beginning of the
20th century—from 47 years in 1900 to 72 years in 1974. This increase
has taken place during a period of major economic and social change,
as well as advances in health research and medical practice. Many
infectious diseases have been virtually eliminated as a result of increased knowledge about their causes, prevention, and treatment.
Advances in medical technology have lengthened life for many persons.
On the other hand, the larger number of people living to oid age has
resulted in an increased prevalence of chronic diseases—such as
cancer—caused partly by the degenerative processes of aging. Chronic
diseases are generally more difficult and costly to treat than acute
infectious diseases. Moreover, the increased life expectancy that
would result from eliminating many of these diseases is limited.
According to Nationa Cancer Institute data, for example, the complete
cure of cancer would increase average life expectancy by only about
2 years.

SPECIAL ANALYSIS K

209

Table K-i *. SELECTED HEALTH STATUS INDICATORS (annual rates)
1900

Death rate (per 1,000 population)
Average life expectancy at birth in years
Infant mortality rate (deaths under 1 year of age
per 1.000 live births)
Leading causes of death (per 100,000 population):
Tuberculosis
Diphtheria
Typhoid
Measles
Whooping cough
Streptococcal sore throat and scarlet fever
Cancer
Diseases of the heart
Cerebrovascular disease
Accidents
Kidney disease
Diabetes
Cirrhosis of liver

1950

1960

1970

1974

17.2
47.3

9.6

9.5

9.2

68.2

69.7

70.9

71.9

99.9

29.2

26.0

20.0

16.7

194.4
40.3
31.3
13.3
12.2
9. 6
64.0
137.4
106.9
72.3
92.1
11.0
12.5

22.5
.3
.1

6.1

2.6

1.7

.3
.7
.2

.2
.1
.1

139.8
355.5
104.0
60.6
20.8
16.2

149.2
369.0
108.0
52.3
11.9
16.7
11.3

162.8
362.0
101.9
56.4

170.5
349.2
98.1
49.5

9.2

8.4

6.4

18.9
15.5

17.7
15.8

RELATIONSHIP BETWEEN HEALTH SPENDING AND HEALTH STATUS

Comparisons both with other countries and among the various
regions of the United States show that more health spending and
health resources do not necessarily mean better health. Certain U.S.
health status indicators have improved somewhat in recent years.
This limited degree of improvement, however, has occurred during a
period of substantial increases in health spending.
Comparison with other countries.—Although good data are
not available for most countries, U.S. health spending over the last
decade seems to have been as high as in any country in the world, and
is significantly higher than in most countries. Health status in the
United States is not significantly higher than in other industrialized
countries, however, despite differences in the amount of health spending, measured as a percentage of GNP.
The following chart shows life expectanc3r in the countries for which
sufficient recent data to make meaningful comparisons on health
spending are available. Life expectancy for both males and females is
higher than in the United States in all countries but Germany.
Germany and Sweden are the only countries with health spending
that may match that of the United States, while in England the share
of GNP spent on health is only about half that of the United States.

O - 77 - 14
240-700

210

THE BUDGET FOR FISCAL YEAR 1978

Life Expectancy in Selected Countries, 1972

Germany

Comparisons among different parts of the United States.—
The amount of health resources—physicians, hospitals, etc.—in
different parts of the United States varies widely, as does per capita
health spending. Health status as measured by average life expectancy
also varies by geographical area. There is no direct correlation, however, between the amount of health resources or health spending in
each area and health status in that area. Table K-10 implies that
people in States with high levels of health resources and spending
have generally the same life expectancy as those in States with
lower levels of health resources and spending.
Table K-10. PHYSICIANS, HOSPITAL BEDS, HEALTH SPENDING, AND
LIFE EXPECTANCY IN SELECTED STATES

State

New York
California
Arizona
West Virginia
South Carolina
Iowa
Mississippi
South Dakota
United States

Physicians
per 1,000
population,
1975

2.57
2.18
1.81
1.22
1.13
1.12
.93
.89
1.75

Hospital
beds per
1,000
population,
1975

5.03
4.46
4.43
6.50
4.46
6.19
5.52
6.66
4.97

Per capita health
spending
Private
health
insurance
benefits
paid,
1972-73

State and
local
governraent,
1972

$125
111
60
92
63
90
57
51
101

$137
70
51
51
67
50
72
31
66

Average life
expectancy,
1969-71
Male

66.95
68.19
66.05
65.56
63.85
68.83
64.06
68.49
67.04

74.15
75.37
74.03
73.74
72.29
76.50
74.40
76.19
74.64

SPECIAL ANALYSIS K

211

The number of physicians and amount of health spending per
person in South Dakota, for example, are lower than in other States,
and yet life expectancy in South Dakota is higher than in almost any
other State. The number of physicians and amount of health spending
per person in New York, on the other hand, are higher than in any
other State, and yet life expectancy is only in the midrange as compared to other States.
Other factors influencing health.—An inescapable conclusion
from the above data is that factors other than the availability and
use of health services affect health status. Other important determinants of health are the quality of the natural environment, working
conditions, economic and social well-being, housing, sanitation,
heredity, and personal lifestyle—such as smoking, drinking, exercise,
eating habits, and the ability to deal adequately with the stresses of
life.
THE FEDERAL ROLE IN THE HEALTH SECTOR

Federal health programs attempt to improve the health status
of Americans by adding to the knowledge of human disease, translating research findings into accepted health habits and medical practice,
regulating known health hazards, improving financial and physical
access to health services, and reforming the existing health care
service system.
Health resources.—Federal programs for the development ol
health resources encompass support for health research, health
professions training and education, construction of health care facilities, health planning, and statistics. The combined outlays for these
programs, as shown in Table K - l l , will be $6.6 billion in 1978.
Table K-11. FEDERAL OUTLAYS FOR THE DEVELOPMENT OF HEALTH
RESOURCES (in millions of dollars)
Outlays
1976
actual

Health research (excluding research facilities)
Training and education __
Construction
Health planning

Total

1977
estimate

1978
estimate

3,095
1,476
1,243
256

3, 301
1,353
1,613
354

3,592
1,387
1,321
308

6,069

6,621

6,609

Health research.—Federal support of biomedical and behavioral
research programs attempts to provide new knowledge for the prevention, diagnosis, and treatment of disease. Paralleling the increasing
incidence of chronic diseases in the United States, Federal research
support places emphasis upon degenerative illnesses, such as cancer
and cardiovascular disease, and upon environmentally induced health
problems. Table K-12 indicates the allocation of Federal funds
among research fields and includes funding for construction of research facilities. The amount of basic research being performed in
key areas such as genetics and immunology will be increased in 1978.

212

THE BUDGET FOR FISCAL YEAR

1978

Table K-12. FEDERAL OUTLAYS FOR HEALTH RESEARCH AND
RESEARCH FACILITIES
(in millions of dollars)
Outlays
1976
actual
Cancer
Cardiovascular
Mental health
Neurological and visual
Population and family planning
Environmental health
Aging
Metabolic diseases
Child health
Infectious diseases
Pulmonary
Dental__.__
Health services research and development
Other research and development
Research facilities
Total

657
327
125
205
65
465
61
194
104
170
58
56
52
556
44
3,138

1977
estimate
664
298
120
174
61
536
69
179
93
204
58
51
84
710
28
3,329

1978
estimate
757
339
126
211
71
664
78
203
102
201
61
61
85
631
20
3,612

Federal outlays for health research have risen over the past quarter
century from $70 million in 1950 to $3,592 million in 1978. The Federal
Government currently funds more than 60% of all biomedical research in this country.
The National Institutes of Health (NIH), within the Department
of Health, Education, and Welfare (HEW), is the largest Federal
health research agency and will administer 63% of the total Federal
health research funds in 1978. NIH conducts an extensive research
program through grants and contracts as well as in its own laboratories
and clinical facilities. The Department of Health, Education, and
Welfare also supports research on mental health, drug and alcohol
abuse, and the organization, delivery, quality, and financing of health
care.

213

SPECIAL ANALYSIS K
Funds for Medical Research and Development
5,11

SBiltiom

J Billions

-5

5I Other Support
i::::::::::::::::j (Ortwr Private Support and Stale Government)
Industry Support

——

—-

Federal Support

2.86

3.16

1.56

.44
.16

1950

1957

1963

1970

1976

Fiscal Y«on

Other Federal agencies support and conduct health research in
support of their program missions. The three largest are the Energy
Research and Development Administration, the Department of
Defense, and the Veterans Administration. These three agencies
together account for 16% of all Federal health research expenditures.
Training and education.—More than 40% of the revenues
of the Nation's 114 medical schools are derived from Federal grants
or contracts. Table K-14 shows the Federal funds provided to
medical schools from selected agencies. These outlays do not include
medicare and medicaid payments for the treatment of patients in
hospitals affiliated with medical schools.

214

THE BUDGET FOR FISCAL YEAR 1978
Table K-14. FEDERAL FUNDS TO MEDICAL SCHOOLS
(In millions of dollars)
Agency

Department of Health, Education, and Welfare

Research and development
Education and training
Construction
Department of Defense

Education and training
Construction

Outlays

1976

1977

1978

1,352

1,108

1.114

914
247
188
70
1
3
56

850
144
109
96
1
4
8
1

933
15
1
60
50
1
6
33

3
1

4
1
3
1
3

4
1
5
14

1
3
1
3

1
3

1
5

1
7

1,468

1,268

1,244

884
189
11
9
5

968
177
93

Veterans Administration:

Education and training
National Aeronautics and Space Administration:

Research and development
Energy Research and Development Administration.

Research and development
Other agencies:
Research and development
Total

Research and development
Education and training
Construction
Other

945
111
244
3

As Table K-15 indicates, the Federal Government will spend a
total of $1.9 billion in 1978 for health training and education. The
principal programs of direct support for health professions schools,
which are administered by H E W , include:
• institutional support grants of $1,500 per student tied to conditions designed to improve specialty distribution of physicians
and dentists; and
• student assistance programs which enable students to finance
their educations through guaranteed loans or scholarships that
require payback through service in an area with few health
professionals.
Table K-15. FEDERAL FUNDS FOR HEALTH TRAINING AND
EDUCATION
(In millions of dollars)
Outlays
1976
actual

Degree or certificate training
Research personnel
Physicians
Dentists
Nurses
Mental health professionals
Other health professionals
Paramedical personnel
All other training
Total

1977
estimate

1978
estimate

1,246
137
532
88
151
38
144
157
680

1,140

1,149

99
562
64
127
23
98
16
6
693

11
1
516
73
156
26
83
184
768

1,926

1,833

1,917

SPECIAL ANALYSIS K

215

The national health service scholarship program will be funded at
a level of $35 million in 1978 and will support approximately 3,500
medical, osteopathic, and dental students in return for commitments
to periods of service to meet public needs. This program helps to meet
student financial needs as well as Federal requirements for health
professionals to staff programs, such as the Indian Health Service. It
also addresses the problem of geographic maldistribution of health
personnel by placing physicians and dentists in areas with shortages
of health professionals, either as members of the National Health
Service Corps or as private practitioners.
The National Health Service Corps seeks to demonstrate the ability
of areas with shortages of health care providers to attract and retain
health personnel. The program will place 975 health professionals in
453 underserved areas in 1978.
Construction of health facilities.—The United States is well
supplied in the aggregate with hospitals as a result of over 30 years of
Federal hospital construction assistance through the Hill-Burton
program. The program provided more than $4.5 billion in grants and
$1.5 billion in direct and guaranteed loans, and assisted in the construction of more than 4,200 hospitals—3 out of every 5 hospitals in
the country.
The basic goal of the Hill-Burton program—to provide needed new
facilities—has been largely accomplished. Some areas of the country
are now oversupplied with hospital beds, however, which results in
empty beds and excessive hospital costs. The great majority of new
construction and modernization of hospitals and other health facilities
is now supported through non-Federal bonds, private long-term
loans, and depreciation funds set up by the health facilities. Medicare,
medicaid, and private insurance reimbursements to hospitals and
other facilities for patient care include amounts for depreciation and
interest on loans. Medicare, for example, will pay about $1 billion in
1977 for depreciation and interest.
In 1978, direct Federal outlays for the construction of health care
facilities, including environmental health facilities, are estimated at
$1.3 billion. This figure does not include medicare and medicaid
depreciation and interest payments.

216

THE BUDGET FOR FISCAL YEAR 19 78

Table K-16. HOSPITAL AND HEALTH FACILITY CONSTRUCTION
(In millions of dollars)
Outlays
1976
actual

Federally supported construction:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Health professions educational facilities
Other facilities

1977

1978

47
16
4
27
44
19
5
80
29
0
1
7

22
97
24
28
37
6
21
0
80
1
3

1
0
74
24
20
36
4
7\
74
3

Total, federally supported

78
2

82
3

62
2

Federal hospitals and health facilities:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Other facilities

73
310
8
1
9
4
6
1
8
4
1

78
59
1
1
0
8
1
49
1
8
27

47
450
22
64
57
3
5
24

55
1

72
8

69
9

1,243

1,613

Total, Federal facilities
Total, Federal funds for hospital and health facility construction

1,321

States will be able to use a portion of the proposed health block
grant funds for the construction of health care facilities. Federal
assistance for the construction of health facilities will also continue
to be provided through the Department of Housing and Urban Development, which funds mortgage insurance for the construction of
hospitals, nursing homes, and group practice facilities.
Health planning.—Funds for health planning will be incorporated into the proposed health block grant program in 1978. Inclusion
of health planning reflects the traditional State and local responsibility
for resource planning. Other agencies besides HEW will spend a total
of $72 million in 1978 on health planning activities, including statistical
programs.

217

SPECIAL ANALYSIS K
Table K-17. FEDERAL OUTLAYS FOR HEALTH PLANNING
AND STATISTICS (in millions of dollars)
Outlays
1976
actual

1977
estimate

1978
estimate

Financing of health planning, total
State-wide health planning
Substate health planning
Other health planning
Direct planning of Federal health activities.
Health statistical activities, total
General purpose statistics
Federal program management statistics...

10
8
60
92
28
36
39
32
7

111
63
11
4
33
76
4
1
34
8

14
8
22
16
3
2
5
76
49
42
7

Total, health planning activities

256

354

308

FINANCING AND PROVIDING HEALTH SERVICES

Since enactment of medicare and medicaid, the Federal Government has become a major source of financing for health services,
particularly hospital and nursing home care. As Chart K—18 indicates,
the Federal Government provides almost 30% of the funds for health
services in the country, including 39% of total hospital expenses and
32% of nursing home expenses.
Sources of Expenditures for Health Services
$ Billions

K-IS
$ Billions

218

THE BUDGET FOR FISCAL YEAR 1978

Federal programs to finance or provide health services include
medicare and the proposed Financial Assistance for Health Care block
grant to the States. These are the Federal Government's two largest
health activities and will account for 77% of Federal health services
outlays in 1978. Other health services programs are administered by
the Department of Defense, the Veterans Administration, and HEW.
Table K-19 shows Federal expenditures for financing and providing
health services.
Table K-19. FEDERAL FINANCING AND PROVISION OF HEALTH
SERVICES (in millions of dollars)
Outlays
1976
actual

Financing of indirect hospital and medical services:
General hospitalinpatients
Psychiatric hospital inpatients
Long-term care inpatients
Outpatient services
Outpatient mental health services
Other services

25,074
202
5,215
4,711
450
5,050

36,443

40, 703

3,149
619
192
1,655
37
231
_

22,821
559
4,518
4,028
441
4,077

30,155

Provision of direct hospital and medical services:
General hospital inpatients
__
Psychiatric hospital inpatients
Long-term care inpatients
Outpatient services..__
.
Outpatient mental health services
Other services...

Total, financing and provision of services

1978
estimate

18,914
467
3,682
3,344
485
3,262

Total, financing of indirect services

Total, provision of direct services

1977
estimate

3,561
695
228
1,900
45
257

3,680
718
252
1,991
44
216

5,884

6,686

6,902

36,039

43,129

47,604

Medicare.—Medicare finances health services for the aged, the disabled, and persons suffering from chronic kidney disease. Medicare
hospital insurance (HI) pays for inpatient care, skilled nursing home
care and home health benefits after a person has been hospitalized.
Supplementary medical insurance (SMI) affords protection against
the costs of physician and other outpatient services.
Medicare currently provides uneven benefits over the course of a
prolonged illness. After payment of a deductible for the first day of a
hospital stay, a beneficiary receives up to 60 days of hospital care
without cost for those services which are covered. Individuals whose
stays in hospitals and skilled nursing homes extend over 60 days must
pay an increasing proportion of their costs until medicare coverage
ends after 90 hospital days (with a one-time reserve of 60 days) or
100 skilled nursing home days per benefit peiiod. Proposed legislation
would more equitably distribute the cost of such catastrophic illness
by removing the limits on length of stay, but requiring all patients
who use services covered by HI to pay 10% of the costs after payment

SPECIAL ANALYSIS K

219

of the deductible. An individual's payments for the 10% coinsurance
plus the HI deductible would not exceed a maximum of $500 in 1978.
The proposed legislation would also limit beneficiary cost-sharing for
covered services under SMI to $250 in 1978.
The costs of medicare have escalated from $3.4 billion in 1967 to
$17.8 billion in 1976. Under current law, medicare costs are estimated
to climb to $26 billion in 1978. Average benefits per person will reach
$693 for HI and $288 for SMI. Financing of HI benefits and administration is largely through social security taxes on earnings. Premiums
from enrollees—current $7.20 per month—and general tax revenues
pay for supplementary medical insurance.
In order to slow the rate of increase in medicare costs and to
prevent further underfinancing of the HI trust fund, proposed legislation would limit increases in reimbursements to institutions and
individual providers of care. The legislation would set an upper limit
of 7% on annual increases in hospital per diem payments. Further
increases in physician charges in 1978 and 1979 would be limited
to 7% for reasonable charges, not to exceed charges prevailing in
localities in 1977. Proposed legislation would also hold hospital depreciation payments, not required for loan repayments, in escrow
accounts until States approved replacement or expansion of hospital
facilities and major equipment. Thus, medicare would finance only
State-endorsed capital expansion.
The following table shows the budgetary effects in 1978 and 1979 of
all proposed medicare legislation.
Table K-20. PROPOSED MEDICARE IMPROVEMENTS
(In millions of dollars)
Outlays
1977
ettimate

Catastrophic insurance:
Hospital insurance:
Unlimited days of care
$500 liability limit
Supplementary medical insurance ($250 limit)

+990
+760
+679

+594

Cost-sharing provisions:
Hospital insurance (10% coinsurance)
Supplementary medical insuranceDynamic deductible ($80 on Jan. 1, 1978)
10% coinsurance on hospital-based services

+2,429

—450 —2,350
-127
—26

Subtotal

-270
—54

- 6 0 3 -2,674

Reimbursement limits:
Hospital insurance:
7 % per diem cap
Depreciation escrow accounts
Supplementary medical insurance

- 9 5 -1,075
—50
—440
—73
—260

-2,435
—520
—493

- 2 1 8 -1,775

Subtotal.

1979
estimate

+180
+70
+344

Subtotals

Total

1978
estimate

-3,448

-218

-3,693

-1,784

220

THE BUDGET FOR FISCAL YEAR 1978

Table K-21 displays basic data concerning the medicare program
coverage, benefits, and administration.
Table K-21. MEDICARE COVERAGE, BENEFITS, AND ADMINISTRATION
(In millions of dollars)
1976
actual
Hospital insurance (HI):
Persons with protection (millions)..
Beneficiaries receiving services (millions)__
Benefit payments..__
Administrative expenses. __
Claims received (millions)
Supplementary medical insurance (SMI):
Persons with protection (millions)
Beneficiaries receiving services (millions)
Benefit payments
Administrative expenses
Claims received (millions)

24.5
5.7
$12,267
$317
11.8
24.0
14.0
$4,671
$528
112.1

1977
1978
estimate estimate

25.2
25.7
59
.
60
.
$15,715 $17,814
$315
$344
12.7
13.2
25.4
24.8
14.9
15.6
$5,999 $7,325
$502
$587
129.1
141.6

Financial Assistance for Health Care.—The proposed Financial Assistance for Health Care block grant will consolidate 20 categorical health programs, including medicaid, into a new grant to the
States. The $12.3 billion in outlays in 1978 will be used primarily to
help provide health services to the low-income population. Up to
10% of the funds will be available for other health-related purposes.
Other support for health services.—The Federal Government
assists in the provision of health services through a variety of activities
in addition to medicare and the proposed health block grant.
Limited support is provided to health maintenance organizations
(HMOs) in order to help demonstrate the HMO concept in the
delivery and organization of health services. Health maintenance
organizations deliver comprehensive medical care and disease prevention services on a prepaid basis.
A total of $456 million will be provided for drug abuse research,
prevention, treatment, and rehabilitation activities in 1978, as shown
on Table K-22. Most federally supported activities to overcome
drug abuse will be funded by HEW through the National Institute
on Drug Abuse (NIDA) within the Alcohol, Drug Abuse, and Mental
Health Administration (ADAMHA), and the health block grant
to the States. NIDA funding for drug abuse treatment in 1978 will be
$179 million, which will maintain the capacity to treat more than
100,000 persons at any one time in facilities funded by NIDA. Health
block grant funds can be used by States to make additional drug
abuse treatment services available when and where they are needed.
ADAMHA will continue to assist States in developing statewide drug
abuse treatment programs. Defense and VA will continue efforts
to remedy drug problems among military personnel and veterans.
Within the Department of Justice, the Bureau of Prisons administers
drug abuse treatment and rehabilitation services for Federal prisoners,
the Drug Enforcement Administration conducts education and
research programs, and the Law Enforcement Assistance Administration supports a broad range of community efforts to prevent the

SPECIAL ANALYSIS K

221

abuse of drugs. Drug law enforcement activities are discussed in
Special Analysis N. Increased efforts are being made to see that the
services provided by the Social and Rehabilitation Service in HEW
and the Department of Labor are available to drug abusers and
former drug users.
Table K-22.

FEDERAL FUNDS FOR DRUG ABUSE PREVENTION AND
TREATMENT
(In millions of dollars)
Outlays
1976
actual

Department of Health, Education, and Welfare
Alcohol, Drug Abuse, and Mental Health Administration
Social and Rehabilitation Service 1
Office of Human Development
Office of Education
__
Department of Defense.
__
Veterans Administration
Department of Housing and Urban Development.
Department of Justice
Other 2
_.__
Total

1977
estimate

1978
estimate

314
(211)
(90)
(9)
(3)
54
37
1
24
11

311
(199)
(100)
(10)
(2)
47
39
4
26
8

345
(233)
(100)
(10)
(2)
37
40
4
23
7

441

435

456

Outlays for drug abuse treatment activities supported by the medicaid program in the Social
and Rehabilitation Service are estimates. In 1978, these activities would be included in the proposed
health block grant.
2
Includes drug abuse treatment activities within the Departments of Labor. Transportation, and
Agriculture; the terminated Special Action Office for Drug Abuse Prevention; and other agencies.

The Federal Government also finances or provides medical services
for certain special categories of beneficiaries, specifically Armed
Forces personnel, dependents, retirees, and veterans; American Indians
and Alaska Natives; and Federal Government employees.
Medical care to active and retired military personnel and their de-

pendents.—In 1978, DOD will operate 170 hospitals directly and will
finance additional care from community facilities for its 9 million
beneficiaries. Outlays for DOD health activities will be $3.9 billion
in 1978.
Medical care to veterans.—The Veterans Administration (VA) will
operate 172 hospitals, 106 long-term care facilities, and 228 outpatient
clinics. VA will provide inpatient care for 1.4 million veterans and
will fund over 18.2 million outpatient medical and dental visits to
VA and community facilities. Total VA outlays for health activities,
including construction of health care facilities, will be $5.1 billion in
1978—an increase of $276 million over 1977.
Indian health services.—A total of $472 million will be spent on
Indian health services and facilities in 1978. These funds are used
primarily to provide comprehensive health care, with an emphasis on
ambulatory care, as well as to construct hospitals, clinics, Indian
Health Service employee quarters, and sanitation and potable water
facilities.
The health status of Indians and Alaska Natives has greatly improved over the last quarter century. Since 1950, for example, there
has been an increase in Indian average life expectancy of 5.1 years, a
Digitized 78% decline in infant mortality, and a 72% decline in deaths due to
for FRASER

222

THE BUDGET FOR FISCAL YEAR 1978

influenza and pneumonia. In recent years, the overall health status of
Indians and Alaska Natives has come closer to that of the general U.S.
population, as indicated in Table K-23. Differences in health status
remain, however, especially in connection with causes of death
associated with social and environmental conditions on reservations.
Table K-23. SELECTED INDICATORS OF HEALTH STATUS OF AMERICAN
INDIANS AND THE GENERAL U.S. POPULATION (annual rates)
General
population

Indians and Alaska Natives
1950

Birth rate (per 1,000 population)
Death rate (per 1,000 population)
Average life expectancy at birth (years)
Infant mortality rate (deaths under 1 year of
age per 1,000 live births)
Leading causes of death (per 100,000 population):
Heart disease
_
Accidents
Influenza and pneumonia
Certain diseases of early infancy
Cancer
Cerebrovascular diseases
Homicide.__
Diabetes
Suicide
Cirrhosis of liver

1960

1970

1974

1970

1974

36.2
12.9
60.0

42.7
9.1
61.7

32.6 30.8
7.7 7.2
64.0 65.1

18.4
95
.
70.9

15.0
91
.
72.0

85.8

50.3

23.8 18.7

20.0

16.5

148.8
125.9
108.0
77.3
60.3
43.6
16.8
12.4
8.5
7.7

135.5
155.2
95.0
66.7
65.2
49.8
19.5
16.0
16.8
20.7

142.0 169.5
362.0
157.1 163.2 56.4
38.6 30.7
30.9
29.6 13.0
21.3
62.6 88.4 162.8
42.8 41.0 101.9
20.6 25.7
83
.
23.0 17.6
18.9
18.7 18.7
11.6
45.2 66.7
15.5

349.2
49.5
25.9
13.6
170.5
98.1
10.2
17.7
12.1
15.8

Based on an eligible federally recognized Indian population of
564,000, health spending by Federal agencies in 1978 will result in
over $800 per beneficiary, or over $3,300 per Indian family of four.
The following table displays Federal funding for health activities
specifically benefiting American Indians and Alaska Natives.
Table K-24. FEDERAL FUNDS TO IMPROVE THE HEALTH OF AMERICAN
INDIANS AND ALASKA NATIVES (in millions o dollars)
f
Outlays
1976

Hospitals and medical services
Prevention and control of health problems.. _
Construction
(Hospitals and clinics)...
(Sanitation projects)
Training and education
Health planning activities
Medical and health-related research
Total..

_
_
_

200
93
59
(11)
(44)
12
4
3
372

1977

27
1
17
3
6
5
(18)
(46)
1
1
6
4
440

1978

27
2
14
4
80
(29)
(50)
1
2
5
4
472

Health insurance for Federal employees.—Health benefits for 3.6
million Federal civilian employees and annuitants and their 6.9 million
dependents are financed under the Federal employees health benefits
programs managed by the Civil Service Commission. In 1978, Federal
payments to finance these programs will increase by $206 million to
a total of $1,963 million.

SPECIAL ANALYSIS K

223

Tax expenditures.—Federal tax expenditures of $8.7 billion for
health iesult from special provisions of the tax laws and are larger
than those for any other programs except medicare and the proposed
health block grant. The exclusion of employer health insurance
contributions from the taxable income of employees is estimated to
result in a $5.8 billion tax subsidy for employees in 1978. An additional
$2.9 billion in revenue loss will result from itemized deductions that
individuals take in their income tax computations fcr certain health
expenditures and insurance premiums.
Distribution of health care outlays by age group and economic
status.—Table K-25 distributes Federal outlays for health services
among three major age groups and between poor and nonpoor persons.
Federal funds for the development of health resources and for the
prevention and control of health problems are excluded from the table
because they are not normally distributed by population group or
income. Unlike other tables in this special analysis, Table K-25 does
not include funds for health care provided to foreign nationals,
because poverty levels in other countries differ from the U.S. poverty
level.
The table shows that most Federal health care funds go toward
helping nonpoor persons. Even when the figures are adjusted to
exclude all expenditures for Federal employees, only about 37% of
Federal health care funds are spent on the poor. The proposed health
block grant will require that 90% of the funds under the program
be u:ed by States to provide personal health services, with priority
on services for the low income. Table K-25 and other tables in this
special analysis assume that health block grant funds will initially
be spent along the same general lines as the program funds they
replace.
Table K-25. ESTIMATED FEDERAL HEALTH CARE OUTLAYS BY
POPULATION AND INCOME GROUPS (in millions of dollars)
Outlays
1976
actual

Total, all recipients

Aged (65 and over).
Other adults (19 to 64)
Children and youth (0 to 18)

47,471

24,060
14,736
4,214

26,504
16,433
4,535

11,920
_..

43,010

19,899
12,356
3,680

Poor persons, total

Nonpoor persons, total

1978
estimate

35,935

Aged (65andover)
Other adults (19 to 64)
Children and youth (0 to 18)

Aged (65 and over)
Other adults (19 to 64)__
Children and youth (0 to 18)

1977
estimate

14,244

15,626

4,070
5,949
1,901

4,914
7,108
2,223

5,168
8,018
2,441

24,015

28,766

31,845

15,828
6,407
1,780

19,147
7,628
1,991

21,336
8,414
2,095

224

THE BUDGET FOR FISCAL YEAR 19 78
PREVENTION AND CONTROL OF HEALTH PROBLEMS

The Federal Government's main efforts to prevent and control
health problems are in the areas of communicable disease control,
mental illness prevention, occupational safety and health, and consumer safety. A total of $1.8 billion will be spent on the prevention
and control of health problems in 1978, as shown on Table K-26.
Table K-26. FEDERAL OUTLAYS FOR THE PREVENTION AND CONTROL
OF HEALTH PROBLEMS (in millions of dollars)
Outlays
1976
actual

Disease prevention and control
Mental illness prevention and control
Occupational safety and health
Consumer safety
__
Total, prevention and control

589
123
273
520
1,505

1977
estimate

650
129
307
597
1,682

1978
estimate

656
149
302
682
1,789

The Federal Government sponsors a wide variety of programs to
prevent illness and injury through research, regulatory activities, provision of preventive services, and public education. Categorical Federal
grants for State and local activities in disease prevention and control
will be consolidated into the new health block grant to the States
in 1978. ADAMHA will continue to support publications and other
activities to help reduce mental illness and drug and alcohol abuse in
1978. ADAMHA will also assist States and localities in developing
mental health and substance abuse treatment programs.
Consumer safety.—Federal outlays for consumer safety activities
will increase $85 million to $682 million in 1978. The Food and Drug
Administration in HEW will expand its eflForts to assure the safety
and efficacy of medical devices in 1978. The Consumer Product
Safety Commission will continue research, information dissemination,
and regulatory measures to protect consumers from unreasonable
risks from consumer products. The Department of Transportation will
al^o work to prevent automobile accidents and reduce injuries from accidents through various motor vehicle and highway design safety
standards. In 1975, about 46,000 deaths resulted from motor vehicle
accidents, an 18% reduction from the 56,000 deaths in 1973. The
decline is due in large part to the reduced speed limits on highways.

SPECIAL ANALYSIS K

225

FOREIGN H E A L T H ASSISTANCE

In 1978, the United States will provide $332 million for health
activities in other countries and the U.S. territories, and for health
assistance to foreign nationals in the United States. These funds will
support efforts by various agencies, including the Agency for International Development, the Peace Corps, and international agencies to
which the United States contributes financially, such as the World
Health Organization and the Pan American Health Organization. The
funds are distributed across all categories of health activities, as
illustrated on Table K-27. Excluded from these figures are funds for
health programs for U.S. employees abroad.
Table K-27. FOREIGN HEALTH ASSISTANCE
(In millions of dollars)
Outlays
1976
actual

Health research
Health training:
Assistance to individuals
Assistance to institutions
Construction of health facilities
Health planning and statistics
Health services
Prevention and control of health problems
Total

1977
estimate

1978
estimate

22
1
4
1
2
1
3
12
0
4
6

2
5
9
1
0
1
3
9
5
6
6

27
1
0
1
4
1
7
97
9
1

266

284

332

EXPENDITURES FOR HEALTH ACTIVITIES BY AGENCY

The following tables distribute the health-related outlays of Federal
agencies by the categories used in this analysis. Health outlays of
HEW, the Consumer Product Safety Commission, and parts of the
Civil Service Commission, and the Departments of Agriculture,
Housing and Urban Development, Interior, and Labor are included
under the health function (550) in Part 5 of the budget document.
Health-related outlays of all other agencies are assigned to other
functions, reflecting the major mission of the programs of which they
are a part. The following tables, therefore, indicate the predominant
budget functional code for each agency. Other special analyses such
as those on research and development, education, and training and
employment also include some of the same outlays in their tabulations.

O - 77 - 15
240-700

Table K-28. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1976
(In millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Social Security Administration
Social and Rehabilitation Service
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation ___
Department of the Interior
Department of Transportation
Department of Justice
Other agencies
____
Agency contributions to employee health funds
Total outlays for health, 1976
*An asterisk denotes expenditures of less than $1 million.

550
551
550
550
553
550
553
550
551
551
550
051
703
451
352
304
250
251
550
150
251
300
400
750
551

Health
research

2,325
9
23
145
35
2,066
22
-6
13
3
15
108
94

Training
and
Construeeducation
tion

929
49
491
132
4
196

Health
planning
activities

Direct
Federal
hospital
and
medical
services

612
71
466
21

169
8
162
7

286
225

52
2
-2

-10

*
56
252
241

3
230
192
165
2

3
*
20
34

*
*
1

*
*

11
1
18
*

10
25
10
*

256

58
45
71
256
2
3
45
34
6
2
46
*

28
*

*
_
4
1
2
23
*

3,095

1,476

1,243

*
6
8
*
11
2

2,292
3,260

Indirect
Federal
hospital
and
medical
services

27,693
880
6
476

3
86
1,539

4
86
103
24
*
76
15
18
104
1

30,155

1,505

43,613

15
17,765
8,360
191
559
234
15

738
220
3
101
136
33
195
4

Total

32,753
1,461
1,152
939
174
2.348
218
5
17,779
8,363
314
3,490
4,041
214
348
45
75
352
111
48
45
137
46
50
315
1,540

5,884

Prevention and
control
of health
problems

47
49
*
288

Table K-29. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1977
(In millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Social Security Administration
Social and Rehabilitation Service
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
__
.___"
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1977
*An asterisk denotes expenditures of less than $1 million.

„.

550
551
550
550
553
550
553
550
551
551
550
051
703
451
352
304
25 n
251
550
150
251
300
400
750

Health
research

2,407
12
36
139
76
1,929
24
8
11
2
170
126
105

Training
and
Construeeducation
tion

720
42
386
69
4
155

64
274
291

Health
planning
activities

Direct
Federal
hospital
and
medical
services

531
66
372
22

297
9
250
8

315
250

65
3
1

1
*
2,501
3,804

2
331
293
385
23

4
*
23
1

1
19
10

19
*

*
*
2

12
2

11
1
19

22
30
14

354

6,686

65
56
77
305
5
3
49
40
6
2
55

1
3
2
25

3,301

1,353

1,613

Indirect
Federal
hospital
and
medical
services

33,615
911
4
418

3
79
1,757

5
109
102
31
*
93
17
21
130
1

36,443

1,682

51,432

21
21,762
10,265
234
599
325
37

796
245
1
102
144
29
213
4

Total

38,681
1,534
1,049
819
223
2,178
240
63
21,773
10,268
534
3,888
4,841
424
408
56
81
434
125
62
49
158
62
59
346
1,758

551

Prevention and
control
of health
problems

58
57
*
320

Table K-30. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1978
(In millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration i
Health Resources Administration i
Alcohol, Drug Abuse, and Mental Health Administration *
Center for Disease Control l
National Institutes of Health *
Food and Drug Administration
Assistant Secretary for Health i
Social Security AdministrationSocial and Rehabilitation Service
__
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration _
Department of Labor
Department of State
National Science Foundation __
Department of the Interior
Department of Transportation
.._
Department of Justice
. _
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1978

550
551
550
550
553
550
553
550
551
551
550
051
703
451
352
304
250
251
550
150
251
300
400
750

Health
research

Training
and
Construeeducation
tion

2,561
4
29
147
58
2,255
27
12
13

713
23
332
94
3
176

16
130
108

70
286
317

Health
planning
activities

Direct
Federal
hospital
and
medical
services

354
82
191
6

236
11
152
7

323
255

69
4
1

74
75
79
344
4
4
58
40
7
2
106

1
20
12

2
191
347
365
11
*
18

7
*
25
6

2,551
3,954

*
*
2

2
4
2
27

16
1
23

26
33
14

1,387

1,321

308

6,902

11
3

37,559
497
*
377

Prevention and
control
of health
problems

3
79
1,963

5
127
109
35
*
98
17
18
142
1

40,703

1,789

56,001

12,161
24,283
*
241
654
367
47

826
155
*
112
110
31
246
111

Total

42,574
1,027
704
808
170
2,532
277
12,363
24,297
1
397
3,888
5,117
418
416
75
85
490
133
72
58
162
72
59
417
1,964

551
3,592

Indirect
Federal
hospital
and
medical
services

60
77
*
331

*An asterisk denotes expenditures of less than $1 million.
.
_R
Outlays for these agencies as reported here include salaries and expenses funding which was transferred to the Office of the Assistant Secretary tor Health in IV/o.
For that reason, total agency outlays here are somewhat different from those reported in the Budget Appendix.
1

SPECIAL ANALYSIS L
FEDERAL INCOME SECURITY PROGRAMS

Federal income security programs provide essential income protection for millions of Americans. A major, although not exclusive,
objective of these programs is to increase the income of people at the
lower end of the income scale. The programs included in this analysis
are divided into two broad categories:
—Cash benefits, such as social security and other income replacement programs.
—In-kind benefits, such as health care and food stamps, which
effectively increase real income by providing necessary goods.
In addition, several major tax expenditures contribute to income
security.
OVERVIEW

Total Federal income security benefits are estimated to equal
$194 billion in 1978. This represents a $13 billion increase (or 7. 0%)
over the 1977 total of $181 billion.
There are many factors accounting for this change:
—By law, $126 billion of the 1978 outlays are in programs whose
benefits are tied to the cost of living.
—Outlays of $12. 3 billion for unemployment compensation in 1978
reflect a decrease in unemployment levels from 1977, although
this decrease is partially offset by increases in benefit amounts
and the number of eligible workers.
Table L-1. FEDERAL INCOME SECURITY BENEFITS (in millions of dollars)
1976
actual

Federal outlays for cash benefits:
Social security (OADSI)
Federal employee benefits
Veterans benefits
Public assistance
Unemployment insurance
Railroad retirement
Other programs
Proposed legislation included above

81,908
18,722
9,548
10,179
14,283
3,604
1,091
(43)

89,309
21,032
9,633
11,044
12,327
3,752
1,036
(928)

128,763

Federal outlays for in-kind benefits:
Food and nutrition
Healthcare^
Housing___-____._.
Proposed legislation included above

Total benefits

1978
estimate

71,362
16,703
8,734
9,803
17,612
3,445
1,105

Subtotal, cash benefit outlays

Subtotal, in-kind benefits outlays

1977
estimate

139,334

148,133

7,714
25,896
2,264
.__

7,690
6,809
31,905
35,967
2,369
3,038
(—218) (—3,365)

35,875

41,964

45,814

164,639

181,298

193,947

1
Outlays reported here would be included in the financial assistance for health care block grant to
States under proposed legislation for 1978. See Part V, Health, of the Budget of the United States
ates
1 97
~
nent
Government for additional information.

229

230

THE BUDGET FOR FISCAL YEAR 1978
TARGET GROUPS

Federal income security programs maintain or supplement the
income of persons and families whose capacity for self-support is
reduced by old age, disability, illness, unemployment, poverty or
death of the primary wage earner.
In situations where only partial self-support is currently possible or
where self-support may be achieved in the future, income security programs provide supplementary or temporary support. Where selfsupport is not possible, income security programs provide basic
support.
The analysis below is organized by target group: that is, the programs discussed provide support to people sharing similar problems
and circumstances—the aged (annuitants and others), the unemployed,
parents with small children and no breadwinner, and low-income
persons with insufficient income to provide for their basic needs.
Needs-tested benefits are included in this analysis by target group.
Table L-2. INCOME SECURITY BENEFITS BY TARGET GROUPS
(In millions of dollars)
1976
actual

Annuitants
Other aged
Disabled
Mothers and children
Temporary unemployed
Other transitional low income
Other
Total

45,665
45,752
25,194
8,468
18,523
12,823
8,214

1977
estimate

52,679
52,804
29,285
9,137
14,723
13,170
9,499

1978
estimate

Change
1976-78

58,124 12,459
57,171 11,419
32,347
7,153
9,888
1,420
12,887 -5,636
13,922
1,100
9,608
1,394

164,638 181,298 193,947

29,308

Percent
change
1976-78

27.3
25.0
28.4
16.8
-30.4
8.6
17.0
17.8

T H E AGED

Income security benefits for the elderly consist of (1) wage replacement for workers retired from full-time gainful employment, (2)
benefits to women who depended on their husband's income as their
main source of support, and (3) assistance to those who were needy
before becoming aged.
In-kind program benefits received by the aged include medical
care through medicare and medicaid, as well as food and shelter on
an income-tested basis.
Several provisions of the Federal personal income tax are designed
to benefit the aged. The largest benefits result from the extra personal
exemptions available to persons 65 or over and from the exclusion of
all social security benefits (not just that portion representing a return
of contributions) from their taxable income. These two tax expenditures are expected to result in a loss of receipts in 1978 of $1.3 billion

SPECIAL ANALYSIS L

231

and $3.5 billion, respectively. In addition, the tax credit for the elderly
is estimated to be a tax expenditure of $0.4 billion in 1978 while the
exclusion from income of railroad retirement benefits is estimated at
$0.2 billion. The combined loss of tax receipts from the retired and
elderly due to these four provisions is an estimated $5.9 billion in
1978. This aggregate is greater than the sum of the individual estimates
because more elderly persons would be pushed to taxpaying levels of
income or into higher tax brackets if all of these items were deleted
from the tax code.
Other tax provisions are directed to the future security of aged
persons by encouraging private provision for retirement years. The
major benefits flow from the exclusion of employer contributions to
and earnings of qualified pension funds from the employee's current
taxable income. After allowing for deferred taxes collected from
present retirees, the net loss in receipts from this tax expenditure is
estimated to be $9.9 billion in 1978. Similar tax provisions for employees not covered by any pension plan other than Social Security or
for the self-employed will result in an estimated tax expenditure of
$1.5.billion in 1978. A temporary tax credit on earned income up to $8
thousand has provided a tax expenditure of $0.3 billion in 1976 for
low-income workers with children. The Tax Reform Act of 1976
extended this credit through calendar year 1977. The President's
budget, however, reflects proposed legislation to repeal this credit and
to substitute other provisions that reduce income taxes.
Table L-3. INCOME SECURITY BENEFITS FOR THE AGED
(In millions of dollars)
Benefits
1976
actual
Covered employment:
Social security (OASI) members
Federal civilian employees
Railroad employees
Uniformed services members
Coal miners'widows
Supplemental security income
Income-tested veterans pension

1977
1978
estimate estimate

Percent
increase
1976-78

58,553
6,385
3,198
1,230
233
1,810
1,606

67,210
7,565
3,349
1,379
259
1,754
1,737

73,135
8,609
3,483
1,458
285
1,731
1,789

24.9
34.8
8.9
18.5
22.4
—4.4
11.4

73,015

83,252

90,491

23.9

14,996
3,030
569

18,274
3,722
485

20,118
4,301
639

34.2
41.9
12.4

Subtotal, in-kind benefit outlays

18,595

22,481

25,058

34.8

Total

91,610 105,734 115,549

26.1

Subtotal, cash benefit outlays
Medicare
Medicaid
Other in-kind

232

THE

BUDGET FOR FISCAL YEAR

1978

Federal A i d tO the Elderly-Benefit Payments
$ Billions

IBillio

125.1
120-

1
100-

H5.5

|:;:j!j!ji;j Other Benefit*
1 Health Care

-180

104.4

WttM Social Security

— 100
92.9
81.3

80 H

60 H

-60
44.0

40H

37.1

20H

-40

— 20

Annuitants.—In all four federally run contributory retirement
systems, the benefit calculations are based upon past earnings and
payments are adjusted twice a year.
Under Old-age and survivors insurance (OASI), 15.4 million retired workers receive pensions in 1978. Some recipients in 1978 are
primary beneficiaries under the railroad retirement system, but almost
40% of these particular retiiees a/e also beneficiaries under the social
security system. A total of 870,000 persons are beneficiaries of either
the civil service retirement system or of the foreign service retirement
system in 1978. Approximately 43% of the beneficiaries of the two
Federal civilian employee systems also receive social security.
The estimated total number of primary beneficiaries of all the
contributory retirement systems is 15.3 million persons in 1976 and
16.7 million in 1978.

SPECIAL ANALYSIS L

233

Table L-4. ANNUITIES TO PRIMARY BENEFICIARIES IN CONTRIBUTORY
RETIREMENT SYSTEMS: ANNUITY BENEFITS, BENEFICIARIES, AND
AVERAGE PAYMENTS BY SYSTEM
Benefit outlays
(in millions of dollars)
1976
actual

1977
est.

1978
est.

Number of primary
beneficiaries
(thousands)
1976
actual

1977
est.

1978
est.

Average monthly
payments
(in dollars)
1976
1977
actual
est.

1978
est.

Old-age and survivors
insurance
38,244 44,179 48,602 14,119 14,826 15,436
226 248 262
Civil Service Commission
5,535 6,551 7,500
752
818
865 613 667 723
Railroad Retirement
Board.....
1.829 1,878 1,938
423
417
412 360 375 392
Foreign Service retirement
57
72
84
4
4
5 1,327 1,382 1,478
Total

45,665 52,679 58,124

Other aged.—This category includes income support to the aged in
which the benefits are based upon criteria other than past earnings.
The criteria of the program may, for example, be the work history of
some person related to the beneficiary, and may not necessarily be
based on any measure of need. Underlying the purpose of these programs is the presumption that persons past a certain age (usually 65)
are generally not self-supporting through their own current earnings.
Aged widows.—Aged widows account for $18.2 billion in benefit
outlays in 1978, or 32% of all benefits to the aged outside of annuities
to primary beneficiaries. The increase in benefit outlays to aged
widows between 1976 and 1978 is due to increased benefit levels under
the social security and the railroad retirement systems. Some 5
million aged widows will receive benefits from social security in 1978,
while 1.6 million widows will be covered in other programs. A considerable proportion of the widows covered by social security also
receives benefits from other programs. Tax expenditures again augment the value of these benefits. The exclusion from taxable income
of social security benefits for dependents and survivors is estimated to
result in a $0.8 billion revenue loss in 1978.
Aged wives of retirees.—The entitlement of wives under OASI and
railroad retirement is independent of any contribution history of their
own, and requires only that they exceed a particular age. Where a
wife has dual entitlement under social security based upon her earnings
history as well as her husband's, she will receive only the larger benefit.
In the railroad retirement system, she receives both benefits. In 1978,

234

THE BUDGET FOR FISCAL YEAR 1978

687,000 wives will have dual entitlement under social security in
which the wife's benefit exceeds the benefit based upon her own
earnings.
Table L-5. BENEFITS FOR THE AGED EXCEPT ANNUITIES TO PRIMARY
BENEFICIARIES: BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)
1976
actual

Civilian covered
employment:
Social security
Federal civilian
employees
Railroad employees...
Coal miners'
widows
Medicare
Uniformed services:
Aged widows
Aged retirees
Aged veterans and
widows: Income
tested
Supplemental
security
income*
In-kind benefits to
needy aged:
Medicaid
Food
Housing
Total
1

1977
estimate

1978
estimate

Number of beneficiaries
(thousands)
1976
actual

1977
estimate

1978
estimate

20,309 23,031 24,533 11,677 11,856 11,963

Average monthly
payments
(in dollars)
1976
actual

1977
estimate

1978
estimate

145

162

171

600

692

771

202

214

221

248

269

290

1,369

1,471

1,545

551

554

555

207

221

232

233
259
285
98
102
107
14,996 18,274 20,118 17,811 18,709 19,435

198
70

211
81

221
86

542
688

597
783

598
860

238
92

239
98

239
102

190
625

208
666

208
705

1,606

1,737

1,789

1,810

1,860

1,832

1,810

1,754

1,731

1,990

1,885

1,805

3,030
569
405

3,722
485
425

4,301
639
545

4,041
2,294
1,085

4,279
2,232
1,312

4,429
2,344
1,521

62
21
31

72
18
27

81
23
30

46,157 53,229 57,716 _

Federal payment only.

Payments based on the minimum.—These are statutory minimum
amounts paid to retired workers, to the dependents of such retired
workers, and to noninsured beneficiaries age 72 and over.
Aged retirees of the uniformed services.—The retirement systems for

the uniformed and military services are noncontributory, with benefits
based on time in service and the rank held at retirement rather than
the overall earnings history of the individual. Because military service
is credited for social security coverage, there is substantial overlap of
the military retirement systems beneficiaries and OASI beneficiaries.
THE DISABLED

Disabled.—The disabled constitute the second target group for
whom there is a presumption of permanent inability to achieve selfsupport. Eligibility for an income security benefit for a disabled

SPECIAL ANALYSIS L

235

individual may be based on membership in a contributory retirement
system (OASDI or civil service), on military service, on occupation
(coal miner), or on indigency (welfare).
Members of the social security system and the railroad retirement
system are eligible for retirement benefits based upon their earnings
history to the date of permanent disability, and are also eligible for
medicare benefits. Federal civilian employees receive a disability
benefit based on total disability for their previous occupation and are
paid a minimum benefit of 40% of the average of their highest 3 years
of earnings.
Benefits to the disabled in the uniformed services are scaled to the
degree of physical impairment rather than previous levels of earnings.
Disability retirement from the military and veterans compensation
and indemnities are provided for disabilities which are presumptively
service-connected. Veteran's pensions provide benefits for a nonservice-connected but presumptively total disability to persons who
have seen wartime military service and whose financial need can be
demonstrated.
Under the Federal Coal Mine Health and Safety Act, compensation is paid to black lung victims in amounts related to the workers'
compensation law for Federal employees (the Federal Employees
Compensation Act). Eligible persons began registering for benefits in
the spring of 1970.
Beginning in 1974, 1.3 million needy disabled received assistance
under the new Federal Supplemental security income program enacted
in 1972 to replace State administered programs of assistance to the
blind and disabled. By 1978 that number will grow to almost 2.2
million needy blind and disabled.
In 1978, 5.0 million persons will receive benefits from the Disability
insurance trust fund administered by the Social Security Administration. Another 365,000 individuals will receive benefits through
Federal civilian employee programs. There is a substantial overlap
between these latter two groups and those who receive disability
benefits because of prior military service or employment in coal mines.
It is estimated that in 1978 5.7 million adults and children will be
supported b}^ public assistance based on disability. Nearly all of these
persons are eligible for medicaid benefits.
Disabled persons benefit from the exclusion from taxable income of
(1) social security disability insurance benefits, (2) worker's compensation benefits, and (3) payments such as sick pay and private disability
payments. In to to, these exclusions are expected to reduce tax receipts
in 1978 by $1.8 billion. The exclusion from taxable income of veterans
service-connected disability compensation is an additional tax expenditure of $0.7 billion for the same period.
Benefits for a parent with dependent children and no
spouse.—Benefit eligibility varies considerably for this last target
group for whom self-support is assumed to be not universally possible.
This group includes those parents with dependent children who either
have no spouse or whose spouse is disabled. Eligibility is determined
by either the work history of a deceased husband or a means test.

236

THE BUDGET FOR FISCAL YEAR

1978

Table L-6. BENEFIT OUTLAYS FOR THE DISABLED: BENEFITS,
BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays (in
millions of dollars)
1976
actual

Civilian covered employment:
Disability insurance
Federal civilian employees
Railroad employees
Coal miners
Medicare
.
Uniformed services:
Service-connected
disability
Other:
Incometested
Public assistance to
the disabled:
Supplemental
security income..
A F D C (disabled
male head of
family)
Medicaid
In-kind benefits to
needy
disabled:
Food
Total

9,222

1977
estimate

1978
estimate

10,929 12,294

Number of beneficiaries
(thousands)
1976
actual

Average monthly
payments (in
dollars)

1977
estimate

1978
estimate

1976
actual

1977 1978
estiestimate mate

4,352

4,709

4,982

177

193

206

1,668
213
638
1,942

1,998
219
582
2,682

2,254
233
571
3,237

317
45
349
1,872

344
45
325
2,027

365
46
303
2,224

439
394
152
86

484
406
149
110

515
422
157
121

5,215

5,755

5,818

3,187

3,215

3,226

136

149

150

523

575

594

507

524

514

2,630

2,966

3,269

1,865

2,040

2,160

118

121

126

643
2,131

655
2,618

725
3,027

1,365
2,957

1,365
3,131

1,373
3,240

39
60

40
70

44
78

369

307

325

1,153

1,097

925

25,194 29,285 32,347

Table L-7. BENEFITS FOR MOTHERS WITH DEPENDENT CHILDREN AND
NO HUSBAND: BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)

1976
actual

Benefits to widows
of covered employees:
Social s e c u r i t y
(OASDI) members______
Federal civilian employees
Railroad employees.
Uniformed service
members
Coal miners
Public assistance
(AFDC) mothers
with
preschool
children:
Cash payments....
Medicaid
Total

1977

1978

Number of beneficiaries
(thousands)

1976 1977

Average monthly
payments
(in dollars)

1978 1976 1977
est.

actual

est.

1978

est.

actual

est.

3,587

3,769

3,880

1,937

1,916

1,888

154

164

171

151
34

175
36

195
36

47
11

49
11

51
10

268
258

295
273

319
300

433
34

475
40

498
42

561
25

573
25

64
113

69
134

72
140

2,621
1,609

2,665
1,977

2,950
2,286

5,561
8,595

5,563
8,787

5,580
8,821

39
16

40
19

44
22

8,468

9,137

9,888

SPECIAL ANALYSIS L

237

Unemployment
compensation.—The
intent of income security
outlays for able-bodied persons is to tide them over periods in which
they cannot support themselves, until other measures correct the
causes of such inability to provide self-support.
The major system of unemployment insurance, constituting 9 0 %
of unemployment benefits paid in 1978, is State-administered. I t
should be noted that the States vary in eligibility requirements,
benefit levels, and duration of benefits.
Table L-8. BENEFITS FOR TRANSITIONAL LOW INCOME AND OTHER:
BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)

Number of beneficiaries
(thousands)

1976
actual

1977
est.

1978
est.

1977
est.

1978
est.

Temporary unemployment:
Unemployment insurance system. 17,307 13,990 11,922 9,778 10,578 9,763
Other unemployment benefits...
1,216
733
965
851
677
617
Long-term unemployment:
Unemployed
fathers....
271
355
390
584
708
736
Mothers with all
children
in
school
1,825 1,781 1,975 3,863 3,740 3,750
Other
income
1
tested
575
602
593
696
707
691
In-kind benefits, low
income:
Food 2
6,285 6,105 5,725 33,483 39,888 21,824
Housing2
2,264 2,369 3,038 6,758 7,915 9,150
Medicaid
...
1,554 1,908 2,202 8,301 8,479 8,510
Uniformed
services
retirees under 6 5 . . 5,723 6,503 7,141
839
897
930
Food for non-needy
children
492
792
120 26,050 26,390
Other
41,170 47,595 53,140 15,628 16,546 17,163

Average monthly
payments
(in dollars)
~Wll
actual

V977
est.

1978
est.

148

110

102

119

130

16
28
16

13
25
19

22
28
22

568

604

640

2
220

3
240

258

Total, transitional low
income
78,682 82,733 87,211
1

Includes all assistance to refugees and Indians.
2 Includes all benefits to AFDC and UF families.

Special unemployment benefit programs are provided for Federal
employees and ex-servicemen, railroad employees, and unemployed
workers in industries adversely affected by foreign trade. Although
federally financed, they are, except for railroad retirement unemployment insurance, State-administered.

238

THE BUDGET FOR FISCAL YEAR 1978

The exclusion from taxable income of unemployment insurance
benefits is a tax expenditure expected to decline from $3.3 billion in
1976 to $2.4 billion in 1978.
A second set of programs providing income security benefits to ablebodied men and women are means-tested cash and in-kind programs.
A third set of benefits, not based on need, lack of employment, or
age, are provided to uniform services retirees under the age of 65
because of their length of service.
NEEDS-TESTED BENEFITS

The foregoing tables have provided displays of benefits for various
target groups. Within these target groups, benefits may or may not be
based on a needs or means test. Public assistance, veterans and surTable L-9. NEEDS-TESTED BENEFITS BY TARGET GROUPS AND

PROGRAM (in millions of dollars)
Benefit outlays
1976
actual

By target group:
Benefits to the aged:
Public assistance
Veterans and survivors pension
Medicaid
Other

1,810
1,606
3,030

1977
estimate

1,754
1,737
3,722

1978
estimate

1,731
1,789
4,301

569

639

7,698

3,460

3,273
523

Benefits to the disabled:
Public assistance
Veterans and survivors pension
Medicaid
Other

485

7,015

Subtotal, benefits to the aged__

3,621
575

3,994

2,131

2,618

594
3,027

369

325

7,120

7,940

2,621
1,609

Benefits to mothers:
Public assistance
Medicaid
Other__.

307

6,296

Subtotal, benefits to the disabled

2,665
1,977

2,950
2,286

228

237

242

4,458

4,879

5,479

2,096
1,554
6,285
2,264

2,136
1,908
6,105
2,369

2,365
2,202
5,725
3,038

623

652

593

Subtotal, benefits to unemployed

12,823

13,170

13,922

Total needs-tested benefits

30,591

32,868

35,801

By program:
Public assistance
Veterans and survivors pension
Medicaid
Food.
Housing

9,920
2,859
8,325
7,222
2,264

10,304
3,071
10,225
6,898
2,369

11,098
3,160
11,816
6,689
3,038

30,591

32,868

35,801

Subtotal, benefits to mothers
Benefits to the unemployed and other low income:
Public assistance
Medicaid
Food
Housing
Other

Total needs-tested benefits

_
_..

SPECIAL ANALYSIS L

239

vivors pensions, medicaid, and food and housing programs are those
which provide benefits to individuals based on a test of need. In
addition to that test, eligibility for cash assistance may be based on
such considerations as prior military service, age, disability, or absence
of a breadwinner in a family. The following table arrays only those
program benefits available to each target group on a needs-tested
basis.
Table L-10. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM
Benefit outlays

Department, agency and program
1976
ictual

Department of Health, Education, and Welfare:
Social security:
Old-age and survivors insurance
Disability insurance
Hospital insurance
Supplementary medical insurance
Supplemental security income
Public assistance:
Maintenance payments
Medicaid
Special benefits for disabled coal miners
Assistance to refugees
Public health service officers retirement
Medical care for retired commissioned officers
Proposed legislation included above
Total Health, Education, and Welfare
Veterans Administration:
Disability and dependency and indemnity compensation.__
Veterans and survivors pensions
Life insurance (net subsidy)
Other veterans benefits
Proposed legislation included above
Total Veterans Administration
Department of Labor:
Unemployment insurance (State programs)
Special unemployment assistance
Railroad unemployment
Unemployment compensation for Federal employees and exservicemen
Trade adjustment activities
Federal employee worker's compensation
Special benefits for disabled coal miners
__
Total Labor
Department of Defense—Military:
Military retirement.
Medical care for retirees
Proposed legislation included above
Total Defense

62,140
9,222
12,267
4,671
4,440
5,363
8,325
974
67
25
6
107,500

1977
estimate

1978
estimate

70,979
10,929
15,030
5,926
4,720

77,015
12,294
16,099
7,256
5,000

5,459
10,225
938
74
28
8
(—175)

6,044
11,816
958

124,315

31
8
(—786)
136,521

5,154
2,859
529
191

5,733
3,071
545
198

5,713
3,160
556
204
(—79)

8,734

9,548

9,633

16,413
894
218

13, 690
300
173

11,522
400
165

911
87
227
14

440
120
291
27

560
240
295
24

18,764

15,041

13,206

7,296
627

8,234
716

9,044
787
(9)

7,923

8,950

9,831

240

THE BUDGET FOR FISCAL YEAR 1978

Table L-10. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM—Continued
Department, agency and program

Department of Agriculture:
Food stamps
Child nutrition
Special milk
Removal of surplus commodities
Proposed legislation included above

Benefit outlays
1976
actual

1977
estimate

1978
estimate

5,266
2,308
88
53

4,390
3,066
180
53

7,714

7,690

6,809

8,055

9,505

10,849

8,055

9,505

10,849

Railroad Retirement Board: Railroad retirement

3,445

3,604

3,752

Total Railroad Retirement Board

3,445

3,604

3,752

1,392

1,414

1,950

873

955

1,088

Total Agriculture
Civil Service Commission: Civil service retirement
Total Civil Service Commission

Department of Housing and Urban Development:
Public housing
Rent and mortgage interest supplements
Total Housing and Urban Development
Department of Transportation: Coast Guard retirement
Total Transportation
Department of State: Foreign Service retirement
Total State
Department of the Interior: General assistance to Indians
Total Interior
Department of Commerce: NOAA officers retirement
Total Commerce
Total Federal outlays

2,264

2,369

4,332
2,414
25
39
(—1,581)

3,038

122

140

155

122

140

155

164,639

181,298

193,947

SPECIAL ANALYSIS M
FEDERAL CIVIL RIGHTS ACTIVITIES
COVERAGE AND SCOPE OF THE ANALYSIS

This analysis of Federal civil rights activities comprises more than
the traditional programs and policies related to civil rights enforcement. In addition to Federal activities regarding the protection of
such rights as voting, public accommodations, fair housing, and equal
employment opportunity in the public and private sectors, there are
included Federal programs related to civil rights research and information dissemination and to the conciliation and prevention of racial
disputes. Outlays for these civil rights activities have risen from $346
million in 1975"to $467 million in 1978.1
Outlays for Civil Rights Enforcement
S Millions

S Millions

500

500
467
442

400

375
346
291

300

—

-300

262

200

too

100

1973
Fiscal Year*

1974

1975

1976

1977

1978
Estimate

Programs relating to problems of the economically and socially
disadvantaged, whether in employment and training, community
development, or bilingual education, are not discussed in this analysis,
1
Civil rights activities of the Postal Service, which by law is off-budget, are shown in the table
as m e m o r a n d u m entries.

240-700 O http://fraser.stlouisfed.org/ 77 - 16
Federal Reserve Bank of St. Louis

241

242

THE BUDGET FOR FISCAL YEAR 1978

even though they may benefit a substantial number of minorities.
These programs are considered in other analyses in this document.

Federal service equal employment opportunities.—The head of

each Federal Executive department and agency is charged by Executive Order 11478 and the Civil Rights Act of 1964, as amended by the
Equal Employment Opportunity Act of 1972 (Public Law 92-261),
with establishing and maintaining an affirmative program of equal employment opportunity within the agency. Enforcement responsibility
for the Government-wide program is assigned to the Civil Service
Commission and special procedures are available to employees and
applicants who believe they have been discriminated against in any
aspect of Federal service. Out of the 38,812 people who contacted
equal employment opportunity counselors in 1976 for advice and
assistance, 7,059 filed formal discrimination complaints. If equal employment opportunity counseling, impartial investigation, and a
third-party hearing do not resolve the matter to an individual's
satisfaction, the complainant may appeal to the Commission's Appeals
Review Board or may file a civil action in U.S. district court.
Table M-1. FEDERAL CIVIL RIGHTS OUTLAYS BY PROGRAM CATEGORY
(In millions of dollars)
1976
actual

Civil rights enforcement:l
Federal service equal employment opportunities
Military service equal opportunities 2
Private sector equal employment opportunities
Equal educational opportunity
Fair housing3
Enforcement and investigation4
__
Research and information dissemination
Civil rights conciliation and prevention of disputes.
Total

—

TQ
actual

1977
estimate

1978
estimate

160.80
38. 33
104.38
19.64
16. 71
22.18
9.07
4.09

37.40
9.86
26.95
4.43
3.80
8.55
2.93
1.10

197.65
40.18
114.56
24.73
19.56
27.74
13.28
4.45

210.73
41.55
118.40
26.40
20.27
29.55
14.86
5.05

375.20

95.02

442.15

466.81

1
2

Civil rights enforcement programs guarantee and protect the basic civil rights as defined by law.
Excludes outlays for contract compliance, fair housing and title VI activities reported elsewhere.
Includes U.S. Coast Guard.
3
Excludes funds for contract compliance and departmental personnel who directly administer
housing and urban development programs but concern themselves with the objectives of fair
housing laws.
* Includes all title VI efforts except HEW and HUD.

Government policy is clear that personnel actions shall be free
from discrimination based on race, color, religion, sex, or national
origin, and that Federal agencies shall take affirmative act on to
assure equal employment opportunity. Agency equal employment
opportunity programs are documented in written plans of action
that must be submitted to the Comm'ssion annually for review
and approval. Careful consideration will be given to assure that
recruitment activities reach all sources of job candidates, that present

243

SPECIAL ANALYSIS M

employee skills are hi\\y utilized, that opportunities for upward
mobility are provided, and that managers are trained with regard to
their equal employment opportunity responsibilities.
Changes in Minority and Non-Minority Employment' November 1974—November 1975
Percent Change
12

Percent Ckange
12

1-4

5-8

*-ff

12-13

14-15

16-18

ALL GS

'General Schedule and Similar Grade Groupings.

Outlays for Federal civil service equal employment opportunity
programs (including upward mobility) will increase by 31% in the 2
years, 1976 to 1978, to $211 million. \Vork-vears in these programs will
increase by 2,531 to 10,688.
As of November 30, 1975, more than one-fifth (21%) of Federal employees were members of minority groups. Recent surveys have reflected a continuing trend of more minorities in the middle and upper
grade and pay levels. As of October 31, 1975, women represented 42.1%
of the full-time Federal white-collar work force (excluding the Postal
Service). Between October 1974 and October 1975, women represented
76% (14,114) of the total increase (18,493) in general schedule
employment.
Under the Intergovernmental Personnel Act of 1970 (IPA), the
Civil Service Commission provides technical and financial assistance
in personnel management and employee development to State and
local governments. This promotes and supports State and local equal
employment opportunity efforts. During 1976, the Commission:
—Awarded $1.7 million in IPA grant funds to support 68 projects
exclusively designed to improve various aspects of equal employment opportunity in State and local governments.

244

THE BUDGET FOR FISCAL YEAR 1978

—Provided technical assistance on request to more than 1,000
jurisdictions on developing affirmative action plans, removing
artificial barriers to employment and promotion, and establishing
job related selection methods.
—Developed and issued a variety of publications for State and local
use, aimed wholly or partially at improving equal employment
opportunity.
In 1978, the Commission will continue to provide technical and
financial assistance in this area.
Military services equal employment opportunities.—Each of
the military services 2 has placed equal opportunity officers at various
levels within individual command structures. They guide, monitor,
and evaluate all matters pertaining to the equal opportunity and treatment of military personnel and their dependents, and are responsible
for and participate in race relations councils, seminars, and training.
In 1978, outlays for insuring equal opportunities for members of the
Armed Services, excluding fair housing expenditures, will total $41
million and provide for more than 4,812 work-years.
Equal opportunity for servicewomen will receive added emphasis.
As the number of women in the military services continues to rise at
a rapid rate, greater utilization is being made of their talents. For
example, the Army has now opened 92% of its enlisted occupational
specialties to women, and the Navy is accepting women in 87% of
the enlisted career specialties. Six women currently serve at the
general/flag officer rank.
All services are now also training women as noncombat pilots and, in
June 1976, women were admitted to service academies for the first
time. Service ROTC programs are also open to women.
The Defense Race Relations Institute, located at Patrick Air Force
Base, Fla., continues as the primary arm of the Defense Department's
education program in race and human relations. The institute was
established to give members of the Armed Forces a common body of
knowledge in such areas as minority studies and behavioral science.
The Institute has graduated more than 4,300 instructors from all the
services in the past 6 years.
Recruiting efforts will continue to insure minority participation in
the military services. All services have increased the percentage of
minority recruiters. An example of their success is the service academies where the enrollment of 1,374 minorities is 10.4% of the total
enrollment—more than 10 times the number enrolled in 1970. Significant progress has also been made in obtaining minority officers from
reserve officer training programs and officer candidate training
schools, and in giving minority officers the opportunity to attend
senior and intermediate level professional military schools. Minorities
in the ROTC program have increased from 11,911 in 1975 to 16,436
in 1976.
Currently there is a minority at the 4-star general rank, and 21 other
minority general officers are on active duty. Prior to 1971, only 4
minorities had ever achieved general/flag officer rank in the entire
history of the Armed Services. The top enlisted position in the Air
Force continues to be held by a minority.
2Including the U.S. Coast Guard.

245

SPECIAL ANALYSIS M

Private sector equal employment opportunities.—Title VII of
the Civil Rights Act of 1964, as amended, prohibits discrimination in
employment on the basis of race, color, religion, sex, or national origin
by employers, unions, or employment agencies. Executive Order
11246, as amended, requires Federal and federally assisted Government contractors and subcontractors to provide similar opportunities.
Outlays for the agencies charged with these responsibilities, the
Equal Employment Opportunity Commission, the Justice Department, the Department of Labor, and 11 cooperating Federal agencies,
will total $118 million in 1978.
Equal Employment Opportunity Commission Activities
Completed Investigation;

$ Millions
100

100,000
Completed investigation
EEOC Expenditures

75-

75,000

50,000

25,000

1973

1974

1975

:
Fiscal Yeews ' .
•
' Include) imtttHgaKoMfeyEEOC <a w«l! as tty eWmrol

1976"

1977'

(978'

del and administrative closurei.

The Equal Employment Opportunity Commission will spend $72.0
million in 1978 to carry out its responsibilities relating to nondiscrimination in employment in the private sector and State and local
governments. An estimated 85,500 charge resolutions are projected
through the combined efforts of the Commission and the State and
local agencies to which, under law, charges are deferred. The Commission will increase the amount of its grants by 73% to $10.4 million for State and local agencies that administer fair-employment
practices statutes, to strengthen the Federal/State partnership in
handling charges.
Enforcement of title VII, as amended, is also the responsibility of
the Justice Department which, through conciliation and litigation,

246

THE BUDGET FOR FISCAL YEAR 1978

seeks to secure compliance with the law where it finds patterns or
practices of employment discrimination in State and local governments
and their agencies. In 1978, the Justice Department plans to spend
$2.1 million to help eliminate such discrimination.
Federal Contract Compliance Activities

M-4

Hires and Promotions, (Thousands)

$ Millions

700

70
| Hires QB4 Promotions'

60-

600

Contract Compliance Expenditures

500

50-

400

30-

1973

1974

!975

1976

1977

1978

Fiscal Y e a s
Estimate
' From affirmative actioo plant in non-eowtruction contacts. Exclude! Pwtat Seme* Outlayi.

Executive Order 11246, as amended, prohibits the practice of
discrimination in Federal contracts, subcontracts, and on federally
assisted construction projects. The order covers both construction and
industrial work forces, and requires affirmative action on the part of
recipients of Federal contract moneys to promote the equal employment of minorities and women. In 1978, the Federal agencies responsible for implementing this order will spend $40.0 million. More than
600,000 new hires and promotions will be affected by such affirmative
action goals.
Eighty areawide plans for affirmative action in the construction
industry, including the well-known "Philadelphia plan," have been
put into effect. In addition, the Office of Federal Contract Compliance
programs, within the Department of Labor, is continuing to develop
proposals for statewide construction contracts. The goal for 1978 is to
insure that all areas with substantial minority populations are covered
under either a voluntary or imposed affirmative action plan. In order
to strengthen the contract compliance program and make it more
responsive to the needs of minorities and women, responsibility for
enforcement will be consolidated in 1978, and the number of agencies
with contract compliance responsibilities will be reduced from 17 to 11.

SPECIAL ANALYSIS M

247

Other highlights include:
• The Federal Communications Commission will continue to
investigate complaints of employment discrimination by broadcasters, cable television systems, and common carriers, and
review licensees' annual reports of employment patterns as part
of its program to enforce the rules of the Commission relating
to equal employment opportunity.
• The Department of Labor will spend $4.4 million in administering
the Equal Pay Act. In 1976, as a result of these efforts, $17.9
million in wages was received by 24,610 employees, primarily
women, to rectify illegal pay practices. An additional $7.8 million in back wages was also restored to 16,728 employees.
Equal educational opportunity.—Responsibility
for insuring
equality of educational opportunity rests both with the Department
of Health, Education, and Welfare and with the Department of
Justice. This responsibility includes guaranteeing students the full
range of educational opportunity, as well as promoting a nondiscriminatory policy with regard to school staff and administration.
In 1978, educational activities in support of these goals will expend
$26.4 million.3
To enforce Federal laws requiring equal education opportunities
for public school students, the Justice Department will spend $1.8
million in the coming year. Although substantial compliance with
the constitutional mandate has been achieved in recent years, the
Justice Department continues its enforcement supervision through
more than 200 cases involving some 500 school systems. In addition,
the Department engaged in active litigation in 103 of these cases to
assure full compliance with the law, including nondiscrimination in
the hiring and promoting of school personnel. Currently, the Federal
Government is also taking steps to provide demonstration programs
for non-English-speaking pupils to provide them full equality of
opportunity. Title IX of the Higher Education Amendments of 1972
charged the Department of Health, Education, and Welfare with the
responsibility of insuring nondiscrimination on the basis of sex in
some 2,850 institutions of higher education throughout the United
States. In 1978, the Department expects approximately 475 complaints will be investigated.
Fair housing.—-Title VIII of the Civil Rights Act of 1968 prohibits
discrimination in the sale, rental, or financing of housing, and in the
provision of brokerage services, on the basis of race, color, religion,
sex, or national origin. The Department of Housing and Urban Development (HUD) is charged with the administration and enforcement
of this act and the promotion of fair housing throughout the United
States. All executive agencies and departments are required to cooperate with HUD—the lead agency in this area—and to conduct
their programs in a manner that affirmatively furthers fair housing
opportunities for all Americans.
Expenditures for the administration of fair housing programs in
executive departments and agencies will increase in 1978 to $20.3
million.
3

Excludes amounts for nondiscrimination against the handicapped.

248

THE BUDGET FOR FISCAL YEAR 1978

Highlights of the Government's fair housing efforts are :
• HUD will spend $5.8 million to strengthen its efforts under title
VIII and enable it to reduce the backlog in the reactive complaint
system.
• The Department of Justice will spend $2.1 million in the development, litigation, and negotiation of cases to enforce title VIII.
• The Department of Defense will spend $6.5 million to assure the
rights of all military personnel to available off base housing.
• The General Services Administration (GSA) will spend $1.1
million to assure that federally constructed or leased space is
located where there is an adequate supply of low- and moderateincome housing available on a nondiscriminatory basis.
Table M-2. FEDERAL CIVIL RIGHTS OUTLAYS BY TYPE OF ACTIVITY
(In millions of dollars)
1976
actual

Complaint conciliation
Complaint investigation
Compliance review and monitoring
Legal enforcement
.
.
..
Program direction, research and information dissemination
Technical assistance
_
Upward mobility
_
Military services equal opportunities
Total...-

TQ
actual

1977
estimate

1978
estimate

22.13
52.67
74.18
27.32

4.39
12.52
19.35
4.62

27.54
62.35
88.53
31.56

28.73
65.25
94.28
33.37

82.66
5.79
72.12
38.33

25.81
.83
17.64
9.86

105.05
7.18
79.94
40.00

109.90
7.75
85.98
41.55

375.20

95.02

442.15

466.81

During 1976, HUD received 3,123 complaints, and closed 4,049. In
addition, 584 conciliation agreements were negotiated, generally including both specific relief for the complainant and actions to eliminate
any discriminatory practices found as a result of the complaint. In
enforcing title VIII, HUD also requires the display of fair housing
posters, oversees advertising guidelines and reviews affirmative marketing plans.
Title VIII requirements are an integral part of HUD regulations
implementing title I of the Housing and Community Development
Act of 1974, which authorizes community development block grants,
and title II of that act, which establishes the new section 8 housing
assistance program. To assure nondiscrimination under these programs, the Department will continue communitywide administrative
meetings, expand compliance reviews, and increase cooperative
efforts with other agencies, particularly the independent Federal
financial regulatory agencies, in order to insure the affirmative administration of all programs relating to housing. Voluntary compliance
agreements have been concluded with the real estate boards of major
cities. HUD's enforcement efforts are supplemented by the Department of Justice and by private civil suits that may be brought under
title VIII.
The Justice Department has brought or participated in 273 suits
against defendants in 34 States and the District of Columbia. Court

SPECIAL ANALYSIS M

249

orders have been entered, most of which required comprehensive
affirmative relief to correct the effects of past housing discrimination
and to maximize equal opportunity in the future. The Department has
also obtained supplemental relief or brought contempt of court proceedings in cases where defendants had failed to implement provisions
of earlier orders.
The Defense Department expects to continue its successful implementation of the open offbase housing program. Today, 99% of surveyed facilities are pledged to a policy of nondiscrimination. Recently,
Defense revised its procedures to take stronger measures against
landlords practicing race and sex discrimination. In 1978, Defense
will devote 460 work-years of effort to furthering this record.
GSA, under Executive Order 11512, will expend 43 work-years on
matters relating to the positive impact that selection of sites for
Federal facilities can have on the social and economic conditions in
the area. GSA and HUD are continuing to develop affirmative action
plans where necessary to insure that an adequate supply of housing
will be available on a nondiscriminatory basis.
Civil rights enforcement.—Primary responsibility for the enforcement of civil rights laws and constitutional guarantees is vested
in the Justice Department. This includes the development, negotiation, conciliation, and litigation of cases and complaints. In
1978, the Justice Department and other agencies with enforcement
responsibilities will spend $29.5 million to carry out these responsibilities. The Department will focus on its ongoing coordination of
Federal agencies, enforcement efforts under title VI of the 1964 Civil
Rights Act which prohibits discrimination in federally assisted programs and under the general revenue sharing legislation. The Department will also carry on enforcement activities directed toward
compliance with laws that prohibit the interference with basic civil
rights, including the right to vote and the use of public accommodations and facilities.
In 1978, the Justice Department will continue to investigate,
litigate and protect the civil rights of citizens who may have suffered
violence or threats of violence, including special protections for migrant
workers, prison inmates, and, with the Interior Department, American
Indians. Attention will also be directed to civil litigation involving
injustices and substandard conditions in correctional institutions,
mental hospitals, and juvenile homes.
The voting rights program will expand its efforts to secure for all
citizens, including non-English-speaking citizens, the right to register
and vote without discrimination or intimidation. In addition, all
proposed changes affecting voting under section 5 of the Voting
Rights Act of 1965, as amended, are submitted to the Attorney
General and must be investigated, reviewed, and adjudicated in the
Department of Justice. In 1976, 2,658 submissions involving 6,902
changes were processed. In support of the voting rights program, the
Civil Service Commission provides personnel to prepare and maintain
lists of eligible voters and to observe election procedures in States or
other political subdivisions designated by the Attorney General. The

250

THE BUDGET FOR FISCAL YEAR 1978

Commission receives complaints, hears and determines challenges,
and assists in the defense of challenge cases filed in the U.S. circuit
courts of appeals.

Civil rights research and information dissemination.—Ex-

penditures grouped in this category include all moneys for civil rights
activities not counted elsewhere, as well as Federal research and information dissemination efforts. Outlays in this area will total $14.9
million in 1978, and include the following highlights:
• The Commission on Civil Rights will spend $10.4 million to carry
on its factfinding function relating to denials of equal protection
under the law.4
• The Women's Bureau, within the Department of Labor, will
devote $2.6 million to questions and issues relating to the utilization of womanpower and the economic, legal, and civil status of
women. The Bureau works with State, national, international,
local, and union organizations, and concerned individuals in
achieving its goals, and provides support services to the Citizens
Advisory Council on the Status of Women.
• The women's action program, Department of Health, Education,
and Welfare (HEW), in association with the Secretary's Advisory
Committee on the Rights and Responsibilities of Women, will
spend $0.4 million to analyze the effects of and develop the changes
in HEW programs to achieve equality for women.

Civil rights conciliation and prevention of disputes.—The

Community Relations Service of the Department of Justice was
established by title X of the Civil Rights Act of 1964 to reduce and
prevent racial tensions and to provide assistance to communities in
resolving difficulties arising from discriminatory practices which
disrupt peaceful relations among citizens. The Service actively cooperates with Federal, State, and local agencies, private and public
groups, and individuals on methods and programs for the peaceful
resolution of racial disputes.
In 1978, the Service will spend $5.0 million for this purpose. This
will permit an expansion in crisis resolution and State liaison activities.
State liaison representatives continue to work with State and local
officials in developing their own crisis contingency plans to enable
communities to provide community relations services for themselves.
4

Excludes expenditures authorized under the Age Discrimination Act of 1975.

251

SPECIAL ANALYSIS M

Table M-3. FEDERAL CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND
AGENCY (in millions of dollars)
1976

Department of Agriculture
Department of Commerce
Department of Defense
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
_
Department of State
_
Department of Transportation
Department of the Treasury
Civil Service Commission i
Commission on Civil Rights
Energy Research and Development Administration 2__
Environmental Protection Agency
Equal Employment Opportunity Commission
Federal Communication Commission
General Services Administration
Postal Service 3
Small Business Administration
Veterans Administration
Other independent agencies
Total

1977

1978
stimate

6.00
1.03
51.89
23.71
10.58
1.64
23.87
11.57
*
3.97
1.36
161.66
7.89
2.00
.84
59.07
.35
4.87
(1.85)
1.19
1.02
.69

1.54
.27
13.24
5.15
2.78
3.9
6.22
3.37
*
.83
.34
38.71
2.35
.50
.21
16.65
.09
1.47
(-.07)
.48
.25
.18

6.53
1.10
54.72
29.63
11.59
2.12
25.22
13.58
*
4.31
1.56
200.56
9.32
2.20
.88
68.42
.40
6.08
(1.01)
1.91
1.24
.78

5.44
1.11
58.79
29.65
12.34
2.07
27.29
14.00
*
4.64
2.18
212.06
10.14
3.23
1.24
71.86
.41
6.15
(1.81)
2.18
1.24
.79

375.20

95.02

442.15

466.81

"Less than $10 thousand.
1
All Federal service equal employment opportunity outlays, including upward mobility, are reported under the lead agency, Civil Service Commission.
2
The Atomic Energy Commission expired Jan. 19, 1975. The majority of its resources were transferred to this new agency upon its expiration.
3
Postal Service outlays appear in the Annexed Budget and are included here for memorandum
purposes only.

SPECIAL ANALYSIS N
FEDERAL PROGRAMS FOR THE REDUCTION OF CRIME
Two basic responsibilities of government are the maintenance of
order and the administration of justice. The Federal Government fulfills these responsibilities through crime reduction and criminal justice
programs that include:
• Operation of the Federal criminal justice system;
• Support for crime and criminal justice research and development
to determine new methods of controlling crime and strengthening
criminal justice; and
• Financial and technical assistance to States and localities for
crime reduction and criminal justice improvement.
The objective is to reverse the trend of rising crime, thereby decreasing the fear of criminal abuse and exploitation and the loss of
human and economic resources associated with crime.
EVENTS OF THE PAST YEAR

Federal crime reduction activities reflect the continued high
priority the administration has placed on these programs. During
the past year:
• The President transmitted a Special Message on Drug Abuse to
Congress that:
—established two new Cabinet committees: Drug Law Enforcement, and Drug Abuse Prevention, Treatment, and
Rehabilitation;
—directed the Secretary of State, the Attorney General, and
the Ambassador to the United Nations to discuss with foreign
governments the development of adequate controls on the
production and distribution of illicit drugs;
—endorsed the Mexican Government's proposal to establish
a mechanism for formally exchanging information and
ideas on drug law enforcement;
—proposed legislation to: (1) require minimum mandatory
prison sentences for persons convicted of high-level trafficking
in heroin, (2) enable judges to deny bail in certain drug
cases, and (3) expand Customs authority to search for
money being smuggled out of the United States;
—urged congressional confirmation of the 1971 international
treat}^ (Convention on Psychotrophic Substances) aimed
at controlling synthetic drugs.
• The Cabinet level Domestic Council Committee on Illegal
Aliens, chaired by the Attorney General, completed 9 months of
intensive study of problems related to illegal immigration. The
Committee's preliminary report was released in early January.
• The Law Enforcement Assistance Administration funded 19
career criminal programs focused on habitual offenders. Accomplishments included significant reductions in court delays and plea
252

SPECIAL ANALYSIS N

253

bargaining, conviction of 94% of all persons identified as habitual
criminals, and incarceration of 93% of those convicted.
• Four new Federal correctional facilities were activated, including
metropolitan correctional centers in New York and Chicago, a
youth facility at Miami, Fla., and an adult institution at Butner,
N.C.
During the first 9 months of 1976, overall crime increased only 2%.
This compares to increases of 11% and 16% in 1975 and 1974, respectively. Violent crime—murder, robbery, aggravated assault, and forcible rape—decreased in the same period; this is the first time since
this statistical series was started (1970) that violent crime has
decreased.
1978 BUDGET HIGHLIGHTS

The 1978 budget proposes continued emphasis on Federal programs
to reduce crime and improve criminal justice. Outlays from these
programs are expected to total $3.3 billion in 1978, $102 million more
than in 1977, and $304 million greater than in 1976. Estimated total
criminal justice expenditures by all levels of government—Federal,
State, and local—are estimated to exceed $26 billion in 1978.
Recognizing that the heaviest burden of crime reduction and
criminal justice improvement rests upon State and local governments,
the Federal Government will devote more than $1 billion in Federal
expenditures to assist those governments in carrying out these responsibilities. Federal funds channeled to State and local governments
through the principal criminal justice assistance program—the Justice
Department's Law Enforcement Assistance Administration (LEAA)—•
will result in $819 million in outlays in 1978.
The Department of Justice, the primary Federal agency responsible
for crime reduction and criminal justice programs, anticipates outlays
of $2.1 billion in 1978 for these purposes. Specific emphasis will be
placed on the following program areas:
• Law enforcement.—The Federal Bureau of Investigation (FBI)
will accelerate efforts to automate fingerprint operations. LEAA,
in cooperation with FBI and other Federal, State, and local law
enforcement agencies, will continue funding antifencing projects—such as the highly effective "Sting" operation in Washington, D.C.—to disrupt illicit commerce in stolen goods.
• Adjudication.—The Washington-based legal divisions and U.S.
Attorne3r's offices around the country will receive additional resources to accommodate an increased and more complex caseload.
LEAA will emphasize financial and technical assistance for State
and local judicial systems to reduce court delay and improve
administration.
• Corrections.—Additional prison and detention facilities will be
provided to relieve overcrowding, accommodate increased inmate
population, and reduce the use of older, inadequate institutions.
The Department of the Treasury has the second largest Federal
crime reduction program because of its responsibility to enforce tax,
currency, and other revenue laws. Outlays of $459 million are expected
in 1978 with special emphasis on the following enforcement areas:
• Firearms and explosives.—The Bureau of Alcohol, Tobacco and
Firearms will evaluate, test, and make a decision whether to
expand its concentrated urban enforcement project against illegal
trafficking in firearms and explosives.

254

THE BUDGET FOR FISCAL YEAR 19 78

• Counterfeiting and forgery.—The Secret Service will devote an
increased proportion of resources to the investigation and arrest
of persons engaged in counterfeiting, forging, or altering currency, coins, checks, and bonds of the United States and foreign
governments.
Total 1978 outlays for drug law enforcement are expected to exceed $334 million. Because the incidence of drug abuse, especially
heroin, appears to have a major effect on the incidence of crime,
several programs to reduce the availability of drugs and imprison
high-level traffickers will be strengthened:
• Eradication.—These activities will be encouraged, particularly the
intensified eradication program begun in 1976 by the Mexican
Government to reduce the supply of brown heroin.
• Drug removal.—Efforts to control drug smuggling at the Nation's
borders through the use of contraband detection devices and
"sniffer dog" teams will be expanded; additional investigative
efforts will be concentrated on high-level traffickers.
• Tax enforcement.—Additional resources will be focused upon investigation of high-level drug traffickers who violate Federal
tax laws.
Table N-l. OUTLAYS FOR FEDERAL CRIME REDUCTION BY AGENCY
(In thousands of dollars) 1
Outlays
1976
actual

The Judiciary.____
Department of Agriculture
Department of Commerce
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
General Services Administration
Veterans Administration
Other independent agencies
Total Federal outlays

145,620
10,657
2,896
6,579
215,422
8,192
63, 327
1,960,848
7,000
41,818
67, 692
377, 973
3, 443
131,035
681

1977
estimate

1978
estimate

174,518
191,788
14,055
13.780
4,003
4,003
7,503
8,453
230,029
260,667
3,605
63,432
61,412
2,073,671 2,084,713
5.000
5,000
35,150
35,600
100,167
109,075
413,066
458,727
3,367
2,941
119,172
108,287
75
6
78
9

3,043,183 3,245,483

3,347,264

1
Does not include outlays for the Department of Defense—Military and the U.S. Postal Service
that are included in the 1978 Annexed Budget.

CRIME REDUCTION PROGRAMS BY ACTIVITIES

Budget outlays discussed in this special analysis pertain to all
Federal programs directly related to crime reduction except those of

255

SPECIAL ANALYSIS N

the Department of Defense.1 The analysis excludes general social
programs, even though such programs may indirectly reduce the
causes of crime, and does not include resources devoted to background
investigations for employment, administrative inspections, or investigations of a regulatory nature that might result in the application of
criminal sanctions in rare cases. Where activities involve both criminal
and civil proceedings, such as operation of Federal courts, an allocation
of outlays to the crime-related function has been estimated. The discussion is not intended to be exhaustive but rather to highlight the
wide range of activities and agencies involved in Federal crime
reduction programs.

Growth in Outlays for Federal Crime Reduction Activities

Millions

3500

3000-

3000

tsoo

— 2500

2000

-2000

1500

-1500

10Q0

1000

500 —

1970

1971

1972

1973

1974

1975

1976

Fiscal Years

1977

1978

Estimate

Crime prevention.—Crime prevention programs include efforts to
reduce crime through means other than direct enforcement or general
criminal justice activities; that is, actions taken before the fact. The
category includes public education, drug treatment, juvenile delinquency prevention, and community crime prevention projects.
1

Defense D e p a r t m e n t o u t l a y s for law e n f o r c e m e n t are e s t i m a t e d as (in t h o u s a n d s of dollars):
1976 act.
TQ act.
1977 est.
1978 est.

Department of the Army
Department of the Navy
Department of the Air Force
Total, Department of Defense

360,647
10,695
201,863

90,542
2,732
46,550

408,075
16,910
184,410

418,502
17,529
188,789

573,205

139,824

609,395

624,820

256

THE BUDGET FOR FISCAL YEAR 1978

Table N-2. OUTLAYS FOR FEDERAL CRIME REDUCTION BY PROGRAM
AND ACTIVITY (in thousands of dollars) 1
Major program and activity

Outlays
1976
actual

1977
estimate

1978
estimate

Crime prevention:

Public education on law observance, enforcement, and crime
prevention
.
Special programs for the treatment of narcotic addicts
Juvenile delinquency prevention
Development of community crime prevention services
Program total

24,343
173,877
81,866
22,789

28,372
172,727
93,781
12,583

46,427
195,595
96,213
24,952

302,875

307,463

363,187

Law enforcement:

Enforcement of Federal criminal law
Protection of facilities and individuals
General law enforcement support
Research and development
Program total

939,178 1, 038, 778 1,110,882
76,314
75,092
77,506
538,992
517,965
502,236
27,071
31,539
26,618
1,581,555 1,663,374 1,717,242

Adjudication:

Preparation of Federal criminal cases
Operation of the Federal court system
Assistance to States and localities
Research and development
Program total

98,860
100,687
163,126
16,811

114,436
115,886
174,786
17,117

121,429
123,092
145,911
13,853

379,484

422,225

404,285

192,901

226,542

261,452

63,843
11,553
24,596
287,921
12,010
2,872

78,611
14,392
30,731
301,553
11,628
3,287

84,950
15,607
33,786
273,129
10,041
3,450

595,696

666,744

682,415

42,011
12,775
1,536
127,251

34,539
13,165
1,660
136,312

34,228
10,153
1,650
134,104

183,573

185,676

180,135

3,043,183 3,245,483

3,347,264

Corrections:

Operation of Federal correctional institutions
Federal probation, parole, and community treatment
activities
.
...
Federal inmate education and training
Federal inmate medical treatment
Assistance to States and localities
Research and development
Other Federal correctional activities
Program total
Criminal justice systems support:

Statistics on crime and criminal justice systems
Research on behavior and the causes of crime
Reform of criminal laws
Planning and coordination of crime reduction programs
Program total
Total Federal outlays
1

Does not include Department of Defense—Military and U.S. Postal Service.

An estimated $363 million will be spent on crime prevention activities
in 1978. Specific program emphases are:
• Community crime prevention.—The Law Enforcement Assistance
Administration will implement a new community anti-crime
program to encourage citizen groups to participate in crime
prevention programs, and will continue research to determine
how physical and urban design variables affect criminal behavior

SPECIAL ANALYSIS N

257

and influence community response to crime. The FBI will assist
residents in safeguarding their homes and propert}^ through
the crime resistance program.
• Juvenile delinquency prevention.—LEAA's Office of Juvenile Jus-

tice and Delinquency Prevention will support several programs
started in 1976 and 1977, including removal and diversion of
status and other juvenile offenders from the traditional juvenile
justice system, restitution, community restoration, and special
studies on youth groups, the violent youth offender, and school
violence. In 1978 youth advocacy, alternative education programs,
and studies of youth probation and alternatives to incarceration
will be initiated. LEA A will also continue support for runaway
youth programs in coordination with title 20 funds of the Social
Security Act.
• Drug treatment.—The National Institute on Drug Abuse (NIDA)
in the Department of Health, Education, and Welfare will
continue to assist States and localities in developing statewide
community-based drug abuse treatment programs. LEAA will
extend the treatment alternatives to street crime program, which
refers drug addicts to appropriate institutional or community
services. Community treatment for drug dependent Federal
offenders will be expanded by the Bureau of Prisons. In addition,
the Veterans Administration will provide assistance to eligible
veterans through its drug dependence treatment program, which
combines medical, social, psychiatric, and vocational treatment
to reduce dependence on opiates and other drugs.
Law enforcement.—Law enforcement consists of detection, identification, and apprehension of violators of Federal criminal law; protection of Federal facilities and individuals; and law enforcement
research and development. Other general support is also included,
such as the operation of criminal intelligence systems and forensic
laboratories, education and training of enforcement officers, and
international programs supporting domestic enforcement efforts. Outlays of $1.7 billion are projected for law enforcement in 1978—the
single largest category of all Federal crime reduction programs. Of
this amount, $246 million will constitute assistance to State and
local law enforcement agencies. Specific initiatives in 1978 include:
• Federal law enforcement.—In addition to the enforcement activities
mentioned above, the Immigration and Naturalization Service
will strengthen the border patrol and increase the number of
inspectors at new and expanded ports of entry. The Justice
Department's Criminal Division will refocus its strike forces
and concentrate on top organized crime figures, who are usually
insulated from prosecution for their serious crimes. The Internal
Revenue Service will strengthen the tax fraud investigation
program; a task force is currently studying tax fraud to determine how this can best be done. The State Department will
continue to assist foreign governments and international organizations in their efforts to disrupt the flow of illicit narcotics,
primarily through training in drug enforcement and intelligence,
equipment procurement, advisory assistance, and crop substitution projects.

http://fraser.stlouisfed.org/
240-700 O - of 17
Federal Reserve Bank 77 -St. Louis

258

THE BUDGET FOR FISCAL YEAR 1978

• Protection of facilities and individuals.—The Secret Service will
continue to provide security for foreign diplomatic missions in
Washington, D.C. The Bureau of Indian Affairs will provide law
enforcement services for approximately 380,000 persons on 100
reservations. The National Park Service in the Department of
the Interior will expand visitor protection in selected areas.
• Law enforcement research and development.—Most Federal law
enforcement agencies support modest research and development
programs to identify better methods of carrying out their responsibilities. The Federal Government's primary law enforcement research effort is LEAA's National Institute of Law Enforcement
and Criminal Justice. In 1978 the Institute will extend projects
focusing on police management and police patrol strategies.
• Other general support.—The FBI will assist States and localities
through fingerprint and laboratory analysis and police training
programs. Other Federal law enforcement agencies will continue
training State and local law enforcement officers in specific program areas. Several projects to improve police operations will be
funded by LEAA. The Federal Law Enforcement Training Center
will complete renovation of its facilities in Georgia.
Adjudication.—Adjudication includes the preparation and prosecution of criminal cases, operation of court systems, trial of cases, provision of legal defense, and related activities. Adjudication research
and development and State and local assistance is also included.
More than $404 million will be devoted to these programs in 1978,
including $146 million in assistance to States and localities. Specific
program emphases are:
• Prosecution of Federal cases.—The Justice Department's legal
divisions, in concert with the U.S. attorneys, are responsible for
prosecution of crimes against the United States. In 1978, the
Department will emphasize its prosecution of white-collar crime,
public corruption, organized crime, and large scale narcotics
trafficking.
• Operation of courts.—The Federal judiciary will expend $180
million in 1978 to operate criminal courts. Additional Federal
judgeships, which are expected to be considered by Congress,
would improve administration of the judiciary's responsibilities.
• State and local assistance.—LEAA provides assistance to State
and local judicial systems to improve administration and reduce
court delays. In 1978, emphasis will be placed on the creation
and augmentation of State court planning capabilities, the
delivery of technical assistance, and the support of fundamental
improvements, such as the reorganization of court systems and
the restriction of delay practices.
• Research and development.—LEAA's National Institute supports
various research projects to determine improved methods of
court operation. Specific projects planned in 1978 include studies
of alternatives to traditional court processing, consistency in
prosecution practices, performance measures for courts, and
sentencing guidelines.

SPECIAL ANALYSIS N

259

Corrections.—These programs encompass custody and treatment
of criminal offenders, including supervision and operation of correctional institutions, inmate and offender treatment and training
programs, probation and parole services, and other supportive
services. Corrections research and development, and State and local
assistance are also included. Expenditure of $682 million will support
correctional activities in 1978, of which $273 million will be allocated
to State and local correctional activities. Areas of focus are:
• Care and custody of Federal offenders.—The Bureau of Prisons in
the Department of Justice is responsible for the care and custody
of Federal offenders. In 1978, the Bureau will strengthen security
and implement unit management at selected institutions. One
new institution will be activated and two more will be expanded.
• Construction of new facilities.—In 1978, new construction will be
accelerated to provide additional prison and detention space.
Work will continue on youth facilities in Alabama, California,
New York, and the New Jersey-Philadelphia area, an adult
institution in New York, and a metropolitan correctional center
in Detroit. New construction will begin on adult institutions in
the south central and west coast regions.
• State and local assistance and correctional research and development.—Eesponsibility for this program is shared by LEAA
and the National Institute of Corrections (NIC) in the Bureau
of Prisons. In 1978, NIC will support projects to upgrade alternatives to incarceration, improve management and operation of
correctional systems, and study rehabilitation and deterrence.
LEAA will survey the needs of State and local correctional
systems and support studies in adult probation and the reorganization and reorientation of field services.
• Parole activities.—The U.S. Parole Commission will continue
efforts to implement the Parole Commission and Reorganization
Act. Additional resources will be provided to improve the parole
process.
Criminal justice system support.—This category includes activities
that affect more than one component of the criminal justice system
and consists of information systems and training, law and policy
formulation, general research and development, and overall planning
and coordination activities. In 1978, $180 million will be expended
for these activities. Specific components include:
• Statistics.—LEAA's National Criminal Justice Information and
Statistics Service compiles information and statistics on crime
and criminal justice, and provides assistance for State and
local information systems. In 1978, special projects will include
continuation of both the National Crime Panel victimization
project and the comprehensive data systems program, which
supports the development of uniform State criminal justice
information systems. The FBI will continue to compile statistics
on crime and related matters.

260

THE BUDGET FOR FISCAL YEAR 1978

• Research.—The National Institute of Law Enforcement and
Criminal Justice in LEAA will support several general crime and
criminal justice research projects. The National Institute on
Mental Health in the Department of Health, Education, and
Welfare will continue research in biomedical and behavioral
sciences to acquire knowledge of criminal and delinquent behavior.
• Reform of law.—The Justice Department will continue study
of the Federal criminal code to develop more effective criminal
justice procedures. LEAA will assist States and localities in
efforts to revise existing laws.
• Planning and coordination.—LEAA supports activities to improve
planning and coordination of criminal justice systems. Fifty-five
State and territorial planning agencies and several local planning
units will be funded in 1978. Emphasis will be placed on developing capabilities in planning, evaluation, monitoring, auditing, and overall management.

SPECIAL ANALYSIS N

261

Table N-3. OUTLAYS FOR FEDERAL CRIME REDUCTION BY PROGRAM
AND AGENCY (in thousands of dollars) *
Outlays
Program and agency

Crime prevention:
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Transportation
Veterans Administration
General Services Administration
Program total
Law enforcement:
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of the Interior
Department of Justice
Department of State
Department of Transportation
Department of the Treasury
General Services Administration
Department of Commerce
Department of Housing and Urban Development
Department of Agriculture
Securities and Exchange Commission
Veterans Administration
Other agencies
Program total
Adjudication:
The Judiciary
Department of the Interior
Department of Justice
Department of Transportation. __•
General Services Administration
Program total
Corrections:
The Judiciary
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Program total
Criminal justice systems support:
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Justice
Department of Transportation
General Services Administration
Department of Housing and Urban Development
Program total

1976
actual

1977
estimate

178
166,613
6, 721
2,016
90,250
350
36,738
9

189
171,393
3, 000
1,995
91,102
800
38,96^
17

204
201,293

302,875

307,464

363,187

5,255
4,982
58,233
906,948
41,818
67,276
377,973
3,264
6,813
40
6,740
681
94,297
7,235

5,962
5,894
53,605
938,010
35,150
99,298
413,066
2,535
10,238
1
7,820
765
80,204
10,826

6,739
6,206
54,550
946,069
35,600
107,999
458,727
2,740
9,878

1,581,555

1,663,374

1,717,242

2,010
118,893
1,000
39,767
20

7,905
798
68,520
11,511

83,833
1,132
294,513
2
4

99,297
3,844
319,081
2
1

109,447
3,680
291,155
2
1

379,484

422,225

404,285

51,624
1,160
41,734
1,427
1,946
490,805
7,000

64,355
1,290
48,787
603
1,968
544,741
5,000

70,830
1,445
50,097
3,192
551,851
5,000

595,696

666,744

682,415

50
2,029
181,260
64
166
4

62
3,995
180,737
67
815

65
3,071
176,745
74
180

183,573

185,676

180,135

Does
not include Department of Defense—Military and U.S. Postal Service.

1978
estimate

262

THE BUDGET FOR FISCAL YEAR

1978

Table N-4. SELECTED CRIME REDUCTION AND
CRIMINAL JUSTICE DATA (dollars in thousands)
Program and agency

Federal crime reduction outlays:
Federal programs
Assistance to States and localities

1974
actual

1975
actual

1976
actual

$1,407,227 $1,679,103 $1,877,763
$1,023,906 $1,142,297 $1,158,249

Total crime reduction outlays
$2,431,133 $2,821,400 $3,036,012
Criminal justice personnel: *
2
Total Federal criminal justice personnel
93,234
95,465
101,190
Law enforcement personnel
68,257
68,924
72,577
Adjudicative personnel
13,603
14,415
15,352
Corrections personnel
9,893
10,647
11,781
Other personnel
1,481
1,479
1,480
Total State and local criminal justice personnel
886,996
929,040
973,252
Law enforcement personnel
525,952
543,397
561,329
Adjudicative personnel
156,023
169,869
184,987
Corrections personnel
200,013
210,305
221,030
Other personnel
5,008
5,469
5,906
Federal investigations:
FBI, investigative matters received
745,840
673,957
538,182
Immigration and Naturalization Service, investigations
completed
32,101
38,067
43,170
Internal Revenue Service, cases closed
7,215
8,000
8,130
Customs Service, cases closed
21,981
24,508
27,145
Secret Service, cases closed
113,544
127,891
125,852
Bureau of Alcohol, Tobacco and Firearms, cases closed._
5,455
5,203
4, 385
Postal Service, criminal caseload
319,293
307,509
301,734
Disposition of Federal criminal cases:
Investigative cases presented for decision—prosecution
declined
102,535
105,737
108,667
Federal criminal cases commenced
47,050
46,951
44, 172
Federal criminal cases terminated
48,200
46,467
45,668
Federal criminal cases pending
27,202
27,898
26, 354
Federal criminal defendants convicted
34,699
38, 766
39,988
High echelon organized crime figures convicted
69
54
54
Federal corrections:
Average Federal inmate population
23,332
23,034
24,967
Average number of Federal offenders in non-Federal in5 877
5 738
5 574
stitutions
-.—.— r
'
'
'
Court commitments to Federal institutions
16,144
17,718
20,296
Releases
. . .
_ .. _
14,630
17,442
16,262
Federal paroles granted..
...
5,540
8,886
7,753
Persons under supervision of the Federal probation
system
59,615
64,261
64,246
State and local crime: 3
Total number of crimes reported
10,192,034 11,256,566
(4)
Violent crimes
969,823 1,026,284
(*)
Property crimes
9,222,211 10,230,282
(«)
Crime rate (per 100,000 inhabitants)
4,821
5,282
(4)
Standard metropolitan statistical areas
5, 622
6,111
(4)
Other cities
4,027
4,437
(«)
Rural areas
1,747
1,997
(*)
Index offenses cleared by arrest (percent)
21.3
21.0
(4)
Disposition of persons charged by police (percent):
Convicted.......
__
_
63.3
64.5
(•)
Acquitted or dismissed
18.4
16.5
(4)
Referred to juvenile court
18.3
19.0
(4)
1
2
3
4

Full-time only, from "Expenditure and Employment Data for the Criminal Justice System".
1976 numbers are estimates. Actual amounts are not available.
From FBI Uniform Crime Reports.
Not available.

PART 3

SPECIALIZED ASPECTS AND
VIEWS OF FEDERAL PROGRAMS

263

INTRODUCTION
Part 8 discusses trends and developments in selected areas of
Government activity—aid to State and local governments, research
and development, and environmental quality. It covers three special
analyses, those designated O through Q.
Special Analysis 0 summarizes Federal grants to State and local
governments as well as assistance provided through loans, tax expenditures, and indirect aid. It traces the development of Federal aid
over time and relates them to the finances of both the Federal Government and State and local governments. This analysis also provides a
profile of Federal grants tty region, and a description of the State and
local government sector of the national income accounts.
Special Analysis P identifies Federal programs for the conduct of
research and development, and for facilities related to such activities.
Special Analysis Q identifies Federal funding for selected environmental activities, including pollution control and abatement, environmental protection and enhancement, and understanding, describing,
and predicting the environment.
264

SPECIAL ANALYSIS O
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS1
Proposed Federal grant-in-aid outlays to State and local governments are estimated to be $71.6 billion in 1978, a 2% increase over the
estimated 1977 total of $70.4 billion, and a 21% increase over the 1976
total of $59.0 billion. From 1966 to 1976, the average annual increase
has been 16%, while total Federal outlays have grown 11% per year,
and gross national product 8% per year. The relatively small growth
from 1977 to 1978 is related primarily to declines in anti-recession
grants as economic conditions improve.
Another form of Federal aid to State and local governments is
lending. In 1978, the Federal Government is expected to disburse
$2.2 billion of new loans to State and local governments. Loan outlays
net of repa3^ments are expected to be $145 million in 1978.
The chart shows trends over the past 10 years of major grant
categories. Grants for highways remained fairly level through 1975, but
increased approximately 50% from 1975-78. Grants for human resources which include the education, training, employment, and social
Federal Grants to State and Local Governments
$ Billions

-25

k!>;i;::; f X:-:iwt&-&*E£•

1968

1969

1970

Fiscal Years

1971

1972

%£• ^-' i&!•::• -UHl9hvraysX:.k #• • • i 0
1973

1974

1975

(976

1977

1978

Estimate

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

265

266

THE BUDGET FOR FISCAL YEAR 19 78

services; health; income security; and veterans functions, account for
more than half of the increase since 1968. Of these, employment and
training grants grew during the recession in the mid-1970's, but are
expected to decline in 1978 with economic recovery. The total of other
grants is expected to level off in 1977 and 1978. The addition of general
revenue sharing in 1973 increased the level of grants by approximately
$6 billion per year.
HIGHLIGHTS OF THE FEDERAL AID PROGRAM

Major grant consolidations.—The 1978 budget proposes the
consolidation of 58 categorical programs into three major block
grants, which would be phased in over several years. All matching
requirements for these programs would be eliminated by these reforms.
More thorough discussion of these proposals is provided in the functional sections in Part 5 of the Budget. The proposals are the following:
—The Financial Assistance for Health Care Act—the largest of the
Federal grant-in-aid programs proposed—would consolidate
medicaid and 19 other health programs. The primary purpose of
this consolidation is to assist States in providing health care
for their low-income population. Proposed 1978 budget authority
of $13.2 billion would be distributed according to a formula based
on State low-income population, per capita income, and tax
effort.
—The Financial Assistance for Elementary and Secondary Education Act would consolidate 23 separate grants into one program.
Like some other education programs, the proposal provides for
funds to be appropriated before the beginning of the school year
so that school districts can include the grants in their budget
formulation. The 1978 budget authority of $3.8 billion is the same
level of support as the estimated level for the separate grant
programs in 1977.
—Under the proposed Child Nutrition Reform Act, 15 complex and
overlapping child nutrition programs would be consolidated into
one child nutrition block grant. This program would provide
benefits to the 700,000 needy children who are not receiving
assistance, while permitting savings of more than $1 billion in
1978 by eliminating subsidies for the nonpoor. Budget authority
of $1.9 billion is proposed in 1978 for this program.
Other major grant changes.—The Congress, with strong Presidential support, reauthorized general revenue sharing in 1976 for the
next 3% years, through 1980, providing $25.6 billion during this
period. The new legislation continues the program with outlays
estimated at $6.8 billion in 1978. The legislation places increased
emphasis on eliminating discrimination on the bases of age, race, sex,
and other criteria, and grantees are required to have public hearings
on the use of the funds. Units of government that receive $25,000
or more in a period must have an independent audit 'of all their
budget transactions at least every 3 years. Grantees are no longer
limited to spending the funds for specific activities formerly identified
by the act, and funds may now be used as the non-Federal matching
share for other Federal grants.

SPECIAL ANALYSIS 0

267

The community development block grant program continues to
provide assistance to State and local governments. Recipients have
considerable freedom in selecting projects for this program, so long as
they are within the general guidelines of community development.
This program will expire in 1978 unless reauthorized. Its reauthorization is strongly supported with proposed budget authority of $3.5
billion for 1978. The budget proposes a change in the way funds are
allocated under this program. Entitlements would be calculated under
both the current formula (population, poverty, and housing overcrowding), and an alternative formula (poverty, loss of population,
age of housing), with each community receiving the higher of the
two amounts. Outlays for the program for 1978 are expected to be
$3.1 billion, an increase of $850 million over the 1977 estimate.
Outlays for Federal aid for highways from the highway trust fund
for 1976 were $6.1 billion, substantially higher than in 1975, because
various restrictions were removed from the obligation of 1975 funds,
and because States had many projects planned and ready to cany
out. This led to fewer projects ready for construction in 1976, resulting
in relatively lower estimated outlays of $5.6 billion for 1977. Estimated
outlays for 1978 are $6.7 billion,^ 20% higher than 1977 because of
proposed increases in obligations for 1977 and 1978.
The public assistance aid to families with dependent children program
is expected to have outlays of $6.5 billion in 1978, an increase of
$237 million over 1977. This increase results from increases in the
number of recipients and increases in State and local payment
schedules.
Outlays for construction of sewage treatment plants are expected
to increase from an estimated $4.4 billion in 1977 to $5.2 billion in
1978. Proposed budget authority for 1978 is $4.5 billion, contingent
upon enactment of reforms to ensure that only high-priority projects
are undertaken.
The consolidation of pollution control and abatement grants is
planned, giving States more flexibility in how their Federal funds are
distributed among air, water quality, water supply, solid waste, and
toxic substance control.
The local public works program provides $2.0 billion in budget
authority in 1977 to assist State and local government construction
projects and help decrease unemployment. Outlays are expected to
be $802 million in 1978. This program provides 100% Federal funding
for almost any type of public construction or renovation project.
Areas with unemployment rates above the national average receive
70% of the funds, while areas at or below the national average receive 30%. The Administration believes that public works construction is an inappropriate means of stimulating increased employment,
that it does not provide significant numbers of permanent lasting
jobs and tends to result in the construction of low priorit}T public
facilities. According^, no additional funding for grants is proposed
for 1978.
Another temporary program designed to assist communities especially troubled by unemployment and to maintain basic services is the

268

THE BUDGET FOR FISCAL YEAR 1978

antirecessionfiscalassistance program. The funds will be allocated for
the period from July 1, 1976, through September 30, 1977. For each
quarter, $125 million is allocated, plus $62.5 million per quarter for
each complete one-half percentage point that the national unemployment rate, lagged 2 quarters, is over 6%. In addition, the unemployment rate must have been over 6% the last month of the quarter ending
2 quarters earlier. For example, for the quarter beginning July 1976,
$312.5 million was allocated because the national unemployment rate
was 7.6% the first quarter of 1976. Allocations for the five-quarter
period cannot exceed $1,250 million. Under current estimates, these
funds will be used by June 30, 1977.
Two-thirds of these grants are reserved for local governments in
areas that had an average unemployment rate of more than 4.5%, two
quarters earlier. In addition, the community must also have had an
unemployment rate of more than 4.5% in the last month of the quarter
ending 3 months before the quarter for which grants are to be made.
The other third of the grants is distributed to States under the same
procedure as described above for local governments. The amount each
State receives is determined by the excess unemployment rate over
4.5% and the size of its general revenue sharing payment. The funds
may be used to match other Federal grants. Approximately 26,000
units of State and local government are expected to receive payments
from this program.
Temporary employment assistance program outlays are estimated to
be $2.4 billion in 1977 to provide an estimated 260,000 jobs. This
program is proposed to be phased out during 1978. Outlays for 1978
are estimated to be $1.0 billion. This phaseout is consistent with
the anticipated improvement in employment, and reflects the fact
that other programs already enacted and funded that provide jobs
and aid to State and local governments—including the local public
works programs—are expected to continue to have significant outlays
in 1978.
The employment and training assistance program continues to
provide assistance to unemployed and disadvantaged individuals.
Outlays for this program are estimated to be $2.8 billion in 1978, $70
million less than in 1977.
Legislation is proposed for the work incentive (WIN) program to
require certain applicants and recipients of aid to families with
dependent children (AFDC) to seek work as a condition of being
eligible for AFDC benefits. WIN-sponsored child care and supportive
services would not be available after the first 30 days of employment,
although individuals registered with WIN would continue to be
eligible for social services provided under title XX of the Social
Security Act.
Reform of the impact aid program is again proposed. Recognizing
that Federal activities provide an economic benefit to host communities, the reform would provide Federal aid primarily to those
school districts where free education is provided for children whose
parents both live and work on Federal property. Since Federal property is exempt from local taxes, these families do not contribute
directly to the cost of education, as other families do, and Federal
contributions are justified. The reform would result in estimated
savings of $317 million in 1978.

SPECIAL ANALYSIS O

269

Outlays for urban mass transportation grants continue to grow, and
are estimated to be $2.1 billion in 1978, a 16% increase over 1977 and a
63% increase over 1976. More than three-fourths of the grants go to
large metropolitan areas that have or are building rapid transit systems. The remainder is primarily for bus systems in smaller communities.
Outlays for criminal justice assistance grants are estimated to
decline 6% from 1977 levels and 15% from 1976 levels, accompanied
by greater emphasis on evaluation and research in order to provide
guidance for making basic decisions regarding the program.
The legal services program, formerly part of the Community
Services Administration, is now operated by the private, nonprofit
Legal Services Corporation and is no longer considered a grant-in-aid.
Nongrant programs and proposals affecting State and local
governments.—Support is continuing for the New York City seasonal
financing fund. Under this program, the Treasury Department is
authorized to lend the city up to $2.3 billion each year through
June 1978. The city is charged an interest rate 1 percentage point
above the Treasury borrowing rates, and must repay all loans before
June 30, the end of its fiscal year. The loans are purchased b}^ the
off-budget Federal Financing Bank, and outlays therefore do not
affect the budget totals.
Legislation has been enacted with administration support that allows
the Federal Government to withhold military pay for State and local
income taxes. The Advisory Commission on Intergovernmental Relations estimates that this will result in increased revenues to the
State and local sector of $94 million on an annual basis.
A major study of the needs and problems of the unemployment insurance system is underway, with results expected by 1979.
The taxable municipal bond option is again proposed in order to
improve the efficiency of the municipal bond market. This will give
State and local governments a 30% subsidy of their interest payments
if they choose to sell bonds in the taxable market. It will not affect
their right to sell bonds in the tax-exempt market. The proposal also
includes a requirement that industrial development bonds be sold
in the taxable market. Those currently eligible for tax exemption
would receive a 20% subsidy of interest costs. Outlays under this
program are considered a grant-in-aid and are estimated to be $44
million in 1978. Most of these outlays are expected to be offset
by increased tax receipts.
Funds are requested for the new coastal energy impact program to
provide loans and loan guarantees for communities that must expand
public facilities or services as a result of coastal energy development
activities, such as Outer Continental Shelf oil development.
Tax expenditures.—Federal aid is also provided through a number of
tax expenditures. (More information on tax expenditures is provided in
Special Analysis F, "Tax Expenditures'7.)
First, the deductibility of most State and local taxes permits taxpayers who itemize their deductions to offset part of these taxes with
a reduced Federal income tax liability. Hence, a State or locality
can raise a dollar of revenue with less than a dollar net cost to its
taxpayers. The receipts forgone by the Federal Government in 1978
are estimated to be $0.9 billion for gasoline taxes, $5.0 billion for

270

THE BUDGET FOR FISCAL YEAR 1978

property taxes on owner-occupied homes, and $7.6 billion for other
nonbusiness State and local taxes.
Second, the exclusion of interest on State and local securities from
Federal taxable income permits these jurisdictions to borrow at reduced interest rates. The tax expenditures for the exclusion of interest
on State and local general purpose debt is estimated to be $5.4
billion in 1978, with a somewhat smaller benefit going to these Governments. Interest on industrial revenue bonds—which are nominally
governmental debt, but are backed only by revenues from private
industry—is also excluded from income. These tax expenditures
are expected to decrease because of the taxable municipal bond
option that would transfer some of these bonds to the taxable market.
Benefits from this tax-exempt borrowing go largely to private companies. The exclusion on the debt to finance pollution control facilities
will reduce Federal receipts an estimated $0.3 billion and the exclusion
on other industrial development borrowing an estimated $0.3 billion.
FEDERAL GRANTS-IN-AID BY FUNCTION, AGENCY, AND REGION

Pursuant to the Congressional Budget Act of 1974, the Congress
reviews the budget and sets targets b}^ function. Consequently, the
functional classification of the budget has become important not
only for analysis, but also as a control mechanism. Part 5 of the
Budget discusses the entire Federal budget by function.
Table 0-1 provides a functional distribution of Federal grant-in-aid
outlays. Major trends in 1978 include increases in natural resources,
environment, and energy, reflecting higher spending for water and
sewer construction; and a decline in training and employment programs, reflecting improved economic conditions and less need for
programs to alleviate the effects of unemployment.
The functional composition of the grant program has changed
significantly over the }^ears, as shown in table 0-2. The most dramatic
growth has occurred in the health function, which has increased from
4% of Federal aid in 1957 to an estimated 19% in 1978. This reTable 0 - 1 . FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
(In millions of dollars)
Function

National defense
Natural resources, environment, and energy
Agriculture
Commerce and transportation
Community and regional development
Education, training, employment, and social services.
Health
Income security
Veterans benefits and services
Law enforcement and justice
General government
Revenue sharing and general purpose fiscal assistance. _
Totaloutlays

1976
actual

TQ
actual

1977
estimate

1978
estimate

3,082

1,090

5,222

6,008

2,011
1,140
3,805
2,721
2,785

349

334

7,991
3,825
13,761
10,914
10,875

425

123

8,362
5,846
15,485
12,402
12,804

9,962
6,058
14,089
13,550
12,541

52
795
127

13
169
35

75
716
167

99
682
144

7,102

2,002

8,938

8,057

59,037

15,909

70,424

71,581

271

SPECIAL ANALYSIS 0

fleets primarily increased spending for medicaid. Other recent changes
are the addition of general revenue sharing, increases in outlays for
environmental protection, and the relative decline in grants for highway and income security programs, the latter being related primarily
to the assumption by the Federal Government of the public assistance
programs benefiting the aged, blind, and disabled.
Table 0-2. PERCENTAGE FUNCTION DISTRIBUTION OF FEDERAL
GRANTS-IN-AID
Actual
1952

Natural resources, environment, and
energy
Agriculture
Commerce and transportation
Community and regional development.
Education, training, employment,
and social services
Health
Income security
Revenue sharing and general purpose
fiscal assistance
Other

1957

1
4
18

1962

9
24

Estimate

1967

1972

1976

1977

1978

2
3
27

2
1
15

5
1
14

7
*
12

8
*
14

6
36

8
4
49

8
5
38

25
10
25

26
17
26

23
18
18

22
1
8
1
8

20
1
9
1
8

2
*

3
1

2
*

1
1

12
3

1
3
2

1
1
2

100

Total

9
8
57

100

100 100

*Less than 0.5%.

Table O-3 shows grant outlays by agency. The Department of
Health, Education, and Welfare will provide an estimated 4 1 % of
total grants-in-aid in 1978.
Table O-3. FEDERAL GRANT-IN-AID OUTLAYS BY AGENCY
(In millions of dollars)
Agency

Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of Transportation
Department of the Treasury
Environmenta 1 Protection Agency
Veterans Administration
Community Services Administration
District of Columbia
Washington Metropolitan Area Transit Authority
Other
Total outlays

1976
actual

TQ
actual

1977
estimate

1978
estimate

3,383
585
89
24,816
4,101
571
789
6, 167
7, 811
6,569
2,563
52
383
226
170
762

860
170
1
5
6,358
1,198
247
18
6
1,866
1,955
1,655
955
1
3
16
1
89
52
11
9

4,403
1,225
59
27,984
5,515
704
710
6,837
8,029
8,346
4,622
75
496
280
315
824

3,475
1,125
56
29,466
6,465
857
672
5,430
9,757
7,183
5,352
99
417
290
19
7
758

59,037

15,909

70,424

71,581

272

THE BUDGET FOR FISCAL YEAR 1978

Distribution of grants by region.—Table 0-4 shows that Federal
aid on a per capita basis varies widely among regions. The thinly
populated Western States traditionally rank high because of highway
construction grants and shared revenues from Federal land holdings.
For example, the Rocky Mountain States have a low regional population density, extensive Federal land holdings and, until recently, the
highest per capita aid.
This effect has diminished in recent years, however, as human resource programs have grown relative to physical resource programs.
Further, the addition of general revenue sharing has tended to equalize per capita figures among the regions. Region VIII, which had per
capita grants 37% above the national average in 1969, was only 14%
over the average in 1975, while region V has risen from 22% below
the average to only 16% below. Regions II and III have experienced
the most rapid growth during the period.
Table 0-4. DISTRIBUTION OF GRANTS BY REGION, SELECTED
FISCAL YEARS

Federal region

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

1975 2
total
grants

$3.0

Per capita
1969

1975

Percent
change.
1969-75

8.0

$102
13
0

$246
21
8

11
4
13
7

6.2

20
6

17
7

7.3

11
0

29
0

17
0

8.8

15
9

13
5

4.7
2.2

HI
88

214
196

93
123

1.6

16
3

26
6

5.9
1.9

116
117

235
267

103
128

49.7

233

135

These are not the same regions as those used for national income account computations.
In billions of dollars.
See "Federal Aid to States," Department of the Treasury, for additional information concerning
State distribution of Federal grants.
2

HISTORICAL PERSPECTIVES

Although grants from the National Government technically predate
the Constitution, they were very small until the end of the 19th
century, and did not become a truly significant factor in government
expenditure until after World War II. In 1950, Federal grants to
State and local governments totaled $2 billion, and by 1965 they had
risen to $11 billion. In 1976, they were $59.0 billion, an average annual
increase of 16% since 1966. This compares to an average annual growth

SPECIAL ANALYSIS 0

273

of 11% for total Federal outlays over the same period. In 1978,
Federal grants are expected to constitute 16.3% of total Federal outlays, and 22.3% of domestic Federal outlays.
Table 0-5 shows the growth in grant outlays since 1950. Apart
from a few one-time factors, such as a $1 billion advance payment of
public assistance funds in 1972 (with a corresponding decrease in
1973), and retroactive payments of general revenue sharing entitlements in 1973, the growth of Federal grant outlays has been relatively
steady.
Table 0 - 5 . HISTORICAL TREND OF FEDERAL GRANT-IN-AID OUTLAYS
(Dollar amounts in millions)
Composition of
Grants-in-Aid
Grants

1950...
1955
1960
1965
1970
1971
1972
1973
1974
1975
1976
TQ
1977 estimate..__
1978estimate.___
1
2

$2,253
3,207
7,020
10,904
24,018
28,109
34,372
41,832
43,308
49,723
59,037
15,909
70,424
71,581

Grants for
payments
to individuals

$1,421
1,770
2,735
3,954
8,867
10,789
13,421
13,104
14,030
16,105
19,511
5,122
23,513
25,459

Other
grants

$832
1,437
4,285
6,950
15,151
17,320
20,951
28,728
29,278
33,618
39,526
10,787
46,911
46,122

Federal Grants as a percent of:
Federal Outlays
Total

Domestic

5.3
4.7
7.6
9.2
12.2
13.3
14.8
17.0
16.1
15.3
16.1
16.8
17.1
16.3

8.8
12.1
15.9
16.6
21.1
21.4
22.8
24.8
23.3
21.3
21.7
22.6
23.1
22.3

State and
local
expenditures 2

10.4
10.1
14.7
15.3
19.4
19.9
22.0
24.3
22.7
23.2
24.7
25.5
26.7
25.0

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

Approximately 35% of estimated 1978 grants are payments to
individuals. These programs include, among the larger ones, medicaid,
public assistance cash payments, housing payments, and nutrition
programs for children and the elderly. The public assistance program
for the blind, disabled, and aged—known as supplemental security
income—became a direct Federal program in January 1974. The
figures for this program are therefore included as grants for payments
to individuals in 1973 but not as grants in 1974.
Table O-5 also shows grants-in-aid as a percent of State and local
expenditures. This percent has increased from 15% in 1965 to 25% in
1976, and is also estimated to be 25% in 1978.
OTHER SOURCES OF FEDERAL AID INFORMATION

The budget grant-in-aid series is designed to provide a comprehensive picture of Federal grants-in-aid, focusing on programs that are
financed but not directly administered by the Federal Government.
The census series (published in Governmental Finances) and the national
income accounts (NIA) series (published in the Survey of Current
Business) are parts of a broader statistical concept encompassing the
entire economy, and as a consequence they define Federal grants-in-aid

240-700 O - 77 - 18

274

THE BUDGET FOR FISCAL YEAR

1978

somewhat differently from the budget series. They both omit the following items that the budget series includes:
—Federal aid to the Governments of Puerto Rico and U.S. territories;
—payments in-kind, primarily commodities purchased by the Department of Agriculture and donated to the school lunch and other
nutrition programs; and
—payments to private, nonprofit entities such as nonprofit hospitals,
that operate under State auspices or within a State plan.
One major group of payments that the budget definition of grants
excludes but census and the NIA series include is payments for research
conducted by public universities. The budget series excludes these
payments because they are considered to be a purchase of services
for the Federal Government rather than aid for State or local programs.
Since both census and the NIA series focus on cash payments to State
and local governments, they count these as grants. One major kind
of outlay included in the budget and census definitions but excluded
from the NIA series is payments for low-rent public housing, which
the NIA count as subsidies by the Federal Government rather
than as grants. Table 0-6 shows other minor differences among the
three series, but the differences are largely offsetting and, thus, these
three series reflect similar patterns.
In addition to these data sources, Federal Aid to States, published
by the Treasury Department, provides a detailed listing of outlays
by State for more than 90 grant programs. The Catalog of Federal
Domestic Assistance, prepared by the Office of Management and
Budget and available from the Government Printing Office, provides
a detailed listing of grant-in-aid and other assistance programs, and
provides information on eligibility criteria, application procedures,
estimated obligations, and other information. This is a primary
reference source for communities wishing to apply for grants-in-aid.
The Federal Register is published daily by the Government Printing
Office and provides current information on agencies that are accepting
proposals for specific programs. This source also provides information
on eligibility criteria and application procedures.
Table 0-6. THREE MEASURES OF FEDERAL GRANTS-IN-AID TO STATE
AND LOCAL GOVERNMENTS, 1972-75 (in billions of dollars)
1972

1973

1974

1975

Budget (Special Analysis 0)
Less principal exclusions:
Agricultural commodities
Geographical exclusions
Plus payments for research
Allother (net)

34.4

41.8

43.3

49.7

-0.6
-0.4
1.1
-0.9

-0.5
-0.6
1.2
-0.2

-0.6
-0.7
1.3
-0.4

-0.5
-0.9
1.5
-0.2

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

33.6
—0.7
-0.3

41.7
—1.0
-0.3

42.9
—1.1
-0.2

49.6
—1.3

32.6

40.4

41.6

48.3

Grants-in-aid (national income accounts)
* Less than $50 million.

SPECIAL ANALYSIS 0

275

Federal Outlays, published by the Community Services Administration, uses various proration techniques and financial concepts,
primarily obligations, to estimate grant payments at the State, county,
and large-city level. Their grant estimates therefore often differ
from those in the budget. These estimates are cross-referenced where
possible with the program identification number in the Catalog oj
Federal Domestic

Assistance.

The Office of Management and Budget has available upon request
a document entitled, "Administrative Policies and Information
Sources Relating to Federal Domestic Assistance Programs." This
guide is a brief overview to these policies and information sources,
with particular emphasis on their interrelationships.
GRANTS ADMINISTRATION

The rapid growth of the grant system in the past 10 years has
caused increasing complexities in its administration. In earlier years,
many grants were designated for specific categories by Federal
legislation or regulation, and came to be known as categorical grants.
They frequently required matching funds from the recipient governments, and gave little discretion in their use to State and local officials.
In the 1960's and early 1970's, these grants expanded and many
persons involved with grants administration at all levels of government looked for better alternatives. As a result, most major new
programs give considerably more discretion to State and local officials.
Table 0-7 shows the increasing role of general-purpose and broadbased aid since 1972. General-purpose aid involves grants with almost
complete discretion for their use at the State and local level; broadbased aid gives State and local governments considerable discretion
within a broadly defined program area, such as employment and training or community development. In 1972 there was virtually no generalpurpose or broad-based aid. Since that time these programs have
grown to be 23. 8% of total grants-in-aid in 1976. The administration
supports this trend by proposing the block grants for health, education, and nutrition; with these proposals, such grants would be
46.0% of total grants in 1978.
Most general-purpose and broad-based grants significantly reduce or
eliminate the requirement that recipients match Federal funds with
their own. Despite the increase in these grants, matching requirements
for all grants have not changed significantly. In 1972, State and local
governments were estimated to provide approximately $1 of matching
funds for $3 of Federal aid, and this ratio is virtually unchanged for
1976. The decrease in matching requirements for general-purpose and
broad-based aid has been offset by the significant growth in programs
such as medicaid, which requires substantial matching aid.
Although the specific-purpose grants constitute a smaller portion of
the total than previously, there continue to be hundreds of grants of
this nature with different matching requirements, application procedures, duplication of programs, and other administrative problems.
The numerous efforts undertaken to correct some of these problems
include:
—Grant consolidations described above.
—Establishment of uniform administrative requirements for grants
to State and local governments, universities, hospitals, and non

276

THE BUDGET FOR FISCAL YEAR 1978
Table 0-7. OUTLAYS FOR GENERAL-PURPOSE, BROAD-BASED,
AND OTHER GRANTS-IN-AID (dollar amounts in millions)
1972

1974

1975

1976

1977

1978

General-purpose aid:

General revenue sharing
...
Other general purpose fiscal assistl
ance and TVA

$6,106 $6,130 $6,243 $1,588 $6,776 $6,814
$516

655

Subtotal, general purpose aid.

516

6,761

281
602

878

807

434

7,008

7,050

2,022

518

38
82
2,340
2,047
577

983
128
2,603
2,251
519

439
18
876
561
137

529

577

558

2,230

1,324

9,006

8,13s

Broad-based aid:

Community development block
grants
Comprehensive health grants
Employment and training 2
Social services (title XX)
Criminal justice assistance
School aid in federally affected
areas
Local public works
Financial assistance for health care
(proposed)
Child nutrition reform (proposed).
Financial assistance for elementary
and
secondary
education
(proposed)
Subtotal, broad based aid__._
Otheraid
Total

2,262 3,112
104
94
2,668 2,598
2,713 2,533
486
522
791
791

433
802
12,302
2,000
336

973 1,136 5,661 7,042
32,883 35,411 37,054 44,945

2,097 9,815 24,732
11,790 51,603 38,711

34,372 43,308 49,723 59,037 15,909 70,424 71,581

Addendum (Percent of total)

General-purpose aid
Broad-based aid
Otheraid

1.5
2.8
95.7

15.6
2.6
81.8

14.1
11.4
74.5

11.9
11.9
76.1

12.7
13.2
74.1

Total

100.0

12.8
13.9
73.3

11.4
34.6
54.1

100.0 100.0

1
For detail, see grants in the revenue sharing and general purpose fiscal assistance function, table 9.
Amounts in table O-7 above include shared revenues from the Tennessee Valley Authority, shown
in 2 the natural resources, environment, and energy function.
Comprehensive Employment and Training Act, titles I and II, and summer employment
program.

profit institutions. These replaced thousands of different and
often conflicting requirements. For example, two one-page
expenditure reports replaced about 250 others, some of which ran
five or six pages each. For applications, 3 standard forms of
approximately 6 pages each replaced more than 200 different
applications that averaged 33 pages each. (Federal Management
Circular 74-7 and OMB Circular A-110.)
—Establishment of uniform cost principles applicable to grants to
State and local governments. This replaced dozens of different
and sometimes conflicting sets of principles established by different agencies. (Federal Management Circular 74-4.)
—Implementation of joint funding legislation allowing State and
local governments to submit only one application for projects
requesting resources from several Federal agencies. Responsibility

SPECIAL ANALYSIS 0

277

for operation of joint funding has been decentralized to the
Federal regional councils. (OMB Circular A-111.)
—Expansion of the system of State and areawide clearinghouses to
review and comment on proposals for Federal and federally
assisted projects. Governors have designated clearinghouses for
every State, and over 545 sub-State clearinghouses cover 95% of
the population in the contiguous United States. More than 200
Federal grant-in-aid programs are now covered, encompassing
developmental, social, and economic activities. (OMB Circular
A-95.)
THE STATE AND LOCAL GOVERNMENT SECTOR OF THE NATIONAL
INCOME ACCOUNTS *

The national income accounts (NIA) provide a comprehensive
statistical description of the U.S. economy that includes State and
local government receipts and expenditures. These State and local
data provide a measure of the relationships between these governments as a sector of the economy and other sectors. The data are
presented here to provide a context in which to compare the grant-inaid data.
There are three major differences between NIA data and the
budgetary accounting for a government's receipts and expenditures.
First, financial transactions and the purchase and sale of land are
excluded from the NIA data but are generally included in a government's data. Second, a large number of transactions in the NIA
accounts are recorded on an accrual basis, while many governments
show transactions on a cash basis. Third, NIA data aggregate total
State and local transactions, whereas many governments separate
general fund data from that of special funds. As a result of these
differences, NIA totals are not the same as an aggregate of these
governments' financial budgets. However, they do provide timely
estimates of total State and local fiscal transactions not otherwise
available and, with care, can be used as financial indicators.
NIA State and local sector.—Table 0-8 provides an historical tabulation of these data with the surplus or deficit broken into two basic
components, social insurance funds and the operating account. 2
As the table shows, the insurance funds have been in surplus since
1950. The funds accumulate assets to pay for their future liabilities.
Because surpluses of these insurance funds are not generally available
to pay for deficits in operating accounts, the operating account is
generally thought to be a better measure of State and local fiscal
condition than the surplus or deficit for the sector as a whole. However, the accrued liability of many of these social insurance funds
exceeds their assets, posing a potential threat to State and local
financial health in future years.
Since the late 1940's the operating account has generally been in
deficit. This is not unusual, since it includes capital expenditures, often
financed through borrowing. Surpluses in 1972 and 1973 resulted from
the first general revenue sharing distributions and new receipts
generated by significant tax increases in 1971 and 1972.
1
2

Special Analysis A of this volume provides general information on the national income accounts.
The operating account is defined here as all activities except those of social insurance funds. This
includes expenditures for capital investment.

278

THE BUDGET FOR FISCAL YEAR 1978

Table 0-8. NATIONAL INCOME ACCOUNTS, STATE AND LOCAL SECTOR
(In billions of dollars)
Surplus or deficit ( —)
Calendar year

1950._
1955
I960...
1965__.
1970__.
1971
1972__.
1973 . _
1974
1975

Receipts

_.__

_-_

21.3
31.7
49.9
75.1
134.9
152.6
177.4
193.5
210.2
234.3

]Expenditures

22.5
32.9
49.8
75.1
132.2
148.9
163.7
180.5
203.0
227.5

Entire
sector

State and
local social

Operating

funds

-1.2
-1.3
0.1
2.8
3.7
13.7
13.0
7.3
6.9

0.7
1.3
2.3
3.4
6.8
7.5
8.1
8.9
10.1
12.0

-1.9
-2.6
-2.2
-3.4
-4.0
-3.8
5.6
4.1
-2.8
-5.1

SEASONALLY ADJUSTED, ANNUAL RATES
1974:
I

Calendar quarter

III
IV
1975:
I _
II

...

IV
1976:
I
II
III

. _
_

201.9
208.0
214.5
216.6

193.2
200.2
206.5
212.0

8.7
7.S
8.0
4.5

9.5
9.8
10.3
10.8

-0.8
-2.0
-2.3
-6.2

222.2
230.4
239.7
245.0

217.5
223.4
231.8
237.2

4.7
6.9
7.9
7.9

11.3
11.9
12.3
12.5

-6.6
-5.0
-4.4
-4.6

251.6
254.3
262.1

239.5
245.0
249.3

12.2
9.2
12.7

12.7
13.0
13.2

-0.6
-3.8
-0.5

*Less than $50 million.

In 1974, the operating account returned to a deficit situation. In
part, this reflected a return to previous patterns, as State and local
expenditure increases absorbed the new, higher income streams. It
also reflected the worsening economic situation, with State and local
governments opting to draw down on balances accumulated during
1972-73 rather than enact new tax increases. The operating account
improved somewhat in the first three quarters of 1976, primarily
because the increase in spending slowed and receipts from own source
receipts increased. Virtually all of the increase in own source receipts
was from improvement in economic conditions, rather than increases
in tax rates.
Another form of Federal aid to State and local governments is
direct and guaranteed loans. Short- and long-term direct loan disbursements (excluding repayments) are expected to be $2.2 billion
in 1978, 29% of which is for long-term debt. Federal disbursements
for long-term loans to State and local governments were approximately
4% of total long-term debt issued by State and local governments for
fiscal year 1975.

SPECIAL ANALYSIS 0

279

DETAILED FEDERAL AID TABLES

The following two tables present detailed Federal aid data for the
3 budget years and the transition quarter. Table 0-9, "Federal
Grants to State and Local Governments—Outlays and Budget
Authority," provides detailed budget authority and outlay data for
grants and shared revenues. Table 0-10, "Federal Direct Loans to
State and Local Governments," provides disbursement and net outlay
data for loan programs. Disbursements do not include repayments,
and net outlays are disbursements minus repayments.

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY
(In millions of dollars)
TQ

1976

1977

1978

Agency and program

OUTLAYS

38
51

39
20

36
20

114
13
49

n
3
3

116
12
47

90
13
28

13
23

5
6

23
22

38
22

1
10
156
73
6

2
43
17
2

*
9
180
85
12

2
10
200
100
7
14
5

134
2.429

36
919

192
4.430

192
5.160

National defense;
Department of Defense—Military:
Civil Preparedness Agency
National Guard centers construction

Functional
code

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY
10

39
20

37
18

301
302
302

106
10
46

17
3
10

69
11
40

71
9
28

302
306

18
24

5
6

35
22

45
22

301
301
303
303
303
303
305

1
9
176
95
11

2
24
1
3

*
9
175
95
10

2
12
352
118

304
304

159

051
051

Total, national defense
Natural resources, environment and energy:
Department of Agriculture:
Watershed planning and flood control
Resource conservation and development
Forest Service
Department of Commerce:
NOAA coastal zone management
NOAA—Operations research and facilities
Department of the Interior:
Bureau of Reclamation
Office of Water Research and Technology
Land and water conservation fund
Fish and Wildlife Service
Preservation of historic properties
Historic preservation fund
Energy Research and Development Administration
Environmental Protection Agency:
Abatement and control
Sewage treatment plant construction

1976
actual

41
28 __

140
1,080

34
5
138
4,500

48
5

5
20

17
68
3

44
81

3 082

1,090

5,222

6,008

101
|8|
143
__*

28
48
47
*

127
199
21
2

135
199
1

425

123

349

334

6
4

2
2

11
7

18
7

5
269
32
6 132
30
78
2
1,262
1
170

1
26
7
1,605
13
21
5
279
1
52

7,991

2,011

315

6
548
38
6,741
170
130
64
2,059
2
179

8,362

9,962

308
42
5,609
124
100
64
1,773
2

See footnotes at end of table.

Federal Energy Administration
Tennessee Valley Authority (shared revenue)
Water Resources Council

305
_ 301
301

Total, natural resources, environment and energy

5 .
_

3 .

401
development
403
Urban transpor404
_
._
_

406
__ 405
.__ 404
404
404
404
404
404
__ 407
404

1,717

5,383

111
191

28
47

124
200

132
201

303

352
352
351
352

Total, agriculture.

Total, commerce and transportation

675

Agriculture:
Cooperative State Research Service
Cooperative Agricultural Extension Work
Commodity Credit corporation—Donations
_
Agricultural Marketing Service—Cooperative Projects in Marketing, _

Commerce and transportation:
Department of Agriculture: FmHA: Housing
Department of Commerce: EDA—Minority business
Department of Housing and Urban Development:
tation
Department of Transportation:
State boating safety assistance __
Airport and airway trust fund
Highway beautification
Federal aid, highways (trust fund)
Other highway aid i
National Highway Traffic Safety Administration
Federal Railroad Administration
Urban Mass Transportation Administration
Materials Transportation
Washington Metropolitan Area Transit Authority

326

16
2

1
6

6
3

1
515

4,829
41
56
40
947
2
100

3,238
56
126
15
27

510
27
3,425
68
15
71
455
2
116

6
550
33
6,654
99
152
71
455
2
37

6,042

3,983

4,719

8,066

2 .

332

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET

AUTHORITY—Continued

(In millions of dollars)
1976
actual

TQ.

1977

1978

Agency and program

Functional
code

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET

AUTHORITY

452
452 __
453

307
_
78

114

292

152

114

451
452
452

250
12
4

38
3
1

200
10
4

452
452
452

205

203
1,990 _

102

451
451
451

600
1,838

3,448

3,500

477

3
365
1

OUTLAYS
Community and regional development:

315

321
1

320

252

237

118

75
7
4

24
3
1

163
11
5

199
11

202

188
791

187
802

983
1,166

439
295

2,262
1,000

3,112
700

271
92
1
2
380
1

33
20
*
*
116
*

201
98
3
2
494
1

53
63
5
3
4\5
1

3,825

1,140

5,846

6,058

Funds appropriated to the President:
Appalachian regional development programs
Public works acceleration
Disaster relief...
Department of Agriculture:
Rural water and waste disposal grants
Rural development grants
-Rural community fire protection grants
__
Department of Commerce:
Economic development assistance
Local public works
__
Regional Action Planning Commissions
Department of Housing and Urban Development:
State housing finance and development
Community development block grants
Urban renewal
Other categorical programs replaced by community development block grants
Comprehensive planning grants
New Communities Administration
Department of the Interior: Bureau of Indian Affairs
Community Services Administration
Joint Federal-State Land Use Planning Commission for Alaska
Total, community and regional development

451
451
451
452
451
452

2
485
3,948

1
122
1

267

6,725

4,492

Education, training, employment, and social services:

269

129

2,159
25
558
21
1
90
748
43
17
3
7
*
299
2,251
2

695
1
3
66
54
1
6
90
8
1
6
_*
7
84
51
6
1

2,218
30
71
9
269
17
9
726
5
1
16
6
3
32
352
2,713
3

62
31
3
2,533
3

486
1,108

16
3
299

498
1,294
5

509
1,312
20

1
2

2,853
1,887

980
519

2,889
2,358

2,819
1,000

12
8
344

99
515

54
616

2
70
1
7

-26
10
7
5
*
26
6

2
13
0
23

2
17
0
30

13,761

3,805

15,485

14,089

See footnotes at end of table.

336
2,428
25
433
21
7
250
744
30
13
5

Department of Commerce: Job opportunities program
Department of Health, Education, and Welfare:
Financial assistance for elementary and secondary education
Elementary and secondary education
Indian education
School assistance in federally affected areas
Emergency school assistance
Education for the handicapped
Occupational, vocational, and adult education
Higher education
Library resources
Educational development
Special projects and training
Work incentives
Social services
American Printing House for the Blind
Assistant Secretary for Human Development:
Child development
Youth, aging, and vocational rehabilitation programs
Allied services
Department of the Interior: Bureau of Indian Affairs, Indian education
programs
Department of Labor:
Employment and training assistance
Temporary employment assistance
Emergency employment assistance
Grants for employment services
Unemployment trust fund: training and employment
Mountain plains education z nd economic development
Community Services Administration
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities
Total, education, training, employment, and social services

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

374

2,393
35
653
270
100
673
1
6
60

2,226

3,776
150
25
327
273
-153

160

2,699
25
734
273
315
1,131
25
214

25
389
2,816
2

75
608
1

69
357
2,713
3

67
331
2,533
3

501
506
506

488
1,169

117
302

509
1,339
20

509
1,281
20

501

504
504
504
504
504
505
501
503
503

2,636
2,825 .

524

2,989
2,384

2,819

81
492
5 .

20
119

89
524

54
616

78
22

18
14

103
23

107
30

15,614

4,670

16,558

12,839

55
3
200
224

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET

AUTHORITY—Continued

(In millions of dollars)
1976
actual

TQ
actual

1977
estimate

1978
estimate

Agency and program

Functional
code

OUTLAYS

3
6

905
67
535
768

142
11
156
168

872
45
478
706

361
19
437
362
12,302

8,568

2,229

10,229

*
8

2
38

10,914

2,721

12,402

13,550

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

277

1976
actual

34
34

Health:
Special Action Office for Drug Prevention
Department of Agriculture: Animal and Plant Health Inspection
Service-Meat and poultry
Department of Health, Education and Welfare:
Health Services Administration
Center for Disease Control
Alcohol, Drug Abuse, and Mental Health Administration
Health Resources Administration
Financial assistance for health care
Medicaid
Department of the Interior: Mining Enforcement and Safety Administration
Department of Labor Occupational Safety and Health Administration.

553
29

553

551
553
551
552
555
551

765
44
512
367

177
6
65
33

841
57
545
311

8,510

2,220

10,229

553
553

2
34

*
9

2
39

10,264

2,519

12,053

13,536

229

162

Total,health
Income security:
Department of Agriculture:
Agricultural Marketing Service—Funds for strengthening markets,
income and supply-donations
604

6
202
86
13,172

>
t"1

27
6
11
4
8

1,878

6
5
30
9
4
1
*

21
5
23
7
26
2
0

3,007

35
0
12
7
47
1
0
28
2,000

5,849
1,588

1,606

88
6

41
1
20
1

10,875

2,785

6,306
1,948

6,543
2,532

938

94
0

12,804

12,541

Food stamps—administration
Child nutrition and special milk programs__
_
Special supplemental food program (WIC)
Food donations
__
Elderly nutrition program
Child nutrition reform
Department of Health, Education, and Welfare: Public assistance—
maintenance
Department of Housing and Urban Development: Housing assistance.
Department of Labor: Unemployment trust fund: administration of
payments

604
604
604
604
604
604

250
2,021

604
604
603

22
*
9
20

6
*
2
5

44
1
8
22

38
1
14
42
4

Veterans benefits and services:
Veterans Administration:
Medical care
Medical administrative expenses
Grants for construction of State nursing homes
Health training
Grants for State cemeteries

7
5

1,576
98

6,306
9,411

6,543
16,526

924

144

888

904

2,602

20,225

26,200

22
*
10
11

6
*
8

44
1
10
34

38
1
15
41
5

Total, veterans benefits and services.

703
703
703
703
705

5,898
13,785

23,372

Total, income security-

9
6
4

275
2,969
247
27
21

100

686
6

144
2

2
583
6

2
553
10

692

145

591

566

28
4
1
7

62
460

30
3
10
30
1,857

Law enforcement and justice:

789
6

168
1

709
6

2
670
10

795

169

716

682

See footnotes at end of table.

National Institute of Corrections
Department of Justice: criminal justice assistance
Equal Employment Opportunity Commission
Total, law enforcement and justice.

754
754
751

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)

1976
actual

TQ
actual

1977
estimate

1978
estimate

OUTLAYS

Agency and program

Functional
code

General government:

1
9
82
1
0
1
5

1
6
2
1
-5
4

43
88
20
1
5

22
89
26
7

127

167

144

11
9
5

239
5

35
6
3

Department of Interior:
Administration of Territories
Trust Territory of the Pacific Islands
General Services Administration
Civil Service Commission (intergovernmental personnel assistance)-.

1976

actual

1977

estimate

actual

1978

estimate

BUDGET AUTHORITY

806
806
804
806

24
15

1
5

127

147

16
1

852
852

89
4

10
1

50
5

191
4

852
852

173
3

139
1

240
3

365
3

Total, general government.

42
90

20
96

27
85

15 _„

Revenue sharing and general purpose fiscal assistance:

89
4
13
7
3

10
1
4 _
.
10
4
*

Department of Agriculture: Forest Service (shared revenue)
Department of Defense: Flood Control Act (shared revenue)
Department of Interior:
Bureau of Land Management
Fish and Wildlife Service

19
44

187
139
6,243

39
29
1,588

226

200
120
6,776
1,250
280

204
122
6,814
290

5
7,102

2,002

8,938

8,057

59,037

15,909

70,424

71,581

Internal revenue collections for the Virgin Islands (shared revenue) _
Department of the Treasury:
Taxable municipal bond option
Customs receipts for Puerto Rico and the Virgin Islands (shared
revenue)
Internal revenue collections for Puerto Rico (shared revenues)
General revenue sharing
Anti-recession financial assistance fund
Federal payment to the District of Columbia (shared revenue)
Federal Energy Administration, payments to Virgin Islands and
PuertoRico
Total, revenue sharing and general purpose fiscal assistance. _
Total, grants and shared revenues

852

___

852
852
851
852
852

187
140
6,355

852

19
990

54
29
1,664
312
66

200
120
6,655
938
280

204
122
6,855

5
7,222

2,380

8,509

9,044

68,387

16,808

71,719

80,730

249

*Less than $500 thousand.
1
A small amount of domestic highway programs is classified in the budget in the international function. For
purposes of this special analysis the budget authority and outlays for these grants are shown in the commerce and
transportation function. The amounts are as follows (in millions):
1976
TQ
1977
1978
Budget authority
0.7
0. I
0.8
1.0
Outlays
.7
.2
1.2
1.0

290

Table O-10. FEDERAL DIRECT LOANS T O STATE A N D LOCAL GOVERNMENTS
(In millions of dollars)
Disbursements

Net outlays

Agency and program by function
1976
actual

TQ
actual

1977
estimate

1978
estimate

1976
actual

TQ
actual

1977
estimate

1978
estimate

Natural resources, environment and energy:

Department of Commerce: Coastal energy impact fund
Department of the Interior: Reclamation loans

67
17

67
13

Total, natural resources, environment, and energy

Department of Transportation:
Federal aid highways (trust fund)
Right-of-way revolving fund
Urban Mass Transportation Administration

90
22
1

36
9

50
46

90
22
1

36
9

41
46
—*

-60
33
—*

Total, commerce and transportation

113

—27

377
5

112
1

200
15

200
Ml

22
—10

21
—3

—25
—*

—50
—1

115

175

104

162

158

Commerce and transportation:

Community and regional development:

Department of Commerce: Economic development assistance
Department of Housing and Urban Development:
Urban renewal fund— loans and planning advances
Revolving fund (liquidating programs)
District of Columbia:
Loans for capital outlay

Advances to stadium sinking fund, armory board

Education, training, employment, and social services:
Department of Health, Education, and Welfare:
Higher education
Higher education facilities
Department of Housing and Urban Development: College housing loans
_

Health:
Department of Health, Education, and Welfare: Medical facilities
Income security:
Department of Housing and Urban Development: Low-rent public housing,_
General government:
Department of the Interior: Administration of Territories.
Revenue sharing and general purpose fiscal assistance:
Department of Treasury: New York City seasonal financing fund
District of Columbia: Repayable advances
_ _ __

402

493

15
2

10
0

16
4

11
1

285
-9
-49

260
-10
19

-10

269

-10

-8

507

Total, community and regional development

Total, education, training, employment, and social services

1
212

286
2
19

65
2
*

260
4
95 _

307

359

111

64
_*
-11
53

£
r

278

600

1,260
40

1,075
15

2,050
40

1,300

1,090

2,090

2,575

1,477

3,617

2,184

4
1

950

Total

-1

950

Total, revenue sharing and general purpose fiscal assistance

1
6

4
1

1
2
*

600

o
20
528

267

552

145

to
OO
CO

SPECIAL ANALYSIS P
FEDERAL RESEARCH AND DEVELOPMENT PROGRAMS

The significant increases for research and development (R. & D.)
programs in the 1978 budget, reflected in this analysis, further demonstrate the administration's belief that science and technology can make
vital contributions to the Nation's future defense, economy, and
human welfare.
This analysis summarizes the funding of R. & D. incorporated in
the budgets of 29 separate departments and agencies. Research and
development is not, however, a separately programed or budgeted
activity of the Federal Government. Its funding must be considered
primarily in light of the potential contributions of science and technology to meeting agency or national goals and not as an end in itself.
The following analysis consists of two parts. The first presents a
summary and highlights of R. & D. programs in the 1978 budget, as
well as long-term trends. The second describes the R. & D. programs
of the 11 agencies whose activities comprise more than 98% of the
total Federal investment in R. & D.
PART I. HIGHLIGHTS AND TRENDS

Proposed Federal obligations for the conduct of research and
development, and for the scientific and engineering facilities related
to such activities, will total $28.0 billion in 1978, an increase of almost
$2 billion, or 8% over 1977, as displayed in table P - l .
Table P - l . TOTAL FEDERAL FUNDING FOR CONDUCT OF R. & D . AND
RELATED ACTIVITIES (in billions of dollars)
Obligations

Ou tlays

1976
actual

Total

1977
estimate

1978
estimate

1976
actual

TQ*
actual

20.7
.8

5.5
.3

24.5
1.5

26.3
1.6

20.2
.8

5.4
.3

22.6
.9

25.3
1.2

21.5

Conduct of R. &D___.
R. & D. facilities

TQ*
actual

5.8

26.0

28.0

21.0

5.7

23.5

26.5

1978
1977
estimate estimate

* Transition quarter, July 1-September 30, 1976.
CONDUCT OF RESEARCH AND DEVELOPMENT

Federal R. & D. programs can be broadly classified in three major
categories—defense, civilian, and space related. Increases in funding
for the conduct of R. & D. under these categories are shown in table
P-2.
290

SPECIAL ANALYSIS P

291

Table P-2. CONDUCT OF R. & D. BY MAJOR PROGRAM CATEGORY
(In billions of dollars)
Obligations
Program category

Conduct of R. & D.:
Defense1
Civilian
Space2

Total

1976
actual

1977
estimate

Outlays
1978
estimate

1976
actual

1977
estimate

1978
estimate

10.3
7.5
2.9

II. 9
9. 5
3. 1

13.1
10.0
3.2

10.0
7.3
2.9

11. 2
8. 5
2. 9

12.7
9.4
3.1

20.7

24.5

26.3

20.2

22.6

25.3

1
Includes military-related programs of the Department of Defense and the Energy Research and
Development Administration.
2
Includes NASA programs in planetary exploration and space shuttle development but excludes
NASA programs in aeronautical research, pollution monitoring, earth resources observations, and
technology utilization, which are categorized as civilian-related R. & D. The space category also
includes an ERDA program in applications of nuclear energy to space technology.

Highlights of each of the major program categories are presented
below.
Defense.—This category includes the military-related R. & D.
programs of the Department of Defense and the Energy Research
and Development Administration. Obligations for conducting defenserelated R. & D. will total $13.1 billion in 1978, an increase of $1.2
billion, or 10% over 1977. The proposed 1978 program continues the
development of major strategic and tactical weapons systems. It
also provides increased funding for research and technology related
to longer range military needs. The 1978 budget reflects a commitment
to the modernization of Defense equipment and an effort to provide
options for more capable weapons systems in the future. Emphasis
will be placed in 1978, for example, on R. & D. to:
• accelerate development of the M-X intercontinental ballistic
missile;
• develop new land warfare equipment, including the XM-1
tank and the Advanced Attack Helicopter;
• work on vertical and short takeoff and landing (VSTOL) aircraft
technology by the Navy.
Civilian.—Energy-related R. & D. is the largest component of the
civilian category, and health R. & D. the second largest. Other
substantial programs in this category include R. & D. relating to
agriculture, environment, transportation, and education. Civilian
applications of space technology are also included. Obligations for the
conduct of civilian-related R. & D. will total about $10.0 billion in
1978, an increase of $551 million or 6% over 1977. More specifically,
the 1978 budget includes funds to:
• provide for further growth in the overall level of basic research
supported by the Federal Government, chiefly through increasing
the basic research programs of the National Science Foundation,
the EnergAr Research and Development Administration, the
Department of Agriculture, and the National Institutes of
Health;

292

THE BUDGET FOR FISCAL YEAR 1978

• begin, in the Department of Agriculture, a new 5-year program
of competitive grants for fundamental research in agriculture to
lay the groundwork for increasing crop productivity in the 1990's
and beyond;
• more than double the level of funding for earthquake research,
a,s part of a coordinated interagency program that includes
work on earthquake monitoring and prediction by the Geological
Survey and research in earthquake engineering and on the social,
legal, and economic aspects of earthquake prediction sponsored
by the National Science Foundation;
• increase funding for competitive research in health sciences supported by the National Institutes of Health while continuing, at
the high levels of recent years, research on human biological
processes and on the causes, prevention, and treatment of disease;
• initiate an effort to assess further the value of remote sensing
techniques for use in crop forecasting and other applications by
developing a fourth experimental earth resources satellite for
launch by the National Aeronautics and Space Administration
in 1981;
• substantially increase research supported by the Department of
Transportation to upgrade the air traffic control system, including research on the use of satellites to control aircraft over the
North Atlantic;
• accelerate R. & D. in the Energy Research and Development
Administration on technologies to use domestic fossil fuel
resources in an environmentally acceptable manner—and at
reasonable cost—and further increase assistance to industry in
advancing energy conservation and solar and geothermal energy
technologies; and,
• increase R. & D. efforts on nuclear safety and safeguards at the
Nuclear Regulatory Commission and the Energy Research and
Development Administration, and continue development of
fusion technology and demonstration of the breeder reactor.
The largest increase for civilian R. & D. programs in 1978 will be
for energy-related R. & D. The agencies involved in developing
new energy technologies (chiefly ERDA) will increase in budget
authority for direct energy R. & D. (including facilities) from $2.9
billion in 1977 to $3.9 billion in 1978. Indirect or supporting energy
research will also increase, including research on the environmental,
health, and safety aspects of energy systems. More detailed analysis
of the Federal energy R. & D. effort is provided in the annual "National Plan for Energy Research, Development, and Demonstration"
published by ERDA.
These and other increases in the civilian category will be offset
in part by decreases in the R. & D. programs of the Environmental
Protection Agency, the Department of Transportation, the Department of Justice, and other agencies. Such decreases result from a
number of factors including the orderly termination of R. & D.
programs that have met their objectives.
Space.—This category includes those NASA programs oriented
primarily toward space exploration and shuttle development, and
excludes applications of space technology programs ^ such as the
remote sensing from space of Earth resources (categorized above as

SPECIAL ANALYSIS P

293

civilian R. & D.). Obligations for conducting space research and
development will total $3.2 billion in 1978, an increase of $68 million
or 2% over 1977. In 1978, NASA will:
• continue development and testing of two prototype space shuttle
orbiter vehicles and initiate procurement of three others to
establish a fleet of five shuttles that is expected to begin operations
from the Kennedy Space Center in Florida in 1980;
• initiate development of an Earth-orbiting space telescope to be
launched by the space shuttle in 1983;
• develop an orbiter and probe to conduct a comprehensive study
of Jupiter and its 12 satellites;
• continue a cooperative program with the European Space
Agency to build a space laboratory, to be carried into orbit by
the shuttle, for experiments in astronomy, life sciences, and
industrial processing.
CONDUCT OF BASIC RESEARCH

The Federal Government supports approximately 68% of the
Nation's basic research effort, that is the search for new knowledge
and understanding of basic phenomena and processes rather than
specific application of such knowledge. Research in such fields as
chemistry and physics, astronomy, materials, mathematics, oceanography, biology, and social sciences precedes and underlies advances
in applied science. Universities and colleges, other nonprofit organizations and some industries also support basic research, but from a
national point of view, industry as a whole tends to underinvest in
basic research because results are generally not immediately applicable
to the development of new products.
Obligations for the support of basic research (included in funds
for the conduct of R. & D. cited above) will increase from about
$2.8 billion in 1977 to more than $3.0 billion in 1978, as shown in
table P-3.
Table P-3. CONDUCT OF BASIC RESEARCH (in

billions of dollars)
Outlays

Obligations
1976
actual
Conduct of basic research, total

1977
estimate

1978
estimate

1976
actual

2.5

2.8

3.0

2.5

1978
1977
estimate estimate

2.6

2.9

Overall Federal funding for basic research will increase 9% in
1978, an estimated 3% in constant dollars (that is, adjusted for
inflation). The 1978 budget continues the specific action taken in the
1977 budget to provide for such real growth in Federal support,
following an 8-year period from 1967 to 1975 in which overall support
for basic research declined in constant dollars. The National Science
Foundation, a key agency in fostering basic research in all fields of
science, will support basic research at a level of $688 million, a 12%
increase over its 1977 level. Other major supporters of basic research,
as shown in table P-5, are the National Institutes of Health, the
Energ}^ Research and Development Administration, the National
Aeronautics and Space Administration, and the Departments of
Defense and Agriculture.

294

THE BUDGET FOR FISCAL YEAR 197 8
SUPPORT OF R. & D. AT COLLEGES AND UNIVERSITIES

Within the $26.3 billion proposed for R. & D. in 1978, $3.2 billion
will be obligated by the Federal agencies to support colleges and universities (including medical schools) in the conduct of research and
development, representing approximately two-thirds of the R. & D.
financed in these institutions from all sources.
Colleges and universities have traditionally been the primary
performers of basic research not only for the Federal Government,
but also for the Nation as a whole. Approximately half of the Federal
R. & D. funds that colleges and universities receive goes to conduct
basic research; approximately 40% to conduct applied research
(primarily medical), and the remainder to undertake development
activities. HEW and the National Science Foundation are the major
sponsors of R. & D. conducted at colleges and universities at estimated
levels of $1,600 million and $562 million, respectively, in 1978. DOD,
USDA, ERDA, and NASA will each provide more than $100 million
to colleges and universities in 1978.
LONG-TERM TRENDS IN FEDERAL SUPPORT FOR THE CONDUCT OF R. & D.

Federal funding for the conduct of research and development has
substantially expanded in scope and level since 1953. Chart P-l
indicates trends in Federal R. & D. funding in the defense, civilian,
and space categories for the last 25 years.
Conduct of Research and Development — Obli3ations

1953

1955

Fiscal Years

I960

1965

1970

P-I

1975

1978
Estimate

Note.—See Table P 1 2 at the end of the analysis for the information used in preparing this chart.
—

SPECIAL ANALYSIS P

295

After World War II and until the establishment of NASA in
1958, the bulk of the Federal budget for research and development
went to defense-related activities sponsored by the Department
of Defense and the Atomic Energy Commission. Funding for defenserelated R. & D. has grown almost five times since 1953, although
as a percentage of total Federal R. & D. it has dropped from 90%
in 1953 to 50% in 1978.
Space programs grew rapidly after the launch of the Soviet Sputnik
in 1957, peaking in 1965-67 with the completion of major development efforts for the manned lunar landing of 1969. Since then, Federal
R. & D. funding devoted to space-related activities has declined and
emphasis has shifted to the development of the space shuttle, the
exploration of the solar system and universe, and applications of
space technology.
Federal support of R. & D. for purposes other than defense and
space has increased steadily since the early 1950's, when the major
programs were those in agriculture, medicine, and atomic energy.
In the 1960's, new thrusts in housing, transportation, law enforcement, and other domestic programs contributed to R. & D. funding
increases.
In the 1970's, civilian-oriented R. & D. has increased rapidly as a
result of continuing large increases foi health research, increasing
emphasis on applications of space technology for civilian use, and
particularly the expansion of energy R. & D. that began in 1973.
FACILITIES

Amounts for scientific and engineering facilities are considered
separately from funding for the conduct of research and development.
Obligations for the construction or renovation of facilities or for the
acquisition of major items of equipment used to conduct R. & D. will
increase by $181 million to about $1.6 billion in 1978. A variety
of general and specialized facilities are provided for in agency R. & D.
budgets.
Of particular note is the inclusion of funds in the ERDA and NSF
budgets for synchroton light sources that will employ radiation
to investigate the basic structure of materials and biological systems.
Funds are also provided to continue construction of the large colliding
beam facility at the Stanford Linear Accelerator to develop and
test new theories in high-energy physics concerning the ultimate
nature of matter. Construction of several other major projects will
continue, including a wind tunnel at NASA's Langley Research
Center, an aircraft engine test complex at DOD's Arnold Research
Center, and the unique NSF-funded very large array radiotelescope
at Socorro, N. Mex.

296

THE BUDGET FOR FISCAL YEAR

1978

PART I I : AGENCY R. & D. PROGRAMS

Funding of R. & D. by the 29 agencies reporting expenditures for
this purpose is shown in table P-4.
Table P-5 displays estimates for the conduct of basic research by
major funding agencies.
Table P-6 shows funds for support of R. & D. at colleges and universities by Federal agencies.
Table P-7 separately aggregates obligations and outlays for the
construction and renovation of facilities used in the conduct of R. & D.
and for the acquisition of major items of equipment.
Summaries follow of the R. & D. activities of the 11 agencies that
support more than 98% of federally funded R. & D.
Table P-4. CONDUCT OF RESEARCH AND DEVELOPMENT BY MAJOR
DEPARTMENTS AND AGENCIES (in millions of dollars)
Obligations
Department or agency

Defense-Military functions
Energy Research and Development Administration. . . . .
....
National Aeronautics and Space Administration
Health, Education, and Welfare
National Science Foundation
Agriculture
Interior
Transportation
Environmental Protection Agency
Commerce
Nuclear Regulatory Commission
Veterans Administration
Housing and Urban Development
Agency for International Development..
Justice
Labor
Smithsonian
Tennessee Valley Authority
All other i
Total

1976
actual

9,592

Outlays

1977
estimate

1978
estimate

1976
actual

11,132

12,317

9,329

1977
1978
estimate estimate

10,391

11,919

2,499

3,610

4,064

2,225

3,168

3,735

3,488
2,543
617
467
322
274
221
228
94
103
61
24
44
26
26
19
46

3,800
2,910
693
530
349
367
311
247
122
116
55
27
45
35
31
32
49

3,833
2,976
766
579
355
359
266
250
148
118
60
42
36
36
32
31
54

3,521
2,566
623
460
315
303
251
224
81
97
54
23
48
24
28
19
42

3,557
2,532
650
544
342
337
313
243
114
108
59
24
46
34
31
32
49

3,745
2,799
724
573
351
336
277
258
138
112
60
32
41
35
31
31
54

20,694

24,461

26,322 20,233

22,574

25,251

1
Includes the Departments of State and Treasury, the Corps of Engineers, the General Services
Administration, the Arms Control and Disarmament Agency, the Consumer Products Safety Commission, the Civil Service Commission, the Federal Communications Commission, the Federal Trade
Commission, the Library of Congress, and the Advisory Commission on Intergovernmental Relations.

SPECIAL ANALYSIS P

297

Table P-5. CONDUCT OF BASIC RESEARCH BY MAJOR DEPARTMENTS
AND AGENCIES (in millions of dollars)1
Obligations
Department or agency

Health. Education, and Welfare
(National Institutes of Health)
National Science Foundation
Energy Research and Development
Administration..
...
National Aeronautics and Space Administration
Defense—Military functions
Agriculture
Interior
Smithsonian
Commerce
Environmental Protection Agency
Allother2
Total

1976
actual

Outlays

1977
1978
estimate estimate

1976
actual

1977
1978
estimate estimate

660
(590)
541

744
(659)
612

796
(710)
688

694
(627)
534

644
(568)
574

745
(662)
650

346

389

427

330

370

413

298
248
171
\2\
26
22
14
16

352
274
193
\27
31
25
21
17

365
314
215
143
32
24
18
19

297
225
168
125
28
21
13
16

321
279
200
125
31
24
21
15

360
314
210
137
31
25
14
20

3,041

2,451

2,604

2,463

2,785

2,919

1
Amounts reported in this table are included in totals for conduct of R. & D.
2
Includes the Departments of Justice, Labor, Transportation, and State; the Veterans Administration, the Civil Service Commission, the Consumer Product Safety Commission, the Corps of
Engineers, and the Library of Congress.

Table P-6. RESEARCH AND DEVELOPMENT SUPPORT TO COLLEGES
AND UNIVERSITIES (in millions of dollars)1
Obligations

Department or agency
1976
actual

Health, Education, and Welfare
(National Institutes of Health)
National Science Foundation
Defense—Military functi ons
Energy Research and Development
Administration
Agriculture
National Aeronautics and Space Administration
Environmental Protection Agency
Interior
Commerce
Agency for International Development __
Transportation
All other 2
Total

1, 423
(1,215)
445
291

Outlays

1977
1978
estimate estimate

1976
actual

1977
1978
estimate estimate

1,287 1,415
1,577
1,600 1,459
(1.341) (1,373) (1.266) (1,056) (U95)
43
6
51
2
47
9
52
6
46
4
22
8
32
1
33
5
32
1
39
3

144
125

10
7
11
4

23
2
19
6

19
2
15
1

12
5
15
4

200
16
5

119
33
31
31
13
15
20

17
1
42
3
2
3
3

10
2
3
8
34
3
0
2
9

16
1
3
3
3
1
2
9

19
1
3
1
34
28

1
5

2
3
22

24
24

11
1
22
3
1
27
1
3
20
20

20
1
8

2
3
23

2,690

2,980

3,192

2,675

2,621

2,927

1
4

298

THE BUDGET FOR FISCAL YEAR 1978

Table P-7. RESEARCH AND DEVELOPMENT FACILITIES BY MAJOR
DEPARTMENTS A N D AGENCIES (in millions of dollars)
Obligations
Department or agency

1976
actual

Energy Research and Development
Administration
Defense-Military functions
National
Aeronautics
and
Space
Administration
_
National Science Foundation
Transportation
Agriculture
Health, Education and Welfare
Commerce
_
Veterans Administration
Environmental Protection Agency
Tennessee Valley Authority
_..
All other 1
Total

Outlays

1977
1978
estimate estimate

1976
actual

1977
1978
estimate estimate

412
141

61
8
48
6

1.014
37
4

30
7
11
4

43
7
16
6

60
7
31
1

94
52
14
16
28
7
12
6
10
9

16
4
3
9
2
5
2
3
2
5
7
9
7
1
3
1
2

11
6
47
22
1
5
1
5
7
4
2
1
1

10
2
5
0
1
2
9
4
5
8
3
7
1
6
3

15
2
3
7
2
0
3
5
3
1
6
1
0
5
1
3
1
3

13
3
4
5
1
9
2
3
2
1
5
9
5
1
6

784

934

801

1,455

1,636

1,248

1 Includes the Departments of Justice and Interior, the Nuclear Regulatory Commission, and the
Smithsonian Institution.

DEPARTMENT OF DEFENSE

The research and development budget of DOD is larger than that of
any other Federal agency, and comprises about 47% of the total of
R. & D. funding in the 1978 budget. The primary purpose of DOD
R. & D. is to develop new weapons systems to improve the Nation's
defense. The 1978 budget continues the development of major strategic
and tactical programs. Research and technology in areas related to
DOD missions will be increased. Obligations for the conduct of R. & D.
in 1978 will total $12,317 million, an increase of $1,185 million over
1977, while obligations for R. & D. facilities will decrease from $468
million in 1977 to $347 million in 1978, reflecting completion of major
portions of an aircraft-engine test complex at the Arnold Engineering
Development Center in Tennessee.
In strategic weapons programs, development of the M-X intercontinental ballistic missile will be accelerated, while work will
continue on improving ballistic missile warheads. Two long-range
cruise missiles—for air and sea launch—will also continue in development. Efforts on antiballistic missile technology will be maintained,
as will further development efforts on two systems now in production—
the B-l strategic bomber and the Trident submarine.
Programs to develop weapons for tactical forces reflect increased
emphasis on the XM-1 tank and the Advanced Attack Helicopter.
Other important weapons systems under development include the
Air Force F-16 aircraft, the Navy F-18 aircraft, and the Patriot
surface-to-air missile. The combat potential of remotely piloted
vehicles and of high-energy lasers will continue to be studied and
tested. Efforts to standardize weapons systems among the NATO
allies include seeking commonality of components for main battle
tanks and adapting the French/German Roland short-range air
defense missile system.

SPECIAL ANALYSIS P

299

The Navy will pursue development programs in antisubmarine
warfare and fleet air defense, and will continue development of a
surface effects ship, which operates on an "air cushion" above the
water. Development of a tactical cruise missile to improve the strike
capability of combat ships will also continue. Navy effort on vertical
and short takeoff and landing (VSTOL) aircraft will increase.
As part of the space shuttle development program, DOD in conjunction with NASA will continue developing a booster for highaltitude orbits and will prepare Vandenberg Air Force Base in California for west coast shuttle launch and recovery operations.
Table P-8. DEPARTMENT OF DEFENSE—MILITARY RESEARCH AND
DEVELOPMENT (in millions of dollars)
Type of activity

1976
actual

1977
estimate

1978
estimate

OBLIGATIONS
Conduct of R. & D.:
Research, development, test, and evaluation:
Technology base
Advanced technology development _
Strategic programs...
._
Tactical programs
Intelligence and communications. _
Programwide management and support
Other appropriations
Total conduct of R. & D _

Total conduct of basic research included above
Total conduct of applied research, included above
Total conduct of development, included above
R. & D. facilities
Total obligations

1,482
557
2,222
2,895
887
1,131
418

1,706
63
4
2,252
3,719
1,047
1,326
40
4

1,881
65
8
2,444
4,413
1,165
1,306
43
2

9,592

11,132

1 ,3 7
2 1

28
4
1,107
8,238
11
4

24
7
1,299
9,558
48
6

34
1
14 7
,3
1 ,5 6
0 6
37
4

9,733

11,599

12,664

Conduct of R. & D
R. &D. facilities

9,329
141

10,391
166

11,919
311

Total outlays

9,470

10,557

12,230

OUTLAYS

ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION

ERDA was established in 1975 to be the major Federal agency for
the planning, coordination, and conduct of energy R. & D. programs.
Of all civilian R. & D. (i.e., not related to defense missions or to
space exploration), energy R. & D. is the largest single component—
and it is growing at a faster rate than R. & D. directed toward other
civilian objectives. ERDA also funds a substantial program of R. & D.
related to the development and testing of nuclear weapons.
Obligations for the conduct of «11 R. & D. by ERDA will total $4,064
million in 1978, an increase of $454 million or 13%. Of this total, obligations for the conduct of nonmilitary R. & D. will increase from
$2,840 million in 1977 to $3,238 million in 1978. Obligations for the
conduct of R. & D. for military purposes will increase from $770

300

THE BUDGET FOR FISCAL YEAR 197$

million in 1970 to $826 million. Obligations for construction and equipment will total $1,014 million, an increase of $333 million.
Increases for the facilities as well as for the conduct of R. & D. are
directed toward accelerating R. & D. on all major technology options
to supplement—but not supplant—R. & D. being funded by the
private sector. New or improved methods of generating electricity will
be emphasized. Conservation, and geothermal R. & D. will be increased, efforts in the fossil energy programs will be accelerated, and
R. & D. on the nuclear fuel cycle will be expanded (with special
emphasis on ways to dispose of radioactive waste and to prevent
diversion of materials that could be used to build nuclear weapons).
In addition, programs in basic scientific research will be strengthened
to build up the technology base for long-range energy R. & D. efforts.
Major increases are proposed in programs to demonstrate the production of synthetic fuels from coal, to develop technologies to increase
oil and gas production, to burn coal more efficiently and to extract
gas and oil from shale. Continued funding for solar and geothermal
R. & D. will be used to further develop new technologies that will
provide electricity, thermal energy, and clean fuels in an economically sound and environmentally acceptable manner. Increases are
also provided to further assist private sector efforts to develop, market,
and use conservation methods and technologies.
Increases are provided for fusion power development programs to
allow continued research on three approaches to magnetic confinement
fusion as well as for continued research on the laser fusion approach.
In the fission power development and demonstration area, programs for improving the assessment of domestic uranium resources
will be accelerated, as will development of advanced uranium enrichment techniques. Efforts to control the spread of nuclear weapons
capabilities will be expanded b}^ ERDA and other Federal agencies
through the development of technologies that minimize proliferation
risks, and through the development and evaluation of information
to be used by the President in 1978 to determine whether reprocessing
of nuclear fuel can be conducted in a manner consistent with national
nonproliferation objectives. The liquid metal fast breeder reactor
(LMFBR) program will continue, as a means of developing information on the safety, environmental impact, safeguards, and commercial viability of this technology necessary for a decision in 1986
on the acceptability of widespread commercial depWment.
In ERDA's environmental R. & D. program, biomedical and environmental research studies will be expanded, mainly to support the
development of nonnuclear energy technologies.
The basic energy sciences program will be expanded in the fields of
nuclear science; materials sciences; and molecular, mathematical, and
geosciences in support of long-range advancements in energy technologies.
Development will continue on improved naval nuclear propulsion
plants and reactor cores. Increases in the weapons program provide for
the development and design of new weapons types, and underground
testing of these devices.
•
The ERDA's budget for construction of research and development
facilities includes funds for a 10 MWe solar thermal central receiver
pilot plant, new mirror experimental facilities for magnetic fusion

SPECIAL ANALYSIS P

301

research, and high energy gas laser facilities at the Lawrence Livermore
Laboratory and at the Los Alamos Scientific Laboratory.
Included in the liquid metal fast breeder reactor program is funding
for the Safety Research Experimental facilities project and for a high
performance fuel laboratory that will develop and demonstrate remote,
automated, and fully safeguarded mixed plutonium and uranium oxide
fuel fabrication technology. Two new environmental research facilities
are provided for under the environmental research and development
program, while the high energy physics program provides funds for
continuation of the positron-electron colliding beam facility begun in
1977. The 1978 estimate also includes funding for high intensity uranium beams in the nuclear physics program and for the national synchrotron light source, a new facility for using radiation to investigate
the basic structure of materials and biological systems.
Table P-9. ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION—RESEARCH AND DEVELOPMENT (in millions of dollars)
Programs and groups of programs

1976
actual

1977
estimate

1978
estimate

OBLIGATIONS
Conduct of research and development:
Direct nuclear energy research and development:
Fission power reactor and nuclear fuel cycle
Laser and mangnetic fusion
NRC safety facilities
Nuclear materials security and safeguards

1
2

916
263
28
27

1,222
316
24
38

753

1,235

1,600

323
93
31
66

547
261
53
155

514
229
86
154

Subtotal
Supporting energy research and development:
Environmental research and development
Basic energy sciences

512

1,016

983

135
113

161
129

181
147

Subtotal
Weapons and naval reactor R. & D
Other:
High energy and nuclear physics
Space application and other programs

248
717

289
770

328
826

208
60

235
65

256
71

268

300

327

Total conduct of research and development

2,499

3,610

4,064

Total conduct of basic research, included above
Total conduct of applied research, included above
Total conduct of development, included above
Research and development facilities

346
369
1,764
412

339
475
2,747
681

427
531
3,107
1,014

2,911

4,291

5,078

2,225
370

3,168
473

3,735
670

2,595

3,641

4,405

Subtotal
Direct nonnuclear energy research and development:
Fossil
Solar
Geothermal
Conservation

Subtotal

Total obligations

551
191

OUTLAYS
Conduct of R. & D
R. & D. facilities

Total outlays

http://fraser.stlouisfed.org/
240-700 O 77 -20
Federal Reserve Bank -of St. Louis

302

THE BUDGET FOR FISCAL YEAR

1978

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

The entire NASA budget is considered research and development.
In 1978, NASA will seek to maintain a balanced program across all
of its activities—shuttle development, space exploration, applications
of space technology, and aeronautical R. & D. Obligations for the
conduct of R. & D. will increase by $250 million in 1978 to a total of
$3.8 billion. Obligations for the construction of facilities will total
$162 million, an increase of $44 million above 1977. These increases
are related to the continuation of space shuttle development and to
the start of several new programs, including the Earth-orbiting space
telescope, an orbiter/probe to investigate Jupiter, and a fourth
experimental Earth resources satellite (Landsat-D).
Funding is provided in 1978 to continue orbiter development and
flight testing and to start the procurement of an operational fleet of
five space shuttle orbiters. The space shuttle will provide the capability
for a wide variety of uses (including placing satellites and laboratories
in Earth orbit and recovering satellites for service and repair), with
greater flexibility and cost savings than is possible with the present
expendable launch vehicles. The program is proceeding toward the
first approach and landing test in 1977, the first manned orbital flight
in 1979, and initial operational capability by mid-1980. NASA plans
to achieve, by 1982, a full operational capability of five shuttle
orbiters operating from facilities at the Kennedy Space Center in
Florida and at Vandenberg Air Force Base in California.
The space science programs will continue to emphasize the exploration of the solar system and the universe using unmanned spacecraft.
A new mission, the Jupiter Orbiter/Probe, to be launched in 1981
is included in the 1978 budget. Two Pioneer spacecraft are continuing
the exploration of the outer planets—one spacecraft is now escaping
the solar system and the other will fly by Saturn in 1979. Two Viking
unmanned orbiter/lander spacecraft launched to Mars in 1975 are
now mapping the planet from orbit and continuing several geophysical
and biomedical experiments. Two Mariner spacecraft are being developed for Jupiter-Saturn flyby missions scheduled for launch in
1977. An orbiter and probe are being developed for launch to Venus in
1978 to initiate atmospheric investigations of that planet.
In addition to the planetary missions, development will continue
in 1978 on spacecraft to conduct high energy and ultraviolet astronomy
from Earth orbit. High energy astronomy observatories will be
launched during 1977-79 to study X-ray, gamma-ray, and cosmic-ray
sources in the galaxy and distant parts of the universe. Work is proceeding on the solar maximum mission satellite which is scheduled to
be launched in 1979 to study the Sun during the next period of peak
solar flare activity in 1979-80.
Particularly noteworthy is the inclusion of funds in the 1978 NASA
budget to begin development of the advanced Earth-orbiting space
telescope. This observatory, capable of viewing objects as far away as
60 billion light-years, could help mankind better understand the composition, origin, size, and history of the universe. The project is
designed to capitalize on the unique environment of space, above the
obscuring effects of the Earth's atmosphere. The telescope will be
launched by the space shuttle in 1983.
In the space applications program, NASA is continuing development of a third Earth resources technolog}^ satellite (Landsat-C),

SPECIAL ANALYSIS P

303

Table P-10. NATIONAL AERONAUTICS AND SPACE ADMINISTRATIONRESEARCH AND DEVELOPMENT (in millions of dollars)
Program and type of activity

BUDGET PLAN
Conduct of R . & D . :
Space
flight
Space sciences
Space applications
Space research and technology
Aeronautical research and technology
Energy technology applications
Supporting activities
Research and program management

1976
actual

1977
estimate

1978
estimate

1,556
433
178
75
175
6
248
776

,637
39
7
18
9
8
2
10
9
6
23
6
89
2

1,749
45
0
28
2
9
7
20
3
5
20
9
80
3

3,447

3,583

3,833

293
930
2,224
82

320
989
2,274
118

365
1,060
2,408
162

3,529

3,701

3,995

Conduct of R . & D
R.& D. facilities

3,521
120

3,557
125

3,745
133

Total outlays

3,641

3,682

3,878

Total conduct of R. & D. budget plan
Total conduct of basic research, included above
Total conduct of applied research, included above
Total conduct of development, included above
R . & D . facilities
Total budget plan
OUTLAYS

to be launched in late 1977 or early 1978 to conduct further experiments on the use of satellites for agricultural forecasting, identifying
geological features, and other applications. R. & D. will begin on a
fourth, and more advanced Earth resources satellite (Landsat-D),
for launch in 1981. Development is also proceeding on Tiros-N to
provide major improvements in weather forecasting, and on the heat
capacity spacecraft to be launched in 1978 to sense potential sources
of geothermal energy. In the area of environmental quality, development is proceeding on Nimbus-G, scheduled for launch in 1978
to demonstrate the capability of monitoring worldwide pollution
from space, and on Seasat-A, to be orbited in 1978 to monitor ocean
conditions.
Aeronautical research and technology will continue to emphasize
the reduction of aircraft engine noise and fuel consumption. A major
budget increase is requested in 1978 to develop technology, by 1985,
to reduce fuel consumption in commercial transports. The level of
support for fundamental studies in aeronautics will also be increased.
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE

Department of Health, Education, and Welfare (HEW) obligations
in 1978 for the conduct of R. & D. will increase by $66 million over
the 1977 level, reaching a total of $2,976 million. Obligations for
R. & D. facilities will be $15 million.
The largest share of the Department's R. & D. funds is devoted to
the biomedical area. The National Institutes of Health (NTH) is the
primary source of support for health research in the United States
with obligations of $2,280 million in 1978. These funds will finance

304

THE BUDGET FOR FISCAL YEAR 1978

research into human biological processes and the mechanisms of such
diseases as cancer, heart and lung diseases, arthritis, diabetes, and
venereal disease. Basic research in areas such as cell biology and
genetics will be increased through the use of competitive extramural
grants. Funding for studies of carcinogens in the environment will be
increased, to support programs of the Environmental Protection
Agency.
HEW also supports research into the basic biological and behavioral
processes affecting mental health and illness, as well as the biochemical
and psychological mechanisms related to psychiatric disorders and
substance abuse. Research efforts to discover new approaches to preTableP-11. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARERESEARCH AND DEVELOPMENT
(In millions of dollars)
Program areas and organizational units

1976
actual

1977
estimate

1978
estimate

OBLIGATIONS

Conduct of R. &D.:
Health:
National Institutes of Health
Alcohol, Drug Abuse, and Mental Health Administration.
Food and Drug Administration
Center for Disease Control
Health Resources Administration
Assistant Secretary for Health
Health Services Administration

Total
Total
Total
Total

conduct of R. & D. obligations
conduct of basic research, included above
conduct of applied research, included above
conduct of development, included above

R. & D. facilities
Total obligations

1
3
63
70

1
3
158
90

1
9
140
109

21
6

268

63
14
25
7

73
20
20
9

68
23
22
9

123

2,543
660
1,444
439

2,910
744
1,598
569

2,976
796
1,608
572

1
5

2,571

Subtotal, welfare

2,585

Welfare:
Office of Human Development
Social Security Administration
Departmental Management
Social and Rehabilitation Service

2,527

110

Subtotal, education

2,280
146
47
56
32
14
10

15
4

Education:
Office of Assistant Secretary for Education
Office of Education
National Institute of Education

2,215
154
4
1
55
37
14
12

2,289

Subtotal, health

2,005
140
36
46
36
1
1
1
5

2,935

2,991

2,566
45

2,532
3
1

2,799
2
1

2,610

2,562

2,820

OUTLAYS
Conduct of R. & D
R. & D. facilities
Total outlays

SPECIAL ANALYSIS P

305

vention and treatment of drug abuse, alcohol abuse, and mental
illness will be continued. Research will also be conducted in such
diverse health services areas as long-term care, malpractice insurance,
and cost containment. In addition, demonstrations of health maintenance organizations will be funded.
The National Institute for Education (NIE) is the focal point for
educational R. & D. NIE supports research in the areas of equality
of education; essential skills education; education and work; dissemination of research information; and school finance, productivity,
organization, and management. R. & D. obligations by NIE will
increase by $19 million, from $90 million in 1977 to $109 million in
1978.
The total obligations for the conduct of R. & D. in human services
and welfare programs will remain level, at $123 million. The Office of
Human Development, whose obligations will total $68 million in 1978,
will continue to fund R. & D. activities that support its role in
providing ameliorative services to the aged, physically and mentally
handicapped, Native Americans, children, and other subgroups of
the population-at-risk.
NATIONAL SCIENCE FOUNDATION

Obligations for the conduct of R. & D. will increase from $693 million
in 1977 to $766 million in 1978, representing an increase of 11% in the
Foundation's research support activities. In addition, $47 million will
be obligated for research facilities in 1978, an increase of $8 million
above 1977.
Most of the increase in the Foundation's budget will be designated
for support of basic research in a number of scientific disciplines.
Funding for support of basic research will increase from $612 million
to $688 million, or about 12%, representing a continuation of the
initiative in the 1977 budget of providing some real increase in the
overall level of Federal basic research support following a decline in
overall funding from 1967 to 1975 (in inflation-adjusted dollars).
One area of particular emphasis in 1978 will be support of advanced
instrumentation in chemistry, biology, physics, materials, and other
fields. Other areas of research emphasis include fundamental earthquake studies, basic plant sciences, and key aspects of human behavior.
In keeping with a Presidential initiative on earthquake prediction
research involving NSF and the U.S. Geological Survey, the Foundation's applied research program will stress engineering of structures to
better withstand earthquakes, and study of the legal, legislative, social,
and economic issues relating to earthquake prediction.
Funding will be increased for major programs in astronomy,
atmssphsric, Eirth, and ocean sciences. Funding will be continued for
the Antarctic program and for a broad range of international science
and technology efforts conducted through bilateral and multilateral
arrangements. Construction and limited operation of the Very Large
Array radiotelescope will continue.

306

THE BUDGET FOR FISCAL YEAR

1978

DEPARTMENT OF AGRICULTURE

Obligations of the Department of Agriculture for the conduct of
research and development, excluding construction of facilities, will
increase from $530 million in 1977 to $579 million 1978.
Currently, new technology in food production and related areas is
being utilized as rapidly as it is developed. In addition to hastening
the achievement of applied research results, basic research leading
ultimately to breakthroughs in the state-of-the-art of agricultural
production methods is needed to meet long-range food needs in the
United States and throughout the world. Since the results of such
research may not reach the application stage for many years, research
must be initiated now if food needs projected to the year 2000 and
beyond are to be effectively met.
Additional funds will be provided in 1978, primarily for an expanded
competitive grants program in basic research open to the entire
scientific community. These funds will be applied to four major areas
of research related to meeting long-range food needs: nitrogen fixation,
photosynthesis, genetic engineering, and crop protection from pests
and diseases.
Research will be initiated in existing programs to develop crop-loss
appraisal and assessment systems, and current research on genetic
vulnerability will be increased substantially. Research initiated in 1977
will be continued in 1978 on pesticide impact assessment to determine
the consequences of major pesticide use curtailment by EPA and to
develop supportive information aimed at continued registration of
vital agricultural pesticides.
Economic research will include increased effort to analyze Federal
credit programs in rural areas, and a new effort to assess the impacts of
existing food, nutrition, and income assistance programs and possible
alternatives. Forest Service research will include the initiation of an
assessment of supply, demand, and utilization of forest and other
renewable resources as required by the Forest and Rangeland Renewable Resources Planning Act of 1974.
The Department of Agriculture, in cooperation with State and
private research organizations, will continue development of a national
system designed to improve coordination in the planning, financing,
and evaluation of agricultural efficiency and effectiveness of agricultural research.
DEPARTMENT OF THE INTERIOR

Obligations for the Department of the Interior for the conduct of
research and development will increase from $349 million in 1977 to
$355 million in 1978.
An area of special importance in the Department's 1978 R. & D.
program is accelerated funding for basic and applied research to try
to achieve a reliable capability to predict major earthquakes within
10 years and to define national and regional earthquake hazard areas.
Funding for earthquake-related research performed or funded by the
U.S. Geological Survey will more than double (from $11 million in
1977 to $28 million in 1978), as will funding for related research
supported by the National Science Foundation. A capability to

SPECIAL ANALYSIS P

307

predict reliably the timing and area of earthquakes could lead to
reducing potential damages.
Research programs are also conducted by the U.S. Geological
Survey to provide an accurate appraisal of the Nation's mineral
resources, including new or improved methods, and techniques and
instruments for mineral exploration on land and submerged continental margins. An extensive program of investigation of new technologies
for surface and underground mining by the Bureau of Mines is designed to lead to improvements in productivity and in mine health and
safety and to a reduction in the environmental impact of mining.
The efficient allocation and conservation of scarce water and waterrelated resources will be studied by the Bureau of Reclamation.
Studies directed toward better understanding of basic principles of
hydrology necessary for the appraisal and evaluation of the Nation's
water resources, including the effects of underground waste storage,
will be undertaken by the Office of Water Research and Technology.
Special studies will be conducted by the Bonneville Power Administration involving electric energy planning, the development of new
transmission and equipment design concepts to improve system performance, and development of new power system control techniques.
Participation in the ERDA wind energy research development and
demonstration program will continue.
Research is conducted by the Fish and Wildlife Service to improve
the management of habitat to protect fish and wildlife resources and
the environment in general. Studies supporting the direct management
of fisheries and migratory birds include such subjects as population
dynamics, fish disease prevention and control, restoration of endangered species, and the effects of toxic substances.
Archeological investigations and salvage are carried on by the
National Park Service in various areas threatened by inundation
through reservoir construction and other Federal or federally connected
construction activities.
DEPARTMENT OF TRANSPORTATION

Obligations for the conduct of R. & D. by the Department of Transportation are estimated at $367 million for 1977 and $359 million for
1978, reflecting a carryover of obligations from 1976 to 1977. In
1978, obligations for air and urban transportation will increase,
while those for highway and marine R. & D. will remain essentially
level. Highway safety and railroad R. & D. obligations will decrease,
although their budget authority will increase.
Air transportation R. & D. will increase by $6 million to provide
for continued technological upgrading of the air traffic control system
and for improved surveillance, communication, and landing aids
development. The Aerosat program, a joint U.S./Canadian/European
effort to evaluate the use of satellites to improve air traffic control
operations over the North Atlantic air routes will be emphasized.
Advanced traffic management systems to increase the capacity and
reduce delays on the Nation's highways system will continue to be

308

THE BUDGET FOR FISCAL YEAR

1978

developed. Highway traffic safety research will continue to emphasize
accident investigation and data analysis and will support the setting
of Federal safety standards leading to improved vehicle occupant
protection, the reduction of drug and alcohol related accidents, and
the improvement of driver performance.
Urban mass transportation R. & D. will be increased by $6 million
for technology to improve buses, urban rail systems, and automated
guideway transit systems, including technical support for the downtown people mover program. People movers are under design in St.
Paul, Houston, Los Angeles, and Cleveland, and will be partially
funded by Federal capital grants. Demonstrations of improved transit
service, methods, and management techniques to improve the use of
current urban transportation systems will be emphasized. Results of
these demonstrations are intended to foster greater productivity from
the capital assets funded by Federal grants to local governments.
Railroad R. & D. funding will emphasize improved rail freight and
passenger services and rail safety research including equipment and
human factor failures.
Marine R. & D. will continue to stress pollution abatement and
control systems development, improved aids to navigation, and programs to enhance safety at sea, including commercial vessel and
recreational boating safety.
ENVIRONMENTAL PROTECTION AGENCY

EPA supports research and development to determine the sources
and effects of pollution. The overall objective is to provide a strong
scientific basis to develop standards and effective control strategies
and to identify and evaluate long-range environmental problems.
While obligations and outlays will drop in 1978, new budget authority
for the conduct of R. & D. will increase from $264 million in 1977 to
$266 million. An area that will be substantially expanded is that of
evaluating resource conservation and hazardous waste disposal techniques, in support of EPA's program of regulating disposal of solid
waste.
The air pollution research and development program seeks to
develop predictive models for pollutant emission, transport, transformation and removal, and to verify these riodels by actual measurements. In 1978, air health effects research will include work on sulfates,
nitrates, and respirable particulates.
The goals of the water quality research program are to develop:
(1) criteria for clean, safe, ecologically stable water in various aquatic
environments; (2) useful and validatable monitoring methods; (3)
cost-effective and efficient wastewater treatment technology for both
municipalities and industries; and (4) strategies for control of pollution
from various nonpoint sources such as farming, mining, and oil spills.
Water supply activities include research, development, and field
evaluations designed to provide a dependable and safe supply of
drinking water. The program supports the development of valid
criteria for establishing standards for organic, inorganic, and microbiological contaminants of drinking water and the control technology
necessary for economic attainment of drinking water standards.
EPA's research program supporting regulatory activities with respect to pesticides includes: the development of data required to sup

SPECIAL ANALYSIS P

309

port administrative reviews and litigation; monitoring; development
of new methods of pest control; and development of long-term pesticides research strategy.
The interdisciplinary program in health and ecological effects
includes the development of pollutant assessment documents and the
funding for EPA's contribution to the National Center for Toxicological Research (NCTR), to study the long-term effects of low
doses of toxic chemicals by various exposure routes.
EPA's R. & D. programs also address the problems of toxic materials which cross traditional media lines; support for implementing
the new Toxic Substances Control Act; the use and development
of predictive techniques for early identification of substances most
likely to pose a hazard to man or the environment; implementation
of methods for monitoring air, water, and soil for selected toxic
chemicals; and development of strategies under a variety of Federal
authorities to control multimedia toxic pollutants.
EPA's energy R. & D. program seeks to assess the dangers to the
health and environment from the adverse environmental effects of
energy systems. Its primary goals are: (1) to provide a sound data
base necessary for the Agency to establish regulations, and (2) to
evaluate environmental control options for those extraction, processing, and utilization practices which can cause significant health and
ecological damage.
DEPARTMENT OF COMMERCE

Obligations for the conduct of R. & D. and for related facilities by
the Department of Commerce, will increase by $2 million to $256
million in 1978.
This reflects increases for the research and development programs
of the National Oceanic and Atmospheric Administration (NOAA)
and decreases in programs of the National Bureau of Standards
(NBS), the National Fire Prevention and Control Administration
(NFPCA), the Economic Development Administration (EDA) and
the Maritime Administration (MARAD).
The principal objectives of Department of Commerce, research and
development programs include continued improvement of the
Nation's environmental and weather prediction and warning capabilities; management, conservation and development of fisheries resources; studies concerning the causes and amelioration of economic
distress; development of technology to improve the competitive position of the U.S. maritime industry; and encouragement of technological advancement through improved performance and measurement
standards.
NOAA will continue research in the area of improving the detection and tracking of weather systems and violent storms, the extension
of environmental forecasting, and the modification of severe storms
and hurricanes. NOAA also will continue its development of systems
and components in the area of mapping, charting, and marine description. Further, NOAA will increase research aimed at the conservation,
development, and management of fisheries resources and commercial
fisheries.
The National Fire Prevention and Control Administration will continue to conduct research to reduce the loss of life and property from
fires and will provide the essential technical knowledge on which new

310

THE BUDGET FOR FISCAL YEAR

1978

and improved fire prevention, control, and extinguishment efforts
can be based.
In 1978, the technology development and utilization programs of
NBS will emphasize (1) standards and measurement procedures,
(2) energy conservation and energy efficiency in industrial processes,
and (3) computer security techniques.
Eesearch and development activities conducted by EDA explore
the causes and consequences of economic distress and methods of
alleviating such conditions. Through demonstration projects, EDA
attempts to determine appropriate, specific responses to accomplish
economic development actions to directly benefit local and regional
economic development groups and organizations.
Major MARAD research and development efforts will be directed
toward techniques of building ships for less cost in U.S. shipyards,
developing new ship machinery, automating ship operations, and
developing the maritime research simulator. The National Marine
Research Center at Kings Point, N.Y., will continue to provide technology assistance to shippers and shipbuilders. In 1978, MARAD
programs will be funded at a slightly lower level than in 1977. This is
due to the termination of the nuclear ship project and planned completion of the ship operations information system (SOIS) program.
NUCLEAR REGULATORY COMMISSION

Obligations of the Nuclear Regulatory Commission for the conduct
of R. & D. will increase from $122 million in 1977 to $148 million
in 1978.
The Commission's R. & D. program is directed toward the improvement of data needed on the safety, health effects, and environmental
impact of nuclear powerplants and other nuclear fuel cycle facilities.
The increased level of research will accelerate the confirmation and
quantification of the degree of conservatism used in present licensing
assessment methodologies and thus reduce the economic penalties associated with overly conservative licensing criteria where they may exist.
OTHER AGENCY PROGRAMS

The remaining 18 agencies reporting R. & D. expenditures support a
total of 2 percent of federally funded R. & D. Like the programs of the
agencies providing the majority of R. & D. support, R. & D. programs
of these other agencies are closely related to the accomplishment of
their missions. For example, HUD supports R. & D. on lowering the
cost of housing production and on problems of housing safety and
security such as the hazards of lead-based paint or problems of housing
deterioration and neighborhood decay. The Veterans Administration
sponsors biomedical research on health care services and delivery of
rehabilitative services for disabled veterans. The Library of Congress
funds research in scientific communication and documentation, and in
paper chemistry. At the Department of Treasury, the Bureau of
Engraving and Printing supports technology on deterrents to the
counterfeiting of U.S. securities, while the U.S. Customs Service
investigates surveillance and inspection systems.

SPECIAL ANALYSIS P

311

A portion of the R. & D. budget of many agencies reporting such
expenditures goes to economic and policy studies concerning the
impact of proposed or existing legislation or regulatory standards. For
example, the Department of Labor's R. & D. budget is for impact
studies of laws and standards in such areas as occupational safety and
health and employee benefit plans. An important R. & D. activity at
HUD is the collection and analysis of economic and financial data
relevant to housing programs. In the 11 agencies reporting total R. & D.
obligations of $6 million or less, the entire R. & D. effort is devoted to
policy studies concerning agency activities.
SUPPLEMENTARY INFORMATION

The following table provides the information on long-term trends
that was used as a basis for preparing Chart P - l :
Table P-12. T R E N D S IN CONDUCT OF R. & D. BY MAJOR PROGRAM
AREA (obligations in billions of dollars)
Year

Defense

Civilian
(other than

Space

Total

space)

1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974._
1975
1976

_
_ _

1977 (estimate)
1978 (estimate)

______

2.8
2.5
2.2
2.5
3.3
3.8
5.6
6.1
7.0
7.2
7.8
7.8
7.3
7.5
8.6
8.3
8.4
8.0
8.1
8.9
9.0
9.0
9.6
10.3
11.9
13.1

0.3
.3
.4
.5
.6
.7
.9
1.1
1.3
1.6
1.9
2.1
2.3
2.7
3.3
3.5
3.6
3.9
4.6
4.9
5.2
6.0
6.9
7.5
9.5
10.0

0.1
.3
.4
.8
1.4
2.9
4.3
5.0
5.1
4.6
4.2
3.7
3.5
2.9
2.7
2.6
2.5
2.5
2.9
3.1
3.2

3.1
2.9
2.5
3.0
3.9
4.6
6.7
7.6
9.1
10.3
12.5
14.2
14.6
15.3
16.5
15.9
15.6
15.3
15.6
16.5
16.8
17.4
19.0
20.7
24.5
26.3

SPECIAL ANALYSIS Q
FEDERAL ENVIRONMENTAL PROGRAMS
INTRODUCTION

In 1978, 22 Federal agencies and departments expect to have
outlays of $11.5 billion for environmental programs. This is an
increase of 10% over 1977 Federal outlays of $10.5 billion. Although
covering a wide range of activities, Federal environmental programs
are classified in three broad categories: Pollution control and abatement; understanding, describing, and predicting the environment;
and environmental protection and enhancement activities. The
trends in total Federal expenditures for each categor}^ from 1973 to
1978 are shown in the following chart. The relationship between
budget authority and outlays in each categor}' from 1976 to 1978 is
shown in table Q-l.
Environmental Outlays, by Category, 1973 — 1978

Protection and Enhancement
Understanding, Describing and Predicting
Pollution Control and Abatement

312

SPECIAL ANALYSIS Q

313

Table Q - l . BUDGET AUTHORITY AND OUTLAYS—FEDERAL
ENVIRONMENTAL PROGRAMS (in millions of dollars)
Activities

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

Pollution control and abatement
Construction grants
Understanding, describing, and predicting
Protection and enhancement
Total

453.9
19.5
443.4
289.4

2.122.8
1,676.7
1.824.7
2,423.0

2, 200.9
4, 675.6
1,,958.6
1. 900.9

5,320.0

1,206.2

8,047.2

10,736.0

1,931.3
2,604.6
1,651.3
1,294.4

467.7
966.1
459.5
405.0

2.214.5
4.854.3
1,736.9
1.687.4

2, 207.3
5, 565.0
1, 859.7
1, 869.8

7,481.6

1,972.3
196. 7
1,701.3
1,449. 7

2,298.3

10,493.1

11,501.8

OUTLAYS
Pollution control and abatement
Construction grants
Understanding, describing and predicting
Protection and enhancement
Total

As the chart indicates, total Federal outlays for environmental
programs have increased b}^ 210% since 1973. It should be noted
that total Federal outlays for all Government programs have increased 79% during the same period. Pollution control and abatement
activities, including construction grants, represent the largest category
of programs while understanding, describing, and predicting, and
protection and enhancement rank second and third, respectively, in
size of programs.
Federal expenditures include both direct outlays (in-house activities)
and transfers (grants) to State or local governments or to the private
sector. In 1978, transfer payments will comprise 56% of environmental outlays. The distribution of 1978 Federal outla}'S for environmental programs according to direct or transfer spending is
summarized below.
1978 FEDERAL OUTLAYS FOR ENVIRONMENTAL PROGRAMS
(In millions of dollars)
Outlays
Direct

Enhancement
...
_._
Understanding, describing, and predicting
Pollution abatement (excluding construction grants)
Construction grants
Total
1
2

___
._

Transfer

1,298.8
1,859.7
1, 875.0
(2)

571.0
Q)
332. 3
5,565.0

5,033.5

6,468.3

Understanding, describing, and predicting transfers are not separately identifiable.
Not applicable.

In addition to budget outlays, the Federal Government supports
the environmental effort through tax expenditures. These expenditures
result from provisions in the tax code that exempt the interest income
from pollution control bonds. These bonds are issued bj State and
local governments to finance pollution control facilities used b}^

314

THE BUDGET FOR FISCAL YEAR 1978

private firms. These tax expenditures are estimated to be $320 million
in 1978. They are not included in any tables of the Special Analysis,
which covers only appropriated funds.
POLLUTION CONTROL AND ABATEMENT

In 1978, pollution control and abatement outlays represent 68%
of total Federal outlays for environmental protection. These outlays
consist of the sum of the outlays identified in table Q-l as pollution
control and abatement and construction grants. In 1978, outlays are
estimated to be $7,772.3 million. Approximately two-thirds of these
outlays are Environmental Protection Agency grants of $5.2 billion
for the construction of sewage treatment facilities.
There are three primary areas of direct Federal activity—reducing
pollution from Federal facilities, establishing and enforcing standards,
and conducting research and development to identify the sources of
pollution and to reduce pollution. These direct activities account for
24% of Federal outlays for pollution control. The remaining outlays
are transfers to State and local governments for the establishment
and operation of pollution control programs, grants for research and
development, and funding for manpower development activities.
Budget authority and outlays for these activities are shown in
table Q-2.
Table Q-2. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
FUNCTION (in millions of dollars)
1976
actual

Activities

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY
Financial aid to State, interstate, and local
governments_
Research and development__
_
Standard setting and enforcement
___
Reduce pollution from Federal facilities__
Manpower development
_
Other
--.

2,169.0

Total

4,832.9
800.4
525.5
516.8

43.4

1,836.0
777.8
485.5
479.1
11.2
209.9

473.4

3,799.5

6,876.5

2,769.4
683.0
394.2
477.9
11.1
200.3

1,010.8
190.3
112.8
66.8

5,111.5
809.8
466.8
447.1

5,819.9
790.2
495.8
456.2

2.6

9.8

7.8

50.5

223.8

202.4

4,535.9

1,433.8

7,068.8

7,772.3

374.6
723.8
424.7
431.5
13.0
201.4

52.2
181.3
119.1
74.9

2.5

8.2
192.7

OUTLAYS
Financial aid to State, interstate, and
governments- _
Research and development
Standard setting and enforcement
Reduce pollution from Federal facilities
Manpower development
Other
Total—

local

Activities involved.—Financial aid.—In 1978, Federal aid to
State and local governments is estimated to be $5,819.9 million.
Ninety-six percent of this will be used for construction of sewage

SPECIAL ANALYSIS Q

315

treatment facilities, funded primarily through the Environmental
Protection Agency (EPA). Most of these expenditures result from the
$18 billion authorized in the Federal Water Pollution Control Act
Amendments of 1972. Beginning in 1978, a 10-year funding plan of
$4.5 billion per year is proposed, contingent on enactment of program
reform legislation. The reform legislation will focus Federal funds on
those types of projects most effective ii} improving the quality of the
receiving waters and will reduce the Federal share of the program from
$330 billion to $45 billion by
—eliminating funding for collection sewers, storm water discharges,
and sewer rehabilitation,
—reducing funding for the control of combined sewer overflows,
—limiting eligibility to the portion of facilities needed to serve
existing population,
—limiting eligibility to secondary treatment facilities, except where
the benefits of additional standards exceed their costs,
—extending for 1 year the deadline for obligating the $18 billion
authorization.
The Department of Commerce and the Department of Agriculture
also fund treatment facilities, and HUD block grant funds are sometimes utilized for collector sewer construction.
The remainder of these grant funds are utilized in the funding of
air and water pollution control agencies of State and local governments. These agencies are responsible for establishing and maintaining
programs to monitor and enforce air and water quality standards.
In 1978, EPA is consolidating existing categorical grants for air and
water control, water supply, solid waste and toxic substances. The
consolidated grants program will insure that States have maximum
flexibility to allocate funds to State and local agencies in accordance
with State priorities. Grants are also provided for public water systems
supervision and underground injection control programs to insure the
safety of drinking water. EPA is the primary administrator of these
grants.
Research, development, and demonstration.—Outlays for research,
development, and demonstration are expected to be $790.2 million in
1978. These outlays include research whose primary purpose is to
abate pollution ($605.2 million) and research conducted for other
reasons but with the secondary effect of reducing pollution ($185.0
million). An example of secondary research is a program in the
Department of Agriculture that promotes the effective use of pesticide
control methods. This usually results in reducing the need for pesticides, thereby reducing pollution.
Thirty-five percent of the environmental research and development
outlays will be expended by EPA. Other agencies with spending in this
category include the Energy Research and Development Administration (ERDA), the National Aeronautics and Space Administraion (NASA), and the Department of Agriculture. These agencies
directly spend 93% of the research outlays either through contracts
or in-house activities. The remainder is transferred to State and
local governments and private institutions.
Environmental research and development begins with identification
of pollutants and their sources, then to an assessment of the pollutants'

316

THE BUDGET FOR FISCAL YEAR 1978

impact on public health and the environment in general. Next, technology is developed to control pollution either through retrofit devices
or by changing production methods. The final stage of research and
development involves efforts to develop methods and procedures for
monitoring the emission of pollutants.
The amount shown as research in table Q-2 is divided further into
the various types of research detailed above. In 1978, 34% of the
pollution control research and development outlays will be spent to
develop control technology. Twenty-two percent will be spent on the
health effects of pollution and 22% on the sources and environmental
effects of pollution. The remaining 22% will be used for monitoring
research, grants, and administrative costs. Since 1974, pollution
research outlays have increased 90%. During this same period, health
effects research has shown the largest increase—more than 600%.
(Detailed grants data were not collected prior to 1974.)
Examples of pollution abatement related research and development
activities in 1978 include:
• Research related to the establishment or review of health related
ambient air quality standards. (EPA)
• Research and development to control pollution from the Army
ammunition plants and to assess the resultant health effects.
(Army)
• Research to ensure that rapidly expanding energy technologies
that are under development will have minimal impact on the
environment. (ERDA, Interior, and EPA)
• Development of a pollution monitoring satellite to provide data
on the concentration and distribution of aerosols in the ozone layer
of the upper atmosphere. (NASA)
Standard setting and enforcement.—As shown in table Q-2, outlays
for standard setting and enforcement are estimated to be $495.8 million
in 1978—a 6% increase from 1977. Standard setting and enforcement
includes a wide range of activities related to the regulatory efforts of
the Federal Government in the area of pollution abatement. This
includes monitoring, surveillance, standard setting, enforcement,
technical support, and the costs of preparing environmental impact
statements.
Monitoring and surveillance actions refer to direct Federal monitoring of discharged pollutants from point sources and testing of ambient
levels of pollutants. Monitoring and surveillance data are instrumental
in developing and reviewing standards and in the enforcement of
these standards.
The agencies with the most expenditures in this area are EPA,
ERDA, the Bureau of Land Management (BLM), and the Coast
Guard. Examples of activities performed by these agencies are: (1)
testing of new automobiles by EPA during or immediately after
production to determine compliance with emission standards; (2)
enforcement by the Coast Guard of regulations on pollutants discharged into the marine environment; and (3) the preparation of
baseline studies and environmental impact statements by the BLM
on oil and gas leasing on the Outer Continental Shelf, coal leasing,
and onshore oil and gas pipeline projects.

SPECIAL ANALYSIS Q

317

Pollution abatement from Federal facilities.—Federal agencies are
actively involved in efforts to reduce pollution from their facilities
in accordance with the Federal, State, or local regulations in
force at the facility.1 It is estimated that Federal agencies with
environmental programs will spend $456.2 million for this purpose. These expenditures include lemedial actions to control pollution, production process changes to reduce generation of pollution,
the additional costs of switching to cleaner fuels, and operating and
administrative costs of contioiling pollution.
Outlays for these programs will increase 2% in 1978. Remedial
actions such as the installation of electrostatic precipitators, dust
collectors, and sewage systems comprise 74% of these outlays in 1978.
Of the outlays reported in this category, $343.7 million (75%) will
be expended by the Department of Defense. This funding includes
noise and air pollution control of Air Force aircraft, control of pollution at Army ammunition plants, and improvement of Navy sewage
systems.
Manpower development.—In 1978, Federal outlays of $7.8 million
will be used for various manpower development programs that
relate to improving the Nation's pollution abatement capabilities.
About 55% of these funds are for in-house training, with the remainder used for fellowships and training grants. Agencies involved
in these programs are EPA, DOD, and ERD A.
Other control and abatement activities.—Other outlays for pollution
control and abatement will decrease by $21.4 million in 1978 to
$202.4 million. Included in this category are the costs of constructing
and equipping new EPA facilities and improving existing EPA
facilities. Other items are the construction of Indian sanitation
facilities by HEW, technical assistance funds, and public information
costs.
Pollution abatement by media.—Table Q-3 presents Federal
outlays and obligations for pollution control and abatement categorized by media. Outlays and obligations for water programs receive
the largest share of Federal funds because of the large grant programs
that fund the construction of sewage treatment facilities. It should
also be noted that only funding for those activities that directly lead
to pollution abatement are included in table Q-3. Research programs
that may ultimately lead to abatement and control of pollutants but
that do not have abatement as their primary objective are excluded.
Examples of activities which are excluded from table Q-3 are:
• Urban Mass Transportation Administration programs in the
Department of Transportation that work to improve transit
operations, thereby reducing pollution as a secondary benefit.
• Pest management and control programs developed by the
Department of Agriculture that promote the effective use of
pesticide control methods. In most instances, effective pest
control methods actually reduce the need for pesticides, thereby
reducing pollution.
1
Outlays are for facilities or properties which are either owned or leased by the Federal Government and reflect expenditures on both new and existing facilities.

240-700 O
- 77 - 21

318

THE BUDGET FOR FISCAL YEAR 1978

Table Q-3. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
MEDIA OR POLLUTANT (in millions of dollars)
Outlays
1976
actual

Media polluted:
Water
3,306.7
Construction grants or loans
(2, 638.0)
Other
(668.7)
Air
362.8
Land
._
105.6
Other (e.g., living things, materials)
464.7
Multimedia (i.e., more than one of
above)
132.8
Total
Selected pollutants:1
Solid wastes
Pesticides
Radiation
Noise
1

Obligations
1976
actual

TQ
actual

1977
estimate

1978
estimate

5.212.3
(4.550.2)
(662.1)
303.0
115.8

915.6
(753.9)
(161.7)
115.6
34.1

7.875.2
(7.165.9)
(709.3)
442.1
166.1

6,197.9
(5,563.2)
(634.7)
312.3
162.9

465.9

202.8

579.2

706.8

136.4

34.5

191.3

197.1

4,372.6

6.233.4

1.302.6

9,253.9

7,577.0

104.9
61.5
100.4
43.5

93.4
60.0
112.8
44.1

30.4
18.8
31.3
12.0

99.8
71.5
147.2
58.0

99.5
73.9
174.1
55.3

Funds for selected pollutants are included in "media" distribution above.

Table Q-3 only shows amounts spent for each medium and pollutant; it gives no indication of how the money was spent. For example, outlays during 1976 for water pollution control (excluding
construction grants) were made primarily for the reduction of pollution from Federal facilities (44%), for standard setting and enforcement (21%), and for research and development (16%).
Expenditures for air pollution are concentrated in research and
development (42%), in reducing pollution at Federal facilities
(28%), and in standard setting and enforcement programs (18%).
Expenditures for land pollution are divided almost evenly among
these same three program categories.
Table Q-3 also shows selected pollutants for which pollution abatement expenditures are made. Of the pollutants shown, radiation will
receive the most funding in 1978. ERDA will spend most of these
funds for research on the health effects of radiation and for preventing
radiation at ERDA facilities. Not shown as a selected pollutant in
table Q-3 are expenditures for toxic substances. EPA will receive $23
million in budget authority in 1978 to implement the Toxic Substances Control Act. These funds will be used for various regulatory
actions against toxic substances. Other agnecies, such as the National
Institutes of Health, also make expenditures related to toxic substances.
Pollution control and abatement by agency.—Federal budget
authority and outlays for pollution control and abatement are presented by agency in table Q-4. This table summarizes the spending of
21 Federal departments and agencies.

SPECIAL ANALYSIS Q

319

Table ( H . POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
AGENCY (in millions of dollars)
Agency

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

Environmental Protection Agency. _
Defense—Military
Energy Research and Development Administration
Agriculture
Housing and Urban Development
Transportation
Interior
National Aeronautics and Space Administration._
Health, Education, and Welfare
CommerceDefense—Civil
Other agencies

189.0
62.7

853.4
484.2

5,302.4
486.2

245.8
139.1
102.2
96. 1
81.3
62.6
40.2
82.0
40.8
40.8

81.4
38.5
14.0
20.7
21.8
11.1
18.1
9.5
6.6

313.9
139.0
133.8
91.9
113.5
72.2
51.4
455.3
38.2
52.7

362.6
136.0
139.9
104.2
95.3
76.8
50.2
33.8
37.3
51.8

2,169.0

Total

771.5
466.6

473.4

3,799.5

6,876.5

3,118.0
514.3

1, 108.4
66.5

5,295.0
452.4

6,006.0
447.4

253.3
146.9
115.1
75.3
68.5
66. 7
43.7
61.4
40.8
31.9

76.2
48.7
28.8
17.4
20.5
19.9
12.5
16.4
9.5
9.0

298.2
191.9
176.6
91.4
97.7
72.3
55.6
248.0
38.2
51.5

337.3
191.5
160.7
98.0
80.9
76.7
49.5
236.3
37.3
50.7

4,535.9

1,433.8

7,068.8

7,772.3

OUTLAYS
Environmental Protection Agency
Defense—Military
Energy Research and Development Administration
Agriculture
Housing and Urban Development
Transportation
Interior
National Aeronautics and Space Administration. _
Health, Education, and Welfare
Commerce
Defense-Civil
Other agencies
Total

Main agency activities.—Outlays by the Environmental Protection
Agency represent 77% ($6,006.0 million) of the total expected outlays for pollution control and abatement in 1978. Of these outlays
$5,160 million will be for sewage treatment facility giants. Research
and development will account for 33% ($277.4 million) of the estimated outlays for EPA's operating programs in 1978. (Construction
grants are excluded from operating programs.) EPA supports both
intramural and extramural research to determine the sources and
effects of pollution and to develop and test pollution control technologies. The overall objective is to provide a strong scientific basis
to develop standards and effective control strategies and to identify
and evaluate long-range environmental problems.
In 1978, EPA is consolidating existing categorical grants for air
and water control, water supply, solid waste and toxic substances.
The consolidated grants program will insure that States have maximum flexibility to allocate funds to State and local pollution control
agencies in accordance with State priorities.

320

THE BUDGET FOR FISCAL YEAR 1978

EPA's abatement and control programs are estimated to spend
$288.5 million in 1978. These funds support a wide variety of programs,
ranging from the establishment and enforcement of standards to the
issuance of permits. EPA also offers technical assistance to State and
local agencies to assist them in their pollution control efforts.
The Department of Defense—Military is planning to spend $447.4
million in 1978 for pollution abatement and control programs. Funds
are expended by the three services and the Defense Supply Agency
primarily for pollution abatement at Federal facilities. Other expenditures are for research and development and abatement and control.
Outlays are included for such activities as monitoring air quality and
noise levels at Army installations, altering Navy ships to minimize
oil spills, and controlling noise and air pollution emitted from Air Force
aircraft and facilities.
The Energy Research and Development Administration (ERDA) will
be spending $337.3 million in outlays during 1978 for research and
development, monitoring, and for abating pollution from its facilities.
In 1978 research relating to identification of pollution sources, pollutant transport, and effects will be expanded to assure that developing
energy technologies have a minimal impact on the environment.
Research is continuing on the pilot plant programs to convert coal
to oil or gas which are less polluting fuels. ERDA is also conducting
research to determine safe limits of human exposure to energy related
hazardous agents. Particular emphasis in the health studies will
focus on the newer coal technologies.
The Department oj Agriculture conducts a variety of environmental
programs. The major areas are researching the problems of agriculturerelated pollution ($85.0 million), and making grants and loans for
wastewater management facilities ($68.7 million). The Animal and
Plant Health Inspection Service's programs include inspection of
laboratory animal facilities to control water pollution from animal
wastes. The Economic Research Service performs such activities as
estimating the economic costs of new technology and management
practices to reduce pollution from farm and food processing activities.
The Agricultural Research Service (ARS) conducts various agriculture-related research. Recent progress made by ARS includes
development of a nonpolluting method for reprocessing the waste
from soybean oil processing. The Forest Service is also conducting
research and has developed less persistent, safer chemical control
methods for several insect pests.
In cooperation with the EPA, the Department of Agriculture will
undertake a new applied research program to analyze the economic
benefits of pesticides that appear to pose unreasonable hazards to
public health, as required by the Federal Insecticide, Fungicide, and
Rodenticide Act. Outlays of $5.3 million will be expended for this
program in both 1977 and 1978.
The Department of Transportation conducts a wide variety of environmental programs designed to enhance compatibility between
transportation systems and the environment, and to alleviate the
adverse impacts of transportation facilities while promoting the more
efficient use of energy resources. Outlays of $98.0 million are planned
for 1978. The Coast Guard's activities include development of all-

SPECIAL ANALYSIS Q

321

weather means of identifying and quantifying discharges of oil and
hazardous substances, while the Urban Mass Transportation Administration is developing devices for buses to cut hydrocarbon emissions
by 80% to 90%, and carbon monoxide emissions by 40% to 60%. The
environmental programs of the Federal Highway Administration
include the examination of highway air quality problems as a function
of traffic, time, geometry, and wind flows on or near highways. The
Federal Aviation Administration's environmental activities include
the development of standards to minimize generation of aircraft
pollution and noise.
Most of the National Aeronautics and Space Administration's
pollution control outlays are used for environmental research and
development. For example, NASA conducts a continuing research
program to improve the technology for the reduction and control of
aircraft noise and emission pollutants. NASA has two pollution monitoring satellites which are collecting data on atmospheric pollution.
NASA also has demonstration projects such as the use of water
hyacinths to clean wastewater in municipal and industrial wastewater treatment lagoons, and an air pollution detection system for
identifying and locating air pollution sources.
The Bureau of Land Management (BLM) in the Department oj
Interior will spend $34.6 million on pollution abatement and control
programs in 1978. BLM conducts environmental baseline monitoring
studies of marine environments on the Outer Continental Shelf
(OCS) in order to assess the environmental impacts of OCS development. Activities include toxicity studies, faunal succession on oil
rigs, and investigation on drilling and production sites. Other activities
include preparing environmental impact statements for large oil
and gas pipeline projects. The Geological Survey will spend $14.3
million for various studies including water resources research to
determine the sources and effects of pollution. The Bureau of Mines
will expend $20.2 million in 1978 for such programs as researching
and developing methods for removing pollutants from off-gas streams
and liquid effluents of mineral processing plants, and from the burning
of fossil fuels. The remaining outlays will be made by the National
Park Service, the Bureau of Indian Affairs, the Bureau of Reclamation, the Office of Territorial Affairs, the Southwestern Power Administration, and the Fish and Wildlife Service.
The Health Services Administration in the Department oj Health,
Education, and Welfare will spend $49.5 million in 1978 primarily
on construction of sanitation facilities for Indian homes, communities,
and lands. As a result of this direct Federal operation, 8,674 Indian
housing units were served in 1976. Approximately 11,000 will be
served in 1977, and 9,500 will be served in 1978.
The Federal Energy Administration will spend $5.5 million in
1978 for such activities as developing environmental policies, complying with the National Environmental Policy Act (NEPA), and evaluating the environmental implications of energy resource policies. For
example, FEA evaluates the environmental impacts associated with
conversion orders requiring utility powerplants and major industrial
installations to convert from oil or natural gas to use of coal. In
addition, FEA is largely responsible for evaluating Federal environmental policy impacts as they relate to energy development.

322

THE BUDGET FOR FISCAL YEAR 1978

Other agencies with outlays not listed separately in table Q-4
are the Department of Labor, Appalachian Regional Commission,
TVA, Veterans Administration, Nuclear Regulatory Ccmmission,
National Science Foundation, Department of Justice, Department of
State, and the Smithsonian Institution.
UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT

Thirteen Federal departments and agencies will spend $1,859.7
million in 1978 to describe the physical characteristics of the environment, to increase understanding of the environment, and to predict
environmental conditions. This is a 7% increase over estimated 1977
outlays of $1,736.9 million. Although these activities may lead to the
reduction of pollution, they are not specifically intended for that
purpose. Instead, their purpose is to gain a broad understanding of
ecological systems and environmental interactions.
As indicated in table Q-5, 38% of these outlays in 1978 will support
environmental observation and measurement efforts that help describe
and predict weather, ocean conditions, and earthquakes. Locating
and describing natural resources will account for $504.1 million in
1978 expenditures—an increase of 10% from 1977 levels. These
expenditures include such activities as soil mapping and snow and
river basin surveys.
Other expenditures will be for further ecological research, for
physical environmental survey activities, and for aerial reconnaissance
of tropical cyclone and winter storms. There are also expenditures for
research on environmental factors which cause cancer.

SPECIAL ANALYSIS Q

323

Table Q-5. UNDERSTANDING, DESCRIBING, AND PREDICTING THE
ENVIRONMENT—BY FUNCTION (in millions of dollars)
Activity

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

Observe and predict weather, ocean conditions, and
disturbances:
Research and development
Operations.™....
Locating and describing natural resources:
Research and development
Operations
Physical environmental surveys:
Research and development
Operations
._
Weather modification activities
Research on environmental impact on man
Ecological and other basic environmental research _

66.8
111.5

225.1
466.7

248.2
473.4

209.9
207.7

52.3
57.3

223.6
246.1

241.4
288.8

14.0
161.8
17.2
226. 1
181.4

4.2
42.5
7.7
58.4
42.7

18.4
178.8
18.1
252.3
195.6

24.9
186.0
16.6
270.6
208.7

1,701.3

Total

218.6
464.6

443.4

1,824.7

1,958.6

213.6
447.0

76.4
111.2

229.2
445.5

245.8
457.5

215.0
207.7

46.8
57.2

220.0
238.7

225.5
278.6

15.3
139.9
17.2
226.5
169.1

3.8
33.1
7.9
74.6
48.5

17.8
152.0
18.0
227.0
188.7

24.5
156.3
16.5
249.6
205.4

1,651.3

459.5

1,736.9

1,859.7

OUTLAYS
Observe and predict weather, ocean conditions, and
disturbances:
Research and development
Operations
Locating and describing natural resources:
Research and development
Operations.
_
Physical environmental surveys:
Research and development
Operations
Weather modification activities
Research on environmental impact on man
Ecological and other basic environmental research.
Total

Table Q-6 shows the distribution of total budget authority and
outlays by the major agencies involved.

324

THE BUDGET FOR FISCAL YEAR 1978

Table Q-6. UNDERSTANDING, DESCRIBING, AND PREDICTING THE
ENVIRONMENT—BY AGENCY (in millions of dollars)
Agency

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

Commerce
Interior
Defense—Military
_
Health, Education, and Welfare.
National Aeronautics and Space Administration. __
National Science Foundation
Energy Research and Development Administration
Agriculture
Transportation
__
__
Smithsonian Institution.
Defense—Civil
_._
Other...

429.2
306.6
199.6
172.4
168.1
139.0

107.6
85.2
51.3
43.7
43.0
38.4

421.5
332.4
217.9
195.6
182.4
153.2

431.6
374.3
228.1
204.1
182.8
169.4

97.6
147.6
14.5
12.5

26.8
36.9

112.8
163.0
15.1
13.4
10.6

152.4
165.6
15.9
14.1
11.0

6.8

9.3

1,701.3

Total.

9.5
4.7

3.4
3.1
2.3
1.7
443.4

1,824.7

1,958.6

409.4
296.1
194.8
177.7
158.2
141.1

107.6
67.4
52.3
58.8
47.7
45.9

399.4
309.5
211.5
171.7
185.4
149.6

413.1
350.9
219.7
186.6
171.4
164.6

83.8
150.5
13.9
12.4

30.6
38.7

105.3
159.3
15.1
13.3
10.6

140.9
163.4
15.9
14.1
11.0

OUTLAYS

Commerce _
Interior
_
Defense—Military
_
Health, Education, and Welfare
National Aeronautics and Space Administration
National Science Foundation
Energy Research and Development Administration
_
___
Agriculture
Transportation _
Smithsonian Institution
Defense—Civil
Other
Total....

9.5
3.9

3.4
3.2
2.3
1.6

1,651.3

459.5

6.2

8.1

1,736.9

1,859.7

Agencies involved.—The Department of Interior plans to spend
$350.9 million in 1978 in its efforts to understand, describe, and
predict the environment. Most of this money (78%) will be spent
by the Geological Survey to continue programs such as topographic
mapping, earthquake studies and surveys designed to locate and describe water resources. In 1978, outlays for earthquake research will
increase by $16.7 million.
The Bureau of Land Management will spend $33.1 million in 1978
for conducting resource inventories, environmental baseline and
other related studies of public lands and the Outer Continental Shelf.
Outlays of $5.7 million will be spent by the Bureau of Reclamation
for its weather modification research program. This program is aimed
at resolving any uncertainties of the physical processes involved and
evaluation of actual water supply increase from cloud seeding.
The National Oceanic and Atmospheric Administration (NOAA)
in the Department of Commerce conducts a wide range of environmental
monitoring and prediction activities, weather modification experiments, surveys for mapping and charting, and data archiving and
dissemination services. NOAA will spend $413.1 million in 1978 for

SPECIAL ANALYSIS Q

325

these activities. Continued emphasis will be given to improving
weather monitoring, predicting and warning to help reduce loss of
life and property from natural disasters.
The National Aeronautics and Space Administration (NASA) plans
to spend $63.7 million in 1978 on research and development in environmental observation and measurement. These activities include
developing the capacity to make accurate 2-week weather predictions
and improving atmospheric temperature sounding and wind measurements through the all-weather atmospheric sounding satellites.
NASA will also spend $87.1 million on research and development to
locate and describe natural resources. Various satellites are being used
to inventory resources and the environment on a worldwide basis, and
to monitor changes over time.
The National Science Foundation plans to spend $164.6 million
in 1978 to fund a broad range of long-term research projects to
increase the stock of fundamental knowledge about the natural
environment. Most of these projects are in atmospheric, earth,
ocean, and biological sciences. Major programs (some jointly funded
with other Federal agencies and with other countries) include deep sea
drilling efforts, the International Decade of Ocean Exploration, the
global atmospheric research program, and funding of the major
research on the Antarctic and Arctic environments. Other, more
applied programs include support of research into ways to reduce
damage from earthquakes, to understand the nature and distribution
of chemical threats to man, to develop better techniques of managing
environmental programs on a regional basis, and to evaluate the scientific and technical basis of wastewater treatment and sludge management planning under the municipal construction grants program.
In the Department of Health, Education, and Welfare, the National
Cancer Institute and the National Institute of Environmental Health
Sciences conduct environmental programs directed to the identification of chemical, physical, and biological environmental factors which
affect human health. The Institutes determine the mode of action of
such factors and develop a scientific basis for control measures. The
program areas of special emphasis are epidemiologic research on environmental determinants of cancer, screening of chemicals and substances for cancer-causing effects, and development of more effective
methods to detect toxic and mutagenic substances. The Institutes
are spending $186.6 million on these efforts in 1978.
The Smithsonian Institution will spend $14.1 million in 1978 on
various studies to determine the impact of the environment on man
and to perform basic environmental research. Such projects include
(1) research on the effects of climatic changes on man, (2) support
of anthropological and archeological research projects, focusing on
interrelationships between cultural and environmental change, and
(3) the scientific event alert network which provides immediate
scientific information on environmental events, including volcanic
eruptions, meteorite falls, and marine mammal strandings.
The Nuclear Regulatory Commission will spend $7.2 million in 1978
on research activities to insure the safety of power reactors and
other nuclear plants as affected by environmental conditions. This
program provides information to: (1) Improve capability to characterize sites with regard to earthquakes, tornadoes, floods, and other

326

THE BUDGET FOR FISCAL YEAR 1978

natural phenomena; (2) to evaluate the structural response of facilities
and systems to extreme environmental loads; and (3) to improve and
confirm engineering design methods for mitigating effects from natural
phenomena.
The Corps of Engineers investigates terrestrial and marine ecosystems to determine the impact of engineering works and to develop
technology for minimizing the impact on the ecosystem and environment. The Corps field offices and laboratories collect and study windwave relationships, wave activities, storms, streamflow, and rainfall
data as they affect design criteria, and construction technology in
coastal zones. The Corps also conducts research in support of its
aquatic plant control program. The Corps will spend $11.0 million
for these efforts in 1978.
ENVIRONMENTAL PROTECTION AND ENHANCEMENT

In 1978, eight Federal agencies are expected to spend $1,869.8
million to protect and enhance the environment. This is an 11% increase over 1977 outlays. As table Q-7 shows, 70% of 1978 outlays
are direct Federal activities and the balance is for Federal grants to
State and local governments.

SPECIAL ANALYSIS Q

327

Table Q-7. ENVIRONMENTAL PROTECTION AND ENHANCEMENT
ACTIVITIES—BY F U N C T I O N (in millions of dollars)
Activities

1976
actual

TQ
actual

1977
estimate

1978
estimate

BUDGET AUTHORITY

Financial aid to State and local government: Purchase, development, and operations:
City recreation..
__
__
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other State and local aid. __

Subtotal

-.
_

183.2

4.0

3.7

155.3
102.0
20.0
44.0

20.7

4.0
4.7
0.9

170.3
108.2
17.5
56.1

289.9
131.2
35.0
54.1

35.0

539.3

717.3

122.3
240.9
262.4
173.5
44.0
119.8

32.1
67.7
90.8
39.5
12.0
12.3

249.2
726.8
403.9
197.7
217.7
88.4

132.0
374.4
327.6
207.8
63.1
78.7

962.9

254.4

1,883.7

1,183.6

1,449.7

Direct Federal activities: Purchase, development,
and operations:
City recreation
_
__
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other direct activities.
_.
.-.

4.4
0.3

486.8

Subtotal

Total

161.5

289.4

2,423.0

1,900.9

98.5

48.6

172.5

189.0

2.0

0.8

4.5

3.7

142.5
84.8
14.1
50.3

34.9
22.9

4.7
9.8

170.7
97.0
21.5
56.8

174.9
110.7
33.1
59.6

392.2

121.7

523.0

571.0

138.9
245.2
263.8
160.4
38.6
55.3

36.1
84.7
93.6
40.6
14.2
14.1

126.5
385.6
325.4
186.2
75.2
65.5

146.4
456.3
343.7
214.8
84.2
53.4

902.2

283.3

1,164.4

1,298.8

1,294.4

405.0

1,687.4

1,869.8

4.0

203.4

OUTLAYS
Financial aid to State and local government: Purchase, development, and operations:
City recreation
Preserve unique areas..
_
Noncity general recreation
__
_.
Sport fish and wildlife
._
Historic preservation and rehabilitation
Other State and local aid
._
Subtotal

Direct Federal activities: Purchase, development,
and operations:
City recreation...
__
Preserve unique areas
_
_
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other direct activities
Subtotal...
Total

328

THE BUDGET FOR FISCAL YEAR

1978

The major activities in this category are:
• City recreation projects to develop parks and recreational
facilities in urban areas.
• Preservation of unique natural areas, including national parks,
monuments, scenic rivers, trails, wildernesses, seashores, and
refuges for endangered species.
• General recreation projects outside of cities—including expenditures for national recreation areas, recreation programs in
national forests, and recreation sites at Federal water projects.
• Management of sport fish and wildlife at national wildlife refuges,
national fish hatcheries, and other similar projects.
• Historic preservation and rehabilitation, including national
historic sites, military parks, and other federally assisted historic
preservation and rehabilitation projects.
These enhancement and protection activities are categorized in
table Q-7 as direct Federal spending or as grants to State and local
governments for these activities. Table Q-8 lists the departments and
agencies making these expenditures.
Table Q-8. ENVIRONMENTAL PROTECTION AND ENHANCEMENT—
BY AGENCY (in millions of dollars)
Agency
BUDGET AUTHORITY
Interior
Defense—Civil
Housing and Urban Development
Agriculture
Commerce
Tennessee Valley Authority
Other agencies
Total.,

OUTLAYS
Interior
Defense—Civil
Housing and Urban Development
Agriculture
Commerce
Tennessee Valley Authority
Other agencies
Total

1976
actual

actual

949.2
134.8
137.5
101.2
96.2
4.7
26.1

200.4
41.9

1977
estimate

1978
estimate

38.5
6.8
1.6
0.2

1,917.2
150.9
151.3
104.2
69.4
4.8
25.2

1,378.8
184.2
146.5
104.6
79.6
5.0
2.2

1,449.7

289.4

2,423.0

1,900.9

881.7
134.8
90.7
94.9
65.1
4.1
23.1

264.6
41.9
31.4
37.2
11.8
1.4
16.7

1,162.9
150.9
163.2
100.8
76.6
4.3
28.7

1,320.4
184.2
177.7
101.1
76.7
5.0
4.7

1,294.4

405.0

1,687.4

1,869.8

Agencies involved.—The Department of Interior through the National Park Service will spend $451.8 million in 1978 for activities of
the National Park System, except for land acquisition. These funds
will be for operation, maintenance, general administration, planning,
and construction of facilities within the National Park System. States
will receive approximately $33.1 million in matching funds for
projects involving historic properties to help preserve them for future
generations.

SPECIAL ANALYSIS Q

329

The Bureau of Outdoor Recreation (BOR) promotes the coordination of outdoor recreation programs, and administers the land and
water conservation fund which provides grants for planning, acquisition
and development of State and local recreation areas. The fund also
provides for Federal purchases of important recreation and conservation land. BOR will spend $529.9 million in 1978 for these activities.
The Fish and Wildlife Service (FWS) administers 93 hatcheries,
which help support fishery resources in coastal and inland water and
379 units in the National Wildlife Refuge System containing 33.5
million acres. Presently, 44 endangered and threatened species of fish
and wildlife are protected on 139 of the national wildlife refuges. FWS
manages 9.8 million acres on 353 refuges for migratory birds.
The 1978 budget for these three agencies reflects two major initiatives. First is the Bicentennial land heritage program, a 10-year $1.5
billion program to upgrade our parks and refuges. This program will
provide funding for increased staffing, added facilities, and accelerated
land acquisition at Federal parks and refuges, and funding for cities
to upgrade their park systems. The second initiative is full funding
($600 million) of the doubled authorization for the land and water
conservation fund.
The Department of Agriculture will spend $101.1 million in 1978 to
protect and enhance the environment primarily through the Forest
Service and the Soil Conservation Service. Forest Service research
activities are responsible for the development and availability of the
knowledge and technologies required to maintain and enhance our
Nation's forests while meeting expanding demands for timber and
various other goods and services from these lands. Examples of major
accomplishments are improved planning for recreation purposes and
management practices that stabilize or increase big-game populations
and endangered species. The Forest Service will spend $70.2 million
for research and other programs which enhance the environment.
The Soil Conservation Service will spend $29.5 million in 1978,
primarily for technical assistance to soil and water conservation
districts. Outlays are also made for recreation area improvement.
The National Oceanic and Atmospheric Administration in the
Department oj Commerce is continuing efforts to improve management
and conservation of the Nation's coastal zones and marine fishery
resources. In 1978, NOAA will spend an estimated $25.2 million
directly and provide States and localities an estimated $46.9 million
in financial aid.
The Department oj Housing and Urban Development estimates outlays
of $177.7 million for financial aid to State and local governments for
environmental protection and enhancement activities. One such program is the community development block grant program which will
fund, at the grant recipient's discretion, the protection and improvement of properties having scenic, recreation, conservation and/or
historic value. The primary objective of the program is the development of viable urban communities, including decent housing and a
suitable living environment, and expanding economic opportunities.

330

THE BUDGET FOR FISCAL YEAR

1978

In the Department of Defense—Civil, the Corps of Engineers will
spend $184.2 million to construct, operate, and maintain recreation
facilities at water resources projects, and to protect and enhance
lands and shorelines within its jurisdiction. For example, in the forest
management program, the forest resources at civil works projects
are managed to increase their value for recreation and wildlife habitat
and to promote natural ecological conditions by following accepted
conservation practices.
The Tennessee Valley Authority will spend $5.0 million on its Land
Between The Lakes project in western Kentucky and Tennessee. This
project is a demonstration of new ideas in public outdoor recreation
and conservation education.
A small amount of funding is made by the Appalachian Regional
Commission to supplement basic grants provided by the Bureau of
Outdoor Recreation.
RESEARCH AND DEVELOPMENT

A description of funding for environmental research and development programs appears elsewhere in this analysis. However, because
research and development expenditures occur in more than one
category of activity, these expenditures have been summarized in
table Q-9. Total Federal funding for research and development programs related to environmental improvement will reach an estimated
$1,757.5 million in 1978. This represents an increase of 3 % over
1977 outlays.
Federal funding for environmental research and development are
distributed between pollution control and abatement activities and
programs relating to understanding, describing, and predicting the
environment. Research and development expenditures for environmental protection and enhancement programs, to the extent that
they exist, are not included in table Q-9 because these expenditures
are not reported separately.
Table Q-9. ENVIRONMENTAL RESEARCH AND DEVELOPMENT ACTIVITIES
(In millions of dollars)
Category

1976

1977

1978

BUDGET AUTHORITY

Pollution control and abatement *
Understanding, describing, and predicting

723.8
867.2

777.8
933.1

800.4
1,010.4

1,591.0

413.4

1,710.9

1,810.8

683.0
856. 7

190.3
258.0

809.8
900. 7

790.2
967. 3

1,539.7

Total.

181.3
232.1

448.3

1,710.5

1,757.5

OUTLAYS
Pollution control and abatement l
Understanding, describing, and predicting
Total
1

Includes both primary and secondary research and development.

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503