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SPECIAL
ANALYSES
BUDGET OF THE
UNITED STATES
GOVERNMENT
THE BUDGET DOCUMENTS
Data and analyses relating to the budget for 1980 are published
in four documents:
The Budget of the United States Government, 1980 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 in terms of national needs,
agency missions, and basic programs, and an analysis of estimated
receipts including a discussion of the President's tax program. This
document also contains a description of the budget system and
various summary tables on the budget as a whole. (Price $4.25.)
The Budget of the United States Government, 1980—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
rescission proposals 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 $12.00.)
Special Analyses, Budget of the United States Government, 1980
contains 12 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:
alternative views of the budget, i.e., current services and national
income accounts; economic and financial analyses of the budget
covering Government finances and operations as a whole, and Government-wide program and financial information for Federal civil
rights, environment, and research and development programs.
(Price $3.25.)
The United States Budget in Brief, 1980 provides a more concise,
less technical overview of the 1980 budget than the above volumes.
Summary and historical tables on the Federal budget and debt are
also provided, together with graphic displays. (Price $2.00.)
Each of these documents is for sale by the Superintendent of
Documents, U.S. Government Printing Office, Washington, D.C.
20402. (Paper covers only.)
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. ALTERNATIVE VIEWS OF THE BUDGET
A. Current services estimates
B. Federal transactions in the national income accounts...
5
7
45
PART 2. ANALYSES OF THE BUDGET TOTALS
C. Funds in the budget
D. Investment, operating, and other budget outlays
E. Borrowing, debt, and investment
F. Federal credit programs
G. Tax expenditures
H. Federal aid to State and local governments
I. Civilian employment in the executive branch
71
73
85
102
132
183
212
247
PART 3. SELECTED FEDERAL PROGRAMS*
J. Civil rights activities
K. Environment
L. Research and development
259
261
273
294
* Special analyses on Federal programs for education, employment and training,
health, and income security have been deleted from the 1980 Special Analyses
volume. Information on these particular program areas is presented in Part 5 of the
Budget of the U.S. Government, Fiscal Year 1980.
3
PART 1
ALTERNATIVE VIEWS OF
THE BUDGET
INTRODUCTION
Part 1 includes alternative views of the budget. It provides two
different standards against which the budget totals may be measured—current services estimates and national income accounts.
These special analyses are designated A and B.
Special Analysis A (Current Services Estimates) presents the
estimates required by the Congressional Budget Act of 1974 (31
U.S.C. lla). These estimates reflect the anticipated costs of continuing ongoing Federal programs and activities at present levels without policy changes (that is, ignoring all new initiatives, Presidential or congressional, that are not yet law).
Special Analysis B (Federal Transactions in the National Income
Accounts) presents the Federal budget estimates in terms of the
national income accounts. It also explains the relationships of the
unified budget of the Federal Government to the national income
and product accounts, which constitute the most widely used measure of aggregate economic activity in the United States.
SPECIAL ANALYSIS A
CURRENT SERVICES ESTIMATES
The Congressional Budget Act of 1974 requires that the President submit to the Congress estimates of the outlays and budget
authority needed to maintain current Government services and
activity levels. The Act defines the current services levels as
. . . the estimated outlays and proposed budget authority which would be included in the Budget to be submitted
pursuant to section 201 of the Budget and Accounting Act,
1921, for the ensuing fiscal year if all programs and activities were carried on during such ensuing fiscal year at the
same level as the fiscal year in progress and without policy
changes in such programs and activities.
The Act further requires the President to submit the economic and
programmatic assumptions underlying the estimates and calls for
the Joint Economic Committee of the Congress to review and
evaluate the estimates.
Since current services estimates show what would happen if no
policy changes were made, they provide a base with which the
administration's budget proposals, or other proposals, may be compared. Such comparisons are made in various parts of the budget
and serve to highlight the effects of recommended policy changes.1
The 1974 Act required that these estimates be presented in November. Last year, in an experiment agreed to by the Congress, the
current services estimates were presented in conjunction with the
President's January budget. Congress recently passed a joint resolution calling for the President to transmit the 1980 current services estimates to the Congress no later than he transmits the
budget for fiscal year 1980. Therefore, the current services estimates are again presented in conjunction with the January budget.
The current services estimates are based on the same economic
assumptions as the President's budget proposals. Changes in economic conditions significantly affect budget estimates because of
their effects on tax receipts, unemployment benefits and other
programs under which spending varies with the unemployment
rate, and cost-of-living adjustments. As a result, if different economic assumptions were used, it would be very difficult to separate
the effects of policy differences from the effects of differences in
the economic assumptions.
1
Summary comparisons are in the Budget of the United States Government, Fiscal Year 1980, Part 2,
"Budget Summary," and Part 3, "Economic Assumptions and the Long-Range Budget Outlook."
8
THE BUDGET FOR FISCAL YEAR 1980
The economic assumptions presume that all the President's
budget proposals will be adopted. Continuation of all programs and
tax laws unchanged at current services levels would probably
result in a somewhat different economic performance. Other factors being the same, current services outlays, which are higher
than those proposed in the President's budget, could be expected to
add to inflationary pressures in the current economic environment.
The economic assumptions common to the budget and to the
current services estimates are summarized in table A-l. For further details and discussion of these economic assumptions, see Part
3 of the budget, i 'Economic Assumptions and the Long-Range
Budget Outlook."
Table A - l . SUMMARY OF ECONOMIC ASSUMPTIONS
(Calendar years)
1978
Gross national product (in billions of current dollars)
Rate of growth of constant dollar 6NP (percent
change, fourth quarter over fourth quarter)
Unemployment rate (percent, fourth quarter)
Consumer Price Index (percent change, December
over December)
1979
2,106
1980
2,343
2,565
4.0
5.8
2.2
6.2
3.2
6.2
9.2
7.4
6.3
T H E CURRENT SERVICES CONCEPT
The current services estimates are neither recommended
amounts nor forecasts as to what the figures for 1979 and 1980 will
actually be. Rather, they provide a base against which budgetary
alternatives may be assessed. This base embodies the cumulative
effects of all past congressional and presidential budgetary choices.
Since the estimates indicate the near-term budgetary implications
of the current directions of Federal programs, they in effect answer
the question: "How would the budget come out if we simply left the
Federal Government on automatic pilot through next year?"
The current services concept used in this analysis, and in previous current services estimates submitted by the executive branch,
is not the only concept possible. Under the concept adopted, the
current services estimates for 1980 reflect the expected costs of
continuing ongoing Federal programs at 1979 levels without policy
change; that is, they omit all proposed and pending new initiatives,
Presidential or congressional, that are not now enacted. In general,
the 1979 level on which the current services estimates are based is
that which is implied by enacted 1979 appropriations or, for those
few 1979 appropriations not yet enacted, by the level authorized or
implied in continuing resolutions. The estimates allow for the
SPECIAL ANALYSIS A
future implications of current law, and for anticipated changes of a
relatively uncontrollable nature (as distinct from policy changes).
Anticipated inflation for discretionary programs has proved to be
a difficult issue in developing current services estimates. OMB
excludes automatic inflation adjustments for discretionary programs on the grounds that there is no reason to assume such
increases except where program benefits are tied by law to the cost
of living or where there is a clear intent to cover full costs of
future inflation. The Congressional Budget Office, using a similar
"current policy" concept, provides an inflation adjustment for all
programs. OMB has always provided subsidiary data indicating
what the impact on the budget would be if all programs were
adjusted for inflation. For the 1980 budget, however, the OMB
presentation includes alternative current services totals that contain an adjustment for inflation for the budget as a whole. This
provides an alternative base against which to measure the President's budget. The difference between the President's budget and
the current services totals adjusted for inflation represents a more
meaningful measure of the degree of restraint in the President's
1980 budget. Consideration will be given to adjusting current services estimates at the detailed program level for the 1981 budget.
Specific guidelines for this year's detailed programmatic estimates are:
—For entitlement programs (such as social security), the current
services estimates take into account inflation adjustments that
are mandatory under current law, changes in the benefit base
(usually earnings), and changes in the anticipated numbers of
beneficiaries.
—Individual grants to State and local governments in 1980 are
assumed to be funded at the same dollar amount as in 1979
unless the grants are: (a) scheduled to increase by specified
amounts as a result of legislation; (b) tied by legislation to costof-living increases or the unemployment rate; (c) affected by
changes in beneficiary populations or other factors that affect
benefit payments under entitlement programs; or (d) affected
by spending from prior-year commitments; for example, highway grants.
—Entitlement programs that are not linked by law to the cost-ofliving (such as veterans compensation and readjustment benefits) are assumed to remain level except for changes in the
benefit base and in the number of people eligible.
—Procurement and construction activities are assumed to proceed in an orderly fashion, consistent with current law and
appropriation levels. Outlays for these programs are largely
determined by prior-year contracts and obligations. Some appropriations provide for anticipated inflation in the cost of
10
THE BUDGET FOR FISCAL YEAR 1980
multiyear projects. In such instances, the current services estimates take into account anticipated inflation (consistent with
the economic assumptions). In the past section 801, title VIII,
of the Defense Authorization Act of 1978 required that the
President's budget requests reflect anticipated price increases
in the cost of defense operations and maintenance. Although
this is no longer a legal requirement, current services estimates for Department of Defense military programs are adjusted accordingly.
—Outlays for Federal pay are assumed to increase in accordance
with the projected results of the annual pay comparability
survey. The October 1979 pay raise is projected to be 10.25%
on this basis. This figure includes a 3 percentage point "catch
up" from the below comparability increase for October 1978.
—Interest on the public debt is estimated on the basis of the
current services deficit and the same interest rate assumptions
used in the President's budget proposals.
—Offsetting receipts are estimated on the basis of judgment as to
their most likely level, assuming no change in current law.
—Budget authority for certain major trust funds consists of trust
fund receipts. These are estimated using standard revenue estimating techniques.
—Proposed rescissions of budget authority are not reflected.
—It is assumed that deferral actions continue in effect for the
period specified in the special message transmitted to the Congress under the Impoundment Control Act of 1974 (unless they
have been overturned by the Congress).
Many Federal programs are authorized for a limited number of
years, but are routinely renewed. If authority for such a program is
scheduled to expire before or during 1980, it is assumed for purposes of current services estimates that it will be renewed. However, programs that are clearly temporary in nature, such as the
local public works program, are assumed to expire.
The estimates of receipts on a current services basis assume that
temporary provisions of existing law will be extended and that
future tax changes will occur as scheduled under current law.
A guiding principle in establishing a conceptual basis for the
current services estimates was to make the results useful to the
Congress and the public. Clearly, however, alternative assumptions
could have been made and might be more useful for certain purposes.
The difference between the current services totals and the administration's budget proposals is not a comprehensive measure of
the degree of austerity that may exist. Two examples may illustrate the point:
SPECIAL ANALYSIS A
11
—Whenever the administration decides to hold a discretionary
grant program or a direct Federal program at or near the
current level, the inflation may result in a real cut in program.
With high inflation, the size of these real cuts becomes substantial. However, under OMB's current services guidelines,
there is no adjustment for inflation at the program level.
Therefore individual program comparisons may show little or
no difference between current services and the administration
recommendation and therefore do not reflect the real cut in
program.
—By definition, current services do not include amounts proposed for new initiatives requiring new legislation. In a tight
budget, the administration may choose to drop or defer some
legislative proposals previously made. This change will not
appear in the differences between current services amounts
and administration recommendations.
CURRENT SERVICES BUDGET TOTALS
Current services outlays are estimated to be $536.1 billion in
1980, 9.1% higher than in 1979, and budget authority is estimated
to be $610.2 billion, an increase of 10.2% over 1979. Receipts for
1980 are estimated to increase 10.6% on a current services basis,
from $456.0 billion in 1979 to $504.5 billion in 1980. The resulting
1980 deficit would be $31.6 billion, $3.8 billion lower than that for
1979.
Table A-2. CURRENT SERVICES BUDGET TOTALS
(In billions of dollars)
1978
actual
Receipts
Outlays
Deficit ( - )
Budget authority
1980
estimate
1979
estimate
402.0
450.8
456.0
491.3
504.5
536.1
-48.8
-35.4
31.6
501.5
553.7
610.2
Receipts.—The 1980 current services receipts estimates assume
extension of the airport and airway trust fund taxes scheduled to
expire June 30, 1980. The estimates also take into account scheduled increases in payroll taxes that have already been enacted.
For purposes of comparison, table A-3 shows receipts by major
source on a current services basis for 1979 and 1980. As the table
shows, current services receipts are projected to increase by $48.5
billion from 1979 to 1980. This is largely due to assumed increases
in incomes, reflecting both real economic growth and inflation.
12
THE BUDGET FOR FISCAL YEAR 1980
Table A-3. CURRENT SERVICES RECEIPTS BY SOURCE
(In billions of dollars)
Current services
1978
actual
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions
Excise taxes
Other
Total
1979
estimate
1980
estimate
1980
administration
proposals
181.0
60.0
123.4
18.4
19.3
203.6
70.3
141.8
18.4
21.9
229.6
71.0
161.2
18.4
24.2
227.3
71.0
161.5
18.5
24.3
402.0
456.0
504.5
502.6
Individual income taxes are estimated to increase by $26.0 billion
from 1979 to 1980 on a current services basis. This increase of
12.8% reflects rising personal income. Corporation income taxes
are estimated to increase by $0.7 billion, or 0.9%, from 1979 to 1980
on a current services basis, largely as a result of the assumed
increase in corporate profits.
Social insurance taxes are estimated to increase by $19.5 billion
on a current services basis. The estimate reflects assumed increases
in total wages and salaries paid, scheduled increases in the social
security taxable earnings base from $22,900 in calendar year 1979
to $25,900 in 1980, and an administrative action announced last
November to accelerate State and local deposits of social security
taxes.
Other receipts (excise taxes, estate and gift taxes, customs duties,
and miscellaneous receipts) are projected to increase by $2.4 billion
from 1979 to 1980 on a current services basis largely as the result
of increased economic activity. These estimates reflect continued
phaseout of the telephone excise tax by 1 percentage point each
January.
Outlays.—The level of outlays necessary to continue ongoing Federal programs and activities at 1979 levels without policy changes
is estimated at $536.1 billion in 1980. The increase in current
services outlays from 1979 to 1980 is $44.8 billion. Current services
outlays adjusted for inflation are estimated at $544.1 billion in
1980, $8.0 billion greater than the unadjusted amount.
13
SPECIAL ANALYSIS A
Table A-4. CURRENT SERVICES OUTLAYS BY FUNCTION
(In billions of dollars)
Current services
1978
actual
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and social services
Health
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Interest
Allowances:
Civilian pay raises
Contingencies
Undistributed offsetting receipts:
Employer share, employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf
Total outlays
Inflation adjustmentx
Adjusted outlays 1
*$50 million or less.
1
See text.
105.2
5.9
4.7
5.9
10.9
7.7
3.3
15.4
11.0
26.5
43.7
146.2
19.0
3.8
3.8
9.6
44.0
1979
estimate
113.7
7.2
5.1
8.6
11.1
6.0
3.0
17.1
9.0
30.6
49.5
158.8
20.3
4.3
4.3
8.8
52.7
1980
estimate
1980
administration
proposals
125.5
7.9
5.4
8.0
11.8
5.0
3.4
18.0
7.2
31.0
55.1
179.5
20.4
4.3
4.2
9.2
57.1
125.8
8.2
5.5
7.9
11.5
4.3
3.4
17.6
7.3
30.2
53.4
179.1
20.5
4.4
4.4
8.8
57.0
2.1
.9
.5
-5.0
-8.5
-2.3
-5.4
-9.8
-3.5
-5.5
-10.9
-2.6
-5.5
-10.9
-2.6
450.8
491.3
536.1
8.0
531.6
544.1
14
THE BUDGET FOR FISCAL YEAR 1980
Table A-4 shows current services outlays by function. Estimates
by agency are presented in table A-5. The greatest dollar increases
from 1979 to 1980 occur in the income security, national defense,
and health functions, largely due to increases in the number of
beneficiaries, cost-of-living adjustments, and increases in the prices
of goods and services purchased or financed.
Table A-5. CURRENT SERVICES OUTLAYS BY AGENCY
(In billions of dollars)
1978
actual
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Defense—Civil
Department of Energy
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
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies
Allowances
Undistributed offsetting receipts
Total outlays
Inflation adjustment 1
Adjusted outlays 1
1
See text.
Current services
1979
estimate
1.0
.4
.1
4.4
20.4
5.2
103.0
2.6
6.3
162.9
7.6
3.8
2.4
22.9
1.3
13.5
56.4
4.1
.1
4.0
19.0
25.4
1.2
.5
.1
5.0
19.8
4.3
111.1
2.6
8.8
181.0
9.0
4.0
2.6
22.9
1.4
15.3
65.2
4.2
.1
4.2
20.3
26.3
-15.8
-18.7
450.8
491.3
1980
estimate
1980
administration
proposals
1.2
.5
.1
4.0
19.4
3.2
122.8
2.7
9.3
201.8
10.7
4.0
2.6
25.3
1.6
16.1
70.1
4.7
.1
4.6
20.4
27.8
2.1
-19.0
1.3
.6
.1
5.1
18.4
3.3
122.7
2.7
8.9
199.4
10.6
3.8
2.5
24.5
1.7
15.8
69.9
4.8
.1
4.6
20.5
28.0
1.4
-19.0
536.1
8.0
531.6
544.1
SPECIAL ANALYSIS A
15
Table A-6 shows the major components of the changes in current
services outlays between 1979 and 1980. Outlays for income security programs are estimated to rise from $158.8 billion in 1979 to
$179.5 billion in 1980. Outlays for this function increase by $20.8
billion due to automatic cost-of-living increases in many benefit
programs, higher earnings records for new retirees, and increases
in the number of beneficiaries. In the case of social security, for
example, about two-thirds of the 1979 to 1980 outlay increase is due
to cost-of-living adjustments, with higher earnings records and net
increases in beneficiaries accounting for the remaining one-third.
Table A-7 shows caseload projections for major benefit programs
and other selected programmatic assumptions.
Table A-6. CHANGE IN CURRENT SERVICES BUDGET AUTHORITY AND OUTLAYS, 1979 TO 1980
(In billions of dollars)
Budget
authority
Outlays
1979 current services estimate
1979-80 changes:
Income security:
Social security
Federal employee retirement
Unemployment compensation
Housing assistance
Other income security programs
National defense:
Department of Defense—Military:
Procurement
Operation and maintenance
Military and civilian pay raises
Military retired pay
Other defense military
Other national defense
Medicare and medicaid
Net interest
Allowances for civilian agency pay raises
TVA borrowing authority
Farm income stabilization
Local public works
Strategic petroleum reserves
International monetary programs
All other programs, net
553.7
491.3
15.3
2.2
*
6.4
3.1
13.5
1.7
2.1
.9
2.5
1980 current services estimate
610.2
*$50 million or less.
1.7
1.1
4.1
1.1
1.3
.1
4.9
3.4
2.1
15.0 .
-3.3
*
-3.0
-1.8
2.8
2.7
2.3
4.0
1.2
1.6
.1
4.9
3.4
2.1
_ g
-L7
-.4
4.9
536.1
16
THE BUDGET FOR FISCAL YEAR 1980
Current services outlays for the military functions of the Department of Defense are estimated to increase by $11.7 billion between
1979 and 1980. Pay raises for military and civilian personnel, including retired military personnel, account for $4.1 billion of this
increase. The October 1979 Federal pay increase for white-collar
employees is estimated to average 10.25% under the comparability
survey. Current services outlays for defense purchases (excluding
pay) are estimated to increase by $7.6 billion, due to estimated
price increases of 7.0% and the spendout of funds previously appropriated.
Table A-/. CASELOADS AND PROGRAMMATIC ASSUMPTIONS
Fiscal years
1979
Beneficiaries (annual average, in thousands) .
Social security (OASDI)
Railroad retirement4
Federal civilian retirees
Military retirement
Veterans compensation and pensions
Gl bill
Disabled coal miners 4
Supplemental security income4
Public Assistance (AFDC)
Food stamps
Medicaid
Medicare:
Hospital insurance
Supplemental medical insurance
Automatic benefit adjustments (percent):
Social security (June)
Federal employee retirement:
March
September
Veterans pensions (June)
Food stamps:3
January
July
Interest rate (91-day bills, percent, calendar years) 1
Budget deficit (current services, in billions of dollars)
Unemployment rate (percent, annual average, calendar years):
Total
Insured 2
1980
35,025
1,016
1,639
1,262
4,911
1,192
432
4,220
10,538
16,500
22,894
35,931
1,011
1,690
1,300
4,913
999
410
4,245
10,618
17,900
23,005
26,863
26,541
27,464
27,242
9.1
7.1
4.0
3.9
9.1
3.3
3.1
7.1
5.0
4.7
8.8
-35.4
4.5
3.8
7.6
-31.6
6.0
3.1
6.2
3.2
1
Average rate on new issues within period. In the past, interest rates for the forecast period have been assumed to remain at the levels prevailing at
the time the estimates were made. Because current interest rates are unusually high, and because it would be unrealistic to assume continuation of
these high rates, these estimates assume, by convention, that interest rates decline with the rate of inflation.
2
This measures unemployment under State regular unemployment insurance as a percentage of covered employment under that program. It does not
include recipients of extended benefits under that program.
3
1 9 8 0 adjustments assume legislation to raise the food stamp authorization ceiling. Without the legislation food stamp benefits would be decreased.
4
End of year.
SPECIAL ANALYSIS A
17
Current services outlays for the medicare and medicaid programs
are estimated to increase by $4.9 billion between 1979 and 1980,
largely as a result of increases in medical care prices.
Other major changes in current services outlays between 1979
and 1980 include an increase in net interest of $3.4 billion; a $2.1
billion increase for civilian agency pay raises; and a decrease of
$1.7 billion for local public works, reflecting termination of this
program.
Budget authority.— Current services budget authority is estimated to total $610.2 billion in 1980, $56.5 billion more than in 1979.
Current services budget authority adjusted for inflation is estimated at $618.2 billion in 1980, $8.0 billion greater than the unadjusted
amount. Increases in budget authority between 1979 and 1980 generally reflect the higher funding levels that would be necessary to
permit the higher level of outlays required to maintain 1979 services levels in 1980. In the case of most trust funds, however, the
funds' receipts automatically become budget authority; thus increases in budget authority for these funds simply reflect year-toyear growth in expected receipts. Budget authority for some programs display erratic year-to-year changes due to sporadic funding
patterns or advance funding. For example, the Tennessee Valley
Authority (TVA) receives a large increment of budget authority
(borrowing authority) every few years to facilitate the TVA electric
power construction program. Legislation will be proposed for later
transmittal to increase the limitation on borrowing authority
under the TVA Act in 1980 by a currently estimated $15.0 billion.
Tables A-8 and A-9 show the estimates of current services
budget authority by function and by agency, respectively. The
major components of the changes in current services budget authority between 1979 and 1980 are shown in Table A-6.
280-700
O -
7 9 - 2
18
THE BUDGET FOR FISCAL YEAR 1980
Table A-8. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)
Current services
1978
actual
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment and social services
Health
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Interest
Allowances:
Civilian pay raises
Contingencies
Undistributed offsetting receipts:
Employer share, employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf
1
125.5
13.5
5.2
7.5
12.8
8.3
6.1
18.9
8.1
32.2
52.6
191.4
20.4
4.2
4.3
8.6
52.7
1980
estimate
1980
administration
proposals
134.9
11.9
5.5
19.3
12.8
4.9
7.0
19.5
7.6
31.6
57.6
218.5
21.0
4.3
4.4
9.2
57.1
138.2
13.7
5.7
19.5
12.9
4.9
8.3
19.1
11.3
30.9
57.6
214.5
21.0
4.3
4.5
8.8
57.0
2.1
.9
1.5
x
-5.0
-8.5
-2.3
-5.4
-9.8
-3.5
-5.5
-10.9
-2.6
-5.5
-10.9
-2.6
501.5
Total budget authority
Inflation adjustmentx
Adjusted budget authority
117.9
9.8
4.9
8.2
13.6
2.6
5.3
15.0
10.3
22.4
46.5
180.1
19.0
3.9
4.1
9.7
44.0
1979
estimate
553.7
610.2
8.0
615.5
618.2
See text.
Increases in budget authority of $4.9 billion for health and $20.6
billion for income security (excluding housing assistance) are primarily due to higher social security and medicare trust fund receipts and higher medicaid costs.
An increase in budget authority for energy programs of $11.8
billion is largely due to the $15.0 billion currently anticipated
increase in TVA borrowing authority offset in part by a $3.0 billion
decrease in budget authority for the strategic petroleum reserves.
Implementation of the strategic petroleum reserves will continue
in 1980; however, the 1979 appropriation of $3.0 billion will cover
most of the programs costs in both 1979 and 1980.
A $9.3 billion increase in budget authority for the Department of
Defense—Military largely reflects pay increases for military and
civilian personnel and increases in the costs of an equivalent level
of defense purchases.
19
SPECIAL ANALYSIS A
Other major changes in current services budget authority include an increase in net interest of $3.4 billion; a $2.1 billion
increase in allowances for civilian agency pay raises; and a decrease in farm income stabilization of $3.3 billion, reflecting the
fact that borrowing authority for Commodity Credit Corporation
(CCC) price support programs was increased from $14.5 billion to
$20.0 billion in 1979. A further increase will not be necessary in
1980.
Table A-9. CURRENT SERVICES BUDGET AUTHORITY BY AGENCY
(In billions of dollars)
1978
actual
Current services
1979
estimate
Total budget authority
Inflation adjustment 1
1.1
.5
.1
7.5
16.5
2.3
115.3
2.8
10.7
162.2
38.0
4.6
2.4
20.0
1.5
13.5
56.8
5.5
.2
4.1
19.0
32.9
1.1
.5
.1
11.3
22.6
2.5
122.8
2.7
9.6
183.7
31.8
4.6
2.5
28.5
1.6
17.2
65.3
5.4
.2
4.4
20.4
33.6
-15.8
501.5
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Defense—Civil
Department of Energy
Department of Health, Education, and Welfare....
Department of Housing and Urban DevelopmentDepartment of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration....
Veterans Administration
Other independent agencies
Allowances
Undistributed offsetting receipts
1980
administration
proposals
-18.7
1.1
.5
.1
7.9
20.6
3.0
132.1
2.7
7.5
204.8
38.1
4.6
2.5
28.7
1.6
17.8
70.3
5.4
.3
4.7
21.0
51.7
2.1
-19.0
-19.0
553.7
610.2
615.5
Adjusted budget authority
1
1980
estimate
1.3
.6
.1
10.3
20.5
3.2
135.0
3.1
7.4
.205.2
33.3
4.4
2.4
27.5
1.7
17.8
70.1
5.1
.3
4.7
21.0
57.0
2.4
618.2
See text.
THE IMPACT OF INFLATION
As discussed above, the OMB presentation includes alternative
current services totals that contain an adjustment for inflation for
the budget as a whole. Table A-10 indicates the effect on current
services budget authority and outlays of this approach to inflation.
In estimating current services budget authority and outlays, not
all programs are adjusted for the effects of inflation: most operating expenses (other than salaries), most veterans benefits, and
20
THE BUDGET FOR FISCAL YEAR 1980
many grants to State and local governments are not so adjusted. In
developing the adjusted estimates, rough inflation adjustments
have been made to the non-inflated portion of the budget. As a
result the adjusted current services outlays and budget authority
are about $8.0 billion higher in 1980 than the unadjusted levels.
Table A-10. IMPACT OF INFLATION ADJUSTMENT
(In
billions of dollars)
Budget
Authority
Nonmandatory adjustments for inflation:
Benefit payments for individuals
Other programs not adjusted for inflation
1980
Outlays
1.8
6.2
8.0
Total
1.8
6?
8.0
DIFFERENCES BETWEEN CURRENT SERVICES ESTIMATES AND
BUDGET PROPOSALS FOR
1980
For 1979, the administration's estimates of outlays and budget
authority are above the current services levels by $2.0 billion and
$5.9 billion, respectively. The major increases in budget authority
above the current services level include supplemental appropriations for the Department of Defense—Military of $2.4 billion,
supplemental appropriations for the rural housing insurance fund
of $1.0 billion, and supplemental appropriations of $1.0 billion for
the purchase of Conrail securities. The major increase in outlays
above the current services level due to the supplemental appropriations is a $0.8 billion increase for the Department of Defense—
Military. The administration's estimate of receipts does not differ
from the current services level of $456.0 billion.
For 1980, the administration's estimate of outlays is $4.6 billion
below the current services level, and budget authority is $5.4 billion above the current services level. In comparison, the administration's estimates of 1980 outlays and budget authority are below
the current services levels adjusted for inflation by $12.5 billion
and $2.7 billion, respectively. The current services receipt level is
$2.0 billion above the administration's request of $502.6 billion.
Receipts.—As shown in Table A - l l , the Administration's tax
proposals result in a net decrease in 1980 receipts of $2.0 billion
below the current services level. The real wage insurance initiative, which is the only major proposal affecting income tax receipts,
reduces individual income taxes below the current services level by
$2.3 billion. This decrease in individual income tax receipts is only
partially offset by increases in other receipts of $0.3 billion. Pro-
SPECIAL ANALYSIS A
21
posed legislation to increase railroad retirement payroll taxes (primarily by eliminating the taxable earnings maximum on the industry portion of the tax) increases social insurance taxes and contributions above the current services level by $0.2 billion. A proposed
fee of up to 3 cents per barrel on oil received at any U.S. refinery
or terminal results in an increase in miscellaneous receipts of $0.1
billion above the current services level.1
Table A - l l . EFFECTS OF ADMINISTRATION PROPOSALS ON RECEIPTS
(In billions of dollars)
1979
Current services receipts estimates
Individual income tax proposals:
Real wage insurance
Other
1980
456.0
—2.3
*
Subtotal, individual income tax proposals
—2.3
Social insurance tax proposals:
Increase in railroad retirement payroll tax
.2
Subtotal, social insurance tax proposals
.2
Other proposals
.1
Total proposed changes
Proposed receipts, President's budget
504.5
—2.0
456.0
502.6
*$500 million or less.
Outlays.— Table A-12 shows the major differences between the
administration's 1980 budget and the current services outlay level.
Proposed reductions result in a decrease in outlays of $9.7 billion
below the current services level, which is only partially offset by
proposed increases of $5.2 billion.
The largest proposed reductions from current services outlay
levels include the administration's hospital cost containment proposals, which will reduce outlays for medicare and medicaid by $1.7
billion; and a pay increase of 5.5% for Federal civilian agency
employees, which will reduce outlays by $1.2 billion below the
current services level. Other major reductions include a reduction
in public service employment programs of $0.6 billion, which parallels the decline in unemployment since the major program increases
were made in 1977; a reduction in farm income stabilization outlays of
$0.7 billion, reflecting the proposed establishment of an international emergency food reserve; and proposed reductions in social
security of $0.6 billion, designed to eliminate unnecessary and
windfall benefits. A proposed reduction in the school lunch and
other nutrition programs of $0.5 billion reflects improved adminis'A more detailed discussion of the administration's tax proposals is presented in the Budget of the United
States Government, Fiscal Year 1980, Part 4, "Budget Receipts."
22
THE BUDGET FOR FISCAL YEAR 1980
tration and the targeting of resources on those most in need. Expiration of interim financing of railroads and the administration's
deregulation proposals result in a decrease in outlays for railroads
of $0.5 billion. Other health financing cost savings proposals, and
proposed reductions for higher education and VA hospital and
medical care, are each expected to reduce outlays by $0.4 billion
below the current services level. A shift in the counter-cyclical
revenue sharing program from an emphasis on general anti-recession relief to highly targeted assistance for a few hard pressed local
governments reduces outlays by an additional $0.4 billion.
The largest outlay increase above the current services level reflects proposed legislation to eliminate the food stamp program's
authorization ceiling. This proposal increases outlays by $0.7 billion
above the current services level. Other major increases above current service include increases for social services of $0.5 billion,
primarily for grants to States for social and child welfare services;
a proposed increase in VA compensation benefits of $0.5 billion, for
cost of living adjustments of 7.8%; and increases in allowances for
contingencies (excluding Federal civilian pay increases) of $0.5
billion.
Budget authority.—In accordance with the national wage-price
standards included in the administration's anti-inflation program,
the budget assumes a 5.5% Federal pay increase, resulting in a
decrease in budget authority for civilian agency pay raises of $1.2
billion below the current services level. A reduction in training and
employment assistance, primarily for public service and youth employment programs, reduces budget authority by an additional $1.2
billion.
Increases in budget authority for the military functions of the
Department of Defense of $2.9 billion above the current services
level reflect higher purchases to carry out the administration's
policy to maintain the deterrent capability of our conventional and
strategic forces as the Soviet Union and its allies increase their
military capabilities. Other major increases in budget authority
above the current services level include $3.5 billion for the establishment of the National Development Bank, to provide financial
assistance to economically depressed urban and rural areas; $1.7
billion for foreign economic and financial assistance; $1.7 billion for
the National Credit Union Administration; and $1.5 billion for
allowances for contingencies (excluding pay increases for Federal
civilian employees).
23
SPECIAL ANALYSIS A
Table A-12. DIFFERENCES BETWEEN ADMINISTRATION 1980 BUDGET REQUEST AND CURRENT
SERVICES LEVELS
(In billions of dollars)
Budget
authority
Outlays
Current services estimates for 1980
Proposed reductions:
Hospital cost containment
Allowances for civilian agency pay raises
Farm income stabilization
Public service employment
Social security
School lunch and other nutrition programs
Railroads
Countercyclical revenue sharing
Other health financing cost savings
Higher education
VA hospital and medical care
Summer youth employment
Management of national forests and forestry research
Health resources programs
Aid to families with dependent children (AFDC)
Impact aid
Exploration of national petroleum reserves
Criminal justice assistance
Conservation of agricultural lands
Land and water conservation fund
Housing assistance
Government National Mortgage Association mortgage purchase activities
Sewage treatment plant construction grants
Other
610.2
-.4
-1.0
-.6
Subtotal, reductions
Proposed increases:
Defense—Military
National Development Bank
Foreign economic and financial assistance
National Credit Union Administration
Allowances for contingencies (excluding civilian agency pay raises)
Food stamps
Water resources
Social services
Medicare and medicaid expansions
VA compensation benefits
Elementary and secondary education
Health services programs
Private sector employment initiative
Real wage insurance
HUD: Community development block grants
Urban park and recreation grants
Railroad retirement
Other
-12.5
-9.7
3.9
3.5
1.7
1.7
1.5
.7
.6
.5
.3
.5
.4
.3
.2
.2
.2
.2
2.4
-.1
.2
.3
*
.5
.7
*
.5
.4
.5
.2
.2
.2
.2
*
*
_ \
L8
17.9
615.5
5.2
531.6
Subtotal, increases
President's request for 1980
*$500 million or less.
*
-1.2
*
-.8
*
-.5
-.5
-.4
-.1
-.3
-.5
— .3
-1
-.3
-.2
-.3
-.2
-.1
-.1
_ 2
-4^3
536.1
-1.7
-1.2
-.7
-.6
-.6
-.5
-.5
-.4
-.4
-.4
-.4
-.3
— .3
-.2
-.2
-.2
_ 2
-A
-.1
-.1
*
24
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM
(In millions of dollars)
Current services
1978
actual
050 NATIONAL DEFENSE
051 Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Procurement
Research, development, test and evaluation
Military construction
Family housing
Revolving funds and other
Allowances: Civilian and military pay raises:
Existing law
Proposed legislation
Other legislation
Subtotal, Department of Defense—Military
053
Atomic energy defense activities
054 Defense-related activities:
Existing law
1979
estimate
27,246
9,180
34,732
29,529
11,371
1,641
1,346
278
28,511
10,318
37,864
30,229
12,251
2,319
1,571
-235
1980
estimate
28,831
11,452
39,936
31,926
12,931
2,584
1,692
-313
Deductions for offsetting receipts
Total budget authority
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
Multilateral development banks
International organizations
Agency for International Development
Proposed legislation
P. L 480—Food Aid
Security supporting assistance (AID)
Refugee assistance
Offsetting receipts and other
Subtotal, Foreign economic and financial assistance
152 Military assistance:
Grant military assistance
Foreign military training
Foreign military credit sales
Offsetting receipts and other
Subtotal, Military assistance
153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations & conferences
Other
Proposed legislation
Subtotal, Conduct of foreign affairs
28,890
11,452
40,222
35,402
13,536
2,158
1,575
-429
4,055
115,322
2,514
122,829
2,582
2,256
-81
61
132,093
135,041
2,615
3,022
360
93
91
155
93
91
155
183
—2
—3
—3
—3
Proposed legislation
Subtotal, Defense-related activities
1980
administration
proposals
—178
117,926
125,499
134,860
138,243
1,926
240
1,294
2,515
260
1,544
2,342
260
1,519
923
2,219
79
-209
6,472
806
1,921
101
-201
6,945
719
1,909
100
-220
6,630
3,625
277
1,762
25
719
1,995
152
-208
8,348
180
30
676
-277
209
34
654
-244
211
29
656
-239
110
33
656
-239
608
653
657
560
748
461
32
811
478
34
783
502
32
807
503
35
7
1,241
1,323
1,318
1,352
25
SPECIAL A N A L Y S I S A
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
154
Foreign information and exchange activities
155 International financial programs:
Export Import Bank
Military sales trust fund (net)
International monetary programs
Other
Subtotal, International financial programs..
Deductions for offsetting receipts
Total budget authority
250 GENERAL SCIENCE, SPACE, AND TECHNOLOGY
251 General science and basic research:
National Science Foundation programs
Department of Energy general science programs
Smithsonian scientific information exchange activities-
41
5
1979
estimate
54
0
1980
administration
proposals
1980
estimate
55
1
51
2
689
2,200
829
2,200
-74
2,400
1,832
-76
1,124
4,156
2,812
2,952
-100
9,795
-97
13,483
-78
11,853
-78
13,655
405
2
917
430
2
919
451
1,011
474
1,198
-77 -77
Subtotal, General science and basic research
253 Space flight
1,275
2,192
1,349
1,370
1,485
2,239
2,332
254
Space science, applications, and technology....
1,065
1,228
2,336
1,404
255
Supporting space activities-
39
6
34
8
-2
45
3
4,897
5,198
46
3
-2
5,544
-2
5,651
12
1
12
0
240
-862
173
15,000
Deductions for offsetting receipts..
Total budget authority
1,401
270 ENERGY
271 Energy supply:
Environment (EPA)
Uranium enrichment
Petroleum reserves
Petroleum reserves—Receipts
Power marketing (includes TVA)
Proposed legislation
Spent fuel storage fund (proposed).
Energy tax credit
Department of Energy
Other offsetting receipts
130
528
210
-501
152
112
47
231
-686
173
3,457
-250
1
3,441
-273
1
3,571
-319
4
-862
190
15,000
300
1
3,581
-319
Subtotal, Energy supply..
3,725
3,046
17,915
17,999
527
619
568
555
3,175
3,007
8
8
42
92
290
51
367
53
91
327
65
344
58
91
373
65
308
74
160
373
89
308
82
4
89
7
272
Energy conservation
274
Emergency energy preparedness
276 Energy information, policy, and regulation:
Federal Energy Regulatory Commission
Economic Regulatory Administration
Nuclear Regulatory Commission
Energy Information Administration
Department of Energy—Administration
Subtotal, Energy information, policy, and regulation.
*See footnote at end of table.
1,003
26
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Deductions for offsetting receipts
1979
estimate
1980
estimate
1980
administration
proposals
-25
-96
8,242
7,454
299
2,811
711
48
-51
200
2,683
613
35
-49
204
2,722
604
38
-41
208
3,079
773
99
-46
3,818
3,482
3,527
4,113
302 Conservation and land management:
Management of national forests and forestry research.
Management of public lands
Mining reclamation and enforcement
Conservation of agricultural lands
Other, including offsetting receipts
1,635
394
68
556
-201
1,702
391
115
523
-654
1,702
391
115
528
-598
1,490
387
195
400
-595
Subtotal, Conservation and land management
2,450
2,077
2,138
1,877
628
-18
150
988
4
Total budget authority
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Soil Conservation Service
Corps of Engineers
Department of the Interior
Other
Offsetting receipts
Subtotal, Water resources
303 Recreational resources:
Land and Water Conservation fund
Proposed legislation
Urban recreation grants
Operation of recreation resources
Proposed legislation
Subtotal, Recreational resources
304 Pollution control and abatement:
Sewage treatment plant construction grants
Regulatory and research programs
Rural clean water program
Oil pollution liability and compensation fund (proposed)
Offshore oil pollution compensation fund
Proposed legislation
Subtotal, Pollution control and abatement
306 Other natural resources:
Existing law
Proposed legislation
Subtotal, Other natural resources
Deductions for offsetting receipts
Total budget authority
350 AGRICULTURE
351 Farm income stabilization:
Price-support and related programs
Federal Crop Insurance Corporation
Proposed legislation
Agricultural credit insurance fund
-84
-84
19,301
19,482
861
768
768
964
1,065
1,073
1,825
1,833
1,841
1,752
4,500
876
4,200
1,104
4,200
1,110
3,800
1,198
75
25
14
—7
5,376
5,304
5,310
5,105
1,212
1,308
1,353
—48
1,417
—48
1,212
1,308
1,306
1,370
-1,087
-1,252
-1,339
-1,339
13,593
12,753
12,783
12,878
524
62
6,491
12
3,056
12
509
144
273
3,056
12
-12
273
27
SPECIAL ANALYSIS A
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Other programs
Unallocated salaries and expenses..
Subtotal, Farm income stabilization..
352 Agricultural research and services:
Research programs
Extension programs
Marketing programs
Animal and plant health programs
Economic intelligence
Other programs
Unallocated overhead
Offsetting receipts
Subtotal, Agricultural research and services..
Deductions for offsetting receipts
Total budget authority
370 COMMERCE AND HOUSING CREDIT
371 Mortgage credit and thrift insurance:
Mortgage purchase activities (GNMA)
Mortgage credit (FHA)
Housing for the elderly and handicapped
Department of Agriculture-rural housing programs.
Federal Home Loan Bank Board
National Credit Union Administration
Subtotal, Mortgage credit and thrift insurance
372
Postal Service
Other advancement and regulation of commerce:
Small business assistance
National Consumer Cooperative Bank
Technology utilization
Economic and demographic statistics
Other
Proposed legislation
1979
estimate
1980
estimate
1980
administration
proposals
14
228
36
228
1,337
6,910
43
191
3,574
48
9
29
6
6
5
29
0
15
2
4
8
6
0
-53
66
1
25
7
7
4
21
4
18
3
5
1
7
2
-63
1,405
58
3
26
7
7
5
22
4
10
4
5
1
7
3
-66
1,328
-3
8,312
-3
4,899
1,311
-3
4,868
507
416
800
840
506
278
800
1,624
6
247
800
1,651
1,221
14
2,573
7
552
750
669
-10
40
191
3,559
50
4
29
5
7
6
25
2
14
4
5
4
7
9
-66
1,968
2,563
3,208
1,700
4,405
1,787
1,803
1,698
1,698
85
3
73
6
70
5
197
151
374
237
277
415
247
706
426
735
89
263
712
437
-22
1,558
-5
1,693
*
2,129
*
2,213
*
5,308
6,060
7,034
8,315
7,264
551
1,939
8,551
2,400
2,041
376
Subtotal, Other advancement and regulation of
commerce....
Deductions for offsetting receipts
Total budget authority
400 TRANSPORTATION
401 Ground transportation:
Highways
Mass transit
Railroads
Proposed legislation
Regulation
Subtotal, Ground transportation..
*See footnote at end of table.
65
9,819
7
3
13,065
8,956
9,053
2,473
2,400
2,1521,445
250
81
7
5
13,680
13,205
28
T H E B U D G E T FOR F I S C A L Y E A R 1980
TABLE A-13.
CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
402 Air transportation:
Airways and airports
Aeronautical research and technologyAir carrier subsidies
Regulation
1979
estimate
1980
estimate
1980
administration
proposals
2,785
437
74
25
3,144
530
73
28
3,052
559
76
30
3,096
557
76
31
Subtotal, Air transportation
3,321
3,775
3,717
3,760
403 Water transportation:
Marine safety and transportation..
Ocean shipping
Regulation
1,417
494
10
1,534
511
11
1,588
485
11
1,598
487
11
1,920
2,056
2,084
2,096
89
90
Subtotal, Water transportation...
407
Other transportation
Deductions for offsetting receiptsTotal budget authority
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
HUD: Community development block grants
HUD: Urban development action grants
HUD: Expiring categorical programs
HUD: Rehabilitation loans
HUD: Research and planning
HUD: Neighborhood self-help
HUD: Other programs
HUD: Departmental management
Neighborhood reinvestment corporation
Pennsylvania Avenue Development
Other programs
Subtotal, Community development
452 Area and regional development:
National Development Bank (proposed)
Rural development and business assistance
Economic development (includes inland energy).
Local public works programs
Coastal energy impact
Indian programs
Regional commissions
Other
Offsetting receipts
85
-102
-53
-49
-50
15,043
18,930
19,522
19,101
3,600
400
3
109
3,750
400
3
230
110
3,750
400
14
205
102
111
157
50
171
21
2
27
2
55
203
8
39
2
3,900
400
14
130
93
15
40
192
10
39
2
4,403
4,745
4,778
4,834
966
522
4
115
799
430
139
-295
989
538
11
631
614
2
970
481
155
-350
965
481
122
-353
4
885
484
134
-353
3,530
605
759
2,679
2,793
2,462
6,049
453 Disaster relief and insurance:
Disaster loans
Federal emergency management activities
Drought assistance and other
2,641
576
30
218
325
10
61
327
10
61
313
20
Subtotal, Disaster relief and insurance
3,246
553
398
394
-23
-19
-19
-19
Subtotal, Area and regional development....
Deductions for offsetting receipts
29
SPECIAL ANALYSIS A
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Total budget authority..
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Elementary and secondary education
Indian education
Impact aid
Education for the handicapped
Occupational, vocational and adult education
Other aid to education agencies
Child development
1979
estimate
10,306
estimate
administration
proposals
8,073
7,619
11,259
3,191
38
1
85
0
61
6
73
3
39
3
66
7
3,521
35
3
86
1
97
7
72
8
35
4
66
7
3,521
33
4
86
1
97
7
72
8
35
4
66
7
3,953
39
3
58
2
1,028
72
7
38
5
71
5
6,721
7,452
7,460
7,730
4,141
160
5,332
175
5,282
175
5,013
188
4,300
5,507
5,457
5,200
101
492
517
134
92
33
554
533
134
92
33
620
532
118
98
33
638
518
1,228
1,347
1,412
1,405
3,441
91
212
365
694
3,475
6,777
91
221
385
745
2,941
7,384
91
235
385
762
2,190
6,964
86
235
385
762
4,802
11,694
11,799
10,623
440
522
538
543
2,614
2,965
2,632
2,632
434
500
Subtotal, Elementary, secondary, and vocational
education
502 Higher education:
Student aid and institutional support....
Special institutions
Subtotal, Higher education.
503 Research and general education aids:
Special projects and training
National Institute of Education
Other educational research
Cultural activities
Other
Subtotal, Research and general education aids..
504 Training and employment:
Temporary employment assistance
Employment and training assistance
Other general programs
Older workers
Work incentive program
Federal-State employment service
Subtotal, Training and employment..
505
Other labor services
506 Social services:
Grants to States for social and child welfare servicesProposed legislation
Retroactive claims
Services for the disabled, elderly, and other special
groups
Community service programs
Domestic volunteer programs
Other social services
90
28
543
1,553
598
118
7
1,549
543
119
11
1,613
543
119
15
1,658
505
170
15
Subtotal, Social services
4,891
5,730
4,922
5,414
Deductions for offsetting receipts
-12
-12
-12
-12
30
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
1979
estimate
1980
estimate
1980
administration
proposals
22,370
Education and training of health care work
force:
National Institutes of Health training
Health Resources Administration training
Alcohol, Drug Abuse, and Mental Health Administration training
Other health training programs
35,807
"il"895
12,708
3J58
3^879
47,400
52,394
35,809
2
12,714
-18
3,948
205
52,660
2,659
3,031
2,967
2,979
181
168
216
166
216
166
3,007
Subtotal, Health research
31,747
41,773
Subtotal, Health care services.
30,903
"T$\i
552 Health research:
National Institutes of Health research
Alcohol, Drug Abuse, and Mental Health Administration research
Other research programs
31,576
10,674
550 HEALTH
551 Health care services:
Medicare
Proposed legislation
Medicaid
Proposed legislation
Other health services
Proposed legislation
32,240
27,586
Total budget authority..
3,413
3,348
259
201
3,440
184
556
184
557
184
564
193
275
109
116
2
116
111
850
860
863
59
7
610
248
645
302
640
321
650
312
88
5
97
4
-14
553
Subtotal, Education and training of health care
work force
554
Consumer and occupational
safety:
Consumer safety
Occupational safety and health
health and
Subtotal, Consumer and occupational health and
safety
92
6
-18
-15
91
6
-14
46,469
52,604
57,553
57,627
87,976
100,419
115,740
3,843
4,035
4,274
1,068
6
1,564
7
1,622
6
115,740
14
4,274
211
1,570
6
Subtotal, General retirement and disability insurance
92,893
106,024
121,643
121,816
602 Federal employee retirement and disability:
Retirement and disability programs
Federal employee compensation
17,777
292
Deductions for offsetting receipts
Total budget authority
600 INCOME SECURITY
601 General retirement and disability insurance:
Social security (OASDI)
Proposed legislation
Railroad retirement
Proposed legislation
Special benefits for disabled coal miners
Other
20,608
228
22,715
304
22,716
304
31
SPECIAL ANALYSIS A
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Subtotal, Federal employee retirement and disability
1979
estimate
18,069
1980
estimate
1980
administration
proposals
20,836
23,019
23,020
950
1,576
-800
950
15,660
-900
950
15,660
-900
603 Unemployment compensation:
Federal unemployment benefits and allowances
Unemployment trust fund
Receipts
1,200
14,521
-1,045
Subtotal, Unemployment compensation
14,676
15,726
15,710
15,710
5,250
6,354
5,558
6,665
6,396
7,080
881
5,618
3,416
841
6,015
3,838
1,547
6,189
4,665
32,284
196
25,341
175
31,790
76
439
417
396
6,396
7,080
-212
1,547
6,927
4,484
-358
27,445
76
90
200
240
604
Public assistance and other income supplements:
Supplemental security income
AFDC and other
Proposed legislation
Earned Income Credit (existing)
Food stamps
School lunch and other nutrition programs
Proposed legislation
Housing assistance
Refugee assistance
Proposed legislation
Real wage insurance (proposed)
Other
Subtotal, Public assistance and other income supplements
Deductions for offsetting receipts
Total budget authority
700 VETERANS BENEFITS AND SERVICES
701 Income security for veterans:
Veterans compensation and pension
Proposed legislation
National service life insurance trust fund
U.S. Government life insurance trust fund
All other insurance programs
Insurance program receipts
Subtotal, Income security for veterans
Veterans education, training, and rehabilitation:
Existing law
Proposed legislation
54,438
48,850
58,139
53,914
*
—*
—*
—*
180,077
191,437
218,510
214,460
9,636
10,707
11,202
940
36
4
—484
966
36
6
—471
968
34
5
—457
11,202
498
968
34
5
—457
10,132
11,244
11,753
12,251
2,635
2,446
2,279
2,279
- *
2,635
2,446
2,279
2,278
4,925
5,409
5,705
702
Subtotal, Veterans education, training, and rehabilitation
703 Hospital and medical care for veterans:
Medical care and hospital services
Proposed legislation
Construction
Medical administration, research and other
Subtotal, Hospital and medical care for veterans
*See footnote at end of table.
504
462
462
5,595
-301
395
209
219
179
173
5,638
6,089
6,345
5,862
32
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
705 Other veterans benefits and services:
Undistributed VA expenses and other
Proposed legislation
Non-VA support programs
1979
estimate
1980
administration
proposals
1980
estimate
608
643
604
26
28
29
604
-1
32
635
671
633
635
-3
-3
3
-3
19,037
20,447
21,007
21,024
554
188
129
689
139
195
582
194
136
745
147
255
586
202
141
765
165
261
576
194
139
746
165
268
1,894
2,060
2,121
2,087
361
392
397
463
205
511
270
511
270
433
-6
628
292
1,029
1,173
1,179
1,346
308
350
337
334
654
658
658
181
366
654
658
658
546
-8
10
10
-10
3,877
4,232
4,284
4,304
904
79
951
81
948
81
1,041
92
1,967
204
2,116
281
2,152
300
2,182
312
2,171
2,396
2,452
2,494
804 General property and records management:
Real property
Personal property
Other
75
168
186
21
138
216
138
218
143
244
Subtotal, General property and records management
279
375
356
387
Subtotal, Other veterans benefits and services
Deductions for offsetting receipts
Total budget authority
750 ADMINISTRATION OF JUSTICE
751 Federal law enforcement activities:
General investigation (FBI)
Narcotics violation investigation (DEA)
Alcohol, tobacco, and firearms investigation (ATF)
Border enforcement activities (Customs and INS)
Protection activities (Secret Service)
Other enforcement
Subtotal, Federal law enforcement activities
752 Federal litigative and judicial activities:
Civil and criminal prosecution and representation
Proposed legislation
Federal judicial activities
Representation of indigents in civil cases
Subtotal, Federal litigative and judicial activities
753
Federal correctional activities
754 Criminal justice assistance:
Existing law
Proposed legislation
Subtotal, Criminal justice assistance
Deductions for offsetting receipts
Total budget authority
800 GENERAL GOVERNMENT
801 Legislative functions
802 Executive direction and management
803 Central fiscal operations:
Collection of taxes
Other fiscal operations
Subtotal, Central fiscal operations
33
SPECIAL ANALYSIS A
TABLE A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
805 Central personnel management:
Existing law
:
Proposed legislation
Subtotal, Central personnel management
806 Other general government:
Territories
Indian affairs
Treasury claims
Other
Subtotal, Other general government
Deductions for offsetting receipts
Total budget authority
850 GENERAL PURPOSE FISCAL ASSISTANCE
851 General revenue sharing
852 Other general purpose fiscal assistance:
Antirecession fiscal assistance
Targeted fiscal assistance
Payments and loans to the District of Columbia
New York City Loan Guarantee Program
Payments to States from Forest Service receipts
Payments to States and counties from Federal land
management activities
Payments to territories and Puerto Rico
Other
1979
estimate
1980
estimate
1980
administration
proposals
126
132
132
136
*
126
132
132
136
190
102
287
113
179
122
152
115
169
125
152
68
146
125
152
87
691
568
514
510
-188
-158
-133
-133
4,063
4,346
4,350
4,528
6,862
6,862
6,862
6,861
1,400
125
555
393
1
226
214
1
241
462
1
283
150
462
1
283
394
445
6
420
780
5
420
570
5
470
570
5
Subtotal, Other general purpose fiscal assistance
900
2,865
1,786
2,297
1,943
Total budget authority
9,728
8,648
9,159
8,804
INTEREST
901
Interest on the public debt
902
Other interest
Total budget authority
48,695
59,700
65,800
65,700
-4,728
-7,035
-8,679
-8,679
43,967
52,665
57,121
57,021
920 ALLOWANCES:
921 Civilian agency pay raises
923
2,131
Contingencies for other requirements
1,500
Total budget authority
950 UNDISTRIBUTED OFFSETTING RECEIPTS:
951 Employer share, employee retirement
952 Interest received by trust funds
953 Rents and royalties on the Outer Continental
Shelf
Total budget authority
Total budget authority
Inflation adjustment1
Adjusted budget authority1
* — $500 thousand or less.
'See text.
926
2,131
-4,983
-8,530
-5,388
-9,774
-2,259
-15,772
501,500
-3,500
-18,662
553,719
2,426
-5,482
-10,852
-5,482
-10,940
-2,600
-18,934
610,173
8,010
-2,600
-19,021
615,526
618,183
34
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM
(In millions of dollars)
Current services
1978
actual
050 NATIONAL DEFENSE
051 Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Procurement
Research, development, test and evaluation
Military construction
Family housing
Revolving funds and other
Allowances: Civilian and military pay raises:
Existing law
Proposed legislation
Other legislation
Subtotal, Department of Defense—Military
053
Atomic energy defense activities
054 Defense-related activities:
Existing law
1979
estimate
27,075
9,171
33,578
19,976
10,508
1,932
1,405
-602
28,048
10,281
35,730
22,406
11,432
1,844
1,407
-3
1980
estimate
28,391
11,435
38,002
25,067
12,513
1,915
1,542
-63
Deductions for offsetting receipts
Total outlays
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
Multilateral development banks
International organizations
International Fund for Agricultural Development
Agency for International Development
Proposed legislation
P.L 480—Food Aid
Security supporting assistance (AID)
Refugee assistance
Offsetting receipts and other
Subtotal, Foreign economic and financial assistance
152 Military assistance:
Grant military assistance
Foreign military training
Foreign military credit sales
Offsetting receipts and other
Subtotal, Military assistance
153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations and conferences
Other
Proposed legislation
Subtotal, Conduct of foreign affairs
28,447
11,435
38,690
25,749
13,015
1,951
1,493
-295
3,998
2,234
-80
61
103,042
111,144
122,800
122,700
2,070
2,492
2,524
2,968
76
94
151
Proposed legislation
Subtotal, Defense-related activities
1980
administration
proposals
343
—178
76
—2
105,186
94
—3
113,728
151
—3
125,472
166
—3
125,830
858
210
20
1,007
858
251
20
1,175
937
260
40
1,286
808
1,908
75
-258
4,629
1,055
2,061
95
-232
5,283
993
1,873
98
-261
5,227
1,023
272
40
1,316
6
993
1,950
173
-251
5,523
169
22
570
-277
230
25
555
-246
190
25
525
-240
200
31
525
-240
484
564
500
516
716
382
30
704
465
34
824
531
31
843
532
33
1
1,128
1,203
1,385
1,410
SPECIAL ANALYSIS A
35
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
154
Foreign information and exchange activities
155 International financial programs:
Export-Import Bank
Military sales trust fund (net)
Other
Subtotal, International financial programs.
Deductions for offsetting receipts
Total outlays
250 GENERAL SCIENCE, SPACE, AND TECHNOLOGY
251 General science and basic research:
National Science Foundation programs
Department of Energy general science programs
Smithsonian scientific information exchange activitiesSubtotal, General science and basic research
253
Space flight
254
Space science, applications, and technology...
255
Supporting space activities
1979
estimate
1980
administration
proposals
54
2
59
2
-106
-341
— 194
91
555
-100
-243 -247
561
-641
-253
-97
43
2
-100
5,922
51
0
1980
estimate
7,201
-247
308
-78
7,865
314
-78
8,213
882
438
950
453
803
355
2
419
2
1,160
1,300
1,320
1,403
2,260
972
2,208
2,321
2,339
1,170
388
1,313
407
1,310
354
4,742
-2
5,065
5,359
Deductions for offsetting receipts
-2
407
-2
5,457
Total outlays
270 ENERGY
271 Energy supply:
Environment (EPA)
Uranium enrichment
Petroleum reserves
Petroleum reserves—Receipts
Power marketing (includes TVA)
Spent fuel storage fund (proposed)
Energy tax credit
Other Department of Energy
Other offsetting receipts
118
270
496
-501
1,474
127
121
267
-686
1,937
127
16
428
-862
1,708
131
16
251
-862
1,730
-100
1
2,363
-250
3,405
-273
3,526
-319
3,523
-319
Subtotal, Energy supply
3,970
4,898
4,626
4,371
272
Energy conservation
221
473
638
660
274
Emergency energy preparedness
897
2,367
1,961
1,961
38
79
271
39
371
52
87
305
65
400
58
91
345
65
301
70
156
345
91
308
798
909
859
969
-25
-96
-84
-84
5,861
8,551
8,000
7,878
276 Energy information, policy, and regulation:
Federal Energy Regulatory Commission
Economic Regulatory Administration
Nuclear Regulatory Commission
Energy Information Administration
Department of Energy—Administration
Subtotal, Energy information, policy, and regulation.
Deductions for offsetting receipts
Total outlays
* See footnote at end of table.
36
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Soil Conservation Service
Corps of Engineers
Department of the Interior
Other
Offsetting receipts
1979
estimate
1980
administration
proposals
1980
estimate
205
2,602
679
34
-51
291
2,659
636
49
-49
339
2,722
635
43
-41
235
2,739
651
91
-46
3,468
3,585
3,699
3,670
302 Conservation and land management:
Management of national forests and forestry research,
Management of public lands
Mining reclamation and enforcement
Conservation of agricultural lands
Other, including offsetting receipts
1,275
355
5
582
-233
1,521
392
70
597
-675
1,668
392
70
527
-606
1,362
382
148
427
-604
Subtotal, Conservation and land management
1,984
1,906
2,050
1,716
632
543
577
806
912
912
1,439
1,455
1,489
1,394
3,187
778
3,100
975
3,600
974
3,600
1,035
7
Subtotal, Water resources
303 Recreational resources:
Land and Water Conservation fund
Proposed legislation
Urban recreation grants
Operation of recreation resources
Proposed legislation
Subtotal, recreational resources
304 Pollution control and abatement:
Sewage treatment plant construction grants
Regulatory and research programs
Rural clean water program
Oil pollution liability and compensation fund (proposed)
Offshore oil pollution compensation fund
Proposed legislation
Subtotal, Pollution control and abatement
306
Other natural resources
Deductions for offsetting receipts
Total outlays
350 AGRICULTURE
351 Farm income stabilization:
Price-support and related programs
Proposed legislation
Federal Crop Insurance Corporation
Proposed legislation
Agricultural credit insurance fund
Other programs
Unallocated salaries and expenses
Subtotal, Farm income stabilization
351 Agricultural research and services:
Research programs
Extension programs
Marketing programs
•See footnote at end of table.
479
7
20
884
4
25
14
-7
3,964
4,075
4,574
4,673
1,157
1,301
1,297
1,342
-1,087
-1,252
-1,339
-1,339
10,925
11,071
11,770
11,456
5,623
4,737
3,311
57
21
20
653
39
215
-383
43
230
187
46
186
6,588
462
252
56
4,648
542
250
77
3,750
515
250
76
2,511
127
20
-26
187
43
186
3,049
501
233
78
SPECIAL ANALYSIS A
37
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Animal and plant health programs
Economic intelligence
Other programs
Unallocated overhead
Offsetting receipts
Subtotal, Agricultural research and services
Deductions for offsetting receipts
Total outlays
370 COMMERCE AND HOUSING CREDIT
371 Mortgage credit and thrift insurance:
Mortgage purchase activities (GNMA)
Mortgage credit (FHA)
Housing for the elderly and handicapped
Department of Agriculture—rural housing programs....
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board
National Credit Union Administration
Subtotal, Mortgage credit and thrift insurance
372
Postal Service
Other advancement and regulation of commerce:
Small business assistance
National Consumer Cooperative Bank
Technology utilization
Economic and demographic statistics
Other
Proposed legislation
1979
estimate
1980
estimate
1980
administration
proposals
201
119
46
48
241
136
51
72
242
138
51
72
203
143
53
78
-53
-63
-66
-66
1,129
1,307
1,279
1,223
14
—3
—3
—3
7,731
5,953
5,026
4,269
211
357
176
449
- 567
-403
-13
210
257
184
476
188
-1,121
-390
-23
-429
362
83
700
334
-1,192
-506
-34
-253
362
34
700
362
-1,192
-506
-83
-323
1,778
1,803
1,698
1,698
662
744
689
192
136
353
220
237
397
238
595
397
674
90
252
601
411
-11
1,342
1,598
1,919
376
Subtotal, Other advancement and regulation of
commerce
Deductions for offsetting receipts
Total outlays
400 TRANSPORTATION
401 Ground transportation:
Highways
Mass transit
Railroads
Proposed legislation
Regulation
Subtotal, Ground transportation
—5
2,016
—*
—*
—*
3,325
2,972
3,363
3,390
6,284
2,177
1,829
7,110
2,360
2,136
7,512
2,521
2,273
65
10,355
73
11,679
402 Air transportation:
Airways and airports
Aeronautical research and technology
Air carrier subsidies
Regulation
2,778
398
77
25
2,943
476
73
28
2,931
541
72
29
2,994
539
72
31
Subtotal, Air transportation
3,277
3,520
3,573
3,635
*See footnote at end of table.
75
12,380
7,477
2,539
1,740
40
81
11,876
38
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
403 Water transportation:
Marine safety and transportation
Ocean shipping
Regulation
Subtotal, Water transportation
407
Other transportation
Deductions for offsetting receipts
Total outlays
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
HUD: Community development block grants
HUD: Urban development action grants
HUD: Expiring categorical programs
HUD: Rehabilitation loans
HUD: Research and planning
HUD: Neighborhood self-help
HUD: Other programs
HUD: Departmental management
Neighborhood reinvestment corporation
Pennsylvania Avenue Development
Other programs
Subtotal, Community development
452 Area and regional development:
National Development Bank (proposed)
Rural development and business assistance
Economic development (includes inland energy)
Local public works
Coastal energy impact
Indian programs
Regional commissions
Other
1979
estimate
1,273
571
9
1,854
1980
administration
proposals
1980
estimate
1,411
485
1,476
561
1,484
562
11
11
11
1,906
2,047
2,057
61
94
88
91
-102
-53
-49
-50
17,146
18,040
17,609
15,444
2,464
395
47
118
2,875
44
307
91
112
3,270
162
315
170
109
100
145
49
166
20
12
3,302
35
13
3,693
54
199
8
29
16
4,334
3,272
162
315
125
110
14
59
191
10
42
16
4,316
516
326
3,057
*
746
372
666
348
2,051
11
782
400
508
469
321
53
812
407
195
475
507
319
54
730
412
127
Offsetting receipts
Subtotal, Area and regional development
150
125
134
-295
-350
-353
-353
4,850
4,058
2,342
2,473
453 Disaster relief and insurance:
Disaster loans
Federal Emergency Management activities
Drought assistance and other
2,105
618
148
793
470
42
20
453
23
20
460
30
Subtotal, Disaster relief and insurance
2,871
1,305
496
510
-23
-19
-19
-19
11,000
9,037
7,153
7,281
3,029
302
800
3,234
316
820
3,447
301
619
Deductions for offsetting receipts
Total outlays
500
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Elementary and secondary education
Indian education
Impact aid
*See footnote at end of table.
2,815
289
766
39
SPECIAL A N A L Y S I S A
TABLE A-14.
CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Education for the handicapped
Occupational, vocational and adult education..
Other aid to education agencies
Child development
Subtotal, Elementary, secondary, and vocational
education
502 Higher education:
Student aid and institutional supportSpecial institutions
Subtotal, Higher education
503 Research and general education aids:
Special projects and training
National Institute of Education
Other educational research
Cultural activities
Other
Subtotal, Research and general education aids..
504 Training and employment:
Temporary employment assistance
Employment and training assistance
Job opportunities program
Other general programs
Older workers
Work incentive program
Federal-State employment service
Subtotal, Training and employment.
505
Other labor services
506 Social services:
Grants to States for social and child welfare services..
Proposed legislation
Retroactive claims
Services for the disabled, elderly, and other special
groups
Community service programs
Domestic volunteer programs
Other social services
Subtotal, Social services
Deductions for offsetting receipts
Total outlays
550 HEALTH
551 Health care services:
Medicare
Proposed legislation
Medicaid
Proposed legislation
Other health services
Proposed legislation
Subtotal, Health care services..
*See footnote at end of table.
1979
estimate
1980
estimate
1980
administration
proposals
327
693
235
561
55
2
814
827
814
840
349
689
324
676
326
758
5,686
6,502
7,011
7,106
3,337
148
4,696
177
5,142
177
4,702
185
3,486
4,873
5,319
4,887
60
64
14
490
454
105
89
29
528
518
125
90
29
582
540
104
90
26
592
519
1,082
1,269
1,366
1,330
4,769
4,764
12
88
134
364
653
3,181
7,171
16
3,163
7,236
2,571
6,992
95
210
372
745
84
219
378
762
80
219
378
762
10,784
11,790
11,842
11,002
410
512
521
525
2,809
2,965
2,586
2,586
434
543
1,517
575
113
14
1,444
597
119
25
1,594
597
119
13
1,680
506
151
15
5,027
5,693
4,910
5,372
-12
-12
-12
-12
26,463
30,627
30,956
30,210
25,209
29,499
33,821
10,723
11,897
3,171
3,432
39,103
44,828
33,823
-1,743
12,468
12,474
-18
3,816 3,885
41
50,105
48,462
40
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
552 Health research:
National Institute of Health research
Alcohol, Drug abuse, and Mental Health Administration
research
Other research programs
1979
estimate
1980
estimate
1980
administration
proposals
2,505
2,681
2,966
2,961
180
137
198
149
213
179
229
176
2,822
3,028
3,358
3,365
170
650
170
454
192
436
192
316
110
110
115
116
930
734
742
63
2
587
252
635
288
636
308
644
299
838
923
944
943
-18
-15
-14
-14
43,676
49,498
55,135
53,379
92,242
102,319
115,846
3^983
4,267
1,027
5
1,307
6
97,257
107,898
121,948
121,224
10,491
12,140
13,801
14
7
228
304
13,802
21
304
10,665
12,368
14,105
14,127
603 Unemployment compensation:
Federal unemployment benefits and allowances
Unemployment trust fund
Advances
Receipts
1,165
10,563
1,056
-1,045
820
10,276
950
12,360
950
12,360
-900
-900
Subtotal, Unemployment compensation
11,769
10,296
12,410
12,410
Subtotal, Health research
553
Education and training of health care work
force:
National Institutes of Health training
Health Resources Administration training
Alcohol, drug abuse, and Mental Health Administration
training
Other health training programs
Subtotal, Education and training of health care
workforce
554
Consumer and occupational
safety:
Consumer safety
Occupational safety and health
health and
Subtotal, Consumer and occupational health and
safety
Deductions for offsetting receipts
Total outlays
600 INCOME SECURITY
601 General retirement and disability insurance:
Social security (OASDI)
Proposed legislation
Railroad retirement
Proposed legislation
Special benefits for disabled coal miners
Other
Subtotal, General retirement and disability insurance
602 Federal employee retirement and disability:
Retirement and disability programs
Proposed legislationFederal employee compensation
Subtotal, Federal employee retirement and disability
*See footnote at end of table.
115,846
-609
4,581 4,581
-65
1,515
1,463
6
8
SPECIAL ANALYSIS A
41
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
Public assistance and other income supplements:
Supplemental security income
AFDC and other
Proposed legislation
Earned income credit (existing)
Food stamps
School lunch and, other nutrition programs
Proposed legislation
Housing assistance
Refugee assistance
Proposed legislation
Real wage insurance (proposed)
1979
estimate
1980
1980
estimate
administration
proposals
604
Other
Subtotal, Public assistance and other income supplements
Deductions for offsetting receipts
Total outlays
700 VETERANS BENEFITS AND SERVICES
701 Income security for veterans:
Veterans compensation and pension
Proposed legislation
National service life insurance trust fund
U.S. Government life insurance trust fund
All other insurance programs
Insurance program receipts
Subtotal, Income security for veterans
Veterans education, training, and rehabilitation:
Existing law
Proposed legislation
5,855
6,639
5,558
6,697
6,340
6,961
881
5,499
3,438
841
6,321
3,847
1,547
6,189
4,392
3,667
139
4,436
195
5,317
108
403
310
208
6,340
6,961
-212
1,547
6,877
4,274
-358
5,304
126
90
200
210
26,521
28,205
31,061
31,360
*
—*
—*
—*
146,212
158,767
179,524
179,120
9,573
10,638
11,183
668
67
-79
-484
740
70
-59
-471
771
66
-65
-457
11,183
457
771
66
-65
-457
9,745
10,918
11,498
11,955
702
Subtotal, Veterans education, training, and rehabilitation
703 Hospital and medical care for veterans:
Medical care and hospital services
Proposed legislation
Construction
Medical administration, research and other
Subtotal, Hospital and medical care for veterans
3,365
2,701
2,241
2,241
—*
3,365
2,701
2,241
2,241
4,809
5,403
5,703
5,593
-301
328
222
250
195
294
220
328
227
5,254
5,916
6,259
704 Veterans housing:
Loan guaranty revolving fund
Direct loan revolving fund
Other (HUD PC sales fund)
80
-39
-13
157
-33
-17
—30
-165
-20
—30
-165
-20
Subtotal, Veterans housing
28
106
-215
-215
560
651
614
612
705 Other veterans benefits and services:
Undistributed VA expenses and other
*See footnote at end of table.
5,842
42
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
1979
estimate
1980
estimate
Proposed legislation
Non-VA support programs
Subtotal, Other veterans benefits and services
Deductions for offsetting receipts
Total outlays
750 ADMINISTRATION OF JUSTICE
751 Federal law enforcement activities:
General investigation (FBI)
Narcotics violation investigation (DEA)
Alcohol, tobacco, and firearms investigation (ATF)
Border enforcement activities (Customs and INS)
Protection activities (Secret Service)
Other enforcement
Subtotal, Federal law enforcement activities
752 Federal litigative and judicial activities:
Civil and criminal prosecution and representation
Proposed legislation
Federal judicial activities
Representation of indigents in civil cases
Subtotal, Federal litigative and judicial -activities
753
Federal correctional activities
754 Criminal justice assistance:
Existing law
Proposed legislation
Subtotal, Criminal justice assistance
Deductions for offsetting receipts
Total outlays
800
1980
administration
proposals
- 1
25
31
30
31
585
681
644
642
-3
-3
- 3
-3
18,974
20,320
20,424
20,461
552
178
128
666
129
178
1,831
578
190
134
741
150
272
2,066
583
202
139
753
161
258
2,097
575
193
137
739
161
267
2,072
340
387
394
445
157
512
261
519
259
426
—6
627
281
943
1,160
1,172
1,328
307
367
337
377
729
733
735
536
86
729
733
735
622
-8
-10
-10
-10
3,802
4,317
4,330
4,388
GENERAL GOVERNMENT
801
Legislative functions
802
Executive direction and management
803 Central fiscal operations:
Collection of taxes
Other fiscal operations
Subtotal, Central fiscal operations
804 General property and records management:
Real property
Personal property
Other
Subtotal, General property and records management
805 Central personnel management:
Existing law
*See footnote at end of table.
900
1,015
992
1,064
73
85
81
91
1,940
2,104
2,138
2,175
184
279
295
309
2,124
2,383
2,433
2,485
-168
196
186
-129
138
216
-130
105
218
-140
122
244
214
225
193
226
129
132
135
140
SPECIAL ANALYSIS A
43
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
1979
estimate
1980
estimate
Proposed legislation
Subtotal, Central personnel management
806
1980
administration
proposals
*
129
132
135
140
Other general government:
Territories
155
179
136
137
Indian affairs
Treasury claims
Other
96
198
74
121
241
62
132
152
94
132
152
117
Subtotal, Other general government
Deductions for offsetting receipts
Total outlays
850 GENERAL PURPOSE FISCAL ASSISTANCE
851 General revenue sharing
852 Other general purpose fiscal assistance:
Antirecession fiscal assistance
Targeted fiscal assistance
Payments and loans to the District of Columbia
New York City loan guarantee program
Payments to States from Forest Service receipts
Payments to States and counties from Federal land
management activities
Payments to territories and Puerto Rico
Other
523
602
515
538
-188
-158
-133
-133
3,777
4,283
4,217
4,412
6,830
6,860
6,869
6,869
1,329
127
555
371
2
226
362
1
241
462
1
283
150
462
1
283
393
446
5
421
793
6
421
572
5
471
572
5
Subtotal, Other general purpose fiscal assistance
1,952
2,301
1,945
Total outlays
900
2,772
9,601
8,811
9,170
8,814
INTEREST
901
Interest on the public debt
48,695
59,700
65,800
65,700
902
Other interest
-4,729
-7,034
-8,678
-8,678
Total outlays
43,966
52,666
57,122
57,022
920 ALLOWANCES
921 Civilian agency pay raises
923 Contingencies for other requirements
Total outlays
2,131
2,131
898
500
1,398
44
THE BUDGET FOR FISCAL YEAR 1980
TABLE A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services
1978
actual
950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement
1979
estimate
1980
estimate
1980
adminis
tration
proposals
-4,893
-5,388
-5,482
-5,482
-8,530
-9,774
-10,852
-10,940
-2,259
-3,500
-2,600
-2,600
Total outlays
-15,772
-18,662
-18,934
-19,021
Total outlays
450,836
491,349
536,126
531,566
952 Interest received by trust funds
953
Rents and royalties on the Outer Continental
Shelf
Inflation adjustment1
Adjusted outlays
* — $500 thousand or less.
1
See text.
1
7,969
544,092
SPECIAL ANALYSIS B
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-of-payments 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 complete,
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 and product accounts (NIA) of the United States provide
the most useful measures. This special analysis shows Federal finances as measured in the NIA. 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 1979 issue of the Department of Commerce publication, Survey of Current Business. The second section
of this analysis shows quarterly estimates of Federal sector receipts
and expenditures seasonally adjusted at annual rates and also
discusses estimating errors inherent in preparing this translation;
the final section explains the major differences between the budget
and the NIA concepts. A brief discussion of fiscal policy can be
found in Part 2 of the Budget of the United States, and a more
detailed analysis in the Economic Report of the President.
45
46
THE BUDGET FOR FISCAL YEAR 1980
FEDERAL SECTOR RECEIPTS AND EXPENDITURES
Table B-1 shows Federal sector NIA receipts, expenditures, and
deficits for 1978-80.
Table B - 1 . FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA
[In billions of dollars]
Description
1978
actual
1979
estimate
1980
estimate
RECEIPTS
Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
206.6
76.9
29.0
151.8
236.4
78.2
30.4
168.8
413.8
Total receipts
186.3
67.2
27.2
133.1
464.3
513.8
151.1
(98.1)
(53.0)
181.8
(178.4)
(3.4)
74.6
33.7
166.0
(105.1)
(60.9)
200.2
(196.6)
(3.6)
78.2
41.6
178.2
(115.4)
(62.8)
226.4
(222.5)
(3.9)
78.9
45.2
EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage disbursements less accruals
Total expenditures
9.4
—*
10.5
10.3
*
496.3
539.2
-36.8
Deficit ( - )
450.6
-32.0
-25.4
Trends in Federal sector receipts,—Table B-1 divides receipts into
four major categories, which are also illustrated in the chart on the
distribution of Federal sector receipts by category. Table B-2
shows, at 10-year intervals, 3-year averages of Federal sector receipts by category as a percent of the gross national product (GNP).
Three-year averages are used in order to eliminate the impact of
annual fluctuations and permit a greater focus on basic trends.
Table B-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
1948-50
average
1958-60
average
actual
1968-70
average
actual
1978-80
average
estimate
6.9
4.4
3.1
1.9
8.3
4.4
2.6
3.0
9.4
3.8
2.0
4.9
9.2
3.3
1.3
6.6
16.3
18.3
20.2
20.4
47
SPECIAL ANALYSIS B
Distribution of Federal Sector Receipts by Category
5-Year Averages
r
100
Contributions for
Social Insurance
1
11 •
Indirect Business Tax
and Nontax Accruals
Corporate Profits
Tax Accruals
Personal Tax and
Nontax Receipts
1956-60
1966-70
I97f~75
1976-80
Esftmofc
Personal tax and nontax receipts.—The largest receipt categorypersonal 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 enacted periodically over the past three decades have offset
part of the increase in effective tax rates resulting from the progressive tax structure.
Corporate profits tax accruals.—Corporate profits tax accruals
vary significantly from year to year because corporate profits are
highly volatile. The NIA corporate profits taxes differ from the
corresponding budget category primarily because: (1) The NIA includes the deposit of earnings by the Federal Reserve System as
corporate profits taxes, whereas the budget treats these collections
as miscellaneous receipts; and (2) the NIA records 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, estimated
tax rates, and adjustments for tax law changes. Even for past
periods these estimates are subject to significant revisions based on
48
THE BUDGET FOR FISCAL YEAR 1980
later data. As is shown in Table B-9, the estimated corporate
profits tax accruals for 1977 are now $1.4 billion higher than was
estimated a year ago, even though both estimates were for a period
that had ended. There is about a 3-year lag between initial and
final estimates of corporate tax liability data; in the interim,
successive estimates are made using the better data that gradually
become available.
The gradual decline in corporate profits tax receipts relative to
GNP and (as shown in the chart above) to total receipts 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 increases in permissible depreciation
allowances); and (3) reductions in effective tax rates on corporate
profits resulting from statutory rate reductions and tax credits.
Indirect business tax and nontax accruals.—These receipts are
composed of excise taxes, customs duties, and various miscellaneous receipts such as rents and royalties on the Outer Continental
Shelf lands, import fees on crude oil and petroleum products, and
coal-mining reclamation fees. 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 growth in the economy and partly because some
of them, such as the automobile and telephone excise taxes, have
been reduced or repealed.
Contributions for social insurance.—This is the second largest
category of Federal sector receipts. The 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 increases in the taxable wage base
and tax 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 moderate-income 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 enacted changes reflected in
the Federal sector estimates presented in this analysis are:
—Permanent individual and corporation income tax reductions,
generally effective January 1, 1979, resulting from the Revenue Act of 1978 and the Energy Tax Act of 1978. The effect of
SPECIAL ANALYSIS B
49
these acts on Federal sector receipts was described in the
November 1978 issue of the Survey of Current Business.
—Scheduled increases in social security taxes. The social security
tax rate increased from 12.1% to 12.26% on January 1, 1979,
and the taxable earnings base increased from $17,700 to
$22,900. In 1980, the taxable earnings base is scheduled to
increase to $25,900.
—Continued phaseout of the telephone excise tax by one percentage point per year.
The receipts proposals in the 1980 budget, which are described in
Part 4 of the Budget, do not have a significant effect on Federal
sector receipts in 1979 and 1980. The budget contains one major
proposal—real wage insurance—the bulk of which would be recorded as refunds of receipts under the budget; in the NIA these
transactions are classified as transfer payments.
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 principal distinction 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 the 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 to make transfer payments.
280-700 O - 79 - 4
50
THE BUDGET FOR FISCAL YEAR 1980
Distribution of Federal Sector Expenditures by Category
5-Year Averages
Interest and Other
Grants-in-Aid
Domestic
Transfer Payments
1976-80
Estimate
The chart on composition of Federal sector expenditures shows
the trends in spending by year from 1965 to 1980 and the chart on
distribution of Federal sector expenditures illustrates the trends
over an even longer period. As can be seen, major shifts in the
composition of Federal sector expenditures occur over time. For
example, defense purchases of goods and services have been a
declining share of Federal spending ever since the Korean War.
This pattern was temporarily reversed for 3 years during the Vietnam period, but by 1970 the defense share was well below the preVietnam percentages. The President's enunciated policy of increasing real defense spending over the next few years should result in
a moderate stabilizing of defense purchases relative to the budget
and to the GNP. Defense purchases are expected to total 21.4% of
Federal sector expenditures in 1980; they were 21.8% in 1978, and
23.0% in 1976. Concurrent with the relative decline in defense
spending, there has been a corresponding rise in other components,
especially grants-in-aid and domestic transfer payments.
Table B-3 shows, at 10-year intervals, 3-year averages of Federal
sector expenditures by category as a percent of GNP.
SPECIAL ANALYSIS B
51
Table B-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
Total expenditures
1948-50
average
actual
1958-60
average
actual
1968-70
average
actual
1978-80
average
estimate
4.5
2.3
3.6
1.5
.8
1.6
.3
9.6
1.7
4.1
.4
1.3
1.3
.5
8.4
2.4
5.4
.2
2.2
1.3
.5
4.7
2.6
8.7
.2
3.4
1.8
.4
14.6
18.8
20.5
21.8
Defense purchases and foreign transfer payments are, of course,
largely devoted to the conduct of our national defense and foreign
affairs.1 In 1948-50 defense purchases—reduced by receipts from
large-scale sales of World War II materials—were 4.5% of GNP
and foreign transfer payments were 1.5% of GNP. The total of
these—6.0%—reflects roughly the cost of the conduct of external
affairs. The years 1958-60, while a post-Korean war peacetime
period, reflected a higher level of defense expenditures than was
prevalent prior to the Korean war. In that period, defense purchases and foreign transfers combined were equal to 10.0% of
GNP. Even though the 1968-70 period included some of the peak
spending for the Vietnam war, defense purchases and foreign
transfers were down to 8.6% of GNP. In the 1978-80 peacetime
period they are expected to be equal to 4.9% of GNP.
In contrast, spending on most other expenditure categories—
especially nondefense purchases, domestic transfer payments, and
grants-in-aid—has risen dramatically relative to GNP. In 1948-50,
spending for everything except defense purchases and foreign
transfer payments was equal to 8.6% of GNP; in 1978-80 such
spending is estimated to equal 16.9% of GNP. However, the 1980
budget reflects highly constrained budget outlay proposals, and the
results of these constraints are reflected in these data. Instead of
continuing to rise relative to GNP, as has been the trend in most
recent years, total Federal sector expenditures are estimated to
decline from 22.1% of GNP in 1978 to 21.5% in 1980. About 1/3 of
this decline is due to defense purchases and 2/3 to nondefense
programs.
Table B-4 displays purchases of goods and services (defense and
nondefense) with a split by character of expenditures between compensation of employees and all other purchases, and with some
additional distribution of the nondefense purchases other than
compensation.
1
However, in recent years a significant portion of foreign transfers has arisen from payments under general
domestic social programs—for example, payments to social security retirees living aborad.
52
THE BUDGET FOR FISCAL YEAR 1980
Table B-4. PURCHASES OF GOODS AND SERVICES BY CHARACTER OF EXPENDITURE
(In billions of dollars)
1975
actual
Defense purchases:
Compensation of employees
Other
Total defense purchases
Nondefense purchases:
Compensation of employees
Other
(Commodity Credit Corporation: mainly purchase and
sale of agricultural commodities)
(Strategic petroleum reserves)
(All other)
Total nondefense
1976
actual
1977
actual
1978
actual
1979
estimate
38.9
41.5
40.4
45.1
42.2
50.0
45.1
53.0
80.3
85.5
92.3
98.1
105.1
115.4
18.2
19.5
20.3
20.3
23.3
25.2
25.0
28.0
27.2
33.7
29.5
33.3
(.2)
)
(20.2)
(2.6)
(*)
(22.5)
(.9)
(.6)
(26.5)
(.6)
(1.7)
(31.4)
(1.3)
(31.7)
40.7
48.4
(.2)
(--)
(19.3)
37.6
(
53.0
47.4
57.7
1980
60.9
49.7
65.7
(•3)
62.8
* $50 million or less.
Defense purchases of goods and services.—Defense purchases con-
sist of all purchases of goods and services under programs included
in the national defense function in the budget document. In addition, defense purchases include purchases of goods and services by
the military assistance programs that in earlier years had been
classified in the national defense function but are now classified in
the international affairs function in the budget. Normally about
95% of defense purchases are made by the Department of Defense,
Military. The bulk of the remainder is for military assistance,
defense stockpile, civil defense, and nuclear weapons programs carried out by other agencies.
The budget calls for an increase in defense purchases of $10.3
billion in 1980 over 1979. This increase more than offsets the
impact of inflation, thus continuing the reversal of the pattern of a
steady decline in real terms from 1968 through 1976. While NIA
defense purchases are not estimated in constant prices, the budget
includes constant price estimates of outlays in the national defense
function. This category and defense purchases in the NIA are
sufficiently similar so that these figures give a rough approximation of the same transactions. The budget estimates of outlays in
constant prices for the national defense function are shown in the
following table.
SPECIAL ANALYSIS B
53
DEFENSE FUNCTION OUTLAYS IN CONSTANT (FISCAL YEAR 1972) PRICES
At 5-year intervals:
1945 l
. ..
1950 3
1955
I960
1965 6
1970
1975
1980 estimate
252.0
29.4
75.8
73.8
69 3
90.3
67.1
70.4
For selected years:
1948 2
1953 4
1956 5
1968 7
1976 8
1978 9
1979 estimate
1982 estimate
.. 20.3
.. 96.3
72.9
.. 101.4
.. . .
65.6
67.3
68.3
.. 74.7
' World War II peak year.
Post-World War II low; includes large offsets from sale of assets acquired during the war.
Last year prior to Korean war.
4
Korean war peak year.
5
Post-Korean war low in the 1950's.
6
Post-Korean war low in the 1960's.
7
Peak of spending during Vietnam war.
8
Lowest point in post-Vietnam era.
9
Last year for which "actual" data are available.
2
3
Nondefense purchases of goods and services.—This category
covers the goods and 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,
space, and other scientific research; the capital outlays of Government enterprises; Federal law enforcement; and operation of veterans hospitals. Table B-5 shows the composition of this spending by
agency for the years 1976 through 1980.
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 reflect net capital formation.
As table B-5 shows, the Department of Health, Education, and
Welfare (HEW) is the agency with the largest total of nondefense
purchases. About 50% of the HEW defense purchases are made for
the health programs administered by that agency. These purchases
are largely to conduct medical research, provide direct medical
care, and to administer grant and transfer payments programs for
health care.
54
THE BUDGET FOR FISCAL YEAR 1980
Table B-5. NONDEFENSE PURCHASES OF GOODS AND SERVICES BY AGENCY
[In billions of dollars]
1976
actual
Legislative branch
The Judiciary
Agriculture:
Commodity Credit Corporation (CCC)
Other
Commerce
Defense—Civil
Energy *
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space Administration
Office of Personnel Management1
Postal Service2
Tennessee Valley Authority
Veterans Administration
Allother 3
Total
1977
actual
1978
actual
1979
estimate
1980
estimate
0.8
.3
1.0
.4
1.0
.4
1.2
.5
1.3
.6
.2
2.3
1.0
2.2
2.4
5.7
.5
1.4
1.4
.9
.9
3.2
2.7
.5
3.6
1.0
.7
1.1
4.6
3^
2.6
2.8
1.1
2.4
3.1
6.1
.5
2.7
1.6
1.1
1.1
3.6
2.9
.6
3.9
1.1
.4
1.2
5.2
10
.9
3.7
1.1
2.7
4.0
6.9
.7
3.3
1.8
1.2
1.2
3.9
3.2
.6
3.9
1.3
.4
1.6
5.8
14
.6
3.8
1.2
2.7
5.4
7.6
.6
3.4
2.0
1.9
1.3
4.5
3.6
.8
4.3
1.4
.3
2.2
6.5
5.1
.3
3.6
1.7
2.8
5.4
8.0
.8
3.2
2.0
1.8
1.6
4.7
3.6
.8
4.5
1.7
.4
2.0
6.4
5.6
40.7
48.4
53.0
60.9
62.8
1
Includes
2
3
figures on spending by predecessor agencies for earlier years.
Not included in outlays shown in the Federal budget.
Includes allowances for civilian agency pay raises and contingencies.
Note.—Excludes the transition quarter.
The bulk of the nondefense purchases by the Veterans Administration (VA), which is the second largest agency in terms of such
purchases, is also devoted to medical care. The VA directly operates a nationwide system of hospital and health care facilities for
veterans, especially veterans suffering from service connected disabilities.
The Department of Defense-Civil and Tennessee Valley Authority purchases are primarily for multi-purpose water and power
facilities or for electricity generating and transmission facilities.
The Department of Transportation nondefense purchases are primarily for the costs of the Coast Guard and the Federal Aviation
agency; the great bulk of that agency's ground transportation
spending is in the form of grants-in-aid to State and local governments. The sharp rise in the Department of Commerce purchases
in 1980 is caused largely by the costs of conducting the 1980 census.
SPECIAL ANALYSIS B
55
Composition of Federal Sector Expenditures
-too
200-
Domestic Transfer Payments
150 —
—150
I
I
I
1
I
1
1
I
1
1
I
1
I
I
Domestic transfer payments.—This is now the largest category of
Federal sector expenditures. Spending for domestic transfers has
expanded rapidly in recent years, mainly because of more beneficiaries and higher benefit payments under social insurance programs. As Table B-6 shows, spending on human resources programs—especially income security programs—dominates domestic
transfer payments. This spending is expected to continue to rise in
1980, largely due to demographic and economic conditions—increases in the covered population and adjustments to compensate
for inflation. The President's proposed real wage insurance payments are estimated to add $2.5 billion to domestic transfer payments in 1980. However, Presidential initiatives such as hospital
cost containment and social security reforms should contribute to
restraining the total spent on domestic transfer payments in 1980
and in subsequent years. Program trends (on a unified budget
basis) are discussed extensively in Part 5 of the Budget and elsewhere in the budget documents.
O5
Table B-6. 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 and nutrition
Special payments, Treasuryx
Workmen's compensation
Other
Subtotal, Income security
Health:
Medicare
Other
Subtotal, Health
1969
1970
1971
1972
1973
W
Estimate
1974
1975
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
.2
.6
1.5
1.8
2.2
53.2
2.6
5.6
5.5
1.0
1.9
2.7
.1
.1
.1
.1
.2
.1
.2
.1
.2
.1
32.3
36.7
46.7
52.8
6.2
.3
6.7
.4
7.5
.4
6.6
7.2
7.9
1976
1977
1978
1979
1980
.3
.1
61.5
3.0
7.0
12.2
.9
4.2
4.2
1.7
.4
.1
70.3
3.4
8.2
18.2
1.0
4.6
4.6
.9
.5
.2
81.2
3.7
9.4
13.9
.9
4.7
4.4
.9
.5
.4
89.4
3.9
10.8
10.6
1.0
4.8
4.5
.8
.7
.4
99.2
4.2
12.2
9.1
1.3
5.4
5.2
.8
.8
.4
111.9
4.4
13.9
11.2
1.4
5.7
5.7
4.0
.9
.3
61.7
72.8
95.2
111.8
120.2
127.1
138.7
159.5
8.3
.4
9.0
.4
10.9
.4
14.0
.5
16.8
.6
20.6
.6
24.1
.6
27.9
.6
30.8
.6
8.8
9.4
11.4
14.5
17.4
21.2
24.7
28.5
31.4
gg
S
©
Education, training, employment, and social
services:
Education
Training, employment, and social services
Subtotal, education, training, employment, and social services....
Veterans benefits and services
Total, human resources programs
.4
.5
7
.9
1.0
1.0
1.5
2.1
2.4
27
37
3.9
7
7
.9
.9
7
7
A
.3
.3
.5
.6
.6
1.0
1.3
1.5
17
1.7
17
1.9
2.4
2.8
3.2
4.4
4.6
6.2
6.9
8.0
8.8
9.7
10.4
12.8
14.3
13.3
13.4
13.9
14.5
46.1
52.0
64.2
72.1
82.6
96.3
124.4
145.8
157.6
168.4
185.4
209.9
a?
ALL OTHER FUNCTIONS
2.4
.2
2.8
.2
3.3
.2
3.8
.2
4.3
.2
5.1
.4
6.2
.5
7.2
.5
8.1
.8
9.0
1.0
10.1
1.1
11.3
1.3
Total functions not included in
human resources grouping...
2.6
3.0
3.5
4.0
4.5
5.4
6.7
7.7
8.9
10.0
11.2
12.6
Total domestic transfer payments
48.7
55.0
67.7
76.1
87.1
101.7
131.2
153.5
166.4
178.4
196.6
222.5
National defense (military retired pay)
All other functions
*$50 million or less.
1
Includes both $50 tax rebates and earned income tax credits in excess of tax liabilities; also includes payments of $2.5 billion in 1980 under the proposed real wage insurance program.
Note.—Excludes the transition quarter.
gj
W
58
THE BUDGET FOR FISCAL YEAR 1980
Grants-in-aid.—These expenditures help State and local governments to provide general public services and to finance programs
for the needy. Table B-7 shows detail on grants-in-aid by budget
function and major activity. Grant expenditures are discussed in
greater detail in Special Analysis H of this document. While the
definition of Federal aid used in that analysis differs somewhat
from that used in the NIA, the two sets of data largely overlap.
Special Analysis H explains the relationship between the series.
There is a substantial degree of substitutability between grantsin-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, medicare (transfer
payments). The supplemental security income transfer payments
have substituted for 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 significantly change administrative controls without changing the
total size of grants. In some cases a more accurate picture of
Federal efforts to meet domestic needs through income transfers is
obtained by treating grants and domestic transfer payments together, rather than looking at them separately.
Table B-7. FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID
[In billions of dollars]
Actual
Description
HUMAN RESOURCES PROGRAMS
Income security:
Public assistance cash
Child nutrition and other food programs..
Other
1969
1970
1971
1972
1973
Estimate
1974
1975
1976
1977
3.6
.3
.3
4.1
.4
.3
5.5
.6
.4
6.6
.9
.4
5.9
1.1
.5
5.4
1.2
.5
5.1
1.7
.7
5.8
2.1
1.0
Subtotal, income security
4.2
4.8
6.5
7.8
7.5
7.1
7.5
Health:
Medicaid
Other (includes research, construction,
services, and medical training)
2.3
2.7
3.4
4.6
4.6
5.8
.8
1.2
1.2
1.5
1.7
3.1
4.0
4.6
6.1
3.1
.7
1.0
3.4
.8
1.4
3.7
1.1
1.6
4.8
*
5.6
*
12.2
14.4
1978
1979
1980
6.4
2.7
1.1
6.6
2.6
1.1
6.6
2.9
1.2
6.7
3.0
1.2
8.9
10.1
10.3
10.8
10.9
6.8
8.5
9.8
10.6
11.7
12.3
2.0
2.6
3.1
3.1
3.1
3.2
3.4
6.3
7.8
9.4
11.6
12.9
13.7
14.9
15.7
4.0
1.7
2.9
4.0
2.2
2.6
3.9
1.9
2.5
4.8
3.4
3.4
4.9
5.6
3.4
5.4
6.1
4.0
6.0
9.7
4.4
7.0
10.1
5.0
7.6
9.6
4.6
6.4
*
8.6
*
8.7
8.4
*
11.7
*
13.9
15.4
20.0
22.2
21.8
.1
.1
.1
.1
.1
17.5
22.6
22.5
23.3
28.6
34.5
38.6
44.1
48.0
48.6
^
Subtotal, health
Education, training, employment, and social
services:
Education
Training and employment
Social services
Subtotal, education, training, employment, and social services....
Veterans benefits and services
Total, human resources programs
See footnotes at end of table.
s
j>
Table B-7. FUNCTIONAL COMPOSITON OF FEDERAL GRANTS-IN-AID—Continued
[In billions of dollars]
Actual
Estimate
Description
1969
Natural resources and environment
1970
.3
1971
.4
1972
.8
1973
.8
1974
1.1
1975
2.0
1977
1978
1979
1980
2.4
3.1
4.1
3.8
3.9
4.5
.1
1.0
.6
2.0
2.9
2.4
2.0
2.8
.3
3.2
2.7
2.3
1.8
1.5
1.5
1.8
Community and regional development:
Local public works
Block grants
Other
1976
1.0
1.8
2.0
2.2
2.6
27
B
VH
Subtotal, community and regional
development
Transportation
General purpose fiscal assistance:
General revenue sharing
Anti-recession fiscal assistance
Other
Subtotal, general purpose fiscal
assistance
All other functions
Total other functions
Total grants-in-aid
*$50 million or less.
Note—Excludes the transition quarter.
u
1.0
1.8
2.0
2.2
2.6
27
2.8
3.3
4.4
6.8
6.2
5.3
JA
4^6
4^9
U
03
i3
i8
U
U
00
<U
95
6.6
6.1
6.1
6.2
A
A
.5
.5
6.8
1.7
.6
6.8
1.3
.9
6.9
.3
.9
6.9
.2
U
.3
.3
.3
.3
.3
.3
.3
.3
U
6^
67
67
00
01
8^
U
1.0
1.1
1.3
1.7
1.9
1.9
2.1
2.3
2.3
2.8
3.0
3.2
7.0
8.1
9^2
1O0
17^9
1M
m
210
277
306
302
3CL3
19L2
22^6
26^8
32i
404
4L6
484
57^5
602
74L6
702
709
Q
jg
SPECIAL ANALYSIS B
61
Foreign transfer payments.—There are three major types of foreign transfer payments: expenditure of dollars to assist foreign
economic development, grants of surplus 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 depends on the size of Federal
debt, loans outstanding, and the interest rates on borrowing and
lending. In the early post-war years (1947-48), net interest paid
amounted to over 13% of total Federal sector NIA expenditures,
but it has accounted for around 6-7% of the total each year since
1952. In 1978 net interest comprised 7.5% of total Federal sector
expenditures and it is expected to rise to 8.4% in 1980.
In recent years foreign holdings of Federal debt have increased
significantly. This expansion, combined with higher interest rates,
pushed up the share of net interest paid abroad to over $8 billion
in 1978. The increase in foreign holdings of Federal debt and in
interest payments on that debt is discussed further in Special
Analysis E.
Subsidies less current surplus of Government enterprises.—Subsidies less current surplus of Government enterprises consist of two
elements: (1) Subsidy payments to resident business (including
farms); and (2) the "current surplus" or "deficit" of Government
enterprises. In this context, a subsidy is a monetary grant to a unit
engaged in commercial activities. Examples are housing subsidies,
subsidies for railroads, 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, which
usually appear 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. As noted above, the capital formation of Government enterprises is classified as nondefense purchases. The largest Government enterprises are the Commodity
Credit Corporation, the Postal Service (which is not now included
in the budget), and the Tennessee Valley Authority.
Table B-8 shows the composition of this aggregation by major
category.
Table B-8. SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES
&
[In billions of dollars]
Actual
Description
Subsidies:
Commodity Credit Corporation
Other Department of Agriculture
Maritime
Housing (HUD)
Railroad and mass transit
Other (mainly airline subsidies)»
1969
1970
1972
1973
1974
1975
1976
1977
1978
1979
*
3.6
.3
.4
.8
*
.1
3.0
.3
.4
1.3
.1
.1
4.0
.4
.4
1.7
.1
.7
2.4
.2
.4
1.9
.1
.1
0.6
.4
.5
2.2
.4
.1
0.3
.2
.5
2.5
1.1
.2
0.6
.7
.5
2.9
1.4
.1
2.3
.8
.4
3.4
1.5
.2
2.4
.8
.5
4.0
1.7
.2
1.7
.9
.5
4.8
1.6
.2
4.4
5.2
5.2
7.3
5.2
4.2
6.9
6.4
8.8
9.7
9.8
.6
1.3
-.2
-.2
-.1
-.1
-^
.6
2.0
-.2
-.3
-.1
-.1
- J
.6
1.4
-.2
-.3
-.2
-.1
-^
1.3
1.3
-.2
-.3
-.1
-.1
-J
1.5
2.0
-.3
-.1
-.1
-.2
-A
.3
2.2
-.3
-.2
-.2
-.2
-J.
.2
2.3
-.4
-.2
-.2
-.2
-3
.2
1.6
-.6
-.2
-.2
-.2
-J.
.7
1.5
-.8
-.2
-.3
-.3
-A.
1.0
1.5
-1.0
-.2
-.3
-.3
*
.9
1.6
-1.1
-.2
-.3
-.3
-A
Subtotal
1.1
1.6
1.2
1.8
2.7
1.5
1.2
.6
.6
.6
.7
Total subsidies less current surplus
SA
6.8
6.4
9.1
8.0
5.7
6.1
7.0
94
103
105
Subtotal
Enterprise surpluses (—) or deficits:
Commodity Credit Corporation
Postal Service
Tennessee Valley Authority
Federal Housing Administration
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance Corporation..
Allother 2
*$50 million or less.
1
Includes subsidies by the disaster loan fund of $0.7 billion in 1973.
Includes wage disbursements less accruals.
Note.—Excludes the transition quarter.
a
3.1
.4
.3
.5
1971
Estimate
w
S
g
SPECIAL ANALYSIS B
63
Wage disbursements less accruals.—This is an adjustment item
occasionally made in the NIA when it is necessary 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. The adjustment between national income and personal
income is then small or zero. A small adjustment for wage accruals
by the Government is shown for 1978 and 1979.
QUARTERLY ESTIMATES AND ESTIMATING ERRORS
Estimating errors.—Estimates of NIA receipts and expenditures
are necessarily imprecise. 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. In compiling this special
analysis, each budget receipt and outlay is analyzed and translated
into NIA categories. The budget process does not generate all of
the data needed to make precise NIA estimates, so approximations
are required in the translation. Even the translation from past
year accounting data to NIA "actuals" are subject to adjustment
when more complete information becomes available.
Table B-9 provides some indication of the magnitudes of the
estimating errors associated with the past-year data. When the
1979 budget was published a year ago, fiscal year 1977 had been
over for 3 f months, and the 1977 estimates were labeled "actual";
Ve
yet, as Table B-9 shows, the figures for 1977 are now significantly
different. One can anticipate revisions similar to those shown in
Table B-9 for the "actuals" each year. The margin of error for the
estimated years (1979 and 1980 in this budget) is 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.
64
THE BUDGET FOR FISCAL YEAR 1980
Table B-9. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA FOR 1976: COMPARISON OF
JANUARY 1977 AND JANUARY 1978 ESTIMATES
[In billions of dollars]
Description
"Actuals"
for 1977
shown
in 1979
budget
Currently
reported
"actuals"
for 1977
Change
RECEIPTS
Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts
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
Total expenditures
Deficit ( - )
165.5
57.4
24.6
116.5
0.4
1.4
-.1
-.4
165.9
58.8
24.5
116.1
364.0
1.3
365.3
140.7
(92.0)
(48.7)
169.7
(166.5)
(3.2)
66.0
29.3
*
(.3)
(-.3)
-.1
(-.1)
(•)
.2
- .9
140.7
(92.3)
(48.4)
169.6
(166.4)
(3.2)
66.2
28.4
6.1
.9
7.0
411.8
.2
412.0
-47.8
TT
-46.7
* $50 million or less.
Quarterly estimates.—Table B-1O presents quarterly NIA receipts
and expenditures (at seasonally adjusted annual rates) for 1979 to
1980.
As noted above, the translation of the budget into the NIA
categories is inexact. When the annual NIA estimates are converted into quarterly distributions that are seasonally adjusted at
annual rates, greater imprecision must be expected. The data presented in Table B-10 are the best available estimates of the quarterly NIA receipts and expenditures consistent with the 1980
budget, but should be used with clear recognition of their limitations.
Table B-10. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA, QUARTERLY, 1978-80
[In billions of dollars; seasonally adjusted at annual rates]
Estimated
Actual
Description
RECEIPTS
Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts
EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic (to "persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage disbursements less accruals
Total expenditures
Deficit ( - )
Oct.Dec.
1977
Jan.Mar.
1978
Apr.June
1978
174.8
62.9
25.6
122.2
176.8
59.6
26.5
133.3
186.7
72.6
27.9
137.6
199.7
73.6
28.2
140.1
385.5
396.2
424.7
441.7
JulySept.
1978
Oct.Dec.
1978*
Jan.Mar.
1979
Apr.June
1979
JulySept.
1979
Oct.Dec.
1979
Jan.Mar.
1980
Apr.June
1980
JulySept.
1980
209.7
79.9
29.0
144.0
201.6
74.6
28.6
155.2
206.5
76.2
29.0
157.9
211.6
76.8
29.6
160.0
218.2
77.1
30.0
162.7
232.1
76.8
30.0
169.3
239.1
78.7
30.6
172.1
246.7
80.3
31.0
174.9
462.6
460.0
469.6
478.0
488.0
508.2
520.5
532.9
152.2 151.5
147.2
154.0
163.4
165.7
165.2
169.4
(97.1) (97.9)
(98.6)
(99.6) (102.1) (104.1) (106.1) (108.0)
(55.1) (53.6)
(48.6)
(54.5)
(61.3)
(61.6)
(59.1)
(61.4)
178.3 180.2
180.7
188.8
191.4
196.2
200.9
212.6
(175.0) (176.9) (177.0) (185.5) (187.8) (192.6) (197.3) (209.0)
(3.4)
(3.3)
(3.7)
(3.4)
(3.6)
(3.6)
(3.6)
(3.6)
71.1
73.9
75.9
77.5
79.1
77.1
77.9
78.3
30.7
33.2
34.6
36.3
37.9
41.0
43.1
44.4
11.8
10.0
10.0
8.0
10.5
10.1
10.3
10.1
—.2
.2
175.8
(112.2)
(63.6)
216.7
(212.9)
(3.8)
79.0
44.4
10.9
178.0
(114.3)
(63.7)
225.0
(221.1)
(3.9)
78.7
44.8
10.4
178.9
(116.4)
(62.5)
229.4
(225.5)
(3.9)
78.6
45.4
10.2
180.0
(118.6)
(61.4)
234.2
(230.2)
(4.0)
79.3
46.2
10.1
444.1
448.8
448.3
464.5
482.3
490.3
497.4
514.8
526.8
536.9
542.5
549.8
-58.6
-52.6
-23.6
-22.6
-19.7
-30.3
-27.8
-36.8
-38.8
-28.7
-22.0
-16.9
*Preliminary.
Note.—Because of the methods normally used in seasonally adjusting NIA data, the average of seasonally adjusted data for the 4 quarterts of a fiscal year may not be equal to the unadjusted fiscal year total.
OS
66
THE BUDGET FOR FISCAL YEAR 1980
RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR
NIA
Table B-ll shows the major differences between the budget and
the Federal sector of the NIA. These differences are explained
below.
Table B - l l . RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIA
[In billions of dollars]
Description
1978
actual
1979
estimate
1980
estimate
RECEIPTS
Total budget receipts
Government contributions for employee retirement (grossing)
Other netting and grossing
Adjustment to accruals
Other
Federal sector, NIA receipts
402.0
456.0
502.6
7.1
3.0
2.8
-1.0
7.9
3.5
-1.9
-1.1
8.3
6.3
-2.0
-1.3
413.9
464.3
513.8
450.8
493.4
531.6
—8.4
—5.2
—3.7
7.1
3.0
2.7
1.2
-5.8
7.9
3.5
1.5
2.2
-7.0
8.3
6.3
1.8
1.1
-6.2
450.6
496.3
539.2
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
Lending and financial transactions.—Conceptually, the national
income and product accounts measure the Nation's current income
and production, and therefore do not include transactions, such as
loans, that are an exchange of existing 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-of-funds data of the Federal
Reserve Board. Special Analysis E (Borrowing, Debt, and Investment) and Special Analysis F (Federal Credit Programs) both contain information on the financial market implications of the
budget.
SPECIAL ANALYSIS B
67
Most of the lending and financial transactions displayed in Table
B-ll are shown in Special Analysis F. However, this total differs
from the total for direct loans shown in Special Analysis F 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 treated as financial transactions and, therefore, excluded from the NIA;
and (c) Special Analysis F also shows lending by off-budget Federal
entities, which do not require reconciliation with the NIA because
they are not included in the budget.
Government contribution for employee retirement.—The contribu-
tions 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. Contributions for employee retirement by Government
enterprises such as the Postal Service are recorded as an increase
in the current deficit of enterprises. Contributions by other accounts are recorded as purchases of goods and services. 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. Around 80% of these payments go to the civil
service retirement fund, while most of the remainder is for 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 outlays. For instance,
receipts from social insurance programs operated by the Veterans
Administration (such as the National Service Life Insurance and
U.S. Government Life Insurance) are netted against outlays 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.
68
THE BUDGET FOR FISCAL YEAR 1980
One major element of netting and grossing in recent years has
been due to budgetary collections arising from the Outer Continental Shelf leases. All such collections are recorded in the budget as
negative outlays. The rents and royalties component—but not the
bonuses—are recorded in the NIA as indirect business nontaxes;
this converts the money from an offset to outlays in the budget to a
receipt in the NIA. 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 of the NIA.
Other netting and grossing includes some imputed contributions
for social insurance for Federal employees for unemployment compensation (which adds an equal amount to nondefense purchases)
and workmen's compensation (which adds an equal amount to domestic transfer payments).
As already discussed in the section labeled "major tax changes,"
the President's budget proposes to provide real wage insurance
payments to qualified individuals as part of his anti-inflation program. These payments, to the extent that they do not exceed tax
liabilities, are being treated in the budget as refunds of receipts.
The NIA treats these payments as transfer payments (rather than
as offsets to receipts), thereby requiring a new grossing adjustment
totaling an estimated $2.3 billion in 1980.
Timing adjustments.—The budget records receipts at the time
the cash is collected regardless of when the income is earned, and
outlays (except interest paid to the public) are generally recorded
at the time the checks are issued. The NIA attempt to record most
receipts from the business sector in the time 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 Treasury.
The principal timing adjustment to expenditures is for defense
purchases. The major defense timing adjustment normally involves
procurement items (such as missiles and 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 addition, some
SPECIAL ANALYSIS B
69
accounting adjustments are included with the defense timing adjustment in this translation.
Since both the budget and the NIA record public debt interest to
the public when it accrues, no timing adjustment is needed for
most interest transactions.
Bonuses on Outer Continental Shelf 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. As already noted, 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 are not included 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. Geographic exclusions arise because Puerto Rico, the
Virgin Islands, and other U.S. territories are not included in the
United States for purposes of computing the GNP and related data
series (such as social insurance taxes, domestic transfer payments,
and grants-in-aid) but also are not treated as foreign for purposes
of producing data on exports, imports, and foreign transfer payments. Geographical exclusions will reduce NIA receipts relative to
budget receipts by about $1.4 billion and NIA expenditures by
about $3.9 billion in 1980. Certain nondefense timing adjustments—for example, the difference between State withdrawals of
unemployment benefits and actual payments to individuals—are
included in this adjustment line because of the difficulty in separating them from other adjustments in this line. This line also
includes a $0.4 billion shift of cash payments from 1978 to 1979 in
the supplemental security income transfer payments. Under legislation enacted in 1977, when these payments fall due on a weekend
or holiday the payments are to be made early. The budget recorded
13 such monthly payments for 1978 and will show 11 for 1979; the
NIA records 12 for each year. This category includes adjustment
for certain foreign currency transactions that are not included in
the budget, and transactions of Federal entities that are excluded
from the budget but included in the Federal sector NIA.
Table B-12. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1969-80 [In billions of dollars]
Estimate
Actual
Description
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
122.6
43.7
21.4
84.2
127.1
42.1
111
92.1
136.9
51.9
24.2
100.9
165.9
58.8
24.5
116.1
186.3
67.2
27.2
133.1
206.6
76.9
29.0
151.8
236.4
78.2
30.4
168.8
M
03
8
s
RECEIPTS, NATIONAL INCOME BASIS
Personal taxes and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals...
Contributions for social insurance
Total receipts, national income
basis
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
190.1
194.9
192.5
213.5
240.5
271.8
283.5
313.9
365.3
413.8
464.3
513.8
98.0
(76.1)
(21.9)
50.9
(48.7)
(2.2)
97.0
(75.3)
(21.7)
57.0
(55.0)
(2.0)
94.8
(72.1)
(22.7)
70.1
(67.7)
(2.3)
100.9
(72.5)
(28.4)
78.9
(76.1)
(2.8)
101.7
(73.3)
(28.4)
89.7
(87.1)
2.7
104.6
(74.1)
(30.5)
104.7
(101.7)
(3.0)
118.0
(80.3)
(37.6)
134.3
(131.2)
(3.1)
126.2
(85.5)
(40.7)
156.5
(153.5)
(3.0)
140.7
(92.3)
(48.4)
169.6
(166.4)
(3.2)
151.1
(98.1)
(53.0)
181.8
(178.4)
(3.4)
166.0
(105.1)
(60.9)
200.2
(196.6)
(3.6)
178.2
(115.4)
(62.8)
226.4
(222.5)
(3.9)
19.2
12.1
22.6
13.6
26.8
14.2
32.6
14.1
40.4
15.9
41.6
19.8
48.4
21.9
57.5
25.2
66.2
28.4
74.6
33.7
78.2
41.6
78.9
45.2
4.6
5.4
-.1
6.8
.1
6.4
9.1
-.5
8.0
.2
5.7
.4
6.1
7.0
9.4
*
10.3
*
10.5
184.7
195.6
212.7
232.9
256.2
278.8
328.7
371.5
412.0
450.6
496.3
539.2
+5.4
—.6
—20.2
-19.5
-15.7
-7.0
-45.3
-57.6
-46.7
-36.8
-32.0
-25.4
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
Total expenditures,
income basis
national
Excess of receipts ( + ) or expendit u r e s ^ ) , national income basis
* $50 million or less.
Note—Excludes the transition quarter.
r
2
•8
>
PART 2
ANALYSES OF THE
BUDGET TOTALS
71'
INTRODUCTION
Part 2 provides analyses and tabulations of the budget totals that
cover Government finances and operations as a whole, and reflect
the ways in which Government finances affect the economy. These
special analyses are designated C through I.
Special Analysis C (Funds in the Budget) classifies budget information by the groups of funds (Federal and trust) that comprise
the budget.
Special Analysis D (Investment, Operating, and Other Budget
Outlays) classifies budget outlays in terms of the duration and
nature of the benefits derived, distinguishing those of an investment or developmental 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 (Borrowing, Debt, and Investment) describes
current developments and past trends in Federal borrowing and
debt. It also considers interest on the Federal debt, investment by
Government accounts in Federal securities, the statutory debt
limit, and the total of Federal and federally assisted borrowing
from the public.
Special Analysis F (Federal Credit Programs) covers direct loans,
guarantees of private loans, and loans of Government-sponsored
enterprises. It includes aggregate measures of total credit supplied
to the public, and raised from the public, under Federal auspices.
Special Analysis G (Tax Expenditures) 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 H (Federal Aid to State and Local Governments)
contains information on Federal grants to State and local governments and assistance provided through loans and tax expenditures.
It shows Federal aid for past years and relates it to the finances of
both the Federal Government and State and local governments.
This analysis provides a profile of Federal grants by region, a
description of the State and local government sector of the national
income accounts, and an identification of other grant information
sources.
Special Analysis I (Civilian Employment in the Executive
Branch) deals with the levels of civilian employment in the executive branch. It also contains figures on total Federal personnel
costs (including military personnel).
72
SPECIAL ANALYSIS C
FUNDS IN THE BUDGET
This analysis provides information on the two major fund groups,
Federal and trust, that together, after deducting interfund transactions, as shown in Table C-l, make up the budget totals.
Table C - l . BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(In millions of dollars)
Description
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
Total budget receipts
OUTLAYS
Federal funds:
Total in fund accounts
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
Outlays, Federal funds
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
1978
actual
1979
estimate
1980
estimate
281,311
-1,587
-6,473
-2,768
321,561
-2,425
-8,871
-4,130
349,311
-2,609
8,365
-5,539
270,484
306,135
332,798
180,257
-1,634
-9,462
-1,149
202,838
-1,389
10,558
-1,395
226,728
-1,444
-11,691
-1,385
168,012
189,496
212,208
-36,498
-39,641
-42,452
401,997
455,989
502,553
342,844
-1,587
-6,473
-2,768
376,741
' 2,425
-8,871
-4,130
398,357
-2,609
8,365
-5,539
332,016
361,315
381,844
167,563
-1,634
-9,462
-1,149
185,036
-1,389
-10,558
-1,395
206,695
-1,444
11,691
1,385
155,318
171,694
192,175
-36,498
-39,641
-42,452
450,836
493,368
531,566
-48,839
-37,379
-29,013
73
74
THE BUDGET FOR FISCAL YEAR 1980
The Federal funds are derived mainly from taxes and borrowing
and are used for the general purposes of the Government. The trust
funds collect certain taxes and other receipts for specified purposes, such as payment of social security benefits.
Amounts collected by the funds are classified either as budget
receipts, also called governmental receipts, or as offsets to budget
outlays, known as offsetting collections, depending on the following
criteria.
When the amounts are collected by the Federal Government
from the public and arise from the exercise of governmental or
sovereign powers, the amounts are treated as budget receipts. Premiums from voluntary participation in certain Federal social insurance programs (such as supplemental medical insurance) and gifts
and contributions are also included in this category.
When the amounts are collected from other Government accounts or from transactions with the public that are of a businesstype or market-oriented nature, such as the sale of services or
goods, they are treated as deductions from spending in arriving at
budget outlays.1
FEDERAL FUNDS
The Federal fund group is comprised of the general fund, special
funds, public enterprise (revolving) funds, and intragovernmental
funds. Intragovernmental funds include intragovernmental revolving funds, management funds, and consolidated working funds.
Federal fund budget receipts and outlays. In 1980, the Federal
fund budget receipts are estimated at $332.8 billion and outlays are
estimated at $381.8 billion. The following table, C-2, presents the
distribution of budget receipts by source and outlays by agency for
the Federal fund group.
The Federal fund budget receipts shown in the table are derived
mainly from taxes and borrowing. They are comprised of the
amounts collected by the general and special funds that are governmental in nature. Proprietary receipts from the public of the
general and special funds arise from market-oriented transactions
and thus are offsetting collections rather than budget receipts.
The Federal fund outlays shown are net of all collections credited to the public enterprise and intragovernmental funds and the
proprietary receipts of the general and special funds. These are
offset because the amounts collected are associated with businesstype or market-oriented activities or payments from other Government accounts.
1
Additional information on budget receipts and offsetting collections is provided in Part 7 of the Budget of the
United States Government, Fiscal Year 1980.
SPECIAL ANALYSIS C
75
Table C-2. FEDERAL FUND RECEIPTS AND OUTLAYS
(In millions of dollars)
Description
1978
actual
1979
estimate
1980
estimate
RECEIPTS BY SOURCE
Individual income taxes
Corporation income taxes
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
180,988
59,952
10,054
5,285
6,573
7,632
227,322
70,987
9,123
6,011
8,447
10,908
270,484
306,135
332,798
1,046
Total receipts, Federal funds
203,602
70,307
9,406
5,686
7,517
9,617
1,207
1,303
OUTLAYS BY AGENCY
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Other
Agriculture
Commerce
Defense—Militaryx
Defense—Civil
Energy
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies
Allowances2
Undistributed offsetting receipts: Rents and royalties
on the Outer Continental Shelf
Total outlays, Federal funds
Excess of outlays ( - )
1
2
43
3
7
5
3,914
4,292
617
8
9
4,401
85
8
898
732
20,376
5,238
103,069
2,539
6,285
53,406
7,589
3,873
2,398
12,763
1,289
6,283
56,558
4,071
20,228
4,332
111,894
2,628
8,946
57,776
8,962
4,101
2,586
12,412
1,450
7,338
65,628
4,194
18,413
3,267
122,692
2,707
8,893
60,705
10,634
3,835
2,505
12,029
1,730
7,418
70,057
4,753
84
18
5
11
3
3,979
18,793
19,328
4,400
20,064
20,709
4,593
20,175
21,367
1398
-2,259
-3,500
-2,600
332,016
361,315
381,844
-61,533
-55,180
-49,046
Includes allowances for civilian and military pay raises for Department of Defense.
Includes allowances for civilian agency pay raises and contingencies.
524
88
76
THE BUDGET FOR FISCAL YEAR 1980
Obligations,—The obligations (net) for Federal funds are estimated at $429.6 billion for 1980, as set forth in table C-3. These
transactions largely flow from budget authority for Federal funds
of $443.8 billion for the year, although in part the obligations were
authorized by prior years' budget authority.
Table C-3. OBLIGATIONS INCURRED, NET, IN FEDERAL FUNDS
(In millions of dollars)
Department or other unit
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
International security assistance
International development assistance
Other
Agriculture
Commerce
Defense-Military 1
Defense-Civil
Energy
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Export-Import Bank
Federal Home Loan Bank Board
Office of Personnel Management2
U.S. Postal Service
Railroad Retirement Board
Other independent agencies
Allowances:
Civilian agency pay raises
Contingencies for other requirements
Undistributed offsetting receipts: Rents and royalties
on the Outer Continental Shelf
Total
1
1978
actual
1979
estimate
1980
estimate
1,031
442
75
1,247
534
83
1,302
625
91
2,739
2,506
848
21,593
2,180
112,939
2,643
9,973
55,926
36,252
4,282
2,437
10,272
1,348
8,104
56,696
3,369
195
3,991
18,914
-2,932
-425
8,067
1,787
330
10,254
2,509
2,865
926
22,916
3,041
123,859
2,884
8,819
61,565
42,455
5,379
2,614
12,920
1,692
9,027
65,550
4,565
174
4,940
20,202
2,177
-404
9,473
1,803
413
10,165
2,495
3,218
615
21,298
3,204
133,686
2,823
8,542
61,937
34,489
4,419
2,428
11,673
1,713
8,848
70,083
4,820
280
4,728
20,475
1,814
-524
10,815
1,698
313
11,890
100
926
1,500
-2,259
-3,500
-2,600
373,577
420,994
429,624
Includes allowances for civilian and military pay raises for Department of Defense.
2
This agency assumes the majority of activities previously performed by the Civil Service Commission. The remainder of the Civil Service Commission
activities were assumed by the Merit Systems Protection Board, the Federal Labor Relations Authority, and the Equal Employment Opportunity
Commission.
SPECIAL ANALYSIS C
77
Balances of Federal fund budget authority.—Table C-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 (obligated balances) 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 major procurement or major construction programs
that are fully funded, to provide funding for activities of a continuing nature (such as research and development), for financing loan
programs, for standby emergency purposes (such as backup financing for insurance of the Federal Deposit Insurance Corporation), or
for reserves for losses and debt redemption.
Public enterprise funds.—The public enterprise funds carry on a
cycle of business-type operations, primarily with the public, on
behalf of the Government. These funds are usually supplied with
capital from the general fund, and in a few cases they may borrow
from the public or from the Federal Financing Bank (FFB). These
funds also obtain capital by selling financial assets to the FFB.
Data on public enterprise funds are included on a net outlay basis
in tables C-2 through C-4. Additional information on the gross
outlays and applicable collections are shown in table C-5.
Collections of public enterprise funds is estimated at $38.4 billion
in 1980, and gross outlays are planned to total $46.4 billion, resulting in net outlays of $8.0 billion.
TRUST FUNDS
There are two types of trust funds—nonrevolving and revolving.
Trust revolving funds, like public enterprise funds, carry on a cycle
of business-type operations and are normally stated net of collections.
Cash operations.—Trust fund receipts are estimated at $212.2
billion in 1980, with outlays planned at $192.2 billion, as shown in
table C-6. The transactions of the Federal old-age and survivors
and disability insurance funds are far larger than any other trust
fund.
In fiscal years 1978-80, trust funds have excesses of receipts of
the following amounts (in millions of dollars):
1978
actual
Total receipts, trust funds
Total outlays, trust funds
Excess of receipts or outlays ( — ) , trust
funds
1979
estimate
1980
estimate
168,012
155,318
189,496
171,694
212,208
192,175
12,694
17,801
20,033
T H E BUDGET FOR FISCAL Y E A R 1980
78
Table C-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY
(In millions of dollars)
Department or other unit
Start 1978
Obligated
Legislative branch
The Judiciary
Executive Office of the
President
Funds appropriated to
the President:
International security
assistance
International development assistance
Other
Agriculture
Commerce
Defense-Military1
Defense—Civil
Energy
Health,
End 1979
End 1978
iObligated
Unobligated
Obligated
Unobligated
End 1980
Unobligated
Ot>ligated
Unobligated
155
188
148
158
188
110
187
80
41
10
43
13
53
11
62
3
15
*
14
*
9
3,880
5
3,799
4
11,252
6,342
12,111
3,617
4,192
121
10,846
5,167
10
3,882
7,581
4
13,923
1,393
281 1,317
30
1,304 1,832 1,150 1,832
9,058
6,983 10,271
1,706 12,940
2,141 15,825 1,370
7,218
778 4,231
903 2,973
394 2,910 407
42,606 19,883 52,293 21,151 64,258 22,374 75,252 23,615
874
285
978
421 1,233
191 1,268
375
2,004
1,923 5,692
2,493
5,565
3,342
5,214 2,023
Education, and
Welfare
Housing and Urban Development
17,556
3,025
19,851
2,450
23,619
166,588
32,992
195,252
34,210
228,745
Interior
Justice
1,845
1,007
Labor
State
Transportation
Treasury
Environmental Protection
5,656
249
5,583
296
Agency
General Services Administration
National Aeronautics and
Space Administration..
Veterans Administration...
Export-Import Bank
Federal Deposit Insurance
Corporation
Federal Home Loan Bank
Board
Office of Personnel Management2
Railroad
Retirement
Board
Other independent agencies
Allowances3
Total
13,077
845
275
2,199
1,037
1,042
196
3,479
1,066
5,708
86
9,002
2,621
3,098
291
7,339
425
237
152
6,252
541
1,673 12,374
3,800
1,005 24,852
10,353
252,600
1,586
8,701
296
92
4,062
989
291
61
3,606
533
9,028
347
125
70
4,745
470
3,250
516
10,458
373
218
2
3,608
607
12,745
4,645
12,812
4,911
369
373
479
311
494
387
643
374
709
1,897
5,675
383
3,452
1,604
718
2,002
2,849
452
2,927
3,232
1,258
2,141
4,935
74
2,564
1,020
1,394
2,441
6,188
68
2,424
3,000
13
9,417
18
5
*
10,463
-9
5
4,457
3,000
16
9,831
5
3,000
3,000
-22
10,235
-40
10,759
61
40
67
6
5,846
100
6,326
9,324
1,128
21,041
18
5,045
8,943
296,170 126,228 337,001 115,729 396,645
87,958 444,397
101,290
*$500 thousand or less.
1
Includes balances of allowances for civilian and military pay raises for Department of Defense.
This agency assumes the majority of activities previously performed by the Civil Service Commission. The remainder of the Civil Service Commission
activities were assumed by the Merit Systems Protection Board, the Federal Labor Relations Authority, and the Equal Employment Opportunity
Commission.
3
Includes balances of allowances for civilian agency pay raises and contingencies.
2
79
SPECIAL ANALYSIS C
Table C-5. PUBLIC ENTERPRISE FUND TRANSACTIONS
(In millions of dollars)
Applicable collections
Description
1978
actual
Funds appropriated to the President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporation
Farmers Home Administration
Federal Grain Inspection Service
Federal Crop Insurance Corporation
Commerce
Defense:
Military
Civil (Panama Canal Company)
Department of Energy
Health, Education, and Welfare
Housing and Urban Development:
Government National Mortgage Association....
Urban renewal programs
Low-rent public housing
Federal Housing Administration Fund
Other
Interior:
Bureau of Reclamation
Other
Transportation
Treasury
Environmental Protection Agency
General Services Administration
Veterans Administration
Other independent agencies:
Community Services Administration
Emergency Loan Guarantee Board
Export-Import Bank
Farm Credit Administration
Federal Energy Management Agency
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolving fund
National Consumer Cooperative Bank
National Credit Union Administration
Panama Canal Commission
Pennsylvania Avenue Development Corporation
Small Business Administration
Tennessee Valley Authority
Total
Offsetting collections from the public
Offsetting collections from other accounts
*$500 thousand or less.
110
*
1979
estimate
Gross outlays
1980
estimate
89
*
1978
actual
93
1979
estimate
115
1
96
2
estimate
95
1
7,593
7,605
7,902 13,134 12,902 10,856
13,409 12,900 14,694 14,647 12,866 15,234
28
31
31
24
33
33
103
95
110
149
104 104
115
126
139
148
64
106
5
331
363
130
7
349
416
210
782
248
1,523 2,986
236
134
182
208
1,101 1,302
296
329
2,575
31
208
1,299
371
67
17
41
850
2
890
67
20
38
169
1
2
886
8
7
308
422
735
1,723 3,223 2,911
612
414 296
193
208 208
1,458 1,412 1,333
552 1,084 1,263
89
23
41
171
1
195
24
111
730
1
3
1,292
12
14
344
490 599
1,190 1,267
1
1
936
221 222
31
33
128 123
1
2
1
1
2
2
996 1,084
1
1
2,037
10
146
599
47
2,197 2,435
11
12
143
163
60
643
54
41
70
*
622
2,435
5
848
3,047
33,351
35,029
730
23
65
343
334
10
2
1,932
9
239
195
48
47
,
2,288
11
240
2,996
12
264
252
54
41
47
224
23
65
260
349
8
17
43
26
957 3,215 2,184 1,465
3,213 3,847
4,892
4,966
38,394
(30,591) (32,242) (35,598)
(2,760) (2,787) (2,796)
45,775
45,875
46,446
80
THE BUDGET FOR FISCAL YEAR 1980
Table C-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS
(In millions of dollars)
Outlays
Description
Receipts
1978
actual
Federal old-age, survivors, and disability insurance trust funds
Railroad employees retirement fundVeterans life insurance trust funds....
Federal employees retirement funds...
Unemployment trust fund
Health insurance trust funds
Highway trust funds
Airport and airway trust fund
State and local government fiscal
assistance trust fund
Foreign military sales trust fund
Other trust funds (nonrevolving)
Trust revolving funds
Subtotal
Intrafund transactions
Proprietary receipts from the public..
Receipts from off-budget Federal entities
Total
1979
estimate
1980
estimate
1978
actual
1979
estimate
1980
estimate
93,861
3,983
735
11,003
11,169
25,211
6,058
1,115
103,709
4,267
810
12,486
11,000
29,149
6,849
1,177
116,677
4,516
837
14,165
13,100
32,080
7,222
1,157
89,595
3,887
976
17,799
15,161
27,589
7,567
1,545
101,803
3,991
1,002
20,633
16,300
31,755
8,153
1,704
117,194
4,485
1,003
22,739
16,400
35,811
8,384
1,930
6,823
8,104
720
-1,219
6,852
9,400
979
-1,641
6,863
10,600
1,168
-1,689
6,855
8,445
838
6,855
9,500
1,142
6,855
10,600
1,328
167,563
-1,634
-9,462
185,036
-1,389
-10,558
206,695
-1,444
-11,691
180,257
-1,634
-9,462
202,838
-1,389
-10,558
226,728
-1,444
-11,691
-1,149
-1,395
-1,385
-1,149
-1,395
-1,385
155,318
171,694
192,175
168,012
189,496
212,208
Budget receipts by trust fund.—Table C-7 presents information
classifying the trust fund receipts by major fund, and by source for
each such fund.
Budget outlays by trust fund.—Corresponding information on
trust fund outlays, classifying the data for the larger funds, is
found in table C-8.
Balances of the trust funds.—Total balances of the trust funds
continue to increase, as shown in the following end-of-year figures
(in millions of dollars):
1977
Open book balances
Investments in U.S. securities:
Public debt
Agency debt
Total
1978
actual
1979
estimate
1980
8,169
9,141
9,215
9,362
143,140
1,215
155,061
1,015
172,789
1,015
192,674
1,015
152,524
165,217
183,019
203,051
A summary of the balances by fund is presented in table C-9.
The amounts include both amounts on deposit with the Treasury
(open-book balances) 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, contract authority (a form of budget authority)
has been provided to a trust fund in advance of receiving moneys
81
THE BUDGET FOR FISCAL YEAR 1980
Table C-7. TRUST FUND RECEIPTS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description
1978
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
Railroad employees retirement fund:
Social insurance taxes and contributions
Interest on Federal securities
Receipts from other trust funds
Other (mainly receipts of special Federal payments)
Proposed legislation
Subtotal, railroad employees retirement
fund
Veterans life insurance trust funds:
Interest on Federal securities
Other receipts
Subtotal, veterans life insurance trust
funds
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 liabilities):
Entities included in budget
Entities excluded from budget
Other receipts
Supplemental now requested
employees
1980
estimate
85,391
2,402
97,752
2,180
113,271
2,048
1060
1112
1,184
741
759
677
14
89,595
101,803
117,194
1,822
209
1,618
2,079
228
1,386
2,328
211
1,440
238
298
295
211
3,887
3,991
4,485
492
484
Subtotal, Federal old-age, survivors, and
disability insurance trust funds
Subtotal Federal
funds
1979
estimate
532
471
546
457
976
1,002
1,003
3,230
3,260
3,513
4,113
3,531
4,935
10,152
1,149
9
11,270
1,395
2
340
12,885
1,385
3
..
retirement
17,799
20,633
22,739
Unemployment trust fund:
Social insurance taxes and contributions
Interest on Federal securities
Advances from general fund
13,850
266
1,045
15,870
430
15,855
545
Subtotal, unemployment trust fund
15,161
16,300
16,400
19,111
1,009
22,568
1,176
26,250
1,327
206
111
244
7,262
7,776
7,988
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) ...
280-700 O - 79 - 6
82
SPECIAL ANALYSIS C
Table C-7. TRUST FUND RECEIPTS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
Description
1979
estimate
1978
actual
1980
estimate
8
2
27,589
31,755
35,811
6,904
662
*
7,317
836
7,466
918
7,567
8,153
8,384
1,326
219
1,436
268
1,209
312
1,545
1,704
1,930
State and local government fiscal assistance trust
fund: Deposits for general revenue sharing
6,855
6,855
6,855
Foreign military sales trust fund
8,445
9,500
10,600
Other trust funds (nonrevolving)
838
1,142
1,328
180,257
-1,634
-9,462
-1,149
202,838
-1,389
-10,558
-1,395
226,728
-1,444
11,691
-1,385
168,012
189,496
212,208
Proposed legislation
Subtotal, health insurance trust funds
Highway trust funds:
Excise taxes
Interest on Federal securities
Other receipts
Subtotal, highway trust funds
Airport and airway trust fund:
Excise taxes
Interest on Federal securities
Proposed legislation
Subtotal, airport and airway trust fund
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
Total receipts
409
*$500 thousand or less.
(e.g., the airport and airway trust fund). The note to Table C-9 lists
these accounts and reconciles the balances on a budget authority
basis with the cash balances.
For 1980 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 C-10. The largest of these funds are
those used by the Office of Personnel Management to buy insurance for Government employees.
83
THE BUDGET FOR FISCAL YEAR 1980
Table C-8. TRUST FUND OUTLAYS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description
1978
actual
1979
estimate
1980
estimate
Federal old-age, survivors, and disability insurance
trust funds:
Benefit payments
Payments to other trust funds
Administrative expenses and other
Proposed legislation
90,738
1,618
1,504
100,676
1,386
1,643
4
114,145
1,440
1,701
-609
Subtotal, Federal old-age, survivors, and
disability insurance trust funds
93,861
103,709
116,677
3,950
33
4,231
36
4,541
40
-65
3^983
4,267
4,516
735
810
837
10,692
289
22
12,158
302
26
13,838
302
25
11,003
12,486
14,165
9,566
1,603
8,421
800
1,779
10,339
900
1,861
11,169
11,000
13,100
24,267
944
28,467
1,032
-350
32,760
1,063
-1,743
25,211
29,149
32,080
6,058
6,849
7,222
1,115
1,177
1,157
6,823
6,852
6,863
Foreign military sales trust fund
8,104
9,400
10,600
Other trust funds (nonrevolving)
Trust revolving funds
720
-1,219
979
-1,641
1,168
-1,689
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
167,563
-1,634
—9,462
-1,149
185,036
-1,389
-10,558
-1,395
206,695
-1,444
-11,691
-1,385
155,318
171,694
192,175
Railroad employees retirement fund:
Benefit payments and claims
Administrative expenses and other
Proposed legislation
Subtotal, railroad employees retirement
fund
Veterans life insurance trust funds
Federal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Subtotal, Federal employees retirement
Unemployment trust fund:
Withdrawals for benefit payments
Repayment of advances from general fund
Administrative expenses and other
Subtotal, unemployment trust fund
Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation
Subtotal, health insurance trust funds
Highway trust funds (mainly grants to States)
Airport and airway trust fund
State and local government fiscal assistance trust
fund: Payments for general revenue sharing
Total outlays
84
THE BUDGET FOR FISCAL YEAR 1980
Table C-9. TRUST FUND BALANCES
(In millions of dollars)
As of Sept. 30
Description
1977
actual
Federal old-age, survivors, and disability insurance trust
funds
Railroad retirement accounts
Veterans life insurance funds
Federal employees retirement funds
Unemployment trust fund
Health insurance trust funds
Highway trust funds
Airport and airway trust fund
State and local government fiscal assistance trust fund
Foreign military sales trust fund
Other trust funds (nonrevolving)
Trust revolving funds
1978
actual
1979
estimate
1980
estimate
35,363
3,147
8,267
56,704
10,446
15,771
11,673
3,698
1,789
4,907
1,001
12,452
33,457
2,871
8,459
64,851
15,746
18,378
12,977
4,225
1,791
5,007
1,164
14,093
33,974
2,841
8,625
73,424
19,046
22,108
14,139
4,998
1,784
5,007
1,324
15,782
152,524
Total
39,629
3,222
8,026
49,908
6,474
13,394
10,164
3,268
1,757
4,566
883
11,233
165,217
183,019
203,051
Note.—The following table reconciles balances on a budget authority basis with the cash balances shown above.
1977
166,569
1979
199,460
1980
221,491
-903
-16,850
-10,418
-1
-982
-17,917
-12,818
-982
-19,613
-15,018
5
44
92
2,491
9,269
2
6
92
3,187
10,742
2
6
93
3,597
11,584
2
6
94
4,289
12,803
2
6
152,524
Balance available on a cash basis....
1978
179,314
-689
-16,002
-9,220
-1
Balance available on an authorization 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 Congress.Soldiers' Home permanent fund
Airport and airway trust fund
Highway trust funds
Other
Retained as permanent endowment
165,217
183,019
203,051
_-j
-19
Table C-10. TRUST REVOLVING FUND TRANSACTIONS
(In millions of dollars)
Offsetting collections
Gross outlays
Description
1978
actual
Office of Personnel Management
(employees' life insurance and
health benefits)
Federal Deposit Insurance Corporation
All other trust revolving funds
Total trust
funds 1
1980
estimate
4,011
4,150
4,712
3,446
3,672
4,262
1,734
410
1,197
426
1,266
453
1,167
323
76
385
74
406
6,155
5,773
6,431
4,936
4,133
4,742
(3,193)
(2,581)
(3,560)
(2,871)
(3,782)
(2,373)
Excludes right-of-way revolving fund which is a part of the highway trust funds.
1979
estimate
revolving
Receipts from the public
; from other accounts
1
1978
actual
1980
estimate
1979
estimate
SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER BUDGET
OUTLAYS
This analysis divides outlays between those of an "investment"
or capital nature, and those devoted to "current" or operating
purposes. Investment-type programs are those that yield benefits in
future years through the acquisition of physical assets, financial
assets, or through expenditures for less tangible long-term benefits
such as education. They include: the construction, rehabilitation, or
acquisition of physical assets; education, training and vocational
rehabilitation; research and development; international development; and financial investments such as loans. Current programs
provide benefits primarily in the year they are made. They include:
payments for retirement, disability, and other income maintenance; social and employment service; subsidies or other payments—to agriculture, businesses and transportation systems and
other institutions—that are not directly used to purchase physical
assets; payments for the repair, maintenance, and operation of
established physical assets; and regulatory, law enforcement, and
other operating costs of the Federal Government. Some budgetary
transactions, notably the allowance for contingencies, cannot be
classified as either investment or current in nature.
This special analysis reflects a number of improvements relative
to past years that are designed to make it more useful and more
accurate. Proprietary receipts from the public, which are counted
as offsets to outlays in the budget, are now included as offsets to
those items to which they most nearly apply. This treatment more
nearly reflects the net Federal expenditures in various sectors. In
addition, employment—but not training—programs are classified
as current in nature. This action reflects the fact that these programs provide, on the whole, current benefits to people employed
rather than long-term benefits. International development grants
and foreign military sales have been shifted to the investment-type
category to reflect the long-term benefits of these programs. A new
investment-type category has been created encompassing collection
of information. Included are general purpose statistics, censuses,
and engineering and natural resource surveys. These programs are
classified as investment-type since they provide a data base from
which long-term benefits are derived.
85
86
THE BUDGET FOR FISCAL YEAR 1980
The Federal Government has never produced a capital budget in
the sense of one in which capital or investment-type programs are
financed separately from current expenditures. One major reason
is that a capital budget could be misleading as a measure of the
Government's effect on the demand for economic resources. Another is that such a budget might favor programs with intensive
expenditures for physical assets, such as construction, relative to
other programs for which future benefits cannot be accurately
capitalized, such as education or research. Likewise, physical assets
might be favored relative to current operations in any given program, since deficit financing for capital would be easier to justify.
A capital budget would also pose formidable accounting problems
involving the measurement of depreciation on Government property, especially weapons systems.
There are also inevitable classification difficulties, as illustrated
in preparing the kind of analysis presented here. This analysis
classifies programs in the category where most of the outlays are
expected to occur. However, some programs—such as general revenue sharing or payments to individuals—can be utilized for both
investment-type or current purposes and the classification of them
into one category necessarily results in understating the other.
Another difficulty is that current expenses for special assistance to
a particular sector can be misleading since they are incomplete
measures of Federal aid. For example, the category "aids to agriculture, commerce, and transportation" reflects current benefits
such as payments for subsidies and operating expenses to water
and air transportation and railroad programs. It does not include
subsidies for the construction of private merchant ships, which are
investment-type outlays included under "acquisition of major
equipment". The Federal Government also assists many sectors
through loan guarantees, tax expenditures, off-budget Federal entities, and other ways that are not reflected in the budget, and
therefore, are not included in this analysis.
An additional difficulty is that even after the basic classification
between investment-type or current programs has been made, several alternative subclassifications are possible. For example, grants
for construction of education facilities could logically be considered
to be either the acquisition of physical assets or the conduct of
education and training. In this analysis, these grants are classified
as physical assets. This is in part because complete discussions and
tables of the total amount of education outlays are available elsewhere in the budget, which is not true for Federal outlays for
physical assets. This principle is also observed in the treatment of
the categories "conduct of research and development" and "other
investment." It is applied, in addition, to all outlays for financial
SPECIAL ANALYSIS D
87
investments, so that a complete presentation of all Federal outlays
for financial and physical assets is available.
Investment-type outlays account for over one-fifth of total estimated outlays in 1980. Of these, nearly two-fifths are for national
defense programs, with procurement of major equipment and conduct of research and development being the predominant investment-type defense activities. (In this analysis, defense refers to the
national defense function as defined in the budget). The remaining
three-fifths are for nondefense purposes, with "construction and
rehabilitation of physical assets"—such as highways and mass
transit, pollution control facilities, and energy related facilities—
being the predominant programs. Outlays for "conduct of education
and training"—including student assistance, elementary and secondary education, and veterans readjustment benefits—are the
second largest investment-type nondefense category.
Current outlays make up almost four-fifths of total estimated
outlays in 1980. National defense programs account for about onefifth of total current outlays, with nearly half of that amount
required for "repair, maintenance, and operation of physical
assets". The remainder includes salaries for active military employees and retired pay for military personnel as well as general overhead costs. In the nondefense area, "provision of benefits"—including retirement, disability, health and welfare benefits—accounts
for nearly three-quarters of nondefense current outlays and almost
one-half of total budget outlays. Nearly 14% of nondefense current
outlays—9% of total budget outlays—is for net interest.
A small portion of outlays are not classified as either defense or
civil outlays. These include allowances for contingencies.
Four tables are presented in this analysis. Table D-l presents a
summary of Budget outlays, separated by national defense and
civil programs. Table D-2 provides detailed backup to entries of
Table D-l. An additional view of budget outlays is included in
Table D-3, which separates outlays by grants-in-aid, loans, and
direct Federal programs. This table makes no distinction between
national defense and civil programs. Table D-4 provides detailed
backup to Table D-3.
88
THE BUDGET FOR FISCAL YEAR 1980
Table D - l . SUMMARY OF INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)
1978
actual
1979
estimate
1980
estimate
National defense:
Investment-type programs:
Construction and rehabilitation of physical
assets
Acquisition of major equipment
Conduct of research and development
Other investment-type programs
2,330
20,105
12, 077
546
2,283
22,607
13,437
706
2,496
25,915
14,790
831
Subtotal, investment-type programs
35,057
39,034
44,032
9,207
10,324
11,487
34,658
26,265
37,121
28,024
39,932
30,318
70,129
75,470
81,737
Current programs:
Provision of benefits
Repair, maintenance, and operation of physical
assets
Other current programs
Subtotal, current programs
Unclassified
Total National defense
61
105,186
114,503
125,830
5,964
3,646
Civil:
Investment-type programs:
Loans and financial investments
Construction and rehabilitation of physical
assets
.
Acquisition of major equipment
Conduct of research and development
Conduct of education and training
Other investment-type programs
23,974
522
12,434
18,399
4,868
24,804
640
14,416
21,066
7,108
23,941
722
15,191
21,000
6,955
Subtotal, investment-type programs
69,698
73,999
71,456
198,455
13,175
218,506
13,825
243,629
12,922
10,962
12,893
12,894
391
9,877
5,795
35,435
1,862
-253
9,193
6,211
42,984
1,506
-586
9,123
6,333
46,082
3,385
Current programs:
Provision of benefits
Social service and employment programs
Aids to agriculture, commerce, and transportation
Repair, maintenance, and operation of physical
assets
General purpose fiscal assistance
Regulation, control, and law enforcement
Net interest
Other current programs
9,501
Subtotal, current programs
275,952
304,865
333,780
Total civil
345,650
378,864
405,236
Unclassified
Grand total
500
450,836
493,368
531,566
Loans and financial investments.—A loan creates a financial
asset equal to the outlay. For domestic loans, the Government's
asset is matched by the liability of the private sector. Most Federal
domestic loans—to both State and local governments and private
SPECIAL ANALYSIS D
89
borrowers—finance the acquisition or improvement of either physical assets or human capital, especially in community and regional
development, education, and transportation. Loans to foreign borrowers represent an increase in financial assets held by the United
States. Most foreign loans are for economic development programs
or the promotion of U.S. exports, including military equipment and
farm commodities. Net loan outlays are expected to total $2.5
billion in 1980. However, a significant and growing Federal involvement in loan programs occurs through loan guarantees, where the
Federal Government promises to pay a part or all of the principal
or interest of a loan that is made by the private sector. Loan
guarantees may achieve ends similar to those for direct loans
except that there are no outlays except in cases of default. Additional analysis of loan programs is contained in Special Analysis F,
"Federal Credit Programs."
Financial investments in international organizations such as the
World Bank, are designed to enhance economic and social development in many parts of the world. This is expected, in turn, to be
beneficial to U.S. interests in both the present and future. Outlays
for financial investments are estimated to be $1.1 billion in 1980.
Physical assets.—Construction and rehabilitation of physical
assets, acquisition of major equipment, and establishment of commodity inventories are of a long term nature. Purchases of these
assets are treated as investment-type outlays regardless of whether
the asset is owned by the Federal Government, or by State, local or
private entities. Total outlays for physical assets are estimated at
$57.5 billion in 1980; of this amount $29.2 billion is in the national
defense function. Most national defense outlays for physical assets
are for the procurement of military equipment. A large portion of
Federal outlays for nondefense physical assets is in the form of
grants-in-aid to State and local governments, especially for construction programs. Highway and mass transit programs, and pollution control construction grants are the largest items in nondefense outlays for physical assets, accounting for $8.4 billion and
$3.6 billion respectively, or over two-fifths of estimated nondefense
outlays for physical assets in 1980.
Conduct of research and development—Outlays for research and
development provide benefits in the future even though it is difficult to know ahead of time what the benefits will be. Total outlays
for the conduct of research and development are estimated at $30
billion in 1980. Most national defense research and development
outlays are for weapon system development. In nondefense programs, outlays for health, energy and space account for more than
half of nondefense research and development outlays. Additional
90
THE BUDGET FOR FISCAL YEAR 1980
analysis of research and development programs is contained in
Special Analysis L, "Research and Development/'
Conduct of education and training.—Outlays classified in this
category are designed to add to the stock of human capital by
developing a more skilled and productive labor force. These outlays
represent direct payments to individuals, scholarships and grants
to institutions and other means of financing education and training. As with physical assets, the benefits accrue over a considerable
period of time. Outlays are estimated at $21.0 billion in 1980, with
education programs (including veterans education benefits) accounting for nearly three-fourths of the total.
Collection of information.-—This category includes outlays for collection of information, censuses, topographic or other natural resource surveys and programs that benefit both the present and
future by establishing a base of knowledge. Outlays of $1.7 billion
are estimated for 1980.
International development.—Foreign assistance for general international economic development is included in this category. These
outlays are expected to prove beneficial to U.S. interests by enhancing the economic development of foreign governments. These
outlays are estimated to be $1.6 billion in 1980.
Current programs.—Programs that provide benefits in the current year are divided into several major categories. Total current
outlays are estimated at $415.5 billion in 1980. Outlays classified as
current may be used for investment-type purposes; however, the
intent of these outlays is to provide short-term benefits—such as
unemployment compensation, retirement and disability payments,
and public service employment—rather than providing the means
for future benefits.
Outlays for "provision of benefits"—including retirement, disability, and other income support payments, health care and nutrition,
and housing subsidies are estimated to be $255.1 billion in 1980;
more than three-fifths of current outlays and almost one-half of
total budget outlays.
Current outlays for "social service and employment programs"
are also estimated at $12.9 billion in 1980, while "aids to agriculture, commerce, and transportation" are also estimated to total
$12.9 billion.
Other current outlays are largely for operation of the Federal
Government, including: the "repair, maintenance, and operation of
physical assets"; regulatory and law enforcement activities, personnel, and other administrative or operating expenses of the Government. Net interest payments are estimated at $46.1 billion in 1980.
SPECIAL ANALYSIS D
91
Unclassified.—These outlays have not been placed in either the
investment or the current category. The allowance for contingencies is not classified because it is for unforeseen circumstances and
therefore, it is not known how it will be used.
Table D-2. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)
1978
actual
National defense investment-type programs
Construction and rehabilitation of physical assets:
Military construction
Family housing
Atomic energy defense activities
Other
Subtotal, Construction and rehabilitation of
physical assets
Acquisition of major equipment:
Procurement
Atomic energy defense activities
Subtotal, Acquisition of major equipment
Conduct of research and development
Other investment-type programs:
Atomic energy defense activities—other physical
assets
Other
Subtotal, Other investment-type programs...
Subtotal, Investment-type programs
1979
estimate
1980
estimate
1,836
215
274
5
1,844
92
342
5
1,906
104
484
2
2,330
2,283
2,496
19,976
129
22,476
131
25,749
166
20,105
22,607
25,915
12,077
13,437
14,790
540
6
803
-97
1,025
-194
546
706
831
39,034
44,032
9,171
35
10,281
44
11,435
52
9,207
10,324
11,487
Repair, maintenance, and operation of physical
assets:
Department of Defense, Military
Other
34,656
1
37,119
2
39,930
2
Subtotal, Repair, maintenance and operation of physical assets
34,658
37,121
39,932
26,641
27,755
27,974
2,154
190
National defense current programs
Provision of benefits:
Retired military personnel
Other
Subtotal, provision of benefits
Other current programs:
Military personnel
Allowance for civilian and military pay raises
Other national defense
35,057
-376
270
Subtotal, Other current programs
26,265
28,024
30,318
Subtotal, Current programs
70,129
75,470
81,737
105,186
114,503
125,830
Unclassified
Total National defense
61
92
T H E B U D G E T F O R F I S C A L Y E A R 1980
Table D-2. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1978
actual
Civil investment-type programs
Loans and financial investments:
Loans to State and local governments:
Community and regional development
Other
1979
estimate
1980
estimate
87
50
12
53
16
4
17
3
6
5
6
6
1,326
2,307
3,073
903
429
447
1,401
891
814
1,009
446
362
1,705
176
-632
521
389
298
Subtotal, Loans and financial investments,..
8,486
88
7
9,501
4,921
98
7
5,964
2,458
1,123
3,646
Construction and rehabilitation of physical assets:
Highways and mass transit
Air transportation
Other transportation
Community development block grants
Local public works
Other community and regional development
Pollution control and abatement
Water resources
Other natural resources and environment
Energy
Other
7,200
796
162
2,464
3,057
1,321
3,189
2,134
730
2,054
867
8,152
854
146
2,875
2,051
1,394
3,103
2,052
869
2,188
1,120
8,425
860
119
3,272
319
1,421
3,603
2,010
797
1,943
1,173
Subtotal, Construction and rehabilitation of
physical assets
23,974
24,804
23,941
152
276
94
128
362
151
150
399
172
52
2
60
4
12,434
14,416
15,191
2,283
3,592
186
6,061
2,921
2,978
294
6,193
3,195
2,552
235
5,983
5,505
6,343
6,892
Subtotal, Loans to State and local governments
Loans to other borrowers:
International affairs
Community and regional development
Agriculture
Transportation
Education
Other
Subtotal, Loans to other borrowers
Other financial investments
Acquisition of major equipment:
Energy
Transportation
Other
Subtotal, Acquisition of major equipment
Conduct of Research and development
Conduct of education and training:
Income support programs:
General education
Veterans benefits
Other
Subtotal, Income support programs
Other education and training programs:
Elementary, secondary, and vocational education
72
2
SPECIAL ANALYSIS D
93
Table D-2. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1979
estimate
1978
actual
1980
estimate
1,662
3,834
601
736
2,436
4,892
467
736
2,332
4,679
464
650
Subtotal, Other education and training programs
12,338
14,873
15,017
Subtotal, Conduct of education and training
18,399
21,066
21,000
959
44
2,516
93
2,039
7
1,003
2,609
2,046
1,579
1,290
996
1,754
1,393
1,352
1,565
1,597
1,747
4,868
7,108
6,955
Subtotal, Investment-type programs
69,698
73,999
71,456
Civil current programs
Provision of benefits:
Retirement and survivor benefits:
Social Security and Railroad Retirement benefits
Civil Service retirement and survivors benefits.
Other retirement and survivor benefits
80,856
9,307
930
89,944
10,426
1,071
101,424
11,792
1,130
Subtotal, Retirement and survivor benefits..
91,093
101,441
114,347
Disability benefits:
Social security and Railroad Retirement disability benefits
Civil Service disability benefits
Veterans disability benefits
Other disability benefits
12,246
2,058
9,604
248
13,617
2,423
10,681
629
15,187
2,856
11,682
980
24,157
27,351
30,705
24,267
10,680
5,283
8,126
10,776
5,724
3,592
3,328
28,117
11,751
4,843
9,185
9,244
5,728
4,221
3,571
31,017
12,354
5,699
9,793
11,291
5,647
5,105
4,289
71,776
76,660
85,195
5r098
4,975
Other education
Training
Health
. ...
Other
Other investment-type programs:
Commodity inventories:
Energy
Agriculture
Subtotal, Commodity inventories
Other physical assets
International development
Collection of information
Subtotal, Other investment-type programs...
Subtotal, Disability benefits
Other provision of benefits:
Cash payments:
Medicare
Medicaid
Supplemental security income
Nutrition programs
Unemployment compensation
Assistance payments program
Subsidized housing programs
Other
Subtotal, Cash payments
Direct provision of services:
Hospital and medical care for veterans
4,518
94
THE BUDGET FOR FISCAL YEAR 1980
Table D-2. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1978
actual
Other veterans benefits
Housing payments and subsidies
Other
1979
estimate
53
7
-31
34
8
1980
estimate
63
7
9
3
44
6
66
2
5
7
52
5
Subtotal, Direct provision of services
5,443
6,328
6,210
Subtotal, Other provision of benefits
77,219
82,988
91,404
Administrative expenses:
Social Security Administration.,
Nutrition programs
Unemployment compensation...,
Medicare
Other
Subtotal, Administrative expenses
Subtotal, Provision of benefits
Social service and employment programs:
Human development service
Temporary employment assistance
Other employment
Social services and child welfare services
Other
Subtotal, Social service and employment
programs
Aids to agriculture, commerce, and transportation:
Agriculture
Postal Service
Small business assistance
General aids to commerce
Ground transportation
Air transportation
Water transportation
Other
Subtotal, Aids to agriculture, commerce,
and transportation
2,866
57
2
93
9
96
3
64
6
3,099
66
4
1,053
1,023
95
0
3,259
65
8
1,119
1,053
1,056
5,986
6,726
7,172
198,455
218,506
243,629
1,446
4,769
2,166
2,740
2,053
13,175
3,430
1,778
50
5
44
1
1,770
1,849
81
4
30
3
1,434
3,181
3,641
2,893
2,675
13,825
4,340
1,803
64
5
54
8
2,250
1,962
86
5
44
4
1,613
2,571
3,737
2,945
2,055
12,922
4,044
1,698
64
2
52
8
2,297
2,022
99
0
77
1
10,962
12,893
Repair, maintenance, and operation of physical
assets:
Conservation and land management
Water resources
Recreational resources
Energy
Other
60
8
50
9
45
2
-586
-718
39
4
50
8
41
8
-789
-873
26
7
62
1
53
1
-1,019
-968
Subtotal, Repair, maintenance and operation of physical assets
391
-253
-586
6,823
2,010
1,044
6,852
892
1,449
6,863
918
1,342
9,877
9,193
9,123
General purpose fiscal assistance:
General revenue sharing
Other general purpose grants-in-aid
Shared revenues
Subtotal, General purpose fiscal assistance..
12,894
95
SPECIAL ANALYSIS D
Table D-2. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
Regulation, control, and law enforcement:
Regulatory and inspection activities:
Natural resources and environment
Transportation
Health
Energy
Agriculture
Commerce
Other
1980
estimate
1979
estimate
1978
actual
554
604
553
388
223
-702
608
725
647
600
475
111
-1,229
665
2,226
2,159
2,183
1,817
933
256
563
2,034
1,178
303
538
2,049
1,317
320
464
Subtotal, Law enforcement activities
3,569
4,052
4,150
Subtotal, Regulation, control, and law enforcement
5,795
6,211
6,333
Net interest:
Interest on the public debt
Other interest
Interest received by trust funds ( - )
48,695
-4,729
-8,530
59,800
-7,034
-9,782
65,700
-8,678
-10,940
Subtotal, Net interest
35,435
42,984
46,082
1,145
1,422
924
2,409
944
-4,983
1,784
1,558
1,020
2,837
-305
-5,388
1,789
1,759
1,116
2,804
499
-5,482
898
1,862
1,506
3,385
Subtotal, Current programs
275,952
304,865
333,780
Total, civil
345,650
378,864
405,236
Subtotal, Regulatory and inspection activities
Law enforcement activities:
Federal law enforcement
Federal litigative and judicial
Federal correctional activities
Other law enforcement assistance
Other current programs:
International security assistance
International affairs
Legislative branch
Other general government
Other
Employer share, employee retirement ( — )
Allowances for civilian agency pay raises
Subtotal, Other current programs
500
Unclassified
Grand total
815
672
612
571
239
-1,397
670
450,836
493,368
531,566
An additional view of Federal outlays is presented in tables D-3
and D-4, in which outlays are separated by grants-in-aid, loans,
and direct Federal programs.
Grants-in-aid are resources provided by the Federal Government
in support of State and local programs of governmental service to
the public. Special Analysis H, "Federal Aid to State and Local
96
THE BUDGET FOR FISCAL YEAR 1980
Governments," discusses grants-in-aid in greater detail. Loans are
made by the Federal Government to various borrowers to fulfill
express program purposes. Direct Federal programs are programs
carried out directly by the Federal Government.
Table D-3. SUMMARY OF BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL
PROGRAMS
(In millions of dollars)
1978
actual
1979
estimate
1980
estimate
Grants-in-aid:
Investment-type programs:
Construction and rehabilitation of physical
assets
Conduct of education and training
Other investment-type programs
18,043
9,508
678
18,435
11,106
668
17,860
11,574
864
Subtotal, investment-type programs
28,229
30,209
30,298
25,144
12,305
27,370
12,752
28,759
11,829
894
9,910
805
600
1,096
9,228
849
626
1,364
9,158
828
702
Subtotal, current programs
49,660
51,920
52,639
Total, Grants-in-aid
77,889
82,129
82,937
137
8,485
65
4,922
66
2,456
Current programs:
Provision of benefits
Social service and employment programs
Aids to agriculture, commerce, and transportation
General purpose fiscal assistance
Regulation, control, and law enforcement
Other current programs
Loans:
To State and local governments
To other borrowers
8,622
4,986
2,522
Direct Federal programs:
Investment-type programs:
Construction and rehabilitation of physical
assets
Acquisiton of major equipment . .
Conduct of research and development
Conduct of education and training
Other investment-type programs
8,260
20,577
24,259
8,891
5,918
8,652
23,220
27,586
9,961
8,419
8,577
26,613
29,715
9,426
8,336
Subtotal, investment-type programs
67,904
77,838
82,667
182,517
870
201,460
1,074
226,357
1,093
10,068
11,797
11,530
34,729
4,990
35,435
27,812
36,517
5,362
42,984
29,221
38,875
5,504
46,082
33,437
296,421
328,415
362,879
Total, Loans
Current programs:
Provision of benefits
Social service and employment programs
Aids to agriculture, commerce, and transportation
Repair, maintenance, and operation of physical
assets
Regulation, control, and law enforcement
Net interest
Other current programs
Subtotal, current programs
97
SPECIAL A N A L Y S I S D
Table D-3. SUMMARY OF BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL
PROGRAMS—Continued
(In millions of dollars)
1978
actual
Total, direct Federal programs
364,325
1979
estimate
406,252
445,546
561
Unclassified
Grand Total
1980
estimate
450,836
493,368
531,566
Grants-in-aid to State and local governments are estimated to be
$82.9 billion in 1980. Of this amount, over one-fifth is for construction and rehabilitation of physical assets. Transportation programs
account for over half of these grants-in-aid for 1980, largely for
highway and mass transit programs. Community and regional development, and construction of pollution control and abatement
facilities also account for large shares of grants-in-aid for construction of physical assets. Grants-in-aid for education and training
account for nearly 14% of the total.
Grants-in-aid providing current benefits are largely for health
care or health services, nutrition, and housing assistance. General
revenue sharing and shared revenues provide aid to State and local
governments with few limitations on the use of the funds.
Most Federal loans are made for international programs. Other
major loan programs provide assistance to agriculture, community
and regional development, and transportation.
More than four-fifths of estimated 1980 outlays are for direct
Federal programs. These programs are where the Federal Government directly provides benefits, services, and other assistance. The
largest share of these programs is for provision of benefits, including retirement and disability payments under Social Security and
Civil Service, and military and foreign service retirement. Veterans compensation and pensions and unemployment, compensation
are also included in this category.
Investment-type programs include military procurement and research and development; construction and rehabilitation of physical assets for natural resources and environment, including water
resources and conservation, and land management projects; and
research and development programs focused primarily on general
science, space and technological programs, energy, and health.
The remaining direct Federal programs include general administrative costs of the Federal Government, net interest, and other
defense and nondefense programs.
280-700 O - 79 - 7
THE B U D G E T F O R F I S C A L Y E A R 1980
98
Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS
(In millions of dollars)
1978
actual
1980
estimate
1979
estimate
Grants-in-aid
Investment-type programs:
Construction and rehabilitation of physical assets:
Highways and mass transit
Other transportation
Pollution control and abatement
Other natural resources and environment
Community development block grants
Local public works
Other community and regional development
Other
7,200
660
3,187
233
2,464
3,057
1,083
159
8,151
653
3,100
261
2,875
2,051
1,133
211
8,425
602
3,600
213
3,272
319
1,249
179
Subtotal, Construction and rehabilitation of
physical assets
18,043
18,435
17,860
3,256
2,801
2,853
598
3,986
3,017
3,511
592
3,952
3,428
3,666
528
9,508
11,106
11,574
Conduct of education and training:
Employment and training assistance
Elementary and secondary education
Other education
Other
Subtotal, Conduct of education and training
Other investment-type programs
678
668
864
28,229
30,209
30,298
10,680
2,855
5,724
2,393
1,272
11,751
3,138
5,728
2,834
1,497
12,354
3,195
5,647
3,375
1,558
890
392
939
*
940
487
996
*
1,054
520
1,055
1
2,221
2,422
2,629
25,144
27,370
28,759
995
4,769
1,006
1,380
2,740
1,414
2,284
3,181
1,123
1,361
2,893
1,909
2,359
2,571
1,159
1,533
2,945
1,261
Subtotal, Social service and employment
programs
12,305
12,752
11,829
Aids to agriculture, commerce, and transportation:
Transportation
856
1,037
1,192
Subtotal, Investment-type programs
Current program:
Provision of benefits:
Medicaid
Nutrition programs
Assistance payments
Housing payments and subsidies
Ote
Administrative expenses:
Social Security Administration
Nutrition programs
Unemployment compensation
Other
Subtotal, administrative expenses
Subtotal, Provision of benefits
Social service and employment programs:
Employment and training assistance
Temporary employment assistance
Employment programs
Human development services
Social service and child welfare services
Other
SPECIAL ANALYSIS D
99
Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1978
actual
1979
estimate
1980
estimate
38
59
172
894
1,096
1,364
6,823
3,087
6,852
2,375
6,863
2,295
9,910
9,228
9,158
494
311
486
363
418
411
805
849
828
600
626
702
Subtotal, current programs
49,660
51,920
52,639
Total, Grants-in-aid
77,889
82,129
82,937
87
50
12
53
-80
146
137
65
66
1,326
2,307
3,073
903
429
446
1,401
891
814
1,009
446
362
1,705
176
632
521
389
296
Subtotal, To other borrowers
8,485
4,922
2,456
Total, Loans
8,622
4,986
2,522
Direct Federal Programs
Investment-type programs:
Construction and rehabilitation of physical assets:
National defense
Water resource projects
Other natural resources and environment
Energy
Transportation
. ..
Veterans hospitals
Health
Other
2,308
2,032
601
2,054
297
243
167
557
2,268
1,975
688
2,188
348
284
217
684
2,485
1,934
663
1,943
377
318
212
646
Subtotal, Construction and rehabilitation of
physical assets
8,260
8,652
8,577
Other
Subtotal, Aids to agriculture, commerce,
and transportation
General purpose fiscal assistance:
General revenue sharing
Other
Subtotal, General purpose fiscal assistanceRegulation, control, and law enforcement:
Law enforcement
Other
Subtotal, Regulation, control, and law enforcement
Other current programs
Loans
To State and local governments:
Community and regional development
Other
Subtotal, To State and local governments....
To other borrowers.International affairs
Community and regional development
Agriculture
Transportation
Education
Other
100
THE BUDGET FOR FISCAL YEAR 1980
Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1978
actual
Acquisition of major equipment:
National defense
Energy
Transportation
Other
Subtotal, Acquisition of major equipment
Conduct of research and development
Conduct of education and training:
Assistance to veterans
Higher education
Elementary and secondary education
Employment and training assistance
Health
Other
Subtotal, Conduct of education and training
Other investment-type programs:
Financial investments
Commodity inventories
Other physical assets
International development
Collection of information
Subtotal, Other investment-type programsSubtotal, Investment-type programs
Current programs for:
Provision of benefits:
Retirement and survivor benefits
Disability benefits
Medicare
Other health
Unemployment compensation
Nutrition programs
Housing payments and subsidies
Medical care for veterans
Supplemental security income
Earned income tax credit
Other
Administrative expenses:
Social Security Administration
Nutrition programs
Unemployment compensation
Medicare
Other
Subtotal, administrative expenses
Subtotal, Provision of benefits
Social service and employment programs:
Community and regional development
1979
estimate
1980
estimate
20,102
152
276
47
22,604
128
362
127
25,913
150
399
150
20,577
23,220
26,613
24,259
27,586
29,715
3,576
2,941
381
501
587
906
2,937
4,206
442
827
499
1,050
2,496
4,333
449
668
493
987
8,891
9,961
9,426
878
912
1,818
1,386
925
978
2,483
2,289
1,403
1,265
1,123
1,808
2,225
1,642
1,539
5,918
8,419
8,336
67,904
77,838
82,667
100,299
24,157
24,267
687
10,776
5,271
1,168
4,518
5,244
881
1,483
111,765
27,351
28,117
753
9,244
6,048
1,480
5,098
4,793
841
1,667
125,834
30,705
31,017
793
11,291
6,597
1,802
4,975
5,649
1,547
1,603
1,976
135
54
936
664
2,159
159
57
1,023
905
2,205
165
65
1,053
1,055
3,765
4,304
4,543
182,517
201,460
226,357
36
2
35
4
39
5
101
SPECIAL ANALYSIS D
Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1978
actual
Other
1979
estimate
1980
estimate
544
729
734
Subtotal, Social service and employment
programs
870
1,074
1,093
Aids to agriculture, commerce, and transportation:
Agriculture
Postal Service
Small business assistance
Commerce
Ground transportation
Air transportation
Water transportation
Other
3,430
1,778
550
401
915
1,849
841
304
4,340
1,803
654
567
1,215
1,962
856
400
4,044
1,698
624
553
1,107
2,022
909
572
Subtotal, Aids to agriculture, commerce,
and transportation
Repair, maintenance, and operation of physical
assets:
National defense
Water resources
Conservation and land management
Other natural resources and environment
Energy
Other
Subtotal, Repair, maintenance, and operation of physical assets for
Regulation, control, and law enforcement
Net interest
Other current programs:
Military personnel
Other national defense
Other nondefense
Allowance for Department of Defense pay
raises
Allowance for civilian agency pay raises
Subtotal, Other current programs
10,068
11,797
11,530
34,656
590
680
-380
-644
-173
37,119
580
349
-465
-978
-88
39,930
612
276
-490
-1,332
-122
34,729
36,517
38,875
4,990
35,435
5,362
42,984
5,504
46,082
26,641
-410
1,581
27,755
235
1,231
27,974
155
2,256
2,154
898
27,812
29,221
33,437
Subtotal, current programs
296,421
328,415
362,879
Total, direct Federal programs
364,325
406,252
445,546
Unclassified
Grand total
561
450,836
493,368
531,566
SPECIAL ANALYSIS E
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 outlays 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 guarantees, for certain
private 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, the amount of U.S. Government debt held abroad, agency borrowing, agency investment in
Federal securities, the statutory debt limit, borrowing by Government-sponsored enterprises, and Government-guaranteed borrowing. 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 sector of
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 and
employee retirement.1
Special Analysis F examines the related subject of Federal credit
programs, which include direct loans, guaranteed loans, and loans
by Government-sponsored enterprises. The factors discussed in both
Special Analyses E and F are significant in appraising the impact
on financial markets of the programs contained in the 1980 Federal
budget.
BORROWING AND REPAYING DEBT
The Federal Government borrows from two principal sources.
First, it sells debt to the public, largely in order to finance the
Federal deficit. Second, it sells debt to the Government agencies
that accumulate surpluses in separate funds, primarily trust funds,
which are required by law to be invested in Federal securities.
Most Federal debt has been issued by the Treasury and is called
1
Information on many of these liabilities is contained in "Statement of Liabilities and Other Financial
Commitments of the United States Government," an annual report prepared by the Bureau of Government
Financial Operations of the Department of the Treasury.
102
SPECIAL ANALYSIS E
103
"public debt/' 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 is consequently an important concern of Federal fiscal policy. Borrowing from the public includes borrowing
from the Federal Reserve System as well as borrowing from commercial banks, foreign central banks, other financial institutions
and businesses, and individuals. "Borrowing from the Federal Reserve System" does not ordinarily mean that the Treasury sells
debt securities directly to the Federal Reserve. This occurs only in
exceptional circumstances and then in amounts limited by statute.
The Federal Reserve System normally buys debt securities in the
open market.
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 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 distinction, because the Federal Reserve's open
market operations depend on future economic developments and on
policy decisions not yet made.
Table E-l summarizes Federal borrowing from 1978 through
1982. In 1978 the total Federal borrowing (net of the refunding of
securities)—i.e., the rise in gross Federal debt—was $71.3 billion.
The sale of debt to Government agencies was $12.2 billion, and the
sale of debt to the public was $59.1 billion. Of the increase in debt
held by the public, $10.5 billion was purchased by the Federal
Reserve System and $48.6 billion by the rest of the public.
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 E-6 but also the debt of the Governmentsponsored enterprises listed in table E-10 and certain Government-guaranteed securities.
T H E BUDGET FOR FISCAL Y E A R 1980
104
Table E-l. FEDERAL BORROWING
[In millions of dollars]
Debt outstanding,
end of year
Borrowing or repayment ( - ) of debt
Description
Gross Federal debt:
Treasury debt
Agency debt
Gross Federal debt
Less debt held by Gov. agencies:
Treasury debt
Agency debt
Debt held by Gov. agencies
Total, debt held by public
Composed of:
Debt held by the Federal Reserve
System
Debt held by others
1978
actual
72,705
-1,417
71,287
1979
estimate
1980
estimate
1981
estimate
60,302 6C,236
-1,541 - 4 6 7
NA
NA
59,770
41,294
12,483 18,777 20,777
-301 -16 - 8
NA
NA
58,762
12,181
18,762 20,770 29,391
59,106
40,000 39,000
10,476
48,630
NA
NA
NA
NA
1982
estimate
1980
estimate
NA 892,083
NA
6,873
1982
estimate
NA
NA
11,691 898,956 951,941
NA 207,528
NA 1,480
NA
NA
39,292 209,008 277,691
11,903 -27,601 689,948 674,250
NA
NA
NA
NA
NA
NA
NA
NA
NA=Not available.
1
Estimates for agency investment in 1981 and 1982 are equal to the trust fund surplus.
Borrowing from the public has fluctuated sharply. It rose from
$3.0 billion in 1974 to $82.9 billion in 1976 and then declined to
$53.5 billion in 1977. In 1978, it increased to $59.1 billion. The
exceptionally large borrowing in 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 subsequent decline was due to the economic recovery.
Borrowing from the public is estimated to decrease to $40.0 billion in 1979 and $39.0 billion in 1980. This decline is expected in
spite of the large income tax reductions in the Revenue Act of 1978
and other tax legislation, which are estimated to reduce receipts by
$13.2 billion in 1979 and $23.9 billion in 1980. The principal causes
of the decrease in borrowing are the continued expansion of the
economy and the administration's policy of restraining budget outlays as part of its program to fight inflation. By the end of 1980
gross Federal debt is expected to be $899.0 billion, with 77% 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.
Borrowing from the public for years beyond the budget year is
estimated for the first time in this year's budget as part of the
multi-year budget planning being initiated to improve the manage-
SPECIAL ANALYSIS E
105
ment of the Government.3 As explained in Part 3 of the Budget, the
economic assumptions underlying the receipts and outlay estimates
for 1981 and 1982 are not forecasts of the most probable economic
conditions but instead are projections that assume progress in
moving toward the very ambitious goals for unemployment and
inflation that were set by the Full Employment and Balanced
Growth Act of 1978 (the Humphrey-Hawkins Act). The receipts and
outlay estimates also assume the continuation of current tax laws
as modified by proposals in the budget and the continuation of
existing and currently proposed programs at the levels tentatively
planned for 1981 and 1982.
Under these assumptions, the Government deficit declines considerably in 1981 and turns into a surplus in 1982. Borrowing from
the public decreases to $11.9 billion in 1981, and $27.6 billion of
debt held by the public is repaid in 1982. Despite the projected
surplus, gross Federal debt continues to rise in 1982 because, as
explained on pages 124-25 of this analysis, the surplus is more
than fully accounted for by the trust funds part of the budget. The
projected surplus in 1982 may not, of course, actually occur. It
simply indicates the resources that will be available to accommodate discretionary budget decisions—tax cuts, new or expanded
programs, or reductions in the debt held by the public. As the
President's Economic Report explains, fiscal policy adjustments will
probably be required sometime after 1980 to maintain economic
growth and further reduce unemployment.
BORROWING AND GOVERNMENT DEFICITS
Table E-2 shows the way in which borrowing from the public is
related to the Federal deficit. Until a few years ago the budget
deficit comprised practically the entire deficit of the Federal Government, but the deficit of thd off-budget Federal entities is now
significant. These entities, such as the Federal Financing Bank and
the Postal Service, are parts of the Federal Government but have
been excluded from the budget under provisions of law.
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 finance part
of the deficit; or negative, in which case they, like the deficit, must
themselves be financed by borrowing from the public. In 1978 the
total Government deficit was $59.2 billion. Almost all of this
amount, $59.1 billion, was borrowed from the public, and the remaining $0.1 billion was financed by other means.
3
See the discussion in Part 2 of the Budget.
106
THE BUDGET FOR FISCAL YEAR 1980
Table E-2. MEANS OF FINANCING THE FEDERAL DEFICIT
[In millions of dollars]
Description
1978
actual
1979
estimate
1980
estimate
1981
estimate
1982
estimate
Budget surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities2....
-48,839
-10,327
-37,379
-11,990
-29,013
-11,956
-1,216
-11,501
37,758
-11,096
Total, surplus or deficit ( - )
-59,166
-49,368
-40,969
-12,711
26,662
-2,471
9,944
1,917
247
367
-1,394
-88
907
1,184
-298
1,084
814
939
Total, means of financing other than
borrowing from the public
60
9,368
1,969
814
939
Total, requirements for borrowing
from the public
-59,106
-40,000
-39,000
11,903
27,601
59,106
40,000
39,000
11,903
-27,601
Means of financing other than borrowing from
the public:
Decrease or increase ( - ) in cash and
monetary assets3
Increase or decrease ( - ) in liabilities for:
Checks outstanding, etc.4
Deposit fund balances
Seigniorage on coins
Change in debt held by the public
•Several amounts have been assumed to be zero in 1981 and 1982 because they are usually small and would be very difficult to estimate accurately.
The off-budget Federal entities consist of the Rural Electrification and Telephone revolving fund, Rural Telephone Bank, Pension Benefit Guaranty
Corporation, Federal Financing Bank, Postal Service fund, and one program of the U.S. Railway Association.
3
Includes profits on gold sales, which have been reclassified as a means of financing rather than as an offsetting collection. The budget totals have
been revised retroactively for the period since these sales began in 1975.
•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.
2
The means of financing a deficit other than borrowing from the
public are:
• A decrease in cash or monetary assets. The profit from selling
gold is now included in this category.
• 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. In
this year's budget, the 1978 profit or loss of the Exchange
Stabilization Fund on its foreign exchange transactions is
counted as a change in deposit fund balances.4
• Seigniorage, which is the face value of minted coins less the
cost of their production.
Table E-2 explains an unusual relationship between the change
in the budget deficit from 1979 to 1980 and the change in borrowing from the public. The budget deficit decreases by $8.4 billion,
4
Because it is not practicable to forecast transactions in gold, foreign currency, and foreign transactions,
estimates are not made for 1979 and 1980.
SPECIAL ANALYSIS E
107
but borrowing from the public decreases by only $1.0 billion. This
is caused mostly by an extraordinarily large decrease of $9.9 billion
in cash and monetary assets. Some of this is attributable to the
profits on the sales of gold, which are now included in this category, but most is caused by a decrease in Treasury's cash balances.
At the end of 1978 these balances were more than is ordinarily
needed for operations, so Treasury plans to reduce them. These
resources finance part of the 1979 deficit, thus lessening the need
to borrow, but have no counterpart in 1980.
Notwithstanding the effect that these other means of financing
are estimated to have on the relative changes in the deficit and
borrowing from 1979 to 1980, even in 1979 these other means of
financing are small relative to borrowing from the public. The size
of these other means of financing is limited by their own nature.
Decreases in cash, for example, are necessarily limited by past
accumulations, which themselves required financing when they
were built up. Thus, the extent to which means other than borrowing can finance a deficit are limited in any year and tend to be still
more limited over a longer period of time. When the total Government deficit is sizable, it is necessarily the principal determinant of
borrowing from the public.
The sale of debt to Federal 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 1977-80 are compared
in the table below (in billions of dollars):
1977
actual
Agency investment in Federal debt
Total trust fund surplus or deficit ( — ) .
9.2
9.5
1978
actual
1979
estimate
1980
estimate
12.2
12.7
18.8
17.8
20.8
20.0
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 or sell Federal debt, as shown
in table E-7, and the trust funds may increase or decrease their
open book balances.5
SIZE AND GROWTH OF FEDERAL DEBT
Gross Federal debt has risen substantially over the past half
century, from $17 billion in 1929 to $780.4 billion at the end of
1978. Table E-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
5
Open book balances are cash assets not currently invested. As shown in Special Analysis C, they are very
small relative to trust fund holdings of Federal debt.
108
THE BUDGET FOR FISCAL YEAR 1980
Table E-3. COMPARISON OF TRENDS IN FEDERAL DEBT AND GROSS NATIONAL PRODUCT
[Dollar amounts in billions]
Debt outstanding, end of year
Held by
The public
Fiscal year
Gross
Federal
debt
Federal
Government
accounts
Total
Federal
Reserve
System
Other
GNP
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
46.3 224.5
47.8 226.6
50.5 222.2
52.9 219.4
53.3 226.4
52.8 235.0
25.0 199.5 363.6
23.6 203.0 380.0
23.8 198.5 411.0
23.0 196.4 432.7
25.4 200.9 442.1
26.0 209.0 473.3
61.7
59.6
54.1
50.7
51.2
49.7
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 *
290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1
53.7 237.2
54.3 238.6
54.9 248.4
56.3 254.5
59.2 257.6
61.5 261.6
64.8 264.7
73.8 267.5
79.1 290.6
87.7 279.5
26.5 210.7 497.3
27.3 211.4 508.3
29.7 218.7 546.9
32.0 222.4 576.3
34.8 222.8 616.2
39.1 222.5 657.1
42.2 222.5 721.1
46.7 220.8 774.4
52.2 238.4 829.9
54.1 225.4 903.7
47.7
46.9
45.4
44.2
41.8
39.8
36.7
34.5
35.0
30.9
1970 2
1971
1972 3
1973
1974
1975 4
1976
TQ
1977
1978
1979 estimate
382.6
409.5
437.3
468.4
486.2
544.1
631.9
646.4
709.1
780.4
839.2
97.7 284.9
57.7 227.2 959.0
105.1 304.3
65.5 238.8 1,019.3
113.6 323.8
71.4 252.3 1,110.5
125.4 343.0
75.2 267.9 1,237.5
140.2 346.1 80.6 265.4 1,359.2
147.2 396.9
85.0 311.9 1,457.3
151.6 480.3
94.7 385.6 1,621.7
148.1 498.3
96.7 401.6 1,715.6
157.3 551.8 105.0 446.8 1,834.0
169.5 610.9 115.5 495.5 2,043.4
188.2 650.9
NA
NA 2,289.4
29.7
29.9
29.2
27.7
25.5
27.2
29.6
29.0
30.1
29.9
28.4
1980 estimate
1981 estimate
1982 estimate
899.0 209.0
940.3 238.4
951.9 277.7
689.9
701.9
674.3
NA
NA
NA
NA 2,505.7
NA 2,758.6
NA 3,025.2
27.5
25.4
22.3
NA=Not available.
1
During 1969,3 Government-sponsored enterprises became completely privately owned, and their debt was removed from the totals for the Federal
Government. At the dates of their conversion, gross Federal debt was reduced $10.7 billion, debt held by Government accounts was reduced $0.6 billion,
and debt held by the public was reduced $10.1 billion.
2
Gross Federal debt and debt held by the public increased $1.6 billion due to a reclassification of the Commodity Credit Corporation certificates of
interest from loan assets to debt.
3
A procedural change in the recording of trust fund holdings of Treasury debt at the end of the month increased gross Federal debt and debt held in
Government accounts by about $4.5 billion.
4
Gross Federal debt and debt held by the public increased $0.5 billion due to a retroactive reclassification of the Export-Import Bank certificates of
beneficial interest from loan assets to debt.
the public. From the end of 1954 to the end of 1978, gross Federal
debt rose by 188% while debt held by the public rose by 172%.
Federal debt held by the public apart from the Federal Reserve
System rose still less, by 148%—an average annual rate of growth
109
SPECIAL ANALYSIS E
Percent Distribution of Indebtedness
1930
End of Year
1
1940
1950
1960
1970
Federal debt is held by the public (including the Federal Reserve System).
of 3.9% over the 24 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
increasing the Nation's money stock.
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 preceding chart, as a
proportion of the total credit market debt owed by nonfinancial
sectors of the economy: Federal, State and local, and private.6
Whereas Federal debt held by the public was only 13% of total
debt at the end of calendar year 1929, it had risen to 70% 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 creditworthiness during the depression and by controls and scarcities
during the war.
From 1945 to 1974, however, private debt increased as a proportion of total debt in every year but one, and in every single year
Federal debt held by the public decreased as a proportion of the
total. This uninterrupted trend ended in fiscal year 1975 because of
the large Federal deficit caused by the recession. The large Federal
est
1
during 1929-51 and for fiscal years thereafter. The private sector debt includes debt of foreigners.
110
THE BUDGET FOR FISCAL YEAR 1980
deficit in 1976 caused Federal debt held by the public to rise as a
percentage of total debt again in that year, but in 1977 the Federal
percentage of total debt resumed its downward trend. Over the last
20 years, from 1958 to 1978, the average annual compound rate of
growth was 5.0% for Federal debt held by the public, 8.3% for
State and local debt, and 9.8% for private debt. By the end of 1978,
Federal debt held by the public had decreased to 19% of total debt.
As a result of these trends, Federal debt and borrowing, though
still important, have become relatively much smaller influences in
the financial market.
During the same period Federal debt has decreased relative to
gross national product. As shown in table E-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 again in the following 2 years. The percentage declined
slightly in 1978 and is estimated to decline further through 1982.
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. The
interest rates on 91-day Treasury bills, for example, averaged 7.2%
in calendar year 1978 compared to 5.7% in 1970-77, 4.0% in the
1960's, and 2.0% in the 1950's. Consequently, whereas the Federal
debt held by the public almost tripled between 1954 and 1978, table
E-4 shows that the interest paid on this debt increased by seven
times.
Interest payments to the public tended to grow faster than gross
national product over the entire period. In the first 5 years interest
was equal to 1.4% of gross national product, whereas by the last 5
years the proportion had risen to 1.8%. The percentage was higher
in 1978 than in any of these preceding years and is estimated to be
higher still in 1979 and 1980. These estimates assume that market
interest rates will decline with the estimated decrease in the rate of
inflation. Interest as a percentage of budget outlays, on the other
hand, does not show a sustained trend over the period as a whole.
In 1978, however, this percentage is nearly the highest in the last
25 years, and in 1979 and 1980 the estimated percentages are much
the highest. Thus, by either measure the importance of interest on
the debt is currently rising.
111
SPECIAL ANALYSIS E
Table E-4. COMPARISON OF TRENDS IN INTERES1" ON FEDERAL DEBT
[Dollar amounts in billions]
Interest on the gross Federal debt
Paid to
Interest ()n debt
held by the public
as a pen of
sent
The public
Fiscal year
Total
1
Federal
Government
accounts
Total
Federal
Reserve
System 2
Other
GP
N
Budget
outlays 3
1954
1955
1956
1957
1958
1959
6.4
6.4
68
73
7.8
7.8
1.3
1.2
1.3
1.4
1.4
1.4
5.2
52
5.6
5.9
6.3
6.4
0.5
.4
.5
.7
.7
.8
4.7
4.8
5.1
5.3
5.6
5.6
1.42
1.36
1.35
1.37
1.43
1.35
7?9
7 56
7.90
7.73
7 68
6 96
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
95
9.3
9.5
10 3
11.0
11.8
12 6
14.2
15.6
17 6
1.5
1.5
1.6
1.6
1.8
2.0
2.1
2.6
3.0
3.5
8.1
7.8
7.9
8.7
9.2
9.8
10.4
11.6
12.6
14.1
1.0
1.0
1.0
1.1
1.2
1.4
1.7
2.0
2.4
2.9
7.1
6.8
6.9
7.6
8.0
8.4
8.7
9.6
10.2
11.2
1.62
1.53
1.45
1.50
1.50
1.49
1.45
1.50
1.52
1.56
8.73
7 96
7.40
7.78
7 80
8.29
7.75
7 36
7.07
7.66
20 0
216
22 5
24 8
30.0
33.5
37 7
83
42.6
49 3
60.3
66.1
4.4
5.3
5.8
6.3
7.7
8.8
9.0
.6
9.6
10.2
11.6
12.9
15.6
16.3
16.6
18.5
22.4
24.7
28.7
7.6
33.0
39.2
48.7
53.3
3.5
3.7
3.7
4.3
5.5
6.1
6.3
NA
6.8
7.3
NA
NA
12.2
12.6
12.9
14.2
16.9
18.6
22.5
NA
26.2
31.8
NA
NA
1.63
1.60
1.50
1.50
1.64
1.69
1.77
1.78
1.80
1.92
2.13
2.13
7.95
7.73
7.16
7.49
8.29
7.56
7.84
8.07
8.20
8.68
9.87
10.02
.
..
..
1970
1971
1972
1973
1974
1975
1976
T
Q
1977
1978
1979 estimate
1980 estimate
NA=Not available.
1
Total interest significantly exceeds the outlays for the interest function in the budget, because the interest function includes collections of interest as
an offset to outlays.
2
These figures are not exact. For most years they are estimated as the average of calendar year amounts. The 1978 estimate is tentative.
3
Budget outlays for 1954-80 are published in the Budget, Part 9, table 21.
Since the end of World War II the composition of the Federal
debt has changed. Until recently an increasingly large proportion
of marketable securities had a short maturity. One contributing
factor was the statutory ceiling of 4XA% that has been maintained
since 1918 on the interest rate for Treasury bonds. Because longterm market rates exceeded 4XA% after 1965, the ceiling eventually
prevented the Treasury from selling long-term obligations.
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 maxi-
112
THE BUDGET FOR FISCAL YEAR 1980
mum maturity was raised by law from 5 years to 7 years in 1967
and to 10 years in 1976. As of December 31, 1978, the amount of
notes outstanding with a maturity over 5 years was $112.7 billion,
of which $24.7 billion had a maturity over 7 years. The other
method of relaxing the restriction has been to allow limited
amounts of bonds to be sold at interest rates above the ceiling. In
1971 Treasury was allowed by law to issue up to $10 billion of
bonds at interest rates above 4V2%. In 1973 those bonds held by
Government accounts and the Federal Reserve System were
exempted from the interest rate limit, and since 1976 the amount
of the exception has been raised in four steps to $32 billion. As of
December 31, 1978, $43.8 billion of bonds outstanding had been sold
since the change of law in 1971, of which $26.7 billion were held by
the public exclusive of the Federal Reserve System. The effective
interest rates have ranged from 6.1% to 8.9%.
Notwithstanding the initial relaxations of the interest rate ceiling, the average maturity of Treasury debt decreased steadily from
about 5 years at the end of 1965 to about 2V2 years at the end of
1976. Since then, however, as the restriction has been relaxed
further, the average maturity has lengthened to over 3 years.
DEBT HELD ABROAD
Historically, almost the entire Federal debt was held by individuals and institutions within the United States. After World War II
the debt held in foreign official balances and international accounts tended to grow gradually, starting from a very low amount,
and, as shown in Table E-5, rose to just over $10.0 billion by the
late 1960's. This was still less than 5% of the total Federal debt
held by the public. Interest paid to foreign residents was a correspondingly small proportion of the total interest paid on debt held
by the public.
113
SPECIAL ANALYSIS E
Table E-5. FOREIGN HOLDINGS OF FEDERAL DEBT
[In billions of dollars]
Debt held by
the public
Fiscal year
Total
Borrowing from
the public
Foreign'
Total 2
Interest on debt
held by public
Foreign
Total
Foreign3
1965
1966
1967 ..
1968
1969
261.6
264.7
267.5
290 6
279 5
12.3
11.6
11.4
10.7
10.3
4.1
3.1
2.8
23.1
-1.0
0.3
-.7
.2
_ 7
-.4
9.8
10.4
116
12.6
14.1
0.5
.5
6
.7
.7
1970 ..
1971
1972
1973
1974
284.9
304.3
323.8
343.0
3461
14.0
31.8
49.2
59.4
56.8
3.8
19.4
19.4
19.3
3.0
3.8
17 8
17.3
10.3
-2.6
15 6
16 3
16.6
18.5
22.4
8
13
2.4
3.2
4.1
1975
1976
T
Q
1977
1978
396.9
480.3
498.3
551.8
610.9
66.0
69.8
74.6
95.5
121.0
50.9
82.9
18.0
53.5
59.1
9.2
38
49
20.9
25.4
24 7
28 7
76
33.0
39.2
45
44
12
5.0
7.9
1
Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be small.
Borrowing from the public is defined as equal to the change in debt held by the public from the beginning of the year to the end, except to the
extent that the amount of debt is changed by reclassification. Reclassifications during this period are identified in the footnotes to table E-3.
3
Estimated by Bureau of Economic Analysis, Department of Commerce. These estimates include small amounts of interest on the debt of Governmentsponsored enterprises, which are not part of the Federal Government.
2
Foreign holdings began to grow much faster in 1970. This change
arose in part out of the role of the dollar as an international
currency. Large amounts of the official reserves and other financial
assets of foreign nations are held in dollar denominated form, and
U.S. securities are the safest and most liquid form of holding
dollars. Consequently, as foreign countries acquired more dollar
denominated official reserves, they purchased a large amount of
U.S. debt. The second principal reason for the growth in foreign
holdings has been the massive current account surpluses of the
OPEC nations since 1974. The counterpart to these surpluses has
been the acquisition of financial assets, and these have largely
taken the form of U.S. securities. The increase in foreign holdings
of U.S. securities during the past decade has therefore been initiated primarily by foreign decisions. By the end of 1978 foreign holdings of Treasury debt reached $121.0 billion, which was 20% of the
total debt held by the public. Interest paid to foreign residents as a
proportion of the total interest paid to the public grew over this
period in roughly the same way as did the foreign holdings of debt.
In the years before 1970, when debt held abroad was so small,
borrowing from the public was approximately the same as borrowing from the domestic public. Since 1970, though, borrowing from
the domestic public has generally been quite different from total
borrowing. The relative importance of borrowing from abroad has
280-700 O - 79 - 8
114
THE BUDGET FOR FISCAL YEAR 1980
varied, as table E-5 shows, but for the period as a whole borrowing
from abroad was 34% of borrowing from the public. For the last 2
years borrowing from abroad was 41%. Borrowing from abroad is,
of course, an even larger proportion of total borrowing from the
public exclusive of the debt sold to the Federal Reserve System.
Federal borrowing in recent years has thus placed a considerably
smaller demand upon domestic credit markets than if all the funds
had been raised internally. The interest paid abroad on the^ borrowings has increased the U.S. balance of payments deficit.
Nearly all the Federal debt held abroad is owned by foreign
central banks or other official institutions and is denominated in
dollars. On November 1, 1978, however, the Administration announced that as part of its plan to strengthen the dollar the
Treasury would sell in private markets abroad up to $10 billion of
securities denominated in certain foreign currencies. In December
1978 the Treasury sold the equivalent of $1.6 billion of securities
denominated in Deutsche marks to residents of Germany. At the
same time, it announced that it was planning to sell securities
denominated in Swiss francs in January 1979 and was considering
the sale of securities denominated in Japanese yen. By selling
these securities, the Treasury acquires foreign currencies for use in
intervention operations that are designed to deal with disturbances
in the foreign exchange market.
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. The
authorization to borrow is budget authority, and the disbursement
of borrowed money is an outlay. Agency debt includes the borrowings of the off-budget Federal entities.
Agency borrowing was shown in total in table E-l and is shown
by agency in table E-6. In all years shown more debt is repaid than
is newly borrowed, and over the period as a whole total agency
debt decreases by $3.4 billion or by one-third. The agency debt
outstanding at the end of 1980 is less than 1% of gross Federal
debt.
115
SPECIAL ANALYSIS E
Table E-6. AGENCY BORROWING
l
[In millions of dollars]
Borrowing or repayment ( - ) of debt
Description
Borrowing from the public:
Agriculture: Farmers Home Administration2
Defense
Health, Education, and Welfare2
Housing and Urban Development:
College housing loans2 3
Federal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Assoc.2
Revolving fund (liquidating programs) 2
Transportation: Coast Guard
Veterans Administration2
Export-Import Bank
Postal Service
Small Business Administration2
Tennessee Valley Authority
Total, borrowing from the public.
Borrowing from other funds:
Agriculture: Farmers Home Administration2
Defense
Health, Education, and Welfare2
Housing and Urban Development:
College housing loans2 3
Federal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Assoc.2.
Revolving fund (liquidating programs) 2
Veterans Administration2
Small Business Administration2
Total, borrowing from other funds..
Total, agency borrowing included in gross Federal debt
1978
actual
-58
-100
_4
15
-17
3
-95
-5
-124
-718
1979
estimate
1980
estimate
Debt
end 1980
estimate
172
581
96
-103
-108
-27
-37
-65
-63
-89
-1,141
_*
-93
-157
1
412
843
250
174
1,725
-14
-100
.
390
52
380
317
-1,116
-1,525
-459
5,393
-76
-19
-11
-17
-16
146
72
79
9
13
-15
38
-3
-79
-9
-110
-18
169
45
292
271
270
137
-3
-2
-4
-3
-301
-16
-8
1,480
-1,417
-1,541
-467
6,873
645
1,213
-67
1,340
46
338
1,980
35
728
150
48
1,700
-2
8,510
150
2,500
8,900
390
1,964
3,567
2,624
20,450
MEMORANDUM
Borrowing from Federal Financing Bank:
Export-Import Bank
National Credit Union Central Liquidity FacilityPostal Service
Tennessee Valley Authority
United States Railway Association
Total, agency borrowing from Federal Financing Bank
* $500 thousand or less.
1
Excludes agency borrowing from Treasury.
Certificates of participation in loans issued by the Government National Mortgage Association on behalf of several agencies.
3
The debt of the College housing fund ($464 million) is scheduled to be transferred to the Revolving fund (liquidating programs) on October 1,
1979.
2
116
THE BUDGET FOR FISCAL YEAR 1980
As shown in the memorandum section of table E-6, the amount
of agency borrowing has been profoundly affected by the Federal
Financing Bank (FFB).7 The 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 guaranteed borrowing
and to reduce the cost to the Government of some of its borrowing
operations. It was given the authority to purchase agency debt and
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 limit on the amount.8 Since the FFB
can borrow from the Treasury at lower interest rates than other
agencies would have to pay in the market, this practice 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 a result of the FFB, several agencies that would otherwise
borrow mostly in the market borrowed $2.0 billion from the FFB in
1978 and are estimated to borrow $3.6 billion in 1979 and $2.6
billion in 1980. Because these agencies now borrow almost entirely
from the FFB instead of the public, almost no new agency borrowing in the market took place in the last 4 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 negative each year. If the FFB had not been
created, the agency component of gross Federal debt would be
substantially larger than it is now, though not by the exact amount
that agencies have borrowed from the FFB. The Treasury component would be correspondingly less.
By the end of 1980, $2.8 billion of agency debt, or two-fifths of
the total, will be obligations of three of the five agencies listed in
table E-6 that plan to borrow almost exclusively from the FFB: the
Export-Import Bank, Postal Service, and Tennessee Valley Authority. The other two agencies borrowing from the FFB were established more recently than the FFB and have never had to borrow
from the public. A total of $2.8 billion, or another two-fifths of all
7
FFB purchases of guaranteed obligations are shown in table E-ll.
The FFB also is authorized to have outstanding up to $15 billion of publicly issued debt. Treasury classifies
this as public debt rather than agency 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
SPECIAL ANALYSIS E
117
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
E-6. These certificates have not been issued since 1968. A further
$0.7 billion of agency debt will be family housing mortgages assumed by the Department of Defense (and Coast Guard) under a
program terminated more than a decade ago. The remaining
agency debt—$559 million, or 8% of the total—will have been
issued by the Federal Housing Administration, which conducts the
only program that normally continues to borrow from the public.
This agency issues debentures as payment for insurance claims on
defaulted loans, and the nature of this transaction precludes these
securities from being sold to the FFB.
An adjustment within table E-6 arises from the transfer of all
assets and liabilities of the College Housing fund to the Revolving
fund (liquidating programs) in the Department of Housing and
Urban Development. Debt of $464 million is scheduled to be transferred on October 1, 1979. This transfer does not constitute borrowing by the Revolving fund (liquidating programs) or repayment of
debt by the College Housing fund.
The Treasury supplies capital to business-type Government enterprises in return for both capital stock and debt. The debt is
shown as "borrowing from Treasury" 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 has
been steadily rising from the relatively low level of $4.3 billion in
the recession year of 1976. As shown in table E-7, agency investment was $12.2 billion in 1978 and is estimated to be $18.8 billion
in 1979 and $20.8 billion in 1980.
118
THE BUDGET FOR FISCAL YEAR 1980
Table E-7. AGENCY INVESTMENT IN FEDERAL SECURITIES
[In millions of dollars]
Holdings
end of
1980
estimate
Increase or decrease ( - ) in holdings
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 1
Federal Financing Bank 2
Veterans Administration:
National service life insurance trust fund
Other trust funds
Veterans reopened insurance fund
Federal Deposit Insurance Corp.: Trust fund
Federal Home Loan Bank Board: FSLIC
Office of Personnel Management:
Civil Service retirement and disability trust fund
Other trust funds
Postal Service2
Railroad Retirement Board: Trust fund
Other Federal funds
Other trust funds
Other off-budget Federal entities
Total, investment in Treasury debt
Investment in agency debt:
Agriculture: Commodity Credit Corp
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
Federal Home Loan Bank Board: FSLIC
Office of Personnel Management: Civil Service retirement
and disability trust fund
1979
estimate
1980
estimate
4,443
10
1
784
1,789
-3,045
1,153
1,592
93
8
-1,265
1,782
3,508
23
2
26,102
7,287
16,807
5,226
10
0
-238
1
2
3,530
15
6
7
9
3
3
5,300
10
6
68
38
3,300
2,098
1,418
210
18,117
1,499
41
4
1,348
58
2
1,162
73
7
14,089
4,988
-287
7
9
17
6
92
10
7
17
0
2,100
36
1
368
2
6
28
59
6
450
25
2
1
0
24
1,121
398
17
9
1
4
2
3
1,192
56
0
8,040
1,105
457
10,345
5,891
6,663
50
7
450
-104
-64
19
1
32
8,119
478
-16
-210
8
3
17
2
2
3
8,449
49
4
-485
-30
26
7
12
3
30
72,452
4,465
1,220
2,837
982
814
11
6
12,483
18,777
20,777
207,528
-6
-6
-6
11
1978
actual
555
50
-49
-100 .
-46
-1
-6
4
185
191
-8
*
15
3
78
1,480
209,008
275
-100 .
Total, investment in agency debt...
-301
-16
-8
Total, investment in Federal debt...
12,181
18,762
20,770
See footnotes at end of tabl
SPECIAL ANALYSIS E
119
Table E-7. AGENCY INVESTMENT IN FEDERAL SECURITIES—Continued
[In millions of dollars]
Increase or decrease ( - ) in holdings
Description
MEMORANDUM
Investment by Federal funds
Investment by trust funds
Investment by off-budget Federal entities
1978
actual
-100
11,721
560
1979
estimate
934
17,728
100
1980
estimate
1,233
19,885
-348
Holdings
end of
1980
estimate
13,622
193,689
1,697
* $500 thousand or less.
The change in holdings is estimated as equal to interest collections.
2
Off-budget Federal entity.
1
Three factors have been primarily responsible for this rise in
agency investment. In the early part of the period the economic
recovery was especially important. The decrease in the unemployment rate substantially reduced the benefit payments of the unemployment insurance trust fund—by $7.1 billion from 1976 to 1978—
and to some lesser extent increased the employment tax receipts of
the social security and unemployment insurance trust funds. Secondly, the payment from the general fund to the Civil Service
Retirement and Disability trust fund has increased each year.
During 1978-80 this payment rises by $2.7 billion. The third principal reason is tax increases. In particular, the Social Security
Amendments of 1977, enacted because of the financial problems of
the social security trust funds, are estimated to increase trust fund
receipts by $3.2 billion in 1979 and $8.7 billion in 1980. Without
this legislation, agency investment in 1979 would not rise by as
much and in 1980 would decline to about the same level as in 1978.
Total agency holdings of Federal securities will reach an estimated $209.0 billion by the end of 1980. This will comprise 23% of the
gross Federal debt. Two major trust funds—the Civil Service Retirement and Disability trust fund and the old age and survivors
insurance trust fund—will account for 48% 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.
LIMITATIONS ON FEDERAL DEBT
Statutory limitations have customarily been placed on Federal
debt. Until World War I, the Congress ordinarily authorized a
specific amount for each debt issue. Beginning with the Second
Liberty Bond Act of 1917, however, the nature of the limitation
was modified in several steps until it developed into a ceiling on
the total amount of most Federal debt outstanding. The latter type
120
THE BUDGET FOR FISCAL YEAR 1980
of limitation has been in effect since 1942. 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 limit9 includes virtually all Treasury debt. The small amount of Treasury debt not subject to limit is
shown in table E-8. It consists almost entirely of currencies no
longer being issued, such as silver certificates and national bank
notes, which were generally reclassifled as Federal debt some time
after being discontinued.
The major part of agency debt is not subject to the general
statutory limit. The only categories now included are the debentures issued by the Federal Housing Administration and the parTable E-8. DEBT SUBJECT TO STATUTORY LIMIT
[In millions of dollars]
End of year
Descriptions
1978
1979
1980
actual
estimate
estimate
Federal debt held by the public
610,948
650,948
689,948
Federal debt held by Government agencies
169,477
188,238
209,008
780,425
839,187
898,956
Total, gross Federal debt
Deduct:
Treasury debt not subject to limit
Agency debt not subject to the general limit:
Department of Defense
Export-Import Bank
Postal Service
Tennessee Valley Authority
Participation certificates1
Coast Guard
Total, Federal debt not subject to limit.
Federal debt subject to statutory limit
District of Columbia Armory Board bonds
Other debt subject to limit
Total, debt subject to statutory limit
610
610
610
897
2,141
250
1,825
2,031
2
7,755
777
1,000
250
1,725
1,869
1
6,232
653
843
250
1,725
1,707
1
5,789
772,670
20
*
832,955
20
*
893,168
772,691
832,975
893,168
*
* $500 thousand or less.
1
Certificates of participation in loans issued by the Government National Mortgage Association on behalf of several agencies (excluding certificates
issued during 1968).
9
The statutory debt limit is sometimes called the public debt limit. However, as explained in the text, the
limit does not apply to all public debt and does apply to some debt other than public debt.
SPECIAL ANALYSIS E
121
ticipation certificates sold in 1968. These securities comprise about
one-fifth of all agency debt. However, most other agency debt is
subject to special statutory limits. For example, the Postal Service
is limited to $2 billion of annual borrowing and $10 billion of bonds
outstanding.
The only other appreciable component of debt subject to limit is
the small issue of stadium bonds sold by the District of Columbia
Armory Board in 1960 and payable on December 1, 1979. Unlike
the rest of the debt subject to limit discussed above, the stadium
bonds are not part of the Federal debt. The gross Federal debt also
excludes a very small amount, less than half a million dollars, of
matured principal and interest that are included in debt subject to
limit.
The statutory limit on the Federal debt was $700 billion from
April 1, 1977, to September 30, 1977. This limit consisted of a
permanent limit of $400 billion, which has been in effect since
1971, and a temporary increment of $300 billion. This temporary
increment expired on September 30, 1977, without having been
extended, so for a few days the Federal debt exceeded the statutory
limit. This did not affect the validity of debt issued prior to the
expiration of the temporary ceiling, but all sales of savings bonds
and other new debt instruments had to be suspended temporarily.
On October 4, 1977, new legislation temporarily raised the limit to
$752 billion. This increase expired on March 31, 1978, but was
extended to July 31, 1978.
Again, however, the temporary increment to the debt limit expired without having been extended, so again for a few days the
Federal debt exceeded the statutory limit. All sales of savings
bonds and other new debt instruments had to be suspended temporarily. On August 3, 1978, new legislation temporarily raised the
limit to $798 billion. This increase expires on March 31, 1979, by
which time a further increase will be needed to permit the Federal
Government to meet its obligations.
The outstanding debt subject to limit is shown in table E-8 and
compared with the gross Federal debt and the Federal debt held by
the public. The debt subject to limit was $772.7 billion at the end of
1978 and is estimated to rise to $893.2 billion by the end of 1980.
These amounts are a great deal more than the permanent limit of
$400 billion. As shown in table E-8, the debt subject to limit is
much larger than the debt held by the public and is almost as large
as the gross Federal debt. Almost all of the difference between
gross Federal debt and debt subject to limit is accounted for by
agency debt not subject to the general limitation.
122
THE BUDGET FOR FISCAL YEAR 1980
FEDERAL FUNDS FINANCING AND THE CHANGE IN DEBT SUBJECT
TO STATUTORY LIMIT
The year-to-year change in debt subject to limit, unlike the
change in debt held by the public, is not determined principally by
the total Government deficit, that is, by the sum of the budget
deficit and the deficit of the off-budget Federal entities. The trust
fund surplus or deficit, which makes up part of the budget surplus
or deficit, has no essential effect. This is explained below in a
discussion that is more technical than the rest of this special
analysis.
The budget consists of two major groups of funds: Federal funds
and trust funds.10 The trust funds collect certain taxes and other
receipts for specified purposes, such as paying social security and
unemployment insurance benefits. The Federal funds comprise the
rest of the budget. Their resources are derived mainly from taxes
and borrowing and are used for the general purposes of the Government. The off-budget Federal entities make up a third group of
fiscal operations, analagous to the Federal funds and trust funds
groups. If the off-budget entities were included in the budget,
almost all of them would be classified as Federal funds.
When the Federal funds have a deficit, that deficit must generally be financed by borrowing. Borrowing is necessary regardless of
whether the trust funds have a surplus. This is because trust fund
surpluses are mostly invested in Federal debt securities, and a
trust fund purchase of Federal debt securities issued by Federal
funds is treated as Federal funds borrowing. Federal funds borrowing is almost exclusively done by the Treasury selling debt securities that are subject to the statutory limit. The deficits of the offbudget Federal entities are generally financed in the same way as
the Federal funds deficit. Thus, the Federal funds deficit and the
deficit of the off-budget Federal entities generally have to be financed by selling debt securities that are subject to the statutory
limit; and these securities are sold to either the public, the trust
funds, or certain Federal revolving funds.
Table E-9 shows in detail the relationship of the change in debt
subject to limit to the Federal funds deficit and the deficit of the
off-budget Federal entities. The sum of these deficits is an amount
that has to be financed. Some relatively small portion may be
financed by means other than borrowing, such as seigniorage and a
decrease in those cash assets held by Federal funds and off-budget
Federal entities (if the sum of these other means of financing is
negative, then these other means must themselves be financed).11 A
10
Data for Federal funds and trust funds are presented in Special Analysis C, "Funds in the Budget."
11
The means of financing other than borrowing that are shown in table E-9 exclude amounts attributable to
trust funds. It is not known how the trust fund open book balances are divided between cash and monetary
assets and liabilities for checks outstanding, etc. In this table they are all assumed to be in liabilities for checks
outstanding, etc.
123
SPECIAL ANALYSIS E
small portion may be financed by the Federal funds or off-budget
entities selling their investments in Federal debt. Another small
portion may be financed by their issuing debt that is not subject to
the statutory limit. The remainder of the amount to be financed,
ordinarily comprising most of the total, must be financed by selling
debt subject to the statutory limit. Thus, the deficits of the Federal
funds and the off-budget Federal entities are the principal determinants of the change in debt subject to statutory limit.
Table E-9. FEDERAL FUNDS FINANCING AND CHANGE IN DEBT SUBJECT TO STATUTORY LIMIT'
[In millions of dollars)
Description
Federal funds surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities
Total, amount to be financed
Means of financing other than borrowing:
Decrease or increase ( — ) in cash and
monetary assets 2
Increase or decrease ( — ) in liabilities for:
Checks outstanding etc
Deposit fund balances
Seigniorage on coins
Total, means of financing other
than borrowing
1978
actual
1979
estimate
1980
estimate
1981
estimate
1982
estimate
-61,533
-10,327
55,180
-11,990
49,046
-11,956
-30,607
-11,501
-1,534
-11,096
-71,859
-67,169
-61,002
-42,108
-12,630
-2,471
9,944
2,890
247
367
1,321
-88
907
1,332
-298
1,084
814
939
1,033
9,442
2,117
814
939
Decrease or increase ( - ) in Federal funds
and off-budget entity investments in Federal debt
Increase or decrease ( —) in Federal funds
and off-budget entity debt not subject to
limit
-460
-1034
-885
-1,440
-1,523
-443
Total, requirements for borrowing
subject to debt limit
-72,728
-60,284
-60,213
-41,294
-11,691
Change in debt subject to limit but not part
of Federal debt 3
Change in debt subject to limit
72,728
60,284
-20
60,193
41,294
11,691
*
* $500 thousand or less.
1
Several amounts have been assumed to be zero in 1981 and 1982 because they are usually small and would be very difficult to estimate
accurately.
2
Includes profits on gold sales, which have been reclassified as a means of financing rather than as an offsetting receipt. The budget totals have
been revised retroactively for the period since these sales began in 1975.
s
Almost entirely District of Columbia Armory Board stadium bonds.
124
THE BUDGET FOR FISCAL YEAR 1980
In 1978, for example, the total Federal funds and off-budget
deficit to be financed was $71.9 billion, and only $1.0 billion of this
amount was financed by means other than borrowing. The Federal
funds and off-budget entities increased their holdings of Federal
debt by $0.5 billion, which had to be financed by still further
borrowing; and they decreased their debt outstanding that was not
subject to limit by $1.4 billion, which had to be replaced by an
equal amount of debt that was subject to limit. Therefore, a total of
$72.7 billion had to be borrowed subject to the debt limit.
The trust fund surplus does not have an explicit effect in table
E-9. However, to the extent that trust fund surpluses are used to
increase the trust fund holdings of open book balances instead of
Federal debt securities, the debt subject to limit is reduced. The
increase in open book balances is recorded as an increase in Federal funds liabilities for checks outstanding, etc., in table E-9. This
increases the Federal funds means of financing other than borrowing, which in turn reduces the requirement for borrowing subject
to the statutory limit. The trust fund open book balances do change
from year to year, but they do not usually change a great deal. By
law the trust fund surpluses must generally be invested in Federal
debt, and during 1970-78 the increase in trust fund holdings of
Federal debt equalled 94% of the cumulative trust fund surplus.
Consequently, the effect of the trust fund surplus on debt subject to
limit is minor.
Since the trust fund holdings of Federal debt are included almost
entirely in debt subject to limit, but not in debt held by the public,
the amount of debt held by the public is substantially less than the
amount of debt subject to limit. Since the trust funds as a group
almost always have a surplus, the change in debt held by the
public from one year to the next is usually less than the change in
debt subject to limit. As can be calculated from table E-8, during
1979 and 1980 the debt subject to limit is estimated to increase by
$120.5 billion, whereas the debt held by the public is estimated to
increase by $79.0 billion.
The present analysis helps to show the difficulties in preventing
the Federal debt from continuing to rise. Table E-2 showed that
the Government would have to borrow from the public even if the
budget were exactly balanced, because it would have to finance the
deficit of the off-budget Federal entities. Table E-9 shows that the
debt subject to statutory limit would almost surely continue to rise
even if the debt held by the public remained constant, that is, even
if the budget had a large enough surplus so that the budget and
the off-budget entities were together just in balance.
This is illustrated by the 1982 figures. The Government (including the off-budget entities) has a surplus of $26.7 billion, but this is
more than fully accounted for by a $39.3 billion trust fund surplus.
SPECIAL ANALYSIS E
125
The Federal funds and off-budget entities have a combined surplus
of $12.6 billion, and debt subject to limit rises by $11.7 billion. In
order for debt subject to limit not to rise, the Federal funds portion
of the budget must (as an approximation) have a large enough
surplus so that the Federal funds and off-budget entities are together in balance. The same condition must be met in order not to
have a rise in gross Federal debt, which is approximately equal to
debt subject to 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 principal types: borrowing by Government-sponsored enterprises, and Government-guaranteed borrowing.
The Government-sponsored enterprises were established and
chartered by the Federal Government to perform specific 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.12 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 credit 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 Federal National
Mortgage Association and the Federal Home Loan Banks are required to obtain Treasury approval of the terms and timing of
specific offerings; the Student Loan Marketing Association borrows
exclusively from the Federal Financing Bank.13 Besides their Federal sponsorship, all of these enterprises have a history of successful financial performance. Hence, despite the absence of Federal
guarantees, the obligations of these enterprises are sold at interest
12
Report of the President's Commission on Budget Concepts (Washington: U.S. Government Printing Office,
1967), pp. 29-30.
13
The Student Loan Marketing Association is the only Government-sponsored enterprise whose new securities
are currently guaranteed by the Federal Government and can therefore be bought by the FFB.
126
THE BUDGET FOR FISCAL YEAR 1980
rates only moderately higher than the rates on comparable Treasury issues.
As shown in table E-10, borrowing by the Government-sponsored
enterprises increased dramatically from $7.0 billion in 1977 to $24.1
billion in 1978. This exceeded the previous highest level of $14.9
billion in 1974. Borrowing is estimated to decline substantially in
1979 to a level that is nonetheless relatively high by past standards, $13.3 billion, and then to increase to $16.9 billion in 1980. 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. Most of this
adjustment, particularly in 1977, is accounted for by the Federal
Home Loan Mortgage Corporation (FHLMC) repaying its debt to
the Federal Home Loan Banks.
SPECIAL ANALYSIS E
127
Table E-10. BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES
[In millions of dollars]
Borrowing or repayment ( - )
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...
1977
actual
105
1978
actual
235
1979
estimate
1980
estimate
Debt outstanding
end 1980
estimate
595
410
1,750
807
6,802
1,330
2,816
42,440
864
1,589
2,682
775
444
2,725
552
1,679
2,652
627
1,987
2,975
6,933
16,765
27,888
-1,409
1,045
7,792
5,188
1,221
5,087
303
7,808
26,475
26,704
. 5,683
23,961
13,117
16,927
148,956
Less increase in holdings of debt issued by
Government-sponsored enterprises
-1,365
- 98
-176
4
6
2,441
Total, borrowing by Governmentsponsored enterprises
7,048
24,060
13,293
16,881
146,515
Total
Sharp fluctuations in borrowing, such as shown for these years,
are typical of this sector as a whole. They arise from the operations
of the three Government-sponsored enterprises that assist the housing mortgage market. The degree of tightness in the mortgage
market sometimes shifts a good deal, and during periods of high
and rising interest rates these enterprises usually increase their
lending substantially. This happened to lending in 1978 compared to
1977. The Federal Home Loan Banks increased by $11.1 billion their net
advances (new advances less repayments) to their member savings
institutions, primarily savings and loan associations, which lend
most of their funds for new mortgages. The Federal National Mortgage Association (FNMA) and FHLMC increased their combined
net purchases of mortgages by $8.2 billion over the 1977 level. This
$19.3 billion increase in credit advanced, much of which was not
estimated to occur in the budget a year ago, accounts approximately for the rise in Government-sponsored borrowing from 1977 to
1978.
The operations of the Government-sponsored enterprises are not
subject to the Federal budget review process; and the economic
assumptions on which their borrowing estimates are based for
1979-80 are not necessarily the same as the administration's economic forecast, which is used for the budget. The total degree of
mortgage market support that these enterprises currently estimate
for 1979 and 1980 is less than in 1978. Only the FHLMC, among
these three enterprises, estimates an increase. FNMA's mortgage
128
THE BUDGET FOR FISCAL YEAR 1980
purchases are much less than in 1978, although they are higher in
1980 than in 1979; the Federal Home Loan Banks' net advances are
much lower in both years than in 1978, due to large repayments in
1979 and a sharp drop in new advances in 1980. These estimated
changes lead to the lower but still high levels of borrowing shown
for these years in table E-10. Special Analysis F discusses further
the lending by Government-sponsored enterprises.
The other type of federally assisted borrowing, Government-guaranteed 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. Guaranteed borrowing is the same as 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 by the selling agency is usually
attached. Loan asset sales are offsets to the outlays of the agency
that sells them. Therefore, if the selling agency is in the budget,
the increase in budget outlays caused by the direct loans is offset
by the sale of the loan assets. 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. The certificates of beneficial ownership sold by the Farmers Home Administration and Rural Electrification and Telephone revolving fund would be classified as Federal
debt according to the recommendations of the President's Commission on Budget Concepts.14 However, according to statute these
certificates are required to be treated as loan assets instead of
Federal debt. They are therefore classified as guaranteed loans.
These certificates of beneficial ownership are currently sold only to
the FFB. Sales during 1978-80 are shown below (in millions of
dollars):
1978
actual
Farmers Home Administration
Rural Electrification and Telephone revolving fund
1979
estimate
1980
estimatt
7,660
284
6,173
574
4,385
593
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
4
Ibid., pp. 8, 47-48, and 54-55.
SPECIAL ANALYSIS E
129
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 E-ll, guaranteed borrowing net of repayments
(but before purchases by Federal agencies or Government-sponsored enterprises) was $25.1 billion in 1978 and is estimated to be
$32.8 billion in 1979 and $37.4 billion in 1980. Special Analysis F
presents detailed data on guaranteed loans and loan asset sales.
TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING
Table E - l l summarizes net Federal and federally assisted borrowing. Federal borrowing from the public is presented in total.
Borrowing by Government-sponsored enterprises and guaranteed
borrowing are presented both in total and as net amounts, the
latter having been adjusted in order to remove double counting in
the aggregation of total Federal and federally assisted borrowing.
Double counting would otherwise occur when a Federal agency or a
Government-sponsored enterprise bought or sold a Federal or federally assisted debt security.
280-700 O - 79 - 9
130
THE BUDGET FOR FISCAL YEAR 1980
Table E - l l . NET BORROWING BY GOVERNMENT, GOVERNMENT-SPONSORED ENTERPRISES, AND
GOVERNMENT GUARANTEED BORROWERS
[In billions of dollars]
Borrowing or repayment ( - )
Description
1978
actual
Federal borrowing from the public 1
1979
estimate
Debt outstanding
end 1980
estimate
1980
estimate
59.1
2
Borrowing by Government-sponsored enterprises
Less increase in holdings of Federal debt
Less increase in Government-sponsored debt held by
Federal agencies:
Federal Financing Bank
Net Government-sponsored borrowing
3
Government-guaranteed borrowing
Less increase in 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
Net Government-guaranteed borrowing
Total, Federal and federally assisted borrowing
40.0
39.0
689.9
24.1
— .2
13.3
.1
16.9
.1
146.5
.7
.2
.6
.4
1.8
24.1
12.6
16.4
144.1
25.1
32.8
37.4
333.4
10.7
.1
11.6
-.1
11.4
-.1
56.8
3.0
.2
2.8
*
—.2
.6
.1
*
—.2
.4
.4
-*
—.1
1.7
31.5
.1
1.0
11.3
20.8
25.5
239.4
94.5
73.4
80.9
1,073.4
* $50 million or less.
•See table E-l.
See table E-10.
3
Net of repayments. This line can be calculated from table F-5 as gross guaranteed loans less secondary guaranteed loans.
2
About two-fifths of Federal and federally assisted borrowing
during 1978-80 is made up of Federal borrowing to finance the
budget deficits. Federal borrowing also finances the Federal Financing Bank's purchases of guaranteed obligations (net of repayments). As shown in table E-ll, FFB is estimated to buy about a
third of the total increase in guaranteed obligations outstanding.
Since the FFB finances these purchases by borrowing from the
Treasury, which in turn borrows from the public, these transactions substitute Federal borrowing for guaranteed borrowing in the
market.
The following chart depicts the trends in Federal and federally
assisted borrowing between 1966 and 1980. The series are volatile,
and the 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 then rose
dramatically to $97.9 billion in 1976 due to the large deficit in that
year. The total fell to $78.9 billion in 1977 but rose back up to $94.5
billion in 1978 in large part because of the support given to the
mortgage market by three of the Government-sponsored enterprises. The decrease in the Federal deficit and the reduced support
131
SPECIAL ANALYSIS E
Federal and Federally Assisted Borrowing
JBifli
too-
so-
1966 *67
'68
'69
*70
*72
'73
*74 *75
'77 '7B
Fistal Y«a*
of Government-sponsored enterprises to the mortgage market combine to lower the total Federal and federally assisted borrowing in
1979. The substantial rise in guaranteed borrowing, however, limits
the decline in the total and significantly contributes to the rise in
1980.
As the chart shows, Federal and federally assisted borrowing is
now a great deal higher than a decade ago. Much of the increase
parallels the growth in the economy and in the total funds raised
by the non-financial 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 seems to have increased
as a proportion of the total funds raised. This proportion increased
from 15% during 1960-67 to 21% during 1968-74 and to 32% in
1975-78. Thus, on the average Government programs since 1968
have influenced the allocation of funds raised in financial markets
more than they did in the immediately preceding years, even
though Federal debt has decreased relative to total debt.
During 1975-78, however, the Federal impact was unusually
large. While Federal and federally assisted borrowing remains sizable in 1979 and 1980, the amount is estimated to be somewhat
lower than in 1978 and the economy is estimated to expand. As a
result, the proportion of total funds raised by Federal and federally
assisted borrowing in 1979 and 1980 is likely to be lower than in
1978 and may be near the average for the whole period since 1960.
SPECIAL ANALYSIS F
FEDERAL CREDIT PROGRAMS
Federal and federally assisted credit programs play a significant
role in the functioning of the economy. These programs are primarily in three forms: direct loans from the Federal Government,
Federal guarantees of private lending, and lending by privately
owned Government-sponsored enterprises. These programs, much
like Federal expenditures on goods and services or transfer payments, can be used to change the allocation of resources and the
implied distribution of income. In this regard, they can be used to
overcome market imperfections, to provide additional liquidity for
investors, and to furnish funds to maintain stability in a particular
sector of the economy during business cycle fluctuations. Credit
programs have been designed to fill perceived needs in private
capital markets by providing credit to certain classes of borrowers,
or on special terms or conditions, or for special activities. An
element of subsidy is involved in any Federal credit program since
assistance is given on terms or conditions more favorable than
would have occurred in private capital markets.1
A subsidy is provided, in general, because the Federal Government is willing to accept risks that lenders in private capital
markets are unwilling to bear or would bear only at higher interest
rates than the Federal Government would charge. The interest
subsidy is explicit when the Federal credit assistance provides an
interest rate lower than could be provided in private capital markets, as in the case of direct loans. The interest subsidy is less
explicit, if the Federal credit assistance provides for longer maturities, higher loan-to-value ratios, or greater liquidity than would
have been available in private capital markets. For example, Government guarantees of some residential mortgages, combined with
special borrowing privileges of Government-sponsored enterprises
such as the Federal National Mortgage Association (FNMA) have
helped create well organized special markets for mortgage credit.
The subsidy is implicit in the case of guaranteed loans in which the
Government assumes most or all of the risk of default. Another
kind of implicit interest rate subsidy is the result of the tax exemption of interest received on State and local Government securities.2
1
While in theory Federal credit could be provided without an explicit or implicit subsidy, there would be no
point in doing so, since it would have no advantage over private credit.
2
The subsidy effect of tax-exempt securities is not discussed in this analysis. See Special Analysis G, "Tax
Expenditures."
132
SPECIAL ANALYSIS F
133
Interest subsidies are equivalent to cash grants to the borrower. In
a wide variety of instances, similar programmatic objectives of the
Federal Government can be achieved either with cash payments,
credit assistance, or tax incentives.
Direct loans are payments of cash, secured by a promise to repay
the Government. The promise to repay may be in the form of a
bond, a debenture, or a promissory note. Loan guarantees occur
when a Government agency enters into a firm commitment to use
Government funds as necessary to repay a lender upon default by
the borrower.3 The amount of the guarantee may be less than the
full principal of the loan and may include guarantee of interest.
Similar to a loan guarantee is loan insurance, a type of guarantee
in which a Government agency operates a program of pooled risks,
pledging the use of insurance premiums to secure a lender against
default on the part of a borrower.4
This special analysis compiles basic information on Government
credit programs and plans over the budget period. It is not an
evaluation of such programs and plans. It summarizes major trends
in the credit activity of the Federal Government and Governmentsponsored enterprises and presents the estimates of direct loans
and loan guarantees by major program groupings, agencies, and
enterprises from 1978 to 1980. Some additional detail on Federal
credit programs is available in other publications. The monthly
Treasury Bulletin contains data on direct and guaranteed loans
outstanding,5 for the most recently completed year or quarter—for
accounts and programs within accounts. Part 5 of the Budget presents some information about major credit programs as part of the
discussion of total outlays in terms of national needs. The Appendix volume of the Budget shows detail on particular loan program
accounts and loan guarantee activities.
TRENDS AND DIRECTIONS
Table F-l summarizes data on Federal participation in domestic
credit markets for the last decade. This table uses two measures of
Federal participation—lending (funds advanced) and borrowing
(funds raised). The total amount of funds advanced under Federal
auspices has risen three-fold in the last decade, reaching $59.0
billion in 1978. However, because of the equally rapid rise in the
rate of increase in private lending over this same period, funds
advanced under Federal auspices have been a fairly constant share
of the amounts of funds advanced in domestic credit markets. This
3
A loan guarantee can be thought of as the action of attaching a Federal guarantee to a loan. A guaranteed
loan refers to the loan, usually contracted in the private sector, with a Federal guarantee attached. In some
cases, however, one Federal agency guarantees a loan, and another Federal agency makes the loan.
4
For the remainder of this analysis, the term loan guarantees will include insurance. The Federal Government is, in essence, the co-signer of a federally-guaranteed loan.
5
See, for example, table GA-II-2, "Federal Credit Programs," in the Treasury Bulletin.
134
THE BUDGET FOR FISCAL YEAR 1980
share has generally ranged between 13% and 16%. The Federal
participation rate generally moves countercyclically. For example,
the participation rate reached relative peaks in 1970 and 1975,
which were recession years during which private sector credit demands decreased and Federal mortgage credit programs increased
significantly. The Federal participation rate jumps significantly in
1978 to 16.1%, following an extremely large rise in lending by
Government-sponsored enterprises. Their lending is particularly
volatile as it follows closely the fluctuations in the business cycle.
In 1978, a year of high and rising interest rates, lending by the
Federal Home Loan Banks and FNMA to support mortgage credit
markets increased dramatically. Lending by these two Government-sponsored enterprises is expected to fall equally dramatically
in 1979.
The other measure of Federal participation is funds raised (borrowed) under Federal auspices, which includes funds raised for
Federal and Government-sponsored credit programs as well as
funds raised to finance the Federal deficit. This Federal participation rate is much more volatile, ranging from 12% to 40% of total
borrowing over the past decade. The volatility is due primarily to
swings in the budget deficit. The participation rate peaked in 1976
and has fallen sharply since, as the Federal budget deficit declined
in response to improving economic conditions. The deficits are
expected to continue to fall in 1979 and 1980 from 1978 levels,
thereby reducing overall Federal credit demands further.
Certain credit programs are particularly volatile, responding to
changes in economic conditions. The Federal Home Loan Banks (a
set of Government-sponsored enterprises), for example, make numerous loans to savings institutions during periods of tight monetary conditions in order to avert undue hardship in the mortgage
market and the associated construction and housing industries. As
monetary conditions ease, they make fewer loans and experience
high repayment flows. Similar patterns occur in other programs
related to housing finance, such as those of the Federal National
Mortgage Association (FNMA). Such fluctuations have proved difficult to anticipate in budget planning.
Table hi. FEDERAL PARTICIPATION IN DOMESTIC CREDIT MARKETS (dollars in billions)
Estimates
Actual
1969
1970
1971
1972
1973
1974
1975
1976
T
Q
1977
1978
1979
1980
1
Total funds advanced in U.S. credit markets
(includes equities)
Advanced under Federal auspices
Direct loans:
On-budget
Off-Budget
Guaranteed loans
Government-sponsored enterprise loans
Federal participation rate including Government-sponsored enterprises (percent)
96.9
15.0
93.6
17.4
124.9
16.5
162.8
22.8
206.9
26.7
193.0
26.9
179.7
26.9
248.0
26.6
67.9
6.6
319.5
36.6
366.9
59.0
(2)
53.2
(2)
58.4
2.9
4.5
3.0
7.8
4.3
2.3
10.6
12.2
1.3
2.7
0.2
15.6
4.3
0.3
0.7
14.0
11.6
2.2
2.2
6.2
16.3
4.3
8.5
5.7
8.5
4.2
6.7
10.3
5.4
1.1
2.6
-0.1
2.9
2.6
9.0
14.1
11.0
8.6
11.2
11.3
27.9
5.0
12.0
20.8
15.5
2.8
11.8
25.5
18.4
15.5
18.6
13.3
14.0
12.9
14.0
15.0
10.8
9.8
11.5
16.1
Total funds raised in U.S.credit markets
Raised under Federal auspices
Federal borrowing from public
Guaranteed borrowing
Government-sponsored enterprise borrowing....
96.9
11.3
-1.0
7.8
4.5
93.6
16.4
3.8
2.3
10.3
124.9
32.2
19.4
12.2
0.6
162.8
39.7
19.4
15.6
4.7
206.9
46.5
19.3
14.0
13.2
193.0
24.0
3.0
6.2
14.8
179.7
64.8
50.9
5.7
8.2
248.0
97.5
82.9
10.3
4.3
67.9
19.1
18.0
-0.1
1.7
319.5
79.0
53.5
14.1
11.4
366.9
94.5
59.1
11.3
24.1
73.4
40.0
20.8
12.6
80.9
39.0
25.5
16.4
Federal participation rate (percent)
11.7
17.6
25.8
24.4
22.5
12.5
36.1
39.4
28.2
24.8
25.8
1
1
2
eg
r/>
Nonfinancial sectors..Source.- Federal Reserve Board Flow of Funds Accounts. Estimates from table E-10.
Not estimated.
00
136
THE BUDGET FOR FISCAL YEAR 1980
Federal and Federally Assisted Credit Outstanding
Loans by
off-Budget
and Government.
1969 f70
Fiscal V«or$
71
'7$ *n
*U
'75
'76
'77
'78
'79 'SO
Estimate
The funds advanced in a given year are simply the difference
between the amount of loans outstanding at the beginning and at
the end of that year. The accompanying chart shows the growth of
Federal and federally-assisted credit outstanding in the last decade.
Since 1969, the total amount of loans outstanding has risen by $263
billion, to $440 billion in 1978, an increase of 147%.
While most direct Federal outlays are subject to periodic review
in both the executive and congressional budget processes, several
direct lending programs are excluded from the budget outlay totals
as are all loan guarantees, except for payments of claims on defaults, certain repurchases, interest subsidies, or other installment
payments. As a result, the budget understates the extent of Government involvement in credit markets.6 In the interest of the
development of a more rational credit policy, the administration
OMB is proposing a new system for credit review and control. A
brief discussion is found in a separate section of this analysis and
in Parts 2 and 6 of the Budget.
6
See Parts 2 and 6, "Perspectives of the Budget", of the Budget of the United States Government, Fiscal Year
1980, for a description of the current provisions for review and control of guaranteed loans.
SPECIAL ANALYSIS F
137
DIRECT LOANS
The major Federal agencies and programs that make direct loans
are identified in Table F-2, which shows estimates of direct loans
for 1978-80.
CO
00
Table F-2. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)
Loans
Obligations
Agency or program
1979
estimate
1978
actual
1980
estimate
1978
actual
1979
estimate
1980
estimate
ON-BUDGET AGENCIES
Funds Appropriated to the President:
International security assistance
International development assistance
Agriculture:
Farmers Home Administration
New transactions..
Net outlays
Outstandings
New transactions...
Net outlays
Outstandings
1,873
1,265
1,290
2,149
1954
1,861
413
419
428
1,365
1,534
1,696
12,660
10,507
11,843
Outstandings
3^351
3*808
3^806
New transactions..
Net outlays
Outstandings
7,969
6,926
5,063
New transactions..
Net outlays
Outstandings
69
8
New transactions..
Net outlays
Outstandings
121
213
67
101
New transactions...
Net outlays
1,624
937
3,523
1,480
766
4,289
1,404
706
4,995
269
10
11,271
248
-27
11,244
267
-34
11,210
12,168
309
2,675
10,109
-911
1,764
11,913
-760
7,969
2,729
7,242
6,926
1,479
8,721
689
540
5,873
723
578
6,451
234
204
719
179
148
866
1,003
Commodity Credit Corporation
5,063
8,359
Public Law 480 long-term export credits
Commerce:
Economic Development Administration
723
62
3
10
8
632
472
6,923
182
1,015
3
S3
2
I
I
National Oceanic and Atmospheric Administration
Maritime Administration
Health, Education, and Welfare:
Health programs
Education programs
Housing and Urban Development:
Housing programs
New transactions....
Net outlays
Outstandings
171
191
203
1
9
9
10
New transactions..
Net outlays
Outstandings
107
6
4
108
72
127
6
5
132
4
2
134
New transactions..
Net outlays
Outstandings
111
105
113
40
21
4
40
665
125
27
692
129
34
726
New transactions..
Net outlays
Outstandings
553
579
464
398
454
422
550
506
4,718
522
457
5,176
496
402
5,577
New transactions..
M outlays
Outstandings
1,009
1,659
1,671
649
147
1,257
1,665
1,170
522
8,408
>
546
968
347
7,886
New transactions..
Net outlays
Outstandings
2,172
2,312
2,171
2,419
-207
3,272
2,192
78
3,350
CO
256
95
520
221
158
678
203
7
-1
202
7
1
204
71
42
370
57
45
415
56
44
459
61
29
60
-1
48
48
57
>
7,539
Government National Mortgage Association
1,123
5^385
4^996
4,706
230
362
188
3,478
Community planning and development
New Communities Administration
Interior
Footnotes at end of table.
New transactions..
Net outlays
Outstandings
New transactions..
Net outlays
Outstandings
New transactions..
Net outlays
Outstandings
208
175
7
101
7
33
22
295
35
425
90
33
67
00
to
Table P-2. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Obligations
Agency or program
Transportation:
Railroad programs
Treasury
New transactions..
Net outlays
Outstandings
1978
actual
1979
estimate
1980
estimate
185
206
351
330
455
67
67
111
98
-73
309
208
208
729
-116
3,914
-128
3,786
-131
3,656
430
26
1,474
527
73
1,546
542
-142
1,405
174
46
1,226
135
20
1,246
139
22
1,268
159
111
67
1,315
149
107
1,422
159
135
1,557
4,090
1,260
12
11,550
1,578
240
11,790
2,199
731
12,521
207
207
317
81
81
398
-17
101
98
New transactions..
Net outlays
Outstandings
729
New transactions..
Net outlays
Outstandings
427
530
545
9
13
15
New transactions..
Net outlays
Outstandings
174
135
139
New transactions..
Net outlays
Outstandings
133
c
|
i
95
YEA]
263
:AL
Veterans Administration:
Housing loans and default claims
New transactions...
Net outlays
Outstandings
1980
estimate
1979
estimate
THE
Other
1978
actual
Loans
?3
Insurance policy and other loans
To: District of Columbia
Export-Import Bank
148
New transactions...
Net outlays
1,499
4,222
Outstandings
2,988
5,080
CO
§
Federal Home Loan Bank Board
New transactions
Net outlays
Outstandings
National Consumer Cooperative Bank
New transactions
Net outlays
Outstandings
National Credit Union Administration
National Development Bank
Small Business Administration:
Business and investment loans
Disaster loans
United States Railway Associationx
Other agencies and programs
Footnotes at end of table.
New transactions
Net outlays
Outstandings
38
54
25
41
16
*
50
130
14
8
408
200
New transactions
Net outlays
Outstandings
14
6
12
25
10
100
41
41
41
48
49
40
90
82
82
123
8
3
15
208
53
68
1,032
532
31
31
500
>
New transactions
Net outlays
Outstandings
524
614
634
539
209
1,790
575
269
2,059
580
268
2,327
144
156
180
New transactions
Net outlays
Outstandings
2,569
600
310
155
2,211
2,030
3,709
953
623
4,332
237
-175
4,157
494
100
New transactions
Net outlays
Outstandings
735
1,534
735
295
735
735
1,766
799
799
2,565
440
440
3,005
New transactions
Net outlays
Outstandings
38
33
1
20
14
35
-38
471
43
-33
438
18
-54
384
>
sj
>
w
4
to
Table F-2. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
DO
Obligations
1978
actual
Agency or program
Subtotal, on-budget agencies
New transactions..
1979
estimate
Loans
1980
estimate
1978
actual
1979
estimate
35,233
33,139
31,882
32,229
17,850
21,081
22,989
76,526
81,495
84,306
New transactions..
Net outlays
Outstandings
1,167
1,100
985
1,979
1^979
1,814
881
294
9,111
1,100
203
9,314
1,150
208
9,522
New transactions...
Net outlays
Outstandings
159
185
185
449
474
474
142
138
614
160
149
763
185
171
935
21,716
12,252
20,970
22,236
20^693
24^998
15,309
10,695
33,818
13,795
11,568
45,386
16,665
11,378
56,764
Net outlays
Outstandings
8,600
29,097
1980
estimate
4,969
29,025
2,811
OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving fund
Rural Telephone Bank
Federal Financing Bank
New Transactions.
Net outlays
Outstandings
B
1
United States Railway Association..
New Transactions
Net outlays
Outstandings
58
20
3
3
New transactions
Subtotal, off-budget Federal entities-
56
23,098
13,595
3
79
69
384
90
68
453
58
35
488
22,160
16,411
15,146
18,059
11,195
11,988
11,793
Net outlays
Outstandings
23,149
27,289
43,928
55,916
67,709
New transactions
Grand total..
24,667
58,331
46,734
54,043
48,640
44,243
47,084
19,796
16,957
14,603
42,517
44,229
50,278
120,454
137,412
152,015
1
4
Net outlays
Outstandings
ADDENDUM
Foreign currency loans2
New transactions
1
Net outlays
Outstandings
-153
4
2,036
-128
1,908
-128
1,781
t
* Less than $50 Million.
1
Includes both debentures and repayable preferred stock of Conrail.
2
Foreign currency transactions are excluded from the budget totals.
4
00
144
THE BUDGET FOR FISCAL YEAR 1980
Direct loans are made by both on-budget agencies and off-budget
Federal entities and are financed from a variety of sources such as
taxation, borrowing, and loan repayments.7 (For a discussion of offbudget Federal entities, see Part 6 of the Budget of the United
States.) The table shows loan activity by the headings "obligations"
and "loans". Obligations are firm written agreements by the Government to extend direct loans. Estimated obligations can be a
good indicator of future financial flows. However, obligations in a
given year need not always eventually result in an equal volume of
new transactions of direct loans since the conversion of obligations
to loans can take time under normal circumstances and plans are
changed. Moreover, some prospective borrowers to whom commitments are made do not convert the commitments into borrowing.
Loans, in turn, are the loans actually made or repaid in the specified time period.
New transactions for the column headings are the amount of
new activity in a given year. New direct loans transactions are the
amount of gross loan disbursements, which in turn are the sum of
new loan disbursements, disbursements for guarantee claims,8 and
purchases of existing loans. Net outlays of direct loans are equal to
new transactions less repayments 9 of loans, liquidation of collateral, loan writeoffs, and sales of loan assets. Net outlays are also
equal to the difference between the volume of loans outstanding at
the end of the year and the volume outstanding at the beginning of
the year.10
Net outlays of direct loans by on-budget Federal agencies are
counted as budget outlays and are reflected in the budget deficit.
Because net outlays are sometimes much less than the level of new
transactions,11 the latter may give a more comprehensive indicator
of Federal direct lending activity.
In the case of obligations, new transactions are the new obligations entered into during a given year. Outstanding obligations are
the total amount of obligations outstanding at the end of a particular year.
Net outlays of direct loans on budget are expected to fall from
$8.6 billion in 1978 to $2.8 billion in 1980. The decline is due to
sharp decreases in lending activity by the Farmers Home Adminis7
Taxation and borrowing are indistinguishable sources of funds for a specific program. However, the treatment of loan repayments can differ from program to program.
8
Upon default of a loan guarantee, the guarantee is made good by the Government assumption of the
guaranteed loan. The lender is reimbursed for the amount of the guarantee, while the borrower owes the
Federal Government directly rather than the original lender. Claims paid under insurance or guarantee
programs are considered as direct loans until the acquired loans or collateral are paid off or liquidated. Proceeds
of liquidation are considered repayments and realized losses are writeoffs.
9
Loan repayments and receipts from the sale of loans are not counted as budget receipts, but are netted from
gross loan disbursements in determining net loan outlays.
10
The volume of loans outstanding is thus a stock concept referring to the total of loans that have ever been
made, less principal repaid to date, loans written off and receipts from the sale of loans. Net loan outlays is a
flow concept, the difference in loans outstanding at the beginning and at the end of a particular year.
11
The difference between new transactions and net outlays depends on the amount of loan repayments, asset
sales, and write-offs relative to new loan disbursements.
SPECIAL ANALYSIS F
145
tration (FmHA), the Commodity Credit Corporation (CCC) and the
Small Business Administration (SBA). The decline in lending activity in agriculture follows the administration's proposals to cut
export credits. The decline in SBA disaster loans is the result of
the administration's proposal to terminate such lending as such
activities are covered by the FmHA. Net outlays of direct loans offbudget are expected to rise from $11.2 billion in 1978 to $11.8
billion in 1980.
LOAN ASSET SALES
Loan asset sales are sales of direct loans. A guarantee by the
selling agency is usually attached. After the sale, the loan is held
privately or by an off-budget Federal entity, but the risk of default
is assumed by the Government rather than by the investor. In
some cases, the Federal agency sells securities (called participation
certificates (PC's) or certificates of beneficial ownership (CBO's))
that are backed by loans that the agency continues to hold and
service. These are by definition borrowing unless otherwise provided for by law. Under present budgetary practices, loan asset
sales are treated as if they were the same as loan repayments and
are considered offsets to agency outlays rather than borrowing to
finance outlays. Loan asset sales reduce the agency's outlay totals,
and if the agency is on-budget, reduce total budget outlays.
Loan asset sales generally occur in three instances. First, the
Farmer's Home Administration (FmHA) and Rural Electrification
Administration (REA) carry out direct loan programs and issue
CBO's that are currently required by law to be treated as if they
were loan asset sales rather than borrowing. Second, where some
direct loans have been made or loans may have been acquired
through payments on guarantee claims upon default, or through
sale of collateral using purchase money mortgages,12 the direct
loans may subsequently be sold off, usually with guarantees attached. Third, under its "tandem" program, the Government National Mortgage Association (GNMA) purchases designated types of
mortgages bearing below-market interest rates. These mortgages
are then resold to the private market at prices that are sufficiently
low to afford a normal return to investors. The outlay occurs—and
is recorded—when GNMA purchases the loans. The sale to the
private market at below-market interest rates results in collections
that offset the outlays, except for the subsidy. This purchase and
resale mechanism both insures the availability of credit for the
designated type of mortgage and provides an explicit interest subsidy. Loan asset sales by FmHA and under the GNMA "tandem"
plan represent over three-fourths of all loan asset sales. The sub12
A purchase money mortgage is a sale of property for a financial asset, usually a mortgage, instead of for
cash.
280-700 O - 79 - 10
146
THE BUDGET FOR FISCAL YEAR 1980
sidy is the discount taken from buying loans at one price and selling
them at a lower price.
Traditionally, loan asset sales meant selling of title to the loans
to the public. However, since the creation of the Federal Financing
Bank (FFB) off-budget, most of such assets are sold by on-budget
accounts to the FFB, converting them from direct loans on-budget
loans off-budget.
Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (in millions of dollars)
Repayments and adjustments
Loan assets sales
Agency or program
Transactions with
1978
actual
1979
estimate
1979
estimate
1978
actual
1980
estimate
1980
estimate
ON-BUDGET AGENCIES
Agriculture (Farmers Home Administration):
Commodity Credit Corporation
Repayments..
Adjustments-
the Public.
the FFB
5,389
5,592
5,585
1,379
350
757
1,275
the Public.
the FFB
508
3,640
60
2,106
Repayments..
Adjustments..
1,226
2,937
Rural housing insurance fund
the Public.
the FFB
995
3,360
30
3,691
25
5,307
Repayments..
Adjustments..
1,182
431
995
-1,185
2,775
Rural development insurance fund
the Public...
the FFB
245
660
12
1,044
11
1,471
Repayments..
Adjustments..
39
-398
150
-383
450
91
Repayments..
Adjustments-
Agricultural credit insurance fund
Health, Education, and Welfare:
Health maintenance organization loans
Medical facilities loans
Office of Education
Housing and Urban Development:
Federal Housing Administration fund
Other housing programs
the Public...
the FFB
28
the Public.
the FFB
15
94
CZ3
1
5
53
RepaymentsAdjustments..
-2
2
-4
4
the Public.
the FFB
RepaymentsAdjustments
44
65
94
the Public.
the FFB
Repayments
Adjustments
232
311
339
the Public.
the FFB
Repayments
Adjustments
531
480
378
Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (in millions of dollars)—Continued
00
Repayments and adjustments
Loan assets sales
Agency or program
Veterans Administration:
Direct loan revolving fund
Transactions with
1978
actual
1979
estimate
1978
actual
1979
estimate
estimate
Export-Import Bank
Small Business Administration
140 Repayments..
Adjustments..
78
78
79
409 Repayments..
Adjustments..
136
226
56
the Public
Repayments..
1,249
1,338
1,468
the FFB
Loan guarantee revolving fund
the Public
the FFB
1980
estimate
Adjustments487
24
612
24
700
24
1,543
7
the Public
the FFB
150
Subtotal, excluding tandem plans *
Public
FFB
Public.
FFB
729
the Public.
1,937
282
645 Repayments..
800
736
11,391
11,953
1,575
16
9,463
the FFB
Other agencies and programs
the
the
the
the
190
Repayments..
Adjustments..
Repayments..
500 Adjustments..
8,432
7,767
9,476 Adjustments-
762
1,530
4,541
the Public
the FFB
937
2,455
1,950
Repayments..
Adjustments..
169
142
138
the Public.
2,875
2,737
2,595
Repayments..
11,560
12,095
9,601
the FFB
8,432
7,767
9,476 Adjustments..
762
1,530
4,541
I
so
00
Housing and Urban Development (GNMA):
Tandem plan sales—FHA/VA mortgages
Subtotal, with tandem plan
o
Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (iin millions of dollars)—Continued
Repayments and adjustments
Loan assets sales
Agency or program
Transactions with
OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving fund., the Public
the FFB
1978
actual
284
1979
estimate
574
1978
actual
1980
estimate
593
Repayments..
Adjustments..
303
1980
estimate
1979
estimate
324
348
11
14
Rural Telephone Bank
the Public
the FFB
Repayments..
Adjustments..
Other..
the Public
the FFB
Repayments..
Adjustments..
4,623
2,249
5,310
the Public
Repayments..
4,931
2,584
5,673
Subtotal, off-budget Federal entities.
the FFB
Total.
the Public 2 ,
the FFB
>
284
3
574
593
Adjustments..
2,875
2,737
2,595
Repayments..
16,491
14,679
15,274
8,716
8,341
10,069
Adjustments..
762
1,530
i
4,541
GO
ID
Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (in millions of dollars)—Continued
Purchases or repurchases
1978
actual
1979
estimate
Net sales
1980
estimate
1978
actual
1979
estimate
1980
estimate
ADDENDUM
Repurchases and tandem plan purchases:4
Farmers Home Administration
Tandem plan purchases of:
FHA/VA guaranteed loans
Other on-budget agencies and programs
Off-budget Federal entities
Total
1
All loans sold, except conventional tandem plan sales, are guaranteed upon sale, and reflected in the guaranteed loan totals in Table F-5.
"Public" includes Government-sponsored enterprises such as FMHA and FHLMC which are among the principal purchasers of HUD and VA mortgages.
'See Table F-4 for detail of FFB purchases.
* FmHA repurchases mainly reflect replacements of amortized mortgages underlying previously issued block notes.
2
3,226
2,030
4,855
6,181
5,775
4,126
20
35
513
937
942
284
2,455
209
574
1,950
628
593
3,246
2,065
5,368
8,344
9,013
7,297
2
HH
3
&
SPECIAL ANALYSIS F
151
Table F-3 shows all loan offsets—all repayments, asset sales, or
other credits that reduce the recorded totals of direct loans transactions. Two of the loan entries in Table F-2 are "new (direct loan)
transactions" and "net (direct loan) outlays"; Table F-3 provides a
four-way distribution of these loan offsets that are the difference
between these two measures of direct lending. The four way split is
as follows:
Loan asset sales to the public result in a flow of cash from the
public to the agency in exchange for title to direct loans. In most
cases this form of transaction converts the loan into a privately
held note guaranteed by the Government.
Loan asset sales to the FFB shift title to the loan (or CBO or PC)
from the agency to the FFB. For an on-budget agency, this reduces
the recorded budget outlays by the amount of the sale but raises
the off-budget outlays of the FFB by an equal amount. For an offbudget entity, sales to the FFB reduces the recorded off-budget
outlays of the selling entity and raises the off-budget outlays of the
FFB by an equal amount. Though not required by law, all loans
purchases by the FFB are fully guaranteed by some other account.
Repayments of loans by the public are cash paid to the Government, thereby reducing indebtedness. They are counted a reduction
in new transactions of direct loans during the period covered.
Adjustments are non-cash accounting entries to take cognizance
of losses, write-offs, or other deductions in cases in which the
recorded value of the loans is greater than the amount of money
collected or collectable on the loans.
As the addendum to Table F-3 shows, loan asset sales are not
always final. In fiscal year 1978, for example, while $11,591 million
of loan assets were reported in Table F-3 as being sold, agencies
repurchased $3,246 million to give net sales of $8,344 million. The
repurchases are included in Table F-2 as part of new direct loan
transactions.
THE FEDERAL FINANCING BANK
The Federal Financing Bank (FFB) began operations in May 1974
and has been a significant factor in financing Federal credit activities. The bank is staffed within the U.S. Treasury Department but
its transactions are excluded by law from the budget totals. Hence,
its credit transactions are not counted as budget outlays.
The FFB was designed to serve as a financial intermediary for
the efficient financing of obligations issued, sold, or guaranteed by
Federal agencies. The FFB performs three special functions. First,
with some exceptions, the Treasury may require agencies authorized to borrow from the public to borrow from the FFB instead.13
13
When the FFB buys newly issued guaranteed loans (except loan assets), the guaranteed loans are in effect
converted into direct Federal loans outside the budget.
152
THE BUDGET FOR FISCAL YEAR 1980
Second, the Treasury can direct most agencies to sell loan assets to
the FFB rather that the public.14 Third the FFB is authorized to
purchase guaranteed loans. Generally, it performs this operation at
the same time the loans are guaranteed, so in effect, the FFB
makes direct loans at the behest of the guaranteeing agency.15 The
borrowers may receive assistance in the form of implicit interest
subsidies, as they receive credit at preferred rates.
14
When the FFB buys loan assets, it effectively converts direct loans that have already been made by another
agency into off-budget direct loans of the FFB.
15
There is a modest (1/8 percentage point) surcharge to cover administrative expenses.
Table F-4. FFB ACQUISITION OF AGENCY OBLIGATIONS (in millions of dollars)
1978
actual
Agency or program
Purchase of loan assets from:
Overseas Private Investment Corporation
New acquisitions
Net outlays
Outstandings
1979
estimate
-4
40
-7
33
1980
estimate
-7
26
Farmers Home Administration (CBOs)
New acquisitions
Net outlays
Outstandings
7,660
7,660
22,275
7,673
6,173
28,448
8,885
4,385
32,832
Rural Electrification Administration (CBOs)....
New acquisitions
Net outlays
Outstandings
284
284
638
574
574
1,211
593
593
1,805
Medical facilities guarantees (HEW)
New acquisitions
Net outlays
Outstandings
15
12
164
-4
160
10
6
Health Maintenance Organizations (HEW)
New acquisitions
Net outlays
Outstandings
28
28
57
94
94
151
91
90
242
National Development Bank
New acquisitions
Net outlays
Outstandings
New acquisitions
Net outlays
Outstandings
New York City seasonal financing
Small business development company loans...
500
491
491
729
-1157
-21
112
-24
88
-24
64
New acquisitions
8,716
8,340
10,069
Net outlays
Subtotal, purchase of loan assets
New acquisitions
Net outlays
Outstandings
6,802
6,806
5,528
23,286
30,091
35,620
1,550
1,053
5,030
1,625
975
8,005
Outstandings
Direct loans (purchases of agency loan guarantees):
International security loans (FAP)
"
New acquisitions
Net outlays
Outstandings
1,678
1,462
3,978
153
SPECIAL A N A L Y S I S F
Table F-4. FFB ACQUISITION
OF AGENCY OBLIGATIONS (in millions Of dollars)—Continued
1978
actual
Agency or program
1979
estimate
1980
estimate
Rural Electrification Administration (USDA)...
New acquisitions..
Net outlays
Outstandings
1,809
1,809
4,192
2,550
2,550
6,742
4,100
4,100
10,842
Guarantees of SLMA Obligations (HEW).
New acquisitions..
Net outlays
Outstandings
2,685
235
745
759
595
1,340
470
410
1,750
New Communities Administration (HUD).
New acquisitions..
Net outlays
Outstandings
-4
39
3
9
15
15
54
New acquisitions..
Net outlays
Outstandings
58
39
38
96
-2
94
New acquisitions..
Net outlays
Outstandings
35
10
588
77
7
15
-10
767
New acquisitions..
Net outlays
Outstandings
177
177
177
Outstandings
128
128
270
35
35
305
45
43
348
Satellite leases (NASA).
New acquisitions..
Net outlays
Outstandings
180
180
236
183
183
419
136
136
555
Small business investment companies (SBA).
New acquisitions..
Net outlays
Outstandings
79
75
251
125
120
371
190
183
553
New acquisitions..
6,594
5,454
6,596
Net outlays
3,894
4,762
5,850
Loans to territories (Interior)..
Railroad programs (DOT)
Washington METRO bonds (DOT).
Public building CBIs1 (GSA)
New acquisitions..
Net outlays
Subtotal, direct loans (purchase of....
loan guarantees)
23
1
Outstandings
21,145
New acquisitions..
15,309
13,795
16,665
10,695
11,568
11,378
Outstandings
Footnote at end of table.
15,295
Net outlays
Subtotal, all direct loans and purchases
of agency loan assets
10,533
33,818
45,386
56,764
154
T H E B U D G E T F O R F I S C A L YEAR 1980
Table F-4. FFB ACQUISITION OF AGENCY OBLIGATIONS (in millions of dollars)—Continued
1979
estimate
1978
actual
Agency or program
1980
estimate
LOANS TO GOVERNMENT ACCOUNTS
ADDENDUM:
To.- on-budget agencies:
Export-Import Bank
Tennessee Valley Authority
To: off-budget Federal entitles:
U.S. Railway Association
Postal Service
National Credit Union Association
Total, loans to Government accounts
728
8,510
645
6,568
Net outlays
Outstandings
1,340
5,220
7,782
1,980
7,200
Net outlays
Outstandings
46
357
35
-2
392
390
Net outlays
Outstandings
-67
2,114
2,452
2,500
150
150
1,964
3,567
2,624
14,259
17,826
20,450
338
Net Outlays
Outstandings
Net outlays
Outstandings
1
1,213
Net outlays
Outstandings
1,700
8,900
48
Certificates of beneficial interest.
Borrowing by agencies from the FFB is not included in FFB
outlays; the use of the proceeds from the borrowing by the borrowing agency is counted as outlays of that agency. However, the
agency must pay interest to the FFB on these borrowings and in
turn the FFB pays interest to Treasury on its borrowing to finance
its borrowing. In certain cases agencies are given authority to
borrow from the public instead of borrowing from the Treasury.
Since Treasury borrowing is less expensive than agency borrowing,
the use of this authority could be expensive. This additional expense would be avoided if the agency borrows from the FFB which,
in turn, borrows from the Treasury.
Table F-4 lists the activities of the FFB for 1978-80 by agency
and account. The first set of entries lists FFB purchases of agency
loan assets would result in higher Federal costs. The second set of
entries lists the FFB purchases of other loans guaranteed by Federal agencies which are in effect direct loans by the FFB to the
public. The addendum lists borrowing (debt issues) by both onbudget agencies and off-budget entities from the FFB which, as
stated previously, are not recorded as FFB outlays.
The FFB's net outlays in the purchase of loan assets is expected
to fall considerably from $6.8 billion in 1978 to $5.5 billion in 1980.
This is due to the reduction in purchases of CBO's issued by the
FmHA. On the other hand, FFB net outlays for direct loans (purchases of agency guaranteed loans) is expected to increase sharply
from $3.9 billion in 1978 to $5.9 billion in 1980. This increase is due
to a sharp increase in guaranteed loans originating from REA. The
SPECIAL ANALYSIS F
155
sharp increases and decreases cancel out so that total FFB net
outlays rise only from $10.7 billion in 1978 to $11.4 billion in 1980.
LOAN GUARANTEES
Loan guarantees are agreements in which a Government agency
enters into a firm commitment to use Government funds as necessary to secure a lender against default on the part of the borrower.
A loan guarantee is the Federal guarantee attached to a loan
usually contracted in the private sector: the Government, in effect,
cosigns the note. A guaranteed loan is the resulting loan, with
guarantee attached. Loan insurance is a type of guarantee in
which a Government agency operates a program of pooled risks,
pledging the use of insurance premiums to secure a lender against
default on the part of a borrower.
The nature of the loan guarantee differs widely among programs.
In the case of fully guaranteed loans, the Government guarantees
the repayment of all principal and interest. In the case of partially
guaranteed loans, the Government guarantees only partial repayment of principal and interest. Guaranteed loans also include loans
on which the Government promises to pay a share of the interest,
but none of the principal. Credit may be indirectly guaranteed
without the explicit label of a loan guarantee program under various contractual agreements, including guarantees of private leases
and contracts to make subsidy payments over extended periods.
The Government may guarantee either marketable securities or
loans made and serviced by individual financial institutions.
Loan guarantees are not reflected in the budget outlays when
credit is extended. Except for explicit subsidies (such as under the
"tandem" plan) and administrative costs, guaranteed loans result
in budget outlays only when there is a default, requiring the Government to pay the lender's claims for losses. Losses from more
traditional loan guarantee programs have been small, partly because most of the loans were protected with liens on marketable
property. Some of the newer loan guarantee programs, such as
student loans have suffered high default rates.
Data for loans guaranteed by agency and program for 1978-80
are presented in Table F-5.
Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)
•85
Commitments
1978
actual
Agency or program
Funds Appropriated to the President:
International security assistance
International development assistance
Agriculture:
Farmers Home Administration
New transactions..
Net change
Outstandings
Commerce:
Economic development assistance
1980
estimate
1,584
1,465
1,563
1,150
1065
1,003
New transactions..
Net change
Outstandings
161
210
240
342
411
433
New transactions..
10,398
10,735
10,658
973
1,858
1,237
Outstandings
Rural Electrification Administration
1979
estimate
1978
actual
1979
estimate
1980
estimate
1,678
1,359
4,463
1,550
970
5,433
1,625
925
6,358
101
62
803
141
103
906
219
179
1,085
10,047
6,281
28,221
9,850
7,302
35,523
11,279
5,768
41,291
2,093
2,093
4,829
3,124
3,124
7,953
4,693
4,693
12,646
New transactions..
Net change
Outstandings
2,593
8,219
5,738
6,959
12,054
13,099
New transactions..
202
252
430
106
74
298
349
316
614
430
395
1,010
Outstandings
96
National Oceanic and Atmospheric Administration
New transactions..
Net change
Outstandings
25
34
34
25
21
48
34
27
75
34
25
100
Maritime Administration
New transactions..
Net change
Outstandings
469
1,110
1,000
433
606
719
900
451
5,168
937
730
5,898
661
6,558
td
8
Energy:
Geothermal resources development fund
Health, Education, and Welfare:
Medical facilities guarantees
New transactions
Net change
Outstandings
32
111
107
30
30
30
New transactions
Net change
Outstandings
15
2
2
14
111
111
125
107
107
232
23
-9
1,347
38
38
7
1,354
-32
1,322
Health programs
New transactions
Net change
Outstandings
31
213
285
31
31
135
213
213
348
285
283
630
Education programs
New transactions
Net change
Outstandings
1,854
2,250
2,500
1,854
613
2,250
946
2,500
1,075
8,150
9,097
10,172
New transactions
Net change
Outstandings
12,641
14,208
14,944
12*196
14^844
15^345
9,448
365
14,567
11,310
1,810
16,377
14,193
3,093
19,470
23,953
24,656
27,705
13,563
16,505
19,703
14,292
4,377
98,129
16,450
5,978
104,107
18,601
7,074
111,181
52
-223
568
27
-286
282
Housing and Urban Development:
Subsidized low-rent public housing
23
Federal Housing Administration
Urban renewal
New Communities Administration
GNMA: Mortgage-backed securities
New transactions..
Net change
Outstandings
New transactions
Net change
Outstandings
46
8
5
803
759
737
46
-430
791
New transactions
Net change
Outstandings
48
15
15
-85
144
144
144
New transactions
15,194
15,000
16,500
15,194
15,000
16,500
Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions Of dollars)—Continued
1978
actual
Agency or program
1979
estimate
1980
estimate
Net change
Outstandings..
Interior:
Indian programs.
Transportation:
Rail programs..
Washington, D.C. METRO bonds..
Aircraft loans..
Treasury:
Guarantee of New York City notes..
1979
estimate
1980
estimate
503
289
579
54
6
New transactions..
Net change
Outstandings
5
0
10
0
New transactions..
Net change
50
0
20
5
46
34
86
3
~8
78
86
55
677
213
300
977
15
-70
907
1
997
90
9,836
62,800
7
4
52
4
6
New transactions..
Net change
Outstandings
Outstandings
1978
actual
10,032
52,964
New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings
00
Loans guaranteed
Commitments
97
9
97
9
41
27
209
50
29
238
100
70
308
>
500
490
490
250
213
702
10,500
73,300
NASA: Long term satellite leases
New transactions
Net change
Outstandings
195
59
New transactions
Net change
Outstandings
16,744
18,498
20,470
2,788
2,928
3,074
New transactions
Net change
Outstandings
5,489
8,097
9,465
7,657
9,160
11,097
New transactions
Net change
Outstandings
3,063
3,900
3,895
1,358
1,963
2,128
Lease and surety bond guarantees
New transactions
Net change
Outstandings
1,177
2,000
1,700
Lease guarantees
New transactions
Net change
Outstandings
Veterans Administration
Export-Import Bank
Small Business Administration:
Business loan guarantees
Disaster Loan fund
Pollution control bond guarantees
Footnotes at end of table.
New transactions
Net change
Outstandings
1
*
1
New transactions
Net change
Outstandings
17
183
183
419
136
136
555
14,849
8,871
80,794
16,259
8,951
89,745
18,264
9,739
99,484
4,213
-334
5,407
4,845
-89
5,318
5,572
54
5,373
2,306
1,121
6,901
2,975
1,733
8,634
3,275
1,813
10,447
1,177
126
504
2,000
200
704
1,700
100
804
-30
229
-30
199
1
267
180
180
237
-31
259
110
1
*
10
50
46
70
10
50
50
17
16
23
f
1
-1
9
50
44
114
en
to
Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions Of dollars)—Continued
Commitments
Agency or program
National Development Bank
1978
actual
1979
estimate
Loans guaranteed
1980
estimate
Subtotal, guaranteed loans (gross)
Less secondary guaranteed loans:1
GNMA guarantees of FHA/VA pools
New transactions..
Net change
Outstandings
752
104
12
134
89
44
New transactions..
96,536
112,329
49,125
New transactions..
New transactions..
Net change
Outstandings
DOT guarantees of USRA debt
1980
estimate
1,832
1,777
1,777
1332
120,819
870
115
1,151
79,586
149
133
1,284
88,680
102,634
63,062
70,619
35,385
317,292
43,230
360,522
48,313
408,835
15,194
15,000
16,500
15,194
10,032
52,964
15,000
9,836
62,800
16,500
10,500
73,300
2,395
2,552
2,675
255
200
75
2,430
235
745
2,607
595
1,340
2,800
410
1,750
74
64
381
53
-3
378
-22
356
Outstandings
HEW guarantees of SLMA debt issues
1979
estimate
3,165
New transactions..
Net change
Outstandings
Outstandings
Other agencies and programs
1978
actual
New transactions..
Net change
47
Outstandings
56
58
15
1,299
Cd
1
Less guaranteed loans held as direct loans:2
By budget agency (GNMA)
New transactions..
2,197
2,308
2,166
Outstandings
5,385
5^015
4^543
New transactions..
Net change
Outstandings
21,716
12,252
20,970
22,236
20,693
New transactions..
54,987
Outstandings..
Subtotal, primary guaranteed loans
21,193
Less guaranteed loans held as direct loans:
By Government sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan Banks
Footnotes at end of tabie.
2,348
-140
3,133
2,208
-138
2,995
24,998
15,309
10,695
33,818
13,795
11,568
45,386
16,665
11,378
56,764
80,217
78,508
45,461
54,877
64,461
14,232
By off-budget Federal Financing Bank
1,118
127
3,273
21,374
26,185
37,151
41,000
226,111
247,485
273,670
332
192
711
686
574
1,284
581
421
1,706
5,510
2,841
30,902
2,650
120
31,022
3,525
446
31,468
23
18
76
35
26
102
New transactions..
Net change
Outstandings
332
686
581
New transactions..
Net change
Outstandings
8,769
4,540
6,400
New transactions..
Net change
Outstandings
2^648
4400
23
35
5
101
F1
2
i
to
Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions Of dollars)—Continued
Loans guaranteed
Commitments
Agency or program
1978
actual
GRAND TOTAL
New transactions..
Net change
Outstandings
39
New transactions..
Federal Home Loan Mortgage Corporation
45,824
1979
estimate
1980
estimate
47
1979
estimate
1980
estimate
-163
1,180
-143
1,037
39,549
51,506
20,817
25,462
17,093
34,054
38,352
193,079
213,897
239,358
1,783
822
822
844
844
12,031
1,783
1,783
13,814
71,522
MEMORANDUM:
FAP: International Financial Institutions Callable capital subscriptions.
New Transactions..
Net change
882
Outstandings
1
2
Secondary guarantees by the Export-Import Bank of the debt of the Private Export Finance Corporation have not been estimated and are excluded from both sections of the table.
When loan guarantees are acquired by a budget account, they are direct loans. However, in this instance, GNMA is acquiring a guaranteed loan not only from different accounts, but from different agencies.
a
60,350
11,337
74,909
47
-156
1,343
Net change
Outstandings
1978
actual
11,147
s
I
>
SPECIAL ANALYSIS F
163
The table includes the full amount of the principal of guaranteed
loans, even though in some cases the Government guarantees are
for less than the total amount. The structure of Table F-5 is
comparable to that for direct loans in Table F-2. Information on
the amount of the Federal contingent liability as well as the total
of the loan is shown by program, may be found in the Budget
Appendix.
Commitments for new guarantees are agreements by the Government to guarantee loans upon the prospective borrowers' and lenders' fulfillment of specific conditions. Commitments for new transactions are considered to be a good indicator of future guarantees.
The amount of loans guaranteed in a given year is measured by
the amount of new guaranteed loans in that year. Commitments in
a given year do not always result in new guaranteed loans in that
year, since conversion of a commitment to a guaranteed loan can
take time under normal circumstances and some plans may
change. Moreover, some prospective borrowers to whom commitments are made do not ever convert the commitments into borrowing. The net change in loans guaranteed is equal to the amount of
new guaranteed loans less repayments and other adjustments. The
net change is also equal to the difference in guaranteed loans
outstanding at the end and at the beginning of the year.
The aggregation of loan guarantees of each program to derive a
gross total involves some double counting. Elimination of this
double counting requires three adjustments. The first deducts loans
previously guaranteed, or secondary guarantees. Secondary guarantees occur, for example, in the case of the GNMA mortgage-backed
securities program which guarantees securities, that are backed by
pools of federally guaranteed or insured loans held by the seller.
The second deducts guarantees of loans that are also direct loans
by the Government—by either on- or off-budget accounts. The total
after these two deductions gives primary guaranteed loans. The
third adjustment arises in those cases in which a guaranteed loan
is purchased by a Government-sponsored enterprise. Since such
loans are, in effect, direct loans, the guarantees attached to them
are subtracted from the total of gross guaranteed loans to avoid
double-counting. Deducting these three adjustments leaves a total
of adjusted guaranteed loans which comprise net privately held
(other than Government-sponsored enterprises) guaranteed loans
extended or outstanding. This is the most accurate statistic measuring the level of Federal loan guarantee activity and is called
primary adjusted guaranteed loans.
The net change in primary adjusted guaranteed loans increases
sharply from $11.3 billion in 1978 to $25.5 billion in 1980. The
increase is primarily the result in increased mortgage lending activity, dominated by increases in the subsidized low-rent public
164
THE BUDGET FOR FISCAL YEAR 1980
housing program and increased activity in the Federal Housing
Administration.
GOVERNMENT-SPONSORED ENTERPRISES
Government-sponsored enterprises have been established and
chartered by the Federal Government to perform specialized credit
functions. They are financial intermediaries, designed to facilitate
the financing of selected kinds of economic activity, by serving as
reserve facilities, or performing secondary marketing functions.
They are all privately owned and most are independent of Federal
control to a substantial degree. Since they are private, their activities are not included in the budget totals. They are all subject,
however, to some form of Federal supervision and by law or by
custom consult with the Treasury Department in planning the
marketing of their debt. The enterprises included in this category
are the Student Loan Marketing Association (SLMA), the Federal
National Mortgage Association (FNMA), the Federal Home Loan
Mortgage Corporation (FHLMC), three components of the Farm
Credit System, and the Federal Home Loan Bank system (FHLBS).
Part 6 of the Budget contains discussion of Government-sponsored
enterprises.
Government sponsorship has endowed these enterprises with certain characteristics that differentiate them in credit markets from
completely private institutions. They have been given special preferences, and certain tax exemptions and the special eligibility of
offering their securities as investments of federally regulated institutions. These advantages give their security obligations a preferred position in the securities markets, enabling them to borrow
at rates only slightly higher than those of the Treasury.
Funds lent by Government-sponsored enterprises are generally
obtained from private bond markets. Although, SLMA borrows
exclusively from the FFB, sale of capital stock and retained earnings provide only a very small portion of their resources used for
lending by these enterprises. The pattern of borrowing and lending
varies widely over time. For example, some enterprises, such as
FNMA, were created to establish secondary markets, thereby increasing liquidity in mortgage markets; others, such as the Federal
Home Loan Banks, are facilities advancing reserves to member
institutions, in this case, savings and loan associations.16 Enterprises in the latter grouping have a basic function of providing
liquidity to primary lenders in times of tight monetary conditions,
by either purchasing from the primary lenders or making advances
16
The program of GNMA (a budget entity in HUD) to guarantee mortgage-backed securities achieves a similar
purpose of financial intermediation. GNMA guarantees securities issued against privately held pools of Federally guaranteed or insured mortgages. The Federal Reserve Board flow-of-funds data includes this GNMA program within the definition of Government-sponsored enterprises. GNMA data for this activity appear as entries
in Table F-5, Guaranteed Loans.
SPECIAL ANALYSIS F
165
to the primary lenders. These loans and advances are then paid
back as monetary and financial conditions improve. In recent
years, this latter group of enterprises has expanded its role by
seeking to draw new funds into mortgage markets even in periods
of prosperity. By borrowing additional funds themselves, they can
provide more funds to the basic mortgage lending insititutions.
Table F-6. CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars)
Loans made
1978
actual
Agency or program
LENDING (FUNDS ADVANCED)
Student Loan Marketing Association
New transactions..
332
1979
estimate
686
1980
estimate
Farm Credit Administration:
Banks for Cooperatives
1979
estimate
1980
estimate
581
332
192
711
686
574
1,284
581
421
1,706
10,308
6,974
39,992
4,842
1,567
41,559
7,041
3,110
44,669
13,762
882
6,121
15,297
602
6,722
17,321
684
7,406
Outstandings.
Federal National Mortgage Association
1978
actual
New transactions..
Net change
Outstandings
18,014
9,332
13,491
9,068
7,350
M50
New transactions..
13,762
15,297
17,321
Outstandings..
Federal Intermediate Credit Banks
New transactions..
Net change
Outstandings
10,286
11,969
13,495
10,286
511
13,797
11,969
1,752
15,549
13,495
2,081
17,630
Federal Land Banks
New transactions..
Net change
Outstandings
5,488
5,833
6,266
5,488
3,047
24,595
5,833
3,119
27,715
6,266
3,418
31,133
New transactions..
Net change
Outstandings
24,439
22,135
13,105
24,439
12,057
31,632
22,135
2,660
34,292
13,105
999
35,291
New transactions..
Net change
Outstandings
5,855
7,500
11,000
5,855
4,412
13,410
7,500
5,570
18,710
11,000
8,058
26,768
Federal Home Loan Bank System.Federal Home Loan banks
Federal Home Loan Mortgage Corporation
§
3
5
Subtotal, lending (gross)
New transactions..
72,752
75,259
70,470
68,262
15,844
68,809
18,772
6,450
28,074
129,987
145,831
164,603
-65
2,399
78,176
-209
2,190
2,190
2,607
595
1,340
2,800
410
1,750
Net change
Outstandings
Less loans between sponsored enterprises: *
Federal Home Loan banks to FHLMC
Less secondary funds advanced from Federal sources:
SLMA from FFB
9,068
7,350
New transactions..
Net change
Outstandings
2,395
2,552
2,675
255
200
75
2,430
235
745
New transactions..
TOTAL
New transactions..
Net change
Outstandings
75,781
70,200
72.584
68,040
65,655
66,009
27,904
15,458
18,362
126,843
142,301
160,663
Net change
Outstandings
8,813
7,150
6,375
Net change
Outstandings.
235
745
595
1,340
410
1,750
Federal National Mortgage Association2
Net change
Outstandings..
6,802
38,294
1,330
39,624
2,816
42,440
Net change
Outstandings..
775
5,754
552
6,306
627
6,933
Federal Intermediate Credit Banks
Net change
Outstandings..
444
13,099
1,679
14,778
1,987
16,765
Federal Land Banks
Net change
2,725
2,652
2,975
Farm Credit Administration:
Banks for Cooperatives
Footnotes at end of table.
LYSIS F
BORROWING (FUNDS RAISED)
Student Loan Marketing Association
Table F-6. CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars)—Continued
Loans made
Obligations
Agency or program
1978
actual
1979
estimate
1980
estimate
1979
estimate
1978
actual
1980
estimate
Outstandings..
22,261
24,913
27,888
Outstandings..
7,792
24,951
1,221
26,172
303
26,475
Net change
Outstandings..
5,188
13,809
5,087
18,896
7,808
26,704
23,961
13,117
16,927
Federal Home Loan Bank System:
Federal Home Loan banks
Federal Home Loan Mortgage Corporation:
Subtotal, borrowing (gross)
Outstandings..
118,913
132,029
148,956
Outstandings..
-65
2,299
-209
2,090
2,090
Net change
Outstandings..
-33
272
33
305
46
351
Outstandings.
235
745
595
1,340
410
1,750
Net change
Outstandings..
23,824
115,597
12,698
128,294
16,471
144,765
Less borrowing from other sponsored enterprises:
FHLMC from FHL banks
Other..
Less borrowing from Federal sources:s
SLMA from FFB
Total borrowing from the public and Government
d
i
Less investments in Federal securities:
Investments in Federal securities
Total
Net change
Outstandings
Net change
Outstandings
-238
510
109
619
56
674
24,063
12,588
16,415
115,088
127,676
144,091
1
Since all SLMA borrowing comes from the FFB, when credit is extended by Government-sponsored enterprises and added to Federal lending (as in Table F-9), the inclusion of both FFB lending to SLMA and SLMA lending to the public in the totals is
double-counting. Hence, lending from the FFB to SLMA must be excluded from the total of lending by Government-sponsored enterprises to give the total adjusted for double-counting.
2
Loans purchased at discount are recorded at their acquisition cost.
3
These deductions include those borrowings involved in double-counting to give the adjusted total that is carried over to Table F-9.
>
I
I
170
THE BUDGET FOR FISCAL YEAR 1980
Table F-6 shows the lending and borrowing of Government-sponsored enterprises for 1978-80.17 The format of this table closely
resembles that used in Table F-2 for direct loans. See the section
on direct loans for an explanation of terms. Total gross lending and
borrowing is further adjusted to avoid the double counting that
arises from loans between enterprises and between enterprises and
the Federal Government. In addition, where the borrowing or lending of enterprises is added to Federal credit activities (as in Table
F-9), additional deductions must be made for double counting since
SLMA lending is financed by FFB lending; in addition some enterprise cash balances are invested in Federal securities. (In effect,
this is enterprise lending to the Federal Government.) The deductions in the table identify the amounts necessary to remove this
double counting.
Lending by Government-sponsored enterprises is particularly
volatile in the period 1978-80. Sharp increases and decreases in the
lending of Federal Home Loan Banks and FNMA to support mortgage credit markets are the main sources of the overall movements
in lending. In this period, total lending rises to $27.9 billion in
1978, an increase of $16.9 billion from 1977 levels. Lending is then
expected to fall to $15.5 billion in 1979 and rise to $18.4 billion in
1980. In order to finance this lending, Government-sponsored enterprises are expected to follow the same general pattern in borrowing
in the 1978-80 period.
FUNCTIONAL AREAS SUPPORTED BY FEDERAL CREDIT ASSISTANCE
The functional distributions of direct loans and guaranteed by
major function are given in Table F-7. Table F-7 records the levels
of new transactions taken from Tables F-2 and F-5 for 1978-80.
The functions in which the largest Federal credit activity occurs
are commerce, housing credit, international affairs and agriculture.
These three functions are expected to comprise 83% of total new
transactions in 1980. In addition, Part 5 of the Budget of the
United States discusses Federal credit activities in such functions
in which credit is significant.
17
The Federal Reserve Banks are frequently included in the discussion of Government-sponsored enterprises.
Their activities are unique and not projected for budget periods and are hence not included in the table or other
tabulations of the Government's operations in the Budget.
SPECIAL ANALYSIS F
171
Table F-7. DIRECT LOANS AND GUARANTEED LOANS BY FUNCTION
(In millions of dollars)
New direct loans
Function
1978
actual
1979
estimate
New guaranteed loans
1980
estimate
1978
actual
1979
estimate
1980
estimate
National defense:
Total
International affairs:
Foreign economic and financial
assistance
Export-Import Bank
Total
Natural resources, environment, and
energy:
National resources and environment
Energy
Total
Agriculture: Farm income stabilization
Commerce and housing credit:
Mortgage credit and thrift insurance
Advancement of commerce
Transportation:
Ground transportation
Air transportation
Water transportation
Total
Community and regional development
Total
1
00,000
1
1
2,583
1,260
2,451
1,578
2,303
2,199
1,779
4,213
1,691 1,843
4,845
5,572
3,843
4,029
4,502
5,992
6,536
7,415
58
881
37
1,100
43
1,150
2,095
3,297
4,800
939
1,137
1,193
2,095
3,297
4,800
4,219
3,883
3,021
35,471
5,072
40,883
5,071
13,670
11,016
8,990
7,042
15,878
7,942
14,470
9,619
17,561
863
108
1,096
578
6
4
37,561
34,530
36,752
3^976
2/724
2^949
3,976
2,724
2,949
33,482
3,897
160
41
900
42,699
266
50
937
15
100
888
45,679
49,978
1632
2ffl
4^767
1,632
2,393
4,767
4,284
4,857
5,300
Education, training, employment, and
social services:
Higher education
Total
Income security
564
638
496
88
Health
125
129
652
763
625
4,337
191
204
205
<W8
53
252
285
5,109
5,585
11,310
14,193
Veterans benefits and services
174
135
139
Veterans housing
430
527
542
14,849
16,259
18,264
795
866
886
24,297
27,569
32,457
6
6
3
Total
General government
General purpose fiscal assistance
Other programs
Grand total1
839
29
48,640
149
38
44,243
159
14
47,084
128
74
45
729
180
82,090
500
183
91,340
250
136
105,434
•Less than $0.5 million.
1
Off-budget accounts are included (except sponsored agencies): double counting is eliminated by excluding FFB from guaranteed loans, and certain
GNMA and SLMA items from guarantees.
172
THE BUDGET FOR FISCAL YEAR 1980
INTEREST S U B S I D I E S
To achieve a reallocation of resources to specific areas of the
economy, Federal credit programs provide credit to selected groups
on more favorable terms than would be available in private capital
markets. In most cases, the favorable terms take the form of an
interest rate that is lower than the rate that would be charged by
private lenders. In some cases, the interest rate is even lower than
Treasury borrowing rates. However, the loan-to-value ratio and
risk of the loan may also be higher or the maturity longer than
available in private capital markets. The effects of these latter
factors are not included in this section. Other types of credit subsidies, also not treated in this section, may result from fees or
premiums inadequate to cover costs of administration and losses on
loan guarantee programs, waivers of such fees or premiums, or
forgiveness of part or all of the loan principal. This section also
does not consider the direct grants or other kinds of subsidies that
may accompany Federal credit assistance. Estimates in this section
are made solely on estimating the value of the interest rate subsidy
that accrues to Federally assisted borrowers.
The estimated interest subsidy is defined as the difference between the present value of the interest payments that the borrower
makes under Government assistance and present value of the interest payments that would have resulted from comparable private
loan. These interest differentials arise for many reasons. In some
direct loan programs, the established interest rates are below those
of the private market, and may be set to recover the costs of
borrowing by the Treasury. In loan guarantee programs, the guarantee itself provides a subsidy by eliminating the risk of default.
This allows the borrower to obtain an interest rate less than he
would have had to pay on the riskier unguaranteed loan.
Calculation of the interest subsidies requires estimating the interest rate that borrowers would have paid in private capital markets. For some loans, particularly in housing, private credit market
interest rates are readily ascertainable and could be used in estimation, although the Federal loan may be made to higher risk
groups than would be serviced in the private market. For many
other programs, no comparable loans are made in private markets.
The difficulty in determining the level of private, unassisted interest rates on a program by program basis has led to the arbitrary
selection of two interest rates—9% and 12%—to represent alternative private sector borrowing costs. In some cases, the relevant
market rates may well exceed 12%, and, in others, private markets
may not exist in the absence of Government assistance. The use of
SPECIAL ANALYSIS F
173
alternative interest rates illustrates the importance of the interest
rate assumption in computing the value of the subsidy. The table
indicates the approximate value of the subsidy because the true
measure cannot be calculated exactly.
Interest subsidies occur throughout the life of the loan. The
measurement of interest subsidies therefore requires the conversion of interest payments into a single discounted present-value.
This conversion, which capitalizes the interest payments, is computed by discounting future subsidies by the selected interest rate
(constant over the life of the loan) before adding them into a single
present value.
Table F-8. INTEREST SUBSIDIES OF DIRECT LOAN OBLIGATIONS AND GUARANTEED LOAN COMMITMENTS
Average loan
terms
Agency and program
DIRECT LOANS
International assistance programs:
Foreign military credit sales
Security supporting assistance
Functional development assistance
Export-import Bank
Farm export credits—P.L 480
Other programs
Energy and natural resource programs:
Rural Electrification Administration
Agricultural assistance programs:
Price support and related programs
Agricultural credit insurance
Commerce and housing credit:
Rural housing insurance fund
Federal Housing Administration
Government National Mortgage Association
Housing for elderly/handicapped
Small business loans
National Consumer Cooperative Bank
Other aids to business
Transportation:
Purchase of Conrail securities
Other transportation
Community and regional development:
Rural development insurance fund
Rural Telephone Bank
Percent
Obligation
Years
1978
7.4
2.6
2.6
8.3
2.3
6.5
75
.
40
.
1,356
35.9
1979
1980
1978
1979
Annual
subsidy
per $100
million
1980
12,000 discount
Present value
subsidy
1978
1979
1980
26
89
218
99
393
3
26
92
223
96
344
3
28
.
52
.
79
.
23
.
79
.
43
.
72
225
249
165
445
9
71
125
261
464
467
5
70
131
267
450
408
5
G
632
15
26
159
209
35
375
5
1,100
985
38
.
470
443
397
66
.
629
593
531
3
w
7,969
5,767
6,626
4,024
5,063
3,818
07
.
09
.
82
330
68
230
52
219
25
.
29
.
296
968
246
675
188
641
5,542
5,049
6,537
39
.
2,287
2,083
2,697
3,026
2,757
3,569
223
108
71
2,197
2,308
1,160
2,166
1,287
614
41
54
634
130
25
29
704
164
86
0
3
14
739
349
100
4
4
9
694
388
104
13
2
386
500
790
413
70
.
1,499
4,222
4,090
33.0
21.1
689
27
723
15
4.4
35.0
1,167
7.9
7.6
17
.
518
4.3
10.2
7.5
8.1
7.4
9.4
10.0
34.5
29.8
30.0
40.0
10.0
10.0
545
524
0
38
7.5
7.7
31.0
20.3
735
370
560
192
5.0
7.0
40.0
35.0
1,349
159
90
.
9,000 discount
Present value
subsidy
09
.
35
.
51
.
05
.
52
.
19
.
508
757
404
10.0
Annual
subsidy
per $100
million
13
.
08
.
10
.
288
47
33
302
100
38
284
111
39
67
.
16
.
40
.
36
.
30
.
18
.
14
.
0
210
13
.
10
.
98
33
74
17
0
19
40
.
34
.
238
95
181
49
0
54
1,434
1,486
185
185
35
.
17
.
506
29
538
34
557
34
63
.
45
.
704
59
748
69
775
69
ft
CO
hr
8
n
•rj
P
ft
J>
S3
H-*
SO
00
o
National Development Bank
Coastal energy impact fund
Economic development assistance
Disaster loan fund-SBA
Education and health:
Student assistance
Student loan insurance fund
Health Maintenance Organizations
Medical facilities
Veterans benefits and services:
Veterans housing programs
Veterans insurance policy loans
Education loan fund
Other programs
90
.
85
.
10 5
74
.
20.0
20.0
40 0
10.0
0
61
121
2,569
0
29
168
600
1,032
60
180
310
00
.
04
.
0
2
0
1
0
2
10
.
174
41
30
.
70
.
90
.
67
.
10.0
50
.
30.0
25.0
310
235
28
14
310
262
90
1
220
244
113
35
36
.
11
.
00
.
18
.
74
11
0
3
95
.
50
.
70
.
70
.
29.1
15.0
10.0
12.8
427
126
36
130
530
110
14
32
545 .
112
15
159
25
.
13
.
13
.
83
.
35
.
5,488
8,097
9,495
88
.
88
.
88
.
20.0
19.3
15.0
469
132
0
1,110
503
50
1,000
0
100
30.0 15,194
10 0
16
90
3 063
20 0 1177
15,000
50
3 900
2 000
21
24
.
28
.
14
30
.
0
13
14
455
0
6
20
106
189
13
21
55
74
12
0
0
52
11
0
0
56
.
29
.
24
.
44
.
101
26
5
5
101
29
16
0
72
27
21
0
21
3
13
5,311
18
1
3
4,908
18
1
16
5,314
22
.
45
.
33
.
35
.
77
33
7
29
8,931
96
29
3
7
8,338
98
29
3
36
8,931
04
.
69
101
119
21
.
334
493
578
02
.
01
.
02
.
7
2
0
16
6
1
14
0
1
26
.
25
.
24
.
91
25
0
216
95
8
195
0
17
16,500
50
3 895
1700 .
17
.
2,631
2,597
2,857
44
.
14
05
.
16
5,366
1
85
145
5,298
4
108
247
5,828
4
108
210
3,165
5
0
52
.
0
2
0
0
0
0
20
.
87
.
0
3
0
0
371
0
Total—Major subsidized direct loans..
LOAN GUARANTEES
International affairs:
Export-import Bank
Transportation:
Maritime administration
Assistance to railroads
Aircraft Loan Guarantees
Commerce and housing credit:
Mortgage insurance, susidized
Pollution equipment contract (SBA)
Business and investment loans (SBA)
Surety bond guarantees (SBA)
Community and regional development:
National Development Bank
Urban renewal
70
.
10 0
113
10 0
90
.
45
.
10.0
08
.
0
46
0
8
I
I
r/3
5
5
h-1
-q
Table F-8. INTEREST SUBSIDIES OF DIRECT LOAN OBLIGATIONS AND GUARANTEED LOAN COMMITMENTS—Continued
Average loan
terms
Agency and program
Obligation
Years
1978
1979
1980
1,854
0
46
2,250
112
116
2,500
136
149
9,000 discount
Present value
subsidy
1979
1978
Annual
subsidy
per $100
million
1980
3,200
6,413
6,929
7,824
8514
15,344
15,266
16,755
208
0
0
0
0
2,863
2,909
GRAND TOTAL
8,174
7817
In cases where a program charges an interest rate greater than 9%, no subsidy value is reported.
1980
477
11
28
188
Total—Major subsidized guaranteed
1
1979
429
9
22
155
10.0
10.0
25.0
1978
354
0
9
1.3
7.0
10.0
8.9
12,000 discount
Present value
subsidy
3.3
1.4
2.5
THEB1LJDGET FO
Health, education and income support:
Student loan insurance fund
Health professions graduate student
Medical facilities and HMO's
Percent
Annual
subsidy
per $100
million
SPECIAL ANALYSIS F
177
Using this technique, Table F-8 presents the estimated values of
Federal subsidies for new direct loan obligations and guaranteed
loan commitments by agency and program for 1978-80. The first
two columns of the table give the average interest rate and maturity of the loan. The next three columns give the obligations or
commitments for 1978-80. The next column gives the annual subsidy per $100 million, which is the difference between the chosen
interest rate, in this case 9%, and the interest rate given on the
loan itself, found in this first column. The present value of the
subsidy is shown for each year for 1978-80 using the 9% interest
rate as the discount factor. The final four columns repeat the
process using 12% as the alternative interest rate.
ADMINISTRATION PROPOSALS FOR CONTROLLING FEDERAL CREDIT
The administration is proposing a system of control of the Federal Government's credit programs. Past and current review of individual credit programs has been limited and incomplete, so that
the allocation of public resources has not benefited from comprehensive consideration of the possible tradeoffs.18 Moreover, without
systematic policy review of aggregate Federal credit activity, coordination of fiscal and monetary policy is difficult. At present, our
understanding of the relationships between credit policy and monetary and fiscal policies, and of the impact of Federal credit activity
on the economy as a whole is limited.
In response to these concerns, the administration has drawn up
proposals for controlling Federal credit. The system is designed to
achieve four principal objectives:
—to inform the public more fully about what the Government is
doing;
—to encourage rational choices between public sector and private
sector activities;
—to allocate credit resources better among alternative Government activities; and
—to improve the understanding, and control over, the Government's financial impact on output, employment, and inflation.
To meet these goals, the proposed control system would contain
the following major features:
• A credit information system would supply regular and timely
reports on actual program operations and on estimates for
future years, for all Federal credit programs and for Government-sponsored enterprises. The information provided would
be the basis for monitoring the performance of credit programs, estimating their impact on credit markets and the
economy, modifying credit program targets accordingly, and
"See, The Budget of the United States Government, Fiscal Year 1979, pp. 26-27.
280-700 O - 79 - 12
178
THE BUDGET FOR FISCAL YEAR 1980
making more informed decisions about the scope and scale of
individual credit programs.
• The control system would adopt as its basic mechanism
annual limitations on gross loan activity for both direct lending and loan guarantee programs. These limitations would be
proposed in the budget, reflected in Congressional Budget
Resolutions, and established in regular appropriation acts.19
• Credit program scorekeeping would take the form of tracking
net changes in the amount of direct loans outstanding plus
the net change in guaranteed loans outstanding. Budget authority and outlays associated with direct loans would be
treated in the budget as they are now. Loan guarantees would
not be reflected in the outlay totals or budget authority, but
would be included in the control system displays as limitations on gross loan activity.20
PROPOSED LEGISLATION
One major administration proposal in the area of Federal credit
is the National Development Bank (NDB). The NDB will combine
the current administration proposal for an NDB with a proposal to
consolidate existing economic development loan programs. The proposal will thus help centralize control over these credit programs
and improve capacity to analyze and evaluate them. The proposed
NDB would add $3,530 million of budget authority for economic
development credit assistance and would increase loan guarantee
capacity by $2,665 million beyond what is available in existing
economic development loan programs. The resulting program
would offer loans, loan guarantees, interest rate subsidies, liquidity
facility, and equity assistance to businesses remaining or locating
in distressed areas. The NDB is discussed in more detail in Part 5
of the Budget.
RECENTLY ENACTED LEGISLATION
This section lists and briefly describes 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 or changes in funds for
continuing programs.
Health Planning and Health Services Research and Statistics
Extension Act; Biomedical Research Extension Act; Health Services
Extension Act, P.L. 95-83.—This legislation authorizes credit insti19
The treatment of partial guarantees differs for purposes of control and scorekeeping. On a program-byprogram basis, the system would control the amount of the actual government liability, that is, if the Government guarantee covers 50% of a loan, the limitation in appropriation acts for guarantee authority would be in
terms of 50% coverage. On the other hand, for purposes of scorekeeping the aggregate amount of guarantees,
the scorekeeoing would be based on the full face value of the loan.
20
See Part 2 and 6 of the Budget for a more detailed description of the credit control system.
SPECIAL ANALYSIS F
179
tutions to extend loans to eligible medical students up to $50,000
per student.
Food and Agriculture Act, National Food Stamp Reform. RL.
113.—This legislation sets a level for any commodity at 90% of
parity upon suspension of export sales of that commodity, if suspension occurs because of short supply of that commodity. It also
sets up a producer storage program for wheat and feed grains for
original and extended price support loans.
ERDA Authorization Act of 1978, RL. 95-238.—This legislation
authorizes loan guarantees for alternative fuel demonstration facilities. It also established a fund to carry out the electric and hybrid
vehicle loan guarantee program.
Emergency Agricultural Act of 1978, RL. 95-279—This legislation makes available nonrecourse loans and increases the amounts
of loan to producers of upland cotton. It further increases the bond
authority for the commodity Credit Corporation from $14.5 billion
to $25 billion.
Solar Loans, RL. 95-315.—This legislation amends the Small
Business Act to assist small business' acquiring solar energy facilities and equipment.
Agricultural Credit Adjustment Act of 1978, RL. 39-334.—This
legislation authorizes loans to partnerships and corporations that
finance family farmers and ranchers. It authorizes loan guarantees
at negotiated interest rates. It increases the interest rate for direct
real estate loans from 5% to the Treasury rate. It authorizes a twoyear emergency agricultural credit program totaling $4 billion in
direct and guaranteed loans enabling them to find credit in private
markets. It further provides guaranteed loans or loan insurance for
electric power facilities, and further extends loans under the Emergency Livestock Credit Act.
New York City Loan Guarantee Act of 1978, RL. 95-339.—This
legislation authorizes the Treasury to guarantee the payment of
principal and interest of New York City debt. It limits loan guarantees to $1.65 billion.
National Consumer Cooperative Bank Act, RL. 95-351.—This legislation establishes a bank providing specialized credit and technical assistance to consumer cooperatives. It is empowered to make
and service loans, to make commitments for credit, to make guarantees, and to borrow money and issue obligations.
Upland Cotton Agriculture Act, RL. 95-402—This legislation
amends the Agriculture Act of 1949 by requiring interest rates on
loans to upland cotton producers to be as favorable as those rates
applying to loans to producers of other commodities.
Financial Assistance for the City of New York, RL. 95-415.—This
legislation provides the necessary authority for the Treasury to
guarantee payment of interest and principal on loans in accordance
180
THE BUDGET FOR FISCAL YEAR 1980
with the provisions of the New York City Loan Guarantee Act of
1978. The amounts of the loan guarantees are limited to $1.65
billion and are available until 1998.
Supplemental Financing Facility of International Monetary
Fund, P.L. 95-435.—This legislation authorizes participation in the
Supplemental Financing Facility of the IMF. This facility assists
debt-plagued members. The loans are subject to strict monetary
and fiscal policy that the borrowing nation must meet in order to
improve their international trading position. Participation is limited to $1.45 billion of the United States Special Drawing Rights.
Veterans' Housing Improvements Act of 1978, P.L. 95-476 — This
legislation makes Vietnam-era veterans eligible for home, condominium, and mobile home loans on the same basis as World War II
and Korean War Veterans. It increases the size of guarantees for
home loans and reduces abuses of educational loan programs.
Agricultural Export Trade Act of 1978, P.L. 95-501.—This legislation amends the Food for Peace Act to allow the Commodity Credit
Corporation (CCC) to finance export sales. It also allows the CCC to
provide short-term deferred payment financing for export sales to
the People's Republic of China.
Amendments to Small Business Act and Small Business Investment Act of 1958, P.L. 95-507.—This legislation makes more capital
available for loans to small businesses for minority business investment.
Housing and Community Development Amendments, P.L. 95557.—This legislation establishes priority to low and middle income
persons for low interest rehabilitation loans. It increases the maximum Section 312 rehabilitation loan from $50,000 to $100,000. It
authorizes housing assistance to FHA-insured housing projects and
explicitly extends Section 202 elderly housing loans to the elderly
and the handicapped. It authorizes a home ownership program for
rural housing with benefits for low-income homeowners similar to
those of the central assistance programs.
Health Maintenance Organization Act Amendments of 1978, P.L.
95-559.—This legislation extends the Public Health Service Act to
authorize grants, contracts, loans, and loan guarantees for planning and initial costs related to establishing Health Maintenance
Organizations (HMO's). It also extends and increases loans and
loan guarantees for initial operating costs and adds new authority
to make loans and loan guarantees for HMO acquisition and construction of ambulatory facilities.
College Opportunity Act of 1978, P.L. 95-566—This legislation
amends the Higher Education Act of 1965 to (1) remove the $25,000
family income ceiling on eligibility for Federal payment of interest
subsidies on student loans while the borrower is in school, and (2)
provide for the inclusion of insured student loans by including
SPECIAL ANALYSIS F
181
insured student loans in expected family contributions in the determination of need for the College Work Study and National Direct
Student Loan Program. It also extends eligibility for Federal interest payments under the Guaranteed Student Loan Program to all
students regardless of family income.
Rehabilitation, Comprehensive Services, and Developmental Disabilities Amendments of 1978, P.L. 95-602.—This legislation would
replace existing authority to insure mortgages for construction of
rehabilitation facilities with a loan guarantee program. Under this
new program, borrowers would receive a 2% annual interest subsidy and the total principal outstanding at any time would be a
maximum of $100 million.
Local Rail Service Assistance Act of 1978, P.L. 95-607—This
legislation provides both loans and grants to finance hard pressed
freight lines that provided the only economically feasible transport
service to a community.
Public Utility Regulatory Policies, PL. 95-617.—This legislation
authorizes $300 million for loans to municipalities and non-profit
organizations to develop hydroelectric projects for existing dams.
Energy conservation, P.L. 95-619.—This legislation authorizes a
$100 million revolving loan purchase fund to buy low interest loans
of up to $8,000 to homeowners and builders for the purchase and
installation of solar heating and cooling equipment. It also authorizes a $5 billion fund for insured home improvement loans for
energy conservation measures, including subsidized loans for elderly and low- to middle-income families.
Coal Conversion, PL. 95-620—This legislation authorizes a $800
million loan program to assist utilities in the installation of pollution control equipment. It also authorizes a $100 million loan program for the rehabilitation of railroads affected by coal transportation demands.
A bill to extend the authority for the flexible regulation of interest rates on deposits and accounts in depository institutions, P.L.
95-630.
This bill establishes a central liquidity facility within the National Credit Union Administration. The facility is authorized to
borrow up to $500 million from the Treasury to meet its obligations.
While not part of recently enacted legislation, recent changes in
the regulations governing the savings and loan industry will have
significant influences on credit markets. The FHLBB recently authorized Federal savings and loan associations to offer graduated
payment mortgages and reverse annuity mortgages. Graduated
payment mortgages feature lower scheduled payments in the initial years, rising gradually to a fixed level. The FHLBB estimates
that 2.5 million families now unable to purchase a home using
182
THE BUDGET FOR FISCAL YEAR 1980
standard, fixed-rate mortgages will be able to buy homes using
such mortgages. Reverse annuity mortgages are designed to let
older homeowners draw upon their established equity of their
homes. This promotes continued homeownership, because families
are now able to use accumulated equity to meet the higher costs of
ownership.
SUMMARY
A summary of credit advanced and raised under Federal auspices
is given in Table F-9. Total credit advanced reached $59.0 billion in
1978, led the sharp increase in lending by Government-sponsored
enterprises. Credit advanced is expected to fall somewhat in 1979
to $53.2 billion. This fall occurs as two Government-sponsored enterprises—Federal Home Loan Banks and FNMA curtail lending in
support of mortgage markets. Credit advanced rises to $58.4 billion
in 1980 as guaranteed lending increases sharply in the same year.
Table F-9. SUMMARY OF CREDIT ADVANCED AND CREDIT RAISED UNDER FEDERAL AUSPICES
(In millions of dollars)
Net Change
1978
actual
LENDING (Credit advanced)
Direct loans (from table F-2):
On-budget agencies
Off-budget entities
Guaranteed loans (primary, adjusted,
from table F-5)
Loans by government-sponsored enterprises (from F-6)
Total, credit advanced to
the public under Federal auspices *
Outside the budget
1980
estimate
F-6)
Total, credit raised from
the public under Federal auspices1
Net credit advanced
Excludes Federal Reserve credit.
8,600
11,195
4,969
11,988
2,811
11,793
11,337
20,817
27,904
1978
actual
1979
estimate
1980
estimate
76,526
43,928
81,495
55,916
84,306
67,709
25,462
193,079
213,897
239,358
15,458
18,362
126,843
142,301
160,663
59,036
50,436
53,232
48,263
58,428
55,617
440,376
363,850
493,609
412,114
552,036
467,730
59,106
40,000
39,000
610,948
650,948
689,948
11,337
20,817
25,462
193,079
213,897
239,358
24,063
BORROWING (Credit raised)
Federal borrowing from the public
(from table E-l)
Guaranteed borrowing (same as
guaranteed loans, above)
Borrowing by government-sponsored
enterprises (net, from L01 table
1
1979
estimate
Outstanding
12,588
16,415
115,088
127,676
144,091
94,506
-35,470
73,405
-20,173
80,877
-22,449
919,115
992,521
1,073,397
SPECIAL ANALYSIS G
TAX EXPENDITURES
The Congressional Budget Act of 1974 (P.L. 93-344) requires a
listing of tax expenditures in the budget. The act defines tax expenditures 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 policy instruments.
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, housing, petroleum exploration and development, borrowing by State and local governments, and support of
charitable institutions. The deductibility of medical expenses and
casualty losses and personal exemptions for the aged and blind are
examples of adjustments of tax liabilities for taxpayers in special
circumstances.
The benefits of tax expenditures designed to encourage particular types of economic activity may not rest fully or even mainly
with the corporations or individuals whose taxes are initially affected. 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, to the extent that the investment tax credit
stimulates capital formation, productivity may increase and real
wages may rise, benefiting recipients of labor income as well as
capital income.
This special analysis contains quantitative estimates of 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
provisions of the tax system.
Major changes in tax expenditures contained in the Revenue Act
of 1978 (P.L. 95-600), the Energy Tax Act of 1978 (P.L. 95-618) and
the Foreign Earned Income Act of 1978 (P.L. 95-615) are noted in
the text.
183
184
THE BUDGET FOR FISCAL YEAR 1980
DEFINING TAX EXPENDITURES
Income tax provisions resulting in tax expenditures are further
defined in the legislative history of the Congressional Budget Act
as exceptions to the "normal structure" of the individual and corporate income taxes. They reduce tax liabilities for particular
groups of taxpayers. No estimates are made in this analysis for
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. At present 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. Also, under the Tax Reform Act of 1976
deductions for the costs associated with the demolition of certain
historic buildings were disallowed and crediting of foreign taxes
paid was denied for taxpayers who cooperate with or participate in
an international boycott.
The Internal Revenue Code contains individual income, corporate income, estate and gift, excise and employment taxes. This
analysis deals only with deviations from the "normal structure" in
the taxation of individual and corporate income.
The "normal structure" is not defined in the tax code. The
concept has evolved 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. Tax expenditures might in
principle be defined as departures from a theoretical income tax
base. "Economic income," defined as receipts available to support
consumption or additions to net wealth, the imputed value of inkind consumption, and imputed changes in net worth, might be
used for this purpose.
Such theoretically pure treatment, however, is not possible in
practice. The concept of the normal structure recognizes that it is
impractical to make the necessary imputations. Furthermore, the
normal structure allows for the separate taxation of individual and
corporate incomes whereas a theoretically pure income tax structure would integrate these two taxes.
Although a theoretically pure income tax base can be specified,
there is no theoretical basis for any particular degree of progressivity in the individual income tax rate structure or any particular
structure of income tax rates. For purposes of identifying tax expenditures, the structure of progressive rates and those provisions
that exclude low-income persons from tax liability are considered
to be part of the normal tax structure. 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. Reduc-
SPECIAL ANALYSIS G
185
tions in the tax rates for individuals and the increase in the
personal exemption and the standard deduction (now called the
zero bracket amount) in the Revenue Act of 1978 tend to reduce
the estimated revenue losses associated with some tax expenditure
items. This will occur both because fewer taxpayers will itemize
their deductions and because tax preferences have less value at
lower marginal rates.
Neither tax rates nor outlays can be presumed to be independent
of current tax expenditures. If major tax expenditure items were
repealed, tax rates could be set at lower levels or budget outlays
could be increased to maintain an appropriate fiscal policy.
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.
• Threshold levels for tax liability. The normal structure includes those 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. Personal
exemptions and the standard deduction have determined
these thresholds in recent years. Legislation enacted during
1975, 1976 and 1977 temporarily added the general tax credit
to these threshold provisions. The Tax Reduction and Simplification Act of 1977 made a permanent change in the provisions that establish threshold levels for tax liability by repealing the low-income allowance and the percentage standard
deduction and substituting flat standard deductions (now
called zero bracket amounts) for different types of filing units.
The Revenue Act of 1978 again changed the threshold levels
by not renewing the general tax credit for tax years after
December 31, 1978, increasing the standard deduction and
raising the personal exemption. The additional personal exemptions for taxpayers 65 and over and the blind result in
tax expenditures because they are special provisions directed
at groups in special circumstances.
• The progressive rate schedules for the individual income tax.
A progressive rate schedule for the individual income tax is
considered to be part of the normal tax structure. Therefore,
tax expenditures do not result because some income is taxed
at lower rates than other income. The income averaging provision of the code is also considered to be part of the normal
structure. The maximum tax of 50% on personal service
income is treated as a tax expenditure item because it is a
"preferential rate of tax" as defined in the Congressional
Budget Act.
186
THE BUDGET FOR FISCAL YEAR 1980
• The limited progressive rate schedule for corporations. The
Revenue Act of 1978 changed the treatment of the first
$100,000 of corporate income by taxing it at progressive rates
ranging from 17% to 40%; all amounts over $100,000 are
taxed at 46%. Consistent with the treatment of the corporate
surtax exemption in prior years, the difference in corporate
tax rates is viewed as a tax expenditure rather than as establishing a new normal structure.
• Separate rate schedules for single and married taxpayers, married taxpayers filing separately and heads of households. Existing provisions regarding the definition of taxpaying units
and separate rate schedules for different types of taxpayers
are considered part of the normal tax structure.
• Imputed income from owner-occupied housing and other
sources. A theoretically pure income concept would include
imputations for income received in kind from the occupancy
of a home owned by the taxpayer and for in-kind income from
the ownership of other durable assets. Because such imputations are difficult to make, they are not considered in the
computation of tax expenditures, even though the exclusion of
imputed income from income subject to tax affects the allocation of the economy's resources, particularly by stimulating
owner-occupied housing. If income from owner-occupied housing were imputed, deductions for mortgage interest and property taxes would be an appropriate part of the normal structure in order to measure the amount of net income that
should be included in the tax base. In the absence of imputation, those two deductions result in tax expenditures.
• The value of government benefits received in kind. The exclusion from income subject to tax of most direct cash payments
to individuals by the government, such as social security payments, results in tax expenditures. Other government programs such as medicare and public education that extend
benefits in kind to individuals are not included in income, but
this exclusion does not result in tax expenditures. The dividing line between nontaxable government benefits that result
in tax expenditures and those that do not is not clear cut.
Food stamps, for example, are so nearly the equivalent of
cash that their exclusion from income subject to tax might be
considered to result in a tax expenditure, but in this analysis
they are not so considered.
• Capital gains and losses. Although the base of a theoretically
pure income tax would include net capital gains as they
accrue, practical problems generally prevent the identification and taxation of unrealized capital gains. Hence, the
normal structure taxes such gains only when "realized." How-
SPECIAL ANALYSIS G
187
ever, the exclusion from taxable income of 60% of capital
gains (increased under the Revenue Act of 1978 from 50% in
prior law) results in a tax expenditure. An individual's assets
at death may have appreciated in value. Since these gains are
not deemed to have been realized in the year of death under
current law, they are completely excluded from the decedent's
income subject to tax. The failure to include unrealized capital gains in the year of death in income is considered for
purposes of this analysis to result in a tax expenditure. Prior
to the enactment of the Tax Reform Act of 1976, the basis of
the decedent's assets in the hands of the estate, heir or other
beneficiary was their market value at the date of death. Thus,
gains that accrued before death were never subject to tax.
Under the 1976 act, the estate or beneficiaries must "carry
over" the decedent's basis, adjusted to account for death taxes
attributable to unrealized gains, and thus be subject to tax on
gains that accrued during the lifetime of the decedent as well
as gains that accrued subsequent to inheritance. As a means
of phasing in this provision, an asset's basis to the estate, heir
or beneficiary is generally its value on December 31, 1976, or,
if acquired later, the acquisition cost. The tax on such gains
will partially offset the tax expenditure resulting from the
failure to include capital gains in income subject to tax in the
year of death. However, the Revenue Act of 1978 postponed
the operation of the carryover of basis provisions, which will
only be applicable to property passing from decedents dying
after December 31, 1979. Hence, offsetting revenue gains will
not begin until 1981.
Gifts and bequests. The tax system subjects gifts and bequests
to taxes separate from the income tax. Therefore their exclusion from the recipient's taxable income under the individual
income tax does not result in a tax expenditure. While another set of tax expenditures could be defined for departures
from a "normal structure" of gift and estate taxes, this would
be beyond the scope 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 corporate or the individual level.
Treatment of individuals and corporations as separate taxpaying entities. A theoretically pure income tax would integrate
the taxation of individual and corporate income to avoid mul-
188
THE BUDGET FOR FISCAL YEAR 1980
tiple 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. Although this approach is applied to subchapter S
corporations, separate taxation of corporate entities is accepted as part of the normal tax structure for purposes of this
analysis.
• Deduction of depreciation expenses. The tax code allows a
reasonable allowance for depreciation. Depreciation is defined
as "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 compute depreciation deductions, one needs an asset life and a depreciation
rate. Depreciation over the useful life of an asset may be
taken at a uniform rate, known as straight line depreciation,
or at a rate that is faster in the earlier years of an asset's life,
known as accelerated depreciation. For depreciation purposes
a distinction is made between the treatment of machinery
and equipment and that of buildings. The use of accelerated
depreciation for machinery and equipment is considered to be
part of the normal tax structure inasmuch as they tend to
lose more of their actual value in the first few years of useful
life. However, under the asset depreciation range (ADR)
system, a taxpayer may select a life for an asset of up to 20%
less than the guideline life published by the Internal Revenue
Service without having to justify the choice. If an asset life
within the 20% range but shorter than the guideline life is
chosen, a tax expenditure is assumed to result. In the case of
buildings, no comparable guideline lives are published. Thus,
to the extent that lives claimed by taxpayers are justified on
the basis of "facts and circumstances," tax expenditures do
not result. For certain types of buildings, such as rehabilitated low income housing, the use of shorter lives is, in effect,
permitted by the tax code, thereby giving rise to tax expenditures. Furthermore, for all buildings, the straight-line method
of depreciation is considered to be part of the normal tax
structure, and the additional deductions resulting from the
use of accelerated depreciation are regarded as tax expenditures.
• Deduction of other business expenses. The deduction of business expenses is necessary to determine taxable income. Tax
expenditures do not ordinarily result when deductions for
"ordinary and necessary" business expenses are taken. This
rule is followed in this analysis even when the deduction of
certain expenses, such as those for entertainment and meals,
can be challenged on normative grounds. Tax expenditures do
SPECIAL ANALYSIS G
189
occur when the tax code permits business or investment expenditures that are capital outlays in economic terms to be
treated as current expenses.
• Foreign tax credits. The normal structure of the income tax
includes tax credits for foreign income taxes paid to avoid the
double taxation of income earned abroad. This conforms to
the principle that total taxes paid by a U.S. resident should
be independent of the source of his income.
• 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. There are certain exceptions in order to avoid abuse in
tax-haven countries. The deferral of income of controlled foreign corporations is included as a tax expenditure in this
analysis, because it is an exception to the basic precept of our
tax system that U.S. corporations and citizens are subject to
tax on their worldwide income when earned.
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 the revenue loss is relatively small ($2.5 million or less).
Making distinctions between the normal tax structure and exceptions leading to tax expenditures does not imply that the features
of the normal tax system should be exempt from periodic analysis
and review. Many features of what is now defined as the normal
tax structure have major effects upon the level and composition of
economic activity and the distribution of income. Budget outlays,
or other policy instruments, are alternative means to achieve the
objectives of some features of the normal tax structure just as they
are often a potential substitute for tax expenditures.
MEASURING TAX EXPENDITURES
The tax expenditure estimates reported in table G-l have been
prepared by the Treasury Department and are based upon tax law
enacted as of December 31, 1978. The estimates show the loss of
budget receipts by fiscal year resulting from each of these particular features of the tax system. For those tax expenditures resulting
from the exclusion from taxable income of Federal Government
payments to individuals, the estimates of such 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.
190
THE BUDGET FOR FISCAL YEAR 1980
Each estimate assumes that the tax provision in question had
never been a part of the tax system but that all other features of
the tax system, including the structure of rates, would remain
unchanged. In most cases, the assumed deletion of the special tax
provision would increase taxable income for certain corporations or
individuals; existing marginal tax rates are then applied to the
estimated change in taxable income to compute the tax expenditure. For each itemized nonbusiness deduction for individuals, this
same procedure is followed. However, in some cases taxpayers will
no longer have remaining deductions sufficient to itemize and will
elect the standard deduction. Tax expenditures resulting from credits are simply equal to the estimated credits claimed by all taxpayers. Aggregate output and incomes are assumed to be unaffected by
the deletion of the special features of the tax laws giving rise to tax
expenditures. No "second order" effects are included in the estimates because it is assumed that some offsetting fiscal or other
action would be taken to keep the economic aggregates at the
levels that underlie the 1980 budget estimates.
Taxpayer behavior is also assumed to be unaffected by the assumed deletion of a tax expenditure provision even though, to the
extent that tax expenditures intended to encourage certain economic activities have been successful, their elimination would presumably change taxpayer behavior. Such changes would alter the
mix of economic activity. However, given the assumed unchanged
economic aggregates, no effects on receipts of a different mix of
activity are reflected in the estimates.
Some tax expenditures result from 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 (DISC's). 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 growing business the deferral of taxes continues indefinitely under most of
these provisions. Furthermore, as the economy grows, these
amounts increase over time. Estimates for these items show the
difference between budget receipts under current law and budget
receipts assuming a law without such provisions had always been
in effect. These figure therefore generally show more revenue than
could be obtained in the first years of a transition from one tax law
to another.
Tax expenditure estimates are computed on a "cash-flow" basis.
The estimates reflect the amounts by which receipts will be
changed in each year. An alternative method of measuring tax
expenditures that involve deferral would be to compute for each
year the present value of the tax savings associated with the pref-
SPECIAL ANALYSIS G
191
erence items. This method would make it easier to compare the
values of subsidies that result from tax preferences that postpone
tax liability with the values of those that reduce it permanently.
Such a present value calculation would avoid the anomalous negative estimates that occasionally appear in table G-l when tax
revenues calculated on a cash flow basis are higher than they
would have been without the tax expenditure. This occurs in situations where taxpayers whose tax liabilities were reduced in earlier
years have larger tax payments in later years than they otherwise
would have.
Sample data from tax returns have been used to estimate tax
expenditures whenever possible. These data, however, are not yet
available for the years presented in this analysis. Consequently,
the estimates have been 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. In addition, many tax expenditures result from excluded income not reported on tax returns. In these cases data for
the estimates must be derived from other sources. The estimates
take into account any changes scheduled under existing law, such
as the phasing in or out of specific provisions.
The estimates are reduced by any minimum tax liabilities associated with particular items. The minimum tax on tax preferences
was introduced in 1969 to assure that individuals and corporations
receiving tax preferences do not escape bearing a share of the tax
burden. Several tax expenditure items are included in the base of
the minimum tax.
The Revenue Act of 1978 modified the minimum tax for individuals by excluding capital gains and excess itemized deductions as
preference items subject to the minimum tax. However, a new
alternative minimum tax, levied on the sum of taxable income,
certain deductions in excess of specified income limits and the
capital gains deduction, may be applicable. The new alternative
minimum tax is paid if tax liabilities under this tax exceed the
sum of tax liabilities under the ordinary income tax and the minimum tax as revised. Any revenue gain under the alternative tax is
assumed to offset the tax expenditures that would otherwise result
from the capital gains preference. As a result of the Energy Tax
Act of 1978 intangible drilling costs for oil and gas and geothermal
wells are no longer minimum tax preference items to the extent
that net income from the production of these wells offsets intangible drilling costs deductions. This change makes permanent the
temporary rule which was enacted by the Tax Reduction and Simplification Act of 1977. Although corporations are not affected by
the changes in the minimum tax provisions, the alternative capital
gains tax rate for corporations was reduced from 30% to 28%.
192
THE BUDGET FOR FISCAL YEAR 1980
The Tax Reform Act of 1976 also introduced two "at-risk" rules
that limit deductions attributable to a taxpayer's investment to the
amount of cash investment plus the debts for which the taxpayer is
personally liable. One rule applied to all taxpayers (other than
regular business corporations) engaged in farming, motion picture
films, equipment leasing and the exploring for and the exploitation
of oil and gas. The other rule applied only to partners (including
corporate partners) of a partnership engaged in any activity other
than real estate. These at-risk rules succeeded in reducing tax
expenditures. The Revenue Act of 1978 consolidated the at-risk
rules into one rule, applied it to all taxpayers other than widely
held corporations and to all activities other than equipment leasing
by closely held corporations and real estate.
Tax expenditure estimates cannot be simply added together to
obtain totals for functional areas or a grand total. In some cases
the revenue gained from the deletion of two tax expenditure items
would be greater than the sum of the gains from the deletion of the
two items separately. 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 effects. In other
cases, the revenue gain from the deletion of two items would be
smaller than the sum of the gains considered separately. For example, if the deductibility of mortgage interest payments and homeowner property taxes were both repealed and the standard deduction were left unchanged, many individuals who now itemize their
deductions would opt for the standard deduction, thus limiting the
revenue gain.
In general, elimination of several itemized deductions would increase revenue by less than the sum of the revenue gains measured
by eliminating each item separately because more taxpayers would
use 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
because taxpayers would be pushed into higher tax brackets.
As a measure of this aggregation problem, the revenue loss resulting from all itemized deductions that result in tax expenditures
would be $30.6 billion in 1980, whereas the sum of tax expenditures, taking each item separately, is $42.8 billion. The aggregations of related tax expenditure items that are presented and discussed in the next section have been specially estimated so as to
account for this problem. Where tax expenditures for both individuals and corporations result from the same tax code provision, such
SPECIAL ANALYSIS G
193
as the investment tax credit, the two estimates may be added
together.
PROPOSED CHANGES IN TAX EXPENDITURES
Unlike earlier years, when proposed reforms of the tax system
indicated substantial changes in the volume of tax expenditures,
the administration this year has proposed only one major tax
change resulting in a tax expenditure. To encourage compliance
with the voluntary wage standards, the President has proposed a
program of real wage insurance that will operate through the tax
system. Taxpayers who are members of groups complying with the
wage standard will be eligible to receive tax credits based on the
amount of wages, up to $20,000, shown on their W-2 forms. The
rate of credit will be the excess of the actual rate of inflation over
7%, up to a 3% maximum. The credit will be included in taxable
income. The full amount of the credit will be allowed even if it
exceeds what otherwise would be the taxpayer's tax liability. That
part of the credit in excess of tax liability will be included in
outlays and is not included in tax expenditures. The proposal,
which covers calendar year 1979, is estimated to reduce receipts
and increase tax expenditures in 1980 by $2.3 billion.
The carryover of basis provision contained in the Tax Reform
Act of 1976 has been postponed and now applies only to property
passing from decedents who die after December 31, 1979. The administration has proposed a new carryover of basis provision that
would continue to set the basis of property transferred from a
decedent to estate or heirs as its value on December 31, 1976, or its
acquisition cost if acquired later. The new rule would apply to the
estates of individuals dying after December 31, 1979. However, the
minimum basis subject to the carryover provision would be increased to $175,000 from $60,000 under the 1976 act. The tax expenditure consequences of this proposal are negligible in 1980.
The administration has proposed to limit the use of tax-exempt
funds for mortgage financing to low and moderate income families
and for other narrowly targeted public policy objectives. Tax expenditures will be reduced by $29 million in 1980 as a result of this
proposal.
TAX EXPENDITURES BY FUNCTION
Estimates of tax expenditures for 1978-1980 are grouped together
by functional category and presented in table G-l. The estimates
are shown separately for individuals and corporations. Each tax
expenditure has been classified in the functional categories used
for budget outlays into which they most closely fit. A brief descrip-
280-700 O - 79 - 13
194
THE BUDGET FOR FISCAL YEAR 1980
tion follows of each of the special tax provisions for which a tax
expenditure estimate is shown in table G-l.
National defense.—The housing and meals provided military personnel, either in cash or in kind, are excluded from income subject
to tax. Most of the disability-related military pension income received by current retirees is also excluded.
International affairs.—Prior to January 1, 1978, a U.S. citizen
was able to exclude foreign earnings of up to $20,000 a year (in
some cases $25,000) if the taxpayer was a resident of a foreign
country or remained outside the United States for 17 months in an
18-month period. The Foreign Earned Income Act of 1978 replaced
the exclusion for taxpayers with deductions for certain foreign
living costs and extended these deductions to U.S. resident aliens.
(For a taxable year beginning in the 12-month period from January
1, 1978 to December 31, 1978 taxpayers may elect either the new
law or the $15,000 lump sum exclusion of the Tax Reform Act of
1976. As of tax years beginning after December 31, 1978, only the
new law will apply.)
Under the new law, eligible taxpayers may deduct expenses for
annual home leave travel, the cost of U.S.-type schooling from
kindergarten through grade 12, the excess of foreign living costs
other than housing and education over those in the highest U.S.
mainland city, and the excess of reasonable housing costs over onesixth of earned income less the special deductions. Taxpayers living
in hardship areas will be allowed an additional deduction of $5,000.
Taxpayers living in hardship areas in camps set up by their employers may elect to exclude $20,000 plus the value of meals and
lodging furnished by the employer in lieu of taking the special
deductions. The new law makes no change in the tax-exempt status
of certain allowances received by Federal employees working
abroad. These exemptions also result in tax expenditures.
The profits of a domestic international sales corporation (DISC)
are not taxed to the DISC but instead are taxed to the shareholders
when distributed or deemed distributed to them. For DISC's with
more than $150,000 in otherwise taxable income, the deemed distribution equals all income attributable to base-period exports plus
50% of income attributable to exports in excess of the base-period
exports. Base period exports equal 67% of average annual exports
during an earlier 4-year base period. For DISC'S with less than
$150,000 in otherwise taxable income, the deemed distribution
equals 50% of total income.
Except for certain tax-haven provisions, the income of foreign
corporations controlled by U.S. shareholders is exempt from U.S.
taxation until that income is distributed to the shareholders. The
tax expenditure estimate assumes that if deferral were terminated
SPECIAL ANALYSIS G
195
a controlled foreign corporation would be treated as a partnership
and the controlling U.S. shareholders would be taxed as partners.
In 1980 the phase-out of the preferential treatment of Western
Hemisphere trade corporations, begun by the Tax Reform Act of
1976, will be completed.
General science, space, and technology. —Research and develop-
ment expenditures are intended to result in new products or processes, cost reductions, or other effects whose benefits will in nearly
all cases continue into the future. Businesses may deduct all research and development expenditures in the year when they are
incurred rather than amortize them over several years.
Energy. —Certain capital costs necessary to discover and develop
mineral properties may be deducted as current expenses rather
than being spread over the useful life of the property. Included in
this category are the intangible drilling costs of oil wells, 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 of 1976 made intangible drilling
costs for oil and gas wells a preference item for purposes of the
minimum tax to the extent that such costs exceeded either cost
depletion or 10-year amortization. The rule was liberalized for 1977
by allowing individuals to exclude intangible drilling costs from
their minimum tax base to the extent that the deductions did not
exceed oil and gas income. This temporary rule was made permanent by the Revenue Tax Act of 1978. In addition, the Energy Tax
Act of 1978 adopted the same rules for intangible drilling costs of
geothermal wells.
Extractive industries generally use percentage depletion rather
than cost depletion. Under cost depletion, actual outlays, to the
extent not immediately recovered through expensing of exploration
and discovery and development costs may be deducted over the
productive life of the property, much as businesses may take deductions for the depreciation of other capital goods. Percentage depletion is not limited to the cost of the investment in this way. Under
percentage depletion, taxpayers may deduct a percentage of gross
income from mineral production at rates ranging from 22% for oil
and gas and certain other minerals to 5%; however, the deduction
is limited to 50% of net income from the property or 65% of
taxable income in the case of oil and gas. The Tax Reduction Act of
1975 limited the availability of percentage depletion to independent
oil and gas producers and royalty owners and to specific quantities
of output. The act phased down the percentage depletion rate for
oil and gas from 22% through 1980 to 15% in 1984 and thereafter.
The Energy Tax Act of 1978 made production after September 30,
1978 from geothermal deposits eligible for percentage depletion at
196
THE BUDGET FOR FISCAL YEAR 1980
the same rate as for oil and gas, but with no limit on output and
no limitation with respect to qualified producers.
In lieu of percentage depletion royalties from coal deposits are
treated as capital gains, rather than ordinary income.
The Energy Tax Act of 1978 created a variety of tax incentives to
stimulate energy conservation and to encourage conversions to
energy sources other than oil or natural gas. The act provides a
15% income tax credit to individuals for home insulation and other
energy-conserving components up to a maximum credit of $300.
The credit of 30% on the first $2,000 of expenditures and 20% on
the next $8,000 are for solar and other renewable energy source
property. These credits are retroactive to purchases made after
April 19, 1977.
For business, the act provides an additional 10% credit for investments in specified energy property. Such property includes
alternative energy property (i.e., property using fuel other than oil
or natural gas); solar or wind energy property, specially defined
energy property (i.e., property used in an existing industrial, agricultural or commercial facility to reduce the amount of energy
consumed or heat wasted); recycling equipment; shale oil equipment; and equipment for producing natural gas from geopressurized brine.
Natural resources and environment —Interest on State and local
government debt issued to finance the pollution control facilities of
private firms is excluded from income subject to tax.
Certain payments made by customers to water and sewage disposal utilities for the purpose of aiding the construction of new
facilities are treated by utilities as contributions to capital rather
than as gross income from the sale of a constructed asset. Payments of this kind to public gas and electric utilities were given the
same treatment retroactive to February 1, 1976 by the Revenue Act
of 1978.
Pollution control facilities installed in existing buildings may be
amortized over 5 years instead of over their longer useful lives.
This results in a deferral of income. The revenue effect of this
deferral reflects both the revenue loss attributable to the excess of
amortization over normal depreciation and the revenue gain resulting from the disallowance of depreciation deductions after the end
of the amortization period. In a growing economy in which taxpayers consistently elect rapid amortization, the annual revenue loss
from the amortization of current investments exceeds the gain
from the lower depreciation deductions for past investments. In the
case of pollution control facilities, taxpayers generally elected amortization for investments placed in service between 1969, when the
provision was first effective, and 1971. In 1971, the investment
credit, which had been repealed in 1969, was reinstated, but was
SPECIAL ANALYSIS G
197
not extended to facilities amortized over 5 years. Since 5-year amortization with no investment credit is less favorable than normal
depreciation with the investment credit, taxpayers ceased electing
amortization. The Government is now recapturing some of the
benefits of deferral for investments made between 1969 and 1971,
so that the effect of this provision for 1978-80 is a revenue gain,
producing a negative value of the tax expenditure.
The law was changed by the Tax Reform Act of 1976, which
allowed taxpayers to elect amortization and one-half of the investment credit for facilities placed in service after December 31, 1976,
and by the Revenue Act of 1978, which allows taxpayers the full
investment credit for facilities placed in service after December 31,
1978 to the extent that such facilities are not financed with taxexempt bonds. Thus, taxpayers are now expected to resume the
election of the amortization provision. By 1981, the loss from amortization will exceed the gain from the recapture of past benefits, so
that the tax expenditure will be positive.
Expenditures to preserve and restore certain historic structures
are eligible for special accelerated depreciation. This provision does
not apply to owner-occupied housing. Amendments by the Revenue
Act of 1978 will make the procedures for designating State and
local historical districts similar to those for designating Federal
districts.
The gains on the cutting of timber and royalties from iron ore
deposits are taxed at rates applicable to long-term capital gains
rather than at ordinary income rates.
Agriculture.—Farmers, other than certain corporations and partnerships engaged in agriculture, are allowed to deduct certain costs
as current expenses even though these expenditures are for inventories held at the end of the year or for capital improvements
under normal accrual accounting. Capital gains treatment generally applies to the sale of livestock, orchards, vineyards and other
agricultural products.
Rural electric and telephone cooperatives are exempt from the
corporate income tax. Payments to their patrons of noncash patronage dividends also generally need not be taken into income by
the patron until received in cash. Other cooperatives are subject to
corporate income tax but may deduct cash and noncash patronage
dividends based on business done with patrons provided 20% of
total dividends are paid in cash and the patron has agreed to
include the entire dividend in income. Cooperatives marketing
products for patrons also may deduct amounts retained by the
cooperative on a per-unit basis ("per unit retains") if the patron
has agreed to take the stated amount of the retain in income.
Farmers' marketing and purchasing cooperatives meeting certain
requirements are permitted to deduct dividends on capital stock
198
THE BUDGET FOR FISCAL YEAR 1980
and payments to patrons from nonpatronage 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.
The Revenue Act of 1978 allows certain payments made after
September 30, 1979 under various Federal and State cost sharing
conservation programs to be excluded from gross income. Payments
may be excluded to the extent they serve specified conservation
purposes and do not substantially increase the annual income derived from the property.
Commerce and housing credit—This category includes a number
of tax expenditure provisions that also affect economic activity in
other functional categories. In general, provisions related to investment, such as some depreciation rules and the investment tax
credit, might alternatively have been classified under the natural
resources and environment, energy, agriculture or transportation
categories.
The first $100 ($100 per spouse on a joint return) of dividend
income may be excluded from income subject to tax.
The interest on industrial development bonds issued by State and
local governments is excluded from income subject to tax.
Credit unions are exempt from Federal income taxes. Commercial banks, mutual savings banks, and savings and loan associations are permitted to deduct additions to bad debt reserves in
excess of actual loss experience and reasonable expectations as to
future losses. Mutual savings banks and savings and loan associations may deduct 40% of income in calendar year 1979 and thereafter, provided they maintain stipulated fractions of their assets in
"qualifying assets/' primarily residential mortgages.
Owner-occupants of homes may deduct mortgage interest and
property taxes (but not maintenance outlays or depreciation) as
itemized nonbusiness deductions. The 1980 tax expenditure from
these two items combined is $14.6 billion. This is less than the sum
of the two separately because if both were deleted fewer taxpayers
would itemize deductions.
Interest paid on consumer credit is allowed as an itemized deduction for individuals.
Prior to the Tax Reform Act of 1976 taxpayers deducted interest
and property tax payments made while a building was under construction rather than including them with other costs of construction to be depreciated over the building's useful life. The 1976 act
reduced this tax expenditure by requiring that construction period
interest and taxes be capitalized and amortized over a 10-year
SPECIAL ANALYSIS G
199
period for noncorporate taxpayers. The provision is being phased in
over a 7-year period with more generous transition rules available
for Government-subsidized housing projects.
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 straight-line depreciation (the method
typically used in financial statements) are shown as tax expenditures. The asset depreciation range (ADR) system permits the
guideline lives of depreciable equipment to be reduced by 20%. The
ADR system does not apply to property used abroad.
The Revenue Act of 1978 raised to 60% the share of net longterm gains from the sale of capital assets that may be excluded
from income and eliminated the alternative capital gains tax for
individuals. The excluded 60% of net long-term capital gains is no
longer included as a preference item in computing the minimum
tax. However, the capital gains exclusion is treated as a preference
item in the new "alternative minimum tax." This new tax is applicable only if the sum of a taxpayer's regular income and minimum
tax is less than his alternative minimum tax. Half of net capital
losses may be offset against ordinary income up to a maximum of
$3,000 per year with an unlimited carry-forward.
As a result of the Revenue Act of 1978, corporations may elect a
28% alternative tax rate on capital gains instead of the 30% rate
specified under prior law. The tax expenditure is estimated on the
assumption that these gains would otherwise be taxed at ordinary
rates.
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. To the extent that 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. A loss on the sale of a
home is not deductible.
Capital gains on assets held at the owner's death are not subject
to income tax. The estimate assumes that such gains would be
200
THE BUDGET FOR FISCAL YEAR 1980
taxed as ordinary income in the year of death, but is adjusted for
any taxes paid by heirs on such gains under the carryover basis
provisions of the Tax Reform Act of 1976. Under these provisions,
accretions to the value of assets of a decedent's estate after December 31, 1976, after adjustment for death taxes attributable to such
accretions, would have been taxable. However, the Revenue Act of
1978 suspended the carryover basis rule until after December 31,
1979. At present, the basis to a recipient is the fair market value of
the asset at death so that any gains on assets held at death escape
income taxation.
The Revenue Act of 1978 changed the corporate income tax
structure for the first $100,000 of taxable corporate income. Beginning January 1, 1979, the first $100,000 of taxable income will be
taxed progressively at rates from 17% to 40%. Income over
$100,000 will be taxed at 46%. Estimates are separately shown for
revenue losses resulting from the surtax exemption of prior law for
taxable income up to $50,000.
The investment tax credit was made permanent at 10% by the
Revenue Act of 1978. 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 seven years or more.
Assets with shorter lives are entitled to a reduced credit. As a
general rule, the credit cannot be claimed for investments in land
or buildings or for property used abroad. The 1978 act modified this
rule by allowing credits for the rehabilitation of buildings that are
at least twenty years old and used for business or productive activities (other than for residential purposes).
The 1978 act also made the full investment credit available after
December 31, 1978, for investment in pollution control facilities
eligible for five-year amortization. If, however, tax-exempt bonds
are used to finance the facility, only one-half of the investment
credit is available, as under prior law. Under the 1978 act, the
investment tax credit is available for investments in single purpose
livestock and horticultural structures or enclosures made in taxable years ending after August 15, 1971. Certain vans used to
transport employees to and from work are also entitled to the
investment credit. The investment tax credit may be claimed as
progress payments are made on property that takes 2 or more
years to construct. Under prior law, the maximum credit allowed
against income tax liability in a taxable.year was generally limited
to $25,000 plus 50% of tax liability in excess of $25,000. The 1978
Act raised the excess liability percentage to 60% for 1979 and
increases it through annual increments of 10 percentage points to
90% by 1982. Excess credits may generally be carried back 3 taxable years and forward 7 taxable years, after which unused credits
expire.
SPECIAL ANALYSIS G
201
Transportation.—The Revenue Act of 1978 eliminated deductions
by individuals for State and local taxes on gasoline, diesel and
other motor fuels consumed for personal use beginning in 1979.
Specified classes of railroad rolling stock were eligible for amortization over a 5-year period rather than their longer, expected
useful life, whether owned by railroad companies or by lessors. If 5year amortization was elected the investment tax credit could not
be claimed. These provisions applied only to rolling stock placed in
service before January 1, 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 negative
figures appear in table G-l.
Certain companies that 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. An
investment credit of one-half the regular credit may be claimed on
the tax-deferred amounts withdrawn from capital construction
funds.
Community and regional development.—Taxpayers may, under
certain conditions, elect to amortize rehabilitation expenditures for
low- and moderate-income rental housing over a 5-year period.
Rehabilitation expenditures may not exceed $20,000 per dwelling
unit and must exceed $3,000 to qualify. This provision expires on
December 31, 1981.
Education, training, employment, and social service.—Scholarships and fellowships are excluded from a recipient's taxable
income subject to certain limitations. The exclusion of educational
benefits under the Gl-bill is included in the veterans benefits and
services function.
Taxpayers may claim personal exemptions for dependent children 19 or over who receive income of $1,000 or more per year only
if the children are full-time students. The student may also claim
an exemption on his own return, thus providing a double exemption. The extra exemption for parents results in a tax expenditure.
Many employers provide employee benefits that are excluded
from employee income. The employer's costs for these benefits are
deductible business expenses. The exclusion from an employee's
income of the value of meals and lodgings provided by an employer
for his own convenience is a tax expenditure, as is the exclusion of
housing allowances and the rental value of parsonages from the
taxable income of ministers. The Revenue Act of 1978 allows an
employer to set up an educational assistance program to provide
educational benefits to his employees from January 1, 1979
through December 31, 1983. The program can pay for tuition, fees,
books and supplies. Amounts received under the program are ex-
202
THE BUDGET FOR FISCAL YEAR 1980
eluded from an employee's gross income. Employer contributions to
prepaid legal services plans and the value of legal services received
under the plans are also excluded from employee income.
A corporation may claim an additional 1% investment tax credit
if an equivalent amount of its common stock is set aside in an
employee stock ownership plan (ESOP). A further one-half of 1%
investment tax credit may be claimed to the extent that additional
employer contributions to an ESOP are matched by employee contributions. Employees are generally prohibited from withdrawing
their share of an ESOP for 7 years.
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 that 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. Corporations may deduct charitable contributions
up to 5% of their income. Tax expenditures resulting from the
deductibility of contributions are shown separately here for contributions to educational and other institutions. Contributions to
health institutions are reported under the health function.
The 50% maximum tax rate on personal service income applies
to earned income and certain pensions, annuities and deferred
compensation. The amount to which the maximum tax applies is
reduced by preference items included in the base of the minimum
tax. Capital gains from transactions after October 31, 1978 are no
longer includible in the minimum tax base, and so do not reduce
income eligible for the maximum tax rate. The Revenue Act of
1978 also removed the 30% limit on income subject to preferential
maximum tax treatment where the income is from a trade or
business in which capital as well as personal service generates
income. The maximum tax will now apply to reasonable compensation for personal services rendered.
A 20% tax credit may be claimed by married couples for child
and dependent care expenses incurred when both spouses work full
time or when one spouse works part time or is a student. The
credit may also be claimed by divorced or separated parents who
have custody of children and by single parents. Expenditures up to
a maximum of $2,000 for one dependent and $4,000 for two or more
dependents are eligible for the 20% credit. The Revenue Act of
1978 allows the credit to be taken for payments to relatives of the
taxpayer even if their services are not qualified for coverage under
the Social Security laws.
The AFDC-WIN job credit allows an employer to take tax credits
on wages paid to individuals employed under the WIN (work incen-
SPECIAL ANALYSIS G
203
tive) program and other recipients of AFDC (aid for families with
dependent children). Under the Revenue Act of 1978, this credit
has been liberalized. An income tax credit of 50% of first-year and
25% of second-year wages up to 100% of tax liability can be claimed
as a credit by the employer if the wages are paid for work performed
in a trade or business. A credit can be claimed for wages paid for
work performed outside a trade or business equal to 35% of an
employee's first year wages up to $6,000, with no more than $12,000
of total wages paid by an employer eligible for the credit. The
employer must reduce his deduction for wages by the amount of the
tax credit.
The Revenue Act of 1978 has replaced the jobs credit of the 1977
Tax Reduction and Simplification Act which was available for
wages earned in calender years 1977 and 1978. The "targeted jobs
credit" of the 1978 act allows tax credits for qualified wages paid to
individuals certified as members of any of seven target groups,
principally disadvantaged youths under 25. A credit of 50% of first
year wages and 25% of second year wages up to $6,000 of each
employees wages (the wage base for unemployment taxes) can be
taken by the employer to offset up to 90% of his tax liability,
provided that the credit may not be taken for first year wages in
excess of 30% of the employer's total unemployment tax wage base.
For a given employee, either this credit or the AFDC-WIN credit
can be taken, but not both. The employer's deduction for wages is
reduced by the amount of the credit.
Health.—Payments by employers for health insurance premiums
and other medical expenses are deducted as business expenses by
employers and excluded from employee income. The exclusion from
employee income gives rise to a tax expenditure.
Medical expenses in excess of 3% of adjusted gross income, including payments 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%
limit.
Expenditures up to $25,000 per year for removing architectural
and transportation barriers to the handicapped and the elderly in
any facility or public transportation vehicle used in a trade or
business that would otherwise be treated as a capital outlay now
may be treated as a current expense. This election will no longer
be available after December 31, 1979.
Contributions to nonprofit health institutions are allowed as a
deduction for individuals and corporations. Contributions to other
charitable institutions are discussed under the education, training,
employment, and social services function.
204
THE BUDGET FOR FISCAL YEAR 1980
Income security.—Most government transfer payments to individuals, such as social security and welfare benefits, are excluded
from taxable income. If the taxpayer had no other source of
income, these payments, even if taxable, would not generally be
large enough to result in tax liability, given personal exemptions
and the standard deduction. Since some recipients have property
income, receive earnings (in some instances for only part of a year),
or file jointly with working spouses, tax expenditures result from
these exclusions.
The exclusion of unemployment benefits from taxation has been
modified by the Revenue Act of 1978. If the sum of a taxpayer's
adjusted gross income, unemployment compensation and excludable disability income is over $20,000 ($25,000 for a joint return),
the lesser of his unemployment benefits or one-half of the amount
over the $20,000 ($25,000) limit is taxable.
Certain payments up to $100 per week financed by an employer
in lieu of wages during periods of employee injury or sickness are
excluded from the taxable income of persons under the age of 65
who are permanently and totally disabled. For these individuals
the exclusion is reduced dollar for dollar by adjusted gross income
plus disability income in excess of $15,000.
Certain contributions to pension plans by employers and
amounts set aside by the self-employed and those not covered by an
employer's plan are excluded from the individual's adjusted gross
income in the year of contribution. Self-employed persons can
make deductible contributions to their own retirement 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 $1,750 if the retirement account is owned jointly by a husband
and wife. The investment income earned by pension funds is not
taxable when earned. Tax expenditures result from the lower effective tax rates after retirement, resulting from the lower incomes
and special tax provisions received by the aged, and from the
excess of aggregate current contributions and investment earnings
over amounts paid out in benefits.
The exclusion from employee income of certain other employer
payments, including payments for premiums of group life insurance and accident and disability insurance, are listed here because
of their relationship to income security. The exclusion of certain
other fringe benefits is listed under the education, training, employment, and social services function.
Life insurance policies other than term policies generally contain
a savings element. Savings in the form of policyholder reserves are
accumulated from premium payments and interest is earned on the
SPECIAL ANALYSIS G
205
reserves. Such interest income is taxable neither as it accrues nor
when received by beneficiaries.
A taxpayer who is 55 years of age or older at the time of the sale
of his principal residence may elect to exclude up to $100,000 of
gain from the sale for sales after July 26, 1978. This is a once in a
lifetime election that replaces the prior exclusion of gain allocated
to the first $35,000 of adjusted sales price for taxpayers 65 years of
age or older.
Additional personal exemptions of $1,000 may be taken by taxpayers who are 65 years of age or older or blind. These additional
exemptions may not be claimed for a taxpayer's dependents.
The retirement credit for the elderly allows individuals who are
65 years of age or older to take a tax credit equal to 15% of earned
and retirement income up to $2,500 for single individuals and
married couples filing a joint return where only one spouse is 65
years of age or older, and up to $3,750 for joint returns where both
spouses are 65 years of age or older. The $2,500/$3,750 base is
reduced by tax exempt retirement income, e.g., Social Security
payments, and by one-half of the taxpayer's adjusted gross income
over $7,500 for single individuals and $10,000 for married couples
filing a joint return.
The aggregate effect of excluding social security and railroad
retirement benefits for retirees, the additional exemption for persons 65 years of age or older, and the credit for the elderly results
in a 1980 tax expenditure of $9.6 billion. This effect is greater than
the sum of the individual estimates because more elderly persons
would be pushed across the threshold of tax liability or into higher
tax brackets if all of these items were simultaneously deleted from
the tax code.
Taxpayers generally may take as an itemized nonbusiness deduction each loss due to fire, theft or other casualty in excess of $100
to the extent not compensated by insurance or other payments.
The earned income credit, first established by the Tax Reduction
Act of 1975, has been modified and made permanent by the Revenue Act of 1978. The credit, which low-income workers with minor
dependents may claim, was increased to 10% of earned income up
to $5,000, with a phaseout at the rate of 12.5% for amounts earned
over $6,000. The maximum credit, which was $400 for calendar
year 1978, will be $500 for tax years beginning January 1, 1979,
and later.
Earned income tax credits in excess of tax liabilities are paid to
individuals. This portion of the credit is included in outlays while
the amount which offsets tax liabilities is included as a tax expenditure. Only the latter appears in table G-l. In 1980 the tax expenditure will be $740 million; the outlay will be $1,545 million. The
estimated tax expenditures for 1978 and 1979 are $285 million and
206
THE BUDGET FOR FISCAL YEAR 1980
$350 million, respectively. The estimated outlays for 1978 and 1979
are $885 million and $840 million, respectively.
Mortgage assistance is provided through State and local housing
authorities for low income, and recently higher income, families.
Interest on State and local debt issued to finance housing is excluded from income subject to tax.
Veterans 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—The Revenue Act of 1978 doubled the
maximum political contribution on which a 50% credit may be
claimed to $100 ($200 for joint returns). The act eliminates the $100
deduction ($200 on joint returns) permitted under prior law.
General purpose fiscal assistance.—Interest on State and local
government debt is excluded from Federal taxation. Both corporations, mainly commercial banks, and individuals receive this taxexempt income. As a result, these governments can 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 securities issued to finance pollution control facilities,
other industrial development bonds and housing bonds is classified
elsewhere. Only the effect of excluding interest on general purpose
obligations and revenue bonds for public purposes such as toll
roads is included in this function. The estimated revenue loss from
all tax-exempt bonds is $7.3 billion for 1980.
The deductibility of nonbusiness State and local taxes gives indirect assistance to these governments. The estimates shown here are
primarily for the deductibility of State and local income and sales
taxes. The deductibility of property taxes on owner-occupied homes
and excise taxes on gasoline are classified elsewhere.
U.S. corporations receiving income from sources in a U.S. possession can, under certain conditions, claim a special tax credit equal
to the U.S. tax, but only on income from such sources.
Interest.—The interest on U.S. savings bonds is not taxable until
the bonds are redeemed, thereby deferring tax liability.
207
SPECIAL ANALYSIS G
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION
(In millions of dollars)
Fiscal Years
Corporations
Description
1978
National defense:
Exclusion of benefits and
allowances to Armed Forces
personnel
Exclusion of military disability
pensions
International affairs:
Exclusion of income earned
abroad by United States citizens
Deferral of income of domestic
international sales corporations
(DISC)
Deferral of income of controlled
foreign corporations
Special rate for Western Hemisphere trade corporations
General science, space, and technology:
Expensing of research and development expenditures
1979
Individuals
1980
1979
1978
1980
1,260
585
530
15
130
530
555
445
25
120
565
1,170
1,470
115
1,000
1,370
1,260
5
1,360
1,550
1,745
2
5
30
35
1,010
1,060
1,160 380
430
505
1,115
1,190
1,265 385
435
485
55
65
715
75
435
15
7
25
1
20
4
5
5
Energy:
Expensing of exploration and development costs
Excess of percentage over cost
depletion
Capital gains treatment of royalties on coal
Residential energy credits
Alternative, conservation and new
technology credits
Natural resources and environment:
Exclusion of interest on state and
local government pollution control bonds
Exclusion of payments in aid of
construction of water, sewage,
gas and electric utilities
Five-year amortization on pollution
control facilities
Tax incentives for preservation of
historic structures
Capital gains treatment of certain
timber income
Capital gains treatment of iron
ore
Agriculture:
Expensing of certain capital outlays
Capital gains treatment of certain
income
See footnote at end of table.
10
10
10
220
390
170
200
220
10
10
60
-40
-25
-10
*
5
5
275
315
355
75
90
100
5
10
10
5
10
10
75
75
75
445
445
430
10
10
10
350
365
385
208
THE BUDGET FOR FISCAL YEAR 1980
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal Years
Corporations
Description
1978
Agriculture—Continued
Deductibility of noncash patronage dividends and certain
other items of cooperatives
Exclusion of certain cost-sharing
payments
Commerce and housing credit:
Dividend exclusion
Exclusion of interest on State and
local industrial development
bonds
Exemption of credit union income.
Excess bad debt reserves of financial institutions
Deductibility of mortgage interest
on owner-occupied homes
Deductibility of property tax on
owner-occupied homes
Deductibility of interest on consumer credit
Expensing of construction period
interest and taxes
Excess first-year depreciation
Depreciation on rental housing in
excess of straightline
Depreciation on buildings (other
than rental housing) in excess
of straight line
Asset depreciation range
Capital gains (other than agriculture, timber, iron ore and
coal)
Deferral of capital gains on home
sales
Capital gains at death
Surtax
exemption
(through
1978)
Reduced rates on the first
$100,000 of corporate income
Investment credit, other than
ESOP's and rehabilitation of
structures
Investment credit for rehabilitation of structures
Transportation:
Deductibility of nonbusiness State
gasoline taxes
Five-year amortization on railroad
rolling stock
Deferral of tax on shipping companies
See footnote at end of table.
Individuals
1979
500
1978
505
540
1979
—175
1980
-170
-175
30
440
755
780
255
305
8,225
9,290
5,920
6,615
2,350
280
100
220
5,495
240
90
450
7,595
215
80
450
2,585
2,945
855
500
45
525
50
555
50
140
130
90
135
145
135
75
70
65
300
290
285
145
2,130
135
2,460
135
2,880
130
110
120
130
120
150
525
555
625
7,125
7,520
10,150
955
8,120
1,125
9,015
1,010
10,005
2,250
2,665
3,090
10
60
5,225
3,070
135
3,270
10,870
6,940
13,405
15,370
55
120
920
-40
-40
-40
80
75
70
350
209
SPECIAL ANALYSIS G
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal Years
Corporations
Description
1978
Community and regional development:
Five-year amortization for housing
rehabilitation
Education, training, employment,
and social services:
Exclusion of scholarship and fellowship income
Parental personal exemption for
students age 19 or over
Exclusion of employee meals and
lodging (other than military)...
Employer educational assistance...
Exclusion of contributions to prepaid legal services plans
Investment credit for ESOP's
Deductibility of charitable contributions (education)
Deductibility of charitable contributions, other than education
and health
Maximum tax on personal service
income
Credit for child and dependent
care expenses
Credit for employment of AFDC
recipients and public assistance recipients under work incentive programs
General jobs credit
Targeted jobs credit
Health:
Exclusion of employer contributions for medical insurance
premiums and medical care
Deductibility of medical expensesExpensing of removal of architectural and transportation barriers to the handicapped
Deductibility of charitable contributions (health)
Income security:
Exclusion of social security benefits:
Disability insurance benefits
OASI benefits for retired workers
Benefits for dependents and
survivors
Exclusion of railroad retirement
system benefits
See footnote at end of table.
280-700 O - 79 - 14
1979
Individuals
1980
1
0
1978
1979
10
10
10
255
355
365
780
935
1,020
300
325
20
350
30
10
315
385
450
275
320
355
655
345
395
440
4,905
15
710
20
795
5,965
1,090
550
55
1,035
125
10
195
705
*
985
5
860
15
40
135
8,255
2,890
9,595
3,120
90
8
1,065
1,195
55
1
65
1
75
3
4,635
5,455
6,430
70
3
85
2
90
4
25
7
25
7
35
0
1,625
10
170
120
215
345
610
7,105
2,785
15
1,475
5,320
1,335
20
2
210
THE BUDGET FOR FISCAL YEAR 1980
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal Years
Description
Corporations
1978
Income security—Continued
Exclusion of workmen's compensation benefits
Exclusion of special benefits for
disabled coal miners
Exclusion of untaxed unemploys
ment insurance benefits
Exclusion of public assistance
benefits
Exclusion of disability pay
Net exclusion of pension contributions and earnings:
Employer plans
Plans for self-employed and
others
Exclusion of other employee benefits:
Premiums on group term life
insurance
Premiums on accident and disability insurance
Income of trusts to finance
supplementary
unemployment benefits
Exclusion of interest on life insurance savings
Exclusion of capital gains on
home sales for persons age 65
and over
Exclusion of capital gains on
home sales for persons age 55
and over
Additional exemption for the blind
Additional exemption for elderly
Tax credit for the elderly
Deductibility of casualty losses
Earned income credit
Exclusion of interest on State and
local housing bonds
Veterans benefits and services:
Exclusion of veterans disability
compensation
Exclusion of veterans pensions
Exclusion of Gl bill benefits
General government:
Credits and deductions for political contributions
General purpose fiscal assistance:
Exclusion of interest on general
purpose state and local debt....
See footnote at end of table.
1979
Individuals
1980
1978
1979
1980
835
1,035
1,285
50
50
50
2,090
1,780
1,935
355
140
395
150
9,940
11,335
12,925
1,650
1,920
2,205
840
875
915
75
75
80
10
10
10
2,475
2,720
350
130
2,220
110
25
1,350
170
410
285
2,925
3,245
680
3,515
535
35
1,855
160
475
740
60
90
140
905
45
195
1,005
55
170
80
450
225
30
1,670
160
435
350
800
40
225
280
75
80
100
1,865
2,120
2,365
SPECIAL ANALYSIS G
211
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal Years
Description
Corporations
1978
General purpose fiscal
assistance—Continued
Deductibility of nonbusiness state
and local taxes (other than on
owner-occupied homes and
gasoline)
Tax credit for corporations receiving income from doing business in United States possessions
Interest:
Deferral of interest on savings
bonds
1979
Individuals
1980
1978
9,950
685
685
1979
10,935
1980
12,450
730
620
615
625
Memorandum
Combined effect of provisions
disaggregated above:
Capital gains
Exclusion of interest on state and
local debt
Deductibility of state and local
nonbusiness taxes
Deductibility of charitable contributions
825
790
1,010
4,135
4,695
910
1,015
18,490
22,270
2,680
3,045
15,065
3,590
900
16,795
15,915
17,655
6,540
7,095
7,955
2,315
* Asterisk denoted items indicate tax expenditures below $2.5 million. All tax expenditure estimates have been rounded off to the nearest $5 million.
SPECIAL ANALYSIS H
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS *
State and local governments play a vital role in meeting the
nation's needs. The Federal government contributes directly to that
role by providing grants-in-aid and loans to State and local governments, and it contributes indirectly through policies designed to
improve economic conditions. Federal efforts to promote steady
economic growth assist States and localities in financing programs
from their own tax sources, and efforts to control inflation help
hold down costs.
Federal grant-in-aid outlays to State and local governments are
estimated to be $82.9 billion in 1980, slightly above the estimated
1979 total of $82.1 billion, and higher than the 1978 total of $77.9
billion. During the 20 years from 1958 to 1978, grants grew at an
average annual rate of 14.6%. The relatively slow growth in grants
planned from 1978 to 1980 is a direct result of four major factors:
—a phasedown from $9.2 billion in 1978 to $2.9 billion in 1980 of
outlays associated with temporary economic stimulus grants in
recognition of the improvement in current economic conditions;
—the need for overall budget restraint as part of a major effort
to hold down inflation;
—increased efforts to hold down health costs through hospital
cost containment and antifraud and abuse proposals; and
—a recognition that, relative to State and local governments as a
group, fiscal pressures on the Federal budget have become
more acute due to the change in the population age mix.
In addition to grants-in-aid, Federal lending to State and local
governments and loan guarantees are also significant. In 1980 the
Federal Government is expected to disburse $1.1 billion for new
loans to State and local governments. Loan outlays net of repayments and sales are expected to be $67 million. New guaranteed
loans are estimated to be $15.8 billion in 1980.
The chart shows trends in major grant categories since 1970.
Grants for highways remained fairly level through 1975, but are
estimated to increase by more than 50% from 1975 to 1980. Grants
for human resources account for 63% of the increase from 19701
Federal aid to State and local governments is defined 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" in this analysis is confined only to grants-in-aid, (including
shared revenues).
212
SPECIAL ANALYSIS H
213
1980. Human resources include the education, training, employment, and social services; health; income security and veterans
functions. General revenue sharing has added more than $6 billion
in grants per year since 1972. The phasedown of antirecession
programs designed to provide a temporary economic stimulus results in a substantial slowdown in overall growth between 1978 and
1980, although the increase in grants other than for economic
stimulus programs continues to be strong over this period.
Federal Grants to State and Local Governments
$ Billion,
iiiir
HIGHLIGHTS OF THE FEDERAL AID PROGRAM
Grant programs.—When this Administration took office there
was a need for economic stimulus to reduce unemployment and
promote economic recovery. The economic stimulus programs proposed at that time were primarily grant programs, and grant outlays increased 14% in just one year, from 1977 to 1978. These
stimulus programs were designed to be temporary, and their phasedown in 1980 reflects the substantially different economic conditions today from those prevailing when they were initiated. Table
H-l shows that, excluding stimulus programs, grant outlays increase each year from $63.8 billion in 1977 to an estimated $80.0
billion in 1980, an average annual rate of growth of 7.9%.
214
THE BUDGET FOR FISCAL YEAR 1980
Table H - l . FEDERAL GRANTS, EXCLUDING STIMULUS
(Outlays in billions of dollars)
Actual
1977
Estimate
1978
1979
1980
68.4
77.9
82.1
82.9
Less stimulus grants:
Local public works
Temporary employment assistance
Antirecession fiscal assistance
0.6
2.3
1.7
3.1
4.8
1.3
2.1
3.2
*
.3
2.6
.0
Subtotal, stimulus grants
4.6
9.2
5.2
2.9
63.8
68.7
76.9
80.0
Total grants
Total, excluding stimulus
* $50 million or less.
Table H-2 shows outlay changes from 1978-1980 divided into
three major categories: those that finance major State or local
income transfers to persons, those that provide temporary economic stimulus, and all other grants. Grants that are subsequently paid
to individuals—mainly the public assistance, medicaid, housing assistance, and child nutrition programs—are estimated to increase
$2.0 billion in 1979 and $1.3 billion in 1980. This increase covers
changes caused primarily by inflation and population coverage;
consistent with the President's emphasis on providing assistance to
the neediest, it does not reflect any major effort to impose budget
stringency beyond tightened fraud prevention and hospital cost
containment. Grants for temporary economic stimulus programs
are estimated to decline by $3.9 billion in 1979 and $2.3 billion in
1980, while all other grants are expected to increase by $6.1 billion
in 1979 and $1.9 billion in 1980.
SPECIAL ANALYSIS H
215
Table H-2. FEDERAL GRANT-IN-AID CHANGES, 1978-80
(In billions of dollars)
Total grants, 1978 actual
Changes
Payments for individuals:
Medicaid
Housing programs
Other
Subtotal
Economic stimulus grants:
Local public works
Temporary employment assistance
Anti-recession fiscal assistance
Subtotal
Other:
Highways
Community development block grants
Office of Education
Social services—retroactive claims
Employment and training assistance
Other
Subtotal
Outlays
77.9
1.1
.4
.5
2.0
-1.0
-1.6
-1.3
-3.9
.8
.4
.7
.5
2.0
1.6
6.1
Total grants, 1979 estimate
Changes
Payments for individuals:
Medicaid
Housing programs
Other
82.1
Subtotal
1.3
Economic stimulus grants.Local public works
Temporary employment assistance
Anti-recession fiscal assistance
Subtotal
Other:
Sewage treatment plant construction
Community development block grants
Office of Education
Social services—retroactive claims
Other
Subtotal
Total grants, 1980 estimate
.6
.5
.1
—1.7
-.6
—*
-2.3
.5
.4
.5
- .5
1.0
1.9
82.9
* $50 million or less.
The degree of restraint in the 1980 Budget varies significantly
over the range of grant programs. The administration is committed
to a level and mix of grants sufficient to:
216
THE BUDGET FOR FISCAL YEAR 1980
—meet the essential human needs of the poorest elements of the
population, through programs such as the special supplemental
food program for women, infants and children;
—sustain sufficient investment in State and locally owned and
operated public works to meet national needs, especially for
environmental improvement, community development, and
transportation systems; and
—continue emphasis on human investment through grants for
education, training, and social services, concentrating on those
most in need.
Energy grants provide weatherization assistance to low income
individuals and to public and nonprofit schools and hospitals. The
budget proposes $200 million in budget authority for 1980 for
weatherization assistance to low income people, but proposes to
phasedown the budget authority for assistance to schools and hospitals. Outlays for the latter program, however, are expected to
increase from $60 million in 1979 to $139 million in 1980, since
funds appropriated in prior years are still available.
The administration will submit legislation proposing $110 million
in budget authority for a new State energy management and planning program to replace three existing categorical programs.
Outlays for the Environmental Protection Agency's program for
construction of sewage treatment plants are expected to increase
from an estimated $3.1 billion in 1979 to $3.6 billion in 1980. The
budget requests budget authority of $3.8 billion for the program in
1980, which, together with funds available from prior years, is
estimated to make more than $8.3 billion available to the States for
obligation in 1980. This program provides grants to both State and
local governments for 75% of the cost of planning, designing, and
constructing sewage treatment plants. Under the Federal Water
Pollution Control Act, as amended, more than $27 billion has been
provided to continue this program. With more than 11,000 projects
currently underway, the administration is encouraging the States
to assume responsibility for program management and implementation.
Grants to support the control of hazardous wastes, such as industrial chemicals, and to control air and water pollution are proposed
to increase substantially in 1980. Outlays for these three programs
are estimated to be $143 million in 1980, an increase of $29 million
more than the 1979 estimate.
Legislation proposed by the administration and recently enacted
by Congress will result in several important changes in existing
ground transportation grants. States and localities now have substantially more flexibility in the types of highway and transit
projects that can be supported with Federal aid. In addition, in
order to encourage completion of the Interstate System, States are
SPECIAL ANALYSIS H
217
now required to complete all environmental impact statements by
no later than 1983 and begin construction by 1986.
Outlays for highways are estimated to be $7.2 billion in 1980, an
increase of $0.2 billion over 1979. All of these funds go directly to
State governments, and approximately half are used to continue
construction on incomplete elements of the interstate highway
system.
Grant outlays for urban mass transportation are estimated to be
$2.4 billion in 1980, 9% more than the 1979 estimate. More than
75% of the grant funds go to the 25 metropolitan areas with a
population of one million or more, a number of which have or are
building rapid transit systems. The remaining outlays are primarily for bus systems in smaller communities.
The community development block grant funds will continue to
provide assistance directly to local governments. Recipients have
considerable freedom in selecting projects for this program, so long
as they are within the general guidelines of community development. The enacted legislation provides that entitlements may be
calculated using the original formula (population, poverty, and
overcrowded housing) or an alternative formula (poverty, loss of
population, age of housing). Outlays for the program for 1980 are
estimated to be $3.3 billion, an increase of $0.4 billion over 1979.
The recently enacted urban development action grant program
provides one-time grants to severely distressed cities and urban
counties to supplement local government and private sector financing for major revitalization projects. Budget authority proposed for
1980 for this program is $0.4 billion, the same as for 1979.
The National Development Bank is the major initiative in the
area of community and regional economic development. Like the
economic development programs in other agencies, the National
Development Bank is concerned with the use of Federal assistance
to increase private sector employment in rural and urban areas
experiencing diminished growth and structural unemployment. To
do this the Bank will offer aid to firms in declining areas with a
variety of new financing incentives to induce them to remain,
expand or locate in those areas. These incentives include new
capital grants, loan guarantees, direct interest subsidies on loans
and taxable development bonds, and a liquidity facility to provide
secondary market reinforcement to primary lenders.
Proposed budget authority for the Bank is $3.5 billion in 1980,
$550 million of which is for grants.
The local public works program was expanded as part of the
administration's economic stimulus program and was designed to
provide temporary assistance to local governments for construction
projects. Consistent with the administration's economic policy, out-
218
THE BUDGET FOR FISCAL YEAR 1980
lays are expected to decrease from $2.1 billion in 1979 to $0.3
billion in 1980.
Outlays for elementary, secondary, and vocational education are
estimated to be $6.6 billion in 1980, $0.6 billion more than in 1979.
The largest part of that amount will go to State and local education agencies for supplementary education services to low-income,
low-achieving students.
The budget includes a $258 million supplemental appropriation
in 1979 and a $400 million appropriation in 1980 for a new program of grants to local education agencies to provide supplementary services in areas with especially high concentrations of lowincome students. The budget also includes a substantial reduction
in the impact aid program which compensates school districts for
the burdens imposed by federally related activities. Much of the aid
now goes to school districts where the Federal activity does not
place a special burden on the local community. The budget provides for limiting impact aid to those districts where Federal activity clearly imposes a burden because of reduced tax revenue.
Funding for training and employment has grown steadily over
the years, with large temporary increases in 1977 and 1978 as part
of the President's economic stimulus effort. Continued economic
improvement, particularly the growth in total employment from
88.4 million at the end of calendar year 1976 to an estimated 95.9
million at the end of calendar year 1978, has permitted some
proposed reductions in the countercyclical public service employment program that was increased in 1977 to stimulate the economy. For 1980, the relative funding of training and employment
programs has been changed to direct available resources to the
economically disadvantaged and the long-term unemployed. In addition, greater emphasis will be placed on improvements in management and the increased control of fraud and abuse.
Outlays for employment and training assistance grant programs,
which are primarily to meet the needs of the most disadvantaged,
are estimated to be $6.3 billion in 1980, about the same as the 1979
estimate. Outlays for the temporary employment assistance program, which was designed as a temporary stimulus program, are
estimated to be $2.6 billion in 1980, $0.6 billion below the 1979
estimate.
Grants for regular social services are designed to assist the disadvantaged and disabled to be self-sufficient. Outlays for 1980 are
estimated to be $3.0 billion, about the same as the regular 1979
estimate. In addition to the regular program, the 1979 estimates
include a one time payment of $0.5 billion in retroactive claims for
1972. These claims were brought by the States for obligations incurred under former regulations and not reimbursed by the Federal government.
SPECIAL ANALYSIS H
219
The medicaid program continues to be a large grant-in-aid with
estimated outlays of $12.4 billion in 1980. This program supports
State efforts to provide health services to low-income residents. The
budget proposes an expanded child health assessment program
(CHAP) to provide early and periodic screening, diagnosis, and
treatment to an additional two million low-income children and
youth under the age of 18 currently not eligible for medicaid.
Eligibility will also be expanded for low-income pregnant women
and migrants.
Hospital cost containment legislation and increased efforts to
limit waste, fraud and abuse will provide Federal, State and local
savings in the medicaid program. Federal savings are estimated at
$1.2 billion in medicaid in 1980. State and local 1980 medicaid
savings are estimated at $184 million as a result of hospital costcontainment and $800 million as a result of other savings initiatives. Other health grant initiatives in the 1980 budget include
$100 million in budget authority for a formula grant for mental
health, alcohol and drug abuse activities, $18 million for a formula
grant for disease prevention, and $38 million for cooperative agreements with States for the development of comprehensive mental
health programs.
Outlays for assistance payments (aid to families with dependent
children) are expected to be $6.7 billion in 1980, about the same as
the 1979 estimate.
Budget authority for the special supplemental food program for
women, infants, and children (WIC) is proposed to increase $202
million to $768 million in 1980. This represents a $521 million
increase in budget authority since 1978. Recent studies suggest the
program leads to significant reductions in infant mortality and in
the incidence of low birth-weight babies, both of which afflict poor
families disproportionately, who are the program's beneficiaries.
Outlays for the public housing and State agency components of
the Department of Housing and Urban Devlopment's assisted housing programs are estimated to increase 21%, from $2.2 billion in
1979 to $2.7 billion in 1980. These increases reflect the additional
number of low-income families receiving housing services from
public housing and State agency housing projects and the increased
costs of providing those services.
The administration proposes to continue law enforcement assistance directly to States, counties, and cities and to encourage government and non-profit organizations to carry out programs that
have proved to be effective in improving the criminal justice
system. Outlays for this program are estimated to be $470 million
in 1980, a $75 million decrease from 1979.
General revenue sharing was first enacted in 1972 as an annual
$6 billion grant that gave virtually unlimited discretion for its use
220
THE BUDGET FOR FISCAL YEAR 1980
to State and local governments. It has been reauthorized through
fiscal year 1980. The enacted legislation will continue the program
with outlays estimated at $6.9 billion in 1980. One-third of these
funds goes to State governments and two-thirds to local governments. No decisions have been made concerning the extension of
the program beyond 1980.
A highly targeted fiscal assistance program is proposed to provide
aid to local governments continuing to experience high unemployment and fiscal strain. It will provide transitional aid for 2 years
for those governments most likely to be adversely affected by the
loss of antirecession fiscal assistance. Outlays are estimated to be
$250 million in 1979, declining to $150 million for 1980.
A standby antirecession fiscal assistance program to aid jurisdictions in the event of a decline in economic activity is also proposed.
Under current economic assumptions no outlays are expected to
occur in 1980.
Additional information on many of these grant programs is in
Part 5 of the Budget, which describes all major Federal programs.
Loans.—Another form of Federal aid to State and local governments is assistance in obtaining credit, either directly or through
loan guarantees. Direct loan disbursements (excluding repayments)
are expected to be $1.1 billion in 1980 and $15.8 billion of new
loans are expected to be guaranteed in 1980.
One of the large guarantee loan programs was proposed by the
administration and enacted by Congress to assist New York City.
The legislation allows for the guarantee of principal and interest
for $1.65 billion through 1982 for loans not to exceed a period of 15
years.
Tax Expenditures.—Federal aid is also provided through tax expenditures. (More information on tax expenditures is provided in
Special Analysis G.) The two major tax expenditures are the deductibility of many State and local taxes arid the exclusion of
interest on State and local securities from Federal taxation.
Individuals can claim certain State and local sales, income and
personal property tax payments as itemized deductions on their
Federal tax returns. This permits States and localities to raise a
dollar of revenue with less than a dollar of net cost to their
citizens. The 1980 tax expenditure for property taxes on owneroccupied homes is estimated to be $6.6 billion and the tax expenditure for other nonbusiness State and local taxes—primarily income
and sales taxes—is estimated to be $12.4 billion. The Revenue Act
of 1978 eliminated the individual income tax deduction for gasoline. In 1978 the tax expenditure from this provision was $920
million.
SPECIAL ANALYSIS H
221
Interest on virtually all State and local government securities is
tax exempt. This permits State and local jurisdictions to borrow at
reduced interest rates. The tax expenditure for the exclusion of
interest on State and local general purpose debt is estimated to be
$5.9 billion in 1980.
State and local governments also benefit from the exclusion of
interest on their securities from income subject to tax. State and
local government bonds finance industrial and transportation projects, pollution control facilities and public and, more recently,
selected private housing. Tax expenditures in 1980 are estimated to
be $585 million for industrial facilities, $460 million for pollution
control facilities and $820 million for State and local housing
bonds.
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 by function. Consequently, the
functional classification of the budget has become important not
only for analysis but also for control. Part 5 of the budget discusses
the entire Federal budget by function, and the associated national
needs met by these programs.
Over the past year, the President has initiated a 3-year budget
planning and tracking system, so as to provide an improved means
of understanding the longer term effects of current programs and
proposals. As a result, the discussions and data in many parts of
the budget include the 1980-82 planning period. Consistent with
that approach, this Special Analysis shows for the first time estimates through 1982 in many of the tables and the chart on a
previous page.
Table H-3 shows a functional distribution of Federal grant-in-aid
outlays. Major trends in 1980 include increases in natural resources and environment and transportation, and a decline in functions containing the temporary economic stimulus programs. The
total, excluding stimulus grants, shows strong continued growth
throughout the planning period. The increases beyond 1980 are
primarily for payments to individuals, transportation, education,
and community and regional development.
222
THE BUDGET FOR FISCAL YEAR 1980
Table H-3. FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
(In millions of dOi.ars)
Estimate
Actual
Function
1978
1979
1980
1981 >
1982 *
National defense
Energy
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation
Community and regional development
Education, training, employment, and social
services
Health
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
60
180
3,898
426
13
8,837
7,078
55
393
3,970
436
30
9,945
6,452
50
573
4,559
405
45
10,324
5,416
51
733
5,016
460
61
11,270
6,054
52
771
5,463
470
63
12,078
6,320
20,557
12,725
13,782
76
572
164
9,523
22,676
13,839
14,687
87
565
176
8,818
22,320
14,532
15,321
87
487
149
8,669
22,913
15,828
16,376
92
462
161
8,532
22,996
17,139
17,319
72
418
166
8,569
Total outlays
Less stimulus grants
77,889
9,155
82,129
5,234
82,937
2,890
88,008
1,957
91,896
2,016
68,734
76,895
80,047
86,051
Total outlays, excluding stimulus
grants
89,880
1
Data for 1981 and 1982 are included here to be consistent with the new multi-year planning and tracking system. They have not received as much
review as the estimates for 1979 and 1980.
The functional composition of the grant program has changed
significantly over the years, as shown in Table H-4. The most
dramatic growth has occurred in the health function, which has
increased from 4% of Federal aid in 1958 to an estimated 18% in
1980. This reflects primarily increased spending for medicaid.
Other changes are the addition of general revenue sharing, increases in outlays for environmental protection, and the relative
decline in grants for highways and income security. The latter is
primarily due to the assumption by the Federal government of the
public assistance programs for the aged, blind, and disabled. The
trends are similar through 1982.
SPECIAL A N A L Y S I S
223
H
Table H-4. PERCENTAGE FUNCTION DISTRIBUTION OF FEDERAL GRANT-IN-AID OUTLAYS
Actual
1958
Energy
Natural resources and environment...
Agriculture
Transportation
Community and regional development
Education, training, employment, and
social services
Health
Income security
General purpose fiscal assistance
Other
Total
5
32
1963
*
1
5
36
1
Estimate
1968
1973
1978
*
2
*
2
*
3
3
23
3
1979
*
5
1
13
7
8
7
4
46
2
1
8
5
38
2
1
25
15
23
2
1
21
14
21
17
2
100
100
100
100
*
5
1
1
11
1980
12
9
8
1981 >
1982»
1
6
*
12
7
1
6
1
13
7
1
6
1
13
7
26
18
19
10
1
25
19
19
9
1
26
16
18
12
1
28
17
18
10
1
27
18
18
10
1
100
100
100
100 100
*0.5% or less.
1
Data for 1981 and 1982 are included here to be consistent with the new multi-year planning and tracking system. They have not received as much
review as the estimates for 1979 and 1980.
Table H-5 shows grant outlays by agency. The Department of
Health, Education, and Welfare will provide 40% of total estimated
grant-in-aid outlays in 1980, far more than any other agency. The
declines for the Departments of Commerce, Labor, and Treasury
are the result primarily of the phasing down of the temporary
economic stimulus programs.
Table H-5. FEDERAL GRANT-IN-AID OUTLAYS BY AGENCY
[In millions of dollars]
Estimate
Actual
1978
Department of Agriculture
Department of Commerce
Department of Energy
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
Environmental Protection Agency
Community Services Administration
Other
Total outlays
—
1980
1979
4,565
3,496
100
29,558
5,383
880
563
10,651
8,687
8,577
3,390
730
1,310
5,147
2,489
293
31,768
6,196
1,035
553
11,257
9,818
8,388
3,332
632
1,221
5,112
902
448
33,280
7,232
1,128
470
10,777
10,240
7,559
3,853
485
1,450
77,889
82,129
82,937
224
THE BUDGET FOR FISCAL YEAR 1980
Distribution of grants by region.—Table H-6 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 the lowest
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 45% above the national average in
1968, now has grants only 8% over the average, while Region V
has risen from 24% below the average to only 12% below. Grants
to Region II have experienced the most rapid growth during the
period.
Table H-6. DISTRIBUTION OF GRANTS BY REGION, SELECTED FISCAL YEARS
Per capita
1978 *
Total
grants
Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island
New York, New Jersey, Puerto Rico, Virgin Islands
Virginia, Pennsylvania, Delaware, Maryland, West Virginia, District of Columbia
Kentucky, Tennessee, North Carolina, South Carolina,
Georgia, Alabama, Mississippi, Florida
Illinois, Indiana, Michigan, Ohio, Wisconsin, Minnesota.
Arkansas, Louisiana, Oklahoma, New Mexico, Texas
Iowa, Kansas, Missouri, Nebraska
Colorado, Montana, North Dakota, South Dakota,
Utah, Wyoming
Arizona, California, Nevada, Hawaii, other territories....
Idaho, Oregon, Washington, Alaska
United States
1
1968
1978
$5.1
12.5
$94
90
$415
439
341
388
8.8
88
366
316
11.7
14.0
7.1
3.2
91
70
103
82
324
310
304
273
256
343
195
233
2.5
9.8
3.2
133
113
113
378
371
422
184
228
273
77.9
92
351
282
These are not the same regions as those used for national income account computations.
Preliminary estimate, in billions of dollars.
See "Federal Aid to States," Department of the Treasury, for additional information concerning State distribution of Federal grants.
2
Percent
increase,
1968-78
225
SPECIAL ANALYSIS H
HISTORICAL PERSPECTIVES
Although grants from the National Government predate the Constitution, they were very small until the end of the 19th century
and did not become a significant factor in Government expenditure
until after World War II. In 1950 Federal grants to State and local
governments were $2 billion, and by 1965 they had risen to $11
billion. In 1978 they were $77.9 billion, an average annual increase
of 16% since 1965. This is more than the average annual growth of
11% for total Federal outlays over the same period. In 1980 Federal grants are expected to be 16% of total Federal outlays and 21%
of domestic Federal outlays.
Table H-7 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 through 1978. The increase in grants as a percent of
total Federal outlays in that year is due primarily to the Administration's temporary economic stimulus programs enacted in 1977.
Table H-7. HISTORICAL TREND OF FEDERAL GRANT-IN-AID OUTLAYS
(Fiscal years; dollar amounts in millions)
Composition of Grants-in-Aid
Total
grants
Grants for
payments to
individuals'
Federal grants as a percent of
Federal outlays
Other
Total
Domestic 2
State
and local
expenditures 3
Five-year intervals:
1950
1955
1960
1965
Annually:
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
estimate
estimate
estimate4..
estimate4..
1
$2,253
3,207
7,020
10,904
$1,421
1,770
2,735
3,954
$832
1,437
4,285
6,950
24,018
28,109
34,372
41,832
43,354
49,832
59,094
68,415
77,889
82,129
82,937
88,008
91,896
8,867
10,789
13,421
13,104
14,077
16,217
19,578
23,041
24,765
26,803
28,077
30,425
32,722
15,151
17,320
20,951
28,728
29,278
33,615
39,516
45,373
53,124
55,326
54,860
57,583
59,174
5.3%
4.7
7.7
9.2
12.2
13.3
14.8
16.9
16.1
15.3
16.1
17.0
17.3
16.6
15.6
15.2
14.9
8.8%
12.1
15.9
16.5
10.4%
10.1
14.7
15.3
21.1
21.3
22.8
24.8
23.3
21.3
21.7
22.7
22.9
22.1
20.9
20.4
20.1
19.4
19.9
22.0
24.3
22.8
22.9
24.5
26.4
26.7
25.4
23.6
N
A
N
A
For an identification of accounts in this category, see Table H - l l and footnotes.
Excludes outlays for the national defense and international affairs functions.
As defined in the national income and product accounts.
4
Data for 1981 and 1982 are included here to be consistent with the new multi-year planning and tracking system. They have not received as much
review as the estimates for 1979 and 1980.
NA Not available.
2
3
280-700 O - 79 - 15
226
THE BUDGET FOR FISCAL YEAR 1980
Approximately one-third of estimated 1980 grants are to States
and localities for payments to individuals. Among the larger of
these programs are medicaid, assistance payments, housing payments, and nutrition programs for children and the elderly. The
public assistance program for the blind, disabled, and aged—now
known as supplemental security income—became a direct Federal
program in January 1974. Almost all of the outlays for this program are therefore included as grants through 1973 but not since
then.
Table H-7 also shows grants-in-aid as a percent of State and
local expenditures. This percent has increased from 15% in 1965 to
27% in 1978, and is estimated to continue to finance almost onefourth of total State and local expenditures through 1980.
The charts show the growth of total governmental expenditures
since 1955, and these expenditures as a percent of gross national
product. Federal expenditures including grants have increased as a
percent of GNP from 18% in 1955 to 22% in 1978, while State and
local expenditures including grants have increased from 8% in
1955 to 13% in 1978.
Government Expenditures as a Percent of GNP
j&:£:£:£:2x2: Federal Grants to :
•:•:•:•:•:•:•:•:•:•:•:•:::•:::•:::•: States and Localities :
:;:;:::j:;:;:::;: Other Federal Ex,
— 10
$970
1975
19?$
227
SPECIAL ANALYSIS H
Government Expenditures
$ Billions
Federal, Stale «**<J Local Governments
$8,ff IO ns
700
700
-600
600 —
-500
-400
Federal Grants to
States and Localitie
-300
-200
Other Federal *gg$8&
Expenditures :|:&3j
1970
1975
-too
1978
OTHER SOURCES OF FEDERAL AID INFORMATION
The grant-in-aid series in the budget provides 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 and product accounts (NIA) series (published in
Special Analysis B of this document and in the Survey of Current
Business) are parts of a broader statistical concept encompassing
the entire economy, and as a consequence grants-in-aid are defined
somewhat differently than in 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 manpower
training programs and nonprofit hospitals) that operate under
State auspices or within a State plan.
One major group of payments excluded in the budget definition
of grants but included in the Census and NIA series is payments
228
THE BUDGET FOR FISCAL YEAR 1980
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 grants
to subsidize the operation of public enterprises, mainly housing and
transportation facilities. These are counted as subsidies by the
Federal Government rather than as grants. Table H-8 shows other
minor differences among the three series, but the differences are
largely offsetting and, thus, these three series reflect similar patterns.
Table H-8. THREE MEASURES OF FEDERAL GRANTS-IN-AID TO STATE AND LOCAL
GOVERNMENTS, 1973-77
(In billions of dollars)
1973
Budget (Special Analysis H)
Less principal exclusions:
Agricultural commodities
Geographical exclusions
Plus payments for research
All other (net)
Federal payments (Census)
Less low-rent public housing
Allother (net)
Grants-in-aid (national income and product accounts)
1
1974
1975
1976
1977
42.8
43.3
49.7
59.0
68.4
-0.5
-0.6
1.2
-0.2
41.7
-1.0
-0.3
-0.6
-0.7
1.3
-0.4
42.9
-1.1
-0.2
-0.5
-0.9
1.5
-0.2
49.6
-1.3
-0.5
-1.0
1.8
-0.9
"MA
-1.6
0.7
-0.6
-1.2
1.8
-0.6
1
67.8
-1.8
0.2
40.4
41.6
48.3
57.5
66.2
Excludes $10.6 billion in 1976 and $5.2 billion in 1977 for unemployment compensation that the census series included.
In addition to these data sources, Federal Aid to States, published by the Department of the Treasury, lists grant outlays for
the most recently completed year by State for more than 90 programs, using the budget definition of grants. The Catalog of Federal Domestic Assistance, prepared by the Office of Management and
Budget and available from the Government Printing Office, contains a detailed listing of grant-in-aid and other assistance programs, and information on eligibility criteria, application procedures, estimated obligations, and related 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 has current information on agencies
that are accepting applications for specific programs. This source
SPECIAL ANALYSIS H
229
also provides information on eligibility criteria and application
procedures.
Geographic Distribution of Federal Funds (formerly entitled Federal Outlays), compiled by the Community Services Administration
and available from the Government Printing Office, 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 of Federal Domestic Assistance.
GRANTS ADMINISTRATION
The rapid growth of the grant system in the late 1960's and early
1970's was accompanied by increasingly complex administrative
requirements. 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 grant 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 H-9 shows the increasing importance of general-purpose
and broad-based grants since 1972. General-purpose grants allow
almost complete discretion for their use at the State and local
level; broad-based grants give State and local governments considerable discretion within a broadly defined program area, such as
health or community development. In 1972 there were virtually no
general-purpose or broad-based grants. Since that time these programs have grown to be approximately one-fourth of total grantsin-aid.
230
THE BUDGET FOR FISCAL YEAR 1980
Table H-9. OUTLAYS FOR GENERAL-PURPOSE, BROAD-BASED, AND OTHER GRANTS
(Dollar amounts in millions)
Actual
1972
Estimate
1975
1976
1977
1978~~
1979
$6,130
$6,243
$6,758
$6,823
$6,852
$6,863
907
2,748
2,780
2,066
1,932
7,008
7,150
9,506
9,603
8,918
8,795
1,930
281
602
38
82
1,333
2,047
577
577
983
128
1,698
2,251
519
558
2,089
65
1,756
2,534
580
719
577
2,464
88
1,992
2,809
346
706
3,057
2,875
3,272
90
45
1,875 1,948
3,508
3,020
286
223
735
535
2,051 319
2,903
4,654
6,137
8,359
11,462
11,420
9,632
Other grants
30,953
38,170
45,807
50,550
56,824
61,791
64,780
Total
34,372
49,832
59,094
68,415
77,889
82,129
82,937
General-purpose grants:
General revenue sharing
Other general purpose fiscal assistance
andTVA 1
Subtotal, general purpose grants
Broad-based grants:
Community development block grants
Comprehensive health grants
Employment and training 2
Social services
Criminal justice assistance
School aid in federally affected areas...
Local public works
Subtotal, broad based grants...
516
516
90
878
1980
ADDENDUM: PERCENT OF TOTAL
General purpose grants
Broad based grants
Other grants
Total
1.5% 14.1% 12.1% 13.9% 12.3% 10.9%
8.4% 9.3% 10.4% 12.2% 14.7% 13.9%
90.1% 76.6% 77.5% 73.9% 73.0% 75.2%
10.6%
11.3%
78.1%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
1
For detail, see grants in the general purpose fiscal assistance function, Table, H—11. Amounts in Table H-7 above include shared revenues from the
Tennessee Valley Authority, shown in the energy function.
2
Comprehensive Employment and Training Act (CETA), Titles I and II A, B, and C. An additional $6,934 billion of CETA grant-in-aid outlays are
estimated for 1980, but there are some restrictions on client eligibility for these programs (e.g., income level and employment status) and therefore
they are included in other aid, not broad-based aid.
3
Includes $543 million in 1979 only for retroactive social services claims, appearing in the Department of the Treasury.
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 as a whole 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 1978. The decrease in
matching requirements for general-purpose and broad-based aid
has been offset by the significant growth in programs such as
medicaid that require more than average matching aid.
Although outlays for specific-purpose grants constitute a smaller
portion of the total than in the early 1970's, there continue to be
hundreds of categorical grants with different matching requirements, timing difficulties, application procedures, duplication of
programs, and other administrative problems.
SPECIAL ANALYSIS H
231
The numerous efforts undertaken to correct some of these problems include:
—Development of a single audit guide to replace the almost 100
guides now in use for auditing federally-assisted programs.
—Establishment of Inspectors General in 14 departments and
agencies to uncover and eliminate fraud, abuse, and waste in
Federal programs. As this concept becomes fully operational,
other agencies will follow.
—Initiation of a major interdepartmental review of the Federal
policies and procedures for determining applicant eligibility for
income assistance and human services programs;
—Continued reform of government regulations and reduction in
paperwork requirements. Since the Carter Administration took
office, Federal paperwork has been cut by 12% and more than
400 forms have been eliminated. Each department and agency
has also undertaken a program of improving agency procedures. For example, the Environmental Protection Agency has
speeded up the average processing time for rural water and
sewer grant and loan applications by over a year. In total,
these administrative reforms have saved local governments
several hundred million dollars per year.
—Proposed revision of procurement standards in OMB Circular
A-102, "Uniform administrative requirements for grants-in-aid
to State and local governments." The revised circular reaffirms the Administration's commitment to place maximum reliance on State and local governments by establishing minimum procurement standards and certifying State and local
systems that meet those standards.
—Agreement by various departments, under the leadership of
the Department of Health, Education, and Welfare, to facilitate packaging of 15 to 25 emergency medical services programs as jointly funded projects.
—Continuation of an interagency review of Federal planning
requirements with an objective of making those requirements
common to many Federal grant-in-aid programs as compatible,
unified, and non-duplicative as possible. Approximately 150
grants-in-aid are covered. Areas of review include requirements for citizen participation, governing board membership,
gubernatorial review, data and financial accountability. Significant progress is occurring in the simplification and elimination of existing individual agency requirements; it is anticipated that 35% of the several thousand specific requirements will
be revised by June 30, 1979.
—Completion of a study required by the Federal Program Information Act of ways to improve distribution of information on
Federal assistance programs. Some of the recommended im-
232
THE BUDGET FOR FISCAL YEAR 1980
provements have already begun and many will appear in the
1979 Catalog of Federal Domestic Assistance. This study recom-
mended that more programs be included in the Catalog, that
new programs be added more promptly, and that more emphasis be placed on ensuring that agency information contacts in
the Catalog can answer questions of potential applicants.
—Transfer of the Federal Assistance Programs Retrieval System
(FAPRS) from the Department of Agriculture to OMB and
increased support for FAPRS. With FAPRS, one can (by computer terminals) match the characteristics of a community
with the requirements of Federal programs, and automatically
identify those programs from the Catalog for which a community might apply.
—Initiation of a study of the Federal assistance system under the
Federal Grant and Cooperative Agreement Act. A report due
to Congress by February 1980 will deal with questions such as
the feasibility of developing a comprehensive system of guidance for assistance activities and recommendations for its implementation.
THE STATE AND LOCAL GOVERNMENT SECTOR OF THE NATIONAL
INCOME AND PRODUCT ACCOUNTS2
The national income and product 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 measure the relationship between these governments as a sector of the economy and other sectors. The State and
local data are presented here to provide a context in which to
compare the grants-in-aid.
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 and other already existing assets are excluded from NIA data
but are generally included in budgetary 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 their general fund from
special funds. As a result of State and local 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.
2
Special Analysis B of this volume provides general information on the national income and product accounts.
SPECIAL ANALYSIS H
233
NIA State and local sector.—Table H-10 is a historical tabulation
of State and local data with the surplus or deficit broken into two
components, social insurance funds and the operating account.3
The social insurance funds, primarily retirement programs, have
been in surplus since before 1950. The funds accumulate assets to
pay for their future liabilities. Because these surpluses 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. In fact, despite their cash surpluses the accrued
liability of many of these social insurance funds exceeds their
assets, posing a serious potential threat to future State and local
finances.
Table H-10. NATIONAL INCOME AND PRODUCT ACCOUNTS, STATE AND LOCAL SECTOR
(Calendar years; in billions of dollars)
Surplus or deficit ( - )
Receipts
Expenditures
Entire
sector
Social
insurance
funds
Operating
account
Five-year intervals:
1950
21.3
22.5
-1.2
0.7
1955
31.7
32.9
-1.3
1.3
-1.9
-2.6
1960
49.9
49.8
0.1
2.3
-2.2
3.4
-3.4
1965
Annually:
75.1
75.1
1970
134.9
132.2
- *
2.8
6.8
-4.0
1971
152.6
148.9
3.7
7.5
-3.8
1972
177.4
163.7
13.7
8.1
5.6
1973
193.5
180.5
13.0
8.9
4.1
1974
210.4
202.8
7.6
10.5 - 2 . 9
1975
236.9
230.6
6.2
1976
266.9
246.3
20.7
15.2
12.5 - 6 . 2
5.5
1977
296.2
266.6
29.6
18.0
11.5
-1.3
SEASONALLY ADJUSTED, ANNUAL RATES
1976:
1
256.4
243.6
12.8
14.1
II
262.6
246.2
16.4
14.8
1.6
III
268.6
247.2
21.4
15.7
5.7
IV
280.2
248.2
32.0
16.2
15.8
1977:
1
283.0
253.5
29.5
17.0
12.5
II
292.0
263.5
28.5
17.7
10.8
III
301.8
270.7
31.2
18.3
12.8
IV
307.9
278.9
29.0
19.1
9.9
1978:
1
315.7
284.2
31.5
19.9
11.5
II
327.4
297.7
29.8
20.5
9.3
III*
329.2
305.8
23.4
21.6
1.8
^Preliminary.
3
The operating account contains all activities except those of social insurance funds, including expenditures
for capital investment.
234
THE BUDGET FOR FISCAL YEAR 1980
Since the late 1940's the operating account has generally been in
deficit. This is to be expected, since it includes capital expenditures, often financed through borrowing. Surpluses in 1972 and
1973 resulted from the first general revenue sharing distributions
and higher receipts generated by tax rate increases and the rapidly
expanding economy.
In 1974, the operating account returned to a deficit. In part, this
reflected a return to previous patterns, as State and local expenditure increases absorbed the new, higher income. It also reflected
the worsening economic situation, with State and local governments opting to draw down on balances accumulated during 197273 rather than enact new tax increases. The fiscal position improved substantially in 1976 compared to 1975, and this improvement continued into 1977. The operating account had a surplus of
$5.5 billion in 1976, and $11.5 billion in 1977. These surpluses
declined for the first three quarters of 1978, although they continue
to be high relative to the past.
DETAILED FEDERAL AID TABLES
The following two tables present detailed Federal aid data for
the three budget years. Table H-ll, "Federal Grants to State and
Local Governments—Outlays and Budget Authority," provides detailed budget authority and outlay data for grants and shared
revenues. Table H-12, "Credit Assistance to State and Local Governments," provides information on direct and guaranteed loans to
State and local governments.
Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY
(In millions of dollars)
1978
actual
1979
estimate
Function, agency and program
estimate
Functional
code
11
44
11
39
60
55
50
Total, national defense
96
4
80
286
7
100
428
20
125
180
393
573
42
21
62
21
3
0
0
2
0
14
12
39
54
52
51
369
13
432
11
308
20
381
443
329
301
302
302
302
302
51
4
33
10
50
18
72
0
1
22
0
302
306
47
18
61
63
301
303
0
0
272
276
271
Total, energy
Natural resources and environment:
Department of Agriculture:
Watershed planning and flood control
Conservation operations
Resource conservation and development
Forest management, protection and utilization
Youth conservation corps
Department of Commerce:
NOAA—Coastal zone management
NOAA—Operations research and facilities
Department of the Interior:
Drought emergency assistance
Urban park and recreation grants
C/3
52
18
0
33
CVJ
24
18
12
41
CVJ
6
20
50
18
77
0
5
24
0
17
37
CVI
99
0
17
33
18
Energy:
Department of Energy: Energy conservation
Economic regulatory administration
Tennessee Valley Authority (shared revenue)
051
054
CVJ
16
43
National defense:
Department of Defense—Military:
National Guard centers construction
Federal Emergency Management Agency
1980
estimate
BUDGET AUTHORITY
OUTLAYS
See footnotes at end of table.
1979
estimate
1978
actual
0
145
to
CO
Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1979
estimate
1978
actual
Function, agency and program
1980
estimate
Functional
code
OUTLAYS
1979
estimate
1980
estimate
BUDGET AUTHORITY
250
82
18
31
1
287
88
14
76
*
200
3
225
6
245
8
3,187
3,100
3,600
3
17
37
3,898
3,970
4,559
87
252
87
1
101
250
83
3
98
233
75
0
426
436
405
13
0
14
13
28
16
13
30
45
Land and water conservation fund
Fish and Wildlife Service
Historic preservation fund
Office of Surface Mining and Enforcement
Bureau of Mines
Environmental Protection Agency:
Abatement and control
Enforcement
Sewage treatment plant construction
Water Resources Council
303
303
303
302
306
332
102
49
24
0
371
121
59
50
0
359
124
43
103
0
304
304
304
301
230
7
4,500
294
15
4,200
281
9
3,800
3
52
50
5,448
5,389
5,094
92
269
87
2
103
275
83
2
95
259
75
0
450
462
429
371
0
2
1
376
376
15
0
17
18
42
24
15
38
66
Total, natural resources and environment
Agriculture:
Department of Agriculture:
Cooperative research
Extension activities
Commodity Credit Corporation—Donations
Agricultural Marketing Service—Cooperative Projects in Marketing
352
352
351
352
Total, agriculture
Commerce and housing credit:
Department of Agriculture: FmHA: Housing
Department of Commerce:
Minority business development
Public communications facilities, planning and construction
Total, commerce and housing credit
O
c
DGET
180
91
22
*
*
1978
actual
6
562
28
74
16
5,807
15
47
123
35
1,972
1
149
6
565
19
152
14
6,516
18
72
168
94
2,191
3
126
0
570
15
123
11
6,761
22
96
167
82
2,390
3
84
8,837
9,945
10,324
257
209
Ill
123
292
104
10
180
0
3
12
284
8
4
10
243
2
1
260
3,057
51
*
61
261
2,051
4
2
64
388
319
2
6
60
See footnotes at end of table.
Transportation:
Department of Commerce:
Maritime Administration
Department of Transportation:
State boating safety assistance
Airport and airway trust fund
Highway beautification
Off-systems road programs
Highways crossing Federal projects
Federal aid highways (trust fund)
Highway related safety grants
Other highway aid
National Highway Traffic Safety Administration
Federal Railroad Administration
Urban Mass Transportation Administration
Research and special programs
Washington Metropolitan Area Transit Authority
403
403
402
401
401
401
401
401
401
401
401
401
407
401
6
555
18
165
20
6,548
24
88
152
68
484
2
67
5
644
12
30
16
7,839
24
179
178
70
2,296
3
54
8,198
11,351
0
620
0
0
14
8,433
24
34
178
69
2,350
3
52
11,777
452
453
308
199
363
84
354
90
452
452
452
452
10
300
5
4
10
282
5
4
10
265
0
0
452
452
453
452
452
362
4
0
5
66
407
11
0
0
64
531
0
0
4
71
Total, transportation..
Community and regional development:
Funds appropriated to the President:
Appalachian regional development programs
Disaster relief
Department of Agriculture:
Rural development grant programs
Rural water and waste disposal
Rural development planning
Rural community fire protection grants
Department of Commerce.Economic development assistance
Local public works
Drought assistance program
NOAA—Coastal energy impact fund
Regional Action Planning Commissions
s
a
1
s
c
Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
00
(In millions of dollars)
1978
actual
1979
estimate
1980
estimate
Function, agency and program
Functional
code
2,464
392
46
0
67
1
0
0
17
2
0
0
2,875
300
53
44
59
5
3
2
18
3
0
0
3,272
280
40
162
56
4
14
5
18
3
126
10
7,078
6f452
5,416
16
2,801
56
706
231
226
691
56
6
209
3,017
58
735
343
383
805
77
7
237
1980
estimate
BUDGET AUTHORITY
OUTLAYS
12
1979
estimate
1978
actual
3,428
67
535
319
666
835
77
7
230
Department of Housing and Urban Development:
Community development block grants
Urban renewal
Other categorical programs replaced by block grants
Urban development action grants
Comprehensive planning grants
New Communities Development Corporation
Neighborhood self-help program
Livable cities program
Department of the Interior: Bureau of Indian Affairs
Federal Emergency Management Agency
National Development Bank
Neighborhood Reinvestment Corporation
Total, community and regional development
Education, training, employment, and social services:
Department of Commerce: Job opportunities program
Department of Health, Education, and Welfare:
Elementary and secondary education
Indian education
School assistance in federally affected areas
Emergency school assistance
Education for the handicapped
Occupational, vocational, and adult education
Student assistance
Higher and continuing education
Library resources
3,600
0
0
400
57
0
0
0
17
2
0
0
3,750
0
0
400
53
-8
15
5
18
3
0
0
3,900
0
0
400
40
0
15
5
18
3
550
10
5,338
451
451
451
451
451
451
451
451
452
453
452
451
5,465
6,265
3,173
56
737
333
518
730
64
10
253
3,760
68
740
338
822
779
77
5
266
3,932
73
445
351
877
770
77
2
234
504
501
501
501
501
501
501
502
502
503
M
W
c
8
3
60
1
3
524
353
2,809
1,462
5
101
1
4
665
359
2,965
1,438
5
104
*
4
722
365
3,020
1,613
5
4,251
24
4,769
46
582
0
537
119
19
6,271
45
3,181
22
698
543
561
120
20
6,311
52
2,571
22
720
0
474
152
19
20,557
22,676
22,320
1
27
1
29
0
29
818
54
4
605
212
282
0
10,680
4
953
95
5
619
178
159
3
11,751
0
1,026
102
7
652
164
127
24
12,354
0
See footnotes at end of table.
Special projects and training
Educational development
American Printing House for the Blind
Child development
Work incentives
Social services regular program
Youth, aging, and vocational rehabilitation programs
Department of the Interior: Bureau of Indian Affairs, Indian education programs
Department of Labor:
Employment and training assistance
Community service employment for older Americans
Temporary employment assistance
Grants for employment services
Unemployment trust fund: employment service1
Department of the Treasury: Social services—retroactive claims
Community Services Administration
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities
503
503
501
501
504
506
506
501
101
0
3
637
352
2,614
1,492
5
113
0
4
697
372
2,965
1,560
5
118
0
4
712
372
3,066
1,588
5
504
504
504
504
504
506
506
503
503
2,901
42
0
54
616
0
559
119
19
6,511
47
3,475
22
698
543
506
120
23
6,276
55
2,190
22
720
0
470
152
20
15,390
24,515
22,532
554
554
0
29
0
29
0
29
551
551
552
551
551
553
551
551
554
924
85
7
613
145
205
0
10,593
4
1,061
88
9
653
183
111
7
11,751
0
1,058
110
9
701
175
87
60
12,597
0
Total, education, training, employment and social services
Health:
Special Action Office for Drug Abuse Prevention
Department of Agriculture: Food Safety and Quality Service—Meat and Poultry
Department of Health, Education, and Welfare:
Health Services Administration
Center for Disease Control
Center for Disease Control
Alcohol, Drug Abuse, and Mental Health Administration
Health Resources Administration
Health Resources Administration
Adolescent health services and pregnancy prevention
Medicaid1
Department of the Interior: Mining Enforcement and Safety Administration
Ul
t-H
U
Q
r1
|2
rn
S2
CO
X
to
00
Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1978
actual
1979
estimate
Function, agency and program
1980
estimate
Functional
code
12f725
6
4
269
39
6
41
6
13,839
14,532
8
8
314
299
135
2,391
371
52
342
137
2,525
539
82
39
6,616
56
50
6,671
89
1,721
691
0
939
193
2,201
652
2
996
71
13,782
14,687
1979
estimate
1980
estimate
BUDGET AUTHORITY
OUTLAYS
39
1978
actual
Department of Labor:
Occupational Safety and Health Administration
Mine Safety and Health Administration
34
42
42
12,639
13,941
14,876
604
604
9
33
14
25
5
604
604
604
604
604
604
361
330
151
2,365
247
61
218
316
139
2,551
567
83
315
363
31
2,653
768
90
604
604
604
39
6,327
71
50
6,638
77
50
6,815
73
604
604
604
603
604
22,073
685
0
913
200
14,438
727
10
996
200
14,035
742
0
1,055
40
33,839
27,055
27,061
554
Total, health
Income security:
Department of Agriculture:
10
Rural housing for domestic labor
8
Mutual and self-help housing
298
Food Safety and Quality Service—Funds for strengthening markets, income and s u p p l y donations
342
Food stamps—administrationa
31
Special milk program1
2,521
Child nutrition program 1
730
Special supplemental food program (WIC) 1
91
Food donations 1
Department of Health, Education, and Welfare:
50
Supplemental security incomea
6,704
Public assistance—maintenance1
75
Refugee assistance1
Department of Housing and Urban Development:
2,674
Subsidized housing programs1
720
Operation of housing projects x
2
Congregate services program
1,055
Department of Labor: Unemployment trust fund: administration of payments J
11
Community Services Administration1
15,321
554
Total, income security
6
c
8
3
34
*
7
35
0
36
*
10
41
0
38
1
10
36
2
76
87
87
0
4
559
9
0
7
545
12
4
0
470
13
572
565
487
61
84
19
67
90
19
40
91
18
164
176
149
226
5
241
6
283
5
98
287
5
22
105
309
5
53
108
356
4
26
237
290
See footnotes at end of table.
86
Veterans benefits and services:
Veterans Administration:
Medical care
Medical administrative expenses
Grants for construction of State nursing homes
Health training
Veteran's cemetery construction
703
703
703
703
705
34
1
15
41
0
36
*
10
94
0
38
1
5
0
5
90
140
49
0
8
497
13
0
8
516
18
4
0
387
18
517
542
409
69
116
20
49
113
20
42
98
20
205
183
160
852
852
226
6
241
5
283
5
852
852
852
852
100
287
4
25
105
309
48
108
356
4
24
852
234
282
86
Total, veterans, benefits and services
Administration of justice:
Department of Housing and Urban Development: Fair housing assistance
National Institute of Corrections
Department of Justice: criminal justice assistance
Equal Employment Opportunity Commission
751
754
754
751
Total, administration of justice
General government:
Department of the Interior:
Administration of Territories
Trust Territory of the Pacific Islands
Civil Service Commission (intergovernmental personnel assistance)
806
806
806
Total, general government
General purpose fiscal assistance:
Department of Agriculture: Forest Service (shared revenue)
Department of Defense: Flood Control Act (shared revenue)
Department of Interior.Payments in lieu of taxes
Miscellaneous (shared revenues)
Fish and Wildlife Service (shared revenue)
Internal revenue collections for the Virgin Islands (shared revenues)
Department of the Treasury:
Customs receipts for Puerto Rico and the Virgin Islands (shared revenue)
4
Ul
HH
I1
"
2
>
X
Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1978
actual
1979
estimate
Function, agency and program
estimate
1978
actual
1979
estimate
1980
estimate
BUDGET AUTHORITY
188
0
6,823
0
1,329
304
OUTLAYS
210
240
6,852
250
2
255
220
240
6,863
150
0
327
9,523
8,818
8,669
77,889
82,129
82,937
Functional
code
Internal revenue collections for Puerto Rico (shared revenues)
Payments to U.S. territories, fiscal assistance
General revenue sharing
Targeted fiscal assistance
Antirecession financial assistance fund
Federal payment to the District of Columbia
Total, general purpose fiscal assistance
Total, grants-in-aid
852
852
851
852
852
85?
186
0
210
240
220
240
6,855
6,855
6,855
0
304
250
0
255
150
0
327
9,627
8,804
8,659
92,192
98,379
97,754
1,400
*$500 thousand or less.
1
Programs included in the "Grants for payments to individuals" category shown in Table H-7.
t1
Table H-12. CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS
[In millions of dollars]
Guaranteed loans
Direct loans
1978
actual
Function, agency and Program
Natural resources and environment:
Department of the Interior.- Drought emergency assistance..
Agriculture:
Department of Agriculture:
Agriculture credit insurance fund
Commerce and housing credit:
Department of Agriculture:
Rural housing insurance fund
Transportation:
Federal aid highways (trust fund)
Right-of-way revolving fund
Urban mass transportation fund
New loans
Net loans
Outstanding
New loans
Net loans
Outstandings
New loans
Net loans
Outstandings
1980
estimate
1979
estimate
37
17
22
3
3
25
1980
estimate
1979
estimate
..
25
*
_l
-17
1978
actual
3
2
2
11
9
10
15
-1
9
20
2
11
5
91
7
1
-21
*
8
7
2
10
15
5
5
16
4
9
6
*
I
zn
55
a
New loans
Net loans
Outstandings
New loans
Net loans
Outstandings
New loans
Net loans
Outstandings
-56
100
-100
.
-17
323
323
323
997
997
997
00
Table H-12. CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS—Continued
[In millions of dollars]
Direct loans
1978
actual
Function, agency and Program
Total, transportation
1979
estimate
Guaranteed loans
1980
estimate
1978
actual
1979
estimate
1980
estimate
Department of Commerce:
Coastal energy impact fund.
Department of Housing and Urban Development:
Urban renewal programs
Other programs
Total, community and regional development..
-73
423
-100
323
323
997
997
997
New loans
Net loans
Outstanding
459
33
240
600
23
263
642
-102
161
804
545
2,588
1,006
758
3,347
1,335
921
4,268
9
9
9
48
48
57
215
-16
40
112
-20
20
15
15
5
87
70
599
18
*
Outstanding^
Community and regional development:
Department of Agriculture:
Rural development insurance fund.,
New loans.
Net loans
Outstandings
599
8
U
558
New loans
Net loans
Outstandings
761
87
879
738
12
891
712
-80
811
NPW loans
Net loans
Outstanding
New loans
Net loans
Outstandings
NPW loans
Net loans
2
46
-430
791
52
223
568
27
-286
282
849
115
3,379
1,058
535
3,914
1,362
636
4,550
.
>
Education, training, employment and social services:
Department of Health, Education, and Welfare:
Student loan insurance fund
Student assistance
Higher and continuing education
Higher education facilities loan fund
Total education, training, employment and social services.
Health:
Department of Health, Education, and Welfare:
Medical facilities guarantee and loan fund
Income security:
Department of Housing and Urban Development:
Low-rent public housing
General Government:
Department of the Interior:
Administration of territories.
24
24
24
46
46
70
16
16
86
20
20
20
New loans
Net loans
Outstandings...
New loans
Net loans
Outstandings....
New loans
Net loans
Outstandings
New loans
Net loans
Outstandings
-5
176
New loans
Net loans
Outstandings...
24
19
220
-14
994
2
-4
172
48
42
262
-15
979
-16
962
1
-4
168
CO
17
12
274
-14
994
-15
979
-16
962
>
-28
1,158
555
14,567
11,310
1,810
16,377
14,193
3,093
19,470
58
39
38
96
-2
94
14
-1
22
1
1
23
23
-21
1,175
New loans
Net loans
Outstandings....
190
15
47
200
200
9,448
47
New loans
Net loans
Outstandings..
47
3
2
36
39
-2
37
CO
CO
38
10
1,186
New loans
Net loans
Outstandings.
X
52
Table H-12. CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS—Continued
[In millions of dollars]
OS
Direct loans
1978
actual
Function, agency and Program
General purpose fiscal assistance:
Department of the Treasury:
New York City loan guarantees
Loans to the District of Columbia.
Grand total
1979
estimate
Guaranteed loans
1978
actual
estimate
1979
estimate
500
490
490
New loans
Net loans
Outstandings..
New loans
Net loans
Outstandings....
New loans
Net loans
Outstandings....
1980
estimate
250
213
702
8
131
149
87
107
1,315
1,422
159
135
1,557
1,167
143
2,978
1,158
1,109
10,310
12,966
15,828
65
3,043
67
522
2,873
3,110
21,178
24,051
3,902
27,953
Note: Only direct loans are included in budget outlays. New direct loans less loan repayments, sales, etc, are net loans, which are counted in the budget as outlays. Guaranteed loans are non-Federal loans guaranteed by the Federal government. For a
discussion of credit in the budget, see Special Analysis, F, "Federal Credit Programs" in the Special Analyses volume of the 1980 Budget.
M
W
t1
SPECIAL ANALYSIS I
CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH
Total Federal civilian employment in the executive branch (including the Postal Service) is estimated to be 2,774,200 at the end
of 1980. Of this amount, full-time permanent employment accounts
for slightly more than 87%. The remainder is made up of part-time
employees, intermittent employees (those employed on an irregular
basis), and full-time temporary employees (generally, in positions
occupied for less than 1 year).
Full-time permanent employment in the executive branch at the
end of 1980 is estimated to be 2,417,500, comprising 521,600 Postal
Service employees and 1,895,900 employees in other executive
branch agencies. In his address to the Nation on October 24, 1978,
the President ordered a cut in Federal hiring that would reduce
the number of permanent Federal employees (excluding those in
the Postal Service) by 20,000 below the number planned for September 30, 1979 in the 1979 Budget. This is reflected in the estimates in this analysis, and is discussed in greater detail under
"Full-time Permanent Civilian Employment/'
EMPLOYMENT LIMITATION
As a part of the Civil Service Reform Act of 1978 (section 311),
the Congress placed an employment limitation on the executive
branch. The limitation requires that "The total number of civilian
employees in the executive branch on September 30, 1979, on September 30, 1980, and on September 30, 1981, shall not exceed the
number of such employees on September 30, 1977." It includes all
civilian employees within the executive branch of the Government
(other than the United States Postal Service or the Postal Rate
Commission), whether employed on a full-time, part-time, or intermittent basis, including those employed on an indirect hire basis
under master labor contracts with foreign governments. (The latter
applies to the Defense Department.) The limitation excludes employment programs established for students and disadvantaged
youth.
The statutory limitation also provides that the President may
authorize employment of civilian employees in excess of the limitation if he deems that such action is necessary in the public interest. The upper limit of this additional flexibility is restricted to the
percentage increase of the U.S. population since September 30,
247
248
THE BUDGET FOR FISCAL YEAR 1980
1978, as estimated by the Bureau of the Census. Using this criterion, the September 30, 1979 employment level could exceed that
for September 30, 1977 by about 16,000 positions (0.7%), and a
further 19,000 positions (0.9%) could be added by September 30,
1980—while remaining within the statutory limit.
Finally, the law provides that the number of part-time employees
in excess of the number of such employees on September 30, 1977,
may be counted on a full-time equivalent basis. Since this calculation will yield a smaller number than an actual count of such
employees on a specific date, this provision would permit additional
part-time employees to be added to the allowable executive branch
totals.
The basis for determining the actual statutory limitation is the
Monthly Report of Civilian Employment published by the Office of
Personnel Management (formerly, the Civil Service Commission). A
derivation of the statutory limitation on total employment follows:
Executive branch total employment, as of September 30, 1977
Less:
U.S. Postal Service
Postal Rate Commission
Special employment programs—primarily disadvantaged youth
Plus:
Indirect hires (Department of Defense)
Statutory limitation on total employment:
Unadjusted for population growth
Adjusted for population growth:
Sept. 30, 1979
Sept. 30, 1980
Estimated total employment, planned in this Budget:
Sept. 30, 1979
Sept. 30, 1980
2,789,057
-657,832
-81
- 23,406
83,383
2,191,121
2,207,121
2,226,121
2,195,000
2,184,900
The estimates for executive branch employment for 1979 and
1980 are very austere. New programs have been added and the
scope of others has expanded since September 1977 and these programs require additional employees. For this reason, and to avoid
severe disruptions that would be caused if required reductions were
made too quickly, the President, in approving the employment
estimates for 1979, applied a small portion of the flexibility available under the statutory provisions as necessary in the public interest. By September 30, 1980, employment is planned to be well
within the unadjusted statutory limitation. Reducing planned employment further would have seriously impaired the ability of the
executive branch to discharge its responsibilities properly in such
areas as law enforcement, implementation of key provisions of
environmental statutes, and proper administration of recent tax
and energy legislation.
249
SPECIAL ANALYSIS I
TOTAL FEDERAL EMPLOYMENT
Table 1-1, ' Total Federal Employment," shows Government-wide
Federal civilian employment exclusive of the indirect hire component of the statutory limitation, since indirect hire employees are
not Federal employees. Estimates for indirect hire employment are,
however, reflected in a footnote. Information on Postal Service
employment (including the Postal Rate Commission) is also shown,
together with data for the legislative and judicial branches and for
active duty military personnel.
Table 1-1. TOTAL FEDERAL EMPLOYMENT
September 30
1978
actual
Description
Civilian employment in the executive branch:
Full-time permanent (including lapse)
Other than full-time permanent
1980
estimate
2,117,400
2,106,800
522,700
128,200
521,600
122,800
650,900
644,400
25,280
Subtotal, executive branch civilian employment 2
1,895,900
210,900
656,076
x
1,911,400
206,000
525,343
130,733
Subtotal
1,921,662
217,318
2,138,980
Subtotal
Postal Service:
Full-time permanent
Other than full-time
Exempt from ceilings
1979
estimate
24,000
23,000
2,820,336
2,792,300
2,774,200
2,061,443
37,746
2,050,000
39,000
2,050,000
39,000
2,099,189
2,089,000
2,089,000
4,919,525
4,881,300
4,863,200
3
Military personnel on active duty:
Department of Defense
Department of Transportation (Coast Guard)
Subtotal, military personnel
Total, executive branch employment
Legislative and judicial personnel:4
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches....
Grand total
31,759
20,756
52,515
4,972,040
1
Developmental positions under the worker-trainee opportunity program; disadvantaged summer and part-time workers under such Office of Personnel
Management (formerly the Civil Service Commission) programs as summer aides, stay-in-school, and junior fellowship; and certain statutory exemptions.
2
Excludes foreign nationals working under master labor contracts overseas. Actual employment for 1978 was 81,048; such employment is estimated
to be 77,608 for 1979 and 78,037 for 1980.
3
Excludes reserve components.
* 1979 and 1980 estimates are not available.
FULL-TIME EQUIVALENT EMPLOYMENT
In September of 1977, the President directed executive branch
agencies to establish programs that would expand employment
250
THE BUDGET FOR FISCAL YEAR 1980
opportunities for part-time permanent workers, to provide more
opportunities for persons unable to work full-time. In addition, the
Office of Management and Budget and the Office of Personnel
Management (formerly the Civil Service Commission) were authorized to conduct an experiment with full-time equivalent (FTE) controls in a few agencies.
The selected test agencies were given new 1979 employment
ceilings stated in terms of full-time equivalents (FTE's), i.e., workyear ceilings. Commencing with the beginning of fiscal year 1979
(October 1, 1978) these agencies began to measure and report on
their employment by counting the number of hours worked.
The experiment was designed to accomplish two objectives: (1) To
break down artificial barriers that may have inhibited the employment of permanent part-time workers; and (2) to determine whether FTE controls can improve personnel management, overcome
some of the criticisms directed at the existing end-of-year control
system, and, at the same time, not add significantly to the size of
the Federal work force.
In the meantime, with the objective of increasing the number of
part-time career employees in the Federal Government, the recently enacted Federal Employees Part-Time Career Employment Act
of 1978 requires that employment for part-time career employees
be controlled on a full-time equivalent basis, commencing on October 1, 1980.
FULL-TIME PERMANENT CIVILIAN EMPLOYMENT
This part of the analysis of Federal civilian employment identifies full-time permanent employment separately from total employment (which also includes part-time employees, intermittent employees and full-time temporary employees). Excluding Postal Service employment, which by law is not subject to Presidential control,
and excluding other employment exempted from ceilings, full-time
permanent employment in the executive branch as of September
30, 1979, is estimated to be 1,911,400 or about 20,200 below the
level estimated for September 30, 1979 in the 1979 Budget. For
September 30, 1980, the corresponding estimate is 1,895,900.
Consistent with the goals announced in his anti-inflation message of October 24, 1978, the President ordered an immediate limitation on Federal civilian hiring. Effective on October 25, 1978, all
executive branch agencies were required to limit their hiring to
50% of the vacancies occurring on or after that date. This limitation, when announced, was to remain in effect until further notice.
Since then, as a part of the 1980 budget review process, new
employment ceilings are being provided to all executive branch
agencies, and the Government-wide hiring limitation will no longer
apply. Instead, each agency is being directed to modify its hiring
SPECIAL ANALYSIS I
251
rate so as to remain within newly assigned 1979 and 1980 employment ceilings.
September 30, 1978 actual full-time permanent employment was
1,921,662; an increase of 12,674 over the preceding year and about
25,800 higher than the current estimate for 1980. While the statutory limitation on executive branch employment is directed toward
total employment, corresponding reductions have been achieved in
planned full-time permanent positions as well. The estimate for
September 30, 1979 is about 10,300 below the actual level for 1978
and an additional reduction of 15,500 is contemplated by September 30, 1980.
Table 1-2 shows actual 1978 full-time permanent employment,
1979 employment as shown in the 1979 budget, and estimated 1979
and 1980 employment for the major departments and agencies of
the executive branch. The table also contains an entry to take
account of the fact that, on a Government-wide basis, end-of-year
employment has ranged from 0.5% to 1.25% below the budget
estimates. The estimates for 1979 and 1980 anticipate a lapse of
slightly under 0.6%.
In keeping with the President's objective of constraining the size
of the Federal work force to the lowest number consistent with
efficient operation of the Government and under the provisions of
the statutory limitation prescribed by the Civil Service Reform Act,
many of the agencies shown are experiencing declines in planned
employment, some by a substantial number.
252
THE BUDGET FOR FISCAL YEAR 1980
Table 1-2. SUMMARY OF FULL-TIME PERMANENT CIVILIAN EMPLOYMENT IN THE EXECUTIVE
BRANCH '
[Excluding the Postal Service]
As of September 30
Agency
1979 estimate
Change
1979-80
1978
actual
In 1979
budget
Current
1980
Estimate
84,923
29,641
904,109
28,962
18,863
143,644
15,963
54,798
52,870
21,211
22,680
71,160
108,598
10,156
35,137
84,000
29,800
904,900
28,600
19,100
145,100
17,400
56,000
55,100
20,800
22,800
73,100
112,500
10,800
36,000
85,000
29,500
892,600
28,700
19,600
143,000
16,100
55,000
54,100
22,300
22,500
71,800
110,500
10,700
34,700
82,700
29,600
883,700
28,300
19,000
143,900
16,200
54,400
54,600
22,300
22,600
71,800
110,700
10,900
34,400
23,169
198,027
23,200
203,000
22,800
198,900
22,600 - 2 0 0
197,900
-1,000
5,755
8,293
2,666
6,563
13,117
4,402
17,262
39,693
5,900
8,600
2,800
6,800
13,500
4,600
18,000
41,800
5,800
8,400
2,800
6,600
13,200
4,600
17,700
45,000
Subtotal
Contingencies3
1,921,662
1,944,200
2,000
1,921,900
500
Subtotal
Expected lapse
Total
1,921,662
1,946,200
-14,600
1,931,600
1,922,400
-11,000
1,911,400
Agriculture
Commerce
Defense—military functions
Defense—civil functions
Energy
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other:
Agency for International Development
International Communication Agency
Nuclear Regulatory Commission
Office of Personnel Management2
Panama Canal
Small Business Administration
Tennessee Valley Authority
Miscellaneous2
1,921,662
5,800
8,400
2,900
6,600
8,000
4,600
17,700
45,300
-2,300
100
-8,900
-400
-600
900
100
-600
500
10
0
200
200
-300
100
-5,200
300
1,904,900 -17,000
2,000 1,500
1,906,900 -15,500
-11,000
1,895,900 -15,500
1
Excludes developmental positions under the worker-trainee opportunity program (WTOP) as well as certain statutory exemptions.
Appropriate adjustments have been made to reflect establishment of the Office of Personnel Management (formerly the Civil Service Commission),
the Federal Labor Relations Authority and the Merit Systems Protection Board, pursuant to the provisions of the Civil Service Reform Act of 1978.
3
Subject to later distribution.
2
Reductions in full-time permanent employment between the end
of 1979 and the end of 1980 are planned in the following agencies:
• The Department of Agriculture.—Reductions of about 2,300
positions relate primarily to anticipated management improvement, reductions in resource conservation, and in construction projects.
• The Department of Defense (military functions).— Civilian employment will decline by about 8,900 positions, primarily as a
result of: (a) economically converting some government per-
SPECIAL ANALYSIS I
253
formed activities to contract and (b) productivity gains in
industrial activities of the Department. The reduction would
have been greater had increased responsibilities in Panama,
not required an addition of almost 3,700 positions.
• The Department of Defense (civil functions).—Employment
will decline by about 400 positions, primarily through reductions in administrative positions, organizational improvements and management efficiencies.
• The Department of Energy.—There will be a reduction of
about 400 positions in the regulatory compliance program,
where audits of 1973-1976 petroleum firm transactions are
being phased down. The remaining 200 position reduction will
occur in general program support.
• The Department of the Interior.—Employment will decline by
about 600 positions, mainly as a result of reductions in the
Youth Conservation Corps and other resource conservation
programs as well as reductions in the Bureau of Indian Affairs field staff.
• The General Services Administration.—A decrease of about
300 positions results from increased reliance on contract
cleaners and guards in the Federal Buildings Fund; establishment of an Office of Procurement Policy and centralized
budget and disposal activities that require less overhead staff;
and reduced reimbursable work.
• The Veteran's Administration.—A. decrease of 1,000 positions
will occur due to the automation of administrative functions,
and a further decline in the number of veterans enrolling
under the G.I. bill.
• Panama Canal.—The Panama Canal Treaty of 1977 will come
into effect beginning in 1980. The scope of the activities performed by the U.S. Government will result in a reduction of
5,200 positions, part of which is offset by an increase in the
Department of Defense (military functions).
Over the same time period, significant increases are planned for
only three agencies:
• The Department of Health, Education, and Welfare.—A net
increase of 900 positions will occur, consisting primarily of
National Health Service Corps program expansions, additional staffing for Indian Health Service programs, and new
Health Care Financing Administration positions to handle
workloads due to hospital cost containment and other legislative proposals.
• The Department of Justice.—A net increase of 500 positions is
planned for the Department. The most important increases
are 500 U.S. attorneys and marshals to handle added court
work due to the Omnibus Judgeship Act of 1978, and 350
254
THE BUDGET FOR FISCAL YEAR 1980
positions in the Federal Prison System. Moderate increases of
100 positions will occur in the legal divisions and an additional 100 positions will be added to the Immigration and Naturalization Service. A portion of these increases is offset by
decreases elsewhere in the Department.
• The Environmental Protection Agency,—Increases of about 200
positions will occur chiefly in such areas as the control of
toxic substances, disposal of hazardous waste and air quality
improvement. These increases are responsive to recently enacted statutes.
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.
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.
Obligations for civilian personnel compensation and benefits in
1980 are projected to reach $78.8 billion, excluding the Postal Service. The estimated costs for civilian and military pay increases for
1980 are covered by lump sum allowances in the 1980 Budget.
Under the Federal Pay Comparability Act, salary rates for Federal employees under the "General Schedule" and most other statutory pay systems are adjusted periodically so as to relate to rates
paid 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 national
emergency or economic conditions affecting the general welfare.
The 1980 Budget assumes an October 1979 pay raise of 5.5 percent
which reflects the provisions of the national wage standard included in the anti-inflation program. This is reflected in the estimates
in the 1980 Budget and in Table 1-3.
The Administration will propose comprehensive legislation to
reform and improve Federal pay-setting systems and procedures.
SPECIAL ANALYSIS I
255
Table 1-3. PERSONNEL COMPENSATION AND BENEFITS
[In millions of dollars]
Description
Civilian personnel costs:
Executive branch: 1
Direct compensation
Personnel benefits 2 3
1978
actual
1979
estimate
1980
estimate
37,483
6,286
Legislative and judiciary:
Direct compensation
Personnel benefits3
40,751
6,938
43,769
Subtotal
40,090
6,550
46,640
47,689
4
743
72
836
81
735
Subtotal
671
64
815
917
Allowance for civilian pay raise
Total, civilian personnel costs
Military personnel costs:
Direct compensation
Personnel benefits
1,740
44,504
47,455
50,346
23,854
25,041
25,207
5
6
Subtotal
1,736
25,590
1,844
26,885
Allowance for military pay raise
Total, military pay costs
Grand total, personnel costs
1
1,896
27,103
1,361
25,590
26,885
28,464
70,094
74,340
78,810
Excludes the Postal Service, reflecting conversion to independent status, consistent with the Postal Service Reorganization Act of 1970.
2
In addition to the employing agency's contributions for the costs of life and health insurance, and retirement, this amount includes transfers from
general revenues to amortize the effects of general pay increases on Federal retirement systems, for employees in the legislative and judicial branches as
well as for employees (nonpostal) in the executive branch. The transfers amounted to $2,165 million in 1978 and are estimated to be $2,440 million in
1979 and $2,410 million in 1980.
3
Excludes transfers for interest on unfunded liability for the executive, legislative, and judiciary branches which amounted to $5,268 million in 1978
and are estimated to be $6,330 million in 1979 and $7,603 million in 1980.
4
Excludes Members and officers of Congress.
5
Excludes Reserve components.
6
Excludes payments to current military retirees which amounted to $9,180 million in 1978 and are estimated to be $10,318 million in 1979 and
$11,452 million in 1980.
256
THE BUDGET FOR FISCAL YEAR 1980
GOVERNMENT EMPLOYMENT AND LABOR FORCE COMPARISONS
As shown on the following chart, Government employment—
Federal, State, and local—will comprise about 16% of the total
employed civilian labor force in 1980.
Within this segment, Federal civilian employment in the executive branch accounts for about 2.8% of the total employed civilian
labor force in 1980, down from a high of about 3.8% in 1968.
The percentage of the total employed civilian labor force attributable to State and local government has grown steadily, from
nearly 8.8% in 1959 to 13.3% in 1980.
Government Civilian Employment
as a Percent of Total Civilian Employment
1958
I960
Fiscal Years
1
Executive Branch
1965
1970
1975
1980
257
SPECIAL ANALYSIS I
GOVERNMENT EMPLOYMENT AND POPULATION
COMPARISONS
As illustrated in the following chart and in table 1-4, the Federal
segment of all governmental employment has declined significantly
over the last three decades, from 38.4% in 1952 to an estimated
17.4% in 1980. Employment for all government has been steadily
rising due to increases in State and local government employment.
The ratio of Federal civilian employment to the total U.S. population is expected to be 12.4 per thousand in 1980—which is lower
than all of the 31 years displayed in table 1-4.
Government Civilian Employment
Millions of Employees
1950
1955
End of Fiscal Year
1
Executive Branch
280-700 O - 79 - 17
Millions of Employees
" * "m: """lit
258
THE BUDGET FOR FISCAL YEAR 1980
Table 1-4. GOVERNMENT EMPLOYMENT AND POPULATION, 1950-80
Government employment
Fiscal year
1950 2
1951 2
1952
1953
1954
1955
1956
1957
1958
1959
I960 2
1961 2
1962
1963 3
1964 3
1965
1966
1967
1968
1969 4
1970 2
1971 2
1972
1973
1974
1975
1976
1977 5
1978
1979 (est.).
1980 (est.) :
Federal
executive
branch1
(thousands)
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
2,789
2,820
2,792
2,774
State and
local governments
(thousands)
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
12,617
12,817
Population
All governmental
units
(thousands)
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
15,406
15,637
Federal as
percent of
all governmental
units
32.2
37.9
38.4
37.2
34.4
33.4
31.9
30.8
29.5
28.8
28.1
111
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
18.0
6
17.7
6
17.4
Total
United
States
(thousands)
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
204,878
207,053
208,846
210,410
211,901
213,559
215,152
217,374
219,078
220,714
222,672
Federal
employment per
1,000
population
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
12.8
12.9
12.6
12.4
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 7,411 project employees in 1963 and 406 project employees in 1964 for the public works acceleration program.
4
On Jan.l, 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 starting with 1969.
5
Data for 1950 through 1976 are as of June 30; for 1977 through 1980, as of Sept. 30.
6
The percentages shown for these years are consistent with reasonable estimates based on recent trends in State and local government.
PART 3
SELECTED FEDERAL PROGRAMS
259
INTRODUCTION
Part 3 furnishes Government-wide program and financial information in selected program areas—civil rights, environment, and
research and development, designated J through L.
Special Analysis J (Civil Rights Activities) summarizes Federal
spending for civil rights activities, concentrating on enforcement
efforts.
Special Analysis K (Environment) identifies Federal funding for
selected environmental activities, including pollution control and
abatement, environmental protection and enhancement, and understanding, describing, and predicting the environment.
Special Analysis L (Research and Development) identifies Federal programs for the conduct of research and development, and for
the support of facilities related to such activities.
260
SPECIAL ANALYSIS J
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 concerning civil rights
research, information dissemination, and the conciliation and prevention of racial disputes. Outlays for these civil rights activities
are projected to increase by 32%, from $448.0 million in 1978 to
$592.5 million in 1980.1
Outlays (or Civil Rights Enforcement
J-I
$ Millions
592.
600-
$ Millions
-600
556
500-
-500
448
428
400-
-400
375
346
300~
-300
200-
-200
100-
100
1975
Fiscal Years
1976
1977
1978
1979
1980
Estimate
1
Civil rights activities of the Postal Service, which by law is off-budget, are shown in the table as memorandum entries.
261
262
THE BUDGET FOR FISCAL YEAR 1980
Table J - l . CIVIL RIGHTS OUTLAYS BY PROGRAM CATEGORY
(In millions of dollars)
Program category
Civil rights enforcement:1
Federal service equal employment opportunities....
Military services equal opportunities2
Private sector equal employment opportunities
Equal educational opportunity
Fair housing3
Enforcement and investigation4
Civil rights conciliation and prevention of disputes
Research and information dissemination
Total
1978
actual
1979
estimate
1980
estimate
188.4
32.9
117.1
38.5
14.4
38.8
217.7
33.6
158.8
69.7
15.4
42.0
230.7
34.2
176.3
68.3
19.7
44.8
6.5
11.4
6.5
11.9
6.4
12.1
448.0
555.6
592.5
1
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 Coast Guard.
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.
4
Includes all title VI efforts except HEW.
2
3
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 92261), with establishing and maintaining an affirmative program of
equal employment opportunity. As a result of Reorganization Plan
No. 1 of 1978, effective January 1, 1979, enforcement responsibility
for this Government-wide program has been transferred to the
Equal Employment Opportunity Commission. All Government personnel actions must be free from discrimination based on race,
color, religion, sex, age, handicapped conditions, or national origin.
Agencies are required to submit an annual plan projecting goals
and timetables to the Equal Employment Opportunity Commission
for review and approval. Agency heads must assure that managers
are aware of their responsibilities in eliminating discrimination in
the Federal sector, that recruitment notices are made available to
all sources of job candidates, that present employee skills are fully
utilized, and that opportunities are provided for upward mobility.
Under the President's reorganization plan, the Equal Employment Opportunity Commission will monitor the achievement of
agency goals on a regular basis, and will provide continuing assistance to assure that planned goals are realized.
Outlays for Federal civil service equal employment opportunity
programs (including upward mobility) are expected to increase
from $188.4 million in 1978 to $230.7 million in 1980.
SPECIAL ANALYSIS J
263
Changes in Minority and Non-Minority Employment1 November 1969-November 1977
Percent Oiang
280
Percent Change
280
264
THE BUDGET FOR FISCAL YEAR 1980
The latest available reports show that in November 1977 members of minority groups accounted for 21.6% of all full-time Federal
civilian employees and 18.1% of white-collar (General Schedule and
equivalent) employment as compared with 21.9% and 17.7% in
1976. Women accounted for 30.7% of all full-time Federal employees and 43.0% of white collar employment in 1977, as compared
with 30.1% and 42.6% in 1976. In the same period, the proportion
of middle and upper grade jobs (General Schedule Grades 13-18
and equivalent) occupied by minorities increased from 23.3% to
24.4%; the proportion occupied by women from 16.5% to 17.5%.
Changes in M a l e and Female Employment1 October 1969 — November I977
J-3
-20
-40
Under the Intergovernmental Personnel Act of 1970 (IPA), the
Office of Personnel Management promotes and supports equal employment opportunity efforts by State and local governments
through technical and financial assistance for personnel management and employee development. During 1978, the Office:
—Awarded $3.7 million in IPA grant funds to support projects
that are designed to improve various aspects of State and local
equal employment opportunity efforts;
—Provided technical assistance and advice related to equal employment opportunity in more than 660 visits to State and
local governments;
—Developed and issued a variety of publications for State and
local use, aimed wholly or partially at improving equal employment opportunity.
SPECIAL ANALYSIS J
265
Military services equal employment opportunities.—Each of the
military services, including the U.S. Coast Guard, 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.
Continued growth in the number of minorities and women is
evidence of recruiting emphasis in this area. The number of women
in the military increased by 7,000 to 126,000 in 1978, as it approached the 1983 objective of 199,000 women on active duty.
Within the overall gains there was a rise in the number of women
at the service academies, women participating in ROTC programs,
and women receiving ROTC scholarship assistance.
Gains in minority participation in active and selected reserve
forces continue and are consistent with affirmative action plan
objectives. The percentage of minority personnel in the armed
forces has increased steadily from 20.3% in 1972 to 26.8% in 1978.
Since last year there are over 20,000 minority personnel participating in ROTC programs, and 1,500 minorities enrolled at service
academies, 11.4% of total enrollment.
Affirmative action efforts to insure equitable promotions and job
assignment for all military personnel continue. Twenty-four minorities and eight women currently hold flag or general officer rank.
Reorganization of the Defense Race Relations Institute (DRRI)
has been completed. The newly revised curriculum focuses on ways
to deal with institutional discrimination. While retaining education
in cultural awareness, racism, sexism, ethnicity, and anti-semitism,
the curriculum has been expanded to develop the skill of graduates
as staff advisors and organizational consultants. The Institute has
graduated more than 5,000 instructors for the military services in
seven years of operation. In 1980, the Department of Defense estimates spending $34.2 million toward accomplishing equal opportunity objectives.
Private sector equal employment opportunities.—Title VII of the
Civil Rights Act of 1964, as amended, prohibits discrimination on
the basis of race, color, religion, sex, or national origin by employers, unions, or employment agencies. The Age Discrimination in
Employment Act Amendments of 1978 make it unlawful to require
or permit the involuntary retirement of any individual because of
age. Under the Equal Pay Act of 1963, employees are protected
from discrimination on account of sex in the payment of wages by
employers. Executive Order 11246, as amended, requires Federal
and federally assisted Government contractors or subcontractors to
take affirmative action to avoid and overcome the effects of dis-
266
THE BUDGET FOR FISCAL YEAR 1980
crimination. Outlays for administering the programs are expected
to reach $176.3 million in 1980.
Equal Employment Opportunity Commission Activities
$ Millions
Completed investigations
125-
-125,000
$1240
|
| Charges Resolve*!
<l lllll ll<li
" "
EEOC Expenditures
-100,000
fOO-
93,000
-75,000
-50,000
-25,000
1974
Fiscal Years
1975
1976
1977
(97$
1979
1980
Estimate
Outlays to carry out the programs of the Equal Employment
Opportunity Commission (EEOC) in 1980 are estimated at $124
million. This sum includes funds for the agency's base program, as
well as full year funding to support functions transferred from the
Civil Service Commission on January 1, 1979, and functions to be
transferred from the Department of Labor on July 1, 1979.
In fiscal year 1980, the Commission, through work-sharing agreements with State and local Fair Employment Practices Agencies,
expects to resolve 93,000 charges of discrimination against employers in the private sector. The agency also plans to direct a larger
percentage of its resources toward investigating cases involving
patterns and practices of discrimination.
To improve its operations, EEOC has abolished its regional administrative and litigation offices and will provide direct service
through 22 full-service District Offices and 37 area offices to those
who believe they have been subject to discrimination.
The Office of Federal Contract Compliance Programs (OFCCP) in
the Department of Labor is responsible, under Executive Orders
11246 and 11375, the Rehabilitation Act of 1973, and the Vietnam
Era Veterans Adjustment Act of 1974, for programs requiring
equal employment opportunity and affirmative action by Federal
SPECIAL ANALYSIS J
267
contractors and subcontractors. Effective October 5, 1978, responsibility for contract compliance was consolidated within the Department of Labor under Executive Order 12086. This consolidation
included transfer of contract compliance activities from eleven Federal agencies formerly charged with administering the program.
The basic enforcement tool is the compliance review of contractor
facilities to ascertain compliance. With consolidation, the compliance activities for qualified handicapped workers under Section 503
of the Rehabilitation Act and for veterans under Section 402 of the
Vietnam Era Veterans Readjustment Act will be fully integrated
with Executive Order enforcement.
Other highlights include:
• The Federal Communications Commission will continue to
investigate complaints of employment discrimination by
broadcasters, cable television systems, and common carriers;
review licensees' annual reports of employment patterns; and
foster representation of minorities in the ownership of broadcast facilities. In 1978, the Commission entered into a memorandum of understanding with the Equal Employment Opportunity Commission to coordinate, process, and consider discrimination complaints and actions.
• Under the Equal Pay Program (being transferred to the Equal
Employment Opportunity Commission on July 1, 1979), the
Employment Standards Administration, in 1978, found 18,376
workers employed in violation who were owed $15.9 million.
Back wages amounting to $8.7 million were restored to 14,929
employees.
Equal educational opportunity.—The Department of Health, Education, and Welfare (HEW) and the Justice Department have primary responsibility for insuring equality of educational opportunity in programs and activities receiving Federal financial assistance. The main objectives are to eliminate officially imposed racial
isolation and sex discrimination against students, to develop a nondiscriminatory policy relating to faculty and administrators, and to
reduce discrimination against employees in public schools and colleges. Currently the Federal Government is also taking steps to
provide equal educational opportunity for Spanish-speaking and
other non-English speaking pupils through special education and
bilingual and bicultural education programs. In 1980, outlays of
$68.3 million are proposed to support these activities.
Under Title IX of the Higher Education Amendments of 1972,
HEW is charged with the responsibility of insuring that there is no
discrimination on the basis of sex in federally assisted education
programs. Toward this effort, HEW plans to spend $12.6 million in
1980. Assurances of compliance have been secured from all educa-
268
THE BUDGET FOR FISCAL YEAR 1980
tional institutions receiving HEW funds. This includes 16,000 elementary and secondary public school districts and 2,870 post-secondary education institutions. The investigation of complaints and
the inclusion of sex discrimination issues in the large urban school
system reviews complete the compliance activities in this area.
An additional $19.7 million will be spent in 1980 by HEW to
assure compliance with Section 504 of the Rehabilitation Act of
1973, which prohibits discrimination on the basis of physical or
mental handicap.
During 1980, the Justice Department has targeted $3.0 million to
enforce Federal laws requiring equal educational opportunities for
public school students. Allegations of discrimination in public education prohibited by the Civil Rights Act of 1964 are investigated.
Results of these investigations are analyzed to determine whether
further Federal action is warranted. The Department will continue
to devote resources toward student desegregation cases in large
metropolitan areas. A significant increase in the number of student
assignment cases for court action is anticipated in 1980. Various
laws allow the Attorney General to sue in Federal court to bring
about desegregation of public elementary and secondary schools, to
enforce nondiscrimination in admission or continued attendance at
public colleges, and to promote desegregation of racially separate
systems of higher education. Justice conducts litigation to support
certain civil rights enforcement programs of HEW, such as the
rights of limited- or non-English speaking students.
Fair housing.—Title VIII of the Civil Rights Act of 1968 prohibits
discrimination on the basis of race, color, religion, sex or national
origin in the sale, rental, or financing of housing or in the provision of brokerage services. The Department of Housing and Urban
Development (HUD) administers and enforces the act. In addition,
all executive departments and agencies are directed to cooperate
with HUD and to administer their programs and activities relating
to housing and urban development to promote fair housing. HUD
maintains a 24-hour toll-free phone line that any person in the
United States may use to file a complaint of housing discrimination. During 1978, HUD received 3,169 complaints and closed 3,910.
In addition there were 358 successful conciliation agreements negotiated as a result of 754 attempts to resolve complaints through
conciliation.
Title VIII complaints 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 section 8
housing assistance program. To assure nondiscrimination under
these programs, the Department will continue communitywide ad-
SPECIAL ANALYSIS J
269
ministrative meetings, expand compliance reviews, and increase
cooperative efforts with other agencies, particularly the independent Federal financial regulatory agencies. Voluntary compliance
agreements have been concluded with real estate boards in 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 enforces both the Fair Housing Act of
1968 and the Equal Credit Opportunity Act of 1974. In 1978, Justice
filed 19 suits and 7 other legal proceedings in 14 States involving
55 defendants. Ten of these cases alleged discriminatory rental
practices based on race, national origin, or sex by the owners and
operators of apartments, trailer parks, and rental services. Four
suits alleged violations of the Fair Housing Act in relation to
single-family dwellings by practices such as racial steering and
blockbusting. Five cases involved alleged violations of the Equal
Credit Opportunity Act.
During 1978, consent decrees resolved 28 cases in whole or in
part, including two sex discrimination suits against large mortgage
lenders. Justice also continues to work with the four Federal agencies responsible for the regulation of the Nation's lenders (Office of
the Comptroller of the Treasury, Federal Reserve Board, Federal
Home Loan Bank Board, and Federal Deposit Insurance Corporation) to promote increased attention to equal opportunity in lending.
The Department of HUD and the General Services Administration (GSA) have signed a memorandum of understanding to assure
the availability of housing on a nondiscriminatory basis for low
and moderate income employees in new and relocated Federal
facilities. The Department of Defense supports a program to insure
equal opportunity for available housing for all military and civilian
personnel, including Defense personnel in off-base housing.
Expenditures prepared for the administration of fair housing
programs in the Federal Government total $19.7 million in 1980.
Highlights of these fair housing proposals include spending by:
• HUD of $5.3 million to strengthen its efforts under title VIII
and to continue its cooperative efforts with other Federal
agencies in assuring affirmative administration of their programs. In addition, the Department will spend $3.7 million in
1980 to provide financial assistance to State and local agencies for Title VIII complaint processing.
• Defense of $3.7 million to protect the rights of all military
and civilian personnel in obtaining appropriate housing.
• Justice of $2.8 million in the development, litigation, and
negotiation of suits under title VIII.
270
THE BUDGET FOR FISCAL YEAR 1980
• GSA of $0.2 million to study proposed locations for federally
constructed or leased space to assure an adequate supply of
low and moderate income housing on a nondiscriminatory
basis.
Enforcement and investigation.—Primary responsibility for the
enforcement of civil rights laws and constitutional guarantees rests
with the Justice Department. This includes the development, negotiation, conciliation, and litigation of complaints and cases. Justice,
along with other agencies with enforcement responsibilities, expects to spend $44.8 million in 1980. The Department will continue
to coordinate enforcement by Federal agencies under title VI of the
Civil Rights Act of 1964, which prohibits discrimination in programs receiving Federal funds. Other activities include reviewing
complaints filed under the Community Development Block Grants,
initiating compliance reviews in communities showing a disparity
of services, and investigating Comprehensive Employment and
Training Act programs in several target cities for possible violation
of civil rights statutes.
The Department will continue to investigate, and litigate the
civil rights of citizens who have suffered violence or threats of
violence, including special protection for migrant workers, prison
inmates, and, with the Department of the Interior, American Indians. Attention will also continue on civil litigation involving conditions in correctional institutions, mental hospitals and juvenile
homes.
Under the voting rights program all qualified citizens have the
opportunity to register and vote without discrimination based on
race, color, or membership in a language minority group. Justice
will continue to stress the elimination of barriers to Indian participation in elections. Much of the Department's activity in 1980, as
in past years, will be devoted to expand its investigative and litigative activities to discover and remedy methods of election that
dilute the voting strength of minorities.
During 1978, a total of 4,653 voting-related changes in 1,946
submissions were processed, an increase of 1,531 changes and 129
submissions over the previous year. Provisions of the Voting Act of
1965 authorize the Attorney General to assign observers to monitor
elections to insure the right to vote and assure that the vote is
properly counted. In 1978, there were 477 observers assigned to
cover 11 elections in seven States, including elections in five counties.
In August 1977, President Carter directed the Task Force on Sex
Discrimination to coordinate a review of all Federal policies, programs and procedures to identify and eliminate any that discriminate or have a disparate impact on the basis of sex. On October 3,
1978, the Task Force reported preliminary results, including agreement from the agencies to submit proposed substantive legislation,
SPECIAL ANALYSIS J
271
or to adopt new policies without the need for legislation, to eliminate sexual stereotyping. The Task Force also reported that the
review process has significantly improved agency awareness of and
responsiveness to issues of concern for women. The Task Force is
working with the Department of Health, Education, and Welfare
on a congressionally-mandated study of proposals to eliminate sex
discrimination from the Social Security System.
Civil rights conciliation and prevention of disputes.—The mission
of the Community Relations Service (CRS) in the Department of
Justice is to provide assistance to communities in resolving disagreements arising from discriminatory practices that disrupt
peaceful relations among citizens. The primary techniques employed include conciliation, mediation, and technical assistance.
In 1980, CRS will spend $4.4 million for crisis resolution activity.
CRS's conciliation and mediation efforts will be directed to fostering improved relations and understanding between law enforcement officials and minority groups. Assistance to communities will
continue to minimize the occurrence of racial or ethnic conflict
resulting from school desegregation, especially in those communities where complex transportation plans or major redistricting are
proposed to accomplish desegregation.
Civil rights research and information dissemination.—Expenditures grouped in this category represent Federal research to overcome discriminatory practices. Outlays in this area are estimated
at $12.1 million in 1980.
• The budget proposes $11.1 million of outlays for the Commission on Civil Rights to carry out its factfinding function relating to denials of equal protection under the law.
• The Women's Bureau, within the Department of Labor, promotes the welfare and improved economic status of working
women. The Bureau publishes and disseminates information
to assist women directly and through employer and union
organizations and government agencies. In addition, the
Bureau provides services to both the National Advisory Committee for Women and the Interdepartmental Task Force on
Women, established by President Carter in Executive Order
12050.
• The Fair Housing and Equal Opportunity program in the
Department of Housing and Urban Development conducts research and demonstration projects in methods for broadening
housing opportunities for minorities, including Native Americans and women.
• The Women's Action Program in HEW, together with the
Secretary's Advisory Committee on the Rights and Responsibilities of Women, has a 1980 budget of $0.3 million to analyze
the effects of HEW programs and policies on women, and to
recommend changes identified by this analysis.
272
THE BUDGET FOR FISCAL YEAR 1980
Table J-2. FEDERAL CIVIL RIGHTS OUTLAYS BY TYPE OF ACTIVITY
(In millions of dollars)
1978
actual
Type of activity
Complaint conciliation
Complaint investigation
Compliance review and monitoring
Legal enforcement
Program direction and research
Technical assistance
Upward mobility
Military services equal opportunities
1979
estimate
1980
estimate
27.7
82.6
94.7
23.8
100.5
22.0
63.8
32.9
33.5
131.0
133.5
28.3
131.2
22.8
78.0
34.2
448.0
Total
30.5
117.6
130.8
24.4
122.7
22.5
73.5
33.6
555.6
592.5
Civil rights reorganization.—The President's Task Force on Civil
Rights Reorganization was established as part of the President's
Reorganization Project in the Office of Management and Budget.
The unit studies civil rights compliance programs in order to develop recommendations to promote better execution of the laws and
improve program management and efficiency.
The first phase of the Task Force's Study, the examination of
Federal equal opportunity compliance programs, was the basis of
Reorganization Plan No. 1 of 1978, which became effective on May
5, 1978. The second phase of the study focused upon agency compliance efforts in federally assisted services, housing, and credit programs. The Task Force will submit the recommendations growing
out of the second phase of its study to the President in early 1979.
Table J-3. CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND AGENCY
(In millions of dollars)
1978
actual
Department of Agriculture
Department of Commerce
Department of Defense
Department of Health, Education, and Welfare
Department of Housing and Urban Development...
Department of Justice
Department of Labor
Department of Transportation
Office of Personnel Management12
Department of State
Commission on Civil Rights
Equal Employment Opportunity Commission
General Services Administration
Postal Service3
Small Business Administration
Allother
Total
1979
estimate
7.9
1.4
37.4
36.9
8.4
30.5
46.3
2.2
188.4
*
10.4
74.2
1.1
(17.3)
.9
2.0
8.5
.8
38.3
68.1
8.9
33.8
49.7
2.1
217.7
*
10.8
111.9
1.1
(19.0)
1.3
2.6
8.6
.9
39.3
65.6
13.1
38.1
54.2
2.2
230.7
*
11.1
124.0
.2
(20.3)
1.5
3.0
448.0
555.6
592.5
* Less than $100 thousand.
1
Include outlays for all Federal service equal employment opportunity, including Upward Mobility,
Formerly Civil Service Commission.
3
Postal Service outlays appear in the Annexed Budget and are included here for memorandum purposes only.
2
1980
estimate
SPECIAL ANALYSIS K
ENVIRONMENT
In 1980, 20 Federal agencies and departments expect to have
outlays of $11.6 billion for environmental programs. This is an
increase of more than $100 million over 1979 Federal outlays of
$11.5 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 category from 1976 to 1980 are shown in the following chart.
Environmental Outlays, by Catesory 1976-1980
] Protection and Enhancement
Understanding, Describing and Predicting
Pollution Control and Abatement
5 -
As the chart indicates, total Federal outlays for environmental
programs have increased by 55% since 1976. (Total Federal outlays
for all Government programs have increased 45% during the same
period.) Pollution control and abatement activities, including construction grant programs administered by several agencies, rank
first in size of programs while protection and enhancement and
273
274
THE BUDGET FOR FISCAL YEAR 1980
understanding, describing, and predicting rank second and third
respectively.
The relationship between budget authority and outlays in each
category from 1978 to 1980 is shown in table K-l.
Table K-l. BUDGET AUTHORITY AND OUTLAYS—FEDERAL ENVIRONMENTAL PROGRAMS
(In millions of dollars)
1978
actual
Activities
BUDGET AUTHORITY
Pollution control and abatement
Construction grants
Understanding, describing, and predicting
Protection and enhancement
1979
estimate
1980
estimate
2,464
4,579
2,296
2,947
12,520
2,626
3,575
2,341
2,939
2,827
3,788
2,337
2,677
10,777
Total
12,769
2,245
3,689
2,155
2,688
OUTLAYS
Pollution control and abatement
Construction grants
Understanding, describing, and predicting
Protection and enhancement
3,128
4,014
2,388
2,990
12,286
Total
2,833
4,314
2,467
3,155
11,481
11,629
Federal expenditures include both direct outlays (in-house activities) and grants to State or local governments or to the private
sector. In 1980, grants will comprise 43% of environmental outlays.
The distribution of 1980 Federal outlays for environmental programs according to direct spending or grants is summarized below.
1980 FEDERAL OUTLAYS FOR ENVIRONMENTAL PROGRAMS
(In millions ot dollars)
Outlays
Direct
Protection and enhancement
Understanding, describing, and predicting
Pollution abatement (excluding construction grants)
Construction grants
Total
1
2
Grants
1,795
2,337
2,444
(*)
882
f1)
383
3J88
6,576
5,053
Understanding, describing, and predicting grants are not separately identifable.
Not applicable.
In addition to budget outlays, the Federal Government supports
the environmental effort through the Federal tax system. Revenue
losses result primarily from provisions in the tax code for investment tax credits and the exclusion of interest income from pollution control bonds. Pollution control facilities amortized over 5
years may qualify for a 10% investment tax credit, while a 5%
credit is allowed in the case of tax exempt financing. The total
SPECIAL ANALYSIS K
275
investment tax credit provisions for pollution control facilities will
result in an estimated 1980 revenue loss of $740 million. Revenue
losses resulting from the exclusion of interest on pollution control
bonds are estimated to be $460 million in 1980. These bonds are
issued by State and local governments to finance pollution control
facilities used by private firms and individuals. Additional revenue
losses result from certain payments, made by customers (including
gas and electric utilities) of water and sewage disposal facilities to
finance construction of new facilities, that are treated as contributions to capital rather than income. These exclusions will result in
an estimated 1980 revenue loss of $60 million. Federal tax revenue
losses are not included in any tables of this Special Analysis, but
are discussed in more detail in Special Analysis G, "Tax Expenditures".
POLLUTION CONTROL AND ABATEMENT
In 1980, pollution control and abatement outlays represent 57%
of total Federal outlays for environmental protection. These outlays consist of the sum of the outlays identified in table K-l as
pollution control and abatement and construction grants. In 1980,
outlays are expected to be $6,615 million. Approximately 54% ($3.6
billion) of these outlays are Environmental Protection Agency
grants for the construction of sewage treatment facilities.
Pollution control and abatement activities include three 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 34% of Federal outlays
for pollution control in 1980. There are also several other areas of
activity which include grants to State and local governments for
the establishment and operation of pollution control programs,
grants for research and development, and funding for education
and training activities. Budget authority and outlays for these
activities are shown in table K-2.
T H E B U D G E T F O R ]FISCAL YEAR 1980
276
Table K-2. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BV' FUNCTION
(In millions of dollars)
Activities
1978
actual
1979
estimate
1980
estimate
BUDGET AUTHORITY
Financial aid to State, interstate, and local governments
Research and development
Standard setting and enforcement
Reduction of pollution from Federal facilities
Education and training
4,305
1,111
775
644
8
279
299
7,043
7,147
7,142
3,972
836
524
431
15
3,892
918
666
520
13
4,127
1,017
684
557
12
156
Total
4,646
964
688
560
10
215
Other
4,856
960
566
434
12
192
218
6,201
6,615
OUTLAYS
Financial aid to State, interstate, and local governments
Research and development
Standard setting and enforcement
Reduction of pollution from Federal facilities
Education and training
Other
Total
5,934
Activities involved.—Financial aid.—In 1980, Federal aid to State
and local governments is estimated to be $4,127 million. Ninety-two
percent of this will be used for construction of sewage treatment
facilities, funded primarily through the Environmental Protection
Agency (EPA). Most of these expenditures result from over $27
billion appropriated through 1979 under authority of the Federal
Water Pollution Control Act of 1972 and the Clean Water Act
Amendments of 1977. EPA's funds are provided to meet the most
critical sewage treatment needs as soon as practicable.
The Economic Development Administration of the Department of
Commerce and the Department of Agriculture also fund treatment
facilities. Additionally, HUD community block grants 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.
Research, development, and demonstration.—Outlays for research, development, and demonstration are expected to be $1,017
million in 1980. These outlays include research whose primary
purpose is to abate pollution ($838 million) and research conducted
for other reasons but with the secondary effect of reducing pollu-
SPECIAL ANALYSIS K
277
tion ($179 million). Other environmental research is reported under
understanding, describing, and predicting the environment. 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-nine percent of environmental pollution control and
abatement research and development outlays will be expended by
EPA. As a result of cross-agency zero-based budget reviews, the
administration proposes to target approximately $15 million of National Cancer Institute research and $8 million of Department of
Energy research to support the Environmental Protection Agency's
environmental regulatory mission, primarily in the areas of toxic
substances and air quality control. Other agencies with spending in
this category include the Department of Energy (DOE), National
Aeronautics and Space Administration (NASA), and the Department of the Interior. These agencies directly spend 44% 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 for pollution control
and abatement begins with identification of pollutants and their
sources; then there is an assessment of the pollutant's 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 K-2 is divided further
into the various types of research detailed above. In 1980, 29% of
the pollution control research and development outlays will be
spent to develop control technology, 20% will be spent on the
health effects of pollution control and 31% on the sources and
environmental effects of pollution. The remaining 20% will be used
for monitoring research, grants, and administrative costs. Since
1976 pollution research outlays have increased 49%.
Examples of pollution abatement research and development activities in 1980 include:
• Research and development applied to the production, processing, distribution, use and disposal of possible toxic chemicals
(EPA)
• Research to control pollution generated by the manufacture,
storage, maintenance and disposal of weapons and to assess
the resulting health effects (Army)
278
THE BUDGET FOR FISCAL YEAR 1980
• Research to insure that there are minimum adverse environmental effects from the Nation's expanding energy technologies (EPA, DOE, DOI)
Standard setting and enforcement.—As shown in table K-2, outlays for standard setting and enforcement are estimated to be $684
million in 1980—a 3% increase from 1979. 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 planning, 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 spending in the area are EPA, the
Occupational Safety and Health Administration (OSHA), DOE, and
the Department of Transportation (DOT). Examples of activities
performed by these agencies are: (1) promulgation of primary and
secondary drinking water regulations specifying the maximum permissible bacteriological and chemical levels: (2) contract studies to
assess the environmental impact of proposed OSHA standards; and
(3) surveillance activities associated with site studies and storage
operations for the DOE radioactive waste management program.
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 that facility. It is estimated that Federal agencies with
environmental programs will spend $557 million for this purpose in
1980.1 These expenditures include remedial actions to control pollution, the additional costs of switching to cleaner fuels, and operational and administrative costs of controlling pollution.
Outlays for these programs will increase 7% in 1980. Remedial
actions such as the installation of electrostatic precipitators, dust
collectors, and sewage systems will comprise 69% of these outlays.
Of the outlays reported in this category, $418 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 bases, and improvement
of the different types of Navy sewage systems.
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.
SPECIAL ANALYSIS K
279
Education and training.—In 1980, Federal funds of $12 million
will be used for various education and training programs that
relate to improving the Nation's pollution abatement capabilities.
Of these funds, 59% are for in-house training, with the remainder
used for fellowships and training grants. Agencies involved in these
programs are EPA, DOD, the National Science Foundation, and the
Department of Transportation.
Other control and abatement activities.—Other outlays for pollution control and abatement will increase by $26 million in 1980 to
$218 million. Included in this category are the costs of constructing
and equipping new facilities occupied and maintained by EPA.
Other items are the construction of Indian sanitation facilities by
HEW, technical assistance funds, and public information costs.
Pollution abatement by media—Table K-3 presents Federal outlays and obligations for pollution control and abatement activities
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
K-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.
Table K-3. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY MEDIA OR POLLUTANT
(In millions of dollars)
Outlays
1978
actual
Media polluted:
Water
Construction grants or loans
Other
Air
Land
Other and multimedia
Total
Selected pollutants: x
Solid waste
Pesticides
Radiation
Noise
Toxics
1
Obl| ations
g
1978
actual
1979
estimate
1980
estimate
4,537
(3,751)
(786)
414
93
721
3,922
(3,074)
(848)
456
132
860
4,624
(3,650)
(974)
491
199
1,051
4,725
(3,735)
(990)
628
264
1,112
5,765
5,370
6,365
6,729
488
72
163
35
34
152
80
188
46
49
247
98
175
51
134
274
95
181
33
209
Funds for selected pollutants are included in "media" distribution above.
Table K-3 only shows amounts spent for each medium and pollutant; it gives no indication of how the money was spent. For
280
THE BUDGET FOR FISCAL YEAR 1980
example, outlays during 1978 for water pollution control (excluding
construction grants) were made primarily for the reduction of pollution from Federal facilities (44%), and for standard setting and
enforcement (30%). Expenditures for land pollution are concentrated in efforts to reduce pollution from Federal facilities (26%) and
in research and development, while expenditures for air pollution
are primarily devoted to research and development.
Table K-3 also shows selected pollutants for which pollution
abatement expenditures are made. Of the pollutants shown, solid
waste will receive the most funding in 1980. EPA will spend 26% of
these funds for its solid waste management program. The program
emphasizes land disposal, hazardous waste management, and State
program development.
Pollution control and abatement by agency.—Federal budget au-
thority and outlays for pollution control and abatement are presented by agency in table K-4.
Table K-4. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY AGENCY
(In millions of dollars)
Agency
1978
actual
1979
estimate
1980
estimate
BUDGET AUTHORITY
Environmental Protection Agency
Defense—Military
Energy
Agriculture
Interior
Transportation
Commerce
National Aeronautics and Space Administration..
Defense—Civil
Labor
Health, Education, and Welfare
Other agencies
5,411
50
5
44
1
19
7
10
8
13
4
5
6
6
9
2
8
2
9
5
0
3
8
5,087
69
2
50
3
28
1
20
5
14
4
6
0
8
2
2
7
3
1
5
0
3
4
7,043
Total
5,499
42
2
44
3
16
7
15
5
19
2
3
5
7
7
3
0
2
7
2
2
3
7
7,147
7,142
4,072
423
395
213
94
107
395
72
30
26
3
104
4,194
493
426
233
137
125
429
72
28
29
6
29
4,754
518
493
230
206
134
105
78
27
30
6
34
5,934
6,201
6,615
OUTLAYS
Environmental Protection Agency
Defense—Military
Energy
Agriculture
Interior
Transportation
Commerce
National Aeronautics and Space Administration..
Defense—Civil
Labor
Health, Education, and Welfare
Other agencies
Total
SPECIAL ANALYSIS K
281
Main agency activities.—Outlays by the Environmental Protection
Agency represent 72% ($4,754 million) of the total expected outlays
for pollution control and abatement in 1980. Of these outlays,
$3,600 million will be for sewage treatment facility grants. Abatement and control activities will account for 35% ($407 million) of
the estimated outlays for EPA's operating programs in 1980 (construction grants are excluded from operating programs). These
funds support a wide variety of programs that range over the
different media. Within the media of water, air, solid waste, radiation, pesticides, noise, and toxic substances, EPA must perform
the duties of standard setting, enforcement, planning, monitoring,
surveillance and permits issuance. EPA also offers technical assistance to State and local agencies to help them implement these
various pollution control efforts.
EPA's research and development programs are expected to spend
$401 million in 1980. 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 assure that data gathered by
both government and nongovernment laboratories is accurate, comparable and legally defensible.
The Department of Defense—Military is planning to spend $518
million in 1980 for pollution abatement and control programs.
Funds are expended by the three services and the Defense Logistics
Agency primarily for pollution abatement at Federal facilities.
Other expenditures are for pollution abatement and control research and development. Outlays of $30 million are also included
for such activities as the development of prediction models for
hydrocarbons and trace metals from Navy sources, the assessment
of the effects of certain Air Force pollutants on man, and Army
compliance with State and local landfill permit requirements.
The Department of Energy will spend $493 million in 1980 on a
wide variety of environmental programs. Activities include monitoring functions at DOE-owned facilities, feasibility studies to determine if further reductions in effluents are possible and improving techniques for controlling pollution, monitoring and surveillance. Research activities include pollutant transport and fate, developing methods to convert coal to oil or gas, prevention and
abatement of pollution from processing plants and the recovery of
valuable constituents in mineral processing wastes.
The Department of the Interior will spend $206 million for pollution control and abatement programs in 1980. The Office of Surface
Mining will spend $110 million on programs to regulate surface
mining operations in cooperation with coal-producing States and to
reclaim previously mined lands through grants to States and direct
280-700 O - 79 - 18
282
THE BUDGET FOR FISCAL YEAR 1980
Federal projects. The Bureau of Reclamation will spend $3 million
on developing a comprehensive water management plan for the
Colorado River Basin which will optimize water use while maintaining the salinity levels of the river. Water quality research
activities are undertaken to find better ways to manage water
supply systems and methods of use. The Bureau of Mines will
spend $8 million on activities that include a metallurgy research
program that is exploring ways to reduce or eliminate pollution
generated by mineral processing operations. Also, the mining environmental research program is directed toward the elimination or
reduction of the environmental problems associated with the extraction of minerals. The Geological Survey will spend $23 million
on pollution control activities associated with the National Petroleum Reserve in Alaska which are directed toward cleaning up the
petroleum exploration activities within the Reserve. Also, research
is being conducted on deep waste storage along with monitoring
and surveillance on the Outer Continental Shelf. The Bureau of
Land Management devotes its expenditures of $17 million in this
area to the development of environmental assessments and statements for proposed development, resource use or management
action on public land.
The Department of Agriculture conducts a variety of environmental programs. Outlays for 1980 will be $230 million. The Economics,
Statistics and Cooperatives Service will spend the majority of its $3
million on estimating economic costs of new technology and management to reduce pollution from farm and food processing activities. The Forest Service will spend $13 million primarily on research to find less persistent, safer chemical controls for several
forest insect pests and mechanisms to determine air pollution
damage for some conifer and hardwood trees. The Cooperative
State Research Service will spend $27 million on funding States on
a competitive basis to do research to reduce costs of controlling
pollution resulting from the production and processing of agricultural products. The Farmers Home Administration will spend $112
million primarily on loans and/or grants to local community organizations in rural areas to collect and treat domestic sewage and
solid waste. The Extension Service within the Science and Education Administration will spend most of its $6 million trying to
establish multiple and alternative choice systems of pest control
that are effective, economical and environmentally sound. The Soil
Conservation Service devotes a significant portion of its $7 million
to prevention and abatement of agriculture-related pollution such
as fertilizer residue, sediment and runoff contaminated by chemical
or animal waste.
The Department of Transportation conducts environmental programs designed to enhance compatibility between transportation
SPECIAL ANALYSIS K
283
systems and the environment, and to alleviate the adverse impacts
of transportation facilities while promoting more efficient use of
energy resources. Outlays of $134 million are planned in 1980. The
Coast Guard will spend $78 million on activities that include research to develop all-weather means of identifying and quantifying
discharges of oil and hazardous substances, and equipment to contain and recover oil discharges in various types of sea conditions.
The Federal Aviation Administration will spend $18 million to
continue its initiative to sponsor comprehensive noise abatement
planning within airport master planning. Also, research is being
started to study the effects of aviation-related pollutants on health.
The Federal Highway Administration will spend $2 million to examine the highway air quality problem as a function of traffic,
geometry and weather conditions, with particular emphasis on congested, partially enclosed and joint development areas. The Urban
Mass Transportation Administration will spend $35 million on activities that include a rail technology project to study the origin of
rail-produced noise and means of reducing such noise.
The Department of Commerce estimates $105 million in outlays
for pollution control and abatement in 1980. The Economic Development Administration ($96 million) and the Regional Action Planning Commission ($4 million) provide grants and loans for the
construction of water and waste treatment facilities and water and
sewer lines where these items are needed to foster economic development. The National Oceanic and Atmospheric Administration ($5
million) activities in this area include developing a cost-effective
and comprehensive Federal effort to research and monitor ocean
pollution. The National Bureau of Standards is developing reference standards and measurement systems for air, water, and noise
pollution. The Maritime Administration activities will be related to
continual evaluation of improved tanker design, construction and
operation, as well as navigational equipment, tank cleaning methods, and maneuvering and handling of large tankers.
Most of the National Aeronautics and Space Administration's
pollution control outlays of $78 million are for spacecraft research
and development to develop ways to use aerospace technology to
help in monitoring and controlling pollution. The Nimbus-G Mission will provide data on atmospheric and oceanic pollution. In
addition, an automated system for monitoring water quality in
water treatment systems is being developed as well as an emissions
reduction technology to reduce aircraft exhaust emissions and
noise levels to acceptable levels over the entire range of flight
speeds from take-off, cruise and landing.
The Army Corp of Engineers will spend $27 million on environmental activities that will evaluate and reduce environmental
problems associated with Corps reservoirs and waterway activities.
284
THE BUDGET FOR FISCAL YEAR 1980
One of the ways that the Corps accomplishes this is by preparation
of environmental impact statements for all projects. This includes
biological, cultural and physical inventories, along with impact
assessments. The Corps is also performing research on improved
waste water techniques through the use of land treatment.
The Tennessee Valley Authority will spend $8 million on a diverse environmental quality control research and development and
pollution control program. TVA's regional water quality management program maintains surface and groundwater for propagation
of fish and wildlife, recreation and aesthetic satisfaction. Strip
mine reclamation research is conducted to protect environmental
values and to restore mine land to useful production. Also, TVA
has a program for abatement of pollution in fertilizer production,
which is directed toward avoiding environmental damage from the
manufacture and use of fertilizer.
The Nuclear Regulatory Commission will spend $7 million writing standards for construction specifications of nuclear powerplants to prevent the release of radioactive pollutants. Also included are the resources required to prepare environmental impact
statements for construction permits, operating licenses, early site
reviews, and fuel processing plants.
The Health Services Administration, in the Department of
Healthy Education, and Welfare will spend $6 million in 1980 primarily on construction of sanitation facilities for Indian homes. As
a result of this direct Federal construction operation, approximately 4,000 homes were served in 1978. In 1979, 8,200 will be served
and in 1980 another 7,130 will be served.
Other agencies with outlays not listed separately in table K-4
are the Appalachian Regional Commission, the Department of Justice, Department of State, Veterans Administration, National Science Foundation and the Smithsonian Institution.
UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT
Fourteen Federal departments and agencies will spend 99% of
the $2,337 million in outlays in 1980 to describe the physical characteristics of the environment, to increase understanding of the
environment, and to predict environmental conditions. 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 K-5, 34% of these outlays in 1980 will
support efforts to locate and describe natural resources. These
expenditures include such activities as soil mapping and snow and
river basin surveys. Environmental observation and measurement
efforts that help describe and predict weather, ocean conditions,
SPECIAL ANALYSIS K
285
earthquakes and stream and groundwater quantity and quality will
account for $779 million in 1980 expenditures—an increase of 4%
from 1979 levels.
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 affect human
health.
Table K-5. UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT—BY FUNCTION
(In millions of dollars)
1978
actual
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....
Total
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
1979
estimate
1980
estimate
254
499
265
506
302
499
282
501
331
569
335
420
28
186
18
280
248
21
189
15
310
261
20
187
19
319
287
2,296
2,467
2,388
255
489
246
504
283
496
256
432
301
536
339
447
23
174
18
266
242
22
175
15
286
256
19
171
18
301
263
2,155
2,341
2,337
Table K-6 shows the distribution of total budget authority and
outlays for the major agencies involved.
THE B U D G E T FOR F I S C A L Y E A R 1980
286
Table K-6. UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT—BY AGENCY
(In millions of dollars)
Agency
BUDGET AUTHORITY
Interior
Commerce
Health, Education, and Welfare
National Aeronautics and Space Administration..
Defense—Military
Agriculture
National Science Foundation
Energy
Transportation
Defense—Civil
Smithsonian Institution
Other
Total
OUTLAYS
Interior
Commerce
Health, Education, and Welfare
National Aeronautics and Space Administration..
Defense—Military
Agriculture
National Science Foundation
Energy
Transportation
Defense—Civil
Smithsonian Institution
Other
Total
1978
actual
1979
estimate
1980
estimate
641
448
244
202
217
180
171
112
17
23
12
29
695
475
273
234
222
186
171
123
17
23
12
36
530
492
276
256
206
199
187
147
18
28
14
35
2,296
2,467
2,388
563
439
232
183
209
180
167
102
16
23
12
29
665
463
251
200
213
181
171
111
16
23
12
35
543
474
265
257
202
198
177
139
17
28
3
34
2,155
2,341
2,337
Agencies involved.—Within the Department of Commerce, the National Oceanic and Atmospheric Administration will spend $474
million on conducting a multidisciplinary effort in ocean and coastal mapping investigations, climate and weather research, environmental monitoring and prediction activities and data archiving and
dissemination services. Increases in 1980 will provide for ocean
wave statistics, marine prediction research, the improvement of
weather monitoring, prediction and warning, and a joint Federal
program in remote sensing for agricultural crop prediction programs.
The Department of the Interior plans to spend $543 million in
1980 in this category. Most of this money (68%) will be spent by
the Geological Survey to continue programs to characterize and
map mineral resources, geologic hazards, water resources and land
uses.
The Bureau of Reclamation ($8 million) conducts a program for
precipitation enhancement. The goal is to develop cloud seeding
SPECIAL ANALYSIS K
287
technologies in order to increase the supply of water in the arid
Western States. The Bureau of Land Management ($66 million)
conducts resource inventories for offshore and onshore minerals,
forestry, recreation, wilderness and wildlife habitat management.
The U.S. Fish and Wildlife Service ($54 million) conducts a variety
of activities in this area. These include developing methodologies to
improve methods of measuring impacts from resource development.
Also, various surveys to prepare maps and charts are conducted.
These include the national wetlands inventory and the western
energy and land use team map activities. The Office of Surface
Mining ($32 million) will continue to compile an inventory of abandoned mine lands, which will help establish priorities for future
Federal and State reclamation work, and will fund research on
mining and mineral resources through support to State mineral
institutes.
The National Aeronautics and Space Administration plans to
spend $257 million in 1980 on research and development to enhance its ability to locate and describe natural phenomena related
to the environment, the oceans, weather, and earthquakes.
These activities include developing the capacity to make accurate
long term (two weeks) and short term (two hours) predictions.
NASA will also spend $152 million in 1980 for research and development to locate and describe natural resources through its resources observations programs. Other research programs are aimed
at providing magnetic field survey maps and exploring the Earth's
upper atmosphere for natural and man-made anomalies.
In the Department of Health, Education, and Welfare, the National Institute of Environmental Health Sciences and the National
Cancer Institute will spend $265 million in 1980. The National
Institute of Environmental Health Sciences seeks to increase the
understanding about environmental agents that can adversely
affect man's health either immediately or over time and to determine the human health hazard resulting from exposures to chemical, physical and biological agents in the environment. Special
emphasis is given to: (1) prediction, detection and assessment of
environmentally caused diseases and disorders; (2) mechanisms of
environmental diseases and disorders; and (3) environmental
health research and manpower development resources. The National Cancer Institute's major responsibility is to determine the causes
of cancer and the mechanism of its prevention. It has been estimated that a high percentage of human cancer is environmentally
related, so that the Institute concerns itself with cancers caused by
environmental agents.
The Department of Defense will spend $202 million on understanding, describing and predicting the environment. The Air
Force will spend $114 million on various studies relating to mete-
288
THE BUDGET FOR FISCAL YEAR 1980
orology; development of ground and airborne sensing techniques;
weather radar techniques; satellite meteorology; terminal weather
forecasting; determining extremes and variability of meteorological
elements; numerical weather prediction from math/physics models;
and thunderstorm and cloud dynamics.
The Army will spend $3 million in 1980 to gather data from a
wide variety of programs and staff agencies in order to comply
with local regulations. Surveys to identify all sources of air and
water pollution on Army installations have also been instituted.
The Department of Agriculture will spend $198 million in 1980.
The Soil Conservation Service will spend $164 million to complete
detailed soil mapping on approximately 50 million acres in 1980. In
the snow survey program, about 8,000 snow source measurements
will be made and 4,935 water forecasts will be issued. In the River
Basin Survey program, 55 regional or river basin surveys were
underway in 1979 and will be continued in 1980. The Cooperative
State Research Service will spend $4 million to conduct research
and development through remote sensing from aerial and space
platforms, by making use of multispectral photographic, multispectral scanner, thermal infrared and microwave technology, as well
as through varous biophysical and biochemical techniques.
The National Science Foundation plans to spend $177 million to
fund a broad range of research activities that will increase the
Nation's base of knowledge of the environment. Foundation supported efforts include research projects in the atmospheric, earth,
and ocean sciences and in environmental biology. Major programs
include the global atmospheric research program, the international
decade of ocean exploration, and the climate dynamics program. In
1980, particular emphasis will be given to research to improve the
knowledge base needed for more accurate and longer range forecasts of weather and climate; to efforts to increase the Nation's
capability to understand and manage the threats to man and environment posed by the use of chemicals and the use and disposal of
water and waste waters; and to provide a scientific basis for reducing loss of life and property and the disruption of vital and ecological and community relationships from earthquakes and other natural hazards.
ENVIRONMENTAL PROTECTION AND ENHANCEMENT
In 1980, 12 Federal agencies are expected to spend $2,677 million
to protect and enhance the environment. As table K-7 shows, 67%
of 1980 outlays are direct Federal activities and the balance is for
Federal grants to State and local governments.
289
SPECIAL A N A L Y S I S K
Table K-7. ENVIRONMENTAL PROTECTION AND ENHANCEMENT ACTIVITIES—BY FUNCTION
(In millions of dollars)
Activities
1978
actual
1980
estimate
1979
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
298
12
283
121
74
166
329
11
307
145
91
123
428
24
307
151
69
120
954
1,006
1,099
145
668
432
540
76
132
173
541
421
629
101
284
140
431
458
530
117
215
1,993
2,149
1,891
2,947
3,155
2,990
425
9
158
121
39
95
447
14
212
112
48
158
300
18
243
114
45
162
847
991
882
132
647
372
438
63
189
169
495
387
487
100
310
137
393
428
521
113
203
Subtotal
1,841
1,948
1,795
Total
2,688
2,939
2,677
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
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
The major activities in this category are:
• City recreation projects to develop parks and recreational
facilities in urban areas.
290
THE BUDGET FOR FISCAL YEAR 1980
• 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 and national fish hatcheries, grants to States for fish,
wildlife, and endangered species management, and other similar projects.
• Historic preservation and rehabilitation, including national
historic sites, military parks, and other federally assisted historic preservation and rehabilitation projects.
These protection and enhancement activities are categorized in
table K-7 as direct Federal spending or as grants to State and local
governments for these activities. Table K-8 lists the departments
and agencies making these expenditures.
Table K-8. ENVIRONMENTAL PROTECTION AND ENHANCEMENT—BY AGENCY
(In millions of dollars)
Agency
BUDGET AUTHORITY
Interior
Housing and Urban Development
Defense—Civil
Commerce
Agriculture
Labor
Other agencies
1978
actual
1979
estimate
2,033
239
203
275
170
1980
estimate
1,964
23
4
26
4
15
7
19
6
17
6
2
6
2,947
Total
27
2,111
26
5
24
3
11
6
18
4
27
1
2
8
3,155
2,990
1,613
175
203
375
156
139
27
1,642
15
9
24
3
33
9
17
3
37
0
3
1
1,628
10
8
26
4
29
8
13
5
13
5
2
8
2f688
2,939
2,677
OUTLAYS
Interior
Housing and Urban Development
Defense—Civil
Commerce
Agriculture
Labor
Other agencies
Total
Agencies involved.—The Department of the Interior will spend
$1,628 million in 1980. The National Park Service will spend $468
million in 1980 for activities of the National Park System. These
funds will be for operation, maintenance, general administration,
planning and construction of facilities within the National Park
System.
SPECIAL ANALYSIS K
291
The Heritage Conservation and Recreation Service (HCRS), formerly the Bureau of Outdoor Recreation, will spend $541 million to
serve as a focal point in Government to develop and execute a
nationwide coordinated effort in the provision of outdoor recreation
opportunities and in the identification and preservation of natural
and cultural heritage resources. HCRS also administers two major
funds: The Land and Water Conservation Fund, which finances
Federal land acquisitions for preservation and recreation purposes,
and state grants for recreational land acquisition and development;
and the Historic Preservation Fund which provides matching
grants-in-aid to the States and the National Trust of Historic Preservation for planning, inventories, and for individual historic preservation projects.
The Bureau of Land Management ($18 million) administers a
total recreation program of management, construction, and maintenance, historic preservation, sports fisheries and wildlife and endangered species programs. The Fish and Wildlife Service ($576
million) operates and constructs facilities at wildlife refuges and
fish hatcheries, administers the Endangered Species program, and
makes grants to states to benefit fish, wildlife, and their habitats.
When other non-Federal entities are unable to do so, the Bureau
of Reclamation ($25 million) directly operates and maintains facilities in an effort to preserve natural resources under its control, to
protect the environment, and to assure future generations that
adequate recreational facilities will be available.
The Department of Housing and Urban Development estimates
outlays of $180 million for financial aid to State and local governments for environmental protection and enhancement activities.
One such activity is the community development block grant program which will fund 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.
The Corps of Engineers will spend $246 million, primarily for
planning, design, construction, operation and maintenance of facilities for public visitation and enjoyment of opportunities for outdoor
recreation at reservoirs and other Corps projects. Other activities
include the forest management program, which manages forest
resources at civil work projects to increase their value for recreation and wildlife habitat, and to promote natural ecological conditions by following accepted conservation practices. Under its lakeshore management program, the Corps manages and projects the
shorelines of all lakes under its jurisdiction.
The Department of Agriculture will spend $153 million in 1980 to
protect and enhance the environment, primarily through the
292
THE BUDGET FOR FISCAL YEAR 1980
Forest Service and the Soil Conservation Service. Forest Service
research ($112 million) develops and makes available the knowledge and technologies required to maintain and enhance the environment of the Nation's forest and related lands while meeting
expanding demands for timber and various other goods and services from the land. Examples of major accomplishments in 1980 are
new logging systems that reduce environmental impacts during
harvesting and improved methods of controlling streamflow by
manipulation of vegetation. The Soil Conservation Service will
spend $38 million in 1980 primarily for technical assistance to soil
and water conservation districts and for recreation area improvement.
The Department of Commerce will spend $289 million in 1980.
The technical assistance program of the Economic Development
Administration will spend $93 million to fund public and private
community institutions to enhance their capability to coordinate
and manage public services, some of which are related to park and
recreational facilities. The National Oceanic and Atmospheric Administration ($149 million) continues to provide funds to States to
study, gather data, and train personnel in the conservation of our
coastal resources. Increases in 1980 will provide for energy impact
formula grants and additional program administration grants.
Other program increases include the enhancement and restoration
of marine fishery resources and conservation of endangered marine
species.
The Tennessee Valley Authority will spend $8 million in 1980 on
its Land Between the Lakes project in western Kentucky and Tennessee. The project is a demonstration of new ideas in public outdoor recreation and conservation education. The project includes a
variety of facilities where an urbanizing population can use part of
its increased leisure to renew its acquaintance with the land and
gain new understanding of modern concepts of resource use and
conservation.
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 are summarized in
table K-9. Total Federal funding for research and development
programs related to environmental improvement will reach an estimated $2,240 million in 1980. This represents a 10% increase over
1979 outlays.
Federal funding for environmental research and development is
distributed between pollution control and abatement activities and
programs relating to understanding, describing, and predicting the
SPECIAL ANALYSIS K
293
environment. Research and development expenditures for environmental protection and enhancement programs, to the extent that
they exist, are not included in table K-9 because these expenditures are not reported separately.
Table K-9. ENVIRONMENTAL RESEARCH AND DEVELOPMENT ACTIVITIES
(In millions of dollars)
Category
BUDGET AUTHORITY
Pollution control and abatement1 ...
Understanding, describing, and predicting
Total
OUTLAYS
Pollution control and abatement
Understanding, describing, and predicting
Total
1
Includes both primary and secondary research and development.
280-700 O - 79 - 19
1978
actual
1979
estimate
1980
estimate
960
1,110
965
1,203
1,111
1,282
2,070
2,168
2,393
836
1,060
918
1,126
1,017
1,223
1,896
2,044
2,240
SPECIAL ANALYSIS L
RESEARCH AND DEVELOPMENT
This analysis summarizes the funding of research and development (R. & D.) in the budgets of 29 separate departments and
agencies. It consists of two parts. The first highlights the R. & D.
programs and trends in the 1980 budget. The second describes in
more detail the R. & D. programs of the 12 agencies whose 1980
obligations for R. & D. are each expected to surpass $100 million.
R. & D. is not a separately budgeted activity of the Federal
Government. Decisions on R. & D. funding, as reflected in the
budget, are made primarily in the light of the potential contributions of science and technology to meeting particular national
needs and specific agency mission requirements.
Federal R. & D. covers a wide range of activities. In varying
degrees, agency R. & D. programs include support for:
• Basic research (discovering fundamental knowledge);
• Applied research (using that knowledge to meet identified
needs);
• Development (designing, engineering, and demonstrating new
devices, systems, or methods).
The Federal Government focuses its investments in R. & D. to
meet:
• Direct Federal needs—where the sole or primary user of the
R. & D. results is the Government itself; for example, national
defense, space technology, air traffic control, and environmental regulation.
• General economic and social needs—where the Federal Government assumes major responsibility because there are insufficient incentives for the private sector to invest as adequately as may be needed in the national interest; for example, Federal support of basic research and many areas of
medical, agricultural, and educational research.
• Specific national needs—where the Government seeks to augment, but not supplant, the R. & D. efforts of the private
sector because of an overriding national interest and the need
to accelerate or increase the range of technological options
available to the Nation; for example, support for the development of new energy technologies.
294
295
SPECIAL ANALYSIS L
PART I. HIGHLIGHTS AND TRENDS
A significant feature of the 1980 budget is the continued government-wide growth in the funding of basic research. Obligations for
the conduct of basic research are estimated to be $4.6 billion in
1980. This represents an increase of $379 million, 9% over the 1979
dollar level, or about 2% growth above cost increases.
Proposed Federal obligations for the conduct of all research and
development, including basic research, are expected to total $30.6
billion in 1980, an increase of $1.2 billion or 4.2% over 1979, as
displayed in table L-l. Obligations for R. & D. facilities are estimated to increase from $1.5 billion in 1979 to $1.6 billion in 1980.
Table L - l . TOTAL FEDERAL FUNDING FOR CONDUCT OF R. & D. AND RELATED FACILITIES
[In billions of dollars]
Obligations
1979
estimate
1978
actual
Outlays
1980
estimate
1978
actual
1979
estimate
1980
estimate
26 2
13
.
Total
29.4
1.5
30.6
1.6
24.5
1.1
27.6
1.3
29.7
1.5
27.5
Conduct of R. & D
R. & D facilities
30.9
32.2
25.6
28.9
31.2
CONDUCT OF RESEARCH AND DEVELOPMENT
Investment in R. & D. has received close attention in the preparation of the 1980 budget. The funding of individual agency R. & D.
programs reflects both a realistic assessment of how R. & D. can
effectively contribute to national needs and a critical examination
of the appropriate Federal role in R. & D. in meeting these needs.
Table L-2 below identifies the major R. & D. programs by agency
and summarizes the total Federal obligations for R. & D.:
Table L-2. CONDUCT OF R. & D.
[In billions of dollars]
Obligations
Department or agency
1978
actual
1979
estimate
Outlays
1980
estimate
1978
actual
1979
estimate
1980
estimate
Defense
Energy
National Aeronautics and Space Administration
Health, Education, and Welfare
National Science Foundation
Allother
11.5
4.2
13.0
4.6
13.8
4.7
10.7
3.9
12.1
4.5
13.4
4.6
3.9
3.2
0.7
2.7
4.4
3.7
0.8
2.9
4.5
3.7
0.9
3.0
3.8
3.0
0.7
2.4
4.2
3.2
0.8
2.8
4.4
3.6
0.9
2.8
Conduct of R. & D., total.
26.2
29.4
30.6
24.5
27.6
29.7
296
THE BUDGET FOR FISCAL YEAR 1980
Highlights of each of these agency programs are presented below:
Department of Defense.—At $13.8 billion, the obligations for total
conduct of R. & D. in the Department of Defense are larger than
those of any other Federal agency and account for approximately
45% of total Federal support for R. & D. Obligations are estimated
to increase by $882 million, or 7%, over 1979. Development of
major strategic and tactical weapons will continue, while increased
funding will be provided for research and technology related to
longer-range military needs. In 1980 the Department plans to:
• Increase its support for basic research by 17%, from $373
million to $436 million, over 1979;
• Emphasize a new initiative in research on very high speed
integrated circuits (VHSI) for defense applications; and
• Proceed to full-scale development of a new intercontinental
ballistic missile, the MX, to strengthen U.S. strategic deterrence.
Department of Energy.—Obligations for the conduct of R. & D. in
the Department of Energy are estimated to total $4.7 billion in
1980, a slight increase, $23 million, from 1979. This leveling-off
reflects the view that with the rapid build-up of Federal energy
R. & D. over the past 5 years, and with increases in energy prices
and other incentives for private investment, such as provided
through the recently enacted National Energy Act, less reliance
needs to be placed on the Federal budget to meet national needs.
Thus, the Federal Government can now more profitably focus on
longer-term R. & D., where there is less incentive for private
investments. This strategy also reduces the need for the Federal
Government to undertake numerous and large-size demonstrations.
Consequently a more effective national R. & D. effort is expected
even though Federal R. & D. obligations for energy are essentially
the same as the 1979 level.
In keeping with this strategy the Department of Energy plans,
for example, to:
• Increase its support for basic research by 17% over 1979, from
$469 million to $551 million; and
• Increase overall support for solar R. & D. by 24% and longerterm solar-related technology development and applied research by 40%.
At the same time the Department will:
• Decrease support in areas such as demonstrating enhanced oil
and gas recovery and in coal conversion technologies, as well
as hydroelectric and solar heating R. & D.; and
• Reduce near-term conservation technology efforts, recognizing
the shift in emphasis to incentives and tax credits to accelerate energy conservation.
SPECIAL ANALYSIS L
297
In keeping with the Administration's nonproliferation policy, research on nuclear fuel reprocessing is proposed for termination in
1980. Emphasis will instead be placed on the "once through" nuclear fuel cycle that will be used in conjunction with improved and
more efficient light water nuclear power plants. Research is
planned to be devoted to several ways in which we can extend the
use of domestic uranium supplies. The budget proposes ample funding to continue the development of breeder reactor concepts for the
long-term, with $504 million provided for research on the liquid
metal fast breeder reactor. Funds are not provided, however, for
the Clinch River Breeder Reactor as the Administration continues
to feel that this demonstration is both premature and uneconomic.
National Aeronautics and Space Administration.—Obligations for
conduct of R. & D. in NASA are estimated to total $4.5 billion in
1980, $148 million over 1979. The 1980 budget reflects the Administration's commitment to a space program that will capitalize on
the new capabilities of the space shuttle for both practical and
scientific uses. In 1980, NASA proposes to:
• Continue the development of the shuttle for a first manned
orbital flight in 1979 and initial operations in 1981;
• Increase its support for space science, applications and space
technology by 18%, from $894 million in 1979 to $1,059 million in 1980;
• Initiate development of two Explorer spacecraft to conduct
deep space astronomy and to investigate the Earth's magnetic
fields;
• Emphasize a new research initiative in agricultural research
to apply remote sensing to crop production estimation, especially in foreign areas, and to quantitative early warnings of
natural disasters; and
• Emphasize development of advanced technology to encourage
industry development of communications satellite systems
with significantly improved capabilities and thereby maintain
U.S. leadership in this field.
Department of Health, Education, and Welfare.—Obligations for
the conduct of R. & D. in the Department of Health, Education,
and Welfare are estimated to total $3.7 billion in 1980, about the
same level as 1979. The most significant component of the HEW
budget for R. & D. is the National Institutes of Health (NIH).
While NIH obligations will remain at essentially the same level as
1979, obligations have increased substantially in recent years and
outlays will increase by more than $270 million in 1980, or about
10% above the $2.6 billion estimated for 1979. The 1980 budget
proposal for NIH programs thus maintains a strong national effort
in biomedical research. In 1980 NIH plans to:
298
THE BUDGET FOR FISCAL YEAR 1980
• Obligate nearly $3 billion to support a wide spectrum of biomedical and behavioral research designed to promote health
and prevent and control disease; and
• Provide more than $2.6 billion for basic and applied research
in such areas as cancer cause and prevention, human nutrition, genetic research, pulmonary and cardiovascular diseases.
Additional R. & D. funds in 1980 are planned to be devoted to
health-related research in several other components of HEW. An
important initiative is a 19% increase in obligations, from $218
million to $259 million, for mental health, drug and alcohol abuse
research conducted and supported by Alcohol, Drug Abuse and
Mental Health Administration (ADAMHA). This emphasis reflects
the recommendations of the President's Commission on Mental
Health. The 1980 ADAMHA research budget would:
• Expand research on major mental illnesses such as schizophrenia and depression; and
• Increase support for biochemical research on the factors
which predispose some individuals to drug and alcohol abuse.
National Science Foundation.—While not among the largest
R. & D. agencies, the National Science Foundation is of particular
importance among Federal agencies in its support for basic research.
Obligations for the conduct of R. & D. of the National Science
Foundation are estimated to total $910 million in 1980. Within this
total, $828 million is proposed for the support of basic research.
This represents an increase of $87 million or 12% over 1979 and
reflects the Administration's strong commitment to basic research.
In 1980 the Foundation would:
• Assist in maintaining balanced support, on a governmentwide basis, across all fields of science and engineering in the
national interest;
• Increase funding for research equipment and instrumentation
to advance the frontiers of research in many areas of science;
and
• Expand support for fundamental research that addresses critical national needs.
Interagency R. & D. programs.—Among the R. & D. programs
proposed in the 1980 budget are four of particular note that involve
more than one department or agency. These are illustrative of
many areas in which agencies cooperate in research and development to ensure effective overall use of Federal funds.
• Microelectronics and submicron science and technology.—Complementary efforts of the Department of Defense, the National Science Foundation and the National Bureau of Standards
SPECIAL ANALYSIS L
299
in the field of microelectronics and submicron science and
technology are proposed to be undertaken in 1980. These efforts address a technology that is important for the industrial
strength and defense of the Nation. This technology is the
next step in the development of faster and less expensive
electronic devices, as well as applications of other small-scale
devices and structures, such as in biomedical and chemical
research. The DOD program in microelectronics will support
research and development on electronic devices that are essential for Defense systems. NSF will support fundamental
research on the properties of microstructures that will stimulate advances in electronics, as well as other applications and
will provide training for future scientists in this important
field. NBS will undertake research and provide technical services yielding measurement technology, data and physical reference standards needed by industry, Government and the
scientific community in general. Obligations across the three
agencies are estimated to total about $41 million in 1980.
Crop condition assessment and forecasting.—Five agencies
plan to undertake expanded efforts to assess the value of
space remote sensing data in two areas: obtaining early quantitative estimates of the effect of natural disasters on crop
conditions; and improving worldwide agricultural production
forecasting capabilities. The Departments of Agriculture,
Commerce, and Interior, and NASA and AID are the participating agencies. Total funding is estimated to increase from
$18 million in 1979 to $29 million in 1980. The six-year program features the development of improved yield models
using satellite obtained weather, soil moisture and crop spectral data.
Climate research.—The 1979 budget proposed that Federal climate program efforts be expanded in five broad program
areas: impact assessments, diagnosis and projection activities,
research, observations, and data management. In the past
year the National Climate Program Act (P.L. 95-367) was also
signed into law. The Act provides a framework for comprehensive management of Federal research activities in these
program areas. Obligations for the climate program in 1980
are estimated to increase by 43% over 1979—from $79 million
to $113 million.1 These funds are included in the budgets of
the Department of Commerce, in which the National Oceanic
and Atmospheric Administration has the lead role; the De-
•The 1979 budget showed agency requests totalling $104 million for FY 1979. The current 1979 estimate of $79
million is primarily the result of a redefinition by DOD of portions of its climate-related programs. This
redefinition leads to the apparent $25 million reduction in the Federal climate program for 1979.
300
THE BUDGET FOR FISCAL YEAR 1980
partments of Defense, Energy, Agriculture, and Interior; and
NASA and NSF.
• Earthquake research.—Last year the Administration completed development of the interagency National Earthquake Hazards Reduction Program as required by P.L. 96-124, the
Earthquake Hazards Reduction Act of 1977. In 1980 the earthquake programs of the Department of Interior (U.S. Geological Survey) and NSF are planned to be maintained at approximately the same level as in 1979, with total obligations
of about $52 million in the budgets of the two agencies. The
USGS program includes research on the nature of earthquakes, and on earthquake prediction, hazards delineation,
and induced seismicity. The NSF supports fundamental research studies on earthquakes, basic and applied research on
earthquake engineering, and related policy research and analysis. Future coordination of earthquake hazard reduction activities will be the responsibility of the new Federal Emergency Management Agency.
CONDUCT OF BASIC RESEARCH
The Federal Government supports about two-thirds of the Nation's basic research effort, that is the search for new knowledge
and understanding of fundamental natural phenomena and processes. Research in such fields as chemistry, physics, biology, astronomy, materials, oceanography, and Earth sciences precedes and
underlies the advancement of applied science and technology. Universities and colleges, other nonprofit organizations, and a number
of industrial firms also support basic research. But from a national
point of view, as a whole they tend to underinvest in such research
either because their resources are limited (as in the case of universities or nonprofit organizations); or because the results do not lead
in the near-term to the development of patentable and marketable
new processes and products (as in the case of private industry).
Obligations for the conduct of basic research (included in funds
for the conduct of R. & D. cited above) are estimated to increase
from $4.2 billion to $4.6 billion in 1980, an increase of 9%. Taking
into account anticipated cost increases in 1980, this will provide a
real-dollar growth of 2%.
The allocation of funds provided in the 1980 budget for basic
research recognizes the need not only to maintain a vigorous national research effort in all areas of scientific inquiry, but also to
strengthen basic research in specific areas of national concern and
Government responsibility. These two aspects of Federal support
for basic research—to expand the knowledge base and to address
critical problems—resulted in several relatively large increases in
agencies where both purposes are served—e.g., DOE, DOD and
SPECIAL ANALYSIS L
301
EPA. The 1980 budget also continues efforts to strengthen basic
research in the Department of Agriculture, particularly through
support for competitively awarded grants to university investigators.
While the Administration recognizes that the private sector underinvests in basic research because of its long-term nature and the
difficulty in appropriating its results, private investment in basic
research is critical to the overall national effort, and industry, as
well as the Federal Government, should seek to strengthen its
support.
Table L-3 summarizes Federal support for the conduct of basic
research by agency.
Table L-3. CONDUCT OF BASIC RESEARCH BY MAJOR DEPARTMENTS AND AGENCIES
[In millions of dollars]'
Outlays
Department or agency
Health, Education, and Welfare
(National Institutes of Health)
National Science Foundation
National Aeronautics and Space Administration
Energy
Defense—military functions
Agriculture
Interior
Smithsonian
Commerce
Environmental Protection Agency
All other 2
Total
1978
actual
1979
estimate
1980
estimate
1978
actual
1979
estimate
1,269
(1,156)
1,561
(1,429)
1,581
(1435)
1,182
(1082)
1,514
(1,382)
678
741
828
628
(U51)
697
774
478
414
311
228
156
35
28
5
32
530
469
373
252
176
37
32
8
29
630
551
436
268
174
39
33
17
31
439
427
283
209
149
34
28
3
24
501
464
344
226
169
38
31
6
29
612
535
391
226
167
40
32
13
31
4,589
3,405
3,872
4,335
3,635
4,210
1,368
1980
estimate
1
Amounts reported in this table are included in totals for conduct of R. & D.
Includes the Departments of Justice, Labor, and State; the Veterans Administration, the Corps of Engineers, the Federal Trade Commission, the
Tennessee Valley Authority, and the Library of Congress.
2
SUPPORT OF R. & D. AT COLLEGES AND UNIVERSITIES
Within the $30.6 billion proposed for R. & D. in 1980, $3.9 billion
will be obligated by the Federal agencies to support the conduct of
research and development in colleges and universities (including
medical schools). Approximately two-thirds of the direct support of
R. & D. in these institutions is provided by the Federal Government. This does not include funds that flow indirectly to colleges
and universities through the support of national laboratories or
other intermediaries.
Researchers at colleges and universities continue to be the primary performers of basic research not only for the Federal Government, but also for the Nation as a whole. Academic researchers
will benefit significantly from the continued growth in basic re-
302
THE BUDGET FOR FISCAL YEAR 1980
search provided in the 1980 budget. This growth is intended not
only to encourage scientists to undertake innovative research, but
also to assist in ameliorating some of the problems currently associated with the performance of research in colleges and universities, including the growing obsolescence of equipment and the lack
of opportunities for young investigators.
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. In 1980 HEW
and the National Science Foundation are the major sponsors of R.
& D. conducted at colleges and universities.
Table L-4 summarizes Federal R. & D. support at universities
and colleges by agency.
Table L-4. RESEARCH AND DEVELOPMENT SUPPORT TO UNIVERSITIES AND COLLEGES
[In millions of dollars] 1
Obligations
Department or agency
Health, Education, and Welfare
(National Institutes of Health)
National Science Foundation
Defense—military functions
Energy
Agriculture
National Aeronautics and Space Administration
Agency for International Development
Environmental Protection Agency
Interior
Commerce
Transportation
Allother 2
Total
Outlays
1978
actual
1979
estimate
1980
estimate
1978
actual
1979
estimate
1980
estimate
1,705
(1,492)
1,993
(1,737)
2,001
(1747)
1,595
(1,398)
1,739
(1,528)
1,931
(1,686)
551
308
232
173
604
331
238
210
681
372
251
218
508
294
225
156
563
317
238
177
631
359
250
179
130
146
151
132
131
136
24
43
35
34
15
37
48
47
40
39
21
39
66
49
42
37
21
39
15
30
32
34
15
33
22
38
36
39
19
38
31
43
39
37
19
38
3,285
3,755
3,927
3,067
3,358
3,692
1
Amounts reported in this table are included in totals for conduct of R. & D.
Includes the Departments of Justice, Labor, State, Treasury and Housing and Urban Development; the Corps of Engineers, the Arms Control and
Disarmament Agency, the Consumer Product Safety Commission, the Smithsonian Institution, the Veterans Administration, and the Nuclear Regulatory
Commission.
2
R. & D. FACILITIES
Amounts for scientific and engineering facilities are considered
separately from funding for the conduct of R. & D. Obligations for
the construction or renovation of facilities, for the acquisition of
major items of equipment and for demonstration plants used for
conducting R. & D. or for testing and evaluation will increase by
$97 million to about $1.6 billion in 1980.
SPECIAL ANALYSIS L
303
The majority of the funds for R. & D. facilities are for applied
research and development projects and demonstrations. Included in
the 1980 budget, for example are funds for:
• solvent-refined coal and low- and high-Btu gas demonstration
plants in the Department of Energy budget;
• support facilities for the space shuttle and wind tunnels for
aeronautics R. & D. funded by the National Aeronautics and
Space Administration; and
• additional facilities for pavement testing at the Fairbank
Highway Research center supported by the Department of
Transportation.
The 1980 budget also proposes funds for several basic research
facilities that will upgrade the Nation's capability and capacity to
seek new knowledge at the frontiers of science, for example:
• continued funding by the Department of Energy of the intersecting storage accelerator (ISABELLE), at Brookhaven National Laboratory, which will be the most powerful physics
research facility of its type in the world;
• funding for the three highest priorities in nuclear physics,
construction—a major heavy-ion facility at Michigan State
University; an energy doubling, electron beam recirculator at
the Bates Linear Accelerator of the Massachusetts Institute of
Technology; and an experiment staging area at the Anderson
Meson Physics Facility, Los Alamos Scientific Laboratory—
provided by the Department of Energy;
• completion of antennas for the Very Large Array radiotelescope in Socorro, N. Mex., supported by the National Science
Foundation; and,
• funding for the construction of a coastal research vessel by
the National Science Foundation to modernize and upgrade
the academic oceanographic research fleet.
Table L-5 summarizes Federal support for R. & D. facilities by
major departments and agencies.
304
T H E B U D G E T FOR F I S C A L Y E A R 1980
Table L-5. RESEARCH AND DEVELOPMENT FACILITIES BY' MAJOR DEPARTMENTS ANDAGENCIES
[In millions ot dollars]'
Obligations
Department or agency
19?g
1979
estimate
actual
Energy
Defense—military functions
National Aeronautics and Space Administration
Health, Education, and Welfare
(National Institutes of Health)
Allother1
Total
Outlays
1980
estimate
1978
actual
1979
estimate
1980
estimate
684
233
919
164
936
261
481
313
747
212
879
212
162
77
(74)
126
148
77
(69)
150
158
61
(57)
141
124
68
(67)
119
154
87
(85)
145
155
105
(98)
145
1,105
1,345
1,497
1,282
1,459
1,556
1
Includes the Departments of Agriculture, Commerce, Interior, Treasury and Transportation; the Environmental Protection Agency, the Veterans
Administration, the Consumer Product Safety Commission, the National Science Foundation, the Smithsonian Institution, and the Tennessee Valley
Authority.
PART II: AGENCY R. & D. PROGRAMS
Funding of R. & D. by the 29 agencies reporting obligations and
outlays for this purpose is shown in table L-6.
Summaries follow of the R. & D. activities of the 12 agencies that
support more than 98 percent of federally funded R. & D.
Table L-6. CONDUCT OF RESEARCH AND DEVELOPMENT BY MAJOR DEPARTMENTS AND
AGENCIES
[In millions of dollars]
Outlays
Obligations
Department or agency
1978
actual
1979
estimate
1980
estimate
1978
actual
1979
estimate
1980
estimate
Defense—military functions
Energy
National Aeronautics and Space Administration
Health, Education, and Welfare
(National Institutes of Health)
National Science Foundation
Agriculture
Environmental Protection Agency
Interior
Transportation
Commerce
Nuclear Regulatory Commission
Veterans Administration
All other 1
11,520
4,237
12,961
4,642
13,842
4,665
10,726
3,925
12,145
4,508
13,433
4,639
3,875
3,199
(2,575)
749
608
385
357
372
268
139
117
413
4,392
3,685
(2,956)
819
667
400
390
381
308
160
131
443
4,540
3,721
(2,958)
910
664
436
377
357
310
183
129
485
3,833
2,980
(2,439)
701
554
310
322
326
266
124
112
354
4,224
3,218
(2,597)
773
620
374
382
345
302
150
124
413
4,412
3,566
(2,868)
856
604
401
365
338
313
165
123
452
Total conduct of R. & D...
26,237
29,379
30,620
24,532
27,577
29,668
1
Includes the Departments ot Justice, Labor, State; Treasury, and Housing and Urban Development; the Agency tor International Development, the
U.S. Office of Personnel Management, the Smithsonian Institution, the Tennessee Valley Authority, the Federal Preparedness Agency, the Corps of
Engineers, the Arms Control and Disarmament Agency, the Consumer Products Safety Commission, the Federal Communications Commission, the Federal
Trade Commission, the Library of Congress, and the Advisory Commission on Intergovernmental Relations.
SPECIAL ANALYSIS L
305
DEPARTMENT OF DEFENSE
The research and development budget of DOD, at $13.8 billion, is
larger than that of any other Federal agency, and comprises about
45% of the total of R. & D. funding in the FY 1980 budget. DOD
R. & D. encompasses diverse activities ranging from basic research,
primarily in the physical sciences, to construction of full-scale preproduction hardware and its test and evaluation. The primary
purpose of DOD R. & D. is to provide new strategic and tactical
weapons and supporting systems to improve the Nation's defense.
DOD obligations in 1980 for the conduct of R. & D. will increase by
$882 million, 7% over the 1979 level. DOD basic research funding
will increase by 17%, from $373 million in 1979 to $436 million in
1980. Other increases include $96 million for new R. & D. facilities.
Major R. & D. initiatives for 1980 include:
Technology base and advanced technology development.—A real
growth in basic research activity over the 1979 level, and continued
research on high energy systems (e.g., lasers and particle beams)
and high-speed integrated circuits.
Strategic programs.—Full-scale development of a new intercontinental ballistic missile, the M-X; development of the new Trident
II missile; continuation of the air-launched cruise missile program;
and concept development of a new strategic bomber and a cruise
missile carrier. Effort will also continue on ballistic missile technology, ballistic missile defense, and space defense systems, all with
the objective of strengthening deterrence. Development funding for
the Trident submarine and for the Trident I missile will decline as
these systems near deployment.
Tactical programs.—Development of systems to improve the capability of U.S. forces to fight a conventional war. Programs to
upgrade our early combat capability in Europe will continue to
receive emphasis. Major development progams funded in 1980 include the advanced attack helicopter, the Pershing II missile, and
the LAMPS anti-submarine warfare helicopter. R. & D. support for
the XM-1 tank and gun, the F-16 and F-18 air combat fighter, and
the Patriot air defense missile are reduced from previous years
because these systems are transitioning into production.
Intelligence and communications, program management and support—Improvements in Defense intelligence systems, command,
control and communications programs, and test and evaluation
capabilities.
306
THE BUDGET FOR FISCAL YEAR 1980
Table L-7. DEPARTMENT OF DEFENSE—MILITARY RESEARCH AND DEVELOPMENT
[In millions of dollars]
1978
actual
Type of activity
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
11,520
Total conduct of basic research, included
above
R. & D. facilities
Total obligations
1,785
500
2,246
4,516
551
1,487
434
(311)
233
1979
estimate
1,948
502
2,295
5,354
660
1,738
464
12,961
(373)
164
1980
estimate
2,280
652
2,405
5,240
866
1,926
473
13,842
(436)
261
11,752
13,125
14,103
10,726
313_
12,145
212
13,433
212
11,039
12,357
13,646
OUTLAYS
Conduct of R. & D
R. & D. facilities
Total outlays
DEPARTMENT OF ENERGY
The Department of Energy, established in 1977, is the major
Federal Agency for the planning, coordination, and conduct of
energy R. & D. programs. DOE also funds a substantial program of
R. & D. related to the development and testing of nuclear weapons.
Obligations for the conduct of R. & D. by DOE will total $4,665
million in 1980. Of this total, obligations for the conduct of nonmilitary R. & D. are estimated to be $3,483 million in 1980, about the
same level as 1979. Obligations for the conduct of R. & D. for
military purposes will increase from $1,122 million in 1979 to
$1,182 million in 1980. Obligations for the conduct of basic research
in DOE will grow from $469 million in 1979 to $551 million in 1980,
17% above the 1979 level. Obligations for construction and equipment will total $936 million in 1980, an increase of $17 million
above the 1979 level.
Energy.—The energy R. & D. program for 1980 emphasizes Federal support for long-range R. & D. in areas of national interest for
which industry is not likely to provide adequate support. Particular
attention in this regard is given to solar power and other longrange efforts.
In energy R. & D., the area proposed for greatest emphasis and
the largest budget increase in 1980 is solar energy technology. This
SPECIAL ANALYSIS L
307
emphasis at a time of constrained budget growth reflects the Administration's belief that solar energy can, in time, make a significant contribution as an environmentally attractive, renewable
energy supply. Areas of solar technology receiving particular emphasis include: photovoltaics, to help bring about economical production of electricity directly from solar energy; and biochemical
and photochemical conversion, to convert organic wastes and crops
to fuel.
R. & D. on nonnuclear technology options, other than solar
energy, also will be accelerated to supplement, but not supplant,
R. & D. being funded by the private sector. Major R. & D. efforts in
fossil energy will be continued. Emphasis in these efforts is given
to developing technologies for producing synthetic liquid and gas
fuels from coal, for burning coal more cleanly and efficiently, and
for extracting oil and gas from shale. Other key non-nuclear R. &
D. efforts will include: continued support for development of the
Nation's major geothermal resources; and the development of conservation technologies to use energy more efficiently in the major
energy consumer sectors of building, industry and transportation.
The advanced nuclear fission R. & D. program will continue to
focus on establishing the technical and engineering basis for the
future selection of a breeder system, if one is necessary, consistent
with U.S. nonproliferation objectives and anticipated national electrical energy requirements. A significantly increased effort will be
devoted to improving the fuel efficiency of current generation light
water reactors. In addition, programs for improving the assessment
of domestic uranium resources will be increased to ensure a more
accurate basis for determining when advanced nuclear technologies
will be required.
The nuclear waste management programs for both commercial
and defense-related nuclear wastes will continue to increase their
activities aimed at assuring that long-lived radioactive hazards are
isolated from the biosphere. Increases are provided for the examination of alternate geologic environments for siting of a deep waste
repository, and the development of new waste forms to be used
when disposing of high level defense wastes.
Legislation is also being proposed to implement the President's
Spent Fuel policy of October 1977, and will assure the availability
of interim storage facilities for commercial spent fuel rods.
Funding is provided for the magnetic fusion program to allow
continued development and demonstration of reactor-like conditions of hydrogen plasmas in present generation mainline experimental devices, evaluation of various alternative concepts, and the
development of fusion reactor materials.
The primary goal of the DOE environmental R. & D. program is
to assure that energy technologies being developed do not adversely
308
THE BUDGET FOR FISCAL YEAR 1980
affect environmental health and safety by ensuring that proper
emphasis is placed on environmental and health considerations in
formulating energy technology plans and programs.
Increases in the basic energy sciences program support research
to advance the understanding of fundamental phenomena underlying all energy technologies; e.g., materials and chemical sciences.
General sciences.—In the general sciences, the emphasis on providing new facilities for the advancement of knowledge in high
energy and nuclear physics is continued while the research effort is
maintained at the current level.
National defense.—The nuclear weapons programs will continue
the current level of design and development aimed at improvements to the nation's nuclear arsenal. Development efforts aimed
at improving naval nuclear powerplants and reactor cores will be
maintained at prior years' levels.
Facilities.—The energy R. & D. budget includes construction
funds for one solvent-refined coal demonstration plant and continued funding for a high Btu synthetic pipleline gas demonstration
plant and low Btu gas demonstration plants. Funds are also provided for construction of a new 300 acre research facility at the
Solar Energy Research Institute in Golden, Colorado.
The high energy physics program includes funds for continuation
of the ISABELLE accelerator at the Brookhaven National Laboratory and the energy saver project at the Fermilab Facility, Brookhaven National Laboratory. The 1980 budget also includes funding
in the nuclear physics program for the Bates linear accelerator
beam recirculator project at Massachusetts Institute of Technology
and an experimental support addition for the Los Alamos Physics
Facility.
SPECIAL ANALYSIS L
309
Table L-8. DEPARTMENT OF ENERGY—RESEARCH AND DEVELOPMENT
[In millions of dollars]
1978
actual
1979
estimate
1980
estimate
OBLIGATIONS
Conduct of R. & D.:
Energy
General sciences
National defense
2,899
275
1,063
3,210
310
1,122
3,146
337
1,182
Total conduct of R. & D
4,237
4,642
4,665
Type of activity
Total conduct of basic research, included
above
R. & D. facilities
Total obligations
(414)
684
(469)
919
(551)
936
4,921
5,561
5,601
3,925
481
4,508
747
4,639
879
4,406
5,255
5,518
OUTLAYS
Conduct of R & D
R. & D. facilities
Total outlays
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
The entire NASA budget is considered research and development. In 1980, NASA will continue advances in all of its major
activities—space shuttle development, space science and exploration, applications of space technology, and aeronautical R. & D.
The budget plan for the conduct of R. & D. will increase by $148
million in 1980 to a total of $4.5 billion, and the plan for construction of facilities will increase by $10 million to a total of $158
million, as a result of the continuation of space shuttle facilities
and facility repair. The R. & D. changes are related to the development, procurement, and operational planning of the space shuttle,
the development of major space science and space applications
flight projects mentioned below, advanced space and aeronautical
technology development, and basic supporting activities.
Shuttle development and testing, and procurement of a fleet of
four orbiters will continue in the space transportation systems
program area. The shuttle will provide the capability for a wide
variety of uses, with greater flexibility and cost savings than is
possible with expendable launch vehicles. The shuttle will make
possible the retrieval of spacecraft from orbit for reuse; service and
repair of spacecraft in orbit; and operation of space laboratories,
such as the European-built Spacelab, for scientific and technology
application purposes. First shuttle approach and landing tests were
performed in 1977, and the first manned orbital flight will take
place in 1979. In 1981, NASA plans to achieve an operational
280-700 O - 79 - 20
310
THE BUDGET FOR FISCAL YEAR 1980
capability to launch and land shuttle orbiters from the Kennedy
Space Center in Florida and, in 1983, from the Vandenberg Air
Force Base in California.
In space science, work is continuing on three significant NASA
missions to be launched between 1981 and 1983 using the space
shuttle. These include the earth-orbiting space telescope, capable of
viewing objects as far away as 60 billion lightyears from an orbit
well above the obscuring effects of the Earth's atmosphere; a European-built laboratory for experiments in astronomy and life sciences; and an orbiter and probe to the planet Jupiter.
Work on other science missions approved in prior year budgets
will continue in 1980. These include the Solar Polar Mission, which
will investigate the Sun's polar regions for the first time, and the
Solar Mesopheric Explorer, which will study the effect of solar
radiation on the Earth's ozone layer. These missions will be
launched by the shuttle in the early 1980's.
An orbiter and probe was sent to Venus in 1978 using an expendable launch vehicle and the orbiter part of the mission will continue to orbit Venus to collect scientific information over the next
several years. The operation of several spacecraft launched in prior
years will also continue. The Voyager spacecraft will fly by Jupiter
in 1979, and photograph the rings and surface of Saturn in 1980
and 1981. One other spacecraft, Pioneer 11, is now escaping the
solar system and will become the first man-made device to do so.
In space and terrestrial applications, the 1980 budget will continue to emphasize the development and demonstration of the practical applications of space technology to explore the potential use of
such technology in meeting national needs (e.g., land use management and conservation of natural resources).
The 1980 budget recommends an agriculture research initiative
to investigate further the value of space remote sensing data for
global, repetitive monitoring of agricultural crop conditions. The
initiative will place emphasis on the evaluation of remote sensing
data as a way to improve our ability to forecast world-wide commodity production of important crops such as corn, wheat, soybeans, barley, and rice. Data from spacecraft have the potential for
determining the extent of crop damage following a major disaster
such as a hurricane or insect blight. Early assessment of the magnitude of crop damage could result in more efficient relief operations in areas of the world suffering from severe food shortages.
The budget proposes continued development of spacecraft to
monitor the Earth's land surfaces and oceans. A major effort will
continue to investigate the potential benefits of using spacecraft to
survey the Earth's resources on a recurring basis. Landsat-D,
scheduled for launch in 1981, is expected to enhance the experimental use of space based platforms in a variety of applications,
SPECIAL ANALYSIS L
311
such as forecasting crop production for the agriculture initiative
described above. The Landsat-D is expected to ensure the continuity of Landsat data for foreign and domestic users. As part of the
administration's program in climate research, the 1980 budget proposes funds for continued development of an Earth radiation
budget satellite system. The Earth's radiation budget is the amount
of solar energy absorbed by the Earth in a given region minus the
energy emitted back to space by the region. The system is scheduled for launch in 1982 and 1983 by the Shuttle. In addition to new
development efforts, the 1980 budget provides for the continued
operation of spacecraft launched in prior years (for example, the
Landsat-C and Nimbus-G spacecraft).
Space remote sensing techniques and data can result in an improved ability to manage critical Earth resources. Studies to define
the most effective and economic combination of instruments and
platforms will be conducted to determine the optimum means for
providing such remote sensing data through the 1980's. Additional
studies for better integration of current remote sensing capabilities
will also be conducted. NASA is also developing ways to use the
Spacelab (to be flown in the shuttle) for materials processing, technology development, and other applications.
Aeronautical research and technology programs will continue to
emphasize the reduction of aircraft noise and fuel consumption,
particularly in commercial transports. Support for fundamental
studies in aeronautics will also be emphasized.
312
THE BUDGET FOR FISCAL YEAR 1980
Table 1-9. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION—RESEARCH AND
DEVELOPMENT
[In millions of dollars]
Program and type of activity
1978
actual
1979
estimate
1980
estimate
BUDGET PLAN
Conduct of R. & D.:
Space transportation systems
Space science
Space and terrestrial applications
Space research and technology
Aeronautical research and technology
Energy technology
Supporting activities
Research and program management
Total conduct of R. & D
Total conduct of basic research, included
above
R. & D. facilities
Total budget plan
1,747
404
244
97
228
7
278
871
2,005
504
283
107
263
5
302
923
1,900
600
343
116
300
3
333
945
3,876
4,392
4,540
(479)
162_
(530)
148_
(630)
158_
4,038
4,540
4,698
3,833
124
4,224
154
4,413
155
3,957
4,378
OUTLAYS
Conduct of R. & D
R. & D. facilities
Total outlays
4,568
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
Department of Health, Education, and Welfare (HEW) obligations in 1980 for the conduct of R. & D. will increase by $36 million
over the 1979 level, to $3,721 million. Within this total, basic research will increase 1.3% to $1,581 million. Obligations for R. & D.
facilities will be $61 million.
Approximately 80% of the Department's R. & D. funds are devoted to the National Institutes of Health. The primary mission of the
National Institutes of Health is to advance the Nation's capabilities
for the prevention, diagnosis, and treatment of disease through
biomedical research. The level of R. & D. obligations in 1980 is
estimated to be $2,958 million. The following efforts are among the
most significant activities to be supported:
• Studies to provide a better understanding of the role of nutrition in cancer, cardiovascular disease, human development,
and the prevention of nutrition-related disorders;
• Studies on the cause and prevention of diseases associated
with environmental agents;
• Increased research in the neurosciences and genetics, especially in areas related to neurologic disorders such as Huntington's disease;
SPECIAL ANALYSIS L
313
• Expanded adolescent health services and pregnancy prevention research to provide improved contraceptives and to
assure the birth of healthy infants;
• Smoking research to understand the role of smoking in arteriosclerosis and identify individuals at high risk from smoking;
• New initiatives in international health to expand research on
tropical diseases; and,
• Greater emphasis on basic and clinical research into the
cause, cure, and prevention of diabetes.
Additional R. & D. funds are devoted to health related research
supported by several agencies, including the Alcohol, Drug Abuse
and Mental Health Administration and the Food and Drug Administration. Such diverse areas as preventive health, focusing on occupational health and communicable diseases; methodologies for the
detection of animal drug residues in food; the bio-effects of various
kinds of radiation; and toxicological reviews of food and color additives, cosmetics, and drugs will be emphasized. An increase of $41
million in 1980 obligations for research in the areas of mental
health, alcohol, and drug abuse reflects the recommendation of the
President's Commission on Mental Health.
The National Institute for Education is the focal point for educational R. & D. NIE supports research in the areas of equality of
education; improved practice; functional competencies; the use of
tests for bilingual students; education and occupational barriers
facing minorities and women; individual achievement of literacy;
and the effect of TV on education for poor and minority students.
In 1980, NIE will concentrate on improving practice and equity
throughout the educational system. R. & D. obligations will increase by $2 million to $94 million in 1980. In addition, the Office
of Education supports R. & D. in such areas as language training
and area studies, bilingual, Indian education, basic skills, vocational education, handicapped and school finance.
The total obligations for the conduct of R. & D. in human services and welfare programs will decrease to $129 million. The Office
of Human Development Services will continue to fund R. & D.
activities that support its role in providing services to the aged, the
handicapped, native Americans, and children. The Social Security
Administration will support applied research on income security,
the effects of social insurance benefits, and the economic situation
of low-income persons not attached to the labor force.
Obligations of $28 million are also included for Policy Research
which supports basic and applied economic, social, and statistical
research. The activities include experiments in income maintenance, and national health insurance, and a Survey of Income and
Program Participation.
314
THE BUDGET FOR FISCAL YEAR 1980
Table L-10. DEPARTMENT OF HEALTH, EDUCATION1, AND WELFARE—RESEARCH AND
DEVELOPMENT
[In millions of dollars]
1978
actual
1979
estimate
1980
estimate
2,575
2,956
2,958
180
50
58
46
5
17
19
218
53
64
47
1
18
33
259
57
75
43
2,951
3,390
3,456
1
40
89
1
69
93
1
41
94
130
Program areas and organizational units
163
137
74
13
30
87
16
29
82
19
28
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
Office of Assistant Secretary for Health
Health Resources Administration
Health Services Administration
Health Care Financing Administration
Subtotal, health
Education:
Office of Assistant Secretary for Education
Office of Education
National Institute of Education
Subtotal, education
Welfare:
Office of Human Development
Social Security Administration
Departmental Management
Subtotal, welfare
13
51
117
Total conduct of R. & D
Total conduct of basic research, included
above
132
129
3,199
3,685
3,721
(1,269)
(1561)
(1,581)
77
61
3,762
3,782
2,980
68
3,218
87
3,566
105
3,048
Total obligations
77
3,276
R. & D facilities
3,305
3,671
OUTLAYS
Conduct of R. & D
R. & D. facilities
Total outlays
NATIONAL SCIENCE FOUNDATION
NSF supports long-term fundamental research in all fields of
science and engineering and applied research on selected problems.
The Foundation has a broad mandate to support the advancement
of U.S. science and to balance Federal support of basic research
across all scientific disciplines. Most NSF research funds are
awarded on a competitive basis to researchers in colleges and universities, the primary source of much of this Nation's new knowl-
SPECIAL ANALYSIS L
315
edge in science. The Foundation also supports the improvement of
science education from the elementary to the post-graduate levels.
NSF obligations for the conduct of R. & D. will increase from
$819 million in 1979 to $910 million in 1980, an increase of $91
million or 11% above 1979. In addition, $24 million will be obligated for research facilities in 1980. Funding for basic research programs will increase from $741 million to $828 million, or about
12%. In 1980, the Foundation expects to emphasize work in a
number of areas, among which are mathematics, chemistry, materials research, engineering, earth sciences and bio-sciences. In addition, NSF plans to emphasize basic studies related to national
problems, such as research on ecosystems and on fundamental
phenomena related to weather and climate.
Highlights of the Foundation's 1980 budget include:
• A major new initiative in the science and fabrication of
microstructures, an area of considerable potential value to
industry in fields such as electronics and computers; this
effort will involve work in many fields on such topics as
submicron devices, integrated circuits and systems, sychrotron radiation lithography, and metal cluster chemistry.
• Additional funding for advanced research equipment and instrumentation, in view of the increasing sophistication of instruments needed to conduct forefront research in many disciplines.
• Construction of a 125-140 foot coastal research vessel, as part
of a continuing effort to modernize and upgrade the fleet
of research vessels operated by academic oceanographic laboratories.
• Partial completion of the Cornell Electron Storage Ring, and
limited research and operations at this facility.
• Completion of the Very Large Array radiotelescope at Socorro, New Mexico, and increases in funding for related research and operations.
• Expanded work on the physical and chemical basis of life
processes at the molecular and cellular levels as well as the
levels of organ systems and whole organisms.
The program of earthquake-related basic and applied research
and engineering is proposed to be continued at approximately the
same level as in 1979, as is funding for a broad range of international science and technology efforts conducted through bilateral
and multilateral arrangements. In the U.S. Antarctic Research
Program, supported and managed by the Foundation, additional
work will be undertaken on studies of krill and of ocean ecosystems.
316
THE BUDGET FOR FISCAL YEAR 1980
DEPARTMENT OF AGRICULTURE
Obligations of the Department of Agriculture for the conduct of
research and development will decrease slightly in 1980 from $667
million to $664 million. Within its 1980 R. & D. program the
Department will, however, give increased emphasis to basic research and a shift from intramural research to research in universities and other non-government laboratories.
Almost all of the R. & D. conducted by the Department of Agriculture falls within three units: the Science and Education Administration, the Forest Service, and the Economics, Statistics and
Cooperatives Service.
The Science and Education Administration's Agricultural Research obligates approximately half ($341 million) of the Department's R. & D. program funds. It conducts basic and applied research on the production of plants and animals and their protection from pests and diseases; on the use and improvement of soil,
water, and air resources; on human nutrition; on the processing,
marketing, safety, and use of agricultural products; and on rural
development and consumer services. In 1980, added emphases will
be placed on energy research with special emphasis on production
of biomass for energy and production of methane from animal and
other agricultural residues; human nutrition; human health and
safety; animal sciences; integrated pest management; and land and
water use.
Funds ($135 million in 1980) administered by the Science and
Education Administration's Cooperative Research provide for payments to agricultural experiment stations for comparable research
undertakings. This equals the amount available in FY 1979. An
additional $43 million will be available to meet specific research
objectives. The competitive extramural grant program, will provide
$21 million for basic research on efficiency of food production and
$9 million for improvement of human nutrition. This program was
initiated in FY 1978 and will be doubled from $15 million to $30
million. The emphasis in crop production research will be on basic
knowledge needed over the long-term to increase the efficiency of
crop production; to break yield barriers in certain crops; and to
reduce the energy requirement for production of crops. Human
nutrition research will emphasize the factors affecting food choice,
human requirements for nutrients, and the nutrient composition of
food.
In 1980, the Economics, Statistics and Cooperatives Service will
obligate $40 million for economic research. New emphasis will be
on improvement of statistics on prices paid and received by farmers; studies to improve water quality, conservation and manage-
SPECIAL ANALYSIS L
317
ment; food safety, quality and nutrition; and small farm research
and data development.
Forest Service R. & D., funded at a level of $105 million in 1980,
provides land managers with scientific knowledge to manage, protect and utilize forest and rangeland resources in rural, suburban
and urban areas. Research is conducted on tree culture and genetics; watershed management; forage production; wildlife habitat;
recreation; protection of forest and range resources from fire and
pests; mined land reclamation; harvesting and utilization of forest
products; the economics of forest and range management and utilization alternatives; and the assessment of forest and range resources. In 1980 the program will emphasize work on intensive
culture of conifers, the utilization of residues, increased use of
hardwood resource, development of energy and petrochemical substitutes from biomass, integrated pest management systems and
the economics of multiresource management.
DEPARTMENT OF THE INTERIOR
Obligations for the conduct of research and development for the
Department of the Interior for 1980 are estimated at $377 million,
$13 million below 1979 level. The R. & D. activities derive from a
broad range of responsibilities to encourage development and management of mineral, water, land and recreation resources.
The 1980 R. & D. budget reflects increases for research in the
environmental aspects of coal development, coal hydrology, preparation of environmental impact statements relative to mining plan
approvals and leasing of coal lands; for mineral surveys in support
of potential Forest Service wilderness areas; for increased research
seeking solutions to both short and long range problems resulting
from surface mining activities; for water use studies; and for application demonstration of remote sensing technology. Offsetting program decreases are contained in several areas including geologic
framework, resource information and analyses, geothermal resource assessment, and basic metallurgy research.
Emphasis is given to research programs directed toward providing an accurate appraisal of the Nation's mineral resources, including new or improved methods, techniques, and instruments for
mineral exploration on land and on the submerged continental
margins. Basic data will be developed on geological principles and
processes, on terrain and foundation conditions, and on earthquake
processess. Research efforts will continue to obtain a better understanding of basic hydrologic principles necessary for the appraisal
and evaluation of water resources, including the effects of underground waste storage. Emphasis is also placed on development of
methods to apply environmental resource data in land resource
planning and decision-making processes and methods to apply in-
318
THE BUDGET FOR FISCAL YEAR 1980
formation acquired by remote sensing to the Earth science and
marine resource fields.
The program to investigate new technologies for surface and
underground coal and oil shale mining is designed to lead to improvements in environmental control technology and in mine
health and safety; research in nonfuel mining technology will emphasize technology for productivity improvement. Research will
continue on extraction, processing and the use of nonenergy minerals to assure an adequate supply of raw materials to meet expanding national needs.
Land use problems, the quality of the physical environment, and
the efficient allocation and conservation of scarce water and waterrelated resources will be studied. Emphasis is given to water resources research programs which are carried out through a structure of State University water research institutes. Research will be
conducted to develop water technologies for use in the solution of
water and water-related problems and the transfer of research
results and technology to the water community. The R. & D. effort
also includes the operation of a water resources scientific information center.
Fishery and wildlife basic and applied research is carried out to
enhance the scope of knowledge about birds, fish and mammals
and their environmental relationships. Research and development
will be encouraged and supported that can lead to the solution of
local, State, regional and national water problems and provide
technology transfer and demonstration of findings. Research and
development of saline and brackish water conversion processes will
continue.
DEPARTMENT OF TRANSPORTATION
Obligations for the conduct of research and development for the
Department of Transportation are estimated at $381 million for
1979 and $357 million in 1980. The Department's R. & D. program
is oriented toward providing the information and new technology
needed for its own operational (e.g., air traffic control) and regulatory (e.g., automotive safety standards) programs, with a smaller
effort designed to support new or improved transportation options
for the nation (e.g., automated guideway transit).
The Federal Aviation Administration, which accounts for approximately one-third of the Department's R. & D. funds ($107
million), will support programs to continue the engineering development for the present air traffic control system and to maintain
the technological momentum generated by the various development activities such as microwave landing systems and discrete
address radar beacons. These types of technological advances are
SPECIAL ANALYSIS L
319
expected to reduce delays, to enhance safety, and to increase the
capacity of the Nation's airports.
The Federal Highway Administration will conduct programs in
highway planning and safety, and in motor carrier safety, at a
level of $47 million in 1980. Major attention is focused on increasing highway, vehicle, driver, and pedestrian safety. Other areas
include reduction of highway construction and maintenance costs,
pollution control, and the development of advanced traffic management systems to increase the capacity and energy efficiency on the
Nation's highway system. $6.5 million will be provided in 1980 for
additional research facilities at the Fairbank Highway Research
Facility at Langley, Virginia.
The National Highway Traffic Safety Administration will obligate $61 million mainly to continue programs in driver and vehicle
safety factors, to continue assessment and analysis efforts on automotive fuel economy, and to expand the National Accident Sampling System.
The Federal Railroad Administration will obligate $44 million in
1980 with major emphasis on safety research. Programs associated
with improvements in freight and passenger systems will also be
emphasized.
The Urban Mass Transportation Administration will obligate $52
million to assist in the achievement of urban community development goals through the development and introduction of improved
public transportation equipment and systems.
The U.S. Coast Guard program will support activities at a level
of $21 million to maintain and expand the technology base and to
develop equipment crucial to the successful execution of Coast
Guard operational and regulatory missions such as search and
rescue, aids to navigation, commercial vessel safety, and marine
environmental protection.
The Research and Special Programs Administration will obligate
$11 million to provide support to stimulate innovation in advanced
transportation technology and to provide a focal point for coordination and development of technologies that can be used by more
than one transportation mode.
ENVIRONMENTAL PROTECTION AGENCY
EPA supports research and development to determine the
sources and effects of pollution. The overall objective is to provide
strong scientific bases for standards and control strategies, and to
identify and evaluate long-range environmental problems. Obligations for the conduct of R. & D. will increase from $400 million in
1979 to $436 million in 1980, with a 16% increase in longer-term
research. The other new major effort in 1980 will be to increase
knowledge about the effects of toxic substances on human health
320
THE BUDGET FOR FISCAL YEAR 1980
and ecosystems and to develop methods for testing substances for
their toxicity.
Programs concerning air, land, and water use are directed
toward determining the relationships between pollution sources
and the quality of air and water in order to formulate strategies
for attaining media quality goals; developing new methods and
instruments for detecting, identifying and characterizing pollutants
in all media; assuring safe drinking water supplies; managing pollution and other deleterious environmental impacts from agriculture, silviculture and community sources and disposing and managing hazardous and other waste materials.
Energy, minerals and industry programs are designed to determine the environmental implications and effects of the Nation's
energy development efforts, and to develop appropriate cost-effective control technologies for existing and emerging energy systems.
For the non-energy industrial sector, the program focuses on assessing, developing and demonstrating new or improved cost-effective technologies for point source discharges into the environment.
In addition the program assesses various industrial processes to
determine possible sources of toxic emissions.
Health and ecological effects research is conducted to provide
data on the ecological impact of pollutants as they move through
the environment and to evaluate the human health risks that
result from the exposure to these pollutants, as well as to determine the health effects of specific pollutants or combination of
pollutants. This research provides the scientific basis upon which
to establish and evaluate primary ambient air quality standards
criteria for the safe treatment and disposal of wastewater and
sludges, health-related criteria for fresh and marine recreational
waters, and criteria for the reuse of waste waters for potable purposes. The efforts also provide health and ecological effects information essential for the pesticide registration and control program
and data upon which criteria and standards are established for
hazardous and toxic materials including non-ionizing radiation.
Possible carcinogenic, mutagenic, teratogenic and respiratory effects on humans from emerging energy technologies are also examined.
Monitoring and technical support programs include efforts to
develop monitoring technology, quality assurance techniques and
technical support services to meet the more immediate needs of the
Agency. Applied R. & D. is conducted to provide improved monitoring methods and equipment to measure the concentration of pollutant discharges from point and non-point sources and the distribution of pollutants in the ambient environment; and to standardize
monitoring techniques and procedures to assure the accuracy, comparability, and defensibility of environmental monitoring data.
SPECIAL ANALYSIS L
321
DEPARTMENT OF COMMERCE
Obligations for the conduct of R. & D. by the Department of
Commerce in 1980 will increase by $2 million to $310 million in
1980.
This total reflects increases for the research and development
programs of the National Oceanic and Atmospheric Administration
(NOAA), and the National Bureau of Standards (NBS); and decreases in the Economic Development Administration (EDA), and
the Maritime Administration (MARAD).
The principal objectives of the research and development programs in the Department of Commerce are to continue to improve
the Nation's environmental prediction and warning capabilities,
encourage technological advancement through improved performance and measurement standards, and develop technology to improve the competitive position of the U.S. maritime industry.
The largest portion of R. & D. obligations by the Department
($190 million) is for programs conducted by NOAA. In 1980, 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 data gathering programs, and the
modification of severe storms and hurricanes. (See "Climate research" in Part I.) Research will also concentrate on mapping,
charting, and marine description. Funding will increase for research aimed at the conservation, development and management of
commercial fisheries of the United States and research on ocean
pollution.
In 1980, funding for research and development activities at the
National Bureau of Standards will be increased in the following
areas: development of methods to retard processes that limit materials durability, improvement of methods to disseminate NBS calibration services to users, and development of methods and data to
aid communities in recovering valuable resources from municipal
solid waste. Funding will also be increased for the development of
measurement methods for accurately characterizing the electromagnetic environment, and a fund to enhance NBS' basic science
and engineering capability will be expanded. In addition, work will
continue on the program begun in 1979 to develop automatic data
processing standards for use by the Federal Government.
Major MARAD research and development efforts will be directed
towards building ships for less cost in U.S. shipyards, development
of new, improved ship machinery, automation aboard ships, and
the maritime research simulator. The National Marine Research
Center at Kings Point, N.Y., supports program efforts by providing
technology assistance. In 1980, continued emphasis will be placed
on computer-aided operations research at the Kings Point facility.
322
THE BUDGET FOR FISCAL YEAR 1980
Research and development activities conducted by EDA explore
the causes and consequences of economic distress and methods of
alleviating such conditions. The research attempts to determine
appropriate, specific responses to accomplish particular economic
development actions that would be of direct benefit to local and
regional economic development groups and organizations.
The U.S. Fire Administration, previously part of the Department
of Commerce, will be transferred to the Federal Emergency Management Agency under Reorganization Plan No. 3. It will continue
to conduct research to reduce the loss of life and property from
fires and to build on the essential technical knowledge needed for
fire prevention, control and extinguishment efforts. Additional emphasis in 1980 will be placed on studying the movement of smoke
and toxic gases in homes and analyzing the fire growth contribution of furnishings.
THE NUCLEAR REGULATORY COMMISSION
Obligations of the Nuclear Regulatory Commission for the conduct of R. & D. will increase from $160 million in FY 1979 to $183
million in FY 1980.
The Commission's R. & D. program is directed toward the improvement of data needed to verify the safety of nuclear power
plants in order to assure an independent technical basis for licensing these facilities; the health effects associated with the nuclear
power fuel cycle; the environmental impact of nuclear power; waste
management and disposal; and the transportation of radioactive
materials. Increased emphasis will be given to waste management
research to support development of design and performance criteria, evaluation methodology, and the necessary regulations and
guides for licensing of waste repositories. Work on long-term projects, such as experiments at the Loss-of-Fluid Test Facility (LOFT),
International Three-Dimensional Flow Distribution Experimental
Program (3-D), and Boiling Water Reactor-Counter Current Flow
(BWR-CCFL), will continue.
VETERANS ADMINISTRATION
Obligations for the Veterans Administration for the conduct of
R. & D. will be $129 million in 1980, or about 1% less than in 1979.
Research and development activities in the Veterans Administration are divided into Medical Research, Rehabilitative Research
and Health Services Research programs. The Medical Research
program is an intramural biomedical research program comprised
of fundamental and applied medical and scientific investigations
which are designed to benefit patients in the health care system by
increasing the quality and effectiveness of health care delivery.
SPECIAL ANALYSIS L
323
Rehabilitative Research activities are directed toward developing
and testing prosthetic, orthopedic and adaptive equipment for the
purpose of improving the care and rehabilitation of disabled eligible veterans, including amputees, paraplegics and the blind. The
Health Services Research program provides support for health
services projects at VA health care facilities for improving the
effectiveness and economy of delivery of health services and improving the accessibility of services to veterans.
OTHER AGENCY PROGRAMS
The remaining 17 agencies reporting R. & D. funds support a
total of about 2% of federally funded R. & D. Like the programs of
the 12 agencies providing the majority of R. & D. support, the
R. & D. programs of these remaining agencies are closely related
to the accomplishment of their missions. The R. & D. program of
the Department of Housing and Urban Development supports a
variety of activities to improve housing opportunities. The program
includes research in stabilizing housing costs, particularly subsidized housing costs; new finance mechanisms; urban revitalization
and development; and a comprehensive series of evaluations of
selected HUD programs. At the Consumer Product Safety Commission, the R. & D. program is directed toward assessment of potential consumer product hazards and the development of safety
standards and testing methods and devices. At the Department of
Justice, priority research includes community crime prevention,
utilization and deployment of police resources, improved civil and
criminal justice systems, and fundamental studies of criminal behavior.
A portion of the R. & D. budget of many agencies reporting such
funds goes to economic and policy studies concerning agency activities. In some cases, such policy studies constitute the agencies
entire R. & D. effort.
SUPPLEMENTARY INFORMATION
The following table provides additional information on the longterm trends in Federal R. & D. funding.
324
THE BUDGET FOR FISCAL YEAR 1980
Table L - l l . TRENDS IN CONDUCT OF R. & D. BY MAJOR PROGRAM AREA
[Obligations in billions of dollars]
Year
Defense
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
1978
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
9.7
10.4
11.9
12.6
14.1
15.0
1979 (estimate)
1980 (estimate)
O
Civilian
(other than
space)
.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
3.8
4.5
4.9
5.2
5.9
6.8
7.4
9.0
10.5
11.7
12.0
Space
Total
0.1
0.3
0.4
0.8
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
3.1
3.6
3.6
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
15.5
16.5
16.8
17.4
19.0
20.7
23.9
26.2
29.4
30.6
@FedFRASER