Full text of Budget of the United States Government, Special Analyses : Fiscal Year 1982

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

SPECIAL
ANALYSES
BUDGET OF THE
UNITED STATES
GOVERNMENT
FJSCAI

JL I M

lk Ji mm

YFAR

JL Ji AJL Jk JL %»

1982

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET




THE BUDGET DOCUMENTS
Data and analyses relating to the budget for 1982 are published
in four documents:
Budget of the United States Government, 1982 contains the
Budget Message of the President and presents an overview of the
President's budget proposals. It includes explanations of spending
programs in terms of national needs, agency missions, and basic
programs, and an analysis of 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.
United States Budget in Brief, 1982 is designed for use by the
general public. It provides a more concise, less technical overview
of the 1982 budget than the above volume. Summary and historical
tables on the Federal budget and debt are also provided, together
with graphic displays.
Budget of the United States Government, 1982—Appendix contains detailed information on the various appropriations and funds
that comprise the budget. The Appendix contains more detailed
information than any of the other budget documents. It includes
for each agency: the proposed text of appropriation language,
budget schedules for each account, new legislative proposals, explanations of the work to be performed and the funds needed, 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
are presented separately. It also includes the President's recommendations for executive, legislative, and judicial salaries, as well
as information on certain activities whose outlays are not part of
the budget totals.
Special Analyses, Budget of the United States Government, 1982
contains analyses that are designed to highlight specified program
areas or provide other significant presentations of Federal budget
data. This document includes information about: alternative views
of the budget, i.e., current services and national income accounts;
economic and financial analyses of the budget covering Government finances and operations as a whole; and Government-wide
program and financial information for Federal civil rights and
research and development programs.
Instructions for purchasing copies of any of these documents are
on the last two pages of this volume.
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.

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402




TABLE OF CONTENTS
Page

I. ANALYSES OF THE BUDGET
PART 1. ALTERNATIVE VIEWS OF THE BUDGET
A. Current services estimates
B. Federal transactions in the national income accounts

5
7
43

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
87
107
141
203
239
275

PART 3. SELECTED FEDERAL PROGRAMS
J. Civil rights activities
K. Research and development

289
291
305




3




PART 1

ALTERNATIVE VIEWS OF
THE BUDGET




INTRODUCTION
Part 1 includes two alternative views of the budget—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. 11a). 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.
6




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 outlays, receipts, and
budget authority would be 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 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,
interest, and inflation rates. 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.
The economic assumptions assume 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 somewhat different economic conditions than would occur
under the budget proposals. For the 1982 budget, however, the
1 Summary comparisons are in the Budget of the United States Government, Fiscal Year 1982, Part 2,
"Economic Assumptions and the Budget Outlook."




7

8

THE BUDGET FOR FISCAL YEAR 1982

differences are small compared to the uncertainties inherent in the
economic forecast.
The economic assumptions common to the budget and the current services estimates are summarized in table A - l . For further
details and discussion of these economic assumptions, see Part 2,
"Economic Assumptions and the Budget Outlook," in the 1982
Budget
Table A - l . SUMMARY OF ECONOMIC ASSUMPTIONS
(Calendar years)
1980

Gross national product (in billions of current dollars)...
Change in constant dollar GNP (percent change,
fourth quarter over fourth quarter)
Unemployment rate (percent, fourth quarter)
Consumer Price Index (percent change, fourth quarter
over fourth quarter)
Interest rate, 91-day Treasury bills (percent)

1981

1982

2,627

2,928

3,312

-0.1
7.5

0.9
7.7

3.5
7.4

12.8
11.5

12.6
13.5

11.0

9.6

THE CURRENT SERVICES CONCEPT

The current services estimates are neither recommended
amounts nor forecasts as to what the budget for 1981 and 1982 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?"
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. The current services concepts used in this
analysis, and in previous current services estimates submitted by
the executive branch, are not the only concepts possible. Different
concepts may be useful for different purposes. Under the current
concepts, the current services estimates for 1982 reflect the expected costs of continuing ongoing Federal programs at 1981 levels in
real terms, without policy change; that is, they omit all proposed
and pending new initiatives, presidential or congressional, that are
not now enacted. In general, the 1981 level on which the current
services estimates are based is that which is authorized or implied
by enacted 1981 appropriations or continuing resolutions. The estimates allow for the future implications of current law, and for
anticipated changes of a relatively uncontrollable nature (as dis-




SPECIAL ANALYSIS A

9

tinct from policy changes)—such as increases in the number of
social security retirees.
The question of whether or not to adjust estimates of discretionary programs for anticipated inflation has proven to be a difficult
one. Prior to the 1981 Budget, this Special Analysis excluded inflation adjustments for discretionary programs on the grounds that
there was no reason to assume such increases except where program benefits were tied by law to the cost of living or where there
was a clear intent to cover the full costs of future inflation. It
provided subsidiary data indicating what the impact on the current
services estimates would have been if all programs were adjusted
for inflation. However, beginning a year ago, the current services
estimates presented in this Special Analysis and in the rest of the
budget reflect the effects of inflation on virtually all budget accounts, including discretionary programs. The current services estimates thus provide a "constant real program" base against which
to measure the President's 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 determined by past earnings), and changes in the anticipated numbers of beneficiaries.
—Individual grants to State and local governments in 1982 are
assumed to support the same program levels or to be funded at
the same real (constant-dollar) amounts as in 1981 unless the
grants are: (a) set by law at specified amounts; (b) tied by
legislation to cost-of-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) are assumed to remain
level in real (constant-dollar) amounts 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
past 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 multiyear projects. In other cases, however, current
services estimates may reflect constraints on spending levels
imposed by available funding.




10

THE BUDGET FOR FISCAL YEAR 1982

—Outlays for Federal pay are assumed to increase, in accordance
with current law, with the projected results of the annual pay
comparability survey. The October 1981 pay raise is projected
to be 13.5% on this basis. This figure includes a 4 percentage
point "catch up" from the below-comparability increases for
October 1978 through October 1980.
—Interest on the public debt is estimated on the basis of the
current services deficit and the same interest rate assumptions
as are used in computing the budget estimates for interest.
—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 1982, it is assumed for purposes of current services estimates that it will be renewed. Programs that are clearly temporary in nature, such as temporary
study commissions, 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.
CURRENT SERVICES TOTALS

Current services outlays are estimated to be $736.2 billion in
1982, 11.5% higher than in 1981, and budget authority is estimated
to be $806.7 billion, an increase of 11.6% over 1981. Receipts for
1982 are estimated to increase 16.8% on a current services basis,
from $605.0 billion in 1981 to $706.5 billion in 1982. The resulting
1982 deficit would be $29.7 billion, $25.8 billion lower than the
$55.4 billion deficit for 1981.
Table A-2. CURRENT SERVICES TOTALS
(In billions of dollars)
1980
actual

Receipts
Outlays
Deficit ( - )
Budget authority




1981
estimate

520.0
579.6
-59.61
658.8

1982
estimate

605.0
660.5

706.5
736.2

-55.4

-29.7

722.9

806.7

11

SPECIAL ANALYSIS A

Receipts.—Table A-3 shows receipts by major source on a current services basis. For purposes of comparison, receipts under the
administration's proposals for 1982 are also shown. Current services receipts are projected to increase by $101.5 billion from 1981 to
1982, largely due to assumed increases in incomes resulting from
both real economic growth and inflation.
Table A-3. CURRENT SERVICES RECEIPTS BY SOURCE
(In billions of dollars)
1980
actual

Individual income taxes
Corporation income taxes
Social insurance taxes and contributions
Excise taxes
Other
Total

Current services
1981
estimate

1982
estimate

1982
administration
estimates

244.1
64.6
160.7
24.326.3

284.5
66.8
184.8
40.6
28.3

334.5
73.3
214.2
53.5
31.1

331.7
64.6
214.7
69.6
31.2

520.0

605.0

706.5

711.8

Individual income taxes are estimated to increase by $49.9 billion
from 1981 to 1982 on a current services basis. This increase of
17.5% reflects rising personal income. Corporation income taxes
are estimated to increase by $6.4 billion, or 9.6%, from 1981 to 1982
on a current services basis, largely as a result of the assumed
increase in corporate profits.
Social insurance taxes are estimated to increase by $29.3 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 to $29,700 in calendar year 1981 and
$32,100 in 1982, and scheduled increases in the combined employeremployee social security tax rate to 13.3% on January 1, 1981 and
13.4% on January 1, 1982.
On a current services basis, excise taxes are estimated to increase by $12.9 billion, or 31.9%, from 1981 to 1982. This increase is
in large part due to a $12.4 billion rise in estimated windfall profit
tax receipts from 1981 to 1982.
Other receipts (estate and gift taxes, customs duties, and miscellaneous receipts) are projected to increase by $2.8 billion from 1981
to 1982 on a current services basis largely as a result of increased
economic activity.
Outlays.—The level of outlays necessary to continue ongoing Federal programs and activities at 1981 levels without policy changes
is estimated at $736.2 billion in 1982. The increase in current
services outlays from 1981 to 1982 is $75.7 billion.




12

THE BUDGET FOR FISCAL YEAR 1982
Table A-4. CURRENT SERVICES OUTLAYS BY FUNCTION
(In billions of dollars)
1980
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 agency 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

135.9
10.7
5.7
6.3
13.8
4.8
7.8
21.1
10.1
30.8
58.2
193.1
21.2
4.6
4.5
8.6
64.5

Current services
1981
estimate

159.3
11.3
6.3
8.8
13.9
1.2
3.6
23.6
11.2
31.8
66.2
231.6
22.6
4.7
5.0
6.9
80.4

1982
estimate

1982
administration
proposals

177.8
11.9
7.3
11.8
13.8
4.8
5.1
21.9
9.2
35.0
75.5
259.3
24.4
4.8
5.2
6.5
89.9

184.4
12.2
7.6
12.0
14.0
4.8
8.1
21.6
9.1
34.5
74.6
255.0
24.5
4.9
5.2
6.9
89.9

3.2

0.9
1.0

-5.8

-6.6

-6.8

-6.8

-12.0

-4.1

-13.4
-7.8

-14.7
-9.9

-15.2
-9.9

579.6

660.5

736.2

739.3

Table A-4 shows current services outlays by function. Estimates
by agency are presented in table A-5. The greatest dollar increases
from 1981 to 1982 occur in the income security, national defense,
interest, and health functions, largely due to increases in the
number of beneficiaries, cost-of-living adjustments, increases in the
prices of goods and services purchased or financed and, in the case
of interest, higher interest rates and increased borrowing requirements.




13

SPECIAL ANALYSIS A
Table A-5. CURRENT SERVICES OUTLAYS BY AGENCY
(In billions of dollar)
Current services

198U
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 Education
Department of Energy
Department of Health and Human Services
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
National Aeronautics and Space Administration
Veterans Administration
Office of Personnel Management
Other independent agencies
Allowances
Undistributed offsetting receipts
Total outlays

1981
estimate

1982
estimate

.1
7.5
24.6
3.8
132.8
3.2
13.1
6.5
194.7
12.6
4.4
2.6
29.7
1.9
19.0
76.7
5.6
4.8
21.1
15.1
20.0

1.4
.7
.1
6.2
20.9
3.0
155.6
3.4
14.7
9.8
227.5
13.3
4.6
2.6
37.7
2.2
21.7
90.9
5.5
5.3
22.5
18.0
20.8

-21.9

-27.8

1.4
.7
.1
6.1
28.7
3.1
174.0
3.4
16.5
13.1
259.7
15.5
4.2
2.6
36.7
2.5
19.9
100.1
5.6
6.3
24.4
20.8
18.9
3.2
-31.4

579.6

660.5

736.2

1.2
.6

1982
administration
proposals

1.4
.7
.1
6.3
28.0
3.2
180.0
3.4
15.7
14.1
258.2
15.5
4.1
2.7
34.5
2.6
20.0
104.3
5.8
6.4
24.4
20.2
17.5
1.9
-31.9
739.3

Table A-6 shows the major components of the changes in current
services outlays between 1981 and 1982. Outlays for income security programs are estimated to rise by $27.7 billion, from $231.6
billion in 1981 to $259.3 billion in 1982 due to automatic cost-ofliving increases in many benefit programs, increases in the number
of beneficiaries, and higher earnings records for new retirees. In
the case of social security, for example, about three-fourths of the
1981 to 1982 outlay increase is due to cost-of-living increases;
higher earnings records and net increases in beneficiaries account
for the remaining one-fourth. Table A-7 shows caseload projections
for major benefit programs and other selected programmatic assumptions.
Current services outlays for the military functions of the Department of Defense are estimated to increase by $18.4 billion between
1981 and 1982. Increased outlays for retired military personnel
account for $2.2 billion of this increase. October 1981 pay raises of
13.5% for military and civilian personnel account for an additional
$7.2 billion of the increase. Current services outlays for other Department of Defense purchases are estimated to increase by $9.0




14

THE BUDGET FOR FISCAL YEAR 1982

billion, due to estimated price increases averaging 9.7% and to
spending from funds previously appropriated.
Table A-6. CHANGE IN CURRENT SERVICES BUDGET AUTHORITY AND OUTLAYS, 1981 TO 1982
(In billions of dollars)

1981 current services estimate
1981-82 changes:
Income security:
Social security
Federal employee retirement
Unemployment compensation
Housing assistance
Food and nutrition assistance
Other income security programs
National defense:
Department of Defense—Military:
Military and civilian pay raise allowance
Procurement
Operation and maintenance
Military retired pay
Other defense military
Other national defense
Net interest
Medicare and medicaid
Other health programs
Allowances for civilian agency pay raises
Energy programs
General science, space, and technology
Rents and royalties, offshore oil lands
Veterans programs
Farm income stabilization
Mortgage credit and thrift insurance
General revenue sharing
Ground transportation
Community and regional development
Education
Employment and training
International financial programs
Foreign aid
All other programs, net
1982 current services estimate
*$50 million or less.




15

SPECIAL ANALYSIS A
Table A-7. CASELOADS AND PROGRAMMATIC ASSUMPTIONS
Fiscal years
1982

1981

Beneficiaries (annual average, in thousands):
Social security (OASDI)
Railroad retirement1
Federal civilian retirees
Military retirement
Veterans compensation
Veterans pensions
Gl bill
Disabled coal miners
Supplemental security income
Maintenance assistance (AFDC)
Food stamps
Housing subsidy recipients (section 8 housing)
Medicaid
Medicare:
Hospital insurance
Supplementary medical insurance
Automatic benefit increases (percent):
Social security and veterans pensions (June)
Federal employee retirement:
March
September
Food stamps (January)2
Interest rate (91-day bills, percent, calendar years) 3
Budget deficit (current services, in billions of dollars)
Unemployment rate (percent, annual average, calendar years):
Total
Insured 4
Strategic petroleum reserves (thousands of barrels, end of year)

36,000
1,000
1,822
1,347
2,634
1,965
975
393
4,157
10,936
22,000
4,021
18,324

36,500
989
1,881
1,391
2,639
1,867
773
370
4,165
10,851
21,500
4,769
18,783

28,027
27,725

28,575
28,364

12.3

11.3

4.8
7.2
11.4
13.5
-55.4

4.7
5.2
16.3
11.0
-29.7

7.8
4.4
168,000

7.5
4.1
252,000

End of year.
Under the provisions of Public Law 96-499, the Omnibus Reconciliation Act of 1980, food stamp allotments will be adjusted annually,
beginning with the January 1982 adjustment. There will be no increase in July 1981.
3 Average rate on new issues within period. These estimates assume, by convention, that interest rates decline with the rate of inflation. They
do not represent a forecast of interest rates.
4 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.
1

2

Current services outlays for the medicare and medicaid programs
are estimated to increase by $8.7 billion between 1981 and 1982,
largely as a result of increases in medical care prices.
Other major changes in current services outlays between 1981
and 1982 include an increase in net interest of $8.3 billion; a $3.2
billion increase for civilian agency pay raises; an increase of $3.5
billion for farm income stabilization; and a $3.0 billion increase in
energy programs.




16

THE BUDGET FOR FISCAL YEAR 1982

Budget authority.—Current services budget authority is estimated to total $806.7 billion in 1982, $83.7 billion more than in 1981.
Increases in budget authority between 1981 and 1982 generally
reflect the higher funding levels that would be necessary to maintain 1981 services levels in real terms in 1982. 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-to-year growth in expected receipts.
Budget authority for some programs display erratic year-to-year
changes due to sporadic funding patterns or advance funding.
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 1981 and 1982 are shown in table A-6.
Increases in budget authority of $27.4 billion for income security
(excluding housing assistance) and $14.4 billion for health are primarily due to higher social security and medicare trust fund receipts and higher medicaid costs.
Table A-8. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)
1980
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 agency pay raises
Contingencies
Undistributed offsetting receipts:
Employer share, employee retirement
Interest received by trust funds
Rents and royalties on the Outer Continental Shelf..
Total budget authority




145.8
15.5
6.1
36.4
13.1
4.9
10.5
20.2
10.1
30.6
59.8
224.2

21.2

4.4
4.6
8.7
64.5

Current services
1981
estimate

172.3
25.1
6.6
8.0
12.4
5.4
6.8
25.5
10.4
31.4
72.2
255.6
23.2
4.4
4.9

6.2

80.4

1982
estimate

191.8
19.2
7.7
12.5
13.4
5.0
7.8
25.1
9.2
36.6
86.6
288.5
24.8
4.8
5.2
6.5
89.9
3.4

-5.8

-6.6

-6.8

-12.0

-4.1

-13.4
-7.8

-14.7
-9.9

658.8

722.9

806.7

17

SPECIAL ANALYSIS A

A $19.5 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.
Other major changes in current services budget authority include an increase in net interest of $8.3 billion; a $3.4 billion
increase in allowances for civilian agency pay raises; a $2.5 billion
increase in education programs; a $1.7 billion increase in employment and training programs; a $1.6 billion increase for veterans
programs; a $2.1 billion increase in offsetting collections from
Outer Continental Shelf leases; a $0.5 billion decrease in ground
transportation programs; and a $7.4 billion decrease in international financial programs that results primarily from a $5.5 billion
payment in 1981 of the U.S. quota to the IMF and a $1.5 billion
decrease for the Export-Import Bank.
Table A-9. CURRENT SERVICES BUDGET AUTHORITY BY AGENCY
(In billions of dollars)
1980
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 Education
Department of Energy
Department of Health and Human Services
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
National Aeronautics and Space Administration....
Veterans Administration
Office of Personnel Management
Other independent agencies
Allowances
Undistributed offsetting receipts
Total budget authority.

3H0-700

0 - 8 1 - 2




Current services
1981
estimate

1982
estimate

24.9
34.3

1.3
.7
.1
14.6
26.3
2.9
168.6
3.0
15.1
11.3
225.8
38.6
4.3
2.3
33.6
2.4
23.7
90.6
4.7
5.5
23.2
28.5
23.5

-21.9

-27.8

1.4
.7
.1
9.9
29.8
3.1
187.8
3.4
17.6
14.0
259.4
43.9
4.3
2.5
38.9
2.8
23.2
100.5
5.5
6.6
24.8
31.2
23.4
3.4
-31.4

658.8

722.9

806.7

1.3
.6
.1
12.5
24.9
3.1
142.6
3.3
13.8
10.0
195.9
35.7
4.6
2.5
28.8
2.1
18.2
90.6
4.7
5.2

21.2

18

THE BUDGET FOR FISCAL YEAR 1982
DIFFERENCES BETWEEN CURRENT SERVICES ESTIMATES AND
BUDGET PROPOSALS

For 1981, the estimates of budget authority and outlays under
administration proposals exceed the current services levels by $3.5
billion and $2.3 billion, respectively. The 1981 receipts estimate
under administration proposals exceeds current services by $2.5
billion. The deficit under administration proposals is $0.2 billion
lower than that under current services.
For 1982, the administration's estimate of outlays is $3.1 billion
above the current services level, and budget authority is $3.1 billion above the current services level. The current services receipts
level for 1982 is $5.3 billion below the administration's estimate of
$711.8 billion. The 1982 current services deficit of $29.7 billion
exceeds the administration's estimated deficit by $2.2 billion.
Table A-10. SUMMARY OF CURRENT SERVICES AND PROPOSED BUDGET TOTALS
(In billions of dollars)
1981 Estimate
1980
actual

Receipts
Outlays
Deficit ( — )
Budget authority

Current
services

1982 Estimate

Administration
proposals

Current
services

Administration
proposals

520.0
579.6

605.0
660.5

607.5
662.7

706.5
736.2

711.8
739.3

-59.6

-55.4

-55.2

-29.7

-27.5

658.8

722.9

726.5

806.7

809.8

Receipts.—As shown in table A - l l , the administration's estimate
of receipts for 1981 is $2.5 billion higher than the current services
level of $605.0 billion. This difference is due primarily to the effect
of the proposed increases in the motor fuels and other highway use
taxes and the limitation on the foreign tax credit on oil and gas
extraction on 1981 receipts, offset somewhat by the effect on 1981
receipts of the tax reductions in the economic revitalization program.
The administration's tax proposals for 1982 are $5.3 billion above
the current services level. Proposed increases include the motor
fuels and other highway use taxes ($14.6 billion), withholding on
interest and dividend income ($3.9 billion), and airport and airway
trust fund taxes ($1.4 billion). Other increases proposed for 1982
total $3.7 billion. The tax proposals in the economic revitalization
program would reduce 1982 receipts by an estimated $18.3 billion.
The major reductions are the social security tax credit ($8.5 billion)
and constant rate depreciation ($9.0 billion).1
1 A more detailed discussion of the administration's tax proposals is presented in the Budget of the United
States Government, Fiscal Year 1982, Part 4, "Budget Receipts."




19

SPECIAL ANALYSIS A

Table A - l l . ESTIMATED EFFECT OF PROPOSED LEGISLATION AND ADMINISTRATION ACTION ON
RECEIPTS
(In billions of dollars)
1981

Current services receipts estimatesEconomic revitalization program:
Constant rate depreciation
Social security tax credit
Other proposals
Subtotal, economic revitalization program..
Motor fuels and highway use taxes
Foreign tax credit on oil and gas extraction...
Withholding on interest and dividend income..
Airport and airway trust fund taxes
Other proposals
Subtotal, other revenue proposalsTotal proposed changes
Proposed receipts, President's budget.

605.0
-2.9
-0.1

-3.1
3.5
1.4
0.2
0.5
5.6
2.5
607.5

Outlays.—In 1981, the major increase above current services outlays is $2.1 billion for the Department of Defense—Military supplemental appropriations request. Supplemental appropriations for
ground and water transportation, student financial assistance, government personal property, and conservation and land management programs increase 1981 outlays by $0.9 billion. The refundable tax credits proposed under the economic revitalization program
add another $0.2 billion. Proposed rescissions reduce 1981 outlays
by $0.7 billion.
Table A-12 shows the major differences between the administration's 1982 budget and the current services outlay level. Proposed
reductions result in a decrease in outlays of $15.9 billion below the
current services level, which is more than offset by proposed increases of $19.1 billion.
The largest proposed reduction from 1982 current services outlay
levels results from proposals to restrain civilian pay, which limit
the October 1981 pay raises to 5.5% for Federal civilian employees
and 9.1% for military personnel, rather than the 13.5% raise under
comparability. These pay proposals would reduce outlays by $5.8
billion below the current services level. Other major budget savings
include reductions in unemployment compensation programs of
$2.2 billion; and proposed reductions in the public assistance and
food and nutrition programs of $1.0 billion, which reflect improved
administration and the targeting of resources toward those most in




20

THE BUDGET FOR FISCAL YEAR 1982

need. Proposed modifications to indexation formulas in military
and civil service retirement programs reduce 1982 outlays by an
estimated $1.1 billion.
The largest outlay increase above the current services level for
1982 is the proposed $10.8 billion increase in defense programs for
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. The refundable tax credits proposed as part of the
economic revitalization program increase outlays by $4.2 billion
above the current services level. Other major increases above current services for 1982 include a $0.4 billion increase for student
financial assistance; a $0.3 billion increase in science and space
programs; a $0.3 billion increase for foreign economic and financial
assistance; and increases in allowances for contingencies of $1.0
billion.
Budget authority.—For 1981, the largest increase in budget authority beyond current services is a supplemental appropriations
request totaling $1.8 billion for the Department of Defense—Military. Supplemental appropriations requested for ground and water
transportation, student financial assistance, government personal
property, and conservation and land management programs account for an additional $2.2 billion increase in budget authority
beyond current services levels. Decreases totaling $1.3 billion result
from rescissions of 1981 budget authority proposed by the administration.
The administration's proposals to restrain pay decreases budget
authority below the 1982 current services level by $2.4 billion for
civilian agencies and $3.4 billion for the Department of Defense.
Housing assistance budget authority for 1982 is $5.4 billion below
the current services level primarily because of proposed changes in
homeownership assistance and other housing subsidy programs.
Reductions in impact aid, student loan guarantees, unemployment
compensation, medicare, medicaid, food and nutrition assistance,
and public assistance reduce budget authority by a further $4.4
billion. Other budget authority reductions from 1982 current services levels include $0.9 billion for the Export-Import Bank and $1.2
billion for indexation proposals in military and civilian Federal
employee retirement programs.
Budget authority increases for defense programs are $12.7 billion
above the current services level for 1982. Other major increases in
budget authority above the current services level for 1982 include
$4.2 billion for refundable tax credits under the economic revitalization tax proposals; $1.2 billion for the youth education and training initiative; $1.1 billion for foreign economic and financial assistance; $0.6 billion for highway programs; $0.6 billion for rural devel-




21

SPECIAL ANALYSIS A

opment business assistance; $0.5 billion for agricultural crop insurance programs; and $1.0 billion for allowances for contingencies.
Table A-12. DIFFERENCES BETWEEN ADMINISTRATION 1982 BUDGET REQUEST AND CURRENT
SERVICES LEVELS
(In billions of dollars)

-22.3

-15.9

11.8
0.9
1.1
0.4
0.5
0.6
0.6
0.1
1.2
4.2
2.0
2.0

10.0
0.8
0.3
0.3
0.1
0.1
*

25.4

809.8

^ •— I—' KD c_n Ln
^ bi cr>
i—' M

.

736.2

Lo Ln cn

806.7

Subtotal, decreases
Increases:
Defense—Military, program increases
Atomic energy defense activities
Foreign economic and financial assistance
Science and space programs
Federal Crop Insurance Corporation
Highway programs
Rural development business assistance proposals
Student financial assistance
Youth education and training proposal
Economic revitalization—refundable tax credit proposals
Allowance for contingencies
Other
Subtotal, increases
President's request for 1982

-3.4
-0.5
-0.2
-0.9
-0.2
-0.4
-0.4
-0.5
-0.8
-0.1
-0.7
-2.0
-5.4
-0.6
-0.5
-2.4
-3.3

Outlays

CD

Current services estimates for 1982
Decreases:
Defense, pay raise allowance
Defense, retired pay proposals
Defense, stockpile sales proposal
Export-Import Bank
Employment and training assistance
Payment to the Postal Service
Rail assistance
Federal impact aid to education
Loan guarantees to students and parents
Medicare and medicaid proposals
Civil service retirement indexation proposal
Unemployment compensation proposals1
Housing assistance
Food and nutrition assistance
Public assistance program reform
Civilian agencies, pay raise allowance
Other

1 1 1 1
I I 1 1 1 1 1 I I I I 1
^ r o c ^ o o r o o o o o c s ?1^ pppo w

Budget
authority

0.4
0.1
4.2
1.0
1.7
19.1
739.3

*$50 million or less.
1 Most of the outlay savings from this proposal are related to the national trigger. Under current law, extended benefits would be paid nationally for the
first three quarters of fiscal year 1982, using the unemployment rates forecast in this budget. Under the proposal, these unemployment rates would not
activate the national trigger. Extended benefits would still be paid in individual States that trigger extended benefits; these payments are estimated to be $1.5
billion in 1982. If the unemployment rate were only V«percentage point higher for 1982 the national trigger would be activated under both current and
proposed law and the outlay savings from this proposal would be relatively small.




22

THE BUDGET FOR FISCAL YEAR 1982
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM
(In millions of dollars)
Current services

1980
actual

050 NATIONAL DEFENSE
051 Department of Defense—Military:
Military personnel
Retired military personnel
Proposed legislation
Operation and maintenance
Procurement
Research, development, test and evaluation
Military construction
Family housing
Revolving funds and other
Allowances for civilian and military pay raises
Other legislation
Subtotal, Department of Defense—Military
053

Atomic energy defense activities

054 Defense-related activities:
Emergency planning, preparedness, and mobilization
GSA stockpile sales and related
Proposed legislation
Other
Subtotal, Defense-related activities
Deductions for offsetting receipts
Total budget authority
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
International Development Cooperation Agency
Multilateral development banks
Public Law 480—Food aid
Peace Corps
Economic support fund/Peacekeeping operations
Refugee assistance
Offsetting receipts and other
Subtotal, Foreign economic and financial assistance

1981
estimate

1982
estimate

1982
administration
proposals

31,014
11,965

36,317
13,917

37,448
16,077

46,365
35,283
13561
2,293
1,526
615

52,873
44,909
16,054
3,234
1,919
-661

56,319
48,493
17,335
3,467
2,064
-604
7,216

142,621

168,562

187,815

195,660

2,991

3,607

3,781

4,704

132
-60

162
-144

186
-123

85

101

123

186
-123
-210
123

38,363
16,077
-477
61.492
49,065
19,841
5,554
2,156
-402
3,771
220

156

119

186

-24

-4
145,764

-3
172,284

-3
191,779

-3
200,337

1,856
2,308
886
100
1,972
483
-296

1,960
1,584
1,305
108
2,153
491
-307

1,962
2,414
1,263
122
2,147
611
-369

2,726
2,414
1,263
122
2,450
611
-364

7,310

7,295

8,150

9,222

152 Military assistance:
Grant military assistance
Foreign military training
Foreign military sales credit
Relocation of facilities (Israel)
Offsetting receipts and other

110
25
645
236
-333

110
28
500

112
28
850

34
36
850

-276

-286

-286

Subtotal, Military assistance

682

363

704

633

821
486
36

998
517
38

1,053
724
41

1,281
724
43

1,343

1,553

1,817

2,048

518

565

602

687

1,842

7,023

5,478

4,594

153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations and conferences
Other
Subtotal, Conduct of foreign affairs
154

Foreign information and exchange activities

155 International financial programs:
Export-Import Bank




23

SPECIAL ANALYSIS A
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

3,997

Foreign military sales trust fund (net)
International monetary programs
International commodity agreements
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

Current services
1981
estimate

1982
estimate

1982
administration
proposals

2,376

2,376

-77

2,889
5,516
88
-79

239
-80

239
-80

5,761

15,437

8,013

7,129

-96

-81

-79

-79

15,519

25,132

19,207

19,639

991
470*

1,083
504*

1,181
560*

1,359
607*

1,461

1,588

1,741

1,966

253

Space flight

2,820

3,143

3,749

3,802

254

Space, science, applications, and technology

1,425

1,416

1,694

1,782

255

Supporting space activities

439

451

558

558

Deductions for offsetting receipts

-3

-4

-4

-4

6,141

6,593

7,738

8,104

245
-916
14,924
3,559

1,286
-636
-90
3,964

562
-969
2,421
5,674

569
-961
2,133
4,406

36,813

4,524

6,688

6,147

736

800
121

872
132

872
127

736

922

1,004

999

-2,000

1,486
1,845

3,650
248

3.650
248

2,000

-1,845
1,486

-248
3,650

-248
3,650

91
68
151
400
8
233

105
76
183
454
22
264

127
77
184
501
37
271

127
86
184
501
37
402

951

1,104

1,196

1,336

Subtotal, General science and basic research

Total budget authority
270 ENERGY
271 Energy supply:
Synthetic fuels promotion
Spent fuel storage fund (proposed)
Uranium enrichment
Petroleum reserves and other
Power marketing (net)
Other

19,000

Subtotal, Energy supply
272 Energy conservation:
Energy conservation (DOE)
Solar energy and Energy Conservation Bank
Subtotal, Energy conservation
274 Emergency energy preparedness:
Strategic petroleum reserve
Strategic petroleum reserve entitlements and royalties
Strategic petroleum reserve receipts
Subtotal, Emergency energy preparedness
276 Energy information, policy, and regulation:
Energy Information Administration
Federal Energy Regulatory Commission
Economic Regulatory Administration
Nuclear Regulatory Commission
Alaska Gas Inspection
Department of Energy—administration and other
Subtotal, Energy information, policy, and regulation




...

24

THE BUDGET FOR FISCAL YEAR 1982
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Deductions for offsetting receipts..
Total budget authority
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Soil Conservation Service
Corps of Engineers
Department of the Interior
Proposed legislation
Other
Offsetting receipts
Subtotal, Water resources.
302 Conservation and land management:
Management of national forests, cooperative forestry, and
forestry research
Management of public lands
Mining reclamation and enforcement
Conservation of agricultural lands
Other, including offsetting receipts
Subtotal, Conservation and land management..
303 Recreational resources:
Land and water conservation fund
Urban recreation grants and historic preservation fund.
Operation of recreation resources
Subtotal, Recreational resources..

Current services
1981
estimate

1982
estimate

-53

-58

-58

36,447

7,977

12,482

214
3,293
656

224
3,070
826

203
3,393
954

4,157

4,118

4,545

1,965
440
180
540
-538

1,843
454
175
583
-605

2,104
475
252
613
-892

2,586

2,450

2,553

539
165
969

409
52
951

413
57
1,020

1,672

1,412

1,490

1,235
37

1,302
16

1,383
19

304 Pollution control and abatement:
Regulatory, enforcement, and research programs..
Oil pollution funds
Hazardous substance response fund
Sewage treatment plant construction grants

3,400

3,305

4,033

Subtotal, Pollution control and abatement

4,672

4,623

5,435

1,401

1,523

1,599

1,401

1,523

1,599

-1,439

-1,717

-2,187

13,051

12,410

13,436

3,056
12
335
43
191

3,300
31
297
36
210

2,296
34
795
43
214

3,637

3,874

3,381

560

635

677

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...
Agricultural credit insurance fund
Other programs
Administrative expenses
Subtotal, Farm income stabilization..
352 Agricultural research and services:
Research programs




25

SPECIAL ANALYSIS A
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

Proposed legislation
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programsEconomic intelligence
Other programs
Administrative expenses
Offsetting receipts

1981
estimate

1982
estimate

286
76

304
82

331
84

251
145
64

282

-66

159
70
100
-70

295
175
71
109
-72

1,402

1,562

1,670

4,945

5,431

5,047

1,869
324
806
2,282
1,200

210
344
781
618
197

502
305
861
2,218
310

6,481

3,150

4,195

1,677

1,593

1,501

376 Other advancement and regulation of commerce:
Payments in excess of corporate tax liability (proposed)....
Small business assistance
National Consumer Cooperative Bank
Technology utilization
Economic and demographic statistics
Chrysler Corporation loan guarantee program
Other

788
67
241
750
2
493

881
122
271
272

962
136
279
191

512

530

Subtotal, Other advancement and regulation of commerce

2,340

2,060

2.099

Total budget authority

10,497

6,804

7,796

400 TRANSPORTATION
401 Ground transportation:
Highways
Mass transit
Railroads
Regulation

9,177
2,565
2,198
79

9,534
4,682
3,991

10,274
5,096
2,327

14,019

18,293

17,786

3,269
560
96
29

3,576
528
114
30

3,795
567
114
31

3,954

4,248

4,507

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 or handicapped
Department of Agriculture—rural housing programs.
National Credit Union Administration
Subtotal, Mortgage credit and thrift insurance..
372

Postal Service..

86

-95

1

1

Deductions for offsetting receipts..

Subtotal, Ground transportation..
402 Air transportation:
Airways and airports
Aeronautical research and technology..
Air carrier subsidies
Regulation
Subtotal, Air transportation.




86

26

THE BUDGET FOR FISCAL YEAR 1982

Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

403 Water transportation:
Marine safety and transportation
Proposed legislation
Ocean shipping
Regulation
Subtotal, Water transportation
407

Other transportation

Deductions for offsetting receipts
Total budget authority
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
Community development block grants
Urban development grants
Rehabilitation loans
Neighborhood Reinvestment Corporation
Pennsylvania Avenue development
Other programs
Subtotal, Community development
452 Area and regional development:
Rural development and business assistance
Proposed legislation
Economic development
Coastal energy impact
Indian programs
Regional commissions
Other programs
Offsetting receipts

....

1981
estimate

1982
estimate

1982
administration
proposals

1,681

1,971

2,116

507
11

912
12

657
13

2,175
-9
601
13

2,199

2,895

2,786

2,779

97

112

121

122

-60

-60

-56

-56

20,210

25,488

25,143

25,509

3,752
675
110
12
40
338

3,695
675
130
12
32
367

4,038
738
130
15
31
396

3,960
675
134
15
31
387

4,927

4,911

5,348

5,202

647

803

716

553
-35
1,183
474
271
-304

667
1,134
425
350
-375

668
58
1,161
423
381
-266

499
635
674
1
1,175
350
201
-266

2,790

3,003

3,142

3,268

453 Disaster relief and insurance:
SBA disaster loans
Federal emergency management activities
Drought assistance and other

1,208
1,182
35

1,470
1,038
10

729
11

729
10

Subtotal, Disaster relief and insurance

2,426

2,518

740

739

Subtotal, Area and regional development

Deductions for offsetting receipts
Total budget authority
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Elementary and secondary education
Proposed legislation
Indian education
Impact aid
Education for the handicapped
Vocational and adult education
Other

-32

-25

-25

-25

10,110

10,407

9,205

9,184

3,596

3,838

4,183

346
825
1,051
927
479

356
790
1,102
932
464

370
875
1,201
1,016
643

4,203
900
384
401
1,225
904
488

7,225

7,482

8,288

8,505

500

Subtotal, Elementary, secondary, and vocational education




27

SPECIAL ANALYSIS A
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

502 Higher education:
Student financial assistance
Loan guarantees to students and parents
Higher and continuing education
Special institutions

Current services
1981
estimate

1982
estimate

1982
administration
proposals

3,496
1,609
442
188

3,357
2,312
428
204

3,985
3,143
453
248

4,091
2,346
437
248

5,735

6,301

7,829

7,121

375
161
661
146

377
248
678
149

396
255
765
153

389
255
768
157

1,344

1,451

1,569

1,569

1,627
6,493

729
7,246

1,142
8,456

90
267
365
781

95
277
365
845

97
277
365
904

1,142
7,374
1,125
105
277
385
904

9,623

9,557

11,241

11,312

572

625

675

688

2,823

2,398

3,132

237
3,132
-41

2,047
574
550
146
11

1,870
966
542
160
12

2,061
1,056
542
186
14

2,095
1,011
542
186
13

Subtotal, Social services

6,150

5,969

6,989

7,173

Deductions for offsetting receipts

-28

-30

-32

-32

30,622

31,355

36,559

36,336

35,855

44,874

56,840

14,543

17,365

18,999

3,902

4,197

4,583

56,840
31
18,999
-98
4,520
-5

54,300

66,435

80,422

80,287

3,211

3,412

3,680

3,611

233

240

260

276

Subtotal, Higher education
503 Research and general education aids:
Educational research and improvement
Administrative expenses
Cultural activities
Other
Subtotal, Research and general education aids
504 Training and employment:
Temporary employment assistance
Employment and training assistance
Proposed legislation
Other general programs
Older workers
Work incentive program
Federal-State employment service
Subtotal, Training and employment
505

Other labor services

506 Social services:
Tax credit for non-profit institutions (proposed)
Grants to States for social services
Proposed legislation
Services for the elderly, children, youth, families and other
special groups
Rehabilitation services and research for the handicapped
Community service programs
Domestic volunteer programs
Other social services

Total budget authority
550 HEALTH
551 Health care services:
Medicare
Proposed legislation
Medicaid
Proposed legislation
Other health care services
Proposed legislation
Subtotal, Health care services
552 Health research:
National Institutes of Health research
Alcohol, Drug Abuse, and Mental Health Administration
research




28

THE BUDGET FOR FISCAL YEAR 1982
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Other research programs
Subtotal, Health research
553 Education and training of health care work force:
National Institutes of Health training
Health Resources Administration and other training
Alcohol, Drug Abuse, and Mental Health Administration
training

Current services
1981
estimate

1982
estimate

1982
administration
proposals

198

187

200

198

3,642

3,839

4,140

4,086

218
591

232
481

246
536

237
183

114

116

125

114

Subtotal, Education and training of health care workforce

923

829

907

534

554 Consumer and occupational health and safety:
Consumer safety
Occupational safety and health

658
337

723
379

732
397

754
418

995

1,102

1,129

1,172

Subtotal, Consumer and occupational health and safetyDeductions 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
Subtotal, General retirement and disability insurance
602 Federal employee retirement and disability:
Retirement and disability programs
Proposed legislation
Federal employee compensation
Subtotal, Federal employee retirement and disability
603 Unemployment compensation:
Existing law
Proposed legislation
Subtotal, Unemployment compensation
604

Housing assistance

605 Food and nutrition assistance:
Food stamps
Proposed legislation
WIC-food supplements
School lunch and other nutrition programs
Proposed legislation
Subtotal, Food and nutrition assistance
609 Other income security:
Supplemental security income
Proposed legislation
AFDC and other




-17

-3

-3

-3

59,844

72,202

86,595

86,075

115,997

131,048

150,145

-4,400

4,848

5,384

1,848
17

1,898
14

1,952
15

150,145
247
5,384
118
1,880
15

122,262

137,809

157,497

157,790

24,466

27,952

30,654

266

311

353

30,654
-698
353

24,732

28,263

31,007

30,308

17,703

22,575

26,018

25,988
-1,957

17,703

22,575

26,018

24,031

27,813

31,280

36,786

31,386

9,182

11,084

12,882

758
3,834

927
4,072

1,068
4,637

12,882
-487
1,068
5,026
-453

13,774

16,083

18,588

18,037

6,468

7,278

7,983

7,709

7*728

6,263

7,983
-45
6,263

29

SPECIAL ANALYSIS A
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

Proposed legislation
Earned income tax credit
Refugee assistance
Low income energy assistance
Proposed legislation
Other
Subtotal, Other income security
Total budget authority
700 VETERANS BENEFITS AND SERVICES
701 Income security for veterans:
Service-connected compensation
Proposed legislation
Non-service-connected pensions
Burial and other benefits
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
702 Veterans education, training, and rehabilitation:
Existing law
Proposed legislation
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
705 Other veterans benefits and services:
VA administrative expenses and other
Proposed legislation
Non-VA support programs
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)
Proposed legislation
Other enforcement
Subtotal, Federal law enforcement activities




1981
estimate

1982
estimate

1982
administration
proposals

-531
1,115
767

1,275
617
1,618

1,203
948
1,850

1,115
800
1,850

227

538

598

1,850
598

17,914

19,545

18,608

18,000

224,198

255,555

288,504

279,551

7,353

8,584

9,697

3,608
186
1,044
38
5
-464

3,860
199
1,135
34
6
-474

4,106
204
1,162
32
8
-478

8,658
1,039
4,106
204
1,162
32
8
-478

11,770

13,344

14,731

14,731

2,374

2,040

1,658

1,658
31

2,374

2,040

1,658

1,689

5,832

6,365

6,971

402
175

549
196

549
214

7,005
-47
673
220

6,409

7,110

7,734

7,851

624

668

656

678
1
38

34

33

36

658

701

692

717

-2

-3

-3

-3

21,208

23,192

24,812

24,984

614
201
143
800
179

669
216
152
859
175

710
234
160
902
187

278

319

400

744
236
160
895
187
1
359

2,214

2,390

2,593

2,582

30

THE BUDGET FOR FISCAL YEAR 1982

Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

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

1981
estimate

1982
estimate

1982
administration
proposals

459

501

547

610
300

674
321

738
344

554
-13
753
347

1,370

1,496

1,629

1,641

753

Federal correctional activities

320

355

371

379

754

Criminal justice assistance

498

158

194

235

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
Federal Financing Bank
Other fiscal operations
Subtotal, Central fiscal operations
804 General property and records management:
Real property
Personal property
Records management
Other
Subtotal, General property and records management
805

Central personnel management

806 Other general government:
Territories
Proposed legislation
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:
General revenue sharing payments
Administration
Subtotal, General revenue sharing
852 Other general purpose fiscal assistance:
Tax credit for State and local governments (proposed)
Payments and loans to the District of Columbia
New York City loan guarantee program
Payments to States from Forest Service receipts




-11

-12

-12

-12

4,391

4,387

4,776

4,825

1,106

1,073

1,193

1,208

102

114

113

113

2,288
-253
448

2,489
-116
429

2,649
-128
429

2,649
-128
477

2,484

2,802

2,950

2,998

154
85
167

161
90
185

170
98
199

121
170
98
199

406

435

467

588

145

161

166

168

210

167

168

465
438
-531

144
305
-29

15
378
-37

199
1
15
378
-37

583

587

523

555

-224

-267

-193

-193

4,602

4,905

5,220

5,439

6,855
6

4,570
7

4,570
7

4,570
7

6,861

4,577

4,577

4,577

439
1
280

465
1
223

581
1
275

495
581
1
275

*

31

SPECIAL ANALYSIS A
Table A-13. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Payments to States and counties from Federal land
management activities
Payments to territories and Puerto Rico
Other

488
593
5

Current services
1981
estimate

572
365
5

1982
estimate

686
370
5

1982
administration
proposals

583
370
5

Subtotal, Other general purpose fiscal assistance

1,805

1,631

1,918

2,310

Total budget authority

8,667

6,208

6,496

6,887

900 INTEREST
901 Interest on the public debt

74,781

94,100

106,500

106,500

502
-5,915
-4,860

708
-8,899
-5,509

600
-12,073
-5,081

600
-12,073
-5,081

-10,273

-13,700

-16,554

-16,554

64,508

80,400

89,946

89,946

3,360

958

902 Other interest:
Interest on refunds of tax collections
Interest on loans to the Federal Financing Bank
Other
Subtotal, Other interest
Total budget authority
920 ALLOWANCES
921 Civilian agency pay raises
928

2,000

Contingencies for other requirements
Total budget authority

950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement
952 Interest received by trust funds:
Existing law
Proposed legislation
Subtotal, Interest received by trust funds
953 Rents and royalties on the Outer Continental
Shelf
Total budget authority
Total budget authority
*$500 thousand or less.




3,360

2,958

-5,787

-6,561

-6,798

-6,798

-12,045

-13,428

-14,713

-14,714
-451

-12,045

-13,428

-14,713

-15,165

-4,101

-7,800

-9,900

-9,900

-21,933

-27,789

-31,410

-31,863

658,790

722,940

806,688

809,829

32

THE BUDGET FOR FISCAL YEAR 1982
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM
(In millions of dollars)
Current services

1980
actual

050 NATIONAL DEFENSE
051 Department of Defense—Military:
Military personnel
Retired military personnel
Proposed legislation
Operation and maintenance
Procurement
Research, development, test and evaluation
Military construction
Family housing
Revolving funds and other
Allowances for civilian and military pay raises
Other legislation
Subtotal, Department of Defense—Military
053

Atomic energy defense activities

054 Defense-related activities:
Emergency planning, preparedness, and mobilization
GSA stockpile sales and related
Proposed legislation
Other
Subtotal, Defense-related activities
Deductions for offsetting receipts
Total outlays

1981
estimate

1982
estimate

1982
administration
proposals

30,842
11,920

36,330
13,880

37,467
16,049

44,770
29,021
13,127
2,450
1,680
-969

50,540
35,419
15,441
2,514
1,787
-277

53,930
38,770
16,744
2,051
1,950
-180
7,216

132,840

155,633

173,996

180,000

2,878

3,544

3,709

4,478

133
-62

149
-144

169
-159

72

109

124

169
-159
-210
124

38,291
16,049
-477
59,659
40,120
18,485
2,919
1,959
-932
3,707
220

142

114

134

-76

-4

-3

—3

-3

135,856

159,288

177,837

184,399

1,609
784
1,073
101
1,904
446
-311

1,814
988
1,471
106
2,104
486
-324

1,814
1,219
1,263
121
2,132
585
-362

1,898
1,219
1,263
12L
2,314
585
-363

5,607

6,646

6,772

7,038

152 Military assistance:
Grant military assistance
Foreign military training
Foreign military sales credit
Relocation of facilities (Israel)
Offsetting receipts and other

219
26
644
341
-335

151
26
595
360
-278

150
30
660
68
-288

148
34
660
68
-288

Subtotal, Military assistance

894

854

620

622

842
492
33

916
539
39

1,022
668
39

1,122
668
42

1,367

1,494

1,729

1,831

534

576

603

610

150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
International Development Cooperation Agency
Multilateral development banks
Public Law 480—Food aid
Peace Corps
Economic support fund/Peacekeeping operations
Refugee assistance
Offsetting receipts and other
Subtotal, Foreign economic and financial assistance

153 Conduct of foreign affairs:
Administration of foreign affairs
International organizations and conferences
Other
Subtotal, Conduct of foreign affairs
154

Foreign information and exchange activities




33

SPECIAL ANALYSIS A
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

155 International financial programs:
Export-Import Bank
Foreign military sales trust fund (net)
International monetary programs
International commodity agreements
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 activities
Subtotal, General science and basic research

1981
estimate

1982
estimate

1982
administration
proposals

2,352

2,782

2,657

-559

5
-562

30
-556

30
-556

2,427

1,795

2,256

2,131

1,836
1,137
12

-96

-81

-79

-79

10,733

11,285

11,901

12,152

912
469*

1,007
510*

1,041
557*

1,190
597*

1,381

1,518

1,598

1,787

253

Space flight

2,594

2,984

3,647

3,679

254

Space, science, applications, and technology

1,346

1,330

1,586

1,635

255

Supporting space activities

405

431

494

494

-3

-4

-4

-4

5,722

6,258

7,321

7,590

Deductions for offsetting receipts
Total outlays
270 ENERGY
271 Energy supply:
Synthetic fuels promotion
Spent fuel storage fund (proposed)
Uranium enrichment
Petroleum reserves and other
Power marketing (net)
Other

26

391

409

243
-858
1,552
3,610

196
-414
1,922
3,777

284
-925
2,001
4,601

409
200
272
-879
1,786
4,445

Subtotal, Energy supply

4,574

5,872

6,369

6,234

568

729
47

799
137

931
136

568

776

936

1,067

342

2,018
1,000
-1,845

2,567
1,093
-248

2,567
1,093
-248

Subtotal, Emergency energy preparedness

342

1,173

3,412

3,412

276 Energy information, policy, and regulation:
Energy Information Administration
Federal Energy Regulatory Commission
Economic Regulatory Administration
Nuclear Regulatory Commission
Alaska Gas Inspection
Department of Energy—administration and other

75
67
132
378
5
225

102
79
183
437
21
254

127
76
173
484
36
260

127
85
216
484
36
370

272 Energy conservation:
Energy conservation (DOE)
Solar energy and Energy Conservation Bank
Subtotal, Energy conservation
274 Emergency energy preparedness:
Strategic petroleum reserve
Strategic petroleum reserve entitlements and royalties
Strategic petroleum reserve receipts

340-700 0 - 8 1 - 3




34

THE BUDGET FOR FISCAL YEAR 1982
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Subtotal, Energy information, policy, and regulation
Deductions for offsetting receipts

882

Current services
1981
estimate

1,076

1982
estimate

1,156

1982
administration
proposals

1,317

-53

-58

-58

-58

6,313

8,839

11,815

11,973

250
3,258
798

259
3,388
855

224
3,410
935

50
-62

67
-55

59
-56

220
3,412
929
4
70
-56

4,294

4,513

4,572

4,578

1,798
456
85
548
-559

1,844
420
158
605
-598

2,172
438
141
594
-914

2,153
494
134
565
-921

Subtotal, Conservation and land management

2,328

2,428

2,432

2,425

303 Recreational resources:
Land and Water Conservation fund
Urban recreation grants and historic preservation fund
Operation of recreation resources

595
53
1,059

518
102
1,037

612
114
1,070

556
94
1,031

1,707

1,658

1,796

1,681

1,143
23

1,243
32

1,329
19

4,343

4,200

4,240

1,338
29
163
4,230

5,510

5,475

5,588

5,760

1,412

1,551

1,620

1,662
120

1,412

1,551

1,620

1,782

-1,439

-1,717

-2,187

-2,187

13,812

13,907

13,821

14,039

2,717

-84

2,151

38
478
36
190

216
-745
43
204

80
640
49
209

2,151
-86
183
640
48
214

Total outlays
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Soil Conservation Service
Corps of Engineers
Department of the Interior
Proposed legislation
Other
Offsetting receipts
Subtotal, Water resources
302 Conservation and land management:
Management of national forests, cooperative forestry, and
forestry research
Management of public lands
Mining reclamation and enforcement
Conservation of agricultural lands
Other, including offsetting receipts

Subtotal, Recreational resources
304 Pollution control and abatement:
Regulatory, enforcement, and research programs
Oil pollution funds
Hazardous substance response fund
Sewage treatment plant construction grants
Subtotal, Pollution control and abatement
306 Other natural resources:
Existing law
Proposed legislation
Subtotal, 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
Agricultural credit insurance fund
Other programs
Administrative expenses




35

SPECIAL ANALYSIS A
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Subtotal, Farm income stabilization
352 Agricultural research and services:
Research programs
Proposed legislation
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programs
Economic intelligence
Other programs
Administrative expenses
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 or handicapped
Department of Agriculture—rural housing programs
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance Corporation and other..
National Credit Union Administration
Subtotal, Mortgage credit and thrift insurance
372

Postal Service

Current services
1981
estimate

1982
estimate

1982
administration
proposals

3,459

-365

3,129

3,148

546

644

681

288
81

302
87

329
85

251
147
64
86
-66

277
157
69
102
-70

296
174
71
107
-72

688
6
303
95
-25
296
177
71
119
-72

1,398

1,569

1,670

1,659

-95

-5

-5

-5

4,762

1,199

4,795

4,803

1,358
151
753
1,719
-922
552
85

528
61
800
-739
-1,450
415
198

1,012
-104
780
1,571
-1,500
-650
288

1,013
-116
780
1,571
-1,500
-650
287

3,696

-187

1,397

1,385

1,677

1,593

1,501

1,119

376 Other advancement and regulation of commerce:
Payments in excess of corporate tax liability (proposed)
Small business assistance
National Consumer Cooperative Bank
Technology utilization
Economic and demographic statistics
Chrysler Corporation loan guarantee program
Other

950
9
241
794
2
414

928
136
264
291
1
547

1,050
138
279
204
1
519

3,493
881
128
305
210
1
535

Subtotal, Other advancement and regulation of commerce

2,409

2,168

2,191

5,554

_ *

_ *

7,782

3,573

5,089

8,058

9,523
3,307
2,170
79

9,001
3,680
3,913
85

8,689
3,903
2,199
88

8,836
3,827
1,795
84

15,079

16,679

14,879

14,542

3,136

3,325

3,530

3,470

Deductions for offsetting receipts
Total outlays
400 TRANSPORTATION
401 Ground transportation:
Highways
Mass transit
Railroads
Regulation
Subtotal, Ground transportation
402 Air transportation:
Airways and airports




_*

36

THE BUDGET FOR FISCAL YEAR 1982
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Aeronautical research and technology
Air carrier subsidies
Regulation
Subtotal, Air transportation
403 Water transportation:
Marine safety and transportation
Proposed legislation
Ocean shipping
Regulation
Subtotal, Water transportation
407

Other transportation

Deductions for offsetting receipts
Total outlays
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
Community development block grants
Urban development grants
Rehabilitation loans
Neighborhood Reinvestment Corporation
Pennsylvania Avenue development
Other programs
Subtotal, Community development

Current services
1981
estimate

1982
estimate

1982
administration
proposals

509
89
28

542
118
30

549
114
31

556
114
31

3,762

4,016

4,224

4,171

1,613

1,885

2,074

611
11

997
12

653
12

2,122
-9
654
12

2,235

2,895

2,740

2,779

104

111

115

115

-60

-60

-56

-56

21,120

23,640

21,902

21,551

3,902
225
165
12
24
551

3,938
365
133
12
36
576

4,000
615
134
15
34
537

3,998
610
135
15
34
531

4,878

5,061

5,334

5,322

452 Area and regional development:
Rural development and business assistance
Proposed legislation
Economic development
Local public works
Coastal energy impact
Indian programs
Regional commissions
Other programs
Offsetting receipts

798

897

1,035

629
416
28
991
458
164
-304

458
150
41
1,004
423
278
-375

609
60
55
936
403
246
-266

933
11
614
60
50
947
364
222
-266

Subtotal, Area and regional development

3,180

2,876

3,077

2,935

453 Disaster relief and insurance:
SBA disaster loans
Federal emergency management activities
Drought assistance and other

949
1,070
23

2,300
944
29

-99
936
16

-99
936
15

Subtotal, Disaster relief and insurance

2,043

3,273

853

852

Deductions for offsetting receipts
Total outlays
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Elementary and secondary education
Proposed legislation
Indian education

-32

-25

-25

-25

10,068

11,186

9,239

9,084

3,569

3,374

3,919

395

294

311

3,942
50
332

500




37

SPECIAL ANALYSIS A
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Impact aid
Education for the handicapped
Vocational and adult education
Other
Subtotal, Elementary, secondary, and vocational education
502 Higher education:
Student financial assistance
Loan guarantees to students and parents
Higher and continuing education
Special institutions
Subtotal, Higher education
503 Research and general education aids:
Educational research and improvement
Administrative expenses
Cultural activities
Other
Subtotal, Research and general education aids
504 Training and employment:
Temporary employment assistance
Employment and training assistance
Proposed legislation
Other general programs
Older workers
Work incentive program
Federal-State employment service
Subtotal, Training and employment
505

Other labor services

506 Social services:
Tax credit for non-profit institutions (proposed)
Grants to States for social services
Proposed legislation
Services for the elderly, children, youth, families, and
other special groups
Rehabilitation services and research for the handicapped
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 care services




Current services
1981
estimate

1982
estimate

1982
administration
proposals

690
822
863
393

932
1,074
939
465

888
1,090
1,129
576

443
1,088
1,092
419

6,732

7,079

7,914

7,366

3,683
1,408
410
193

3,407
2,168
457
212

3,500
2,970
424
246

2,350
2,350
384
246

5,694

6,244

7,141

6,927

401
170
632
154

390
234
671
173

400
249
750
154

387
249
745
157

1,357

1,469

1,553

1,539

1,796
7,065

974
7,488

1,096
8,268

97
235
395
756

99
265
365
830

97
277
365
904

1,096
7,347
875
105
277
385
904

10,345

10,022

11,006

10,989

551

604

650

664

2,706

2,963

3,116

237
3,116
-41

2,242
427
592
133
16

1,691
960
588
155
18

1,846
1,044
546
178
13

2,004
1,003
544
183
13

6,116

6,386

6,743

7,058

-28

-30

-32

-32

30,767

31,775

34,974

34,511

35,034

40,065

47,044

14,028

16,577

18,313

3,958

4,159

4,357

47,044
-446
18,312
-98
4,183

38

THE BUDGET FOR FISCAL YEAR 1982
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Current services
1981
estimate

1982
estimate

Proposed legislation
Subtotal, Health care services
552 Health research:
National Institutes of Health research
Alcohol, Drug Abuse, and Mental Health Administration
research
Other research programs
Subtotal, Health research
553 Education and training of health care work force:
National Institutes of Health training
Health Resources Administration and other training
Alcohol, Drug Abuse, and Mental Health Administration
training

1982
administration
proposals

-5
53,019

60,800

69,713

68,991

3,029

3,212

3,441

3,433

255
158

199
165

216
183

237
174

3,442

3,577

3,840

3,844

193
404

220
416

224
470

222
322

122

125

135

104

Subtotal, Education and training of health care workforce

719

761

829

649

554 Consumer and occupational health and safety:
Consumer safety
Occupational safety and health

674
327

701
369

725
387

752
404

1,001

1,070

1,112

1,156

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
Pension Benefit Guaranty Corporation
Other
Subtotal, General retirement and disability insurance
602 Federal employee retirement and disability:
Retirement and disability programs
Proposed legislation
Federal employee compensation
Subtotal, Federal employee retirement and disability
603 Unemployment compensation:
Existing Law
Proposed legislation
Subtotal, Unemployment compensation
604

Housing assistance

605 Food and nutrition assistance:
Food stamps
Proposed legislation
WIC-food supplements




-17

-3

-3

-3

58,165

66,204

75,491

74,636

117,117

138,260

159,648

4,737

5,295

6,013

1,843
-27
13

2,009
-37
16

1,947
-28
15

159,648
-23
6,013
-186
1,875
-29
15

123,684

145,543

167,595

167,313

14,442

17,292

20,185

233

311

353

20,185
-655
353

14,675

17,603

20,538

19,883

18,023

26,140

24,118

24,088
-2,210

18,023

26,140

24,118

21,878

5,514

6,823

8,397

8,465

9,117

10,950

12,722

717

904

994

12,722
-482
994

39

SPECIAL ANALYSIS A
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

1981
estimate

1982
estimate

1982
administration
proposals

School lunch and other nutrition programs
Proposed legislation

4,181

4,052

4,307

4,676
-429

Subtotal, Food and nutrition assistance

14,015

15,905

18,023

17,481

6,411

7,305

8,017

7,308

7,794

8,216

1,275
368
1,577

1,203
881
1,850

1,115
810
1,850

8,017
-45
8,216
-531
1,115
768

250

523

597

1,850
597

17,190

19,555

20,604

19,987

193,100

231,569

259,275

255,006

7,434

8,492

9,595

3,585
183
928
77
-55
-464

3,840
198
1,036
67
-55
-474

4,085
204
1,062
62
-54
-478

8,643
952
4,085
204
1,062
62
-54
-478

11,688

13,103

14,477

14,477

2,342

1,955

1,587

1,588*

2,342

1,955

1,587

1,589

5,981

6,306

6,950

309
225

384
245

554
236

6,983
-47
558
242

6,515

6,935

7,739

7,737

704 Veterans housing:
Loan guaranty revolving fund
Direct loan revolving fund
Other

28
-67
16

-42
-119
55

25
-72
-6

25
-72
-6

Subtotal, Veterans housing

-23

-106

-53

-53

633

671

652

609 Other income security:
Supplemental security income
Proposed legislation
AFDC and other
Proposed legislation
Earned income tax credit
Refugee assistance
Low income energy assistance
Proposed legislation
Other
Subtotal, Other income security
Total outlays
700 VETERANS BENEFITS AND SERVICES
701 Income security for veterans:
Service-connected compensation
Proposed legislation
Non-service-connected pensions
Burial and other benefits
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
702

Veterans education, training, and rehabilitation:
Existing law
Proposed legislation
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

705 Other veterans benefits and services:
VA administrative expenses and other
Proposed legislation
Non-VA support programs
Subtotal, Other veterans benefits and services




32

34

37

677
1
37

665

705

689

715

40

THE BUDGET FOR FISCAL YEAR 1982
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1980
actual

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)
Proposed legislation
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

Deductions for offsetting receipts
Total outlays
800 GENERAL GOVERNMENT
801 Legislative functions
802

Executive direction and management

803 Central fiscal operations:
Collection of taxes
Federal Financing Bank
Other fiscal operations
Subtotal, Central fiscal operations
804 General property and records management:
Real property
Personal property
Records management
Other
Subtotal, General property and records management
805

Central personnel management

806 Other general government:
Territories
Proposed legislation
Indian affairs
Treasury claims
Other
Subtotal, Other general government




1981
estimate

1982
estimate

1982
administration
proposals

-2

-3

-3

-3

21,183

22,589

24,436

24,462

609
204
146
816
179

665
213
151
849
172

710
230
158
872
185

282

320

341

743
232
158
866
186
1
350

2,237

2,370

2,496

2,536

452

491

529

575
320

685
328

732
347

540
-12
746
347

1,347

1,504

1,608

1,620

342

363

375

378

656

495

318

359

-11

-12

-12

-12

4,570

4,719

4,786

4,882

1,032

1,133

1,157

1,173

97

113

113

113

2,335
-253
440

2,480
-116
439

2,634
-128
423

2,634
-128
473

2,522

2,803

2,929

2,979

-47
161
84
167

-10
166
88
181

22
173
97
209

28
154
97
209

364

425

500

487

154

162

163

165

126

192

198

475
438
-480

153
305
-50

13
403
-73

202
1
13
378
-72

559

600

541

522

41

SPECIAL ANALYSIS A
Table A-14. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1980
actual

Deductions for offsetting receipts
Total outlays
850 GENERAL PURPOSE FISCAL ASSISTANCE
851 General revenue sharing:
General revenue sharing payments
Administration
Subtotal, General revenue sharing
852 Other general purpose fiscal assistance:
Tax credit for State and local governments (proposed)
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

Current services
1981
estimate

1982
estimate

1982
administration
proposals

-224

-267

-193

-193

4,505

4,969

5,210

5,246

6,829
6

5,156
7

4,559
7

4,559
7

6,835

5,163

4,566

4,566

425
1
280

468
1
223

606
1
275

495
606
1
275

483
555
5

577
415
7

691
370
5

582
370
5

Subtotal, Other general purpose fiscal assistance

1,749

1,691

1,950

2,336

Total outlays

8,584

6,854

6,516

6,902

74,781

94,100

106,500

106,500

502
-5,915
-4,865

708
-8,899
-5,504

600
-12,073
-5,081

600
-12,073
-5,081

-10,278

-13,695

-16,554

-16,554

64,504

80,405

89,946

89,946

3,226

920
1,000

3,226

1,920

900 INTEREST
901 Interest on the public debt
902 Other interest:
Interest on refunds of tax collections
Interest on loans to the Federal Financing Bank
Other
Subtotal, Other interest
Total outlays
920 ALLOWANCES
921 Civilian agency pay raises
928 Contingencies for other requirements
Total outlays
950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement
952 Interest received by trust funds:
Existing law
Proposed legislation

-5,787

-6,561

-6,798

-6,798

-12,045

-13,428

-14,713

-14,714
-451

-12,045

-13,428

-14,713

-15,165

-4,101

-7,800

-9,900

-9,900

Total outlays

-21,933

-27,789

-31,410

-31,863

Total outlays

579,613

660,473

736,168

739,296

Subtotal, Interest received by trust funds
953 Rents and royalties on the Outer Continental
Shelf

*$500 thousand or less.







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 March 1981 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 and also discusses estimating errors inherent in preparing this translation, while the final section explains the major
differences between the budget and the NIA concepts. A discussion
of fiscal policy can be found in the Economic Report of the President
In December 1980 the Department of Commerce issued a major
("benchmark") revision of the GNP and related data series. While
this revision included both conceptual (definitional) and estimating
changes, the Federal sector data were subject only to estimating




43

44

THE BUDGET FOR FISCAL YEAR 1982

changes—no definitional changes were made in the Federal sector
concepts.
FEDERAL SECTOR RECEIPTS AND EXPENDITURES

Table B - l shows Federal sector NIA receipts, expenditures, and
deficits for 1980-82.
Table B - l . FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA
(In billions of dollars)
1980
actual

Description

1981
estimate

1982
estimate

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

249.7
70.6
35.7
171.3

290.5
67.9
61.2
194.8

339.3
78.8
83.8
226 3

527.3

614.4

728.2

190.2
(126.1)
(64.1)
239.3
(234.7)
(4.6)
86.7
51.2

218.5
(148.0)
(70.5)
281.5
(276.8)
(4.7)
90.3
67.3

248.7
(167.5)
(81.2)
313.9
(308.7)
(5.2)
94.6
75.1

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 ( - )

10.8

13.4

14.0

578.2

671.0

746.3

-50.9

-56.6

-18.1

Trends in Federal sector receipts.—Table B - l 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
1950-52
average
actual

Description

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




-

1960-62
average
actual

1970-72
average
actual

1980-82
average
estimate

7.4
5.7
3.0
2.1

8.6
4.2
2.6
3.5

9.0
3.2
1.9
5.1

10.2
2.5
2.0
6.9

18.2

18.9

19.2

21.6

45

SPECIAL ANALYSIS A

Distribution of Federal Sector Receipts by Category
Percent
100
INSNM

kWVt

KVsNfc

NVstt

Percent
T100

kWM

Contributions
for Social
Insurance
Indirect
Business Tax
and Nontax
Accruals
Corporate
Profits Tax
Accruals
Personal Tax
and Nontax
Receipts

90
80
70
h60

50
b 40
30
20

h io
1953-57 58-62 63-67 68-72 73-77 78-82
Fiscal Years

0

Estimate

Personal tax and nontax receipts.—The largest receipt category—
personal tax and nontax receipts—is composed primarily of individual income taxes but also includes estate and gift taxes and some
miscellaneous receipts. Increases in income, because of both real
growth and inflation, automatically increase these receipts. Since
personal income taxes are progressive, these receipts normally
grow at a faster rate than personal income. However, tax reductions 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.




46

THE BUDGET FOR FISCAL YEAR 1982

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
later data. As is shown in Table B-10, the estimated corporate
profits tax accruals for 1979 are now $2.6 billion lower 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 the recently enacted windfall profit taxes,
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. However, these receipts nearly triple between 1979 and
1982, largely due to the recently enacted windfall profit taxes and to
the proposed motor fuels tax, both of which are discussed in part 4 of
the Budget.
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.




SPECIAL ANALYSIS A

47

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:
—Increases in social security taxes. The taxable earnings base
increased from $25,900 in calendar year 1980 to $29,700 in
1981, and is estimated to increase to $32,100 in 1982. The social
security tax rate rose from 12.26% in calendar year 1980 to
13.3% in 1981, and is scheduled to rise to 13.4% in 1982.
—The windfall profit tax on domestic producers of crude oil. This
was enacted in April 1980.
The receipts proposals in the 1982 budget, which are described in
Part 4 of the Budget, increase Federal sector receipts by $2.2 billion
in 1981 and by $4.3 billion in 1982. The provisions of the proposed
economic revitalization program, which are designed to increase
productivity, lower unemployment, and reduce inflation, reduce
Federal sector receipts by $4.1 billion in 1981 and $19.4 billion in
1982. The other major proposal affecting Federal sector receipts is
the excise tax on gasoline and diesel fuels. This proposal increases
estimated indirect business tax and nontax accruals by $4.2 billion
in 1981 and $13.2 billion in 1982.
Part 4 of the Budget discusses tax changes and proposed legislation on a unified budget basis 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.
The chart on the distribution of Federal sector expenditures
illustrates the trends for 5-year averages starting with 1953. As can
be seen, major shifts in the composition of Federal sector expenditures occur over time. For example, for most years since the
Korean war, defense purchases of goods and services have been a
declining share of Federal spending. This pattern was temporarily
reversed for 3 years during the Vietnam period, but by 1970 the
defense share was well below the pre-Vietnam percentages. Defense purchases are expected to total 22.1% of Federal sector expenditures in 1981 and 22.4% in 1982; they were 21.8% in 1980,
and 21.7% in 1979.




48

THE BUDGET FOR FISCAL YEAR 1982

Distribution of Federal Sector Expenditures by Category

Percent

Percent

100

100

1953-67 58-62 63-67 68-72 73-77 78-82
Fiscal Years

Estimate

Table B-3 shows, at 10-year intervals, 3-year averages of Federal
sector expenditures by category as a percent of GNP.
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

1950-52
average
actual

1960-62
average
actual

1970-72
average
actual

1980-82
average
estimate

8.0
1.8
3.1
1.1
.8
1.4
.3

9.0
1.9
4.4
.4
1.4
1.3
.6

7.1
2.3
6.3
.2
2.6
1.3
.6

5.1
2.5
9.5
.2
3.2
2.2
.4

16.6

19.0

20.5

23.1

Defense purchases and foreign transfer payments are, of course,
largely devoted to the conduct of our national defense and foreign
affairs. In 1950-52 defense purchases were 8.0% of GNP. In 1950
these were greatly reduced by receipts from large-scale sales of
World War II materials while 1951 was the first year of the Korean
War. Foreign transfer payments in 1950-52 averaged 1.1% of GNP.




49

SPECIAL ANALYSIS A

The total of these—9.1%—-reflects roughly the cost of the conduct
of external affairs. The years 1960-62, 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 9.4%
of GNP. Even though the 1970-72 period included some spending
for the Vietnam war, defense purchases and foreign transfers were
down to 7.3% of GNP. In the 1980-82 peacetime period they are
estimated to be equal to 5.3% 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 over this
period. In 1950-52, spending for everything except defense purchases and foreign transfer payments was equal to 7.5% of GNP; in
1980-82 such spending is estimated to equal 17.8% of GNP.
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.
Table B-4. PURCHASES OF GOODS AND SERVICES BY CHARACTER OF EXPENDITURE
(In billions of dollars)
1977
actual

Defense purchases:
Compensation of employees
Other
Total defense purchases
Nondefense purchases:
Compensation of employees
Other
Total nondefense

1978
actual

1979
actual

1980
actual

1981
estimate

1982
estimate

42.2
49.7

45.4
52.6

48.0
59.4

51.4
74.7

56.9
91.1

62.0
105.5

91.9

98.0

107.4

126.1

148.0

167.5

23.0
25.4

25.1
27.6

26.7
29.3

28.6
35.5

30.5
40.0

32.8
48.4

48.4

52.7

56.0

64.1

70.5

81.2

Defense purchases of goods and services.—Defense purchases consist of all purchases of goods and services under programs included
in the national defense function in the budget 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 $19.5
billion in 1982 over 1981. This increase more than offsets the
impact of inflation, thus continuing the current trend of rising

340-700

0 - 8 1 - 4




50

THE BUDGET FOR FISCAL YEAR 1982

defense purchases in real terms. The pattern of real defense spending has altered significantly over the past decade. From a Vietnam
peak in 1968, real defense purchases declined each year until 1976.
Between 1976 and 1978 they stayed remarkably stable, and starting
in 1979 began the rise that is continuing in this budget.
In former years, while constant price estimates of total purchases
of goods and services were available, there was no disaggregation
as between defense and nondefense purchases in constant prices.
Beginning with the GNP revision issued in December 1980, defense
and nondefense purchases are now estimated separately in constant as well as current dollars. This new series of constant price
data extends back to 1972. It shows that defense purchases declined
by 8.6% between 1972 and 1976, was virtually unchanged from
1976 to 1978, and began climbing in 1979. They are estimated to be
17% higher in 1982 than in 1978. While NIA defense purchases are
not estimated in constant prices for years prior to 1972, 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. Table B-5 shows the budget estimates of outlays in constant prices for the national defense function for a substantially longer period of time.
Table B-5. DEFENSE FUNCTION OUTLAYS IN CONSTANT (FISCAL YEAR 1972) PRICES
(In billions of dollars)

At 5-year intervals:
1945 1
1950 3
1955
1960
1965 6
1970
1975
1980 9
1
2
3
4
5
6
7
8
9

255.5
29.7
77.0
73.7
69.3
90.3
68.4
72.5

For selected years:
1948 2
1953 4
1956 5
1968 7
1976 8
1981 estimate
1982 estimate

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.
Korean war peak year.
Post-Korean war low in the 1950's.
Post-Korean war low in the 1960's.
Peak of spending during Vietnam war.
Lowest point in post-Vietnam era.
Last year for which "actual" data are available.




20.5
96.6
74.2
101.7
66.9
77.0
80.4

SPECIAL ANALYSIS A

51

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-6 shows these purchases by agency for the
years 1975 to 1982.
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. The most volatile major segment of nondefense purchases is CCC purchases, because the Corporation buys and sells agricultural commodities. On occasion—as
in 1979 and in 1981—such sales may exceed new purchases.




Table B-6.—NONDEFENSE PURCHASES OF GOODS AND SERVICES BY AGENCY AND ACTIVITY
(In billions of dollars)
Actual
1975

Legislative and judicial branches
Department of Agriculture
Commodity Credit Corporation
Forest Service
All other
Department of Commerce
Corps of Engineers, Civil
Department of Education
Department of Energy
Department of Health and Human Services
Health
Income security and other
Department of Housing and Urban Development.
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Coast Guard
Federal Aviation Administration
Other
Department of the Treasury
Internal Revenue Service
Other
Environmental Protection Agency
National Aeronautics and Space Administration..
Veterans Administration
Hospital and medical care
Administration and other




1.0
2.6
(0.2)
(0.8)
(1.5)
0.8
2.1
0.5
1.7
4.8
(3.2)
(1.6)
0.7
2.0
1.3
0.7
0.7
2.9
(0.8)
(1.7)
(0.4)
2.5
(1.6)
(0.9)
0.5
3.2
4.1
(3.6)
(0.5)

1976

1.1
2.6
(0.2)
(0.9)
(1.5)
1.0
2.2
0.4
2.2
5.3
(3.6)
(1.7)
0.5
2.2
1.4
1.0
0.9
3.2
(0.9)
(1.8)
(0.4)
2.7
(1.7)
(1-0)
0.5
3.6
4.7
(3.9)
(0.7)

1977

1.4
5.4
(2.6)
(1.1)
(1.7)
1.1
2.3
0.5
3.1
5.7
(3.7)
(2.0)
0.5
2.7
1.6
1.1
1.0
3.6
(1.0)
(2.0)
(0.5)
2.9
(1.8)
(1.1)
0.6
3.9
5.2
(4.6)
(0.7)

Estimate
1978

1.5
4.5
(0.9)
(1.2)
(2.3)
1.2
2.6
0.5
4.1
6.4
(4.4)
(2.0)
0.6
2.9
1.8
1.3
1.2
3.9
(1.1)
(2.2)
(0.6)
3.1
(1.9)
(1.2)
0.6
3.9
5.8
(5.1)
(0.7)

1979

1.6
2.8
(-0.9)
(1.5)
(2.2)
1.3
3.0
0.5
5.1
6.6
(4.6)
(2.1)
0.7
3.3
1.9
1.7
1.4
4.2
(1.3)
(2.3)
(0.7)
3.4
(2.1)
(1.3)
0.8
4.1
6.2
(5.4)
(0.7)

1980

1.8
5.4
(1.0)
(1.8)
(2.6)
1.9
3.3
0.5
3.8
7.8
(5.3)
(2.5)
0.7
3.9
2.1
1.9
1.4
4.8
(1.4)
(2.5)
(0.9)
4.0
(2.3)
(1.7)
0.9
4.8
7.0
(6.3)
(0.7)

1981

2.1
3.2
(-1.7)
(2.0)
(2.9)
1.6
3.4
0.5
7.3
8.3
(5.4)
(2.9)
0.7
4.0
2.2
2.1
1.6
5.4
(1.7)
(2.7)
(1.0)
4.3
(2.5)
(1.8)
1.1
5.2
7.4
(6.7)
(0.7)

1982

2.1
5.7
(0.9)
(2.2)
(2.6)
1.8
3.4
0.6
9.2
8.6
(5.5)
(3.1)
0.8
3.8
2.3
2.3
1.9
5.9
(1.9)
(2.9)
(1.1)
4.6
(2.6)
(1.9)
1.3
6.2
8.3
(7.6)
(0.7)

All other
Tennessee Valley Authority
0PM: Imputed employee retirement contributions
Postal Service
Imputed bank service charges
Other
Total




5.4
(1.0)
(0.6)
(0.7)
(0.5)
(2.6)

5.4
(1.1)
(0.7)
(0.7)
(0.3)
(2.6)

5.8
(1.2)
(0.9)
(0.4)
(0.5)
(2.8)

6.9
(1.5)
(1.1)
(0.3)
(0.6)
(3.4)

7.3
(2.0)
(1.2)
(0.4)
(0.4)
(3.3)

8.1
(1.7)
(1.4)
(0.4)
(0.3)
(4.3)

10.1
(2.4)
(1.6)
(0.5)
(0.4)
(5.2)

12.4
(2.3)
(1.8)
(0.7)
(0.4)
(7.2)

37.7

40.7

48.4

52.7

56.0

64.1

70.5

81.2

54

THE BUDGET FOR FISCAL YEAR 1982

Until 1982, the Department of Health and Human Services will
continue to account for more nondefense purchases than any other
agency—$8.3 billion in 1981 and $8.6 billion in 1982. Of this, $5.5
billion is for health programs—both for the administration of
health care and for medical research—and $3 billion is to administer the old-age, survivors, and disability (social security) trust
funds. The next largest agency in terms of nondefense purchases
traditionally has been the Veterans Administration, with a total of
$8.3 billion in 1982. The bulk of these purchases are for hospital
and medical care for veterans. Both the National Aeronautics and
Space Administration with $6.2 billion in 1982 nondefense purchases
and the Department of Energy with $9.2 billion in 1982 nondefense purchases conduct major research and development programs, though the Energy Department also has purchases for a
wide range of other activities. The Department of Energy is growing rapidly and is estimated to have higher nondefense purchases
in 1982 than any other agency. The Transportation Department's
$5.9 billion of 1982 nondefense purchases are mainly for the operation of the Federal Aviation Agency and the Coast Guard. The
Corps of Engineers has an estimated $3.4 billion in 1982 nondefense purchases which, along with the Tennessee Valley Authority's $2.3 billion, is primarily for public works for natural resources
and power activities.
Domestic transfer payments.—This is 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-7 shows, spending on human resources programs—especially income security programs—dominates domestic
transfer payments. This spending is expected to continue to rise in
1982, largely due to demographic and economic conditions—increases in the covered population and adjustments to compensate
for inflation. Social security accounts for 50.2% of total domestic
transfer payments in 1982, while medicare accounts for another
14.7%, unemployment assistance for 6.5%, and Federal employee's
retirement, disability, and compensation for 15.0% of the total.
Program trends (on a unified budget basis) are discussed extensively in Part 5 of the Budget and elsewhere in the budget documents.




Table B-7. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS
(In billions of dollars)
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, Treasury1
Workmen's compensation
Other

Actual
1971

1972

1974

1973

Estimate
1976

1975

1977

1978

1979

1980

1981

1982

.3
.1

61.5
3.0
6.9
12.5
.9
4.2
4.2
1.7
.4
.1

70.3
3.4
8.2
18.3
1.0
4.6
4.7
.9
.5
.2

81.1
3.7
9.4
14.2
.9
4.7
4.4
.9
.5
.2

89.3
3.9
10.8
10.9
1.0
4.9
4.5
.9
.6
.2

99.4
4.2
12.2
9.5
1.6
5.2
5.7
.8
.7
.2

113.7
4.7
14.5
16.7
1.7
5.7
7.6
1.3
.8
.2

134.2
5.2
17.3
24.3
1.8
6.5
9.1
1.2
.9
.3

155.1
5.7
19.6
20.2
1.7
7.1
10.3
1.2
1.0
.4

61.8

72.9

95.5

111.9

120.2

127.0

139.5

166.9

200.8

222.3

8.3
.4

9.0
.4

10.9
.4

14.1
.5

16.9
.6

20.7
.6

24.2
.6

28.1
.6

33.8
.8

38.7
.8

45.5
.8

7.9

8.8

9.4

11.4

14.6

17.4

21.3

24.8

28.7

34.6

39.4

46.3

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

.7
.7

.8
.8

.8
.7

.8
.7

1.3
.6

1.9
.4

2.5
.6

2.9
.8

3.4
.9

4.5
1.0

5.1
1.0

5.7
1.1

Subtotal, education, training, employment,
and social services

1.3

1.5

1.5

1.5

1.9

2.4

3.0

3.6

4.3

5.5

6.0

6.8

8.0

8.8

9.7

10.4

12.8

14.3

13.3

13.5

14.0

14.5

15.5

16.6

Subtotal, Income security
Health:
Medicare
Other
Subtotal, Health

Veterans benefits and services
See footnote at end of table.




34.0
1.9
3.2
5.6
.3

38.0
2.1
3.8
6.5
.4

46.6
2.4
4.5
4.9
.9

1.5

1.8

2.1

53.2
2.6
5.6
5.6
1.0
1.9
2.7

.2
.1

.2
.1

.2
.1

46.7

52.9

7.5
.4

Table B-7. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS—Continued
(In billions of dollars)

Total, human resources programs

Actual
1971

1972

1973

1974

1975

Estimate
1976

1977

1978

1979

1980

1981

1982

64.0

71.9

82.5

96.3

124.8

146.0

157.8

168.9

186.4

221.4

261.7

291.9

oo
CO

Description

3.8
.4

4.3
.4

5.0
.5

6.2
.4

7.2
.6

8.1
.7

9.0
.7

10.1
1.3

11.8
1.5

13.6
1.5

15.4
1.4

3.7

4.2

4.7

5.6

6.6

7.8

8.8

9.8

11.4

13.3

15.1

16.8

67.7

76.1

87.2

101.8

131.4

153.8

166.6

178.7

197.8

234.7

276.8

308.7

ALL OTHER FUNCTIONS
National defense (military retired pay)
All other functions
Total functions not included in human
resources grouping
Total domestic transfer payments
1

Includes both $50 tax rebates and earned income tax credits in excess of tax liabilities.

Note—Excludes the transition quarter.




SPECIAL ANALYSIS A

57

Grants-in-aid.—These expenditures help State and local governments to provide general public services and to finance programs
for the needy. Table B-8 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 (Federal grants to
finance State and local purchases), in a veterans hospital (nondefense purchases), or, perhaps under 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.) Most grants
in the income security function plus medicaid are grants to assist
States to provide income support; most other grants finance State
and local services to the public. (However, the income support may
be aid in-kind as is the case of medicaid where the State and local
spending is to purchase medical care for the poor.) Grants-in-aid for
income security are estimated to rise by 19% from 1980 to 1982,
only about one-half of the rate for domestic transfers in that
function. Medicaid grants are projected to rise by 30%, close to the
35% rise in medicare transfer payments. The remainder of grants
are projected to rise by only 2% from 1980 to 1982, while the
remainder of domestic transfer payments are up nearly 20%.




Table B-8. FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID
(In billions of dollars)
Description

Estimate

Actual
1972

1971

1974

1973

1976

1975

1977

1978

1979

1981

1980

1982

HUMAN RESOURCES PROGRAMS
Income security:
Public assistance cash
Child nutrition and other food programs
Other

5.5
.6
.4

6.6
.9
.4

5.9
1.1
.5

5.4
1.2
.5

5.1
1.7
.9

5.8
2.1
1.2

6.3
2.7
1.3

6.6
2.8
1.3

6.5
3.3
1.5

7.2
4.0
3.1

7.7
4.3
4.6

7.6
4.5
4.8

Subtotal, income security

6.5

7.8

7.5

7.1

7.7

9.2

10.4

10.8

11.3

14.2

16.6

16.9

3.4

4.6

4.6

5.8

6.8

8.6

9.8

10.6

12.4

13.9

16.4

18.1

1.2

1.5

1.7

2.0

2.4

2.9

2.9

2.8

2.8

2.7

3.1

3.1

4.6

6.1

6.3

7.8

9.2

11.4

12.7

13.4

15.1

16.7

19.5

21.2

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

3.5
1.1
1.8

3.8
1.7
3.1

3.6
2.2
3.0

3.5
1.9
2.9

4.6
3.4
3.6

4.5
5.6
3.8

4.9
6.0
4.4

5.5
9.5
5.0

6.6
9.2
5.8

7.4
8.6
5.2

7.7
8.0
5.5

8.2
8.9
5.8

Subtotal, education, training, employment,
and social services

6.4

8.6

8.7

8.4

11.7

13.9

15.4

20.0

21.6

21.2

21.1

22.9

.1

.1

.1

.1

.1

.1

.1

Health:
Medicaid
Other (includes research, construction, services,
and medical training)
Subtotal, health

Veterans benefits and services
Total, human resources programs
Natural resources and environment




*

*

*

*

*

17.5

22.6

22.5

23.3

28.7

34.5

38.5

44.2

48.1

52.2

57.3

61.0

.8

.8

1.1

2.0

2.3

2.9

4.1

3.9

4.7

5.5

5.4

5.5

Community and regional development:
Local public works
Block grants
Other
Subtotal, community and regional development
Transportation-

Total grants-in-aid
*50 million or less.
Note—Excludes the transition quarter.




2.0

6.3

6.0

6.2

9.5

11.8

11.8

11.8

6.8

6.8

5.2

4.6

2.6

2.7

2.8

2.4

2.0

2.2

2.6

2.7

2.8

3.3

4.4

6.8

6.4

4.9

5.1

5.3

5.3

5.8

7.5

7.7

8.1

6.6

6.1

6.1

6.2

6.8

".5"

7

1.7
.5

6.8
1.3

7

7

.8

.4
3.8

.1
3.9
2.3

1.6

2.2

Subtotal, general purpose fiscal assistance

Total other functions

3.1
1.7

2.0

General purpose fiscal assistance:
General revenue sharing
Anti-recession fiscal assistance..
Other

All other functions

2.9
2.4
1.5

.6
2.0
1.8

1.0

2.1

"9"

.1

3.8

'""1.2",

""i"8

7.0

6.5

6.6

6.7

9.0

8.9

7.8

7.9

6.3

6.3

1.9

1.9

2.2

2.6

2.6

2.8

2.6

3.0

3.5

3.8

1.3

1.7

9.2

10.0

17.9

18.4

19.7

23.0

27.7

30.4

31.0

34.5

33.0

33.6

32.6

40.4

41.6

48.4

57.5

66.3

74.7

79.1

86.7

90.3

94.6

26.8

3
o>
r
>

>1
tr
to
t—1
ui
w

so

60

THE BUDGET FOR FISCAL YEAR 1982

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 declined to less than 0.2% of GNP. The
peak year for foreign transfer payments was 1949; in that year
they were equal to 1.9% of GNP.
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 accounted for around 6-7% of the total each year from 1952
to 1977. Net interest paid rose from 6.9% of Federal sector expenditures in 1977 to 8.9% in 1980 and 10.1% in 1982.
In recent years foreign holdings of Federal debt have increased
significantly. This expansion, combined with higher interest rates,
pushed up the amount of interest paid abroad to over $11.8 billion in
1980, roughly triple the $3.2 billion total in 1973. These foreign
interest payments are partially offset by interest collections from
abroad; in 1973 such collections totaled $0.9 billion and in 1980
they totaled $2.4 billion. 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 businesses (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. As
table B-9 shows, roughly half of the subsidies are for housing
programs. These subsidies are designed mainly to reduce the cost of
housing to moderate- and low-income families.
"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




SPECIAL ANALYSIS A

61

extent, covered by the sale of goods and services to the public
rather than 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-9 shows the composition of this aggregation by major
category.




Table B-9. SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES
(In billions of dollars)
uescripnon

Subsidies:
Commodity Credit Corporation
Rural housing insurance fund
Other Department of Agriculture
Maritime
Housing (HUD)
Railroad and mass transit
Other1

Estimate

Actual
1972

1971

1974

1973

1975

1977

1976

1978

1979

1981

1980

1982

.3

2.9
.1
.4
.4
1.3
.1
.2

3.6
.1
.4
.4
1.7
.1
1.1

2.4
.1
.3
.4
1.9
.1
.1

0.6
.2
.4
.5
2.1
.5
.1

0.3
.3
.3
.5
2.3
1.1
.1

0.6
.4
.3
.5
2.9
1.4
.3

2.3
.4
.4
.5
3.5
1.5
.2

2.0
.6
.3
.5
4.3
1.7
.4

0.5
.6
.3
.6
5.2
2.2
.2

1.0
.7
.3
.6
6.6
2.0
1.9

0.5
.7
.3
.6
8.0
1.9
3.8

5.3

5.3

7.4

5.4

4.4

5.0

6.4

8.9

9.9

9.6

13.2

15.9

.6
2.1
-.2
-.3
-.1
-.1
-.3

.6
1.7
-.2
-.3
-.2
-.1
-.3

1.3
1.7
-.2
-.3
-.1
-.1
-.2

1.0
2.2
-.3
-1
-.1
-.2
-.4

.3
2.5
-.3
-2
-.2
-.2
-.4

.2
2.8
-.4
-.2
-.2
-.2
-.6

.2
2.0
-.6
-.2
-.2
-.2
-.4

.8
1.9
-.6
-.2
-.3
-.3
-.6

1.3
1.0
-.8
-.2
-.3
-.3
-.8

1.5
2.2
-1.1
-.3
-.3
-.2
-.6

1.3
1.7
-1.3
-.3
-.3
-.3
-.7

.6
1.3
-1.7
-.4
-.3
-.4
-.9

Subtotal

1.7

1.2

1.8

2.2

1.5

1.2

.6

.7

-.1

1.1

.2

-1.9

Total subsidies less current surplus

7.0

6.5

9.2

7.6

6.0

S.2

7.0

9.6

9.8

10.8

13.4

14.0

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...
All other2

3.4
.1
.4
.4
.8
*

Includes subsidies by the disaster loan fund of $0.7 billion in 1973. Includes proposed legislation for subsidies as part of the economic stimulus program and the 8% social security tax credit.
Includes wage disbursements less accruals.
Note—Excludes the transition quarter.
1

2




SPECIAL ANALYSIS D

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.
ESTIMATING ERRORS AND QUARTERLY ESTIMATES

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" is subject to adjustment
when more complete information becomes available.
Table B-10 provides some indication of the magnitudes of the
estimating errors associated with the past-year data. When the
1981 budget was published a year ago, 1979 had been over for ZV2
months, and the 1979 estimates were labeled "actual"; yet, as table
B-10 shows, the figures for 1979 are now significantly different.
One can anticipate revisions similar to those shown in table B-10
for the "actuals" each year. The margin of error for the estimated
years (1981 and 1982 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 1982

Table B-10. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA: COMPARISON OF JANUARY 1980
AND JANUARY 1981 ESTIMATES FOR 1979
(In billions of dollars)
Description

"Actuals" for 1979
shown in 1981 budget

Currently reported
"actuals for 1979

Change

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

223.5
78.4
29.4
152.4

-0.4
-2.6
-0.3
0.3

223.1
75.8
29.1
152.7

483.7

-3.0

480.7

162.4
(105.9)
(56.5)
201.7
(197.7)
(4.0)
79.3
40.4

1.0
(1.5)
(-0.5)
0.1
(0.1)
(*)
-0.2
0.2
*

163.4
(107.4)
(56.0)
201.8
(197.8)
(4.0)
79.1
40.6

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

9.8

9.8

Total expenditures

493.6

1.1

494.7

Deficit ( - )

-9.9

-4.1

-14.0

*$50 million or less.

Quarterly estimates.—Table B - l l presents quarterly NIA receipts
and expenditures (at seasonally adjusted annual rates) for 1980 to
1982.
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 - l l are the best available estimates of the quarterly NIA receipts and expenditures consistent with the 1982
budget, but should be used with clear recognition of their limitations.




Table B - l l . FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA, QUARTERLY, 1980-82
(In billions of dollars; seasonally adjusted at annual rates)
Actual
Description

Estimated

Oct.-Dec.
1979

Jan.-Mar.
1980

Apr-June
1980

July-Sept.
1980

Oct.-Dec.
1980*

Jan.-Mar.
1981

Apr-June
1981

July-Sept.
1981

Oct.-Dec.
1981

Jan.-Mar.
1982

Apr-June
1982

July-Sept.
1982

247.1
74.3
29.6
163.0

246.9
80.5
31.9
169.2

252.0
60.9
38.7
169.3

259.4
66.7
42.9
171.8

273.6
68.4
48.3
178.7

284.1
66.9
57.0
196.8

295.0
67.0
62.9
201.2

309.6
69.1
76.3
206.8

320.1
75.4
80.9
212.0

333.4
76.8
82.7
225.4

347.2
79.9
84.6
230.9

360.1
83.2
87.1
237.2

514.0

528.4

520.9

540.8

569.0

604.8

626.1

661.8

688.4

718.3

742.6

767.6

178.1
(118.7)
(59.4)
221.7
(216.8)
(4.9)
84.9
44.4
9.5

190.0
(125.0)
(64.9)
228.9
(224.4)
(4.5)
85.5
50.3
10.1

198.7
(128.7)
(70.0)
236.0
(232.2)
(3.8)
87.2
54.4
11.0

194.9
(131.4)
(63.5)
265.3
(260.4)
(4.9)
87.7
53.5
13.7

212.0
(142.9)
(69.1)
268.3
(263.6)
(4.7)
88.9
55.3
13.5

215.1
(146.2)
(68.9)
276.1
(271.4)
(4.7)
88.6
65.9
13.6

220.6
(149.6)
(71.0)
281.4
(276.7)
(4.7)
90.5
73.0
12.2

226.0
(153.3)
(72.7)
300.0
(295.3)
(4.7)
93.2
75.0
14.2

238.1
(161.2)
(76.9)
301.7
(296.8)
(4.9)
93.7
75.1
14.4

245.7
(165.4)
(80.3)
307.1
(301.9)
(5.2)
94.4
75.1
14.2

252.3
(169.6)
(82.7)
313.7
(308.4)
(5.3)
95.2
75.1
13.8

258.6
(173.8)
(84.8)
333.0
(327.6)
(5.4)
95.1
75.1
13.6

538.6

564.7

587.3

615.0

638.0

659.3

677.7

708.4

723.0

736.5

750.1

775.4

-24.5

-36.3

-66.5

-74.2

-69.0

-54.5

-51.6

-46.6

-34.6

-18.2

-7.5

-7.8

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 ( - )

Note—Because of the methods normally used seasonally adjusting NIA data, the average of seasonally adjusted data for the 4 quarters of a fiscal year may not be equal to the unadjusted fiscal year total.




THE BUDGET FOR FISCAL YEAR 1982

66

RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR N I A

Table B-12 shows the major differences between the budget and
the Federal sector of the NIA. These differences are explained
below.
Table B-12. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIA
(In billions of dollars)
Description

1980
actual

1979
actual

1981
estimate

1982
estimate

RECEIPTS
465.9

520.0

607.5

711.8

Government contributions for
employee retirement
(grossing)
Other netting and grossing ..
Adjustment to accruals
Geographic exclusions
Other

7.7
3.6
4.5
-1.2
.1

8.6
4.0
-4.4
-1.2
.3

9.7
6.4
-8.0
-1.5
.3

10.3
6.3
1.1
-1.5
.2

Federal sector, NIA receipts

480.7

527.3

614.4

728.2

493.6

579.6

662.7

739.3

-7.2

-10.3

-6.1

-6.8

7.7
3.6
-.6

8.6
4.0
-.7

9.7
6.4
-.9

10.3
6.3
-2.3

1.9
-3.9
-.4

2.2
-4.5
-.8

5.2
-4.9
-1.1

6.1
-5.3
-1.3

494.7

578.2

671.0

746.3

Total budget receipts

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
Geographic exclusions
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




SPECIAL ANALYSIS D

67

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.
Most of the lending and financial transactions displayed in table
B-12 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 includes lending by off-budget Federal
entities; these loans do not require reconciliation with the NIA
because they are not included in the budget outlay totals.
Government contribution for employee retirement—The contributions of Government agencies to the retirement trust funds of their
employees are not included in the budget totals. While the outlays
are recorded in each agency's budget, they are offset by an intragovernmental deduction. However, the NIA counts Government
payments for employee retirement as part of the compensation
paid to Government employees and, therefore, as Government expenditures; this treatment maintains comparability with the treatment of employee retirement contributions in the rest of the economy. 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 1982

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.
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).
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 attempts 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
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




SPECIAL ANALYSIS D

69

assets, because the payments are not included in calculating book
profits under current corporate accounting practice.
Geographic 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. Since the budget includes receipts from
and payments to persons and local governments in these territories
and the NIA excludes such transactions, this constitutes a major
reconciliation item between the two data series.
Other.—This category contains miscellaneous adjustments, such
as the NIA expenditures by off-budget Federal entities and foreign
currency transactions that are included in the NIA but not in the
budget.




Table B-13. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1971-82

O

(In billions of dollars)
Description

Actual

Estimate

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

87.9
31.9
20.0
52.6

100.5
34.2
19.9
58.9

107.4
41.2
20.7
71.5

122.7
43.4
21.4
84.2

127.5
41.8
22.2
91.9

137.2
52.5
24.4
101.0

166.4
58,8
24.5
116.2

186.4
67.2
27.2
133.4

223.1
75.8
29.1
152.7

249.7
70.6
35.7
171.3

290.5
67.9
61.2
194.8

339.3
78.8
83.8
226.3

192.4

213.4

240.7

271.6

283.4

314.9

365.9

414.2

480.7

527.3

614.4

728.2

94.9
(72.2)
(22.7)
70.1
(67.7)
(2.3)
26.8
14.0

100.6
(72.2)
(28.4)
79.0
(76.1)
(2.8)
32.6
14.0

101.1
(72.8)
(28.4)
89.8
(87.2)
(2.7)
40.4
15.7

104.5
(73.6)
(30.9)
104.8
(101.8)
(3.0)
41.6
19.6

117.9
(80.2)
(37.7)
134.5
(131.4)
(3.1)
48.4
21.7

125.1
(84.4)
(40.7)
156.8
(153.8)

140.3
(91.9)
(48.4)
169.8
(166.6)
(3.2)
66.3
28.4

150.7
(98.0)
(52.7)
182.2
(178.7)
(3.5)
74.7
33.5

163.4
(107.4)
(56.0)
201.8
(197.8)
(4.0)
79.1
40.6

190.2
(126.1)
(64.1)
239.3
(234.7)
(4.6)
86.7
51.2

218.5
(148.0)
(70.5)
281.5
(276.8)
(4.7)
90.3
67.3

248.7
(167.5)
(81.2)
313.9
(308.7)
(5.2)
94.6
75.1

7.0
.1

6.5

9.2
-.5

7.6
.2

6.0
.4

6.2

Total expenditures, national income
basis

212.9

232.7

256.7

278.2

328.8

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

-20.5

-19.2

-14.9

-6.6

-45.4

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

*$50 million or less.




1971

Note—Excludes the transition quarter.

a?
25.2

H
ffl
M
W

C

so
o>
r

7.0

_9.6
*

9.8*

10.8

13.4

14.0

>w
w

370.7

411.7

450.5

494.7

578.2

671.0

746.3

OC
to

-55.8

-45.8

-36.3

-14.0

-50.9

-56.6

-18.1

tD

PART 2

ANALYSES OF
THE BUDGET TOTALS




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 provided, distinguishing those of an investment or developmental type from those that primarily yield current benefits. Apart from this analysis, the U.S. budget 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 credit raised from the public under Federal
auspices. It also reviews the credit control system, which applies
budget-type controls to Federal lending activity.
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 and the systems used to control civilian employment. 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 sho^vn in Table C-l, comprise the budget totals.
Table C - l . BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(In millions of dollars)
Description

1980
actual

1981
estimate

1982
estimate

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

372,074
-3,301
-11,721
-6,203

445,888
-3,643
-17,944
-9,062

518,940
-3,431
-19,146
-12,258

350,849

415,239

484,105

226,134
-1,451
-9,320
-1,489

256,808
-1,635
-10,897
-1,730

301,802
-1,938
-12,015
-1,737

213,875

242,545

286,113

-44,674

-50,259

-58,437

520,050

607,525

711,780

440,438
-3,301
-11,721
-6,203

505,581
-3,643
-17,944
-9,062

565,653
-3,431
-19,146
-12,258

419,214

474,932

530,817

217,333
-1,451
-9,320
-1,489

252,330
-1,635
-10,897
-1,730

282,606
-1,938
-12,015
-1,737

205,074

238,068

266,916

-44,674

-50,259

-58,437

579,613

662,740

739,296

-59,563

-55,215

-27,516

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

Note—The transactions of the Pension Benefit Guaranty Corporation have been excluded from the budget by law since its establishment. This
provision was repealed effective October 1, 1980. Accordingly, all budget totals and Department of Labor amounts for past years have been
adjusted retroactively to include these transactions.




73

74

THE BUDGET FOR FISCAL YEAR 1982

The Federal funds are derived mainly from taxes and borrowing
and are used for the general purposes of the Government. Most of
these funds are not restricted by law to any specific Government
program. The trust funds, on the other hand, collect certain taxes
and other receipts for specified purposes, such as payment of social
security benefits, in accordance with the terms of a trust agreement or statute.
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, they 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 1982, the Federal
fund budget receipts are estimated at $484.1 billion and outlays are
estimated at $530.8 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 1982.




SPECIAL ANALYSIS

75

D

Table C-2. FEDERAL FUND RECEIPTS AND OUTLAYS
(In millions of dollars)
Description

1980
actual

1982
estimate

1981
estimate

RECEIPTS BY SOURCE
Individual income taxes
Corporation income taxes
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total receipts, Federal funds

244,069
64,600
15,563
6,389
7,174
13,054

284,013
66,009
36,762
6,909
7,439
14,107

331,677
64,648
55,836
7,668
7,800
16,476

350,849

415,239

484,105

1.215
563
95

1,446
672
108

1,421
732
111

4,556
1,829
24,620
3,763
132,837
3.216
13,113
6,501
51,054
12,576
4,537
2,632
13,247
2,018
8,529
76,831
5,602
4,849
20,711
28,421

5,033
1,179
20,893
2,995
157,596
3,341
14,826
9,717
59,404
13,305
4,799
2,680
16,238
2,226
11,630
90,798
5,520
5,282
22,028
31,015

5,233
1,115
28,036
3,204
179,998
3,364
15,713
14,109
67,369
15,507
4,268
2,658
15,780
2,692
9,005
104,602
5,671
6,360
23,933
27,915
1,920

-4,101

-7,800

-9,900

419,214

474,932

530,817

-68,364

-59,693

-46,712

OUTLAYS BY AGENCY
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Other
Agriculture
Commerce
Defense—Military1
Defense—Civil
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
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

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




76

THE BUDGET FOR FISCAL YEAR 1982

Obligations.—The obligations (net) for Federal funds are estimated at $580.4 billion for 1982, as set forth in table C-3. These
transactions flow largely from budget authority for Federal funds
of $581.1 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
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies:
Export-Import Bank
Federal Home Loan Bank Board
General Services Administration
Office of Personnel Management
U.S. Postal Service
Railroad Retirement Board
All 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

1980
actual

1981
estimate

1982
estimate

1,263
577
99

1,428
674
110

1,466
741
111

2,830
2,742
2,074
25,656
3,153
140,377
3,148
14,156
7,010
52,008
39,607
4,662
2,532
12,592
2,081
9,813
76,738
6,010
5,058
20,701

2,566
2,898
5,326
21,666
3,129
169,334
3,251
16,708
14,785
60,620
47,548
5,045
2,422
16,036
2,327
13,541
91,437
5,288
6,160
22,434

2,931
4,359
1,135
27,489
2,985
192,578
3,496
17,045
14,499
66,605
44,282
4,602
2,560
16,240
2,838
10,601
104,635
6,364
6,733
24,314

4,004
647
99
12,032
1,677
340
11,667

5,959
314
-42
13,835
1,343
350
12,631

3,314
-648
67
14,438
1,119
350
10,138
958
2,000

-4,101

-7,800

-9,900

461,254

541,323

580,444

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

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




77

SPECIAL ANALYSIS D

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 conduct
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 net of collections in
tables C - l through C-4. Additional information on the gross outlays and applicable collections is shown in table C-5.
Collections of public enterprise funds are estimated at $47.0 billion in 1982, and gross outlays are planned to total $58.6 billion,
resulting in net outlays of $11.6 billion.
TRUST FUNDS

There are two types of trust funds—revolving and nonrevolving.
Trust revolving funds are similar to intragovernmental revolving
funds and public enterprise funds in that they conduct cycle of
business-type operations and are normally stated net of collections.
Cash operations.—Trust fund receipts are estimated at $286.1
billion in 1982, with outlays planned at $266.9 billion, as shown in
tables C - l and C-6. The transactions of the Federal old-age and
survivors insurance and disability insurance funds are far larger
than any other trust fund.
In fiscal years 1980-82, trust funds have excesses of receipts of
the following amounts (in millions of dollars):
1980
actual
Total receipts, trust funds
Total outlays, trust funds.
Excess of receipts or outlays ( — ) , trust
funds




1981
estimate

1982
estimate

213,875
205,074

242,545
238,068

286,113
266,916

8,801

4,477

19,196

78

THE BUDGET FOR FISCAL YEAR 1982
Table C-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY
(In millions of dollars)
Department or other unit

Legislative branch
193
The Judiciary
53
Executive Office of the
13
President
Funds appropriated to the
President:
International security
5,382
assistance
International
development
6,433
assistance
11,194
Other
10,481
Agriculture
3,050
Commerce
60,825
Defense—Military 1
867
Defense—Civil
9430
Education
7,520
Energy
Health and Human
11,984
Services
Housing and Urban
223,742
Development
2,653
Interior
956
Justice
Labor
3,930
413
State
Transportation
8,198
Treasury
440
Environmental Protection
12,684
Agency
National Aeronautics and
1,006
Space Administration
2,426
Veterans Administration
Other independent
agencies:
4,014
Export-Import Bank
Federal Deposit
Insurance
Corporation
Federal Home Loan
-22
Bank Board
General Services
Administration
,
568
Office of Personnel
Management
29
Railroad Retirement
1
Board
All other independent
agencies
5,712
Allowances2
Total

394,175

End 1981

End 1980

Start 1980
Obligated

Unobligated

140
14
*

Obligated

201
58

Unobligated

174
18

Obligated

184
60

70
4

17

16

Obligated

228.
70

Unobligated

59
1

17

346

5,489

125

5,144

2

5,186

2

12,239
5,169
4,942
649
22,889
292
3,217
4,963

7,310
11,298
11,470
2,421
67,871
799
10,357
8,026

13,117
5,479
4,157
584
24,118
385
2,878
7,799

8,081
15,444
12,216
2,550
79,610
709
12,231
13,095

13,091
6,587
546
318
25,049
156
1,803
2,757

10,091
15,463
11,669
2,331
92,190
841
13,574
13,485

13,107
6,572
1,524
398
28,128
8
1,763
2,539

349

12,650

949

13,865

183

13,100

133

9,642
967
230
743
112
5,535
9,231

244,151
2,723
830
3,207
461
9,385
293

9,729
803
133
617
62
1,249
25,397

272,448
2,970
571
3,004
562
11,297
932

5,583
203
70
390
14
688
25,077

294,520
3,291
473
3,465
708
12,893
964

4,502
147
68
320
99
591
25,423

4,088

12,772

3,050

12,540

2,456

13,232

1,203

523
2,661

1,212
2,391

705
2,387

2,090
2,797

79
2,324

2,463
3,178

68
2,203

1,936

5,737

184

8,772

3,000

8,728
3,000

3,000

3,000

10,333

73

9,686

-28

9,372

-26

10,020

304

474

428

344

790

393

877

48

55

11

11

47

13

7

*

27

*

*

7,098

5,453

21,417

5,493

2,380

5,647
1,038

2,397

111,689

427,185

138,638

487,008

103,038

529,224

105,161

*500 thousand or less.
1 Includes balances of allowances for civilian and military pay raises for the Department of Defense.
2 Includes balances of allowances for civilian agency pay raises and contingencies.




End 1982

Unobligated

SPECIAL ANALYSIS

79

D

Table C-5. PUBLIC ENTERPRISE FUND TRANSACTIONS
(In millions of dollars)
Gross outlays

Applicable collections
Description

Legislative Branch
Funds appropriated to the President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporation
Farmers Home Administration
Federal Grain Inspection Service
Federal Crop Insurance Corporation...
Rural Electrification Administration....
Commerce
Defense: Military
Department of Education
Department of Energy
Health and Human Services
Housing and Urban Development:
Government National Mortgage Association
Urban renewal programs
Low-rent public housing
Federal Housing Administration
Fund
Other
Interior:
Water and Power Resources Service.
Other
Department of Justice
Transportation
Treasury
Environmental Protection Agency
Veterans Administration
Other independent agencies:
Community Services Administration...
Export-Import Bank
Farm Credit Administration
Federal Emergency Management
Agency
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolving fund
General Services Administration
National Consumer Cooperative
Bank
National Credit Union Administration
Pennsylvania Avenue Development
Corporation
Small Business Administration
Tennessee Valley Authority
All other not included above
Total
Offsetting collections from the public
Offsetting collections from "other accounts
*$500 thousand or less.




1981
estimate

1980
actual

1980
actual

1982
estimate

*

*

*

91

96

8,528
17,151
27
104

1982
estimate

1981
estimate
*

*

*

103

39

44
2

32

7,759
16,300
36
154
1
152
4
173
1,299
108

11,466
19,563
29
130

119
2
171
638
70

10,243
23,393
33
158
1
139
4
171
986
96

153
4
185
589
106

10,227
22,188
37
343
20
43
6
203
893
129

9,871
18,860
37
200
13
99
8
176
1,307
155

1,239
163
1,301

1,942
41
308

2,338
16
308

2,606
375
1,335

2,512
206
314

3,336
166
400

1,126
221

1,589
336

1,657
411

1,277
1,171

1,650
1,309

1,541
1,340

224
19

358
21

439
23

232
29

358
30

439
31

42
596
1
871

46
486
1
1,008

47
479
1
979

153
115
819

152
3
1
830

86
3
1
920

1
2,355
13

2
2,765
13

3
3,132
16

4,191
12

30
5,115
14

8
5,788
16

172

225

249

578

481

492

834
20

966
61

1,063
64

1,387
19

1,382
61

413
64

4

3

3

3

3

3

69

27

6

179

115

289

2,177

3,646

374

2,375

3,933

7
1,068
3,329
96

5
1,202
3,752
134

3
1,349
4,543
137

7
2,749
5,198
147

25
4,098
5,930
114

18
1,888
6,701
131

40,889

52,827

47,019

55,046

61,304

58,590

(25,973)

(32,341)

(34,929)

(14,917)

(20,486)

(12,090)

*

*

*

*

*

*

*

*

*

*

*

80

THE BUDGET FOR FISCAL YEAR 1982

Table 0-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS
(In millions of dollars)
Receipts

Outlays
Description

Federal old-age, survivors, and disability insurance trust funds
Railroad retirement account
Black lung disability trust fund
Veterans 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

1981
estimate

1982
estimate

1981
estimate

1982
estimate

118,559
4,737
808
1,005
14,862
16,440
35,034
9,212
1,224

139,884
5,295
922
1,102
17,796
23,500
39,939
8,773
1,406

161,551
5,827
770
1,125
20,114
21,590
46,599
8,615
2,357

117,439
4,400
808
1,082
24,503
16,195
35,690
7,647
2,274

132,672
4,848
922
1,169
27,986
20,000
44,877
7,993
830

152,318
5,502
770
1,194
29,990
23,743
56,871
11,382
3,256

6,829
8,791
1,201
-1,369

5,156
9,612
984
-2,038

4,559
10,714
1,021
-2,235

6,855
7,654
1,588

4,570
9,612
1,329

4,570
10,714
1,492

217,333
-1,451
-9,320

252,330
-1,635
-10,897

282,606
-1,938
-12,015

226,134
-1,451
-9,320

256,808
-1,635
-10,897

301,802
-1,938
-12,015

-1,489

-1,730

-1,737

-1,489

-1,730

-1,737

205,074

238,068

266,916

213,875

242,545

286,113

1980
actual

1980
actual

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):

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

1979
actual

1980
actual

1981
estimate

1982
estimate

11,905

11,961

11,226

11,841

170,632
1,015

179,376
1,015

184,590
1,015

203,423
765

183,552

192,352

196,831

216,029

A summary of the balances by fund is presented in table C-9.
The amounts include both amounts on deposit with the Treasury




SPECIAL ANALYSIS

81

D

(open-book balances) and investments in U.S. securities. These balances include both obligated and unobligated balances. The balances on a budget authority basis differ from 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 while unappropriated receipts are included in the cash
balances but are not a part of the balances of budget authority.
The note to Table C-9 lists these accounts and reconciles the balances on a budget authority basis with the cash balances.
For 1982, the largest net investments are expected to be those of
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.
Table C-7. TRUST FUND RECEIPTS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description

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
Subtotal, Federal old-age, survivors, and disability insurance trust funds
Railroad retirement account:
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 retirement account
Black lung disability trust fund:
Excise taxes
Advances from general fund
Subtotal, black lung disability trust 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

340-700

0 - 8 1 - 6




1980
actual

1981
estimate

1982
estimate

113,220
2,337

128,544
2,078

148,138
1,546

1,204

1,378

1,539

679

672

849
247

117,439

132,672

152,318

2,312
355
1,442

2,592
309
1,624

2,784
220
1,926

291

323

304
268

4,400

4,848

5,502

272
536

275
647

292
478

808

922

770

618
464

695
474

716
478

1,082

1,169

1,194

3,712
4,968

4,114
5,770

4,144
7,170

82

THE BUDGET FOR FISCAL YEAR 1982
Table C-7. TRUST FUND RECEIPTS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
Description

Federal payment as employer for employee retirement (including payment on prior year liabilities):
Entities included in budget
Entities excluded from budget
Other receipts
Proposed legislation
Supplemental now requested

1981
estimate

1980
actual

14,328
1,489
7

1982
estimate

15,834
1,730
11

17,627
1,737
11
-698

527
24,503

27,986

29,990

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

15,336
859*

16,338
1,222
2,439

19,699
1,503
3,898
-1,357

Subtotal, unemployment trust fund

16,195

20,000

23,743

26,161
1,457

33,229
1,717

39,399
2,469

249

324

371

7,823

9,604
3

14,601
31

35,690

44,877

56,871

6,620
1,027*

6,890
1,112

6,960
726

-9

3,697

7,993

11,382

511
319

349
2,907

2,274

830

3,256

State and local government fiscal assistance trust
fund: Deposits for general revenue sharing

6,855

4,570

4,570

Foreign military sales trust fund

7,654

9,612

10,714

Other trust funds (nonrevolving)

1,588

1,329

1,492

226,134
-1,451
-9,320
-1,489

256,808
-1,635
-10,897
-1,730

301,802
-1,938
-12,015
-1,737

213,875

242,545

286,113

Subtotal Federal employees retirement funds...

Health insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments)
Proposed legislation
Subtotal, health insurance trust funds
Highway trust funds:
Excise taxes
Interest on Federal securities
Other receipts
Proposed legislation
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
*$500 thousand or less.




7,647
1,874400

83

SPECIAL ANALYSIS D
Table C-8. TRUST FUND OUTLAYS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description

Federal old-age, survivors, and disability insurance
trust funds:
Benefit payments
Payments to other trust funds
Administrative expenses and other
Proposed legislation
Subtotal, Federal old-age, survivors, and disability insurance trust funds
Railroad retirement accountBenefit payments and claims
Administrative expenses and other
Proposed legislation
Subtotal, railroad retirement account
Black lung disability trust fund:
Benefit payments
Federal administrative expenses
Subtotal, black lung disability trust fund
Veterans life insurance trust funds
Federal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Proposed legislation
Subtotal, Federal employees retirement
Unemployment trust fund:
Withdrawals for benefit payments
Repayment of advances from general fund
Administrative expenses and other
Proposed legislation
Supplemental now requested
Subtotal, unemployment trust fund

1980
actual

1982
estimate

1981
estimate

115,514
1,442
1,603

136,409
1,624
1,851

157,628
1,906
2,040
-23

118,559

139,884

161,551

4,699
38

5,257
38

5,809
54
-36

4,737

5,295

5,827

722
87

775
148

570
200

808

922

770

1,005

1,102

1,125

14,453
385
24

17,371
407
29
-12

20,255
482
32
-655

14,862

17,796

20,114

14,280
250
1,910

21,184

20,701

2,203

2,499
-1,610

113
16,440

23,500

21,590

33,937
1,097

38,870
1,153
-84

45,820
1,225
-446

Subtotal, health insurance trust funds

35,034

39,939

46,599

Highway trust funds (mainly grants to States)

9,212

8,773

8,615

Airport and airway trust fund

1,224

1,406

2,357

State and local government fiscal assistance trust
fund: Payments for general revenue sharing

6,829

5,156

4,559

Foreign military sales trust fund

8,791

9,612

10,714

Other trust funds (nonrevolving)
Trust revolving funds

1,201
-1,369

984
-2,038

1,021
-2,235

217,333

252,330

282,606

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

Subtotal




84

THE BUDGET FOR FISCAL YEAR 1982
Table C-8. TRUST FUND OUTLAYS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
1980
actual

Description

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

1982
estimate

1981
estimate

-1,451
-9,320
-1,489

-1,635
-10,897
-1,730

-1,938
-12,015
-1,737

205,074

238,068

266,916

Table C-9. TRUST FUND BALANCES
(In millions of dollars)
uescripnon

Federal old-age, survivors, and disability insurance
trust funds
Railroad retirement account
Black lung disability trust fund
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
Total

As of Sept. 30
1979 actual

1981 estimate

1980 actual

33,379
3,056
1
8,432
64,677
15,131
18,373
12,564
4,392

32,259
2,719

1982 estimate

25,047
2,272

15,815
1,947

8,509
74,317
14,886
19,029
10,999
5,442

8,575
84,508
11,386
23,967
10,220
4,866

8,644
94,384
13,539
34,240
12,988
5,765

1,796
6,341
1,311
14,099

1,822
5,204
1,698
15,468

1,236
5,204
2,044
17,506

1,247
5,204
2,516
19,741

183,552

192,352

196,831

216,029

*

*$500 thousand or less.
Note—The following table reconciles balances on a budget authority basis with the cash balances shown above.
1979
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
Balance available on a cash basis




1980

1981

1982

195,148

208,320

217,808

238,069

-961
-17,878
-8,091

-914
-18,348
-12,087

-1,041
-18,731
-14,976

-1,256
-20,564
-17,352

- 1

- 1

3

-49

2

2

94
3,755
11,475
1
6

96
4,716
10,610
2
6

96
3,991
9,576
101
6

112
4,767
12,008
236
6

183,552

192,352

196,831

216,029

85

SPECIAL ANALYSIS D
Table C-10. TRUST REVOLVING FUND TRANSACTIONS
(In millions of dollars)
Offsetting collections
Description

1980
actual

Office of Personnel Management (employees' life insurance and health
benefits)
Federal Deposit Insurance Corporation....
All other trust revolving funds
Total
trust
funds 1
Receipts from the public
Receipts from other accounts
1

1981
estimate

1980
actual

1981
estimate

1982
estimate

4,541
1,507
485

5,505
1,566
519

6,386
1,624
561

4,134
584
444

4,963
116
473

5,702
124
510

6,532

7,589

8,571

5,163

5,551

6,336

(2,863)
(3,669)

(3,299)
(4,290)

(3,778)
(4,793)

revolving

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




Gross outlays
1982
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 or financial assets, or
through expenditures for less tangible long-term benefits such as
education. They include: the construction, rehabilitation, and acquisition of physical assets; education, training, and vocational rehabilitation; research and development; international development;
and financial investments such as loans. Outlays for investmenttype programs are estimated to be $161.5 billion in 1982.
Current programs provide benefits primarily in the year in which
the outlays that finance them are made. They include: payments
for retirement, disability, and other income maintenance; social
services; payments (including subsidies) to agriculture, businesses,
transportation systems, and other institutions that are not directly
used to purchase physical assets; payments for the repair, maintenance, and operation of existing physical assets; and regulatory,
law enforcement, interest, and other operating costs of the Federal
Government. Outlays for current programs are estimated to be
$576.8 billion in 1982.
The allowance for contingencies cannot be classified as either
investment or current in nature; it accounts for the remaining $1.0
billion of 1982 outlays.
INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In billions of dollars)
1980
actual

Investment-type programs
Current programs
Unclassified
Total

1981
estimate

1982
estimate

136.7
442.9

142.9
519.8

161.5
576.8
1.0

579.6

662.7

739.3

The Federal Government has never had a capital budget in the
sense of financing capital or investment-type programs separately
from current expenditures. While the application of accounting




87

88

THE BUDGET FOR FISCAL YEAR 1982

concepts for capital budgeting is difficult for private sector entities,
it is much more so for the public sector. For example, the Federal
Government holds vast amounts of land and controls off-shore
areas; both have potential value as sources of timber, oil, and
minerals. As a matter of national policy, however, these are not
available for public sale, and do not have a known or easily estimated market value. Defense procurement poses similar problems
of using capital accounting. A capital budget would pose formidable
accounting problems in the measurement of depreciation on Government property, especially weapons. Moreover, a capital budget
would be misleading as a measure of the Government's effect on
the demand for economic resources, and might also suggest that
programs with intensive expenditures for physical assets, such as
construction, are better than those 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 because deficit financing for capital purposes
would be easier to justify.
There are inevitable classification difficulties in preparing the
kind of analysis presented here. In the case of a few programs—
such as general revenue sharing—the recipients are free to utilize
the funds for either investment-type or current purposes. In such
cases, this analysis classifies the outlays in the category where
most of the outlays are expected to occur.
Some programs could logically be put in more than one subcategory within these broader categories. For example, grants for construction of education facilities not only finance the acquisition of
physical assets but are an important element in the conduct of
education and training. In such cases, the outlays are classified in
the subcategory that is most "capital-like" and therefore appears
first in the special analysis structure (i.e., first, loans, then construction and rehabilitation, then acquisition of major equipment, then
conduct of research and development, etc.).
The classification structure used in compiling information for
this analysis is designed primarily to distinguish investment-type
outlays from current outlays. It does not provide a ready source of
information on total outlays assisting a particular sector of the
economy. For example, the category "aids to agriculture, commerce, and transportation" reflects current benefits, such as current subsidies for operating expenses for air, water, and rail transportation. It does not include related subsidies for the construction
of private merchant ships, which are investment-type outlays included under "acquisition of major equipment" nor does it include
assistance provided by the Federal Government through loan guarantees, tax expenditures, and other ways not reflected in this
analysis.




89

SPECIAL ANALYSIS D
Table D - l . SUMMARY OF INVESTMENT, OPERATING, AND OTHfR BUDGET OUTLAYS
(In millions of dollars)
1980
actual

National defense:
Investment-type programs:
Construction and rehabilitation
Acquisition of major equipment and other physical assets..:.
Conduct of research and development
Other investment-type programs

1982
estimate

1981
estimate

2,591

2,919

3,509

30,341
14,648
258

36,811
17,237
139

41,987
20,455
81

47,838

57,106

66,032

11,970

13,851

15,657

46,317
29,731

53,886
36,246

61,496
41,214

88,018

103,982

118,367

135,856

161,088

184,399

Civil:
Investment-type programs:
Loans and financial investments
Construction and rehabilitation
Acquisition of physical assets
Conduct of research and development
Conduct of education and training
Other investment-type programs

9,839
28,992
4,543
15,592
26,169
3,757

4,841
30,277
3,712
16,570
26,464
3,926

7,257
31,553
6,364
18,579
27,822
3,864

Subtotal, investment-type programs

88,892

85,790

95,439

263,572
8,751

311,973
9,005

346,330
9,685

12,504

17,124

18,360

-334
8,824
7,792
52,458
1,297

-182
7,116
7,665
66,971
-3,809

-1,091
7,241
7,832
74,781
-4,679

354,865

415,863

458,458

Subtotal, investment-type programs
Current programs:
Provision of benefits
Repair, maintenance, and operation of physical
assets
Other current programs
Subtotal, current programs
Total, national defense

Current programs:
Provision of benefits
Social services and related 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
Subtotal, current programs
Unclassified

1,000

Total, civil

443,757

501,653

554,897

Grand total

579,613

662,740

739,296

14,722
-8

23,219
-10

18,531
-30

-617
148

-4
-6

-168
-23

Addendum:
Off-budget Federal entities (civil):
Loans
Other investment-type programs
Aids to agriculture, commerce, and transportation
Other current programs
Total, off-budget Federal entities




14,245

23,198

18,309

90

THE BUDGET FOR FISCAL YEAR 1982
Table D-2. SUMMARY OF BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL
PROGRAMS
(In millions of dollars)
1981
estimate

1980
actual

1982
estimate

Grants-in-aid:
Investment-type programs:
Construction, rehabilitation, and acquisition of
physical assets
Conduct of education and training
Other investment-type programs

22,569
15,549
405

21,342
15,210
457

22,433
16,347
430

Subtotal, investment-type programs

38,523

38,009

39,209

33,431
7,567

39,414
7,817

42,128
8,286

1,395
8,859
831
866

1,182
7,152
738
1,030

1,128
7,284
595
1,199

Subtotal, current programs

52,950

57,333

60,620

Total, grants-in-aid

91,472

95,343

99,829

9,032

3,790

5,936

9,330
30,861

11,250
37,574

13,027
42,824

3,707
29,952
10,620
4,705

2,553
33,482
11,255
4,983

5,130
38,713
11,476
5,156

89,175

101,096

116,326

242,111
1,185

286,410
1,187

319,859
1,398

11,109

15,942

17,232

45,411
6,961
52,458
30,700

53,159
6,927
66,971
31,915

59,734
7,237
74,781
35,965

389,934

462,511

516,206

479,109

563,607

632,532

Current programs:
Provision of benefits
Social services and related programs
Aids to agriculture, commerce, and transportation
General purpose fiscal assistance
Regulation, control, and law enforcement
Other current programs

Loans
Direct Federal programs:
Investment-type programs:
Construction and rehabilitation
Acquisiton of major equipment
Acquisition of commodity inventories and other
physical assets
Conduct of research and development
Conduct of education and training
Other investment-type programs
Subtotal, investment-type programs
Current programs:
Provision of benefits
Social services and related 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
Total, direct Federal programs
Unclassified
Grand total
Addendum (Direct Federal):
Oft-budget Federal entities:
Loans
Other investment-type outlays
Aids to agriculture, commerce, and transportation
Other current
Total, Off-budget Federal entities




1,000
579,613

662,740

739,296

14,722
-8

23,219
-10

18,531
-30

-617
148

-4
-6

-168
-23

14,245

23,198

18,309

SPECIAL ANALYSIS D

91

The remainder of the text discusses in greater detail the components and rationale for classifying the various types of budget
outlays. The benefits from outlays in each investment-type subcategory, either in the form of financial, physical or less tangible assets,
are briefly discussed. The remaining outlays by definition (except for
the allowances for contingencies) are classified as current.
Four tables are presented in this analysis. Table D - l summarizes
budget outlays, divided between national defense and civil programs. Table D-2 separates outlays by grants-in-aid,1 loans, and
direct Federal programs. This table makes no distinction between
national defense and civil programs. Tables D-3 and D-4 provide
detailed backup to the summary tables. This year, for the first
time, these tables show the outlays of off-budget Federal entities as
addendum items.2 Most of the off-budget outlays are for loans, which
are investment-type outlays.
Investment-type programs.—Total investment-type outlays are estimated to increase from $142.9 billion in 1981 to $161.5 billion in 1982.
About $7.3 billion are for loans and financial investments, $83.4
billion are for the acquisition, construction or rehabilitation of
physical assets, and $70.8 billion are for the conduct of education,
training, research and development, and other investment-type programs. Defense investment-type outlays are primarily for the acquisition of major equipment and other physical assets, and for research
and development. Civil programs, which account for 59% of total
investment-type outlays, are primarily for construction and rehabilitation of physical assets and the conduct of education, research, and
development.
Loans and financial investments.—A loan creates a financial
asset; if made at competitive market rates, the asset is of value
equal to the outlay. For domestic loans, the Government's asset is
matched by the liability of the private sector. Most Federal domestic loans finance the acquisition or improvement of either physical
assets or human capital. This is especially true for loans in the
commerce and housing credit, education, and transportation functions. 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.

1 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 Governments,"
discusses grants-in-aid in greater detail.
2 See part 6 of the Budget of the United States Government for a discussion of off-budget Federal entities.




92

THE BUDGET FOR FISCAL YEAR 1982

Net loan outlays are estimated to total $5.9 billion in 1982. This
figure masks the volume of new loans made in a given year because outlays for new loans are offset by loan repayments, or by
sales of loans (so-called "asset sales") to the private sector or to the
Federal Financing Bank. Outlays for financial investments are
estimated to be $1.3 billion in 1982 and almost entirely go to international organizations. Off-budget loans are estimated to be $18.5
billion in 1982. Federal loan programs are discussed in greater detail
in Special Analysis F, "Federal Credit Programs."
Physical assets.—The benefits provided by the construction and
rehabilitation of physical assets, the acquisition of major equipment,
and the establishment of commodity inventories are of a long term
nature. Budget outlays designed specifically to purchase such 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
$83.4 billion in 1982; of this amount $45.5 billion is for national
defense. 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
such as highways, mass transit, and pollution control facilities.
Conduct of research and development.—Outlays for research and
development increase our base of knowledge and apply that knowledge for its future benefit to the Nation. Total outlays for the
conduct of research and development are estimated at $39.0 billion
in 1982. Outlays for defense research and development are estimated to increase by 19% over 1981 and represent nearly one-half of
research and development outlays. Outlays for nondefense research
are estimated to increase by approximately 12%. Outlays for
health, energy, and space technology research account for approximately one-half of nondefense research and development outlays in
1982. Additional information about Federal research and development programs is contained in Special Analysis K, "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
are largely for direct payments to individuals, scholarships and
grants to institutions, and State and local governments. As with
physical assets, the benefits accrue over a considerable period of
time. Outlays are estimated at $27.8 billion in 1982, of which $16.3
billion are in the form of grants to State and local governments.




SPECIAL ANALYSIS D

93

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. The completion of the
decennial census is primarily responsible for the decline in total
outlays from $2.0 billion in 1980 to an estimated $1.5 billion in
1982.
International development.—Foreign assistance for general international economic development is included in this category. These
outlays, which are expected to prove beneficial to U.S. interests by
enhancing the economic development of friendly foreign nations,
are estimated to be $2.4 billion in 1982.
Current programs.—Programs that provide benefits in the current year are divided into several subcategories briefly discussed
below. Outlays classified as current may in part be used by their
recipients for investment-type purposes. However, the principal
effect of these outlays is to provide short-term benefits—such as
unemployment compensation, and retirement and disability payments—rather than providing the means for future benefits. Total
outlays for current programs are estimated to increase from $519.8
billion in 1981 to $576.8 billion in 1982. More than three-quarters
of 1982 estimated budget outlays are for current programs. About
$118.4 billion of current outlays in 1982 are for defense and $458.5
billion for civil programs.
Outlays for "provision of benefits'' is the largest category in the
budget. Social security and other disability and retirement benefits
are estimated to be $215.0 billion of the total in 1982. Other major
outlays in this category are for medicaid, medicare, unemployment,
and food and nutrition programs. Total outlays for the provision of
benefits are estimated to increase from $325.8 billion in 1981 to
$362.0 billion in 1982.
Current outlays for "social services and related programs" include human development and child welfare services, and employment programs. Outlays in 1982 are estimated to be $9.7 billion, of
which $8.3 billion are in the form of grants to State and local
governments.
"Aids to agriculture, commerce, and transportation'? are primarily for direct Federal activities, including price support, small business and transportation programs. Outlays for these programs are
estimated to increase from $12.5 billion in 1980 to $17.1 billion in
1981 and $18.4 billion in 1982. The 1981 estimates include a onetime payment of $2.1 billion to the Penn Central Corporation for
properties transferred to Conrail in 1976. The estimates also include




94

THE BUDGET FOR FISCAL YEAR 1982

outlays of $0.3 billion in 1981 and $3.5 billion in 1982 for proposed tax
refunds to businesses with no tax liability.
Other current outlays are largely for the operation of the Federal
Government, including: the repair, maintenance, and operation of
physical assets (primarily defense related); regulatory and law enforcement activities; net interest, and other administrative or operating expenses. Because proprietary receipts from the public—such
as receipts from the sale of power and other utilities, the sale of
publications and reproductions, and the sale of minerals and mineral
products—are offsets against the outlays to which they most nearly
apply, net outlays for the operation of the Federal Government are
negative in some cases.
Unclassified.—The allowance for contingencies is not placed in
either the investment or current category because it is for unforeseen circumstances.




95

SPECIAL ANALYSIS D
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)
1980
actual

1981
estimate

1982
estimate

National defense investment-type programs
Construction and rehabilitation of physical assets:
Military construction
Family housing
Atomic energy defense activities

2,119
137
335

2,336
95
487

2,780
91
638

Subtotal, construction and rehabilitation of
physical assets

2,591

2,919

3,509

29,021
1,072

35,422
1,333

40,120
1,710

30,093

36,755

41,830

248

57

157

14,648

17,237

20,455

258

139

81

47,838

57,106

66,032

National defense current programs
Provision of benefits:
Retired military personnel
Proposed legislation
Other

11,920
50

13,880
-85
55

16,049
-477
85

Subtotal, provision of benefits

11,970

13,851

15,657

Repair, maintenance, and operation of physical
assets:
Department of Defense, Military
Other

46,176
142

53,711
175

61,269
227

46,317

53,886

61,496

30,374

36,119

-644

127

37,679
3,707
-172

Acquisition of major equipment:
Procurement
Atomic energy defense activities and other
Subtotal, acquisition of major equipment
Commodity inventories
Conduct of research and development
Other investment-type programs
Subtotal, investment-type programs

Subtotal, repair, maintenance, and operation
of physical assets
Other current programs:
Military personnel
Allowance for civilian and military pay raises
Other national defense
Subtotal, other current programs

29,731

36,246

41,214

Subtotal, current programs

88,018

103,982

118,367

135,856

161,088

184,399

3,335
-858
3,615
359
832
773

3,819
-3,996
-408
530
699
2,320

3,925
-179
650
554
206
-158

Total, national defense
Civil investment-type programs
Loans:
International affairs
Agriculture
Mortgage credit and thrift insurance
Aids to commerce
Transportation
Disaster relief




96

THE BUDGET FOR FISCAL YEAR 1982
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1980
actual

1982
estimate

1981
estimate

272
465
249

130
529
178

126
500
322

9,042

3,800

5,946

796

1,013
28

1,259
52

797

1,041

1,311

Construction and rehabilitation of physical assets:
Highways and mass transit
Air transportation
Other transportation
Community development block grants
Other community and regional development
Pollution control and abatement
Water resources
Other natural resources and environment
Energy
Veterans hospitals and other health facilities
Other

10,985
886
147
3,902
2,133
4,345
2,458
1,242
1,900
509
487

11,085
859
162
3,938
1,976
4,202
2,487
1,383
2,992
567
625

11,050
886
158
3,998
1,922
4,234
2,598
1,499
3,746
752
711

Subtotal, construction and rehabilitation of
physical assets

28,992

30,277

31,553

453
322

462
384

472
541

775

845

1,013

444
1,567

1,371
-128
5

3,695
33
30

2,011

1,248

3,759

1,757

1,619

1,593

15,592

16,570

18,579

5,161
6,378
503

5,896
6,652
565

6,330
7,041
575

12,042

13,113

13,946

2,385
8,922
1,028
1,792

2,042
8,434
1,068
1,808

1,669
9,378
996
1,834

26,169

26,464

27,822

Other community and regional development
Education
Other
Subtotal, loans
Other financial investments:
International development
Other
Subtotal, other financial investments

Acquisition of major equipment:
Transportation
Other
Subtotal, acquisition of major equipment
Commodity inventories:
Energy
Agriculture
Other
Subtotal, commodity inventories
Other physical assets
Conduct of research and development
Cojiduct of education and training:
Department of Education:
Higher education
Elementary, secondary, and vocational education..
Other
Subtotal, Department of Education
Veterans readjustment benefits
Training and employment programs
Health training
Other education and training
Subtotal, conduct of education and training




97

SPECIAL ANALYSIS D
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1980
actual

Collection of information:
Census Bureau
Other

1981
estimate

1982
estimate

758
1,237

255
1,388

165
1,270

1,995

1,642

1,435

1,762

2,283

2,429

88,892

85,790

95,439

Civil current programs
Provision of benefits:
Retirement, survivor, and disability benefits:
Social Security:
Retirement and survivor benefits
Disability benefits

100,615
14,899

119,478
16,861

138,890
18,682

Subtotal, Social Security

115,514

136,339

157,572

Civil Service:
Retirement and survivor benefits
Disability benefits

11,899
2,791

14,259
3,345

15,994
3,900

14,690

17,603

19,894

4,737

5,295

5,827

11,238

12,569

13,922

Subtotal, collection of information
International development
Subtotal, investment-type programs

Subtotal, Civil Service
Railroad retirement and disability benefits
Veterans disability benefits
Other retirement and disability benefits
Subtotal, retirement, survivor, and disability
benefits

1,784

2,098^

2,083

147,963

173,903

199,298

33,937
13,957
941
16,847
6,001
13,446
5,694
6,126
4,031

38,786
16,452
1,078
24,632
7,582
15,426
6,434
6,540
5,021

45,374
18,120
1,118
20,259
9,700
16,695
7,095
6,259
5,082

100,981

121,952

129,702

Direct provision of services:
Hospital and medical care for veterans
Other health services
Other

5,644
1,093
-113

5,943
1,036
199

6,543
1,129
-99

Subtotal, direct provision of services

6,625

7,177

7,573

Administrative expenses:
Social Security retirement and disability
Medicare
Unemployment compensation
Nutrition programs
Supplemental security income

1,480
1,080
1,215
735
668

1,751
1,137
1,549
805
767

1,923
1,207
1,665
944
826

Other provisions of benefits:
Medicare
Medicaid
Other health benefits
Unemployment compensation
Housing programs
Food and nutrition programs
Supplemental security income
Assistance payments program
Other
Subtotal, other provisions of benefits

340-700

0 - 8 1 - 7




98

THE BUDGET FOR FISCAL YEAR 1982
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1980
actual

1982
estimate

1981
estimate

1,178
667
980

1,250
695
988

1,422
717
1,053

8,003

8,941

9,757

263,572

311,973

346,330

2,069
1,409
2,668

1,426
1,488
3,061

1,914
1,593
3,000

2,605

3,030

237
2,941

Subtotal, social services and related programs

8,751

9,005

9,685

Aids to agriculture, commerce, and transportation:
Proposed payments in excess of business tax
liabilities
Agriculture
Postal Service
Small business assistance
Mortgage credit and thrift insurance
Ground transportation
Air transportation
Water transportation and waterways
Other

2,850
1,677
809
309
2,497
2,139
1,365
858

227
3,696
1,343
436
1,004
4,676
2,284
1,9951,464

3,493
3,335
1,119
518
1,364
2,598
2,439
1,802
1,692

Subtotal, aids to agriculture, commerce, and
transportation

12,504

17,124

18,360

Repair, maintenance, and operation of physical assets:
Natural resources:
Water resources
Conservation and land management
Recreation resources and other
Offsetting receipts

792
1,223
511
-1,519

907
1,335
636
-1,942

807
1,307
822
-2,592

1,008

937

345

-1,316

-1,517

-1,883

-682

-279

-284

656

677

732

-334

-182

-1,091

6,829

5,156

681
1,315

735
1,225

4,559
459
805
1,381

8,824

7,116

7,241

Assistance payments program
Veterans benefits
Other
Subtotal, administrative expenses
Subtotal, provision of benefits
Social services and related programs.Human development services
Employment programs
Social services and child welfare services
Proposed Social Security tax credit payments to
nonprofit institutions
Other

Subtotal, natural resources
Energy (net of naval petroleum reserve and other
receipts)
Indian tribal receipts
Other
Subtotal, repair, maintenance, and operation
of physical assets
General purpose fiscal assistance:
General revenue sharing
Proposed Social Security tax credit payments
Other general purpose grants-in-aid
Shared revenues
Subtotal, general purpose fiscal assistance




99

SPECIAL ANALYSIS D
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)
1980
actual

Regulation, control, and law enforcement:
Regulatory and inspection activities:
Natural resources and environment
Transportation
Health
Energy
Agriculture
Savings institutions
Tax collections
Other

1982
estimate

1981
estimate

945
825
663
582
291
-965
521
573

1,088
897
706
748
321
-1,952
576
679

1,188
916
776
820
344
-2,199
607
670

3,434

3,062

3,122

Law enforcement activities:
Federal law enforcement
Federal litigative and judicial activities
Federal correctional activities
Other law enforcement assistance

2,215
1,335
318
489

2,391
1,500
347
364

2,519
1,606
362
223

Subtotal, law enforcement activities

4,358

4,602

4,710

Subtotal, regulation, control, and law enforcement

7,792

7,665

7,832

74,781
-10,278
-12,045

94,100
-13,695
-13,435

106,500
-16,554
-15,165

52,458

66,971

74,781

1,488
1,090
2,966
2,066

1,673
1,194
3,087
2,024

2,030
1,253
3,302
2,466

7,609

7,978

9,051

3,122
-5,787
-4,101

2,160
-6,561
-7,800

453

413

2,108
-6,798
-9,900
920
-61

Subtotal, other current programs

-6,312

-11,788

-13,731

Subtotal, current programs

354,865

415,863

458,458

Subtotal, regulatory and inspection activities...

Net interest:
Interest on the public debt
Other interest
Interest received by trust funds
Subtotal, net interest
General Administration:
International affairs
Legislative branch
Other general government
Other
Subtotal, general administration
Other current programs:
International security assistance
Employer share, employee retirement
OCS receipts
Allowances for civilian agency pay raises
Other

Unclassified

1,000

Total, civil

443,757

501,653

554,897

Grand total

579,613

662,740

739,296

14,722

23,219

18,531

Addendum:
Off-budget Federal entities (civil):
Investment-type:
Loans (see Table D-4)




100

THE BUDGET FOR FISCAL YEAR 1982
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS—Continued
(In millions of dollars)

Other investment

1982
estimate

1981
estimate

1980
actual

-8

-10

-30

14,714

23,209

18,500

Current:
Aids to agriculture, commerce, and transportation:
Postal Service
Railways
Other

-424
39
-232

229
-23
-210

-40
29
-158

Subtotal, aids to agriculture, commerce and transportation

-617

-4

-168

148

-6

-23

Subtotal, current

-469

-11

-191

Total, off-budget Federal entities

14,245

23,198

18,309

Subtotal, investment

Other




101

SPECIAL ANALYSIS D

Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS
(In millions of dollars)
1980
actual

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
Other community and regional development
Other construction

1981
estimate

1982
estimate

10,981
624
4,343
261
3,902
1,938
205

11,075
536
4,200
312
3,938
1,710
174

11,042
549
4,230
298
3,998
1,719
201

Subtotal, construction and rehabilitation of
physical assets

22,254

21,945

22,036

Acquisition of equipment and other physical
assets

316

397

397

Conduct of research and development

288

325

320

7,987
5,349
2,213

7,339
5,437
2,434

8,143
5,507
2,697

15,549

15,210

16,347

117

133

110

38,523

38,009

39,209

13,957
4,662
6,126
3,412
2,292

16,452
4,886
6,540
4,582
3,693

18,120
4,918
6,259
5,452
3,728

1,138
582
1,143
120

1,462
594
1,204*

1,564
711
1,375*

2,983

3,260

3,651

33,431

39,414

42,128

1,162
1,992
2,668
1,745

1,220
1,358
3,061
2,178

1,317
1,842
3,000
2,128

Subtotal, social services and related programs

7,567

7,817

8,286

Aids to agriculture, commerce, and transportation:
Transportation

1,361

1,155

1,097

Conduct of education and training:
Employment and training assistance
Elementary and secondary education
Other
Subtotal, conduct of education and training
Collection of information
Subtotal, investment-type programs
Current programs:
Provision of benefits:
Medicaid
Nutrition and food programs
Assistance payments
Housing payments and subsidies
Other
Administrative expenses:
Unemployment compensation
Nutrition and food programs
Assistance payments program
Other
Subtotal, administrative expenses
Subtotal, provision of benefits
Social services and related programs:
Employment programs
Human development services
Social services and child welfare services
Other




102

THE BUDGET FOR FISCAL YEAR 1982

Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1980
actual

Other

1981
estimate

1982
estimate

34

27

30

Subtotal, aids to agriculture, commerce, and
transportation

1,395

1,182

1,128

Repair, maintenance, and operation of physical
assets

573

544

672

6,829
1,315

5,156
1,225

General purpose fiscal assistance:
General revenue sharing
Shared revenues
Proposed Social Security tax credit payments
Other

716

771

4,559
1,381
495
848

8,859

7,152

7,284

428
403

332
406

197
398

831

738

595

294

486

527

Subtotal, current programs

52,950

57,333

60,620

Total, grants-in-aid

91,472

95,343

99,829

3,335
-858
3,615
832
773
465
870

3,819
-3,996
-408
699
2,320
529
828

3,925
-179
650
206
-158
500
991

9,032

3,790

5,936

Subtotal, general purpose fiscal assistance
Regulation, control, and law enforcement:
Law enforcement assistance
Other
Subtotal, regulation, control, and law enforcement
Other current programs

Loans
International affairs
Agriculture
Mortgage credit and thrift insurance
Transportation
Small Business Administration, disaster loans
Education
Other
Total, loans
Direct Federal Programs
Investment-type programs:
Financial investments
Construction and rehabilitation of physical assets:
National defense
Water resource projects
Other natural resources and environment
Energy
Transportation
Veterans hospitals and other health facilities
Other construction

797

1,041

1,311

2,537
2,400
1,040
1,900
413
490
550

2,906
2,428
1,132
2,992
494
547
751

3,492
2,548
1,255
3,746
503
732
751

Subtotal, construction and rehabilitation of
physical assets

9,330

11,250

13,027

30,091
770

36,755
819

41,830
994

Acquisition of major equipment:
National defense
Other




103

SPECIAL ANALYSIS D

Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1980
actual

1982
estimate

1981
estimate

30,861

37,574

42,824

Commodity inventories

2,259

1,305

3,916

Other physical assets

1,448

1,248

1,215

29,952

33,482

38,713

2,621
5,061
403
863
638
1,034

2,278
5,806
347
1,022
597
1,204

1,932
6,252
381
1,158
543
1,210

10,620

11,255

11,476

Collection of information

1,896

1,533

1,349

International development

2,013

2,409

2,496

89,175

101,096

116,326

116,187
43,747
33,937
5,644
1,126
16,847
8,784
2,616
5,655
1,275
1,272

137,009
50,745
38,786
5,943
1,110
24,632
10,540
3,138
6,389
1,203
1,234

158,415
56,540
45,374
6,543
1,171
20,259
11,777
4,313
7,095
1,115
1,151

1,480
1,080
153
668
1,639

1,751
1,137
211
767
1,815

1,923
1,207
233
826
1,917

5,020

5,680

6,106

242,111

286,410

319,859

Social services and related programs:
Proposed Social Security tax credit payments to
nonprofit institutions
Other

1,185

1,187

237
1,161

Subtotal, social services and related programs

1,185

1,187

1,398

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 training
Other
Subtotal, conduct of education and training

Subtotal, investment-type programs
Current programs:
Provision of benefits:
Social Security retirement and disability
Other retirement and disability benefits
Medicare
Medical care for veterans
Other health
Unemployment compensation
Nutrition programs and food
Housing payments and subsidies
Supplemental security income
Earned income tax credit
Other
Administrative expenses:
Social Security retirement and disability
Medicare
Nutrition and food programs
Supplemental security income
Other
Subtotal, administrative expenses
Subtotal, provision of benefits




104

THE BUDGET FOR FISCAL YEAR 1982

Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1980
actual

1982
estimate

1981
estimate

Aids to agriculture, commerce, and transportation:
Proposed payments in excess of business tax
liabilities
Agriculture
Postal Service
Small business assistance
Mortgage credit and thrift insurance
Ground transportation
Air transportation
Water transportation and waterways
Other

2,850
1,677
809
308
1,139
2,139
853
1,333

227
3,696
1,343
436
1,002
3,524
2,284
1,422
2,009

3,493
3,335
1,119
518
1,362
1,504
2,439
1,189
2,273

Subtotal, aids to agriculture, commerce, and
transportation

11,109

15,942

17,232

Repair, maintenance, and operation of physical
assets:
National defense
Other (includes offsetting collections)

46,315
-905

53,884
-724

61,490
-1,756

Subtotal, repair, maintenance, and operation
of physical assets

45,411

53,159

59,734

6,961

6,927

7,237

52,458

66,971

74,781

30,374

36,119

-679

91

-5,787
-4,101
10,891

-6,561
-7,800
10,066

37,679
3,707
-215
920
-6,798
-9,900
10,571

30,700

31,915

35,965

Subtotal, current programs

389,934

462,511

516,206

Total, direct Federal programs

479,109

563,607

632,532

Regulation, control, and law enforcement
Net interest
Other current programs:
Military personnel
Allowance for Department of Defense pay raises
Other national defense
Allowance for civilian agency pay raises
Employer share, employee retirement
Offshore oil receipts
Other
Subtotal, other current programs

Unclassified
Grand total
Addendum (Direct Federal):
Off-budget Federal entities:
Investment-type:
Loans:
International
Agriculture
Mortgage credit and thrift insurance
Transportation
Community and regional development
Education
Other




1,000
579,613

662,740

739,296

1,928
3,982
2,033
158
1,214
1,070
4,338

2,005
6,096
5,668
-24
1,403
1,095
6,976

2,215
1,570
3,736
319
1,464
1,923
7,304

105

SPECIAL ANALYSIS D

Table D-4. BUDGET OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1980
actual

Subtotal, loans
Other investment-type
Subtotal, investment
Current:
Aids to agriculture, commerce, and transportation:
Postal Service
Railways
Other
Subtotal, aids, agriculture, commerce,
& transportation

1982
estimate

1981
estimate

14,722

23,219

18,531

-8

-10

-30

14,714

23,209

18,500

-424
39
-232

229
-23
-210

-40
29
-158

-617
148

-4
-6

-168
-23

Subtotal, current

-469

-11

-191

Total, off-budget Federal entities

14,245

23,198

18,309

Other

*$500 thousand or less.







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, Government-guaranteed borrowing, and borrowing by Government-sponsored enterprises. The analysis concludes with a brief discussion of the trend
in Federal and federally assisted borrowing and the relationship of
this trend to the total funds raised by the nonfinancial 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 provide direct loans, loan guarantees, 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 1982 Federal
budget.
BORROWING AND REPAYING DEBT

The Federal Government sells debt for two principal reasons.
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,
that are required by law to be invested in Federal securities. Most
Federal debt has been issued by the Treasury and is called "public
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.




107

108

THE BUDGET FOR FISCAL YEAR 1982

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 Federal Reserve holdings of debt have only a small effect on
the budget surplus or deficit. 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 1980 through
1984. In 1980 the total Federal borrowing (net of the refunding of
securities)—i.e., the rise in gross Federal debt—was $80.6 billion.
The sale of debt to Government agencies was $10.1 billion, and the
sale of debt to the public was $70.5 billion. Of the increase in debt
held by the public, $5.3 billion was purchased by the Federal Reserve System and $65.3 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 certain Governmentguaranteed securities and the debt of the Government-sponsored enterprises listed in table E-10.




109

SPECIAL ANALYSIS D
Table E - l . FEDERAL BORROWING
(In millions of dollars)

Debt outstanding, end of
yed!

Borrowing or repayment (—) of debt
Description

Gross Federal debt:
Treasury debt
Agency debt

1980
actual

1981
estimate

1982
estimate

1983
estimate

1982
estimate

78,592 66,411
- 5 1 2 -1,145

80,566

78,081

65,266

10,060
-9

6,071
10

20,517
-251

NA
NA

NA
NA

224,331
1,228

NA
NA

Debt held by Gov. agencies V,,,

10,051

6,081

20,266

14,443

8,007

225,559

248,009

Total, debt held by public

70,515

72,000

45,000

22,309 - 1 8 , 3 5 2

832,105

836,062

5,253
65,263

NA
NA

NA
NA

NA
NA

NA
NA

Less debt held by Gov. agencies:
Treasury debt
Agency debt

Composed of:
Debt held by the Federal Reserve
System
Debt held by others

NA 1,052,705
NA
4,959

1984
estimate

81,182
-616

Gross Federal debt

NA
NA

1984
estimate

NA
NA

36,752 - 1 0 , 3 4 5 1,057,664 1,084,071

NA
NA

NA
NA

NA=Not available.
1 Estimates for agency investment in 1983 and 1984 are equal to the total trust fund surplus.

Borrowing from the public has fluctuated sharply in recent
years, with a large part of the change automatically generated by
fluctuations in the economy. It rose from $3.0 billion in 1974 to
$82.9 billion in 1976 primarily because the 1974-75 recession and
its aftermath automatically reduced tax receipts and raised unemployment benefits and certain other spending, and because tax
reductions and some expenditure programs were enacted to stimulate the economy. Borrowing then declined to $33.6 billion in 1979,
mainly due to the economic recovery. The rise in borrowing to
$70.5 billion in 1980 was caused in considerable part by the economic slowdown and recession of that year.
Borrowing from the public is estimated to remain about level in
1981 and decrease to $45.0 billion in 1982, as the economy gradually recovers. By the end of 1982 gross Federal debt is estimated to
be $1,057.7 billion, with $832.1 billion or 79% 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 as part of the Government's multi-year budget planning.
As explained in Part 2 of the Budget, the economic assumptions
underlying the receipts and outlay estimates for 1983 and 1984 are
not forecasts of the probable economic conditions in these years,
unlike the economic forecast underlying the 1981 and 1982 estimates. Instead, the 1983-84 assumptions are projections that




110

THE BUDGET FOR FISCAL YEAR 1982

assume progress in reducing unemployment and inflation. The receipts and outlay estimates also assume that current tax laws are
continued, as modified by the proposals in the budget, and that
existing and proposed programs are carried out in 1983 and 1984 at
the levels planned under current policy.
Under these assumptions, the total Government deficit declines
substantially in 1983 and turns into a surplus in 1984. Borrowing
from the public decreases to $22.3 billion in 1983, and $18.4 billion
of debt held by the public is repaid in 1984. The projected 1984
surplus may not, of course, actually occur. In particular, it is
unrealistic to assume that Federal receipts will be allowed to rise
continually as a percentage of gross national product, as implied by
current law. Tax reductions were enacted during the last two
decades to partially offset the rising tax burdens, and tax reductions
will be required periodically in the future to continue this policy and
to provide incentives for business investment and innovation.
BORROWING AND GOVERNMENT DEFICITS

Table E-2 shows the way in which borrowing from the public is
related to the Federal deficit. Until several years ago the budget
deficit comprised practically the entire deficit of the Federal Government, but the deficit of the 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 1980 the
total Government deficit was $73.8 billion. The greater part of this
amount, $70.5 billion, was borrowed from the public, and the remaining $3.3 billion was financed by other means.




111

SPECIAL ANALYSIS D
Table E-2. MEANS OF FINANCING THE FEDERAL DEFICIT 1
(In millions of dollars)
Description

Budget surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities2
Total, surplus or deficit ( - )

1980
actual

1981
estimate

1982
estimate

1983
estimate

1984
estimate

-59,563 -55,215 -27,516 -8,045
-14,245 -23,198 -18,309 -15,326

32,008
-14,726

-73,808 -78,414 -45,825 -23,371

17,283

Means of financing other than borrowing from the
public:
Decrease or increase ( - ) in cash and other
monetary assets
Increase or decrease ( — ) in liabilities for:
Checks outstanding, etc.3
Deposit fund balances
Seigniorage on coins

643

5,110

-490
2,478
663

227
633
444

15
161
649

1,062

1,069

Total, means of financing other than borrowing
from the public

3,293

6,414

825

1,062

1,069

Total, requirements for borrowing from the
public
-70,515 -72,000 -45,000 -22,309

18,352

Change in debt held by the public

70,515

72,000

45,000

22,309

-18,352

1 Several amounts have been assumed to be zero in 1982 and 1983 because they are usually small and would be very difficult to estimate
accurately.
2 The off-budget Federal entities consist of the Rural Electrification and Telephone revolving fund, Rural Telephone Bank, Federal Financing Bank,
Postal Service fund, Synthetic Fuels Corporation, and one program of the U.S. Railway Association.
3 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.

The means of financing a deficit other than borrowing from the
public are:
• A decrease in the Treasury cash balance or other types of
monetary assets.
• An increase in monetary liabilities for checks outstanding,
accrued interest payable to the public, 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.
• Seigniorage, which is the face value of minted coins less the
cost of their production.




112

THE

BUDGET

FOR

FISCAL

YEAR

1982

These other means of financing are normally small relative to
borrowing from the public. This is because they are 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 structure of table E-2 demonstrates that, because of the offbudget Federal entities, balancing the budget is not enough to
prevent an increase in the Federal debt held by the public. Even if
the budget were balanced, the off-budget deficit would have to be
financed by borrowing. By 1983, the projected off-budget deficit is
larger than the projected budget deficit. The budget and the offbudget entities combined must be in balance in order for the Government not to have to borrow from the public (aside from the
effects of the other means of financing).
The sale of debt to Federal agencies largely depends on the
surpluses of the trust funds, which own 91% of the Federal debt
held by Government agencies. Agency investment in Federal securities and the total trust fund surplus during 1979-82 are compared
in the table below (in billions of dollars):
1979
actual

19.7
18.3

A g e n c y i n v e s t m e n t in Federal d e b t .
Total trust fund surplus

1980
actual

10.1
8.8

1981
estimate

6.1
4.5

1982
estimate

20.3
19.2

As the table shows, the agency investment in Federal securities
is similar in size to the total trust fund surplus throughout this
period. This relationship has historically been close, with the small
differences 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.3
SIZE

AND

GROWTH

OF

FEDERAL

DEBT

Gross Federal debt has risen substantially over the past half
century, from $17 billion in 1929 to $914.3 billion at the end of
1980. 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

3 Open book balances are cash assets not currently invested. As shown in Special Analysis C, they are small
relative to trust fund holdings of Federal debt.




113

SPECIAL ANALYSIS D
Table E-3. COMPARISON OF TRENDS IN FEDERAL DEBT AND GROSS NATIONAL PRODUCT
(Dollar amounts in billions)
Debt outstanding, end of year
Held by
Fiscal year

Gross
Federal
debt

Federal
Government
accounts

GNP

The public
Total

Federal
Reserve
System

Other

Debt held
by public
as
percent of
GNP

1954
1955
1956
1957
1958
1959

270.8
274.4
272.8
272.4
279.7
287.8

46.3
47.8
50.5
52.9
53.3
52.8

224.5
226.6
222.2
219.4
226.4
235.0

25.0
23.6
23.8
23.0
25.4
26.0

199.5
203.0
198.5
196.4
200.9
209.0

364.1
381.7
411.7
434.5
442.7
472.1

61.7
59.4
54.0
50.5
51.1
49.8

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 1

290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1

53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7

237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5

26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1

210.7
211.4
218.7
222.4
222.8
222.5
222.5
220.8
238.4
225.4

499.3
510.1
546.9
579.0
618.4
660.5
725.5
776.2
834.4
911.0

47.5
46.8
45.4
43.9
41.6
39.6
36.5
34.5
34.8
30.7

1970 2
1971
1972
1973 3
1974
1975
1976 4
TQ
1977
1978
1979

382.6
409.5
437.3
468.4
486.2
544.1
631.9
646.4
709.1
780.4
833.8

97.7
105.1
113.6
125.4
140.2
147.2
151.6
148.1
157.3
169.5
189.2

284.9
304.3
323.8
343.0
346.1
396.9
480.3
498.3
551.8
610.9
644.6

57.7
65.5
71.4
75.2
80.6
85.0
94.7
96.7
105.0
115.5
115.6

227.2
238.8
252.3
267.9
265.4
311.9
385.6
401.6
446.8
495.5
529.0

968.9
1,032.7
1,126.6
1,255.2
1,381.5
1,480.5
1,642.7
1,729.0
1,864.0
2,085.3
2,357.8

29.4
29.5
28.7
27.3
25.0
26.8
29.2
28.8
29.6
29.3
27.3

914.3
992.4
1,057.7
1,094.4
1,084.1

199.2
205.3
225.6
240.0
248.0

715.1
787.1
832.1
854.4
836.1

120.8
NA
NA
NA
NA

594.3
NA
NA
NA
NA

2,567.5
2,843.7
3,214.8
3,612.5
4,044.0

27.9
27.7
25.9
23.7
20.7

1980
1981
1982
1983
1984

estimate
estimate
estimate
estimate

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 1980, gross Federal
debt rose by 238%, and debt held by the public rose by 219%.
Federal debt held by the public apart from the Federal Reserve System rose a little less, by 198%—an average annual rate of growth

340-700 0 - 8 1 - 8




114

THE BUDGET FOR FISCAL YEAR 1982

Percent Distribution of Indebtedness *
Percent

Percent

100

TirlOO

80

80

Private

60

60

40

40

20

-20

0

0
1930

1940

1950

1960

1970

1980

* Federal Debt Is Debt Held by the Public (Including the Federal Reserve System)

of 4.3% over the 26 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.4
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.

4 The estimates for 1946 to the present are from the Federal Reserve Board flow-of-funds accounts; the
estimates for earlier years are from the Bureau of Economic Analysis of the Department of Commerce and are
linked to the flow-of-funds estimates on the basis of their respective 1946 levels. The data are for calendar years
during 1929-51 and for fiscal years thereafter. The private sector debt includes debt of foreigners.




SPECIAL ANALYSIS D

115

From 1945 to 1974, however, private debt increased as a proportion of total debt in every year but one, and likewise in every year
but one the Federal debt held by the public decreased as a proportion of the total. This uninterrupted trend ended in 1975 because of
the large Federal deficit caused by the recession. Another large
Federal deficit in 1976 caused Federal debt held by the public to
rise as a percentage of total debt again in that year, and the 1980
recession caused a further increase in the percentage. As a result
of these events, Federal debt held by the public declined only
slightly as a percentage of total debt during the 1970's. The percentage was 18% at the end of 1980, which is essentially the same
as in 1973 and only a little less than the 20% in 1970.
Over a longer period, however, the decrease in the relative importance of Federal debt is unmistakable in comparison with both
private debt and State and local government debt. During the years
from 1960 to 1980, the average annual compound rate of growth was
5.7% for Federal debt held by the public, 7.7% for State and local
debt, and 10.2% for private debt. As a result of these trends,
Federal debt, though still important, has become a relatively smaller influence in the financial market than it was some years ago.
During the same period Federal debt has decreased relative to
gross national product (GNP). As shown in table E-3, debt held by
the public equaled 61.7% of GNP at the end of 1954 but declined
steadily to 25.0% by the end of 1974. In 1975, however, due to the
recession, debt held by the public rose as a percentage of GNP, at
the same time as it rose as a percentage of total debt. It rose
further in the following 2 years and, after a decline, rose again in
1980 because of the recession in that year. As a result, Federal debt
held by the public declined only slightly as a percentage of GNP
during the 1970's, from 29.4% in 1970 to 27.9% in 1980. The
percentage is estimated to decrease to 25.9% in 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 rate on 91-day Treasury bills, for example, averaged 11.5%
in calendar year 1980 compared to 6.3% in the 1970's, 4.0% in the
1960's, and 2.0% in the 1950's. Consequently, whereas the Federal
debt held by the public about tripled between 1954 and 1980,
table E-4 shows that the interest paid on this debt increased by
twelve times.
Interest payments to the public have tended to grow faster than
GNP over this entire period. In the first 5 years interest was equal
to 1.38% of GNP, whereas by the last 5 years the proportion had




116

THE BUDGET FOR FISCAL YEAR 1982

risen to 1.96%. The percentage was significantly higher in 1980 than
in any preceding year and is estimated to be higher still in 1981 and
1982. 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. However, this percentage
has been rising steadily in recent years and in 1980 was distinctly
the highest in the last quarter century. In 1981 and 1982 this
percentage is estimated to be higher still. Thus, by either measure
the importance of interest on the debt is now relatively high and
rising.
Table E-4. COMPARISON OF TRENDS IN INTEREST ON FEDERAL DEBT
(Dollar amounts in billions)
Interest on the gross Federal debt

Interest on debt
held by the public
as a percent of

Paid to
Fiscal year

Total1

Federal
Government
accounts

The public
Total

Federal
Reserve
System 2

Other

GNP

Budget
outlays3

1954
1955
1956
1957
1958
1959

6.4
6.4
6.8
7.3
7.8
7.8

1.3
1.2
1.3
1.4
1.4
1.4

5.2
5.2
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
1.36
1.43
1.36

7.29
7.56
7.90
7.73
7.68
6.96

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

9.5
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

1.61
1.53
1.45
1.50
1.49
1.49
1.44
1.50
1.51
1.55

8.73
7.96
7.40
7.78
7.80
8.29
7.75
7.36
7.07
7.66

20.0
21.6
22.5
24.8
30.0
33.5
37.7
8.3
42.6
49.3
60.3
75.2
94.5
106.8

4.4
5.3
5.8
6.3
7.7
8.8
9.0
.6
9.6
10.2
12.1
14.8
16.5
18.6

15.6
16.3
16.6
18.5
22.4
24.7
28.7
7.6
33.0
39.2
48.3
60.4
78.0
88.2

3.5
3.7
3.7
4.3
5.5
6.1
6.3
NA
6.8
8.0
9.6
12.6
NA
NA

12.2
12.6
12.9
14.2
16.9
18.6
22.5
NA
26.2
31.2
38.6
47.9
NA
NA

1.61
1.58
1.47
1.47
1.62
1.67
1.75
1.77
1.77
1.88
2.05
2.35
2.74
2.75

7.95
7.73
7.16
7.49
8.29
7.56
7.84
8.07
8.20
8.69
9.78
10.42
11.76
11.94

1970
1971
1972
1973
1974
1975
1976
TQ
1977
1978
1979
1980....
1981 estimate
1982 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 approximate. For most years they are estimated as the average of calendar year amounts. The 1980 estimate is tentative.
3 Budget outlays for all years are published in the Budget, Part 9, table 23.




SPECIAL ANALYSIS D

117

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 4Vi% 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 maximum maturity was raised by law from 5 to 7 years in 1967 and to
10 years in 1976. As of December 31, 1980, the amount of notes
outstanding with an original maturity over 5 years was $131.1
billion, of which $48.3 billion had an original 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 the Treasury was allowed by law to issue up to
$10 billion of bonds at interest rates above 41/4%. 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 seven steps to $70
billion. As of December 31, 1980, $75.0 billion of bonds outstanding
had been sold since the change of law in 1971, of which $53.1
billion were held by the public exclusive of the Federal Reserve
System. The effective interest rates have ranged from 6.1 to 12.8%.
Notwithstanding the initial relaxations of the interest rate ceiling, the average maturity of privately held, marketable Treasury
debt decreased steadily from 4 years at the end of 1967 to about 2%
years at the end of 1976. Since then, however, as the restriction has
been relaxed further, the average maturity has gradually lengthened to about 3% years.
DEBT HELD ABROAD

The Federal debt during most of American history was held
almost entirely by individuals and institutions within the United
States. In 1946, just after World War II, the debt held in foreign
official balances and international accounts was about $2 billion,
less than 1% of the total debt held by the public. In the following
years the debt held abroad tended to grow gradually, 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.




118

THE BUDGET FOR FISCAL YEAR 1982
Table E-5. FOREIGN HOLDINGS OF FEDERAL DEBT
(In billions of dollars)
Debt held by the public
Fiscal year

Total

Foreign1

Borrowinf [ from the
pulblic
Total2

Foreign

Interest on debt held
by the public
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
11.6
12.6
14.1

0.5
.5
.6
.7
.7

1970
1971
1972
1973
1974

284.9
304.3
323.8
343.0
346.1

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
1.3
2.4
3.2
4.1

1975
1976
TQ
1977
1978
1979

396.9
480.3
498.3
551.8
610.9
644.6

66.0
69.8
74.6
95.5
120.9
125.2

50.9
82.9
18.0
53.5
59.1
33.6

9.2
3.8
4.9
20.9
25.4
4.3

24.7
28.7
7.6
33.0
39.2
48.3

4.5
4.4
1.2
5.0
7.9
10.7

1980

715.1

126.0

70.5

.8

60.4

11.8

1 Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be small.
2 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 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
Government-sponsored enterprises, which are not part of the Federal Government.

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. Government securities are the safest and one of the most
liquid forms of holding dollar assets. Consequently, as foreign countries acquired more dollar denominated official reserves, they purchased a large amount of U.S. Government securities. The second
principal reason for the growth of foreign holdings has been the
massive current account surpluses of some countries, particularly
the OPEC nations, since 1974. The counterpart to these surpluses
has been the acquisition of financial assets, and the financial assets
acquired in the United States have largely taken the form of U.S.
Government securities.
The increase in foreign holdings of U.S. Government securities
during the past decade has therefore been primarily the product of
foreign decisions. By the end of 1980 foreign holdings of Treasury
debt had reached $126.0 billion, which was 18% of the total debt
held by the public. Because of the rising interest rates, the interest
paid to foreign residents grew much faster over this period than
did the debt held by foreign residents. Interest paid to foreign
residents as a proportion of the total interest paid to the public




SPECIAL ANALYSIS D

119

grew in roughly the same way as did the proportion of foreign debt
holdings.
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
varied, as table E-5 shows, but for this period as a whole borrowing
from abroad was 27% of borrowing from the public. For the last 4
years borrowing from abroad was 24%. Borrowing from abroad is,
of course, an even larger proportion of total borrowing from the
public exclusive of the debt securities bought by the Federal Reserve System.
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. Beginning in
December 1978, the Treasury has sold the equivalent of $6.4 billion
of securities denominated in Deutsche marks and Swiss francs to
residents of Germany and Switzerland, respectively. 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. No securities of this kind have
been sold since January 1980.
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 3 years more debt is repaid than is
newly borrowed, and over the period as a whole total agency debt
decreases by $2.3 billion or by one-third. The agency debt outstanding at the end of 1982 is less than 1% of gross Federal debt.




120

THE BUDGET FOR FISCAL YEAR 1982
Table E-6. AGENCY BORROWING

1

(In millions of dollars)
Borrowing or repayment ( - ) of debt
Description

1981
estimate

actual

Borrowing from the public:
Agriculture: Farmers Home Administration 2 ,
Defense
Education:
College housing loans 2
Health education facilities 2
Health and Human Services2
Housing and Urban Development:
Federal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Assoc. 2 .,
Revolving fund (liquidating programs) 2 .
Transportation: Coast Guard
Veterans Administration 2
Export-Import Bank
Postal Service
Small Business Administration 2
Tennessee Valley Authority
Total, borrowing from the public..
Borrowing from other funds:
Agriculture: Farmers Home Administration2
Defense
Education:
College housing loans 2
Health education facilities 2
Health and Human Services2
Housing and Urban Development:
Federal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Assoc.2.
Revolving fund (liquidating programs) 2
Veterans Administration 2
Small Business Administration 2

-106

-31
-117
-1
-16

-68

-73

-47

-92
-15

-116

-80

-272

-211

-415
-133

-607

-521

-19

-10

-894

-28
-12

-1

-14
15

20

22
-83
-14

- 7
—4

-120

Total, borrowing from other funds..
Total, agency borrowing included in gross Federal
debt

-116

1982
estimate

10

-251

-616

-512

-1,145

2,114
90
-67

2,582
210

-232

3,067
300
-67

ADDENDUM
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

2,200

2,100

36

-258

30

3,983

4,503

5,430

1,810

* $500 thousand or less.
1 Excludes agency borrowing from Treasury.
2 Certificates of participation in loans issued by the Government National Mortgage Association on behalf of several agencies.




SPECIAL ANALYSIS D

121

As shown in the addendum to table E-6, the amount of agency
borrowing has been profoundly affected by the Federal Financing
Bank (FFB).5 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.6 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 $4.0 billion from the FFB in
1980 and are estimated to borrow $4.5 billion in 1981 and $5.4
billion in 1982. 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 6 years or is scheduled to
take place in the future. The change in agency debt outstanding is
therefore 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
several times greater 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 1982, $2.0 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 in recent years have borrowed 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 $2.2 billion, or another
5 FFB purchases of guaranteed obligations are shown in table E - l l .
6 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.




122

THE BUDGET FOR FISCAL YEAR 1982

two-fifths of all agency debt, will consist of certificates of participation in pools of loans issued by the Government National Mortgage
Association as trustee on behalf of several agencies, which are
identified in table E-6. These certificates have not been issued
since 1968. A further $0.4 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—$0.4 billion, 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.
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 both in this analysis and 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 rose
steadily from the relatively low level of $4.3 billion in the recession
year of 1976 to $19.7 billion in 1979. This was caused primarily by
the improvement in the economy, the growing payment from the
general fund to the civil service retirement and disability trust
fund, and the tax increase enacted by the Social Security Amendments of 1977. In 1980, however, as shown in table E-7, agency
investment declined to $10.1 billion, and in 1981 it is estimated to
fall further to $6.1 billion. This decline is estimated to be reversed in
1982, with a rise of agency investment to $20.3 billion.
The most important reason for the decline in agency investment
is the recession of 1980, with the unemployment rate rising from
5.8% in 1979 to 6.8% in 1980 and to a still higher average in 1981.




SPECIAL ANALYSIS

123

D

Table E-7. AGENCY INVESTMENT IN FEDERAL SECURITIES
(In millions of dollars)
Increase or decrease ( - ) in holdings
Description

Investment in Treasury debt:
Health and Human Services-.
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
Interior: Outer Continental Shelf deposit funds
Labor: Unemployment trust fund
Transportation:
Highway trust fund
Airport and airway trust fund
Treasury:
Exchange stabilization fund 1
Federal Financing Bank2
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 account: Trust fund
Other Federal funds
Other trust funds
Other off-budget Federal entities 3
Total, investment in Treasury debt
Investment in agency debt:
Agriculture: Commodity Credit Corp
Health and Human Services:
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

1982
estimate

-3,751
2,092
1,493
-416

-2,050
-4,555
5,349
-636

-9,835
673
7,552
2,771

11,138
3,792
27,507
6,693

111
36
21
2,088
-1,082

240
-57
78
827
-3,525

342
-268
93
195
2,153

2,614
1,090
387
3,110
11,339

-1,609
1,046

-779
-569

2,768
899

12,848
5,753

-722
-149

483
51

476
33

4,503
162

105
6
17
926
-553

96
12
18
1,450
-415

96
14
11
1,500
661

8,122
1,118
484
13,128
5,176

9,520
428
288
-376
176
362
2

10,102
537
-467
-412
99
194

9,671
684
-40
-325
180
213

*

93,027
5,557
2,020
1,942
1,355
1,459
8

10,060

6,071

20,517

224,331

-6

-6

-5
-100
-50

-14
11

16

*

455

15

174
222

-ii

135
67

-100

175

10

—251

1,228

10,051

6,081

20,266

225,559

-923
8,744
2,230

456
5,214
412

1,494
18,583
188

16,070
204,188
5,301

Total, investment in agency debt
Total, investment in Federal debt

Holdings end
of 1982
estimate

1981
estimate

1980
actual

-9

MEMORANDUM
Investment by Federal funds
Investment by trust funds
Investment by off-budget Federal entities 3

* $500 thousand or less.
The change in holdings in 1981 and 1982 is estimated as equal to interest collections.

1




2 off-budget Federal entity.
Includes deposit funds.

3

124

THE BUDGET FOR FISCAL YEAR 1982

The growth of tax receipts fell, particularly for the social security
trust funds, and unemployment benefits rose. Unemployment benefit payments increased by $5.5 billion in 1980 and are estimated to
increase by a further $6.9 billion in 1981, for a cumulative rise of
$12.5 billion compared to 1979. If the economy had grown strongly
enough so that the unemployment rate had not risen over its 1979
level, agency investment would not be decreasing from 1979 to 1981.
In 1982 the estimated agency investment rises markedly as the
economy improves, as higher proposed tax rates increase the receipts
of the highway and the airport and airway trust funds, and as
proposed legislation reduces the outlays for extended unemployment
benefits (this last effect would be very small, however, if unemployment is only a little higher than forecast).
The trust funds financed by the social security tax—old age and
survivors insurance, disability insurance, and hospital insurance—
disinvest as a whole each year during 1980-82 for a cumulative
decrease in holdings of Government debt of $3.0 billion. This is in
spite of the very large increase in the funds' tax receipts due to the
Social Security Amendments of 1977. During this period the pattern
of agency investment or disinvestment differs markedly among the
three funds. The old age and survivors insurance trust fund disinvests substantially, whereas the disability insurance trust fund
disinvests considerably less and the hospital insurance trust fund
accumulates large amounts of securities. Because of these diverging
tendencies, legislation was enacted in 1980 to shift some of the
disability insurance payroll tax receipts to the old age and survivors
insurance trust fund during 1981 and 1982. In order to improve
further the solvency of the old age and survivors insurance trust
fund over the next 2 or 3 years, however, legislation is recommended
to permit these funds to borrow among themselves.
In recent years only a very small investment in Federal debt was
made by deposit funds, which, as defined previously, are neither
part of the budget (as Federal funds or trust funds) nor off-budget
Federal entities. During 1980, however, $2.1 billion of Treasury
securities were acquired by two deposit funds that hold amounts
from the Outer Continental Shelf receipts until a decision is made
as to how they are to be divided between the Federal Government
and the States. Until 1980 the balances of these funds were not
invested in Federal debt. These funds are estimated to accumulate
$1.0 billion more of Treasury debt in 1981 and 1982.




SPECIAL ANALYSIS D

125

Total agency holdings of Federal securities will reach an estimated $225.6 billion by the end of 1982. This will comprise 21% of the
gross Federal debt. One major trust fund—the civil service retirement and disability trust fund—will account for 41% of total
agency holdings and will account for four-fifths of net agency
investment during 1980-82. All the trust funds together will account
for 91% of the holdings at the end of 1982. Nearly all of the holdings
will be Treasury debt, and the holdings of agency debt will continue
to decline by a small amount.
LIMITATIONS ON FEDERAL DEBT

Statutory limitations have normally 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 of limitation has been in effect since 1941. The limit currently applies to
the total of:
• almost all public debt issued by the Treasury since September
1917, whether held by the public or by the Government;
• agency debt in the form of participation certificates issued
during 1968 under the Participation Sales Act of 1966; and
• other debt issued by Federal agencies (and the District of
Columbia Armory Board) that, according to explicit statute, is
fully guaranteed as to principal and interest by the United
States.
The debt subject to statutory limit 7 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 reclassified 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 participation certificates sold in 1968. These securities comprise about
one-quarter of all agency debt. However, most other agency debt is
subject to special statutory limits. For example, the Tennessee
Valley Authority was first authorized to issue revenue bonds to
7 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.




126

THE BUDGET FOR FISCAL YEAR 1982

finance power facilities in 1959. The limit was $750 million. Subsequently, to enable TVA to finance additional facilities, Congress
raised the limit several times. In October 1979, Congress raised the
limit from $15 billion to $30 billion, with more than half of the
increase for TVA's current construction program. The Postal Service is limited to $10 billion of securities outstanding and $2 billion
of annual borrowing, but proposed appropriation bill limitations
would restrict the annual borrowing to $1 billion in both 1981 and
1982 and would require that any borrowing for operating expenses
during 1982 be repaid within 12 months.
Table E-8. DEBT SUBJECT TO STATUTORY LIMIT
(In millions of dollars)
End of year
Descriptions

Federal debt held by the public
Federal debt held by Government agencies
Total, gross Federal debt
Deduct:
Treasury debt not subject to limit
Agency debt not subject to 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
Other debt subject to limit, and adjustments
Total, debt subject to statutory limit

1980
actual

1982
estimate

1981
estimate

715,105
199,212

787,105
205,293

832,105
225,559

914,317

992,398

1,057,664

608

608

608

641
662
250
1,725
1,707
1

515
451
250
1,725
1,580
1

387
36
250
1,725
1,030
1

5,594

5,130

4,035

908,724

*

987,268

1,053,628

908,723

987,268

_*

_ *

1,053,628

*$500 thousand or less.
1 Certificates of participation in loans issued by the Government National Mortgage Association on behalf of several agencies (this excludes the
certificates issued during 1968, which are subject to the debt limit).

The only other appreciable component of debt subject to limit in
recent years was the small issue of stadium bonds ($20 million) sold
by the District of Columbia Armory Board in 1960. These bonds
matured on December 1, 1979. Unlike the rest of the debt subject
to limit discussed above, the stadium bonds were not part of the
Federal debt. The gross Federal debt further excludes a very small
amount, less than a million dollars, of matured principal and interest that is included in debt subject to limit. To derive the debt
subject to limit from the gross Federal debt also requires a very
small accounting adjustment.




SPECIAL ANALYSIS D

127

The level of the statutory limit on the Federal debt has frequently been changed by Congress. During the 1960's Congress passed 13
separate acts to raise the limit or to extend the duration of a
temporary increase in the limit, and during the 1970's Congress
passed 18 such acts. These frequent changes have come about both
because the Federal debt has grown steadily and substantially and
because of the nature of the debt limit legislation. Since 1971 the
statutory debt limit has consisted of a permanent limit of $400
billion plus a temporary increment that was usually scheduled to
expire in a year or less. Since the debt subject to limit has been
more than $400 billion, new legislation has been required no later
than the expiration date of each temporary increment. Three times
in recent years the temporary increment has expired without
having been extended, so for a few days on each occasion the
Federal debt exceeded the statutory limit. The validity of debt
issued prior to the expiration of the temporary ceiling was not
affected, but the Treasury Department had to suspend all sales of
savings bonds and other debt securities.
On September 29, 1979, the statutory limit was raised to $879
billion for the period ending May 31, 1980. The same legislation
also changed the method of enacting statutory debt limits in the
future (Public Law 96-78). The purpose was to establish the debt
limit as a part of the congressional budget process. The first and
second concurrent resolutions on the budget (scheduled to be adopted by May 15 and September 15, respectively, for the forthcoming
fiscal year) establish targets or ceilings for budget outlays, receipts,
and the budget deficit and also recommend an appropriate level for
the debt subject to limit. The recommendation as to the appropriate level of debt had not heretofore had the effect of law, nor had it
been part of the direct process whereby the debt limit was established.
However, beginning with the resolutions adopted in calendar
year 1980, the budget resolution that is adopted by the Congress
has had a direct effect. The vote in the House of Representatives is
deemed to have been a vote in favor of a joint resolution setting
the statutory limit. The joint resolution is thus deemed to have
passed the House and is transmitted to the Senate for further
legislative action. Upon final passage, it is sent to the President for
his signature. This procedure is intended to relate the decision on
the debt limit to the congressional decision on the Federal deficit
and the other factors, explained in the following section, that determine the change in the debt subject to limit. It is also intended to
ensure that a new increase to the debt limit will be enacted well
before the previous increase is scheduled to expire, thereby reduc-




128

THE BUDGET FOR FISCAL YEAR 1982

ing the uncertainty about extension of the debt limit and eliminating the costs that occur when the level of debt exceeds or is about
to exceed the debt limit. The debt limit may still be changed by a
separate act as in the past.
The first budget resolution for 1981 did not pass Congress until
June 12, 1980, which was nearly 2 weeks after the expiration date
of the temporary increment to the debt limit that had been enacted
the previous September. Congress did, however, pass legislation to
extend the $879 billion limit in time to prevent the debt from
exceeding the statutory limit. On May 30, 1980, the expiration date
of this limit was extended from May 31 to June 5; and on June 6
the date was extended further to June 30.
Because of the uncertainty about when the debt limit would be
extended, Treasury postponed its auctions for new securities in late
May and then scheduled several in early June when the limit was
first extended. In order to raise as much cash as possible to meet
the Government's operating expenses, Treasury called in all of its
deposits in tax and loan accounts at commercial banks so as to
increase its operating balance at the Federal Reserve Banks; and it
redeemed debt held by the Exchange Stabilization Fund, up to a
maximum of $3 billion at one time, so that it could raise cash by
borrowing from the public. On one occasion it announced that the
sale of savings bonds would have to cease, but this announcement
was rescinded before it took effect when Congress extended the
limit. The question of the debt limit created uncertainty in the
securities market for quite a number of days, and the actions that
the Treasury had to take incurred administrative costs and reduced the earnings of the Exchange Stabilization Fund.
After the first budget resolution was passed on June 12, the new
procedure went into effect. This resolution, which contained revised totals for 1980 as well as the initial targets for 1981, had two
separate provisions for changing the debt limit. In the section
revising the second budget resolution for 1980, it declared that the
appropriate debt limit from the date of enactment through February 28, 1981, was $925 billion; and in the section on the 1981 totals,
it declared that the appropriate debt limit for the fiscal year beginning on October 1, 1980, was $935.1 billion. Both provisions were
deemed to have passed the House, as separate joint resolutions (as
well as being part of the concurrent resolution on the budget), and
were sent to the Senate. The Senate passed the former resolution,
and it was signed into law by the President on June 28.
The second budget resolution, which passed Congress on November 20, 1980, declared that the appropriate level of the debt limit
was $978.6 billion through the end of fiscal year 1981. A separate




SPECIAL ANALYSIS D

129

joint resolution to this effect was deemed to have passed the House,
but the Senate did not concur. Instead, the Senate went back to the
joint resolution (arising from the first budget resolution) that it
had received from the House in June but had not passed. The
Senate passed this resolution, which raised the debt limit to $935.1
billion through September 30, 1981, and it was signed into law by
the President on December 19. However, a further increase will be
required early this year in order 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 $908.7 billion at the end of
1980 and is estimated to rise to $1,053.6 billion by the end of 1982.
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. The debt subject to limit is so much
larger than the debt held by the public because it includes Federal
debt held by Government agencies. The small difference between
debt subject to limit and gross Federal debt is mostly accounted for
by agency debt not subject to the general limitation.
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 on the amount of debt that is
subject to the limit. 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.8 The trust funds collect certain taxes and other
receipts to be used 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,
they would be classified as Federal funds.
8

Data for Federal funds and trust funds are presented in Special Analysis C, "Funds in the Budget."

3H0-700

0 - 8 1 - 9




130

THE BUDGET FOR FISCAL YEAR 1982

When the Federal funds have a deficit, this deficit must generally be financed by borrowing. The borrowing is necessary regardless
of whether the trust funds have a surplus. This is because trust
fund surpluses are mostly invested in securities issued by Federal
funds, Federal funds securities held by trust funds are treated as
Federal debt, and therefore the trust fund surplus does not reduce
the need for Federal funds to issue debt. Federal funds borrowing
is done almost exclusively by the Treasury selling debt securities
that are subject to the statutory limit. The deficits of the off-budget
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).9 A
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, can only be financed by
selling debt subject to the statutory limit. Thus, the deficits of the
Federal funds and the off-budget Federal entities are together the
principal determinant of the change in debt subject to statutory
limit.

9 The amounts for 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.




131

SPECIAL ANALYSIS D

Table E-9. FEDERAL FUNDS FINANCING AND CHANGE IN DEBT SUBJECT TO STATUTORY LIMIT 1
(In millions of dollars)
Description

Federal funds surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities
Total, amount to be financed

1980
actual

1981
estimate

1982
estimate

1983
estimate

1984
estimate

-68,364
-14,245

-59,693
-23,198

-46,712
-18,309

-22,488
-15,326

24,002
-14,726

-82,609

-82,891

-65,021

-37,814

9,276

Means of financing other than borrowing:
Decrease or increase ( —) in cash and other
monetary assets
Increase or decrease ( - ) in liabilities for:
Checks outstanding etc
Deposit fund balances
Seigniorage on coins

643

5,110

-433
2,478
663

-510
633
444

628
161
649

1,062

1,069

Total, means of financing other than
borrowing

3,351

5,677

1,438

1,062

1,069

-1,307

-868

-1,682

-560

-464

-1,094

Total, requirements for borrowing subject to debt limit

-81,126

-78,545

-66,360

-36,752

10,345

Change in debt subject to limit but not part of
Federal debt 3
Change in debt subject to limit

-19
81,108

78,545

66,360

36,752

-10,345

Decrease or increase ( - ) in Federal funds and
off-budget entity investments in Federal debt 2
Increase or decrease ( - ) in Federal funds and
off-budget entity debt not subject to limit

1
2
3

Several amounts have been assumed to be zero in 1982 and 1983 because they are usually small and cannot be estimated accurately.
Also includes change in deposit fund investments.
Almost entirely District of Columbia Armory Board stadium bonds in 1980.

In 1980, for example, the total Federal funds and off-budget
deficit to be financed was $82.6 billion, and $3.4 billion of this
amount was financed by means other than borrowing.10 The Federal funds and off-budget entities increased their holdings of Federal
debt by $1.3 billion, which had to be financed by still further
borrowing in the same way as their deficits had to be financed; 11
and they decreased their debt outstanding that was not subject to
limit by $0.6 billion, which had to be replaced by an equal amount
of debt that was subject to limit. Therefore, a total of $81.1 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. This is
because the cash available from the trust funds surplus can be
used to finance Federal funds outlays without recording an increase in Federal debt. In table E-9 the increase in open book
10 Except that the increase in deposit fund balances includes investment in Treasury debt, which is offset in a
later line of the table.
11 This item also includes deposit fund investment in Treasury debt.




132

THE BUDGET FOR FISCAL YEAR 1982

balances is recorded as an increase in Federal funds liabilities for
checks outstanding, etc. 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 1971-80 the
increase in trust fund holdings of Federal debt equalled 93% of the
cumulative trust fund surplus. Consequently, the effect of the trust
fund surplus on debt subject to limit is minor. 12
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 almost always less than the
change in debt subject to limit. As can be calculated from table
E-8, during 1981 and 1982 the debt subject to limit is estimated to
increase by $144.9 billion, whereas the debt held by the public is
estimated to increase by $117.0 billion.
The present analysis helps to demonstrate the difficulties in
preventing the Federal debt from continuing to rise. The structure
of 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. The structure of 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 offbudget entities were together just in balance. 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 the 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. This condition is met in the 1984 projection, but the
decrease in the debt subject to limit ($10.3 billion) is considerably
less than the decrease in the debt held by the public ($18.4 billion)
or the size of the budget surplus ($32.0 billion).
FEDERALLY ASSISTED BORROWING

The effect of the Government on borrowing arises not only from
its own borrowing to finance Federal operations but also from its
12 The debt subject to limit exceeded the statutory limit during April 1-2, 1979. Under these exceptional
circumstances, Treasury used the net cash inflow of the trust funds to increase the trust funds' open book
balances in order to finance Federal funds outlays that could not legally be financed by increasing the amount
of debt subject to limit.




133

SPECIAL ANALYSIS D

assistance to certain borrowing by the public. Federally assisted
borrowing is of two principal types: Government-guaranteed borrowing, and borrowing by Government-sponsored enterprises.13
Guaranteed borrowing consists of loans for which the Federal
Government guarantees (or insures) the payment of the principal
and/or interest in whole or in part. Guaranteed 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 (FFB). Guaranteed borrowing is the same as guaranteed lending.
Guaranteed loans include most loan asset sales made 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 (a budget agency) and the Rural Electrification and
Telephone revolving fund (an off-budget Federal entity) 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. Since the certificates are guaranteed, they are classified as guaranteed loans. These certificates of
beneficial ownership are currently sold almost entirely to the FFB,
but some certificates sold by Farmers Home before FFB was established are outstanding and continue to mature. The net amount of
sales to the FFB less repayments (i.e., the increase in certificates
outstanding) is shown below for 1979-82 (in millions of dollars):
1979
actual

Farmers Home Administration
Rural Electrification and Telephone revolving fund

8,805
586

1980
actual

6,881
689

1981
estimate

12,420
516

1982
estimate

6,056
624

13 The Federal Government also assists State and local government borrowing, and the private beneficiaries of
certain types of such borrowing, by exempting the interest on State and local obligations from income tax. See
the discussions in Special Analysis F, "Federal Credit Programs," and Special Analysis G, "Tax Expenditures."
14 Report of the President's Commission on Budget Concepts (Washington: U.S. Government Printing Office,
1967), pp. 8, 47-48, and 54-55.




134

THE BUDGET FOR FISCAL YEAR 1982

Loan guarantees are designed to allocate economic resources
toward particular uses by providing credit at more favorable terms
than would otherwise be available in the private market. The
major use of guaranteed loans is to support housing, but in recent
years guarantees have increasingly been used for other purposes.
As shown subsequently in table E - l l , guaranteed borrowing net of
repayments (but before purchases by Federal agencies) was $47.9
billion in 1980 and is estimated to be $73.3 billion in 1981 and $75.0
billion in 1982. Special Analysis F presents detailed data on guaranteed loans and loan asset sales.
The other type of federally assisted borrowing is by Governmentsponsored enterprises. They were established and chartered by the
Federal Government to perform specific credit functions but 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.15
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
groups 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 has
borrowed exclusively from the Federal Financing Bank since the
FFB was established.16 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 rates only a little
higher than the rates on comparable Treasury issues.
The three enterprises regulated by the Farm Credit Administration—the Banks for Cooperatives, Federal Intermediate Credit
Banks, and Federal Land Banks—have recently changed the form
Ibid., pp. 29-30.
The Student Loan Marketing Association (SLMA) is the only Government-sponsored enterprise whose new
securities are currently guaranteed by the Federal Government and can therefore be bought by the FFB. The
Education Amendments of 1980 extended the authority of the Secretary of Education to guarantee SLMA
securities to any obligations issued prior to October 1, 1984.
15
19




SPECIAL ANALYSIS D

135

in which they borrow. Until September 1977 they borrowed separately on the market under their own names. At that time, however, the Farm Credit banks began to issue consolidated bonds to
replace some of their separate offerings, and since January 1979
they have borrowed solely on a consolidated basis. This change was
made in order to improve efficiency.
Borrowing by Government-sponsored enterprises has recently
risen to a much higher level than in earlier years. Until 1978 the
largest amount of borrowing had been $14.9 billion in 1974. In
1978, however, borrowing sharply increased to $24.1 billion, and, as
shown in table E-10, borrowing then grew further by small
amounts in 1979 and 1980. The Government-sponsored enterprises
currently estimate that their total borrowing will decline to $20.7
billion in 1981, still substantially above the 1974 level, and then
rise to a new high of $30.6 billion in 1982. About three-fifths of the
borrowing in these years is done by the three enterprises that
support housing through the mortgage market, the Federal National Mortgage Association, the Federal Home Loan Banks, and the
Federal Home Loan Mortgage Corporation.
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
1981-82 are not necessarily the same as the administration's economic forecast, which is used for the budget. In order to show the
borrowing by this sector as a whole from the rest of the market,
the total borrowing figures in table E-10 are calculated net of the
borrowing by one Government-sponsored enterprise from another.
Most of this adjustment is accounted for by the Federal Home Loan
Mortgage Corporation borrowing from the Federal Home Loan
Banks.




136

THE BUDGET FOR FISCAL YEAR 1982
Table E-10. BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES
(In millions of dollars)
Borrowing or repayment ( - )
Description

Education: Student Loan Marketing Association
Housing and Urban Development: Federal National
Mortgage Association
Farm Credit Administration.-1
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corporation

1979
actual

1980
actual

1981
estimate

1982
estimate

Debt
outstanding
end 1982
estimate

530

1,070

1,095

1,923

5,363

7,705

6,347

5,169

9,199

66,714

1,089
2,725
4,921

1,542
3,536
7,076

777
3,282
5,563

898
3,657
6,389

10,060
26,299
46,209

5,194
4,547

6,454
3,141

-52
5,971

2,553
7,146

39,100
34,613

26,712

29,165

21,805

31,764

228,359

Less increase in holdings of debt issued by Government-sponsored enterprises

962

1,691

1,061

1,148

7,433

Total, borrowing by Government-sponsored enterprises

25,750

27,473

20,744

30,617

220,926

Total

1

The debt represented by consolidated bonds is attributed to the respective Farm Credit banks.

Sharp shifts in Government-sponsored borrowing, such as are
estimated to occur in 1981 and 1982, are typical of this sector as a
whole. They generally arise from the operations of the three enterprises that borrow to support the housing mortgage market. The
degree of tightness in the mortgage market sometimes alters a good
deal, and during periods of high and rising interest rates these
enterprises usually increase their lending and borrowing substantially. This condition led to much of the rise in the level of Government-sponsored borrowing for recent years.
The estimated $6.8 billion decrease in borrowing in 1981 is approximately accounted for by a $7.0 billion decrease in net advances (new advances less repayments) made by the Federal Home
Loan Banks to their member savings institutions, primarily savings
and loan associations, which lend most of their funds for new
mortgages. This decrease in net advances is mostly due to an
increase in repayments; new advances to member savings institutions remain about level. For 1982 the $9.9 billion increase in
Government-sponsored borrowing is led by a $4.1 billion increase in
net mortgage purchases by the Federal National Mortgage Association and a $3.5 billion increase in net advances by the Federal
Home Loan Banks. Special Analysis F discusses further the lending
by Government-sponsored enterprises.
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.




137

SPECIAL ANALYSIS D

Guaranteed borrowing and borrowing by Government-sponsored
enterprises are presented both as total amounts for the sector as a
whole and as net amounts. The latter were 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,
since borrowing would occur both when the security was initially
sold and when the Federal agency or Government-sponsored enterprise borrowed in order to finance its purchase.
Table E - l l . NET BORROWING BY GOVERNMENT, GOVERNMENT-GUARANTEED BORROWERS, AND
GOVERNMENT-SPONSORED ENTERPRISES
(In billions of dollars)

Borrowing or repaymenlt ( - )
Description

1980
actual

1981
estimate

1982
estimate

Debt
outstanding
end 1982
estimate

Federal borrowing from the public 1

70.5

72.0

45.0

832.1

Government-guaranteed borrowing2
Less increase in guaranteed loans held by Federal agencies:
Federal Financing Bank
Government National Mortgage Corporation

47.9

73.3

75.0

510.5

14.4
1.1

23.1
-1.1

18.2
-.1

102.7
1.0

Net Government-guaranteed borrowing

32.4

51.3

56.9

406.7

Borrowing by Government-sponsored enterprises3
Less increase in holdings of Federal debt
Less increase in Government-sponsored debt held by Federal
agencies:
Federal Financing Bank
Less increase in holdings of guaranteed loans:4
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation

27.5
1.5

20.7
-.4

30.6
.1

220.9
2.1

1.1

1.1

1.9

5.4

3.6

1.9

3.8

-.1

-.1

-.1

43.3
.1
.8

21.4

18.2

24.9

169.2

124.4

141.5

126.8

1,408.1

Net Government-sponsored borrowing
Total, Federal and federally assisted borrowing

_*

_*

* $50 million or less.
1 See table E-l.
2 This line is the same as "guaranteed loans (net)" in table F-5 of Special Analysis F. To avoid double counting, it is calculated net of
guarantees of loans previously guaranteed and of Federal debt. "Net Government-guaranteed borrowing" in this table is the same as "primary
guaranteed loans" in table F-5.
3 See table E-10.
4 The increase in holdings of guaranteed loans by the Student Loan Marketing Association is not subtracted out, because these loans are
ultimately financed by Federal borrowing (through the FFB) and therefore are classified as direct loans rather than as guaranteed loans.

About one-third of Federal and federally assisted borrowing
during 1980-82 is made up of Federal borrowing to finance the
budget deficit. Federal borrowing also finances the off-budget deficit, most of which is accounted for by the Federal Financing Bank's
purchases of guaranteed obligations. As shown in table E - l l , the
FFB is estimated to buy about one-quarter of the total increase
in guaranteed obligations outstanding during these years. Since the




138

THE BUDGET FOR FISCAL YEAR 1982

FFB finances these purchases by borrowing from the Treasury,
which in turn borrows from the public, these transactions substitute Federal borrowing in the market for guaranteed borrowing.
Federal borrowing for all purposes during 1980-82 comprises 48%
of total Federal and federally assisted borrowing; Federal debt held
by the public at the end of 1982 is 59% of the total Federal and
federally assisted debt outstanding.
The following chart depicts the trends in Federal and federally
assisted borrowing from 1966 to 1982. The series are volatile, and
the fluctuations are dominated by Federal borrowing. These fluctuations are primarily driven by the Federal deficit. Total Federal
and federally assisted borrowing fell sharply in 1974 and, to a
lesser extent, in 1979, because of the large drop in the deficit in
these years. Total borrowing then rose markedly in the recessions
that followed, increasing from $24.4 billion in 1974 to $98.2 billion
in 1976 and increasing from $81.7 billion in 1979 to $124.4 billion in
1980. Federal and federally assisted borrowing is estimated to increase still further in 1981, with Federal borrowing about level but
with a very large increase in guaranteed borrowing. Guaranteed
borrowing in 1981 is estimated to be twice as large as it was in
1979 and more than twice as large as it was in any earlier year. In
1982, with a sizable fall in the deficit, total Federal and federally
assisted borrowing is estimated to return to approximately the 1980
amount.

Federal and Federally Assisted Borrowing
$ Billions

150




$ Billions

- r 150

SPECIAL ANALYSIS D

139

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 inflation and real growth of the economy and the
growth 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, the
total Federal and federally assisted borrowing seems to have increased as a proportion of the total funds raised. This proportion
increased from 16% during 1960-69 to 25% during 1970-79 and was
clearly higher in the last half of the 1970,s than in the first half. In
large part because of the recent recession, the proportion rose to 36%
in 1980. Thus, on the average, Government programs recently seem
to have influenced the allocation of funds raised in financial markets
more than they did in the immediately preceding years.







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 four forms: direct loans from the Federal Government, Federal guarantees of private lending, lending by privately owned Government-sponsored enterprises, and access to tax-exempt credit.
These programs, much like Federal expenditures on goods and
services, or transfer payments, can be used to change the allocation
of resources and the 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. 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. 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-tovalue 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
' 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 offer no advantage over private credit.




141

142

THE BUDGET FOR FISCAL YEAR 1982

in the case of guaranteed loans in which the Government assumes
most or all of the risk of default.
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
mortgage, 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.2 The amount of the guarantee may be less
than the full principal of the loan and may include the guarantee
of interest. 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.3 Tax-exempt bonds are obligations with
below market interest rates due to the tax exemption of the interest income. The amount of the subsidy is the difference between
the tax-exempt and taxable interest rates.
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 1980 to 1982.
Reporting on Federal credit activities in the budget has expanded considerably in recent years. Part 2 of the Budget contains
aggregated data on those Federal credit activities that are part of
the administration's new system to control Federal credit. Part 3
discusses the growth and effects of credit programs. Part 5 of the
Budget integrates information about major credit programs in the
context of meeting national needs. Part 5 also shows the lending
activities of the Federal Financing Bank according to function.
Part 6 of the Budget examines the debt transactions of the Federal
Government and the role of Government-sponsored enterprises.
The Appendix volume of the Budget shows details and descriptions
of the lending activities of individual budgetary accounts.
TRENDS AND DIRECTIONS

Table F - l summarizes data on Federal participation in domestic
credit markets during 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 over four-fold in the last decade, reach2 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.
3 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.




SPECIAL ANALYSIS D

143

ing $80.8 billion in 1980 and is estimated to reach $109.8 billion in
1982. The Federal participation rate for total funds advanced in
U.S. credit markets reached a new height for this decade of 23.2%
in 1980. This rise is due in part to high and rising interest rates,
which increased demand by the public for many credit assistance
programs.
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 19% to 39% 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 1980.
Certain credit programs are particularly volatile, since they respond to changes in economic conditions. The Federal home loan
banks (a subset 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 FNMA. Such
fluctuations have proved difficult to anticipate.




Table F - l . FEDERAL PARTICIPATION IN DOMESTIC CREDIT MARKETS (dollars in billions)
Actual

Total funds advanced in U.S. credit markets1 (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)
markets1

Total funds raised in U.S. credit
Raised under Federal auspices
Federal borrowing from public
Borrowing for guaranteed loans
Government-sponsored enterprise borrowing
Federal participation rate (percent)
1
2

Nonfinancial sectors. Source: Federal Reserve Board Flow of Funds Accounts.
Not estimated.




1971

1972

1973

1974

1975

1976

125.7
16.5

163.5
22.9

207.7
27.2

193.4
25.7

181.3
27.1

2.0

3.0

16.1
-1.7

19.8
0.1

0.9
0.1
17.7
8.5

3.3
0.8
10.5
11.2

13.1

14.0

13.1

125.7
33.5
19.4
16.1
-2.1
26.6

163.5
40.0
19.4
19.8
0.7
24.5

207.7
47.5
19.3
17.7
10.6
22.9

Estimates
TQ

1977

1978

1979

1980

251.8
27.0

66.1
6.7

314.4
37.3

385.3
58.9

414.3
73.8

348.0
80.8

98.8

109.8

5.8
7.0
8.7
5.6

4.2
6.7
11.2
4.9

1.1
2.6
-0.1
3.1

2.6
9.0
14.0
11.7

8.6
11.2
13.9
25.2

6.0
13.6
26.1
28.1

9.5
14.7
32.4
24.1

3.9
23.2
51.3
20.3

6.1
18.5
56.9
28.3

13.3

14.9

10.7

10.1

11.9

15.3

17.8

23.2

193.4
24.4
3.0
10.5
10.9
12.6

181.3
64.9
50.9
8.7
5.3
35.8

251.8
98.2
82.9
11.2
4.1
39.0

66.1
19.3
18.0
-0.1
1.4
29.2

314.4
79.6
53.5
14.0
12.0
25.3

385.3
94.4
59.1
13.9
21.4
24.5

414.3
81.7
33.6
26.1
21.9
19.7

348.0
124.4
70.5
32.4
21.4
35.7

1981

(2)

(2)

141.5
72.0
51.3
18.2

1982

(2)

(2)

126.8
45.0
56.9
24.9

H
ffl
M
W

O

CO
O
>

^

w
>
wCO
oo
to

SPECIAL A N A L Y S I S

F

Billions

$ Billions

900

900

1970 72

145

74

76

78

Fiscal Y e a r s

80

82

Estimate

The net 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 1971, the total amount of loans outstanding has risen by
$387.4 billion to $613.5 billion in 1980, an increase of 170%.
Most direct Federal outlays are covered within the budget totals
and have been 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. In the interest of developing a more rational credit policy, the administration established a new system to
review and control Federal credit programs in the 1981 Budget. A
brief discussion is found in a separate section of this analysis and
in Parts 2, 3, 5, and 7 of the Budget.
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 1980-82.
34-0-700 0 - 81 - 10




Table F-5.GUARANTEEDLOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued

O*

Loans

Obligations
Agency or program

1980
actual

1981
estimate

1982
estimate

1980
actual

1981
estimate

1982
estimate

ON-BUDGET AGENCIES
Funds Appropriated to the President:
International security assistance

New transactions..
Net outlays
Outstandings

1,348

New transactions..
Net outlays
Outstandings

1,375

2,020

1,519

1,299

1,663

449

406

485

1,450

1,472

1,577

15,703

17,186

11,379

Farmers Home Administration

New transactions..
Net outlays
Outstandings

3,820

4,072

3,338

4,947

3,596

4,620

Commodity Credit Corporation

New transactions..
Net outlays
Outstandings

877

Public Law 480 long-term export credits

New transactions..
Net outlays
Outstandings
New transactions..
Net outlays
Outstandings

10

31

13

26

16

116

116

116

International development assistance
Agriculture:

Rural Electrification Administration
Commerce:
Economic Development Administration




1,645
886
4,749

1,620

1,680

863
5,612

871
6,483

393
112
11,588

369
64
11,652

363
28
11,680

15,768
958
4,096

17,171
-3,261
835

12,445
-324
511

4,947
— 758
7,969

3,596
-2,506
4,562

4,620
21
4,584

877
651
7,134

916
735
7,869

878
682
8,551

18
18

10
10
28

H
ffi
H
W
CJ
H
H

1

i
Kj
M
>
W

New transactions..
Net outlays
Outstandings

79

916

73

878

66

18

152
87
907

115
-12

913

123
47
960

to
00
tsO

National Oceanic and Atmospheric Administration

Maritime Administration
Education:
Student Assistance

Other education programs
Health and Human Services:
Health programs
Housing and Urban Development:
Housing programs

Government National Mortgage Association

Community planning and development.

New Communities




New transactions..
Net outlays
Outstandings

33

47

89

New transactions..
Net outlays
Outstandings

11

New transactions..
Net outlays
Outstandings

305

186

286

297

200

276

New transactions..
Net outlays
Outstandings

384

452

550

143

158

New transactions..
Net outlays
Outstandings

66
25

97

24
24
33

39
39
72

47
47
118

15

14

6

130

15
5
135

15
4
139

311
287
4,098

283
258
4,356

184
4,539

205

334
178
4,594

438
270
4,864

503
316
5,180

66

93

64

11
1,4

80

210

102

2

18

866

-10
856

855

1,431

2,443
869
5,740

1,457
688
6,428

1,422
639
7,067

2,002
1,021
4,329

1,623
-528
3,801

2,398
-244
3,557

373
170
697

213
132
829

209
144
973

10
10
129

25
25
154

154

New transactions..
Net outlays
Outstandings

2,553
830

820

841

New transactions..
Net outlays
Outstandings

2,201

1,832

314

5,525

5,568

3,312

New transactions..
Net outlays
Outstandings

203

197

215

125

109

109

New transactions..
Net outlays
Outstandings

10

25

-1

Table F-2. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued

00

Obligations
Agency or program

Interior..
Transportation:
Railroad programs..

Other..

TreasuryVeterans Administration:
Housing loans and default claims..

Insurance policy and other loans..

To: District of Columbia.

Export-Import Bank..




1980
actual

Loans

1981
estimate

1982
estimate

1980
actual

New transactions..
Net outlays
Outstandings

26

40

50

18

16

20

New transactions..
Net outlays
Outstandings

131

108

155

227

226

288

23

14

19

107

66

21

100

80

10

100

165

New transactions..
Net outlays
Outstandings

362

408

436

4

1

1

New transactions..
Net outlays
Outstandings

264

310

New transactions..
Net outlays
Outstandings

90

133

New transactions..
Net outlays
Outstandings
New transactions..
Net outlays
Outstandings

New transactions..
Net outlays

7,581

42

22

442

1982
estimate.

46
13
455

168
170
368

110

479

93
96
574

29
29
237

55
55
292

64
64
356

10
-111
3,705

10
-93
3,606

15
-90
3,516

641
-5
1,721

725
-84
1,637

747
1,620

308

264
119
1,392

310
153
1,545

308
144
1,690

220

130
46
1,459

108

173

1,567

220
191
1,758

3,288
1906

3,949
2,344

4,316
2,528

40
5,495

45
17
420

1981
estimate

5,000

108

- 1 8

M

3
W
8
>
r

Kj
w
>

oo
to

Outstandings
Federal Deposit Insurance Corporation

Federal Home Loan Bank Board

National Consumer Cooperative Bank..

5,966

New transactions..
Net outlays
Outstandings

325

New transactions..
Net outlays
Outstandings

589

New transactions..
Net outlays
Outstandings

13,765

16,109

18,637

325
306
475

-45
431

-22
409

1,055

589
582
657

1,055
904
1,561

190
29
1,590

187

5
5
5

182
123
128

136
119
247

217
94
114

2,243
216
330

3,671
207
538

753
354
2,354

795
407
2,762

834
435
3,197

1,249
773
5,343

2,887
2,320
7,663

524
-158
7,505

9,024

22
17

23

New transactions..
Net outlays
Outstandings

327

2,227

110

93

New transactions..
Net outlays
Outstandings

761

789

179

148

New transactions..
Net outlays
Outstandings

1,237

2,850

492

385

Tennessee Valley Authority Fund

New transactions..
Net outlays
Outstandings

68

81

68
68
99

81
78
177

76
74
251

United States Railway Association

New transactions..
Net outlays
Outstandings

641

535

641
641
3,115

535
535
3,650

50
50
3,700

Other agencies and programs

New transactions..

31

25

16
-33

50
15

32
—3

National Credit Union Administration...
Small Business Administration:
Business and investment loans

Disaster loans




Table F-5.GUARANTEEDLOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued

Ol
o

Obligations
Agency or program

1980
actual

Outstandings
Subtotal, on-budget agencies..

New transactions..

1981
estimate

Loans
1982
estimate

269

25
39,608

44,370

34,197

Net outlays
Outstandings

21,109

1980
actual

23,991

21,584

1981
estimate

1982
estimate

284

281

37,796

41,178

36,347

9,482

3,946

6,085

91,663

95,620

101,705

OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving fund

Rural Telephone Bank.

Federal Financing Bank..

United States Railway Association.

Subtotal, off-budget Federal entities..




a
H

M

td

M

2,020

1,207
169
9,486

1,100
210
9,696

156
9,852

185

185

200

449

449

449

191
931

185
171
1,102

185
168
1,269

New transactions..
Net outlays
Outstandings

22,188

30,873

24,846

22,188

14,365
61,465

30,873
23,072
84,537

24,846

New transactions..
Net outlays
Outstandings

19

19
-3
384

7
-234
150

151

New transactions..

23,583

23,614

32,165

26,198

14,722

23,219

18,531

72,266

95,485

114,015

New transactions..
Net outlays
Outstandings
New transactions..
Net outlays
Outstandings

1,175

1,100

1,100

2,086

2,086

200

32,165

26,132

Net outlays
Outstandings

2,535

2,535

2,469

1,166

18,206

102,743

1

1

I
Ul
£
r
H
>

Less loan assets of the Federal Financing Bank2

Grand total..

New transactions..
Net outlays
Outstandings

12,110

16,637

8,230

12,110

16,637

8,230

New transactions..

51,081

59,898

52,099

49,300

56,706

54,315

24,203

27,165

24,615

163,928

191,105

215,720

Net outlays
Outstandings

23,644

26,526

24,053

ADDENDUM
Foreign currency loans3..

New transactions..
Net outlays

-118

-71

-78

Outstandings

1,428

1,357

1,280

CZ3

O

>
tr1
>

1
2

only.

s

Includes both debentures and repayable preferred stock of Conrail.
To avoid double counting, new loan assets purchased from agencies by the Federal Financing Bank are deducted. The amount of the loan assets are already recorded as direct loans by the originating agency. This deduction affects new transactions
Foreign currency transactions are excluded from the budget totals.




52!
>
t-1

K!

<2>

Or

152

THE BUDGET FOR FISCAL YEAR 1982

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.4 (For a discussion of offbudget Federal entities, see Part 6 of the Budget.) 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 direct loan transactions since the conversion of obligations to loans can take time and
plans change. Moreover, some prospective borrowers to whom obligations are made do not convert the obligations into borrowing.
Loans, in turn, are the loans actually made in the specified time
period.
New transactions are the amount of new loans in a given year.
New direct loan transactions are the amount of gross loan disbursements, which in turn are the sum of disbursements to make
new loans, disbursements to pay guarantee claims,5 and purchases
of existing loans. Net outlays of direct loans are equal to new
transactions less repayments6 of loans, liquidation of collateral,
loan writeoffs, and sales of loan assets. Net outlays of direct loans
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.7
Net outlays of direct loans by on-budget Federal agencies are
counted as budget outlays. Because net outlays are sometimes much
less than the level of new transactions,8 the latter may be a better
indicator of new 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 still outstanding at the end of a
particular year.
Net outlays of direct loans on-budget increased by $9.5 billion in
1980, but are expected to rise only $3.9 billion in 1981 and $6.1 billion
in 1982. The lower net lending levels in 1981 and 1982 are due
primarily to fluctuations in sales of loan assets and repayments
rather than changes in program levels. These fluctuations occur
•Taxation and borrowing are in many cases indistinguishable sources of funds for a specific program.
However, the treatment of loan repayments can differ from program to program.
5 Upon default of a loan guarantee, the Government assumes 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.
6 Loan repayments and receipts from the sale of loans are netted from gross loan disbursements in determining net loan outlays, rather than being counted by budget receipts.
7 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.
8 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 D

153

primarily in the Farmer's Home Administration, the Commodity
Credit Corporation and the Government National Mortgage Association. Disaster lending by the Small Business Administration (SBA)
declines due to a shifting of their activities to the FmHA.
LOAN ASSET SALES

Loan asset sales are sales of direct loans. A guarantee by the
selling agency is usually attached. Under 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.
After the sale, the loan is held privately or by a Federal account
(usually an off-budget Federal entity), but the Federal Government
continues to bear the risk of default of the borrower.
Loan asset sales generally occur in three instances. First, the
Farmers Home Administration (FmHA) and Rural Electrification
Administration (REA) carry out direct loan programs and issue
certificates of beneficial ownership (CBO's). The President's Commission on Budget Concepts recommended that the sale of such securities be treated as borrowing, but in certain cases legislation requires
that it be treated instead as the sale of loan assets. The Commission
argued, however, that as a means of financing outlays, there is no
difference in substance between an agency selling securities labeled
"certificates of beneficial ownership/' the same agency selling securities labeled "debt" and the Treasury selling securities labeled
"debt." Moreover, when CBOs are sold, the ownership of the specific
loans is retained by the Government, repayments on the loans
continue to be made to the Government, and the Government
continues to incur the servicing costs of the loans and to assume fully
the risk of default on the loans.
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,9 these 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 at below-market yields. 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 (losses).
9 A purchase money mortgage is a sale of property for a financial asset, usually a mortgage, instead of for
cash.




154

THE BUDGET FOR FISCAL YEAR 1982

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 the Department of
Agriculture and under the GNMA "tandem" plan represent over
90% of all loan asset sales.
Traditionally, loan asset sales meant selling the title to the loans
to the public. However, since the creation of the Federal Financing
Bank (FFB), most loan assets are sold by on-budget accounts to the
off-budget FFB, converting them from direct loans on-budget to
loans off-budget.




Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (in millions of dollars)
Loan assets sales
Agency or program

Transactions with

1980
actual

1981
estimate

Repayments and adjustments
1982
estimate

1980
actual

1981
estimate

1982
estimate

ON-BUDGET AGENCIES
Agriculture:
Commodity Credit Corporation
Agricultural credit insurance fund
Rural housing insurance fund
Rural development insurance fund
Department of Education
Health and Human Services:
Health maintenance organization loans
Housing and Urban Development:
Federal Housing Administration fund
Other housing programs
Veterans Administration:
Direct loan revolving fund




the Public..
FFB

Repayments, etc.4
Non-cash adjustments

5,882
49

6,283
1

4,783
11

Repayments, etc.4
2,305 Non-cash adjustments

2,376
10

3,071
11

3,724
12

893
4

1,131
6

1,349
7

the Public..
the FFB

5,257

7,121

the Public..
the FFB

78
4,681

60

7,341

50 Repayments, etc.4
4,161 Non-cash adjustments

the Public.,
the FFB

1,443

Repayments, etc.4
1,064 Non-cash adjustments

68

81

95

1,608

Repayments, etc.4
Non-cash adjustments

177

193

213

the Public.,
the FFB
the Public.,
the FFB

52

2

Repayments,etc4
76 Non-cash adjustments

29

Q

>
r
>
>
r
KJ
t—I

16
1

the Public.,
the FFB

Repayments, etc 4
Non-cash adjustments

249
19

420
20

424
21

the Public..
the FFB

Repayments, etc.4
Non-cash adjustments

1,507

410

2

400
2

the Public..
the FFB

Repayments, etc 4
Non-cash adjustments

56

55

55

2

GO

Cn
Cn

Table F-3. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS (in millions of dollars)—Continued
Loan assets sales
Agency or program

Loan guarantee revolving fund

Transactions with

the Public.,
the FFB

1980
actual

150

1981

280

Cn
Repayments and adjustments

1982
estimate

1980
actual

1981
estimate

1982
estimate

239 Repayments, etc.4
Non-cash adjustments-

383
56

425
48

426
44

1,382

1,605

1,788

649

a
M

Export-Import Bank

the Public.,
the FFB

Repayments, etc.4
Non-cash adjustments..

Small Business Administration

the Public.,
the FFB

Repayments, etc.4
Non-cash adjustments-

226

748
207

849
232

the Public..
the FFB

Repayments, etc.4
Non-cash adjustments..

1,181
549

3,380
517

4,762
530

14,803

17,803

18,885

8
>

Other agencies and programs
Subtotal, excluding tandem plans1

the Public.,
the FFB

Housing and Urban Development (GNMA):
Tandem plan sales—FHA/VA mortgages
Subtotal, with tandem plan

the Public..
the FFB
the Public..
the FFB
the Public.,
the FFB

Other

the Public..




8
1

220

342

11,420

16,121

7,606 Non-cash adjustments-

917

840

860

*<

833

2,000

2,500 Repayments, etc 4
Non-cash adjustments..

121

126

121

I

1,053

2,342

11,420

16,121

689

516

290 Repayments, etc 4

2,790 Repayments,

etc.4

14,924

17,929

19,006

7,606 Non-cash adjustments..

917

840

860

Repayments, etc.4
624 Non-cash adjustments..

349

373

387

7,835

8,049

6,656

OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving fund

§

Repayments, etc.4

r

t©
00
to

the FFB
the Public

Subtotal, off-budget Federal entities

the FFB
Total

the

Public2

the

FFB 3

7

19

1 Non-cash adjustments

-7

-1

708

523

625 Non-cash adjustments

1,034

2,335

12,129

16,644

-19

Repayments,

...

etc.4

2,789 Repayments, etc.4
8,231 Non-cash adjustments

8,204

8,430

7,043

23,127

26,359

26,050

917

840

860

Purchases or repurchases
1980
actual

1981
estimate

Net sales
1982
estimate

actual

1981
estimate

CO

1982
estimate

r
>

ADDENDUM
Repurchases and tandem plan purchases:5
Farmers Home Administration
Tandem plan purchases of:
FHA/VA guaranteed loans
Other on-budget agencies and programs..
Off-budget Federal entities
Total..
1
2
3
4
5

8
1—4
>

4,749

4,530

1,967

6,710

715
445

1,200
575

2,300
169

5,909

6,305

4,436

11,599

5,613

118
-264
708

-242
523

200
147
625

7,272

12,680

6,585

>
5
co
t-H
<Z>

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.
Includes prepayments and other capital recoveries.
FmHA repurchases mainly reflect replacements of amortized mortgages underlying previously issued block notes.




Cn

158

THE BUDGET FOR FISCAL YEAR 1982

Table F-3 shows all loan offsets—all repayments, asset sales, or
other credits that reduce the recorded totals of direct loan 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 those 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 direct loans into privately
held notes guaranteed by the Government.
Loan asset sales to the FFB shift the title of direct loans (or CBO
participation certificates) from the agency to the FFB. For an onbudget 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 off-budget entity, sales to the FFB reduce
the recorded off-budget outlays of the selling entity and raise the
off-budget outlays of the FFB by an equal amount. All loans purchased by the FFB are fully guaranteed by some other Federal
agency.
Repayments, prepayments, and other capital recoveries are cash
paid to the Government, thereby reducing indebtedness. They are
counted as a reduction in new transactions of direct loans.
Non-cash adjustments are non-cash accounting entries to take
cognizance of losses, write-offs, or other adjustments in cases where
the recorded value of the loans is greater than the amount of money
collected or collectable on the loans.
As a result, new direct loan transactions (shown in table F-2)
less new direct loan offsets (shown in table F-3) equal net outlays
of direct loans (shown in table F-2).
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 under the supervision of the Treasury
Department and all its personnel are Treasury employees. Its
transactions are excluded by law from the budget totals. Hence, its
lending 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




SPECIAL ANALYSIS D

159

Federal agencies. The FFB performs three functions. First, with
some exceptions, the Treasury may require agencies authorized to
borrow from the public to borrow from the FFB instead. Second,
the Treasury can direct most agencies to sell loan assets to the
FFB rather than the public.10 Third the FFB is authorized to
purchase guaranteed loans. Generally, the FFB makes loans directly to borrowers whose obligations are guaranteed by a Federal
agency. These guaranteed loans are in effect converted into direct
loans outside the budget. The FFB assures the efficient financing of
these guaranteed loans and reduces borrowing costs.11

10 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.
11 There is a modest (1/8 percentage point) surcharge to cover administrative expenses.




160

THE BUDGET FOR FISCAL YEAR 1982
Table F-4. FFB ACQUISITIONS (in millions of dollars)
Agency or program

Purchase of loan assets from:
Overseas Private Investment Corporation (FAP):
New acquisitions
Net outlays
Outstandings

1980
actual

1981
estimate

1982
estimate

-4
33

—5
28

-5
23

11,381
6,881
37,961

16,070
12,420
50,381

7,531
6,056
56,437

689
689
1,912

516
516
2,428

624
624
3,052

Medical facilities guarantees (HHS):
New acquisitions
Net outlays
Outstandings

-4
164

-4
160

-5
155

Health Maintenance Organizations (HHS):
New acquisitions
Net outlays
Outstandings

39
26
105

52
51
156

76
59
215

-15
89

-15
74

-15
59

177

177

177

12,110

16,637

8,230

7,572

12,962

6,713

40,442

53,405

60,118

2,380
1,932
7,209

2,600
2,010
9,219

3,000
2,220
11,439

Rural Electrification Administration (USDA):
New acquisitions
Net outlays
Outstandings

2,498
2,498
8,424

4,258
4,258
12,682

5,129
5,129
17,810

Guarantees of SLMA obligations (DEd):
New acquisitions
Net outlays
Outstandings

1,070
1,070
2,345

1,095
1,095
3,440

1,923
1,923
5,363

Farmers Home Administration CBOs (USDA):
New acquisitions
Net outlays
Outstandings
Rural Electrification Administration CBOs (USDA):
New acquisitions
Net outlays
Outstandings

Small business development company loans (SBA):
New acquisitions
Net outlays
Outstandings
Other agencies and programs:
New acquisitions
Net outlays
Outstandings
Subtotal, purchase of loan assets:
New acquisitions
Net outlays
Outstandings
Direct loans (purchases of loans guaranteed by agencies):
Foreign military sales credit (FAP):
New acquisitions
Net outlays
Outstandings




161

SPECIAL ANALYSIS D
Table F-4. FFB ACQUISITIONS (in millions of dollars)—Continued
Agency or program

Electric hybrid vehicles (DOE):
New acquisitions
Net outlays
Outstandings

1980
actual

1981
estimate

1982
estimate

1
1
1

1

1

119
119
119

1,458
1,457
1,576

957
942
2,517

45
34
46

270
249
295

270
232
527

-5
34

34

34

9
9
66

*
66

*
66

1,222
161
1,142

545
210
1,352

325
318
1,670

Public building CBI's1 (GSA):
New acquisitions
Net outlays
Outstandings

42
40
458

110
109
567

6
-1
566

Satellite leases (NASA):
New acquisitions
Net outlays
Outstandings

107
107
530

102
102
632

144
144
776

Small business investment companies (SBA):
New acquisitions
Net outlays
Outstandings

149
142
478

360
342
820

360
330
1,150

2,436
685
685

3,437
277
962

4,502
257
1,219

10,079

14,236

16,616

6,792

10,109

11,493

21,536

31,646

43,139

Low-rent public housing (HUD):
New acquisitions
Net outlays
Outstandings
Community development grants (HUD):
New acquisitions
Net outlays
Outstandings
New Communities (HUD):
New acquisitions
Net outlays
Outstandings
Loans to territories (Interior):
New acquisitions
Net outlays
Outstandings
Railroad programs (DOT):
New acquisitions
Net outlays
Outstandings

TVA's Seven States Energy Corporation:
New transactions
Net outlays
Outstandings
Subtotal, direct loans (purchase of loans
guaranteed by agencies):
New acquisitions
Net outlays
Outstandings

340-700

0 - 8 1 - 1 1




162

THE BUDGET FOR FISCAL YEAR 1982
Table F-4. FFB ACQUISITIONS (in millions of dollars)—Continued
Agency or program

Subtotal, all direct loans and purchases of
agency loan assets:
New acquisitions

1980
actual

1981
estimate

1982
estimate

22,188

30,873

24,846

Net outlays

14,365

23,072

18,206

Outstandings

61,978

85,050

103,257

2,114
10,067

2,582
12,649

3,067
15,716

1,810
8,935

2,200
11,135

2,100
13,235

90
90

210
300

300
600

36
482

-258
224

30
255

-67
1,520

-232
1,288

-67
1,221

3,983

4,503

5,430

21,094

25,596

31,027

AGENCY BORROWING
ADDENDUM:
By: on-budget agencies:
Export-Import Bank:
Net change
Outstandings
Tennessee Valley Authority:
Net change
Outstandings
National Credit Union Association:
Net change
Outstandings
By: off-budget Federal entities:
U.S. Railway Association-.
Net change
Outstandings
Postal Service:
Net change
Outstandings
Agency borrowing:
Net change
Outstandings
1

Certificates of beneficial interest.

In certain cases agencies are given authority to borrow from the
public as well as 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 directly from the Treasury or from the FFB which, in turn,
borrows from the Treasury. Borrowing by agencies from the FFB is
not included in FFB outlays; the use of the proceeds from the
borrowing is counted as outlays of the borrowing 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.
Table F-4 lists the activities of the FFB for 1980-82 by agency
and account. The first set of entries lists FFB purchases of agency




SPECIAL ANALYSIS D

163

loan assets. 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 on-budget agencies and off-budget entities
from the FFB.
The FFB's net outlays for the purchase of loan assets are expected
to rise from $7.6 billion in 1980 to $13.0 billion in 1981 and to $6.7
billion in 1982. This is due primarily to substantial increases in
purchases of CBO's issued by the FmHA between 1980 and 1982 and
to increases in FFB purchases of loans guaranteed by the Rural
Electrification Administration and for foreign military credit sales.
Total FFB lending outlays rise from $14.4 billion in 1980 to $23.1
billion in 1981 decreasing slightly to $18.2 billion in 1982.
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.
The loan guarantee is the Federal Government's contingent liability, which may be less than the full face value of the loan. A
guaranteed loan is the resulting loan, with a guarantee attached.
Loan insurance is a type of guarantee in which a Government
agency operates a program of pooled risks, pledging the use of
accumulated insurance premiums to secure a lender against default on the part of a borrower.
The major use of loan guarantees has been to support housing,
but in recent years guarantees have increasingly been used for
other purposes. The effects of loan guarantees on the economy are
difficult to assess. Some portion of the private loans that are guaranteed would have been made without the guarantee, and those
private loans that would not have been made otherwise tend to
divert credit away from other economic activities.
The nature of the loan guarantee differs widely among programs.
The loan 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 FFB. 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 being explicitly labeled as a loan
guarantee program under various contractual agreements, includ-




164

THE BUDGET FOR FISCAL YEAR 1982

ing guarantees of private leases, contracts to make subsidy payments over extended periods and debt service grants. Guaranteed
loans include most loan assets sold by Federal agencies.
Loan guarantees are not reflected in the budget outlays when
credit is extended. Guaranteed loans generally 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 greater losses.
Data for loans guaranteed are organized by agency or program
and for 1980-82 are presented in table F-5. 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. Detailed information on the amount of the
Federal contingent liability under these guarantees may be found
in the Budget Appendix and Part 5 of the Budget
Commitments for new guaranteed loans 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 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.




Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Commitments
Agency or program

Funds Appropriated to the President:
International security assistance

1980
actual

New transactions..
Net change
Outstandings

1981
estimate

Loans guaranteed
1982
estimate

1,450

2,546

2,931

3,767

3,713

3,644

New transactions..
Net change
Outstandings

350

320

430

700

833

897

New transactions..
Net change
Outstandings

830

1,133

New transactions..
Net change
Outstandings

12,833

Commodity Credit Corporation

Rural Electrification Administration-

International development assistance,

1980
actual

1981
estimate

1982
estimate

2,380
1,880
7,550

2,600
1,960
9,510

3,000
2,180
11,690

80
42
893

186
145
1,039

366
323
1,362

9,531

830
830
12,375

1,133
1,133
13,508

9,531
9,531
23,040

17,426

8,504

1,446

1,189

1,016

12,404
7,247
44,325

17,684
12,718
57,043

8,677
6,175
63,217

New transactions..
Net change
Outstandings

744

1,947

2,000

673
652
706

2,036
1,792
2,498

2,000
764
3,262

New transactions..
Net change
Outstandings

5,711

5,148

5,179

12,312

13,091

13,021

3,305
3,305
10,839

4,884
4,884
15,724

5,873
5,870
21,594

48

425

425

48
-86
589

425
305
894

425
275
1,169

CO

3
o

Callable capital contributions1
Agriculture:
Farmers Home Administration

Commerce:
Economic development assistance....




New transactions..
Net
outlays
Outstandings

>

t-H
>
>
C0
t-H
C/)

O*
Ol

Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Commitments
Agency or program

1980
actual

1981
estimate

Loans guaranteed
1982
estimate

1980
actual

1981
estimate

1982
estimate

National Oceanic and Atmospheric Administration

New transactions..
Net change
Outstandings

74

100

100

74
65
171

100
87
258

100
85
343

Maritime Administration

New transactions..
Net change
Outstandings

1,223

1,200

1,400

1,282

1,512

1,524

752
494
5,933

970
630
6,563

1,388
1,004
7,566

New transactions..
Net change
Outstandings

1,070

1,095

1,723

1,070
1,070
2,345

1,095
1,095
3,440

1,923
1,923
5,363

New transactions..
Net change
Outstandings

4,750

7,185

5,697

4,750
3,347
11,649

7,185
5,508
17,157

5,697
2,903
20,060

-22

-23
1,260

-25
1,235

Education:

Guarantees of SLMA debt issues

Student loan insurance fund

Other education programs

Energy:
Geothermal
resources development fund
Energy Conservation




New transactions..
Net change
Outstandings

1,283

H
ffl
M
td

3
8
>
r

$
w

00
to

New transactions..
Net change
Outstandings
New transactions..
Net
outlays
Outstandings

78
30

220

198

78
77
91

220

211
302

198
198
500
6
6

18

Energy production, demonstration, and distribution..

Energy Security Reserve

Synthetic Fuels Corporation

Health and Human Services:
Health professions

Medical facilities guarantees.

New transactions..
Net change
Outstandings

20

New transactions..
Net change
Outstandings

4,500

New transactions..
Net change
Outstandings

1,500

2,000

48

100

6
6
6

14
14
19

4,500
4,500
4,500

4,500

1,500
1,500
1,500

2,000
2,000
3,500

32
32
41

48
48
89

100
100
188

-229
1,091

1
-45
1,047

-48
998

14

cn
New transactions..
Net change
Outstandings

32

New transactions..
Net change
Outstandings

a
o
t-H
>
r
>

>
*

w
i—i
Cfl

Health programs..

Housing and Urban Development:
Subsidized low-rent public housing..

Federal Housing Administration.




52

76

33
31
188

52
50
238

76
58
296

17,013

18,423

20,081

17,335

19,413

22,107

14,214
1,440
16,490

16,095
1,799
18,289

17,137
2,285
20,573

30,585

39,232

44,284

14,670

20,327

22,950

23,344
14,401
124,452

25,911
15,838
140,290

31,840
20,852
161,142

New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings

Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued

a*
oo

Commitments
Agency or program

Community development grants

Urban renewal

New Communities

GNMA: Mortgage-backed securities

1980
actual

New transactions..
Net change
Outstandings

1981
estimate

Loans guaranteed
1982
estimate

157

250

250

131

109

1980
actual

270
232
537

87

45
34
46

270
259
305

53
-191
275

10
-96
179

-12

-26

31,000
25,633
115,085

31,360
24,100
139,185

14
121

2

-5
116

62
53
169

223
262
1,369

309
209
1,578

269
317
1,895

997

997

997

New transactions..
Net change
Outstandings

418

179

114

New transactions..
Net change
Outstandings

11

11

11

63,165

72,000

72,360

28,758

26,200

29,000

22,996
18,894
89,452

62

18

New transactions..
Net change
Outstandings

1982
estimate

1981
estimate

130

104

-65
114

-1

103

H
ffi
M
W
C
M
H

CO

o
>
r

Interior:
Indian programs

Transportation:
Rail programs

Washington, D.C. METRO bonds




New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings
New transactions..
Net
outlays
Outstandings

15
278

395

354

98

184

269

$

Aircraft loans..

Treasury:
Guarantee of New York City notes

Chrysler Corporation loan guarantee program

New transactions..
Net change
Outstandings

273

360

389

274
254
445

360
316
760

389
305
1,065

New transactions..
Net change
Outstandings

300

300

756

300
277

300
211

756
662
1,650

800

700
700
1,500

111

New transactions..

700

Outstandings..
Biomass energy development

NASA: Long term satellite leases

Veterans Administration (housing)

Export-Import Bank

General Services Administration

NCUA: Credit Union share insurance fund




54

New transactions..
Net change
Outstandings
229

Outstandings..

358

256

112

New transactions..
Net change
Outstandings

14,271

22,685

22,666

2,345

4,478

5,192

New transactions..
Net change
Outstandings

9,360

10,078

11,089

6,507

7,831

9,096

New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings

121
123
79

115
50

54
54
54

35
35

ca

107
107
527

102
102
629

144
144
773

>
>

14,966
10,271
99,429

19,907
14,930
114,359

21,363
15,697
130,056

6,032
1,556
7,315

6,635
1,457
8,772

7,298
1,314
10,086

83
65
1,237

110
92
1,330

6
-19
1,311

79
47
60

50
23
83

35

New transactions..

25

1,500
M
O
>

5
w
i—i
<Z>

25
-12

71

CD

Table F - 5 . GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
o
Loans guaranteed

Commitments
Agency or program

Small Business Administration:
Business loan guarantees

Lease and surety bond guarantees

Lease guarantees

Disaster Loan fund

1980
actual

New transactions..
Net change
Outstandings

3,608

4,600

4,800

1,876

2,451

2,991

New transactions..
Net change
Outstandings

1,534

1,600

1,600

New transactions..
Net change
Outstandings

Other agencies and programs

New transactions..
Net change
Outstandings

Subtotal, guaranteed loans (gross)




99

New transactions..

Outstandings..

3,800
1,717
12,108

1,534
-92
505

1,600
2
507

1,600

-30
197

-34
163

-34
129

-1

-i7

110

125

7

99
99
156

-1

1

110

i7

5

110

266

125
125
391

2

2*

2

997

997

997

1,020

1,021

1,021

170,994

213,741

219,348

114,629

151,788

152,886

68,017

99,770

101,041

454,725

554,495

655,537

105,662

116,298

136,182

3
M

to

509

2

New transactions..
Outstandings

8,708

3,600
1,683
10,391

-1

Outstandings..
Pollution control bond guarantees

2,944

1,088

2

New transactions..

1982
estimate

1981
estimate

1980
actual

1982
estimate

1981
estimate

O
W

8>
r

H
>
w

Less secondary guaranteed loans:2
GNMA guarantees of FHA/VA/FmHA pools.

DEd guarantees of SLMA debt issues

New transactions..
Net change
Outstandings

63,165

72,000

72,360
29,000

22,996
18,894
89,452

31,000
25,633
115,085

31,360
24,100
139,185

28,758

26,200

New transactions..

1,070

1,095

1,923

1,070

1,095

1,923

1,070
2,345

1,095
3,440

1,923
5,363

148
125
668

95
-234
434

34
34
468

90,416

119,598

124,569

47,928

71276

74984

Net change
Outstandings
DOT guarantees of USRA debt

Subtotal, guaranteed loans (net).

New transactions..
Net change
Outstandings

158

New transactions..

106,601

15
142,551

145,211

Net change
Outstandings
Less guaranteed loans held as direct loans:3
By budget agency (GNMA)

By off-budget Federal Financing Bank

76,889

90,082

107,167

362,260

435,536

510,521

1,615
—1,077
1,172

2,389
-135
1,037

14,365
61,465

30,873
23,072
84,537

24,846
18,206
102,743

66,231

87,110

97,334

32,430

51,281

56,912

298,546

349,827

406,741

New transactions..
Net change
Outstandings

2,195

1,826

305

5,525

5,570

3,314

1,996
1,134
2,249

New transactions..

22,188

30,873

24,846

22,188

Outstandings
Subtotal, primary guaranteed loans..




New transactions..

Outstandings..

82,217

58,989

109,852

71,005

120,060

80,813

w
^
M
O

h—I
>
r
>

>
r
KJ
CD

Table F-5. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Commitments
Agency or program

1980
actual

1981
estimate

Loans guaranteed
1982
estimate

1980
actual

1981
estimate

ADDENDUM:
Less guaranteed loans held as direct loans:
By Government sponsored enterprises:
Federal National Mortgage Association..

Federal home loan banks..

Federal Home Loan Mortgage Corporation..

Total Enterprise holdings..

New transactions..
Net change
Outstandings

6,926

8,285

8,685

3,285

3J538

3,564

New transactions..
Net change
Outstandings
New transactions..
Net change
Outstandings
New transactions..

1
2
3

6,927

8,285

8,685

3,285

3,838

3,564

In previous years, callable capital contributions had been included as a memorandum entry.
Secondary guarantees by the Export-Import Bank of the debt of the Private Export Finance Corporation have not been estimated and are excluded from 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 different agencies.




4,769
1,940
39,498

-9
82

-7
75

1
-81

Net change
Outstandings..

5,059
3,587
37,558

1,108

-138
969

5,060

4,769

3,497

1,795

38,748

40,542

to

SPECIAL ANALYSIS D

173

The aggregation of loan guarantees for each program to derive a
gross total involves some double counting. Elimination of this
double counting requires two adjustments. The first deducts loans
previously guaranteed, or secondary guaranteed loans. They occur,
for example, in the case of the GNMA mortgage-backed securities
program that guarantees securities that are backed by pools of
federally guaranteed or insured loans held by the seller. The total
after deducting secondary guarantees gives net guaranteed loans.
The second adjustment 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. An addendum includes guaranteed loans purchased by
a Government-sponsored enterprise. These guaranteed loans held
by Government-sponsored enterprises have in past years been deducted from total primary guaranteed loans. They are deducted
from direct loans made by Government-sponsored enterprises found
in table F-6.
Annual net increases in primary guaranteed loans rise sharply
from $32.4 billion in 1980 to $56.9 billion in 1982. The increase is
dominated by increases in housing activity, but also reflects an
aggregate of many small increases in other programs.
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 market 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), three components of the Farm
Credit System, and the Federal Home Loan Bank system (FHLBS)
which includes the Federal Home Loan Mortgage Corporation
(FHLMC). Part 6 of the Budget discusses Government-sponsored
enterprises.
Government sponsorship has provided these enterprises with
characteristics that differentiate them in credit markets from completely private institutions. They have been given special preferences, and certain tax exemptions and their securities may be
offered as investments of federally regulated institutions. These
advantages give their security obligations a preferred position in




174

THE BUDGET FOR FISCAL YEAR 1982

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. However, SLMA borrows exclusively from the FFB. Sale of capital stock and retained earnings
provide only a very small portion of the 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.12 Enterprises in
the latter grouping have the basic function of providing liquidity to
primary lenders in times of tight monetary conditions, by either
purchasing loans from the primary lenders or making advances 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 institutions.

12 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.




Table F-6. CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars)
Obligations
Agency or program

LENDING (FUNDS ADVANCED)
Student Loan Marketing Association

Federal National Mortgage Association
Farm Credit Administration:
Banks for cooperatives

1980
actual

1981
estimate

Loans made
1982
estimate

New transactions.
Net change
Outstandings

1,480

1,605

2,601

705

937

1,204

New transactions.
Net change
Outstandings

10,291

16,225

19,090

4,789

5,735

4,849

New transactions.

26,438

30,305

actual

1981
estimate

1,242
I,039
2,278

1,373
I,076
3,354

8,520
6,458
55,632

9,469
5,662
61,294

34,738

26,438
828
9,481

30,305
972
10,453

Outstandings..
Federal intermediate credit banks

New transactions.
Net change.
Outstandings

15,268

17,573

20,993

15,268
3,337
19,912

17,573
3,426
23,338

Federal land banks

New transactions.
Net change
Outstandings

11,506

11,665

13,185

II,506
8,358
39,260

II,665
7,559
46,819

New transactions.
Net change
Outstandings

35,387

34,394

37,855

35,387
6,454
47,940

34,394
-363
47,577

New transactions.
Net change
Outstandings

4,274

9,000

11,000

4,274
817
4,534

9,000
1,009
5,553

New transactions.
Net change
Outstandings

3,341

7,434

9,173

3,341
2,310
16,770

7,434
5,002
21,771

Federal home loan bank system:
Federal home loan banks
Federal Home Loan Mortgage Corporation:
Corporation accounts

Participation certificate pools1




Table F-6. CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars)—Continued
o
Loans made

Obligations
Agency or program

Subtotal, lending (gross).

1980
actual

New transactions.,

107,984

1981
estimate

1982
estimate

128,201

148,635

Net change

Less loans between sponsored enterprises:
Federal home loan banks to FHLMC
Less secondary funds advanced from Federal sources:a
SLMA from FFB
Less guaranteed loans held as direct loans by:
Federal National Mortgage Association

Federal home loan banks-

Federal Home Loan Mortgage Corporation.




1982
estimate

105,975

121,213

144,147

29,602

24,343

34,984

Outstandings

5,494

6,672

6,053

195,807

220,140

225,123

H
ffl
H

New transactions.

1,130

1,105

1,855

1,130
898
3,697

1,105
1,105
4,802

1,855
1,105
5,907

W
C

New transactions.
Net change
Outstandings

1,070

1,095

1,923

1,070
1,070
2,345

1,095
1,095
3,440

1,923
1,923
5,363

3W

New transactions.
Net change
Outstandings

6,926

8,285

J,685

3,285

3,838

3,564

5,059
3,587
37,558

4,769
1,940
39,498

7,069
3,832
43,330

£

-9
82

-7
75

-8

1,108

-138
969

-121

98,715

114,244

133,300

24,137

20,347

28,253

151,018

171,355

199,608

Outstandings..

New transactions.

New transactions.

Outstandings..

M
H

>
M

New transactions.
Net change
Outstandings

1
-81

Outstandings
Total credit advanced.

1981
estimate

1980
actual

98,857

2,209

117,716

2,834

136,172

2,489

67

W

to
00
to

848

BORROWING (FUNDS RAISED)
Student Loan Marketing Association
Federal National Mortgage Association3
Farm Credit Administration:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal home loan bank system:
Federal home loan banns
Federal Home Loan Mortgage Corporation

Net change
Outstandings..

1,070
2,345

1,095
3,440

1,923
5,363

Net change
Outstandings..

6,347
52,346

5,169
57,515

9,199
66,714

Net change
Outstandings..

1,542
8,385

9,162

777

898
10,060

Net change
Outstandings..

3,536
19,360

3,282
22,643

3,657
26,299

Outstandings..

7,076
34,257

5,563
39,820

6,389
46,209

Net change
Outstandings..

6,454
39,599

-52
36,547

2,553
39,100

Net change
Outstandings..

3,141
21,496

5,971
27,467

7,146
34,613

29,165

21,805

31,764

Outstandings..

174,789

196,594

228,359

Outstandings..

898
3,597

1,000
4,597

1,000
5,597

Outstandings..

793
1,627

61
1,688

148
1,836

Net change
Outstandings..

1,070
2,345

1,095
3,440

1,923
5,363

Net change
Outstandings..

26,403
167,220

19,649
186,869

28,694
215,563

Subtotal, borrowing (gross)
Less borrowing from other sponsored enterprises:4
FHLMC from FHL banks
Other
Less borrowing from Federal sources:
SLMA from FFB
Total borrowing from the public and Government
Less investments in Federal securities:
Investments in Federal securities




1,500

-377

121

Table F-6. CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars)—Continued
Obligations
Agency or program

1980
actual

1981
estimate

Loans made
1982
estimate

1980
actual

1981
estimate

1982
estimate

Outstandings

2,362

1,985

2,106

Net change
Outstandings

3,587
37,558

1,940
39,498

3,832
43,330

Federal home loan banks

Net change
Outstandings

-9
82

-7
75

-8
67

Federal Home Loan Mortgage Corporation

Net change
Outstandings

-81
1,108

-138
969

-121
848

Net change
Outstandings

21,406
126,110

18,231
144,342

24,870
169,212

Less borrowings for guaranteed loans held as direct loans by:
Federal National Mortgage Association

Total credit raised

m i new transactions are loans purchased from FHLMC corporation accounts.
2Since all SLMA borrowing comes from the FFB, when credit is extended by Government-sponsored enterprises and added to Federal lending (as in Table F-7), 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 gross total of lending by Government-sponsored enterprises to give the total adjusted for double-counting.
3 Loans purchased at discount are recorded at their acquisition cost.
4These deductions include those borrowings involved in double-counting to give the adjusted total that is carried over to Table F-7.




SPECIAL ANALYSIS D

179

Table F-6 shows the lending and borrowing of Government-sponsored enterprises for 1980-82.13 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-7), additional deductions must be made for double counting since
SLMA lending is financed by its borrowing from the FFB; also
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 has been growing
rapidly in recent years. Sharp increases and decreases in the lending of Federal Home Loan Banks and FNMA to support mortgage
credit markets together with sharp continuing increases in lending
by FHLMC are the main sources of the overall movements in
lending. In 1980 the net change in gross credit advanced is estimated to rise to $29.6 billion. It falls slightly in 1981 but increases
steeply in 1982 to $35.0 billion. Of that total in 1982, $1.1 billion
represents inter-enterprise lending, and $3.8 billion is holdings of
federally guaranteed mortgages. The FHLMC has been shifting its
portfolio to include conventional mortgages only, leaving FNMA as
the primary Government-sponsored enterprise holder of FHA and
VA insured loans. The economic assumptions on which the estimates rest are not necessarily the same as the administration's
economic forecast, which is used for the budget. In order to finance
this lending, Government-sponsored enterprises are expected to
follow the same general pattern of borrowing in the 1978-80 period.
Special Analysis E discusses the borrowing to Government-sponsored enterprises in detail.
SUMMARY OF CREDIT ADVANCED AND RAISED UNDER FEDERAL
AUSPICES

A summary of credit advanced and raised under Federal auspices
is shown in table F-7. Credit advanced by direct and guaranteed
loans reached $56.6 billion in 1980. This lending level is estimated
to increase to $78.4 billion in 1981, and to $81.5 billion in 1982.
Loans by Government-sponsored enterprises grew by $24.1 billion
in 1980; and will increase by $20.3 and $28.3 billion in 1981 and
1982 respectively. Outstanding credit advanced to the public under
13 The Federal Reserve Banks 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.




180

THE BUDGET FOR FISCAL YEAR 1982

Federal auspices is expected to total $822.1 billion by the end of 1982.
Net credit raised under Federal auspices totaled $124.4 billion in
1980, and is expected to reach $127 billion in 1982, following a rise to
$142 billion in 1981.
Table F-7. SUMMARY OF CREDIT ADVANCED AND CREDIT RAISED UNDER FEDERAL AUSPICES
(In billions of dollars)
Net Change
1980
actual

1981
estimate

Outstanding
1982
estimate

1980
actual

1981
estimate

1982
estimate

LENDING (Credit advanced)
Direct loans (from table F-2):
On-budget agencies
Off-budget entities
Guaranteed loans (primary, from table
F-5)
Total Federal Government
credit advanced
Loans by Government-sponsored enterprises (from table F-6)
Total, credit advanced to
the public under Federal
auspices 1
Outside the budget

9.5
14.7

3.9
23.2

6.1
18.5

91.7
72.3

95.6
95.5

101.7
114.0

32.4

51.3

56.9

298.5

349.8

406.7

56.6

78.4

81.5

462.5

540.9

622.5

24.1

20.3

28.3

151.0

171.4

199.6

80.8
71.3

98.8
94.8

109.8
103.7

613.5
521.8

712.3
616.7

822.1
720.4

70.5

72.0

45.0

715.1

787.1

832.1

32.4

51.3

56.9

298.5

349.8

406.7

102.9

123.3

101.9

1,013.6

1,136.9

1,238.8

21.4

18.2

24.8

126.1

144.3

169.2

124.4

141.5

126.7

1,139.7

1,281.2

1,408.0

-43.6

-42.7

-26.9

BORROWING (Credit raised)
Federal borrowing from the public
(from table E-l)
Guaranteed borrowing (same as guaranteed loans, above)
Total Federal Government
credit raised
Borrowing by Government-sponsored
enterprises (net, from table F-6)
Total, credit raised from
the public under Federal
auspices 1
Net credit advanced
1

Excludes Federal Reserve credit.

FEDERAL RESERVE SYSTEM LENDING

The Federal Reserve System, created by Congress in 1913, is the
central bank for the United States. Its principal purpose is to
conduct the Nation's monetary policy, influencing the cost and
availability of money and credit to improve the stability and
growth of the economy. The system carries out its monetary policy
responsibilties primarily by purchasing and selling Treasury securities in the open market. The system also invests in other Govern-




SPECIAL ANALYSIS D

181

ment-related securities and makes loans to eligible depository institutions. The System's transactions are conducted for the purpose of
monetary control, not for profit. The Federal Reserve System also
has many regulatory and supervisory functions, handles the official
reserve transactions with foreign central banks, and engages in
foreign exchange transactions.
When the Federal Reserve purchases Treasury securities it facilitates an expansion of money and credit in the economy because a
purchase of Treasury securities by the Federal Reserve increases
reserves. Security transactions are conducted both on an outright
basis and on a repurchase basis, the latter being used to supply or
withdraw bank reserves on a temporary basis. Over a year, outright purchases exceed sales by a substantial margin, due to the
growth in money and credit that is needed to accompany the
expansion in income and the volume of transactions. In 1980, the
System's outright holdings of U.S. Treasury securities increased by
$5.3 billion to a level of $120.7 billion. Holdings of Governmentrelated securities rose $558 million to $8.8 billion. The system
ceased holding banker's acceptances in 1977 on an outright basis
and continued to acquire those instruments on a repurchase basis.
In 1972 the Federal Reserve began acquiring Government-related
securities other than Treasury debt issues. These securities consist
of (a) the direct debt obligations of wholly owned agencies of the
Federal Government, such as the Export-Import Bank; (b) loans
and securities guaranteed by a Federal agency, such as loan participation certificates guaranteed by the Farmers Home Administration; and (c) the security obligation of Government-sponsored
enterprises,14 such as the Federal National Mortgage Association.
Since 1974, the Federal Financing Bank has bought most newly
issued securities under the first two categories. The Federal Reserve continued to acquire a small amount of the outstanding
securities in these categories until 1976. Since then, the System's
holdings have declined as securities have matured.
Sponsored enterprise securities are also acquired by the Federal
Reserve in the ordinary performance of its monetary function. The
System adds to its holdings of such securities only through purchases of outstanding issues in the open market. Holdings of maturing issues, however, are exchanged directly with the respective
agencies at times when they are conducting new financing operations. The System's transactions in these securities are a form of
lending. Though not relatively large, they selectively enhance the
marketability of the obligations of identifiable borrowers outside
the Federal Government and thereby affect the allocation of resources.
14

In Federal Reserve publications, these enterprises are called "Federally Sponsored Credit Agencies."




182

THE BUDGET FOR FISCAL YEAR 1982

In addition to transactions in securities markets, the Federal
Reserve makes loans to eligible depository institutions under two basic
programs: adjustment credit and extended credit. Adjustment
credit is advanced for brief periods to help borrowers meet shortterm needs for funds when their usual sources are not reasonably
available. This form of credit accounts for the great bulk of borrowing from the Federal Reserve Banks. Extended credit is advanced
to assist small depository institutions that lack access to long-term
capital markets in order to meet seasonal credit needs, and to
assist depository institutions facing special difficulties.15
In the past loans were extended only to commercial banks that
were members of the Federal Reserve System except under highly
unusual and exigent circumstances. The Monetary Control Act of
1980 directs the Federal Reserve to open its discount window to
any non-member depository institution that maintains transaction
accounts or non-personal time accounts. (Such institutions include,
in addition to member commercial banks, savings and loan associations, mutual savings banks, credit unions and non-member commercial banks.)
A general principle governing all credit extended by the Federal
Reserve is that the borrower should have sought other reasonably
available sources of funds, including credit from special industry
lenders, before turning to the discount window. Thus, institutions
that have access to credit programs by special industry lenders—
such as the Federal Home Loan Bank System, credit union centrals, or the facility of the National Credit Union Administration—
are expected to seek assistance from these sources before approaching the Federal Reserve's discount window.
Table F-8 shows fiscal year historical data for the Federal Reserve System's investments in securities other than Treasury issues
and for its loan acceptances. The first outright purchase of securities other than Treasury debt was made in 1972. The peak year for
the purchase of such securities plus loans and acceptances was
1974, when $3.4 billion was acquired. In 1980 holdings decreased by
$1.0 billion. The combined total of these securities plus loans and
acceptances was $10.5 billion at the end of 1980. Most of this was
securities, and almost all of the securities were obligations of the
Government-sponsored enterprises. The combined total is much
less than the $120.7 billion of Treasury securities held at the end of
1980; the $9.3 billion increase in the combined total from 1972 is
much less than the $55.2 billion increase in Treasury securities.
Federal Reserve lending and other transactions are excluded
from the aggregates of Federal credit shown in tables F - l and F-7.
This is partly because current and budget year estimates cannot
usefully be made, since they would depend upon future economic
developments and Federal Reserve policy decisions.
15

An important loan of this type was the $1.7 billion loan to the Franklin National Bank in 1975.




Table F-8. FEDERAL RESERVE BANK LENDING 1
(In millions of dollars)
1973

1972

AMOUNTS OUTSTANDING:
"Agency issues" held outright:
Government-sponsored enterprises
Farm Credit System2
Federal Home Loan Banks (FHLBs)
Federal National Mortgage Association (FNMA)

1974

1975

1976

TQ

1977

1978

1979

1980

974
192
134
648

1,213
236
194
783

2,415
439
525
1,451

4,490
953
1,216
2,321

6,113
1,395
1,810
2,908

6,064
1,395
1,783
2,886

6,720
1,648
1,871
3,202

7,423
2,014
2,210
3,199

7,761
2,245
2,271
3,245

8,320
2,559
2,442
3,319

Federally guaranteed loans
Farmers Home Administration
DOT—WMATA bonds
GSA—Public building certificates

17
17

76
60
16

244
173
67
4

354
263
82
9

425
294
117
14

425
294
117
14

379
248
117
14

327
196
117
14

327
196
117
14

326
196
117
14

Federal agency debt
Export-Import Bank
GNMA—participation certificates
Postal Service

95
64
25
6

160
98
38
24

201
117
59
25

241
130
86
25

268
142
89
37

268
142
89
37

230
106
87
37

201
81
83
37

136
16
83
37

136
16
83
37

1,106

1,449

2,858

5,085

6,806

6,757

7,329

7,950

8,224

8,782

323
1,160

310
1,551

647
2,078

1,099
2,210

271
1,481

Total, "agency issues" held outright
"Agency issues" held under repurchase
Loans and acceptances

agreements3

Combined total
NET INCREASES:
"Agency issues" held outright
"Agency issues" held under repurchase agreements
Loans and acceptances
Combined total

203

1,836

270
3,514

61
1,243

277
1,343

1,309

3,285

6,642

6,389

8,426

8,240

9,190

10,675

11,533

10,534

1,106

343

2,227
-209
-2,271

1,721
216
100

-49
46
-183

572
-13
391

621
337
527

274
452
132

558
-828
-729

-253

2,037

-186

950

1,485

858

-999

-305

1,633

1,409
270
1,678

801

1,976

3,357

Source: Federal Reserve Board (Fiscal year detail by issuing agency is unpublished; calendar data available in FRB annual report).
Data exclude certain special classes of loans not separately published. See text.
2 Consolidated obligations of the three members of the Farm Credit System.
3 Detail by issuing agency is unavailable.
1




184

THE BUDGET FOR FISCAL YEAR 1982
TAX-EXEMPT CREDIT

Since the adoption of the Federal income tax in 1913, interest on
State and local government obligations generally has been exempt
from Federal income tax. 16 The resulting subsidy to borrowers has
historically been a saving of 30% to 35% of the interest rate.
Through the first 50 years, this exemption was confined mainly to
State and local governmental borrowing for public purposes.
During the 1960's however, tax exempt financing was extended to
certain private uses. These uses were curtailed by the 1968 and
1969 tax acts, but a number of exceptions were permitted that have
allowed major growth of some private uses.
Industrial development bonds (IDB's) are the principal form of
obligations nominally issued by a State or local government to
raise funds for private purposes. In almost all cases of IDB's, the
State or local authority is a conduit for providing tax-exempt financing to the private borrower. The authority lends its name to
the private borrower's debt obligations, but is not responsible for
the payment of interest and principal in the event of default.
As table F-9 shows, the sale of tax-exempt bonds used for private
purposes have increased greatly in recent years, while nominal
State and local government debt (adjusted for advanced refunding)
for public purposes has remained relatively constant. Tax-exempt
bonds issued for private purposes in five activities—owner occupied
and rental housing, private nonprofit hospitals, pollution-control
facilities, student loans, and business financed with "small-issue"
IDB's—will reach an estimated $31.6 billion of new obligations in
1980, accounting for over half (56%) of the total long-term taxexempt market. This compares with $8.5 billion in new issues and
24% of the long-term tax-exempt market just 4 years earlier. The
Omnibus Reconciliation Act of 1980 imposed major restrictions on
the use of tax-exempt credit for owner-occupied housing, where the
largest growth has occurred in recent years. This Act reduced taxexempt financing for private housing from an expected $55 billion
in new issues in calendar 1981 to less than $17 billion. Now, the
"small-issue" exemption on industrial development bonds has the
largest potential for growth. A conservative estimate of the volume
of new issues would exceed $8 billion in 1980 and reach $10 billion
in 1982. Forty-seven States permit "small-issue" IDB's and at least
18 States have virtually no limits on the projects that they can
finance.
Table F-9 also shows the annual revenue loss to the Treasury
from all tax-exempt bonds issued each year, as are the value of the
long-term subsidy received by the borrower and the present value
of the tax loss from newly issued tax-exempt bonds. The revenue
16

Tax exempt interest is one type of tax expenditure, the subject of Special Analysis G.




SPECIAL ANALYSIS D

185

loss reflects the reduction in receipts resulting from the issuance of
tax-exempt rather than taxable debt. The tax loss (and subsidy)
from tax-exempt financing occurs over the entire life of the security. The present value of the total tax loss is substantially larger
than the annual revenue loss. The cost to the Treasury in lost tax
revenues also exceeds the financial benefits to the borrower. (See
Special Analysis G for a discussion of revenue losses attributable to
special provisions of the tax code, including tax-exempt bonds.)
Subsidies of the magnitudes shown in table F-9 create a strong
incentive to allocate credit to the assisted borrowers, just as do
Federal direct loan and loan guarantee programs. Borrowers aided
by tax exemption gain a position of preferred access to credit
resources over competing taxable borrowers, just as with other
forms of Federal credit assistance.
While direct and guaranteed loan programs are subject to the
newly created credit control system, tax-exempt credit is not. Although tax-exempt financing has market effects and costs similar
to other credit assistance, its current statutory structure is of entitlement forms and its use is unilaterally elected by the borrower. Thus
effective control can only be achieved through legislated changes to the
tax code. (See Part 4 of the Budget for a discussion of proposals to
restrict the use of tax exempt obligations for private purposes.)
Although tax-exempt credit is the most visible and direct form of
tax expenditure influencing credit allocations, others not treated
here but described in Special Analysis G are also important. These
include: (1) investment tax credits, (2) personal deductions for mortgage interest and property taxes, and (3) various depreciation
methods.




Table F-9. TAX EXEMPT FINANCING; PRESENT VALUE OF TAX SUBSIDIES TO NEW ISSUES

00
Oi

(In billions of dollars)
Calendar years1
Actual

Total new Issues, long-term tax exempts
State and local government uses2
State and local uses less advance refunding
Private purpose tax-exempts
Housing bonds
Private hospitals
Student loans
Pollution control
Other private business (IDBs)
Subsidy estimates: (new issues only) 3
All new issues:
Annual tax loss, all new issues
Present value, new issue tax loss
Present value, borrower benefit
Private purpose issues only:
Present value, private use tax loss

Estimated

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

18.1

24.9
)

23.6

23.9

24.2
)

30.5
)

34.9
26.4
26.4
8.5
3.0
1.9
.1

46.8
34.4

49.1
34.2
26.6
14.9
5.9

48.3
23.3
23.1
25.0

57.7
25.8
25.8
31.9

2.2

.3
2.8
3.5

2.4
.6
2.5
7.3

56.2
24.6
24.4
31.6
17.5

62.6
27.1
27.1
35.5
18.7
3.4

8.8

1.6
14.8
12.4

1.8
16.1
14.1

16.4
15.1

2.7

3.9

4.9

5.66
8.43
225.1
239.5

5.20
8.02
251.3
263.2

5.52
8.73
279.0
291.4

2.1

1.4
.6
5.7
3.2

7.6
5.3

.7
7.1
5.1

.7
7.3
5.7

0)

.9
7.8
5.9

1.1
10.0
6.5

(l)

(*)

5.86
8.57
188.9
207.7

6.42
8.83
205.3
223.8

1.2
11.2

28.0

12.4
3.8
3.3
.1
3.0
2.2

12.2

2.8

.9
2.3
8.1

16.8

3.1
1.1

6.12
8.04
131.1
144.4

5.22
7.39
146.1
161.8

5.04
7.21
160.7
176.5

4.99
7.44
175.1
191.2

1.2
2.2

8.7

10.0

3
5d

20.5
16.9

3.1
21.5
16.4

3.2
23.0
16.5

£
r

8.5

11.5

11.9

13.1

5.92
9.63
300.2
312.7

7.80
11.92
330.0
343.0

8.70
12.80
364.0
377.0

8.60
12.30
400.0
414.0

2.0

2.8

1976 and 1979 estimates of tax-exempt volume and distribution and 1980-82 objections are by the Treasury Office of Tax Analysis Estimates are unavailable for the amount of private purpose tax-exempts before 1976.
Includes some private purpose tax-exempt debt, and advance refunding, that could not be identified or classified.
Assumed: Average marginal tax rate = .42; taxable securities of comparable quality; average maturity = 18 years,- discount rate = Aaa corporate bond yield.
Sources: Federal Reserve Board, Public Securities Association; subsidy estimates by Office of Management and Budget.
1

2
3




W
a

2.2

MEMORANDUM
AAA State and local bond yields (Moodys), percent
AAA corporate bond yields (Moodys), percent
Outstanding, long-term tax-exempt issues
Outstanding, all tax-exempt issues

ffi
M

CZ)

H<
M
>
W

187

SPECIAL ANALYSIS D

FUNCTIONAL AREAS SUPPORTED BY FEDERAL CREDIT ASSISTANCE

The functional distributions of direct and guaranteed loans by
major function are given in table F-10. Table F-10 records the
levels of new transactions taken from tables F-2 and F-5 for 198082. The grand total for new direct loans is the same as total new
direct loans in table F-2. The grand total for guaranteed loans is
the same as primary guaranteed loans in table F-5. The functions
in which the largest Federal credit activity occurs are commerce
and housing credit, international affairs, and veterans benefits.
These three functions are expected to comprise almost three-fourths of
total new transactions in 1982. In addition, Part 5 of the Budget
discusses Federal credit activities by function.
Table F-10. DIRECT LOANS AND GUARANTEED LOANS BY FUNCTION
(In millions of dollars)
New guaranteed loans

New direct loans
Function

1981
estimate

1980
actual

1982
estimate

1980
actual

1981
estimate

National defense

1982
estimate

30

30

International affairs:
Security Assistance
Export-Import Bank
Other

1,645
3,288
1,281

1,620
3,949
1,296

1,680
4,316
1,242

2,380
6,032
909

2,600
6,635
1,319

3,000
7,298
9,897

Total

6,214

6,865

7,238

9,321

10,554

20,195

30

25

30

Energy

1,279

1,193

1,273

3,389

11,159

8,106

Agriculture:
Farm income stabilization
Other

4,947
7,543

3,596
8,713

4,620
5,841

673
5,431

2,036
7,490

2,000
2,700

12,490

12,310

10,461

6,104

9,526

4,700

9,853

9,612

9,087

51,111

64,347

67,417

1,890

4,276

4,831

5,530

6,160

5,650

11,743

13,888

13,918

56,641

70,507

73,067

857

705

208

309
360
970

269
389
1,388

Natural resources and environment

Total
Commerce and housing credit:
Mortgage credit
Advancement of commerce
thrift insurance

and

Total
Transportation:
Ground transportation
Air transportation
Water transportation
Total
Community and regional development....
Education, training, employment, and
social services
Health
Income security




14

15

15

223
274
752

871

720

224

1,249

1,638

2,046

3,519

5,150

2,157

2,358

3,477

2,508

644

720

713

5,820

8,280

7,620

64

80

103

71

101

176

1,319

305

305

14,214

16,095

17,137

188

THE BUDGET FOR FISCAL YEAR 1982
Table F-10. DIRECT LOANS AND GUARANTEED LOANS BY FUNCTION—Continued
(In millions of dollars)
New direct loans
Function

Veterans benefits and services
Veterans housing
Other
Total
General purpose fiscal assistance and
justice
General government
Subtotal before deductions..

1980
actual

1981
estimate

New guaranteed loans
1982
estimate

1980
actual

1981
estimate

1982
estimate

641
264

725
310

747
308

14,966

19,907

21,363

905

1,035

1,055

14,966

19,907

21,363

133

173

220

300

300

756

22,198

30,879

24,850

92

110

37

61,410

73,318

62,545

114,629

151,788

158,076

24,213

32,190

33,317

Less secondary guaranteed loans
Less loans held by:
GNMA
FFB

12,110

16,637

8,230

1,996
22,188

1,615
30,873

2,389
24,846

Grand total 1

49,300

56,706

54,315

66,232

87,110

97,334

1

Off-budget accounts are included (except sponsored agencies).

INTEREST SUBSIDIES

Federal credit programs provide credit to selected groups on
more favorable terms than would be otherwise available in private
capital markets. A rough estimate of these interest rate subsidies is
calculated in this section. The favorable subsidy terms of Federal
credit assistance however may involve other factors besides interest
and these are not included in these estimates. For example, the
Government accepts higher loan to value ratios, riskier projects,
and longer maturities than would the private market. Other types
of credit subsidies 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 does not consider other kinds
of subsidies such as direct grants that may accompany Federal
credit assistance.
The interest subsidy in this analysis is defined as the difference
between the present value of the loan repayments that the borrower makes under Government assistance and the present value of
the loan repayments that would have been paid under a comparable private loan. These interest differentials arise for many reasons. In most direct loan programs, the interest rates are set by
law either at a fixed ceiling or in relation to the Treasury borrowing rate. In loan guarantee programs, the guarantee itself provides
a subsidy by eliminating the risk of default.




SPECIAL ANALYSIS D

189

Calculation of 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 a 15%
interest rate. In some cases, the relevant market rates may well
exceed 15%, and, in others, private markets may not exist in the
absence of Government assistance. The table indicates the approximate value of the subsidy because the true measure cannot be
calculated exactly.
The rate selected approximates the market yield prevailing in
December 1980 for long-term guaranteed loans that are mainly
serviced by private lenders. These are primarily FHA and VA
housing loans. Insurance fees are not included; thus risk is not
implicity or explicitly covered in the evaluation.
Interest subsidies occur throughout the life of the loan. The
measurement of interest subsidies therefore requires that the interest payments be converted into a single discounted present-value
that capitalizes the interest payments. This conversion is computed
by discounting the subsidy that occurs in each future year by the
selected interest rate (constant over the life of the loan) and then
adding all the discounted subsidies into a single present value.




190

THE BUDGET FOR FISCAL YEAR 1982

Using this technique, table F - l l shows the estimated value of
Federal subsidies for new direct loan obligations and guaranteed
loan commitments by agency and program for 1980-82. The first
two columns of the table give the average interest rate and maturity for loans in the agency or program listed. The next three columns give the obligations or commitments for 1980-82, the annual
subsidy in millions of dollars per $100 million, and the present
value of the subsidy stream. The grand total for the present value
of the interest subsidy for new activity is $21.2 billion in 1982.




SPECIAL ANALYSIS

D

191

Table F - l l . INTEREST SUBSIDY COSTS FOR NEWLY COMMITTED FEDERAL CREDIT ASSISTANCE
(In millions of dollars)
Average loan terms
Agency and programs

DIRECT LOANS
Funds appropriated to
the President:
Economic support
fund
Foreign military sales
credit
Functional
development
assistance
Agriculture:
Price support &
related programs....
Agricultural credit
insurance fund
Rural housing
insurance fund
Farm export
credit—P.L. 480...
Rural development
insurance fund
Rural telephone
bank
Rural electric &
telephone rev. fd....
Rural communication..
Commerce:
Coastal energy
impact fund
Economic
development
assistance
Education:
Student financial
assistance
Student loan
insurance fund
College housing
Energy:
Energy supply
nuclear fuels
Health and Human
Services:
Health maintenance
organizations
Other health
programs
Housing and Urban
Development:
Federal Housing
Administration
Government National
Mortgage Assn




Percent

Years

15,000 discount

Obligations or commitments
1980

Annual
subsidy per
$100
million

1982

1981

Present value of subsidy stream
1980

1982

1981

2.8

33.2

713

735

1,000

10.5

496

511

696

12.0

8.0

635

640

1,020

2.0

60

60

96

2.8

33.2

445

396

475

10.5

310

275

330

11.9

5.3

4,947

3,596

4,620

2.2

375

272

350

8.0

8.4

7,528

8,810

5,658

4.6

1,655

1,936

1,244

3.3

17.0

6,751

6,707

5,390

8.6

3,575

3,551

2,854

2.3

33.0

876

916

878

10.8

625

654

627

5.0

40.0

1,422

1,667

326

9.3

875

1,026

201

10.3

35.0

160

185

185

4.5

48

56

56

4.4
5.0

35.0
35.0

1,175
10

1,100
31

1,100

9.5
9.0

738
6

691
9

691

6.0

25.0

33

47

7.6

16

23

11.5

25.0

116

116

116

3.2

24

24

24

3.0

40.0

305

186

286

10.7

218

133

204

7.0
3.0

13.0
40.0

271
1,140

3,460
1,060

455
95

5.8
10.7

8.9
814

1,142
757

150
68

7.4

10.0

5

10

14

5.2

r

3

4

12.0

20.0

35

520

92

2.6

6

85

15

6.7

14.5

30

15

1

6.1

11

5

*

10.0

20.0

3,010

282

278

4.2

804

75

74

13.0

39.8

2,201

1,832

314

2.0

287

239

41

192

THE BUDGET FOR FISCAL YEAR 1982

Table F - l l . INTEREST SUBSIDY COSTS FOR NEWLY COMMITTED FEDERAL CREDIT ASSISTANCE—
Continued
(In millions of dollars)
Average loan terms
Agency and programs

Percent

Years

Obligations or commitments
1980

1981

15,000 discount
Annual
subsidy per

tifin
J1UU

1982

1980

million

Housing for elderly &
handicapped
New communities
fund
Housing rehabilitation
Low rent public
housing
Interior:
Water resources
Indian loan funds
Transportation:
Highway programs
Rail programs
Veterans Administration:
Veterans housing
programs
Veterans insurance
policy loans
Other veterans loans...
Community Services
Administration
District of Columbia
Export-Import Bank
Federal Home Loan
Bank Board
National Consumer
Cooperative Bank
NCUA: Central Liquidity
Fund
Small Business
Administration:
Business and
investment loans....
Disaster loan fund .
Tennessee Valley
Authority
U.S. Railway Association
Other agencies and
programs
Add:
Federal financing
bank
acquisitions of
loans otherwise
guaranteed
Total—Major
direct loan
subsidies1




Present value of subsidy stream
1981

1982

9.3

40.0

933

896

851

5.6

344

331

314

11.4
3.0

9.8
20.0

10
203

25
197

215

2.6
9.1

1
117

3
114

124

0.0

40.3

1,318

300

300

12.6

1,101

250

250

0.0
10.4

40.0
19.1

12
14

25
15

34
16

12.5
3.9

10
3

21
4

28
4

5.5
2.8

14.9
23.6

23
132

14
108

19
155

7.0
9.6

10
82

6
67

8
97

13.5

29.9

362

408

435

1.4

34

38

41

5.0
5.2

20.0
7.7

256
8

300
10

298
9

7.9
6.2

128
2

150
3

149
3

0.3
9.3
8.9

5.0
30.0
11.3

25
90
5,495

9
133
7,581

8
220
5,000

8.3
5.3
4.3

7
31
1,297

3
46
1,789

2
77
1,188

10.0

3.0

589

1,055

190

2.9

41

73

13

11.6

9.4

23

187

147

2.4

3

22

18

14.5

1.0

310

2,208

3,650

.3

1

6

9

9.3
5.0

8.5
9.8

761
1,236

789
2,850

875
490

3.8
6.6

140
417

145
961

161
165

3.7
7.6

0.9
30.4

680
660

81
542

76
51

6.3
6.7

37
289

4
238

4
22

13.8

5.1

357

52

58

.8

10

1

2

14.2

18.0

10,078

14,236

16,616

.7

429

606

708

15,568

16,422

11,104

193

SPECIAL ANALYSIS D

Table F - l l . INTEREST SUBSIDY COSTS FOR NEWLY COMMITTED FEDERAL CREDIT ASSISTANCE—
Continued
(In millions of dollars)
Average loan terms
Agency and programs

Percent

Years

Obligations or commitments

15,000 discount

1980

1981

1982

Annual
subsidy per
$100
million

Present value of subsidy stream
1980

1982

1981

LOAN GUARANTEES
Education:
Student loan
insurance fund
Health and Welfare:
Health prof. grad.
student loan f u n d Housing and Urban
Development:
Low rent public
housing
Interior: Indian loan
G & 1 fund
Small Business
Administration:
Pollution equipment
guarantees

7.0

13.0

2,760

3,960

2,160

5.8

911

1,307

713

12.0

13.0

32

48

100

2.3

4

6

13

0.0

31.0

2,918

3,786

3,883

11.9

2,296

2,979

3,056

7.3

10.0

3

31

5.3

1

8

6.0

20.0

50

50

7.2

18

23

23

3,230

4,317

3,813

4,857

5,972

6,253

23,655

26,710

21,170

40

SUBSIDY
CONTRACTS:
HUD: Section 8
housing
assistance2

na

18.3

oo

Totalguaranteed
loan
subsidies1

971

1,020

na

Grand total

1 Only explicit subsidies are represented: implicit subsidies arising from the Government's assumption of risks are not included. (See text).
2 Amounts shown in obligations columns for Section 8 housing subsidy contracts are the actual annual subsidy payments newly contracted,
rather than the principal amount of financing supported by payments.

CONTROLLING FEDERAL CREDIT

In the 1981 Budget, the administration introduced a credit control system for reviewing and regulating new credit activity on a
program by program basis. The control system works through appropriations limitations on new direct loan obligations and loan
guarantee commitments. Requests for these limitations are produced through the Administration's budget review process, submitted in the Budget Appendix and acted on by Congress through
regular appropriations bills. The credit control system and the
credit budget are discussed in part 2 and part 3 of the Budget The
greater scrutiny and control of the limitations system will help
achieve the following goals:
340-700 0 - 8 1 - 1 3




194

THE BUDGET FOR FISCAL YEAR 1982

First, at the program level, the system should insure that
credit programs meet the purposes for which they are intended, that they do so efficiently, and that the level of resources is
justified.
Second, the system should result in a more systematic
examination and rationalization of the distribution of Federal
Credit among sectors of the economy. The control system will
be the framework for analyzing the relative distribution of
Federal Credit resources among economic sectors, e.g., education, housing, industrial development and export promotion.
Third, on the aggregate level, the system will be a framework for analyzing the impact of total credit activity on the
economy as a whole—on public versus private needs, and on
economic growth, inflation and employment.
The Federal credit control system integrates Federal credit programs more completely into the budget process. The budget is the
chief instrument for allocating fiscal resources between the public
and private sectors and among different functions or needs; it also
sets fiscal policy.
In its initial phases, the credit control system only covered certain
Federal credit activities. Hence, the credit control coverage differs
from the coverage in previous budgets and in this Special Analysis.
The difference in coverage arises from three primary causes.
(1) The credit activities of the privately owned Government-sponsored enterprises are excluded from the credit control system because of their private ownership.
(2) In a number of programs, Federal loan guarantees cover less
than the full principal of the loan. The credit control system includes only the amount of the loan guarantee, since that is the
amount of the Government's contingent liability.
(3) A number of credit related activities have significant noncredit program characteristics. For example, Federal price or
rental guarantees have significant non-credit characteristics as
well as credit attributes. Transactions of this type are currently
excluded from the credit control system. The following kinds of
direct loan and loan guarantee transactions are excluded from the
credit control system:
—sale of Federal assets on credit terms for more than 90 days
duration;
—investments in obligations or preferred stock of any privately
owned enterprises;
—deferred or delinquent interest that is capitalized,
—long term Government contracts for the purchase or lease of
goods or services or of real property where beneficial interests
of such contracts are pledged or assigned to lenders or investors;




SPECIAL ANALYSIS D

195

—loans supported by contracts to pay any portion of the debt
service;
—callable capital contributions to multilateral development
banks;
—contingency-type direct loan commitments;
—price guarantees;
—guarantees to purchase unsold output; and
—project completion guarantees.
Table F-12 reconciles the Federal credit activity reported in this
Special Analysis to the activity of the credit control system shown
in Part 2 of the Budget There are four kinds of programs included
in the credit control system that are excluded from appropriation
limitations. For these programs, control is exercised only through
authorizing legislation rather than through both authorizations
and appropriations. The first kind are clear and unambiguous entitlements to qualified applicants such as veterans mortgage guarantees. The second kind provide insurance against unforeseen
circumstances, such as insurance of bank deposits.
These two exemptions preclude the appearance of control where
none can exist without changing the basic nature of the programs.
If they were included in the credit control system limits, the need
for mandatory supplemental appropriations actions would arise
whenever the limitations authorized for these programs proved
insufficient. These two exemptions are similar in nature to those
budgetary activities considered relatively uncontrollable, many of
which are also not acted on in annual appropriations bills.
The third kind exempts guarantees of certificates of beneficial ownership (CBO's) issued by the FmHA and the REA. The President's
Commission on Budget Concepts recommended the sale of CBO's be
treated as borrowing but current legislation requires REA and
FmHA to treat them as the sales of loan assets. While in a technical sense they are guaranteed, they are primarily financing. Since
the credit activity they finance is covered in the control system, they
need not be limited.
The fourth kind are export promotion loans by CCC. Under
present circumstances, the administration did not wish to unduly
restrict these activities.
As table F-12 indicates, the two significant differences between
total Federal credit activity and total activity in the control system
are the deduction of loans by Government sponsored enterprises and
the difference between the full principal of guaranteed loans and
the Government's contingent liability.




196

THE BUDGET FOR FISCAL YEAR 1982

Table F-12. RECONCILIATION: TOTAL FEDERAL CREDIT ACTIVITY TO FEDERAL CREDIT ACTIVITY IN
THE CREDIT CONTROL SYSTEM
(In billions of dollars)
1982
New transactions

Total lending:
Total credit advanced to the public under Federal
auspices (from table F-7)
Less loans by Government sponsored enterprises
(from table F-6)
Less the difference between the full principal of
guaranteed loans and the Government's contingent liability:
Veterans Administration
Federal Housing Administration
Export-Import Bank
Less guaranteed loan transactions excluded from
the control system:
IFI: Callable capital subscriptions
Less direct loan transactions excluded from the
control system:
Veterans Administration
Other
Total, credit advanced to the public in the credit
budget (from Part 2 of the Budget)
Less transactions in programs exempt from appropriations control:
Entitlements:
VA programs
Public housing
Insurance:
C.C.C
FHLBB
FmHA
International security assistance
Guarantees of FmHA and REA CBO's
Housing programs
Small business programs
Public Law 480 export sales
Education programs
FFB
Synthetic Fuels Corporation
Railroad programs
PIUS:

Secondary loans in programs exempt from appropriations control
Total transactions in programs under appropriations control

*Less than $50 million.




Outstanding

Net change

284.9

109.8

822.1

133.3

28.3

199.6

10.1
.8
1.1

7.4
.8
.2

49.4
8.4
1.5

9.5

9.5

23.0

.3
.9

*

.3

1.2
25.1

128.9

63.3

513.9

11.9
17.1

8.4
2.3

64.5
20.6

6.6
.2
8.2
1.5
8.6
.9
•9
.9
6.0
24.8
2.0
.1

.8
.8
6.1
.4
•4
.7
3.2
18.2
2.0
.1

7.9
1.6
.3
5.9
62.7
4.6
8.8
8.6
25.5
102.7
3.5
.6

1.9

1.9

5.4

37.3

18.0

190.7

*
*

SPECIAL ANALYSIS D

197

PROPOSED LEGISLATION

Legislative proposals that are covered in the budget plan are also
reflected in this special analysis. Included in the 1982 budget is a
proposal to change the form of the "tandem plan" mortgage assistance programs of the Government National Mortgage Association
(GNMA) so that the interest subsidy is provided as a direct grant to
originating lenders. Under the present tandem mechanism GNMA
purchases multifamily mortgages at below market interest rates
and resells them at a discount sufficient to raise the yield to
market rates. In absorbing the difference in yield, GNMA provides
a subsidy to encourage multifamily or other housing construction.
Under the new proposal financial institutions will be given lump
sum payments compensating them for originating below market
rate mortgages. The new method will simplify the Federal support
mechanism and will require outlays only to cover the subsidy
rather than for the entire loan. About $1.7 billion of the $2 billion
in tandem plan mortgages will be affected.
The Small Business Administration is proposing a major restructuring of its direct and guaranteed business lending programs. The
changes emphasize guarantees over direct lending and orient lending to socially or economically disadvantaged business-owners and
to businesses in industries where competition or innovation is inadequate. The agency will seek legislation to consolidate its business
loan program into one program, increase the interest rates on
direct loans to a rate equal to that charged for guaranteed loans,
and raise its limits on guaranteed loans from $500,000 to $750,000.
RECENTLY ENACTED LEGISLATION

This section lists and briefly describes new credit and credit
related legislation enacted during the 1980 session of the Congress.




198

THE BUDGET FOR FISCAL YEAR 1982

Only new programs or major revisions of existing ones are included, simple extensions or changes in funding are excluded. Several
statutes enacted in 1979 but omitted from last year's analysis have
also been included.
Special International Security Assistance Act of 1979, Public Law
96-35.—This legislation authorizes up to $3.7 billion in loan guarantees to Egypt and Israel for the purchase of weaponry in conjunction with the 1979 Egyptian-Israeli Peace Treaty. The Federal
Financing Bank is expected to be the lender for these loans.
Higher Education Technical Amendments of 1979, Public Law
96-49.—This legislation removes the 5% limitation on the guaranteed student loan special allowance paid to lenders and gives the
Department of Education direct authority to collect payment on
defaulted national direct student loans.
International Security Assistance Act of 1979, Public Law 9692.— This legislation extends the foreign military sales credit program through 1981. Included in the act is a provision relieving
Israel of the requirement to repay half of its $1 billion sales credit
debt and allowing a 10-year grace period before beginning repayment of the remainder.
An Act To Extend the Emergency Agricultural Credit Adjustment
Act of 1978, Public Law 96-220— This legislation extended direct
and guaranteed loans for economic emergencies to farmers and
ranchers who are unable to obtain sufficient private credit during
periods of economic stress. The act stipulates that interest on these
loans be assessed at prevailing market rates. The authority expires
September 30, 1981 and is being replaced by expanded availability
of crop insurance and other farm credit programs.
Depository Institutions Deregulation and Monetary Control Act of
1980, Public Law 96-221.—This legislation authorizes the automatic transfer of funds; allows Federal savings and loan associations to
make and hold unsecured consumer loans, commercial paper, corporate debt securities and bankers acceptances; provides for negotiable order of withdrawal accounts at depository institutions; and
authorizes federally insured credit unions to receive share draft
deposits.
Agricultural Act of 1949—Farmer-Held Reserve Program, Public
Law 96-234.—This legislation authorizes long-term price support
loans under the farmer-held reserve program to corn and wheat
producers who did not participate in the 1979 set-aside program for
these commodities.
Rock Island Railroad Transition and Employee Assistance Act,
Public Law 96-254.—This legislation requires that at least $25
million of the Department of Transportation's rail rehabilitation
funding be lent to State or local governments or non-railroad carrier groups for purchase of Rock Island properties for rail service.




SPECIAL ANALYSIS D

199

Inter-American and Asian Development Banks and African Development Fund, Public Law 96-259.—This legislation increases
U.S. participation in the Inter-American and Asian Development
Banks and African Development Fund which generate capital to be
lent to less developed countries.
Asbestos School Hazard Detection and Control Act of 1980, Public
Law 96-270.—This legislation establishes an Asbestos Hazards Control Loan Program within the Department of Education to provide
loans to local educational agencies for the mitigation of asbestos
hazards in school buildings.
Energy Security Act, Public Law 96-294.—This legislation authorizes loans and loan guarantees for the expansion of energy productivity and supply capacity through the Synthetic Fuels Corporation
and the Department of Energy. Such financing mechanisms include:
• Direct and guaranteed construction loans for development of
municipal waste energy projects.
• Price support loans for existing waste energy projects.
• Creation of credit associations and other lending institutions
under the Farm Credit Administration for the purpose of
extending loans for commercialization of biomass energy
projects. Interest rates approximate FCA borrowing costs.
• Creation of the Solar Energy and Energy Conservation Bank
in the Department of Housing and Urban Development
(HUD) to subsidize interest and principal on loans for residential mortgages with solar energy systems. Subsidies will approximate 40 to 50% of the cost of the energy conservation or
passive solar system investment.
• Loans for geothermal energy development.
Small Business Administration Authorizations of 1980, Public
Law 96-302.—This legislation extends authorization for small business loan programs through 1984, raising authorized loan levels for
most programs. Changes to the disaster loan programs of SBA and
FMHA return agricultural clientele to the latter agency.
Ocean Thermal Energy Conversion Act of 1980, Public Law 96320.—This legislation amends the Merchant Marine Act of 1936 to
authorize commitments to guarantee payment of obligations for
commercial demonstration projects for ocean thermal energy conversion.
Wind Energy Systems Act of 1980, Public Law 96-345— This
legislation establishes a direct loan program in the Department of
Energy to construct power generating projects which will develop
and test new wind energy technologies.
Agricultural Subterminal Facilities Act of 1980, Public Law 96358.—This legislation amends the Consolidated Farm and Rural
Development Act to provide guaranteed loans at market interest




200

THE BUDGET FOR FISCAL YEAR 1982

rates for the construction and improvement of agricultural subterminal facilities and for purchase of transport equipment used for
facility operations.
Education Amendments of 1980, Public Law 96-374-—This legislation extends the provisions of the guaranteed and insured student loan program for 5 years. The act increases annual loan
limits, allows State agencies and nonprofit institutions to serve as
lenders of last resort, expands the number of individuals eligible
for loan repayment deferrals, increases the graduate student loan
interest rate from 7% to 9%, establishes a new unsubsidized loan
program for parents of dependent undergraduate students, amends
the special allowance rate for lenders and alters the role of the
Student Loan Market Association.
Administation of the national direct student loan program is
transferred to the new National Direct Student Loan Association.
Need-based loan programs are to be expanded. The new Association
will have direct authority to collect on defaulted loans.
In addition, loans and loan insurance are authorized for construction and renovation of academic facilities.
Housing and Community Development Act of 1980\ Public Law
96-399.—This legislation reauthorizes Federal Housing Administration programs. Amendments raise FHA mortgage limits for single
family units from $67,500 to as high as $90,000 in some areas;
increase loan limits for the rehabilitation program; authorize
public housing operating subsidies; and require that FHA interest
rates be adjusted as needed to minimize discount points.
Consolidated Farm and Rural Development Act Amendments,
Public Law 96-438.—This legislation authorizes guaranteed farm
ownership loans at market interest rates for renewable resource
energy facilities and residential structures on family farms. The
existing law is amended to include stricter eligibility requirements
for emergency loans. The disaster loan program for creditworthy
borrowers through the Farmers Home Administration (FmHA) is
extended and loss loans will bear a 5% interest rate while subsequent loans will bear interest at Treasury borrowing rates.
Staggers Rail Act of 1980\ Public Law 94~448.—This legislation
reauthorizes $700 million for the Department of Transportation's
rail rehabilitation program. Direct loans under this program are in
the form of purchases of "redeemable preference shares" that
yield an effective return to the Government of approximately 2%.
The new act relaxes certain eligibility criteria, and requires earmarking of 5% of funding for a new rail branch line program.
Methane Transportation, Research, Development, and Demonstration Act of 1980, Public Law 96-512.—This legislation establishes a
direct loan program in the Department of Energy for private sector




SPECIAL ANALYSIS D

201

costs associated with installing methane transmission, storage, and
dispensing facilities.
International Security and Development Cooperation Act of 1980\
Public Law 96-553.—This legislation extends various security assistance and economic development programs through 1982. The
new act eliminates the requirement for appropriation of a 10%
fractional reserve for foreign military sales guaranteed loans.
American Fisheries Preservation Act of 1980, Title II of Public
Law 96-561.—This legislation authorizes loan guarantees for shoreside and ocean-going fishery facilities under the title XI ship financing program of the Merchant Marine Act of 1936. Less stringent economic soundness criteria are authorized for guarantees of
credit for fishing vessels and facilities that are to be used in the
development of domestic markets for under-utilized fish species.
Title II also authorizes direct loans from the Fisheries loan fund to
prevent default by fishing vessel owners on guaranteed and conventional ship mortgages, and to cover operating losses.







SPECIAL ANALYSIS G
TAX EXPENDITURES
The Congressional Budget Act of 1974 (Public Law 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 so designated because they 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 objectives similar to those programs
funded through direct appropriations. There are numerous examples of this. Direct and tax expenditures reduce the cost of ship
acquisition by shipping companies; CETA grant programs and the
jobs tax credit are designed to increase employment of targeted
groups in the labor force; direct interest subsidies and the issuance
of tax-exempt bonds result in lower financing costs for eligible
issuers of mortgage bonds or for eligible businesses. Similarly,
State and local governments benefit both from direct grant programs and from the ability to borrow funds at tax-exempt rates,
and individuals benefit both from direct medicare payments and
from the deductibility of medical expenses for income tax purposes.
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.




203

204

THE BUDGET FOR FISCAL YEAR 1982
DEFINING T A X 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 to encourage certain economic activities or in
recognition of special circumstances. 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 to discourage specified kinds of activities. 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
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 including the imputed
value of in-kind consumption and imputed changes in net wealth,
might be used for this purpose. Such theoretically pure treatment,
however, is not possible in practice.
The concept of the normal tax structure recognizes that it is
impractical for individual taxpayers to make the necessary imputations as, for instance, the imputed income derived from owneroccupied homes. Furthermore, for historical and administrative
reasons the normal structure allows separate taxation of individual
and corporate incomes even though it would be possible to define a
normal income tax structure that would integrate these two taxes.
Although a theoretically pure as well as normal structure for an
income tax base can be specified with reference to generally accepted rules of income measurement, there is no similar point of reference for regarding as theoretically pure or normal any particular
structure of income tax rates. However, for purposes of identifying
tax expenditures, the progressive rate structure and the provisions




SPECIAL ANALYSIS D

205

that eliminate the tax liability of low-income persons 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. Reductions in the tax rates for individuals and increases in the personal
exemption and the standard deduction (now called the zero bracket
amount) tend to reduce the estimated revenue losses associated
with some tax expenditure items. This occurs because fewer taxpayers itemize their deductions, because tax preferences have less
value at lower marginal rates, and because these two factors
reduce the amount of tax liability that may be offset by tax credits.
Distinctions between the normal tax structure and exceptions
leading to tax expenditures do 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, such as rate structure and exemption levels, have major
effects upon the level and composition of economic activity and the
distribution of income. Budget outlays and other policy instruments are alternative means to achieve the objectives of certain
features of the normal tax structure just as they are often a potential substitute for tax expenditures.
Tax rates cannot be presumed to be independent of either direct
outlays or current tax expenditures. If either major tax expenditure items or direct spending programs were repealed, tax rates
could be set at lower levels to maintain an appropriate fiscal
policy.
Several issues relating to the distinction 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. These threshold levels have been affected by legislated changes in personal
exemptions and standard deductions in recent years. 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.
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, as would a
proportional or even a regressive rate schedule, because the
concept of tax expenditures is not characterized by any specific rate schedule. Therefore, tax expenditures do not result




206

THE BUDGET FOR FISCAL YEAR 1982

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.
• The limited progressive rate schedule for corporations. The
first $100,000 of corporate income is taxed 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, corporate tax rates below the
46% top rate are viewed as giving rise to a tax expenditure.
• 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. The concept
of tax expenditures is not characterized by any specific set of
rate schedules applicable to the particular tax filing units.
• 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 an
income 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 extend benefits
in kind to individuals which are excluded from income, but
this exclusion does not result in tax expenditures. The dividing line is not clear cut between nontaxable government benefits that result in tax expenditures and those that do not.
Food stamps, for example, are so nearly the equivalent of
cash that their exclusion from income subject to tax might be




SPECIAL ANALYSIS D

207

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." However, the exclusion from taxable income of 60% of capital
gains results in a tax expenditure.
An individual's assets held 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. Moreover, the basis of the decedent's assets in the hands
of the estate, heir or other beneficiary is their market value
at the date of death. Thus, gains that accrued before death
are never subject to tax. The failure to include these unrealized capital gains in income is considered for purposes of this
analysis to result in a tax expenditure.
• Gifts and bequests. The tax system subjects gifts in excess of a
minimum amount 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, subchapter S corporations treated in a manner
somewhat 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. It is possible to define a tax structure in which
individual and corporate taxes are completely integrated ii:
the sense that all corporate income would be allocated and
taxed to shareholders. However, for purposes of this analysis,
separate taxation of regular corporate entities is considered to
be part of the normal tax structure.
• 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




208

THE BUDGET FOR FISCAL YEAR 1982

allowance for obsolescence) on property used in a trade or
business or for the production of income." To measure actual
depreciation the changes in market values of assets are required. This information is generally not available, so that
estimates of an asset's useful life and its probable rate of
depreciation are used instead. 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 because 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% shorter 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,
a rapid amortization period in place of useful lives is 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. No
attempt was made in this analysis to determine whether certain expenses such as those for entertainment and meals
should not only reduce the taxable income of employers, but
should also be excluded from the taxable income of the employees receiving these in-kind benefits. Tax expenditures do
occur when the tax code permits business or investment expenditures that are capital outlays in economic terms to be
treated as current expenses.
• Foreign tax credits. The normal structure of the income tax
includes tax credits for foreign income taxes paid; this prevents the double taxation of income earned abroad. While




SPECIAL ANALYSIS D

209

there are some limitations on the credit, it generally 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.
This discussion does not exhaust the definitional issues inherent
in the tax expenditure concept nor does this analysis consider all
special tax provisions. Also, some items are omitted because the
revenue loss is relatively small ($5 million or less).
MEASURING T A X 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, 1980. 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 these programs.
The tax expenditure estimating procedure uses the same implicit
assumption that governs estimates of out-year budget outlays,
namely that the existing tax structure and all other institutional
determinants of resource costs are given. In effect, the estimating
procedure answers the question, "How much more tax liability
would be incurred by taxpayers if the preferential tax rule were
not in force, but all other features of the tax system, including the
structure of rates, remained the same?" When the special tax rule
involves an extraordinary deduction or exclusion of income receipts, the tax expenditure is estimated to be the excess deduction
or excluded income times an applicable marginal tax rate. However, in the case of individual taxpayers, account is taken of the
likelihood that some will no longer have remaining deductions
sufficient to itemize and, hence, would elect the standard deduction, absent the preferential deduction in question. When the special tax rule is a preferential credit against taxes otherwise due,

340-700

0 - 8 1 - 1 4




210

THE BUDGET FOR FISCAL YEAR 1982

the tax expenditure estimate is equal to the credits claimed by all
taxpayers.
Tax expenditures, like budget outlays, are intended to reallocate
income or output. It is, therefore, assumed that as a result of
offsetting fiscal or other policies aggregate output and incomes
remain at the levels that underlie the 1982 budget estimates. For
this reason, no "second order" effects on tax receipts are needed or
estimated.
As is the case with estimates of proposed changes in tax law, tax
expenditure estimates are computed on a budget receipts or "cashflow" basis. However, for purposes of the present analysis, the
estimates show the difference between budget receipts under current law and budget receipts under the assumption that a law
without the particular tax expenditure provision had always been
in effect. These figures, therefore, generally show larger revenue
losses than could be obtained in the first years of transition from
one tax law to another.
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 tax expenditure even though for a particular
taxpayer, transaction, or asset the special provision defers a tax
rather then eliminates it. The deferral of tax liability is equivalent
to an interest-free loan from the government to the taxpayer. Thus,
such tax expenditures may be compared with lending transactions
of the government. (See the discussion of credit programs in Special Analysis F). For a stable or growing business, the deferral of
taxes continues indefinitely under most of these provisions.
Estimating tax deferral items on a cash flow basis is consistent
with the way that direct lending transactions are treated in the
budget. Thus, when extensions of new loans exceed repayments of
old loans, budget outlays are positive, and when loans repaid
exceed loans made, budget outlays are negative. Similarly, negative
tax expenditures arise in situations where taxpayers, whose tax
liabilities were reduced in earlier years, have larger tax payments
than they otherwise would have in later years. While tax expenditures reflect the amount of taxes deferred each period, they do not
show the subsidy to taxpayers of interest free borrowing from the
government, just as implicit interest subsidies are not shown for
direct loan outlays.
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 forward sample tax
return data from past years by means of other more current infor-




SPECIAL ANALYSIS D

211

mation, including the economic forecast used in estimating budget
receipts and outlays. In addition, many tax expenditures result
from excluded income not reported on tax return^. 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. An "add-on" minimum tax on tax preferences assures that individuals and corporations receiving tax
preferences do not escape bearing some share of the tax burden. It
has the effect of reducing the amount of the subsidy provided by
the tax preference itself. Intangible drilling costs for oil and gas
and geothermal wells are not minimum tax preference items to the
extent that net income from the production of these wells offsets
intangible drilling costs deductions.
Capital gains and excess itemized deductions are excluded as
preference items subject to the minimum tax for individuals. However, an alternative minimum tax add-on may be applicable, levied
on the sum of taxable income, certain deductions in excess of
specified income limits and the capital gains deduction. The alternative minimum tax is paid if tax liabilities under this tax exceed
the sum of tax liabilities under the ordinary income tax and the
add-on minimum tax. The alternative minimum tax may be offset
by the foreign tax credit and by other tax credits such as the
investment tax credit, attributable to the active conduct of a trade
or business. Any revenue gain under the alternative tax is assumed
to offset the tax expenditures that would otherwise result from the
capital gains preference.
"At-risk" rules limit deductions attributable to a taxpayer's investment to the amount of cash investment plus the debts for
which the taxpayer is personally liable. These rules, which apply to
all taxpayers other than widely held corporations and to all activities other than equipment leasing by closely held corporations and
real estate, have the effect of reducing tax expenditures.
Tax expenditure estimates cannot simply be added together to
obtain totals for functional areas or a grand total. However, where
tax expenditures for both individuals and corporations result from
the same tax code provision, such as the investment tax credit, the
two estimates may be added together.
Simply adding tax expenditures produces inaccurate totals because tax expenditures affect the value of other tax expenditures.
This interaction may be demonstrated by comparing the result of
deleting two tax expenditures simultaneously to that of deleting
them separately. In some cases, the revenue gained from the deletion of two tax expenditure items simultaneously would be greater
than the sum of the gains from the deletion of the two items




212

THE BUDGET FOR FISCAL YEAR 1982

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 together 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, more individuals who now itemize their
deductions would opt for the standard deduction than if only one
preference were repealed. The revenue gain would therefore be
lower from repealing both preferences together than the sum obtained from repealing each one separately.
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 more 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 $62.3 billion in 1982, whereas the sum of these tax expenditures, taking each item separately, is $81.8 billion. The aggregations of related tax expenditure items that are presented and
discussed in the text have been estimated using special procedures
which take account of interaction effects.
The estimates of tax expenditures shown in table G - l are based
on procedures similar to those used in past years. However, because
of improvements in data sources, estimating methodology, and a
number of disaggregations and functional reclassifications, the estimates may not be strictly comparable to those published in previous years. Tax expenditures may also be measured on the basis of
outlays that provide an equivalent subsidy. This is discussed below
with reference to housing and energy tax expenditures.
T A X EXPENDITURES BY FUNCTION

Estimates of tax expenditures for 1980-82 are grouped together
by functional category in table G-l. The estimates are shown separately for individuals and corporations. Each tax expenditure has
been classified in the functional category used for budget outlays
into which it most closely fits.
The functional classification of several tax expenditures has been
changed this year. Exclusion of interest on State and local housing




SPECIAL ANALYSIS D

213

bonds is separated into rental housing, which remains in the
income security function, and owner-occupied housing, which is
now in the commerce and housing function. Exclusions of interest
on State and local debt issued to finance student loans, hospital
construction, and certain energy facilities have been separated
from that for general purpose State and local debt and are now in
education, health, and energy functions. Expensing of exploration
and development costs and the excess of percentage over cost depletion formerly in the energy function have now been separated into
nonfuel and fuel categories. The former are in the natural resources and environment function and the latter are in the energy
function and further separated into oil and gas and other fuels.
The exclusion of capital gains on home sales for persons age 55 and
over and the exclusion of interest on life insurance savings have
been changed from income security to the commerce and housing
function, while tax credits on rehabilitated housing have been reclassified from commerce and housing to community and regional
development. A brief description follows of the special tax provisions 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.—A U.S. citizen or a U.S. resident alien
who is a resident of a foreign country or remained outside the
United States for 17 months in an 18-month period is allowed
deductions for certain foreign living costs.
Eligible taxpayers may deduct expenses for annual home leave
travel, the cost of schooling from kindergarten through grade 12
equivalent to that prevalent in the United States, 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 one-sixth of earned income less the special deductions. Taxpayers living in hardship areas are 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. Individuals who perform charitable
services in lesser developed countries may elect to exclude up to
$20,000 of earned income attributable to the services rather than
taking the special deductions. The tax-exempt status of certain
allowances received by Federal employees working abroad has not
changed. 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




214

THE BUDGET FOR FISCAL YEAR 1982

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
the earnings of a controlled foreign corporation would be taxed to
the parent corporation.
General science, space, and technology.—Research and development 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
certain mineral properties may be deducted as current expenses
rather than amortized 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. Intangible drilling costs for oil and gas wells are a preference item for purposes of the minimum tax to the extent that
such costs exceed either cost depletion or 10-year amortization.
Individuals, however, may exclude intangible drilling costs from
their minimum tax base to the extent that the deductions did not
exceed oil and gas income. The same rules apply to 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 likewise limited to the cost of the investment. 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. Percentage depletion is
available only to limited quantities of output by independent oil
and gas producers and royalty owners. In addition, the percentage




SPECIAL ANALYSIS D

215

depletion rate for oil and gas is being phased out from 22%
through 1980 to 15% in 1984 and thereafter. Production from geothermal deposits is eligible for percentage depletion at 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.
A variety of tax incentives stimulate energy conservation and
encourage conversion to energy sources other than oil or natural
gas. Individuals may take a 15% income tax credit for home insulation and other energy-conserving components up to a maximum
credit of $300. The Crude Oil Windfall Profit Tax Act of 1980
increased the credit allowed under prior law for expenditures on
solar and other renewable energy source property to 40% of the
first $10,000 of qualifying expenditures.
In addition to the investment tax credit, prior law allowed a 10%
credit for business 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.
The Crude Oil Windfall Profit Tax Act of 1980 made several
modifications to these subsidies. The 10% credit for solar, wind or
geothermal energy property is increased to 15% and facilities
which produce process heat from solar energy in agricultural and
industrial applications are made eligible for the credit. The credit
is extended to the end of 1985. In addition, cogeneration equipment, alumina electrolytic cells and certain intercity buses are
made eligible for the 10% credit. A 15% credit is now available for
ocean thermal equipment installed at two sites to be designated by
the Secretary of the Treasury; and an 11% credit is available for
certain small-scale hydroelectric generating property. Furthermore,
a 10% credit for biomass property is extended through 1985. A $3
per barrel of oil equivalent production credit is provided for several
forms of alternative fuels, but, as a general rule, is not available
unless the price of oil drops below $29.50 (in 1979 dollars). The
credit is available notwithstanding this price limitation for processed wood fuel and steam produced from solid agricultural byproducts. The 1980 act extends the 4 cents per gallon Federal excise tax
exemption for gasohol from October 1, 1984 through December 31,
1992 and provides a corresponding production income tax credit for
alcohol used as a fuel in application where the excise tax is not
assessed. The 1980 act also permits the financing of certain proper-




216

THE BUDGET FOR FISCAL YEAR 1982

ty with tax exempt industrial development bonds—certain smallscale hydroelectric generating facilities owned by a governmental
unit and facilities which produce steam or alcohol from solid waste.
Natural resources and environment—As is true for fuel-minerals,
certain capital costs associated with exploration and development
of nonfuel-minerals may be expensed rather than depreciated over
the life of the asset. Most nonfuel-mineral extractors also make use
of percentage depletion rather than cost depletion.
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 are given the
same treatment.
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 taxable income. The revenue effect of
this deferral reflects the net effect of the revenue reduction 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 reduction from the amortization of current
investments exceeds the revenue increase from the lower depreciation deductions for past investments.
Expenditures to preserve and restore certain historic structures
are eligible for special accelerated depreciation. This provision does
not apply to owner-occupied housing.
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 ordinary income.
Up to $10,000 ($5,000 for a married taxpayer filing a separate
return) of direct costs incurred in a taxable year to forest or
reforest a site for the commercial production of timber may be
amortized over a 7-year period. The $10,000 of costs are also eligible for the investment tax credit.
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.




SPECIAL ANALYSIS D

217

Rural electric and telephone cooperatives are exempt from the
corporate income tax. Payments of noncash patronage dividends to
their patrons generally need not be considered 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
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.
Certain payments made under various Federal and State costsharing conservation programs may 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.
Prior to passage of the Crude Oil Windfall Profit Tax of 1980 the
first $100 ($100 per spouse on a joint return) of dividend income
could be excluded from income subject to tax. Effective January 1,
1981, the act raised the exclusion to $200 ($400 in case of a joint
return) and extended the coverage to most interest income.
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 provided they maintain stipulat-




218

THE BUDGET FOR FISCAL YEAR 1982

ed fractions of their assets in "qualifying assets," primarily residential mortgages.
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
reserves. Such interest income is taxable neither as it accrues nor
when received by beneficiaries.
Interest paid on consumer credit is allowed as an itemized deduction for individuals.
Owner-occupants of homes may deduct mortgage interest and
property taxes (but not maintenance outlays or depreciation) as
itemized nonbusiness deductions. The 1982 tax expenditure from
these two items combined is $35.5 billion. This is less than the
$36.2 billion sum of the two separately because if both were deleted
fewer taxpayers would itemize deductions.
Interest on State and local government debt issued to finance
below market rate mortgages for owner occupied housing is excluded from income subject to tax. The Omnibus Budget Reconciliation Act of 1980 restricts the use of mortgage subsidy bonds with
a State-by-State ceiling on the annual volume of such use for single
family housing equal to 9% of the average of all mortgages that
originated in the State during the preceding 3 years or $200 million, whichever is greater. A total ban on mortgage subsidy bonds
for single family housing becomes effective January 1, 1984.
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
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% of the cost 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




SPECIAL ANALYSIS D

219

the guideline lives of depreciable equipment to be reduced by 20%.
The ADR system does not apply to property used abroad.
Sixty percent of net long-term gains from the sale of capital
assets may be excluded from income. The excluded 60% of net
long-term capital gains is no longer included as a preference item
in computing the minimum tax for individuals. 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 long-term capital losses
and 100% of net short-term capital losses may be offset against
ordinary income up to a maximum deduction of $3,000 per year
with an unlimited carry-forward.
Corporations may elect a 28% alternative tax rate on capital
gains. 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.
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. 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.
Capital gains on assets held at the owner's death escape income
tax to the extent that the gains are attributable to increases in
value that occurred during the owner's lifetime. The estimate assumes that such gains would be taxed as ordinary income in the
year of death.
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 is taxed
progressively at rates from 17 to 40%. Income over $100,000 is
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 10% investment tax credit is applied to the cost of qualifying
property (generally, tangible personal property used in a trade or
business) having a useful life of 7 years or more. Assets with




220

THE BUDGET FOR FISCAL YEAR 1982

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 investment tax credit is available for investments in single
purpose livestock and horticultural structures or enclosures. 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. Prior to the Revenue Act of 1978, 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.
Transportation.—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 5-year 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.—Under certain conditions, taxpayers may 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
January 1, 1984.
The 10% investment tax credit is allowed for the rehabilitation
of buildings that are at least 20 years old and used for business or
productive activities (other than for residential purposes).
Education, training, employment, and social service.—Scholarships and fellowships are generally excluded from a recipient's
taxable income, unless the recipient agrees to perform services for
the grantor. The Tax Treatment Extension Act of 1980 provides a
permanent exemption from gross income for scholarships received




SPECIAL ANALYSIS D

221

under Federal programs which require future Federal service by
the recipients to the extent that the scholarships are used for
tuition, fees, and related expenses. In addition, the act extends the
tax-exempt scholarship treatment of National Research Service
Awards through 1981. The exclusion of educational benefits under
the GI bill is included in the veterans benefits and services function. Interest on State and local government debt issued to finance
student loans is excluded from income subject to tax.
Taxpayers may claim personal exemptions for dependent children 19 or over who receive income of $1,000 or more per year 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. An employer may 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 excluded 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.




222

THE BUDGET FOR FISCAL YEAR 1982

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. Where the income is from a trade or business in which capital
as well as personal service generates income, the maximum tax
applies 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 credit may 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 incentive) program and other recipients of AFDC (aid for families with
dependent children). An income tax credit of 50% of first-year and
25% of second-year wages, up to 100% of the 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 targeted jobs credit 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 employee's 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




SPECIAL ANALYSIS D

223

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.
Interest on State and local government debt issued to finance
hospital construction is excluded from income subject to tax.
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 otherwise would have been treated as a capital outlay
can be treated as a current expense prior to January 1, 1983.
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.
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 present levels of
personal exemptions and the zero bracket amount. However, because 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.
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 (or $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 effec-




224

THE BUDGET FOR FISCAL YEAR 1982

tive 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.
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 1982 tax expenditure of $15.8 billion. This effect is greater
than the $14.3 billion 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, which low-income workers with minor
dependents may claim, is 10% of earned income up to $5,000, with
a phaseout at the rate of 12.5% per dollar earned over $6,000. The
maximum annual credit is $500.
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 1982 the tax expenditure will be $755 million; the outlay will be $1,115 million. For
1980 and 1981 the estimated tax expenditures are $720 million and
$635 million and the estimated outlays are $1,275 million and
$1,205 million, respectively.




SPECIAL ANALYSIS D

225

Rental housing assistance is provided through State and local
housing authorities for eligible families. The Omnibus Budget Reconciliation Act of 1980 restricts the use of tax-exempt bonds, for
multi-family rental housing projects to those that include a substantial number of units for low and moderate income individuals.
The restrictions apply to such bonds issued after April 25, 1979
with exceptions allowed for bonds in process as of that date.
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.—A 50% credit may be claimed on political
contributions up to $100 ($200 for joint returns).
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 $15.2 billion for 1982.
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
is classified under commerce and housing credit.
Under certain conditions, U.S. corporations receiving income
from sources in a U.S. possession can 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.

340-700 0 - 8 1 - 1 5




226

THE BUDGET FOR FISCAL YEAR 1982
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION
(In millions of dollars)
Fiscal years
Corporations

Description

1981

1980

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
General science, space, and technology:
Expensing of research and development expenditures
Energy:
Expensing of exploration and development costs:
Oil and gas
Other fuels
Excess of percentage over cost depletion:
Oil and gas
Other fuels
Capital gains treatment of royalties
on coal
Exclusion of interest on State and
local government industrial development bonds for certain
energy facilities
Residential energy credits:
Supply incentives
Conservation incentives
Alternative, conservation and new
technology credits:
Supply incentives
Conservation incentives
Alternative fuel production credit
Alcohol fuel credit 1
Energy credit for intercity buses2
Natural resources and environment:
Expensing of exploration and development costs, nonfuel minerals
Excess of percentage over cost depletion, nonfuel minerals
Exclusion of interest on State and
local government pollution control bonds




Individuals
1982

1980

1982

1981

1,470

1,585

1,715

135

170

200

555

640

665

1,430

1,600

1,830

450

480

520

1,760

2,015

2,230

35

40

45

1,505
20

1,875
25

1,895
25

670

860

1,030

370
455

545
530

535
540

1,120
20

1,580
20

1,725
25

10

10

10

70

80

90

*

*

5

*

*

*

*

5

55
430

115
425

190
420

290
375
55

10

15

20

*

10

140
190
5

220
305
25

5

*

*

5

5

20

25

25

345

390

380

15

15

15

425

490

500

210

230

255

*

SPECIAL ANALYSIS

D

227

Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal years
Corporations

Description

1981

1980

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 iron ore....
Capital gains treatment of certain
timber income
Investment credit and seven-year
amortization for reforestation expenditures
Agriculture:
Expensing of certain capital outlays..
Capital gains treatment of certain
income
Deductibility of noncash patronage
dividends and certain other
items of cooperatives
Exclusion of certain cost-sharing
payments
Commerce and housing credit:
Dividend and interest exclusion
Exclusion of interest on State and
local industrial development
bonds
Exemption of credit union income
Excess bad debt reserves of financial institutions
Exclusion of interest on life insurance savings
Deductibility of interest on consumer credit
Deductibility of mortgage interest
on owner-occupied homes
Deductibility of property tax on
owner-occupied homes
Exclusion of interest on State and
local housing bonds for owneroccupied housing
Expensing of construction period interest and taxes
Excess first-year depreciation
Depreciation on rental housing in
excess of straight line
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




Individuals
1982

1980

1982

1981

60

110

110

15

35

65

10
10

20
10

30
10

25
10

45
10

70
10

420

470

535

120

135

150

*

10

75

80

85

430

475

545

20

25

25

385

405

425

540

625

630

-175

-190

-200

30

75

80

430

1,325

3,170

180

230

310

3,490

4,080

4,770

4,745

5,260

6,040

15,615

19,805

25,295

7,310

8,915

10,920

730
110

1,000
115

1,245
125

470

340

470

*

*

245

470

655

202

370

565

555
50

585
50

615
55

140
135

160
145

160
150

75

80

80

310

330

350

135
2,880

140
3,585

150
3,895

120
150

125
180

135
225

715

940

1,020

15,415

16,230

18,990

1,010

1,110

1,220

228

THE BUDGET FOR FISCAL YEAR 1982
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal years
Description

Corporations
1981

1980

Exclusion of capital gains on home
sales for persons age 55 and
over
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 and energy
Investment credit for rehabilitation
of structures
Amortization of start-up costs
Transportation:
Five-year amortization on railroad
rolling stock
Deferral of tax on shipping companies
Community and regional development:
Five-year amortization for housing
rehabilitation
Investment credit for rehabilitation
of structures
Education, training, employment,
and social services:
Exclusion of scholarship and fellowship income
Exclusion of interest on State and
local student loan bonds
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




Individuals
1982

1980

1981

1982

535
4,750

590
5,085

650
5,440

3,050

3,130

3,425

20

65

110
7,210

7,395

7,590

15,200

16,395

17,340

10

-40

-40

-40

75

75

75

5

10

15

10

15

20

120

145

160

60

65

65

355

410

490

15

25

40

1,030

1,045

1,055

350
30

380
35

410
40

20

35

10

30

55

85

695

770

820

305

310

310

785

950

1,150

375

385

385

5,895

7,135

8,630

1,320

1,655

2,105

885

1,025

1,175

*5

10

10

25

50

30

45
190
130

50
85
255

50
25
150

229

SPECIAL ANALYSIS D
Table G - l . TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal years
Corporations

Description
1980

Health:
Exclusion of employer contributions
for medical insurance premiums
and medical care
Deductibility of medical expenses
Exclusion of interest on State and
local hospital bonds
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
Exclusion of workmen's compensation benefits..
Exclusion of special benefits for
disabled coal miners
Exclusion of untaxed unemployment
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
Additional exemption for the blind
Additional exemption for elderly
Tax credit for the elderly
Deductibility of casualty losses
Earned income credit 3
Exclusion of interest on State and
local housing bonds for rental
housing
Veterans benefits and services:
Exclusion of veterans disability
compensation
Exclusion of veterans pensions.....
Exclusion of GI bill benefits




1981

Individuals
1982

1980

1981

12,075
3,150

14,165
3,580

285

395

450

140

185

190

195

190

1,180

1,425

690
6,890

815
9,020

1,015

1,250

320

380

2,200

2,675

90

100

3,350

5,275

390
170

465
170

19,785

23,605

1,925

2,105

1,675

1,855
100

135

195

240

15
30
2,040
130
570
720

20
30
2,260
125
715
635

175

235

1,065
75
190

1,300
85
180

230

THE BUDGET FOR FISCAL YEAR 1982
Table G-l. TAX EXPENDITURE ESTIMATES BY FUNCTION—Continued
(In millions of dollars)
Fiscal years
Corporations

Description
1980

General government:
Credits and deductions for political
contributions
General purpose fiscal assistance:
Exclusion of interest on general
purpose State and local debt
Deductibility of nonbusiness State
and local taxes other than on
owner-occupied homes
Tax credit for corporations receiving
income from doing business in
United States possessions
Interest:
Deferral of interest on savings
bonds
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
Itemized deductions4
Deductibility of mortgage interest
and property tax on owner-occupied homes
Benefits for the elderly5
Fringe benefits6
Government benefits and payments 7

3,300

905

1981

4,035

1,005

Individuals
1982

4,315

1980

1981

1982

80

100

80

1,625

1,885

2,165

14,690

18,405

23,060

80

-75

335

1,095

1,175

1,455

1,600

22,295

23,645

26,975

7,150

9,025

10,020

3,565

4,340

5,195

20,495

25,480

31,680

7,860
40,915

9,510
50,955

11,505
62,315

22,170
10,320
35,010

28,065
12,965
41,335

35,465
15,760
48,550

18,280

23,765

26,450

870

890

885

*$5 million or less. All tax expenditure estimates have been rounded to the nearest $5 million.
1 In addition, the exemption from the excise tax for alcohol fuels results in a reduction in excise tax receipts of $50 million in 1980, $120
million in 1981, and $190 million in 1982.
2 In addition, the exemption from excise tax for buses, bus parts and certain items used in connection with buses results in a reduction in
excise tax receipts of $40 million in 1980, $50 million in 1981, and $50 million in 1982.
3 The figures in the table indicate the effect of the earned income tax credit on receipts. The effect on outlays is: 1980, $1,275 million; 1981,
$1,205 million; 1982, $1,115 million.
4 Interest on consumer loans; mortgage interest and property taxes on owner-occupied homes; charitable contributions; medical expenses; casulty
losses; nonbusiness State and local taxes other than on owner-occupied homes.
5 Exclusion of social security and railroad retirement plus the additional exemption and tax credit for the elderly.
6 Employer contributions for medical insurance, medical care, pensions and earnings plus premiums on group life, accident and disability
insurance.
7 Exclusion of military benefits, allowances, and disability pensions; OASDI disability insurance; OASI for retirees, dependents and survivors;
Railroad retirement; workman's compensation, benefits for disabled coal miners; untaxed unemployment benefits; public assistance benefits; veterans
disability compensation, pensions and Gl bill benefits.




231

SPECIAL ANALYSIS D
PROPOSED CHANGES IN T A X EXPENDITURES

The administration has made several proposals as part of the
1982 budget that would create new tax expenditures and delete or
change the value of currently existing tax expenditures. The estimates for these proposed changes are shown in table G-2.
On August 28, 1980, the President proposed an economic revitalization program. Through a series of tax and spending initiatives,
this program is expected to put people to work and restore growth
without rekindling inflation. The tax expenditure measures included in this program are designed to increase productivity, lower
unemployment and reduce inflation.
The Administration also proposes to restrict the use of taxexempt financing in certain private purpose activities. The use of
tax-exempt bonds to finance private projects has grown rapidly in
recent years. Tax-exempt financing adversely affects the efficient
allocation of scarce capital resources and the control of the Federal
budget. Two additional Administration proposals lower tax expenditures resulting from deductions of charitable contributions of tangible personal property and the investment tax credit on property
not "at risk". Each of the proposed changes in tax expenditures is
described briefly below:
Table G-2. ESTIMATES OF PROPOSED CHANGES IN TAX EXPENDITURES
(In millions of dollars)
Fiscal Years
Description

Corporations
1981

Constant rate depreciation
Refundable investment tax credit 1
Exclusion of income earned in specified areas abroadExpanded earned income tax credit
Working spouse deduction
Total of tax expenditures from the proposed economic
revitalization program
Limit the issuance of small issue industrial development bonds....
Disallow the use of tax-exempt financing by tax-exempt organizations
Disallow tax-exempt financing of student loans
Limit charitable contributions of tangible personal property
Extend "at risk" to the investment tax credit

2,290
65

Individuals
1982

6,720
10

1981

635
65

2,355
-65

6,730
-270

-25

-95
-35

-10

700
-10
-10

-5
-20
-20

*$5 million or less. All tax expenditure estimates have been rounded to the nearest $5 million.
Note: Details may not add to totals due to rounding.
1 The figures in the table indicate the effect of the refundable investment tax credit on receipts. The effect on outlays is: 1981, $225 million;
1982, $2,335 million.

Constant rate depreciation.—Under current law depreciation is
computed either under the asset depreciation range system (ADR)
or based upon facts and circumstances established by each taxpayer. The proposed program provides for a constant annual rate of




232

THE BUDGET FOR FISCAL YEAR 1982

depreciation (CRD) for each of 30 asset classes. Procedures for
using accelerated depreciation are simplified and the allowable
depreciation rate is increased by approximately 40%. Also the full
10% investment tax credit is made available to all eligible machinery and equipment investments with lives longer than 1 year. The
CRD system is proposed to be fully effective and required for all
assets placed in service after December 31, 1980.
Refundable investment tax credit.—The 10% investment tax
credit that is permitted under current law is of little immediate
value to firms that have little or no earnings yet have substantial
investment needs. Under the Administration's proposal, up to 30%
of the earned but unused credit for investments placed in service
after December 31, 1980, will be refundable. The portion of the
credit not made refundable would be available for carryover as
under present law.
Exclusion for Americans working abroad.—Under this proposal
Americans working abroad in certain areas are exempt from tax
on the first $25,000 of foreign earned income plus 60% of the next
$60,000, for a maximum exemption of $61,000. The exemption is
provided for places where the State Department authorizes a hardship allowance of 10% or more for U.S. Government employees.
The special deductions provided under current law will continue
for Americans working abroad in areas where the new exemption
does not apply. The proposed effective date is January 1, 1981.
Expanded earned income tax credit.—To offset the rise in social
security taxes paid by individuals who have dependent children
and no tax liability, an expansion of the earned income tax credit
is proposed. Under current law, taxpayers with dependent children
are eligible for the credit, which is 10% of the first $5,000 or
earnings and phases out at the rate of $1.25 for each $10 of earned
income above $6,000. Under this proposal the credit is increased to
12% of the first $5,000 of earnings and phases out at the rate of
$1.50 for each $10 of earned income above $7,000. The effective
date for the proposed expansion of the earned income credit would
be January 1, 1982.
Working spouse deduction.—Under current law married couples
with two earners generally pay higher taxes than if they were
single unless one earns substantially more than the other. As a
result, two earner families may be subject to a work disincentive—
or marriage disincentive—created by the tax law. To reduce this
"marriage penalty," a tax deduction equal to 10% of the first
$30,000 of earnings (5% of $15,000 for 1982) of the spouse with the
lower earnings is proposed. The proposed deduction would be made
effective for tax years beginning January 1, 1982.
Limit the issuance of small-issue industrial development bonds.—
Under current law interest paid on "small issue" industrial devel-




SPECIAL ANALYSIS D

233

opment bonds is exempt from tax. The exemption applies to obligations issued in amounts of $1 million or less that are used for the
acquisition or construction of land or depreciable property. Under
certain circumstances, this limitation may be increased to $10 million at the election of the issuer. The Administration proposes to
restrict the categories of projects that qualify for the "small issue"
exemption as follows:
(1) Small industrial firms, defined as those engaged in construction, manufacturing, mining, or utility activities and processes,
with total assets of less than $10 million may issue up to a lifetime
limit of $5 million in exempt small issues; or
(2) Any businesses located in targeted distressed areas may issue
up to a lifetime limit of $10 million of exempt small issues in each
targeted area.
Disallow the use of tax-exempt financing by tax-exempt organizations.—Eliminating the current exemption allowing non-governmental tax-exempt (Section 501(c)(3)) organizations to issue taxexempt bonds would reduce non-governmental use of tax-exempt
financing. The largest use of this exemption is private, non-profit
hospital construction. This proposal is also intended to close access to
tax-exempt financing to other private non-profit organizations. Issuance of tax-exempt bonds for public universities by State-sponsored
authorities would continue to be allowed.
Disallow tax-exempt financing of student loans.—The Administration proposes to prohibit the issuance of tax-exempt bonds for
financing student loans. This would eliminate profits State governments currently earn from the difference between the yield on
student loans—the interest rate on the student loans plus the
special allowance Federal interest subsidy payment—and expenses
consisting of the tax-exempt interest rate and administrative expenses. The current student loan program of federally guaranteed
loans and direct interest subsidies provides adequate compensation
for States as well as private lenders to service student loans, without the need for tax-exempt bonds.
Charitable contributions of tangible personal property.—Under
current law a taxpayer making a contribution of tangible personal
property held for more than one year may claim the fair market
value of the property, instead of being limited to deducting its cost.
To prevent taxpayers from claiming excessive valuation for contributions of tangible personal property, the Administration proposes
to limit the deduction to the taxpayer's adjusted basis (that is, cost
plus improvements) in the property on the date of the contribution.
The effective date of this proposal is January 1, 1981.




234

THE BUDGET FOR FISCAL YEAR 1982

Extension of "at risk" to the investment tax credit.—Individuals
electing to file as small business corporations and certain other
closely held corporations are limited in the amount of losses from
business activities they may deduct to their amounts "at risk" in
the activity at the close of the taxable year. In general, amounts at
risk are direct contributions and loans to the activity for which the
taxpayer is personally liable. Under current law, however, a taxpayer is able to claim investment tax credits for property for which
losses are disallowed by the at risk limit. The Administration proposes that effective January 1, 1981 only amounts at risk be included in the basis of property for purposes of computing the investment tax credit and amounts not at risk be excluded from the
basis.
OUTLAY EQUIVALENTS OF T A X EXPENDITURES

One important purpose served by accounting for budget outlays
on a program basis is to measure the extent and purposes of
Government efforts to reallocate resources. In addition to the
direct Government use of resources to provide "public goods"—such
as the building of highways or provision of national defense—
certain public outlays are designed to reduce market prices of
particular goods and services. These outlays are subsidies in the
sense that they permit goods and services to be bought at less than
the cost of the resources used to produce them.
One use of budget outlay figures is for program evaluation and
for comparison with other program outlays. But these comparisons
are valid only to the extent that budget outlays are consistent and
comprehensive measures of resource costs used for public purposes.
Government outlays as reported in the budget may be deficient
as measures of total program costs in two respects. First, certain
Government outlays give rise to income which is exempt from tax,
and this causes the amounts displayed in the budget to understate
the resource cost of these programs in comparison with those
which generate taxable income. Second, the outlay totals exclude
resources allocated to public use by special tax rules, Government
regulations and credit policies rather than by appropriations.
Tax expenditures as conventionally calculated and displayed in
table G - l may also fail to reflect program costs accurately. Three
types of adjustment to conventional tax expenditure estimates are
required to improve comparability with Federal outlays. First, the
year-to-year estimates of tax expenditures depend on the collection
time pattern of corporate and individual tax liabilities. This may
be quite different from the pattern of payments under a comparable direct-spending program. Thus, to facilitate comparisons with
direct spending, the timing of the tax subsidy is spread evenly over
the year.




SPECIAL ANALYSIS D

235

Second, tax subsidies that involve a deferral of tax liability, such
as rapid amortization, give benefits to the taxpayer that are equivalent to interest-free loans. To be comparable with outlays, these
benefits should be measured in the same way that the budget
treats such Government lending transactions. The general budget
treatment of a subsidized loan is to record as an outlay both the
amount of new loans made less previous loans repaid and the
interest payments on the stock of loans outstanding. For tax expenditures, the equivalent treatment is to measure the net increase
in the amount of taxes deferred and the implicit interest subsidy
on the stock of tax deferrals outstanding.
Finally, tax expenditures are normally measured in "after-tax
dollars" rather than in market prices and "pretax dollars". In
other words, the tax expenditure is the tax saving to the taxpayer,
which normally differs from the (taxable) payment that would be
required under a direct spending program to generate the same
after tax income and hence the same incentive effect. Thus, for
many tax expenditures, the amount of the tax subsidy must be
expressed in pretax market prices to be consistent with direct
expenditure programs.
Not all tax expenditure estimates require an adjustment to reflect market prices. For example, tax subsidies for items of consumption by households may correctly measure the reduction in
prices consumers pay for the subsidized goods and thus be equal to
the direct payment to either consumers or producers that would
result in the same price reduction.
For calculating tax expenditures on a basis that permits direct
comparison with budget outlays, that is, on an "outlay equivalent"
basis, three adjustments are required: (1) the timing of the subsidy
is spread evenly over the year, (2) items involving deferral of tax
liability are treated as Government lending transactions, and (3)
the subsidies provided through the tax system are converted to
pretax dollars where appropriate.
On an experimental basis, and to illustrate how budget totals
may more accurately reflect resource costs, consistent and comprehensive measures of resource costs have been estimated in two
program areas of the budget—housing and energy. For these areas,
tax preferences previously identified as tax expenditures have been
converted into outlay equivalents that are comparable with, and
additive to, budget outlays intended to accomplish the same program objective.
Brief descriptions of the several tax expenditure elements for
housing and energy are presented below. Summary numerical results are shown in table G-3.




236

THE BUDGET FOR FISCAL YEAR 1982
Table G-3. HOUSING AND ENERGY TAX EXPENDITURES AND BUDGET OUTLAYS
(In millions of dollars)
Description

Fiscal year

Housing:
Owner-occupied housing:
Tax expenditures (outlay equivalent)
Outlays

1982

1981

1980

26,840
115

33,170
150

41,655
310

Total
Tax expenditures as a percent of total
Rental housing:
Tax expenditures (outlay equivalent)
Outlays

26,955
99.6

33,320
99.6

41,965
99.3

1,965
6,025

2,155
7,280

2,410
8,680

Total
Tax expenditures as a percent of total

7,990
24.6

9,435
22.8

11,090
2L7

28,805
6,140

35,325
7,430

44,065
8,990

34,945
82.4

42,755
82.6

53,055
83.1

720
570

825
750

895
1,065

1,290
55.9

1,575
52.3

1,960
45.7

7,715
4,575

9,520
5,725

10,875
6,235

12,290
62.8

15,245
62.4

17,110
63.6

8,435
5,140

10,345
6,480

11,770
7,300

13,575
62.1

16,825
61.5

19,070
61.7

Total:
Tax expenditures (outlay equivalent)
Outlays
Total
Tax expenditures as a percent of total
Energy:
Conservation:
Tax expenditures (outlay equivalent)
Outlays
Total
Tax expenditures as a percent of total,.
Supply:
Tax expenditures (outlay equivalent)
Outlays
Total
Tax expenditures as a percent of total
Total:
Tax expenditures (outlay equivalent)
Outlays
Total
Tax expenditures as a percent of total
*$5 million or less. All estimates have been rounded to the nearest $5 million.
Note: Details may not add to totals due to rounding.

Budget resources devoted to housing
Housing programs have different objectives. Some housing programs aim to subsidize the private cost of shelter quite broadly;
others aim to improve the economic status of target population
groups by providing them low-cost housing. However, all such Government housing programs reduce the private costs of housing
occupancy below the market value of the resources consumed. The
budget cost of housing programs is, therefore, the market value of
resources that the Government must reallocate to achieve these
results. (Subsidies to owner-occupied housing are distinguished
from subsidies to rental housing in the estimates.)




SPECIAL ANALYSIS D

237

The particular tax expenditure items that provide subsidies to
homeowners have been discussed above. To enumerate briefly, they
are: (1) deductions for mortgage interest and property taxes; (2)
deferral of capital gains on home sales where the proceeds are used
to buy another home of at least equal value; (3) exclusion of up to
$100,000 of gains from the sale of a home for taxpayers 55 years of
age or older; (4) the issuance of tax-exempt bonds to provide reduced mortgage interest rates for owner-occupied dwellings; (5)
preferences for thrift institutions that hold residential mortgages.
In the calculations presented here, these preferences for thrift
institutions have been divided between owner-occupied and rental
housing according to the share of single family and multifamily
mortgages held by these institutions.
For rental housing, the tax preferences, in addition to those
provided to thrift institutions, are: (1) accelerated depreciation for
rental property; (2) expensing of construction period interest and
taxes; and (3) tax-exempt financing of multifamily housing projects.
Table G-3 presents the results of adjusting these tax expenditures to outlay equivalents. These results are shown along with
comparable direct spending for support of owner-occupied and
rental housing. In the aggregate for 1982, resources channeled
through special tax provisions amount to 83.1 percent of total
public support for housing. Direct spending is relatively more important in the case of rental housing (78.3 percent) and tax subsidies are relatively more important for owner-occupied housing (99.3
percent).
Budget resources devoted to energy programs
The analysis is limited to two energy subfunctions of the budget,
energy supply and energy conservation. These subfunctions involve
activities funded both by appropriations and through the use of
special tax provisions. Although both activities have as their final
objective reduced dependence on oil imports, supply programs emphasize increasing domestic production while conservation programs emphasize reducing demand for energy resources.
The particular tax expenditure items that encourage energy
supply are: (1) expensing of exploration and development costs; (2)
the excess of percentage over cost depletion; (3) capital gains treatment of royalties on coal; (4) investment tax credits for investment
in shale oil production facilities, cogeneration equipment, equipment for producing energy from biomass or natural gas from
geopressurized brine, solar, and wind utilization equipment, equipment for the production and distribution of geothermal and ocean
thermal energy; (5) tax-exempt financing for local furnishing of
electrical energy, facilities used to produce alcohol for use as a
motor fuel, solid waste energy producing facilities, and certain




238

THE BUDGET FOR FISCAL YEAR 1982

hydroelectric facilities; (6) the 40-cents-per-gallon subsidy for alcohol used as a motor fuel accomplished either through exemption
from excise taxation or through a credit against income tax; and (7)
the $3-per-barrel-of-oil equivalent for specified fuels taken as a
credit against income tax.
For energy conservation, the tax expenditures are: (1) investment
tax credits provided to businesses for the acquisition of energy
conservation equipment; (2) investment tax credits provided to
homeowners who invest in insulation and make similar other outlays to improve the energy efficiency of their residences; (3) tax
subsidies to encourage more effective use of buses and vanpools to
reduce usage of private automobiles, thereby increasing energy
efficiency in transportation.
Again, the results are shown in table G-3. In 1982 special tax
provisions constitute 61.7% of total public support for energy supply
and conservation. For energy supply, subsidies provided through
the tax system amount to 63.6% of total public resource costs. For
energy conservation tax subsidies are lower as a share, approximately 45.7%.




SPECIAL ANALYSIS H
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

1

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 the economy.
Federal grant-in-aid outlays to State and local governments are
estimated to be $99.8 billion in 1982, $4.5 billion above the estimated
1981 total of $95.3 billion, and $8.4 billion higher than the 1980
total of $91.5 billion. During the 20 years from 1958 to 1978, grants
grew at an average annual rate of 14.6%. The slower growth in
grants planned from 1978 to 1982 of 6.4% per year is a result of
several factors:
—a phasedown of outlays associated with economic stimulus
grants enacted in response to the 1976 recession;
—the elimination of general revenue sharing payments to States
beginning in 1981; and
—the need for overall budget restraint as part of a major effort
to hold down inflation.
Accompanying this restraint has been a continual effort to improve the administration of grant programs.
The administration has sought to improve the Federal grants-inaid system by pursuing grant consolidations and grant management simplification. The basic approach of the administration's
grant consolidation policy has been to improve the efficiency and
effectiveness of the Federal Government by:
—simplifying grant administration;
—increasing discretion for State and local governments in the
use of Federal funds;
—increasing responsibility at the State and local levels of governments, with approved accountability to voters; and
—reducing overlap in the services provided by government.
Consolidations have already been achieved for elderly assistance,
vocational rehabilitation and are in progress for forestry programs. The administration's proposals to consolidate economic development, energy, environment, airport development, health plan1 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).




239

240

THE BUDGET FOR FISCAL YEAR 1982

ning, and fish and wildlife programs were not approved by the
Congress. Further consolidation proposals are made in this budget
for youth training and employment, health planning and services,
and a major consolidation initiative in the transportation area where
44 separate categorical programs will be reduced to nine.
In addition to grants-in-aid, Federal lending to State and local
governments and loan guarantees are also significant. In 1982 the
Federal Government is expected to disburse $1.5 billion for new
loans to State and local governments. Loan outlays net of repayments and sales are expected to be $133 million. New guaranteed
loans to State and local governments are estimated to be $18.4
billion in 1982.
The chart shows trends in major grant categories since 1971.
Grants for highways remained fairly level through 1975, but have
increased substantially since then. Grants for human resources,
which include those under education, training, employment, and
social services; health; income security; and veterans programs,
account for 63% of the increase from 1972-82. General revenue
sharing has accounted for more than $6 billion in grants per year
from 1973 through 1980. However, under recently renewed legislation outlays are estimated to be $5.1 billion for general revenue
sharing in 1981. The legislation excludes the payment to States in
1981, but authorizes payments to States to be resumed in 1982 and
1983 if funds are appropriated. No funds are requested for the State
share in 1982.




241

SPECIAL ANALYSIS D
HIGHLIGHTS OF THE FEDERAL AID PROGRAM

Summary of changes.—When this administration took office economic stimulus was needed to reduce unemployment and promote
economic recovery. The economic stimulus programs proposed at
that time were primarily grant programs, and total grant outlays
increased 14% in just 1 year, from 1977 to 1978. These stimulus
programs were designed to be temporary, and their phasedown
after 1978 reflects this. Table H - l shows that, excluding stimulus
programs, grant outlays increase from $63.8 billion in 1977 to an
estimated $98.7 billion in 1982, an average annual rate of growth of
9.1%.
Table H - l . FEDERAL GRANTS, EXCLUDING STIMULUS
(Outlays in billions of dollars)
Actual

Total grants
Less stimulus grants:
Local public works

Estimate

1977

1978

1979

1980

1981

1982

68.4

77.9

82.9

91.5

95.3

99.8

0.6

3.1

1.7

.4

0.2

0.1

Temporary employment assistance

2.3

4.8

3.3

1.8

1.0

1.1

Antirecession fiscal assistance

1.7

1.3

Subtotal, stimulus grants

4.6

9.2

5.0

2.2

1.2

1.2

63.8

68.7

77.8

89.3

94.1

98.6

Total, excluding stimulus

*

*

* $50 million or less.

Table H-2 shows outlay changes from 1980 to 1981 and 1981 to
1982 divided into two categories: those grants that finance State or
local payments for individuals, and all other grants.
Grants that are subsequently paid as income support for individuals—mainly the medicaid, housing assistance, and assistance to
help low income persons pay high fuel bills—are estimated to
increase $5.7 billion from 1980 to 1981 and $2.9 billion from 1981 to
1982. This increase covers changes caused primarily by inflation
(especially for the cost of fuel) and increases in the beneficiary
populations. These grants, which will amount to $42.8 billion in
1982, take a substantial financial burden off State and local governments and provide large supplements to the economies of the
area in which the beneficiaries live.
All other grants are expected to decrease by $1.8 billion from
1980 to 1981 and increase $1.6 billion from 1981 to 1982.

340-700 0 - 8 1 - 1 6




242

THE BUDGET FOR FISCAL YEAR 1982
Table H-2. FEDERAL GRANT-IN-AID CHANGES, 1980-82
(In billions of dollars)

Total grants, 1980 actual
Changes
Payments for individuals:
Medicaid
Housing programs
Low income energy assistance
Other
Subtotal payments for individuals.
Other programs:
General revenue sharing
Employment and training
Other
Subtotal, other programs
Total grants, 1981 estimate
Changes
Payments for individuals:
Medicaid
Housing programs
Other
Subtotal, payments for individuals
Other programs:
General revenue sharing
Employment and training
Refundable tax credits to governments..
Other
Subtotal, other programs
Total grants, 1982 estimate

Major proposals.—The major grant funding in this budget is
designed to:
—initiate a major grant consolidation in the transportation area;
—help low-income, unemployed youth acquire the basic education and training needed to find and hold a job;
—meet continuing needs relating to energy problems, especially
to increase aid for mass transit;
—increase funding for the special supplemental food program for
needy women, infants and children; and
—provide general purpose aid through general revenue sharing.
Youth employment.—As part of a major effort to counter the ill
effects of youth unemployment, a new grant program is again
being proposed to help local school districts provide intermediate
and secondary school students with the basic mathematics and
language competence required by employers. Schools with the
greatest number of students needing such assistance will compete
for the $900 million proposed for this new program in 1982.
As the other part of this effort, the Congress is being asked to
consolidate into a single grant program three of the experimental
youth authorities enacted as part of the stimulus program in 1977.
Requested budget authority in the Department of Labor for the




SPECIAL ANALYSIS D

243

new program for 1982 is $1.1 billion, an increase of $250 million
over the amount that would otherwise be needed for current programs. States and localities will be able to mount a concentrated
effort to provide those youth who have the hardest time finding
and keeping a job with the basic work skills required by employers.
Since the primary requisite is competence in language and mathematics, the new program will be operated in close conjunction
with the proposed new education grant program described above.
Transportation.—The budget assumes the major restructuring of
the Federal-aid to highways program to provide substantially
greater flexibility to States and localities. The number of separate
funding categories would be reduced from 44 to 9, along with
the simplification of certain Federal grant requirements. In addition, a greatly expanded effort directed at preserving the Federal
investment in the interstate highway system is also in the budget.
Energy.—The budget proposes grants that would provide additional aid for mass transportation, and proposes continuation of
assistance to low-income persons to meet increased energy costs and
for energy-related emergencies. The aid to low income persons would
be distributed by the States, which are expected primarily to use
existing public assistance agencies. Grant outlays are expected to be
$1.7 billion in 1982.
The budget provides weatherization assistance to low-income individuals and to public and nonprofit schools and hospitals. Budget
authority of $200 million would be provided in 1982 for the lowincome weatherization program. The same amount of budget authority in 1982 is provided for the schools and hospitals program.
The budget also includes funding for the energy management
partnership program, which would consolidate three existing State
energy conservation planning and public education "outreach" programs and extend the assistance to include State emergency
preparedness and supply planning activities. This proposal, for
which authorizing legislation is necessary, will give States more
flexibility to use these funds to meet their needs. Budget authority
of $102 million is included in 1982 for the proposal.
Aid to the disadvantaged.—The 1982 budget provides increases
in a number of programs that aid the disadvantaged.
Budget authority for the special supplemental food program for
women, infants, and children (WIC) is proposed to increase $141
million to $1.1 billion in 1982. This represents a $310 million
increase in budget authority since 1980. Recent studies suggest the
program leads to reductions in infant mortality and in the incidence of low birth-weight babies.
Funding for training and employment has, in general, grown
steadily over the years, with large temporary increases in 1977 and
1978 as part of the President's economic stimulus effort. In 1980,




244

THE BUDGET FOR FISCAL YEAR 1982

the training and employment programs were changed to direct
more resources to the economically disadvantaged and the longterm unemployed and emphasis was placed on finding jobs in the
private sector for program participants. Continued emphasis will
be placed on improvements in management and the control of
fraud and abuse.
Outlays for employment and training assistance grant programs,
including the initiatives for youth described above, which are primarily to meet the needs of the most disadvantaged, are estimated
to be $7.0 billion in 1982, $0.7 billion higher than the 1981 estimate.
Grants to States for social services are designed to assist the
disadvantaged and disabled to be self-sufficient. Outlays for 1982
are estimated to be $3.1 billion, about the same as the 1981
estimate. Grants to improve the quality of child welfare services
are proposed to increase substantially in 1982. Budget authority for
this program is estimated to be $220 million in 1982, an increase of
$56 million over the 1981 estimate and $154 million over the 1980
level.
Revenue sharing.—From 1972 through 1980, general revenue sharing has provided States and localities with more than $6 billion per
year in grants with virtually no Federal restrictions on their use.
However, recently renewed legislation provides general revenue
sharing payments for 1981 to local governments only, excluding
payments for States in that year. The legislation authorizes payments to States in 1982 and 1983 if funds are appropriated. Furthermore, it requires that for a State to receive revenue sharing
payments, it must forego or return to the Federal Government an
equal amount of categorical grant funds. The budget, however, does
not anticipate any further revenue sharing payments to the States.
Outlays for general revenue sharing are estimated to decrease from
$6.8 billion in 1980 to $4.6 billion in 1982.
Tax credit payments to State and local governments.—As part of
the economic revitalization program, the administration proposed an
8% tax credit for social security taxes paid, effective in January
1982. This credit would be refundable to State and local governments. Payments, which are reflected in budget outlays, are estimated at $495 million in 1982.
Other highlights— Outlays for the Environmental Protection
Agency's program for construction of sewage treatment plants are
expected to be $4.2 billion in 1982, about the same as in 1981.
The budget requests budget authority of $3.7 billion for the program in 1982, which, together with funds available from prior
years, is estimated to make over $6.1 billion available to the States
for obligation in 1982. This program provides grants to both State
and local governments for 75% of the cost of planning, designing,




SPECIAL ANALYSIS D

245

and constructing sewage treatment plants. Under the Federal
Water Pollution Control Act, as amended, more than $31 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 drinking water pollution are
proposed to increase substantially in 1982. Budget authority for
these three programs is estimated to be $159 million in 1982, an
increase of almost $12 million over the 1981 estimate.
Grants through the land and water conservation fund, the urban
parks program, the historic preservation fund and other programs
assist States and localities in the management of natural resources.
Outlays for highways are estimated to be $8.4 billion in 1982. Most
of these funds go directly to State governments, and about half are
used for construction or preservation of the interstate highway
system.
Grant outlays for urban mass transportation, including the new
proposals noted above, are estimated to be $3.7 billion in 1982,
$0.1 billion higher than the 1981 estimate. Grant funds go primarily to the 279 urbanized areas with a population of 50,000 or more.
Some funds also go to smaller cities for public transportation projects.
The community development block grant funds will continue to
provide assistance directly to local governments through either
entitlement or discretionary grants. Recipients have considerable
freedom in selecting projects for this program, so long as they are
within the general guidelines of community development and
mainly assist people with low and moderate incomes. Outlays for
the program for 1982 are estimated to be about $4.0 billion, an
increase of almost $0.1 billion over 1981.
The 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 economic development and community revitalization projects. Budget
authority proposed for 1982 for this program is $675 million.
The administration proposes to maintain resources for economic
development assistance program in 1982. The planning, public
works, adjustment and technical assistance grants offered under
the program assist State and local governments in their efforts to
foster private investment, job creation, and job preservation in
distressed areas. Outlays proposed for the program would increase
from $411 million in 1981 to $500 million in 1982.
Outlays for elementary, secondary, and vocational education are
estimated to be $6.9 billion in 1982, $377 million more than in 1981.




246

THE BUDGET FOR FISCAL YEAR 1982

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 also includes a substantial reduction in the impact
aid program that is intended to compensate 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 only to those districts where the aid is
a significant part of their financing needs.
The budget continues proposals for administrative consolidations
for health planning requirements and health services grant programs. The Department of Health and Human Services would
enter into comprehensive performance contract agreements with
State and local governments for primary health care grants. In
addition, actions are proposed to unify current requirements that
States submit eleven separate health care plans.
The medicaid program continues to be a large grant-in-aid with
estimated outlays of $18.1 billion in 1982. This program supports
State efforts to provide health services to low-income residents. The
budget includes funds for an expanded child health assurance program (CHAP) to provide early and periodic screening, diagnosis,
and treatment to an additional 2 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.
In addition, legislation is recommended to improve services for
the mentally ill by mandating case management service and coordination of medicaid with services provided under the recently
enacted Mental Health Systems Act of 1980.
Increased efforts to limit waste, fraud, and abuse will provide
significant savings in the medicaid program. Federal savings are
estimated at about $204 million in medicaid in 1982, including $100
million from improved financial management.
Other health grant initiatives in the 1982 budget include an
increase of $55 million for community health centers, and $59
million for the Mental Health Systems Act.
Outlays for assistance payments (aid to families with dependent
children) are expected to be $7.7 billion in 1981 and $7.6 billion in
1982.
Outlays for the public housing and the State agency low-income
housing assistance components of the Department of Housing and
Urban Devlopment's assisted housing programs are estimated to
increase 19%, from $3.6 billion in 1981 to $4.3 billion in 1982. The
budget also contains an increase in estimated outlays for public
housing operating subsidies, from $972 million in 1981 to $1.1
billion in 1982. These increases reflect the additional number of
low-income families receiving housing services from public housing




SPECIAL ANALYSIS D

247

and State agency housing projects and the increased costs of providing those services.
Because of limited Federal resources the administration proposed, and the Congress approved, elimination of most of the law
enforcement assistance grants in 1981. The remaining grant programs are proposed for termination in 1982. However, to preserve
the most effective programs, funding for the Office of Juvenile
Justice and Delinquency Prevention will be increased to continue
several programs previously funded through law enforcement assistance grants.
Additional information on many of these grant programs is in
Part 5 of the Budget, which describes all major Federal programs
and many minor ones.
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 estimated to be $1.5 billion in 1982, and $18.4 billion of new
guaranteed loans are estimated for 1982.
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 $1,650 million 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 and, on the assistance from tax-exempt financing, in Special Analysis F.) The two major tax expenditures are the
deductibility of many State and local taxes and the exclusion of
interest on State and local securities from Federal taxation.
Individuals can claim nonbusiness sales, income, and property
tax payments to State and local governments (other than payments
already taken as business deductions) 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 1982 tax expenditure for property taxes on owneroccupied homes is estimated to be $10.9 billion and the tax expenditure for other nonbusiness State and local taxes—primarily income
and sales taxes—is estimated to be $23.1 billion. The Revenue Act
of 1978 eliminated the individual income tax deduction for gasoline. In 1979, the last year for this provision, the tax expenditure
was $350 million.
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
$7.0 billion in 1982.




248

THE BUDGET FOR FISCAL YEAR 1982

Interest on State and local industrial revenue bonds is also tax
exempt. These bonds finance industrial and transportation projects,
pollution control facilities, and public and, more recently, selected
private housing. Tax expenditures in 1982 are estimated to be $1.6
million for industrial facilities, $0.8 billion for pollution control
facilities, and $0.6 billion for State and local rental housing bonds.
State and local governments have been using the proceeds of taxexempt borrowing to provide mortgage funds for private housing.
The tax exemption of interest on State and local securities makes
it possible to provide such funds at interest rates well below the
rates for private mortgages. At first, tax-exempt housing bonds
were used mainly to assist low-income, multifamily housing; recently, there has been a dramatic increase in the use of such bonds
for owner-occupied housing, including housing purchased by middle
and upper income families. The 1982 tax expenditure is estimated
to be $1.2 billion.
The Omnibus Reconciliation Act of 1980 places various restrictions on the use of tax-exempt mortgage subsidy bonds. The most
important restriction is a ceiling by State on the volume of single
family housing bonds equal to the greater of $200 million or 9% of
the mortgage market in the State, and a total ban on tax-exemption of single family mortgage bonds as of January 1, 1984. The
legislation also restricts the use of tax-exempt bonds for multifamily housing to projects in which at least 20% of the residents
qualify as low income under present definitions of the Department
of Housing and Urban Development.
FEDERAL GRANTS-IN-AID BY FUNCTION, AGENCY, AND REGION

Under 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 congressional control. Part 5 of the
budget discusses the entire Federal budget by function, and the
associated national needs met by these programs.
In the 1980 budget, the President initiated a 3-year budget planning system, to provide an improved means of planning for the
longer term. Consequently, the discussions and data in many parts
of this budget include the 1982-84 planning period. Consistent with
that approach, this Special Analysis shows estimates through 1984
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 1982 are discussed above. The total shows
strong continued growth throughout the planning period. The increases beyond 1982 are primarily for income security, education,
training, employment and social services, and health.




249

SPECIAL ANALYSIS D
Table H - 3 . FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
(In millions of dollars)
Function

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
Total outlays

Actual
1980

93
499
5,362
569
3
13,087
6,486
21,862
15,758
18,495
90
530

Estimate
1981

51
618
5,298
761
4
12,886
6,215
21,697
18,607
21,771
80
420
160
210
8,478 6,726

1982

1983

66
826
5,294
594
4
12,794
6,434
23,454
20,170
22,937
65
263
236
6,690

91,472 95,343 99,829

1 Data for 1983 and 1984 are included here to be consistent with the multi-year planning system. They have not received as much review as the estimates
for 1981 and 1982.

The functional composition of the grant programs 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 3% of Federal aid in 1960 to an estimated 20% in
1982 and in the education, training, employment and social services function, which increased from 7% in 1960 to an estimated
23% in 1982. 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 food stamp program and the public assistance programs for the aged, blind, and disabled. The trends are similar
through 1984.




250

THE BUDGET FOR FISCAL YEAR 1982
Table H - 4 . PERCENTAGE DISTRIBUTION OF FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
Estimate

Actual

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

1960

1965

1970

1975

1980

1981

1982

*

*

*

*

*

1
5
41
1

2
6
37
5

2
4
22
5

5
1
12
6

6
1
14
7

1
6
1
14
7

1
5
1
13
6

1
5
1
14
6

1
5
1
14
5

7
3
39
2

8
5
34
2
1

25
16
24
2
1

22
17
20
16
2

24
17
20
9
2

23
20
23
7

23
20
23
7
1

23
21
23
7

23
22
23
6

100

100

100

100

100

100

100

100

100

*

*

1983

1

*

1984

1

*

* 0.5% or less.
1 Data for 1983 and 1984 are included here to be consistent with the new multi-year planning system. They have not received as much
review as the estimates for 1981 and 1982.

Table H-5 shows grant outlays by agency. The Department of
Health and Human Services will provide 36% of total estimated
grant-in-aid outlays in 1982, far more than any other agency.
Table H - 5 . FEDERAL GRANT-IN-AID OUTLAYS BY AGENCY
(In millions of dollars)
Agency

Funds appropriated to the President
Department of Agriculture
Department of Commerce
Department of Education
Department of Energy
Department of Health and Human Services
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

Estimate

Actual
1980

1981

710
6,446
1,114
7,122
390
28,553
7,847
1,210
513
9,952
12,987
7,324
4,603
1,726
974

605
6,636
814
7,862
511
33,936
9,171
1,528
394
9,719
12,812
5,459
4,407
538
951

91,472

95,343

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.




251

SPECIAL ANALYSIS D

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 33% above the national average in 1970, now
has grants only 13% over the average, while Region V has risen from
27% below the average to only 6% below. Grants to Region V have
grown the most during the period, averaging 16.0% per year.
Table H - 6 . DISTRIBUTION OF GRANTS BY REGION, SELECTED FISCAL YEARS

Federal Region

1980 1
Total

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

Dollars per capita
1970

$5.7
14.1

$119
120

10.6

127

14.1
17.1

3.7

117
85
127
99
156
150
140

91.5

117

8.2

4.1
3.1
10.6

1 Preliminary estimate, in billions of dollars.
See "Federal Aid to States," Department of the Treasury, for additional information concerning State distribution of Federal grants.

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, partially because of the economic stimulus grants,
they were $77.9 billion, an average annual increase of 16% since
1965. In 1982 Federal grants are expected to be 14% of total Federal outlays and 18% of domestic Federal outlays. Table H-7 shows
historical data for grant outlays since 1950.




252

THE BUDGET FOR FISCAL YEAR 1982
Table H - 7 . HISTORICAL TREND OF FEDERAL GRANT-IN-AID OUTLAYS
(Fiscal years; dollar amounts in millions)
Composition of Grantsin-Aid
Total
grants-inaid

Five-year intervals:
1950
1955
1960
1965
1970
1975
Annually:
1976
1977
1978
1979
1980
1 9 8 1 estimate
1982 estimate
1983 e s t i m a t e 4
1984 e s t i m a t e 4

Grants for
payments
to
individuals 1

Other

$2,253
3,207
7,020
10,904
24,014
49,834

$1,257
1,623
2,479
3,931
9,023
17,441

59,093
68,414
77,889
82,858
91,472
95,343
99,829
109,961
118,599

21,023
23,860
25,981
28,765
34,174
39,855
42,751
47,841
52,840

Federal grants as a percent of
Budget outlays

Total

Domestic 2

State and
local
expenditures 3

$996
1,584
4,541
6,972
14,991
32,392

5.3%
4.7
7.6
9.2
12.2
15.3

8.8%
12.1
15.9
16.5
21.1
21.3

10.4%
10.1
14.7
15.3
19.4
23.1

38,070
44,555
51,908
54,093
57,298
55,488
57,077
62,120
65,759

16.1
17.0
17.3
16.8
15.8
14.4
14.0
13.5
13.3

21.7
22.7
22.9
22.4
21.1
19.4
18.4
18.5
18.6

24.4
25.8
26.4
25.6
26.3
NA
NA
NA
NA

For an identification of accounts in this category, see Table H—11 and footnotes.
Excludes outlays for the national defense and international affairs functions.
As defined in the national income and product accounts.
4 Data for 1983 and 1984 are included to be consistent with the multi-year planning system. They have not received as much review as the
estimates for 1981 and 1982.
NA=Not available.
1

2

3

About two-fifths of estimated 1982 grants are to States and localities for payments to individuals.2 Most such grants are accompanied by State or local matching payments. Among the larger of
these programs are medicaid, assistance payments, housing assistance, and nutrition programs for children and the elderly. Supplemental security income became a direct Federal program in January 1974, as did the food stamps program in 1971. Almost all of the
outlays for these programs were included as grants through the
year prior to their assumption by the Federal Government, but not
since then.
Table H-7 also shows grants-in-aid as a percent of State and
local expenditures. This percent increased from 15% in 1965 to
26% in 1978.

2 Payments for individuals are defined as Federal Budget outlays providing benefits in cash or in-kind that
constitute income transfers to individuals or families.




SPECIAL ANALYSIS D

253

Fiscal Years

The charts show the growth of total governmental expenditures
since 1950, and these expenditures as a percent of gross national
product. Federal expenditures including grants have increased as a
percent of GNP from 16% in 1950 to 23% in 1980, while State and
local expenditures including grants have increased from 8% in
1950 to 12% in 1980.
GRANTS ADMINISTRATION

After World War II, most grants were designated for specific
categories by Federal legislation or regulation, and came to be
known as categorical grants. These grants usually 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, the number of categorical grants increased dramatically.
This rapid growth of the grant system was accompanied by increasingly complex administrative requirements.




254

THE BUDGET FOR FISCAL YEAR 1982

Government Expenditures
$ Billions

1950

Fiscal Years

Federal, State a n d

Local

G o v e r n m e n t s

55

The burdens imposed on State and local governments by the
increasing inflexibility of fiscal and administrative requirements
attached to categorical grants prompted calls for changes in the
grant system.
Table H-8 shows the much greater importance of general-purpose and broad-based grants since 1972. General-purpose grants
give State and local governments almost complete discretion in
determining their use; 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. Currently,
these grants are approximately one-fifth of total grants-in-aid. Their
share of the total declined somewhat after the economic stimulus
program reached its peak in 1978. With the elimination of States
from general revenue sharing, this percentage declines through
1982.




255

SPECIAL ANALYSIS D
Table H - 8 . OUTLAYS FOR GENERAL-PURPOSE, BROAD-BASED, AND OTHER GRANTS
(Dollar amounts in millions)
Actual

General-purpose grants:
General revenue sharing
Other general purpose fiscal
assistance and T V A 1
Subtotal, generalpurpose grants
Broad-based grants:
Community development block
grants
Comprehensive health grants
Employment and t r a i n i n g 2
Social services 3
Criminal justice assistance
School aid in federally affected
areas
Local public works
Subtotal, broad-based
grants
Other grants
Total
ADDENDUM: PERCENT OF
TOTAL
General-purpose grants
Broad-based grants
Other grants
Total

Estimate

1976

1977

1978

1979

0

$6,243

$6,758

$6,823

516

907

2,748

516

7,150

1980

1981

1982

$6,848

6,829

5,156

4,559

2,780

1,485

1,765

1,707

2,295

9,506

9,603

8,333

8,594

6,863

6,854

1,930
233

983
128
1,698
2,251
674

2,089
65
1,756
2,534
519

2,464
88
1,992
2,809
417

3,161
73
1,845
3,634
368

3,902
62
2,144
2,763
372

3,938
29
2,000
3,136
284

3,998
16
2,011
3,075
167

602

558

719
577

706
3,057

858
1,741

622
416

718
150

346
60

2,855
31,001

6,292
45,651

8,259
50,649

11,533
56,753

11,680
62,845

10,281
72,597

10,255
78,225

9,673
83,302

34,372

59,093

68,414

77,889

82,858

91,472

95,343

99,829

1.5%
8.3%
90.2%

12.1%
10.6%
77.3%

13.9%
12.1%
74.0%

12.3%
14.8%
72.9.%

10.1%
14.1%
75.8%

9.4%
11.2%
79.4%

7.2%
10.8%
82.0%

6.9%
9.7%
83.4%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

100%

1972

90

1 For detail, see grants in the general purpose fiscal assistance function, Table, H—11. Amounts in Table H-8 above include shared revenues
from the Tennessee valley Authority, shown in the energy function.
2 Comprehensive Employment and Training Act (CETA), Title II A, B, and C. An additional $6.1 billion of CETA grant-in-aid outlays are
estimated for 1982, but they are limited to particular types of service (e.g., public service employment) or clientle (e.g., youth) and therefore are included in
other grants, not broad-based grants.
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 reduce significantly
or eliminate entirely 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 1980, State and local governments were estimated
to provide approximately $1 of matching funds for $2.50 of Federal
aid, and this ratio is virtually unchanged for 1980. 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 a larger than average matching share.
The chart shows that 80% of the aid is in only 25 programs.
Nevertheless, there continue to be hundreds of categorical grants
with different matching requirements, timing difficulties, application procedures, duplication of programs, and other administrative
problems.




256

Most Grants are Concentrated in a Few Programs
Percent of 1981 Estimated Obligations

Source: 1980 Catalog of Federal Domestic Assistance

In March of 1980, OMB completed a major study of assistance
practices and forwarded a report to the Congress entitled, "Managing Federal Assistance in the 1980's." The study, which had strong
participation by State and local governments, concluded that OMB
must assume a stronger role in assistance management. It contained a list of actions that would be taken. These actions, which
are well under way, include creating new policies for:
—managing the way national policies and administrative standards are applied to assistance programs.
—resolving assistance related conflicts and disputes.
—selecting grants, cooperative agreements, and procurement
contracts to reflect the appropriate relationships between Federal and non-Federal parties.
Numerous additional efforts undertaken recently or in the last
few years to correct assistance problems include:
—a major revision of audit requirements. Nearly 100 audit
guides have been replaced with a single guide, and a 6-month
time limit has been set on audit resolution, with procedures for
prompt settlement of differences. These new procedures will
result in a major improvement in grants administration.




SPECIAL ANALYSIS D

257

—the adoption of the single audit approach for State and local
governments.
—standard financial requirements. Hundreds of inconsistent and
duplicative financial requirements of individual grant programs have been replaced by standard application forms, uniform cost principles, and streamlined reporting rules. These
standardized requirements form a comprehensive system of
financial guidance for assistance programs. They lighten substantially the burden these programs place on State and local
financial systems.
—expanded use of letters of credit. Almost all grants now use
letters of credit, which have the effect of practically eliminating a delay in the receipt of approved funds to grantees.
—establishment by statute of Inspectors General in 15 departments and agencies to uncover and eliminate fraud, abuse, and
waste in Federal programs. As this concept becomes fully operational, other agencies will follow. The President has directed
all departments and agencies to step up their audit and investigation efforts and the Inspectors General have a major role
in this effort.
—improvements in the Catalog of Federal Domestic Assistance,
the reference document used by communities and individuals
applying for Federal assistance. Improvements include publishing in the Catalog a bridge of program deletion and additions
to the Catalog made from 1965-80, expansion of the functional
and subject indices, and expansion of the agency index to
include the responsibilities of each agency and sub-agency
mentioned in the Catalog.
—improvements in the Federal Assistance Programs Retrieval
System (FAPRS). With FAPRS, one can (by using a computer
terminal) 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. Changes include more functional categories for program
selection, and more information advisory bulletins for users,
—revised procurement standards. OMB Circular A-102, "Uniform administrative requirements for grants to State and local
governments", now includes streamlined procurement standards that place greater reliance on State and local purchasing
systems. The new standards permit governments with good
systems to have them certified in advance, keeping Federal
involvement in procurement under grants to a minimum.
—efforts to share the benefits of applicable Federal research and
development programs with States and localities through the
Intergovernmental Science, Engineering and Technology Advisory Panel (ISETAP).

340-700

0 - 8 1 - 1 7




258

THE BUDGET FOR FISCAL YEAR 1982

—the Federal Assistance Award Data System (FAADS) is being
installed nationally to provide better information about current
grant funding to States. This follows a successful 12 State test.
Data on all direct assistance awards will be transferred quarterly to the States for further transmittal to the local level.
—strengthened joint funding, which allows grants from several
agencies to be combined for the applicant into one coordinated
grant. Revised instructions have been issued to Federal agencies regarding this program.
OTHER SOURCES OF FEDERAL AID INFORMATION

The grant-in-aid series in the budget provides a comprehensive
picture of Federal grants-in-aid, which are programs 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 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
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 total cash payments to State and local governments, they
count these as grants. A major item included only in the Census
definition is unemployment compensation for Federal employees,
ex-servicemen, and temporary extended benefits. These items were
either new or became large in 1976, when they were first included
in the Census data. 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 in the NIA rather than as grants.
Table H-9 snows these and other minor differences among the




259

SPECIAL ANALYSIS D

three series, but the differences are largely offsetting and, thus,
these three series exhibit similar patterns.
Table H - 9 . THREE MEASURES OF FEDERAL GRANTS-IN-AID TO STATE AND LOCAL GOVERNMENTS,
1975-79
(In billions of dollars)
1975

Budget (Special Analysis H)
Less principal exclusions:
Agricultural commodities
Geographical exclusions
Plus payments for research
Federal unemployment benefits and relatedAll other (net)
Federal payments (Census)
Less low-rent public housing
Federal unemployment benefits and relatedAll other (net)
Grants-in-aid (national income and product accounts)

1976

1977

49.7

59.0

-0.5
-0.9
1.5

-0.5

-0.6

-0.6

-1.0

-1.2

-1.6

-0.2

-0.8

49.6
-1.3

-1.6

1.8
10.6
69.1

1.8
5.2
-0.6

73.0
-1.8

77.9

2.2

1.2
0.9
-2.3
-1.2

0.6

-5.2
0.2

57.5

66.3

74.7

-10.6

48.4

68.4

1978

-1.8

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; discussions of eligibility criteria, application procedures,
and estimated obligations; and related information. This is a primary reference source for communities wishing to apply for grantsin-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 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 total Federal expenditures as well as grant payments
at the State, county, and large-city level. Their grant estimates
therefore 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.




260

THE BUDGET FOR FISCAL YEAR 1982

THE STATE AND LOCAL GOVERNMENT SECTOR OF THE NATIONAL
INCOME AND PRODUCT ACCOUNTS 3

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 data
measure the relationship between the State and local 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 a government's own budgetary accounting for receipts and expenditures.
First, financial transactions and the purchase and sale of land and
other 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 these differences, NIA totals are not the same as an aggregate of
these governments' financial budgets. However, the NIA data do
provide timely estimates of total State and local fiscal transactions
not otherwise available and, with care, can be used as financial
indicators.
NIA State and local sector.—Table H-10 is a historical tabulation
of State and local data with the surplus or deficit divided between
two components, social insurance funds and the operating account.4
The social insurance funds, primarily retirement programs, have
been in surplus since before 1950. The funds accumulate assets to
pay for their future liabilities. However, 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. Because these social insurance fund 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.

3 Special Analysis B of this volume provides general information on the Federal sector of the national income
and product accounts.
4 The operating account contains all transactions except those of social insurance funds, including expenditures for capital investment.




261

SPECIAL ANALYSIS D
Table H - 1 0 . NATIONAL INCOME AND PRODUCT ACCOUNTS, STATE AND LOCAL SECTOR
(Calendar years; in billions of dollars)
Surplus or deficit (
Receipts

Five-year intervals:
1950
1955
1960
1965
1970
1975
Annually:
1976
1977
1978
1979

Expenditures

Total
sector

Social
insurance
funds

Operating
account

-1.9
-2.6
-2.2
-3.4
-4.0
-7.6

21.3
31.7
49.9
75.1
134.9
237.7

22.5
32.9
49.8
75.1
132.2
232.2

-1.2
-1.3
0.1
2.8
5.5

0.7
1.3
2.3
3.4
6.8
13.1

267.8
298.0
327.4
351.2

251.2
270.0
298.4
324.4

16.6
28.1
29.0
26.7

15.6
17.9
20.0„
23.9

0.9
10.1
9.0
2.9

_*

SEASONALLY ADJUSTED, ANNUAL RATES
1978:
1
II
Ill
IV
1979:
1
II
Ill
IV
1980:
1
II
Ill

316.9
328.0
327.2
337.7

285.8
295.7
303.3
309.0

31.1
32.3
23.9
28.7

19.0
19.4
20.2
21.2

12.0
12.9
3.7
7.4

340.9
342.7
355.4
365.6

311.4
320.8
328.9
336.7

29.5
21.9
26.5
28.9

22.4
23.6
24.5
25.0

7.1
-1.7
2.1
4.0

372.1
373.9
386.8

345.4
350.0
358.2

26.6
23.9
28.5

25.3
25.7
27.7

1.3
-1.7
0.9

*$50 million or less.

It is reasonable for the operating account to be in deficit since it
includes capital expenditures, often financed through borrowing,
and the account was in deficit in the 1950's and 1960's.
In the 1970's however, the account was in surplus several years.
Surpluses in 1972 and 1973 resulted from the first general revenue
sharing distributions and higher tax 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 increased revenues. It also reflected the recession, with
State and local governments choosing to draw down balances accumulated during 1972-73 rather than enact new tax increases. Their
fiscal position improved substantially in 1976 compared with 1975,
and surpluses have continued into 1979. The operating account had
a surplus of $9.0 billion in 1978, and $2.9 billion in 1979. The surplus
is expected to decline in 1980.




262

THE BUDGET FOR FISCAL YEAR 1982
DETAILED FEDERAL AID TABLES

The following two tables present detailed Federal aid data for
the three budget years. Table H - l l , "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)
1980
actual

1981
estimate

1982
estimate

Functional
code1

Function, agency and program

OUTLAYS

1981
estimate

1982
estimate

BUDGET AUTHORITY

54
39

13
37

17
49

National defense:
Department of Defense—Military:
National Guard centers construction
Federal Emergency Management Agency

93

51

66

Total, national defense

382
2
116

462
18
137

654
8
164

499

618

826

57
14
39

59
16
32

50
16
37

41
69

59
81

39
62

2
307
124
56
16

49
323
119
54
18

52
301
137
36
18




1980
actual

Energy:
Department of Energy: Energy conservation
Economic regulation
Tennessee Valley Authority (shared revenue)
Total, energy
Natural resources and environment:
Department of Agriculture:
Watershed planning and flood prevention
Resource conservation and development
Forest management, protection and utilization
Department of Commerce:
N O A A — C o a s t a l zone management
NOAA—Operations research and facilities
Department of the Interior:
Urban park and recreation grants
Land and water conservation fund
Fish and Wildlife grants
Historic preservation
Youth conservation corps

'.

051
054

13
39

13
39

17
51

050

52

52

68

272
276
271

444
16

469
4

564
12

270

459

473

576

301
302
302

48
15
39

50
18
32

45
15
37

302
306

64
71

45
78

39
72

303
303
303
303
302

108
312
134
53
16"

19
228
132
31
18

72
193
157
31
18

Table H - l l FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued

to

(In millions of dollars)
1980
actual

1981
estimate

1982
estimate

Function, agency and program

Func
tional
code1

OUTLAYS

BUDGET AUTHORITY
68
219

224

248

4,230
23

304
304
304
301

3,400
10

3,305
10

3,700
25

5,294

Total, natural resources and environment

300

4,558

4,270

4,795

352
352
351
352

110
286
169
2

129
304
330
2

143
305
157

350

566

765

604

371
376

2
2

2
2

2
2

370

4

4

4

403

1

1

1

60

250
10
4,343
8

207

231

4,200
8

5,362

5,298

*

110
288
169
2

126
302
330
3

134
303
157

569

761

594

1
2

2
2

2
2

3

4

4

1

1
50

*

524




144

302
306

72
1

2
590

79

Office of Surface Mining, Reclamation, and Enforcement
Bureau of Mines
Environmental Protection Agency:
Abatement and control
Enforcement
Sewage treatment plant construction
Water Resources Council

24
1

1

198?
estimate

1981
estimate

1980
actual

535

Agriculture:
Department of Agriculture:
Cooperative research
Extension activities
Commodity Credit Corporation—Donations
Agricultural Marketing Service—Cooperative Projects in Marketing
Total, agriculture
Commerce and housing credit:
Department of Agriculture: Rural housing supervisory assistance
Department of Commerce: Minority business development
Total, commerce and housing credit
Transportation:
Department of Commerce: Maritime Administration
Department of Transportation:
Interstate transfer g r a n t s — h i g h w a y s
State boating safety assistance
Airport and airway trust fund

401
403
402

H

53

722

Tl
O
»
i
C/3
o
>
r
w
>

300
677

M
td
c;
O
O
W
H

750

00
to

26
98
8,675
28
198
184
54
3,129
3
100

28
59
8,222
27
162
172
58
3,556
3
73

15
39
7,955
27
137
213
72
3,672
3
75

13,087

12,886

12,794

335
375

318
287

311
314

12
325
5
3

12
319
6
4

9
279
5
2

452
416
1.
4
104

411
150
1
2
81

500
60

7

30

59

3,902
214
18
225

3,938
175
25
365

3,998
161
7
610

*

See footnotes at end of table.




*

3
32

Highway beautification
Off-systems roads
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
Total, transportation
Community and regional development:
Funds appropriated to the President:
Appalachian regional development programs
Disaster relief
Public works acceleration
Department of Agriculture:
Rural development grants
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
N O A A — C o a s t a l energy impact fund
Regional Development Program
Department of Energy:
Energy conservation
Department of Housing and Urban Development:
Community development block grants
Urban renewal
Other categorical programs replaced by block grants.
Urban development action grants

401
401
401
401
401
401
401
401
407
401

8
54
8,513
24
89
197
84
2,430
3
66

8,922
24
47
239
82
4,790
3
66

9,900

400

12,147

14,902

16,389

452
453
452

347
585

329
166

330
161

452
452
452
452

10
290
6
4

5
200
5
4

100
6

452
452
453
452
452

417

466

466

104

71

452

43

62

50

451
451
451
451

3,752

3,695

3,960

675

675

675

6

10
245
80
5,049
4
52

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1980
actual

1981
estimate

1982
estimate

Function, agency and program

Functional
code1

Planning assistance
New Communities Development Corporation
Neighborhood self-help program
Department of the Interior: Bureau of Indian Affairs
Federal Emergency Management Agency
Neighborhood Reinvestment Corporation

40
2
15
18
3
12

3,345
51
718
283
1,061
960
927
77
14
172




1981
estimate

1982
estimate

BUDGET AUTHORITY

OUTLAYS

6,215

1980
actual

6,434

Total, community and regional development

Education, training, employment, and social services:
Department of Commerce:
2
Job opportunities program
Public communications facilities, planning and construction.
22
Department of Education:
Compensatory programs for disadvantaged students
3,592
Elementary and secondary education
78
Indian education
346
School assistance in federally affected areas
288
Equal educational opportunities
Library resources
1,075
Education for the handicapped
1,003
Rehabilitation services and handicapped research
1,079
Vocational and adult education
77
Student financial assistance 2
5
Higher and continuing education
Special projects and training
School improvement programs

451
451
451
452
453
451

38

34

35

10
18
5
12

9
18
3
12

9
19
4
15

450

6,315

5,754

5,830

504
503

24

22

22

3,570
72
742
296

3,766
77
542
290

1,039
574
919
77
29
1
160

1,089
966
913
77
4

501
501
501
501
501
503
501
506
501
502
502
503
501

*

147

3,859
97
294
297
1,213
1,011
896
77

4

5

126

250

6
163
92
50
166
263

383
2,763
2,077
7

351
3,136
1,432
8

371
3,075
1,909
8

6,191
45
1,796
24
710
547
152
20

6,365
62
974
25
782
492
162
20

7,047
67
1,096
26
853
499
172
23

21,862

21,697

23,454

*

*

30

32

34

916
93
10
679
7
18
13,957

996
114
12
662
195
96
16,452

1,066
90
11
580
148
68
18,120

42

42

46

See footnotes at end of table.




American Printing House for the Blind
Special programs and populations
Educational improvement
Youth education and training
Bilingual and minority language education
Libraries and learning technologies
Department of Health and Human Services:
Work incentives
Grants to States for social services
Human development services
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 service
Community Services Administration
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities
Total, education, training, employment, and social services
Health:
Special Action Office for Drug Abuse Prevention
Department of Agriculture: Food Safety and Quality S e r v i c e — M e a t and Poultry.
Department of Health and Human Services:
Health Services Administration 2
Center for Disease Control
Center for Disease Control
Alcohol, Drug Abuse, and Mental Health Administration 2
Health Resources Administration
Health Resources Administration
Medicaid2
Department of Labor:
Occupational Safety and Health Administration

501
501
501
501
501
503

4

5

250

257

6
120
154
900
198
264

504
506
506
501

352
2,889
1,877
7

351
2,562
1,623
8

371
3,091
2,002
8

504
504
504
504
504
506
503
503

5,532
65
1,627
22
736
503
152
23

6,400
67
729
24
797
491
162
23

7,311
67
1,142
26
853
497
172
26

500

21,541

21,391

24,975

CO
^

w
o»—i
>

>
>
r

GO

GO
K

554
554

30

32

34

551
551
552
551
551
553
551

1,077
99
12
626
60
91
14,445

994
108
13
573
138
70
17,236

1,066
90
11
624
147
54
18,802

554

42

44

47

to
o*

DO
o*
00

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1981
estimate

1980
actual

1982
estimate

Function, agency and program

Functional
code1

6

6

6

15,758

18,607

20,170

13
6
456

14
6
365

21
7
365

412
155
3,233
716
101

434
112
3,213
901
125

472
114
3,390
991
139

39
7,273
338

45
7,747
541
1,714
153

7,638
618
1,714
83

2,610
824
*

*

*

289

346

3,626
972
5

4,327
1,141
5




1982
estimate

1981
estimate

BUDGET AUTHORITY

OUTLAYS

*

1980
actual

Mine Safety and Health Administration
Total, health
Income security:
Department of Agriculture:
Rural housing for domestic l a b o r 2
Mutual and self-help h o u s i n g 2
Food Safety and Quality Service—Funds for strengthening markets, income and s u p p l y — d o n a t i o n s (child
nutrition) 2
Food s t a m p s — a d m i n i s t r a t i o n 2
Special milk program 2
Child nutrition program 2
Special supplemental food program ( W I C ) 2
Food d o n a t i o n s 2
Department of Health and Human Services:
Supplemental security i n c o m e 2
Public a s s i s t a n c e — m a i n t e n a n c e 2
Refugee assistance 2
Low-income energy assistance 2
Cuban and Haitian entrants
Payments for child support
Human development s e r v i c e s 2
Department of Housing and Urban Development:
Subsidized housing p r o g r a m s 2
Operation of housing p r o j e c t s 2
Congregate services program 2

554

6

6

6

550

16,490

19,213

20,882

604
604

25
-5

25

25
5

605
605
605
605
605
605

306
423
152
3,037
755
106

377
462
116
3,208
924
129

463
502
122
3,586
1,065
144

609
609
609
609
609
609
609

39
7,664
482
100

45
7,692
652
1,714
90

5,684
615
1,714
88

*

*

604
604
604

17,376
755
10

*

311

346

28,616
1,071

18,457
1,265

H

S3
M

W

O
W

TO

O
>
tr"

K!
M
>

1,138
1,180

1,462
46

1,564

18,495

21,771

22,937

35
1
14
40
*

90

44

46

6
24
5

9
7
3

80

65

*

7
9
504

8
385

16

19

530

420

*

*

*

263

160

210

236

280
5

223
5

275
5

103
370
7

108
454
12

576
4

*

See footnotes at end of table.




Veterans benefits and services:
Veterans Administration:
Medical c a r e 2
Medical administrative expenses
Grants for construction of State nursing h o m e s 2
Health training
. .
Veterans cemetery construction
Total, veterans benefits and services

Administration of justice:
Department of Housing and Urban Development: Fair housing assistance
Department of Justice:
9
National Institute of Corrections
Law enforcement assistance
226
*
Research and statistics
21
Equal Employment Opportunity Commission

104
110
22

*

Total, income security

6

72
118
21

73
68
191

Department of Labor: Unemployment trust fund: administration of p a y m e n t s 2
Community Services Administration 2

*

Total, administration of justice
General government:
Department of the Interior:
Administration of Territories
Trust Territory of the Pacific Islands
Office of Personnel Management (intergovernmental personnel assistance)
Total, general government
General purpose fiscal assistance:
Department of Agriculture: Forest Service (shared revenue)
Department of Defense: Flood Control Act (shared revenue)
Department of Energy: Payments under Federal Power Act
Department of the Interior:
Payments in lieu of taxes
Miscellaneous (shared revenues)
Fish and Wildlife Service

,

603
609

1,185
1,214

1,335

1,564

600

33,624

46,768

35,646

703
703
703
703
705

35
1
8

44

46

15

18

5

5

700

48

65

64

751

4

6

6

754
754
754
751

8
378
6
15

8
85
19

10
118
10
24

750

411

118

168

806
806
806

86
120
20

73
95
20

100
94
20

800

226

188

214

852
852
852

280
5

223
5

275
5

852
852
852

108
371
7

103
454
12

576
4

*

*

*

*

*

*

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued

to
—Q

o

(In millions of dollars)
1981
estimate

1980
actual

1982
estimate

Function, agency and program

Functional
code1

OUTLAYS
104

278

76

217
6,829
339

225
5,156
2
360

8,478

6,726

6,690

91,472

95,343

99,829

48
*

82
495
230
4,559
415

Payments to U.S. territories
Internal revenue collections for the Virgin Islands (shared revenues)
Department of the Treasury:
Customs receipts for Puerto Rico and the Virgin Islands (shared revenue)
Refundable social security tax credits
Internal revenue collections for Puerto Rico (shared revenues)
General revenue sharing
Antirecession financial assistance fund
Federal payment to the District of Columbia
Total, general purpose fiscal assistance
Total, grants-in-aid

$500 thousand or less.
1 For a description of these codes, see Table 13 in the Budget of the United States Government, 1982.
2 Programs included in the "Grants for payments to individuals" category shown in Table H-7.




1981
estimate

1982
estimate

BUDGET AUTHORITY

40
9

*

1980
actual

852
852

90
2

54

48

852
852
852
851
852
852

262

76

228
6,855

225
4,570

82
495
230
4,570

339

360

415

850

8,546

6,083

6,701

104,987

120,046

116,917

H
K
M
W

cj
M
H
O
W
HH

8
>
tr 1
M
>
W

Table H - 1 2 . CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS 1
(In millions of dollars)
Direct loans
Function, agency and program

Natural resources and environment:
Department of the Interior: Drought emergency loan f u n d Agriculture:
Department of Agriculture:
Agriculture credit insurance f u n d Commerce and housing credit:
Department of Agriculture:
Rural housing insurance fund.
Transportation:
Federal aid highways (trust f u n d ) .
Right-of-way revolving fund
Total, transportation
Community and regional development:
Department of Agriculture:
Rural development insurance f u n d .




1980
actual

New loans
Net loans
Outstandings.

1981
estimate

-1

New loans
Net loans
Outstandings..

- 6

New loans
Net loans
Outstandings..
New loans
Net loans
Outstandings..
New loans
Net loans
Outstandings..

3
3
3
26
26
187
29
29
190

New loans..
Net loans...

1982
estimate

3

-1

10

2

862

1981
estimate

28

1

-12

1980
actual

-1

30

New loans
Net loans
Outstandings.

Guaranteed loans
1982
estimate

15
15
18
40
40
227
55
55
245

19
19
37
45
45
111
64
64
309

817
-56

818
-106

21
-9
23

30
-10
13

40
-5
8

1,253
840

1,408
839

929

Table H - 1 2 . CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS '—Continued

to

(In millions of dollars)

to
Direct loans

Function, agency and program

Department of Commerce:
Coastal energy impact fund
Department of Housing and Urban Development:
Urban renewal programs
Revolving fund (liquidating programs)

1980
actual

1981
estimate

Guaranteed loans
1982
estimate

1980
actual

Outstandings

232

176

71

New loans
Net loans
Outstandings

24
24
33

39
39
71

47
47
118

New loans
Net loans
Outstandings
New loans
Net loans
Outstandings

159
43
21

30
-10
11
*

*

-14
485

-15
470

-16
454

-11

5

New loans
Net loans
.Outstandings.
New loans
Net loans
Outstandings

1
-9
127

-10
116

-11
105

Total, community and regional development. New loans
Net loans
Outstandings

1,047
32
897

887
-52
845

871
-97
748

63

4
4
67

Community development loans
Other programs

Education, training, employment, and social services-.
Department of Education:
Student loan insurance fund




New loans
Net loans
Outstandings

7
7
63

1

99

3,972

1981
estimate

4,811

1982
estimate

5,701
H
ffi
H
W
Cj

53
-191
275

90
87
358

10
-96
179

270
259
590

-65
114

270
232

O
S3
W
O
>
f

><
>

co
OO

1,395
735
4,345

1,688
1,002
5,347

1,199
1,057
6,404

to

Student financial assistanceHigher and continuing educationHigher education facilities loan fund..

New loans
Net loans
Outstandings..
New loans
Net loans
Outstandings..
New loans
Net loans
Outstandings..

Total education, training, employment, and social New loans
services.
Net loans
Outstandings.
Health:
Department of Health and Human Services:
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
General purpose fiscal assistance:
Department of the Treasury:
New York City loan guarantees...
Loans to the District of Columbia

Grand total




20

20

20

-16

— 17
945

-16

962

— 17
945

14,214
1,440
16,490

16,095
1,799
18,289

9
9
66

66

962

1
- 6

165

1

1

-5
160

- 6

154
5

1

2
248

-5
243

New loans
Net loans
Outstandings.

-4
186

182

-5
177

New loans
Net loans
Outstandings.

1,318
38
94

300

300

94

94

New loans
Net loans
Outstandings..

-i

7

241

-18

New loans
Net loans
Outstandings.
New loans
Net loans
Outstandings..

130
46
1,459

173
108
1,567

191
1,758

New loans

2,534

1,23

1,461

220

300
277
777

15,941

300

211
988

18,116

19,165

Table H - 1 2 . CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS '—Continued
(in millions of dollars)
Direct loans
Function, agency and program

1980
actual

Net loans
Outstandings

118
3,125

1981
estimate

99
3,224

Guaranteed loans
1982
estimate

133
3,357

1980
actual

2,435
22,673

1981
estimate

2,984
25,657

1982
estimate

4,010
29,667

1 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 1982 Budget.




SPECIAL ANALYSIS I
CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH
Full-time permanent employment in the executive branch at the
end of 1982 is estimated to be 1,879,500, excluding 527,000 Postal
Service employees. (Postal Service employees are not under the
President's jurisdiction.) Actual full-time permanent employment
as of September 30, 1980 was 1,866,773, a reduction of nearly 45,100
full-time permanent employees since January 31, 1977, when this
administration came into office. Full-time permanent employment
is discussed in greater detail under "Full-time Permanent Civilian
Employment, End-of-Year."
Total Federal civilian employment in the executive branch is
estimated to be 2,131,500 by the end of 1982, excluding 651,300
Postal Service employees. Within the category of "total employment", full-time permanent employees account for 88% of the
workforce. The remainder is made up of part-time employees, intermittent employees (those employed on an irregular basis), and fulltime temporary employees (generally, in positions occupied for less
than 1 year).
The 1981 and 1982 estimates shown for total employment in this
analysis reflect the fractional counting of part-time permanent
positions (based on the number of hours per regularly scheduled
workweek) as required by the Federal Employees Part-Time Career
Employment Act of 1978 (Public Law 95-437).
EMPLOYMENT LIMITATIONS

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 and the Postal Rate
Commission), whether employed on a full-time, part-time, or intermittent basis. It also includes 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.




275

276

THE BUDGET FOR FISCAL YEAR 1982

The statutory limitation also provides that the President may
authorize employment in excess of the limitation, based on the
percentage increase of the U.S. population since September 30,
1978, as estimated by the Bureau of the Census. Using this criterion, the September 30, 1979 employment level could have exceeded
that for September 30, 1977 by about 16,000 employees (0.7%).
Another 18,200 employees could have been added by September 30,
1980, while remaining within the statutory limit. The calculated
statutory upper limit for 1981 is about 20,700 above that for 1980,
based on the population data shown in table 1-5.
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 permits additional parttime employees to be included in 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. A derivation of the statutory limitation on
total employment follows:
Executive branch total employment, as of September 3 0 , 1 9 7 7
Less:
U.S. Postal Service
Postal Rate Commission
Special employment p r o g r a m s — p r i m a r i l y disadvantaged youth
Plus:
Indirect hires (Department of Defense)
Statutory limitation on total employment:
Unadjusted for population growth

2,789,057
-657,832
— 8 1
—23,406
83,383
2,191,121

As indicated in the table below, executive branch employment
subject to the limitation was and is below the statutory limit,
adjusted for growth in the U.S. population, for the 3 years shown.
September 30
1979
actual

Statutory limitation on total employment, adjusted for
population growth
Actual and planned employment
Below limitation
1

1

1980
actual

1981
estimate

2,207,121
2,203,901

12,199,151

2,225,300

2,246,000
2,189,300

3,220

26,149

56,700

Includes an allowable adjustment for part-time employees, added since September 30, 1977, on a full-time equivalent basis.




SPECIAL ANALYSIS D

277

The estimate for executive branch employment for 1981 is also
below the unadjusted statutory limit, i.e., below the September 30,
1977 level (2,191,121) by nearly 2,000.
During the latter half of fiscal year 1980, President Carter imposed a hiring limitation that allowed executive branch agencies to
fill not more than one of every two full-time permanent vacancies
that occurred after February 29, 1980. The announced goal was to
reduce the level of full-time permanent employment that existed
on February 29 by 20,000 by the end of fiscal year 1980. As of
September 30, 1980, the net reduction in full-time permanent employment under the hiring limitation was 20,700.
FULL-TIME EQUIVALENT EMPLOYMENT

Control of Federal civilian employment will shift to a full-time
equivalent (FTE) or workyear basis for the entire executive branch
beginning with fiscal year 1982.
The FTE controls are designed to accomplish two objectives: (1)
to permit improved personnel management, overcoming some of
the difficulties under the existing end-of-year control system, and
(2) to break down artificial barriers that may have inhibited the
employment of permanent part-time workers.
In September 1977, the Office of Management and Budget and
the Office of Personnel Management were directed by the President to conduct an experiment in a few agencies for the purpose of
testing the ability of the FTE control system to achieve these
objectives. Shortly thereafter, the Congress passed the Part-Time
Career Employment Act of 1978, which supported the second objective. The agencies selected for the test were given full-time equivalent employment ceilings and, commencing with fiscal year 1979
(October 1, 1978), began to measure and report on their employment in terms of the number of hours worked.
Preliminary findings indicated that, within the initial group of
test agencies, progress was being made toward the achievement of
both of the experiment's goals. In these agencies, personnel management did improve and more part-time workers were employed.
As a result, five cabinet level agencies were placed under FTE
controls in 1981, and the remainder of the executive branch will
follow in 1982.




278

THE BUDGET FOR FISCAL YEAR 1982
FULL-TIME EQUIVALENT OF TOTAL FEDERAL EMPLOYMENT

The estimated workyears for the executive branch, excluding
employment exempt from ceilings, are:
Fiscal year
1980

Full-time equivalent employment in the executive
branch:
Full-time permanent
Other than full-time permanent
Total

1981

1982

1,882,300
245,400

1,879,600
253,400

1,888,600
252,400

2,127,700

2,133,000

2,141,000

Postal Service employment, which by law is not subject to Presidential control, is excluded.
FULL-TIME EQUIVALENT OF FULL-TIME PERMANENT EMPLOYMENT

Table 1-1 is a tabulation of full-time equivalent estimates for the
major departments and agencies of the executive branch excluding
the Postal Service. Temporary employment, (full-time or part-time)
as well as part-time permanent and intermittent (work performed
on an irregular basis) employment, is also excluded.




279

SPECIAL ANALYSIS D

Table 1-1. SUMMARY OF FULL-TIME PERMANENT CIVILIAN EMPLOYMENT IN THE EXECUTIVE
BRANCH 1
(Excluding the Postal Service)
(Full-time equivalent basis)
Fiscal year
Agency

Agriculture
Commerce
Defense—military f u n c t i o n s 2
Defense—civil functions
Education
Energy
Health and Human Services
Housing and Urban Development.
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space Administration
Veterans Administration
Other:
General Services Administration
International Communication Agency
International Development Cooperation A g e n c y Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authority
Miscellaneous
Subtotal
Contingencies 3
Total

1980
actual

1981
estimate

1982
estimate

85,400
29,300
880,000
27,700
6,400
19,600
136,400
15,600
53,800
53,400
22,100
21,800
68,800
109,400
10,700
22,600
193,100

86,500
32,300
865,000
27,800
6,100
19,700
135,700
16,000
53,600
54,200
22,300

87,000
32,700
865,000
27,600
6,100

68,800
110,400
11,200
22,300
195,600

69,100
113,600
11,700
22,300
195,800

32,300
8,000
5,700
2,800
6,400
7,700
4,400
16,500
42,400

32,200
7,900
5,700
3,200
6,200
8,300
4,700
16,600
43,300

32,200
7,900
5,700
3,400
6,200
8,400
4,700
16,600
44,000

1,882,300

1,877,600
2,000

2,000

1,882,300

1,879,6

5,600

22,000

20,200

136,100
16,300
55,000
54,400
22,600

22,000

Change
1981-82

500
400
-200

500
400
300
1,400
200
300
300
3,200
500
200

200
100
"700
9,0
9,000

Excludes developmental employees under the worker-trainee opportunity program (WTOP) as well as certain statutory exemptions.
Entries for Department of Defense, military functions do not reflect a tehnical cnange in conversion to the FTE system that will result in a
decrease of about 25,000.
3 Subject to later distribution.
1

2

Because a limitation on the hiring of full-time permanent employees has been in effect since March 1980, the 1980 and 1981
workyear levels are quite constrained.




280

THE BUDGET FOR FISCAL YEAR 1982

Several agencies show increases from 1981 to 1982, related to
workload and/or programmatic considerations as noted below.
• The Department of Agriculture—Increases amounting to 500
workyears are planned for; the Farmers Home Administration (increased loan service workload), the Food Safety and
Quality Service (inspection and grading of meat, poultry, etc.),
the Federal Crop Insurance Corporation (expansion, under
new legislation, to all crops and all countries), the Food and
Nutrition Service, and the Forest Service.
• The Department of Commerce—A planned increase of about
400 workyears is to reduce backlogs in the Patent and Trademark Office; to implement export development activities and
the multinational trade negotiations in the International
Trade Administration; and for enhancements of the Inspector
General's office.
• The Department of Energy—A net increase of about 500
workyears is planned. Overall increases of 850 workyears are
provided for expanded workload and improved project management of various atomic defense and energy programs.
These increases are partially offset by a decrease of 350
workyears for the phaseout of petroleum regulations that will
result from the decontrol of oil.
• The Department of Health and Human Services—The increase
of 400 workyears is primarily for civil rights enforcement,
health research and service programs, and management of
medicare and medicaid.
• The Department of Housing and Urban Development—An increase of 300 workyears to improve the timeliness and quality
of housing services is planned.
• The Department of the Interior—An increase of 1,400
workyears is distributed throughout the agency to support
implementation of the Alaska lands legislation, initiation of
the oil and gas leasing program in the National Petroleum
Reserve in Alaska, operation of other energy leasing and
regulatory programs on Federal lands, and increases in maintenance and visitor safety at national parks.
• The Department of Justice—A net increase of 200 workyears
is for the Federal Bureau of Investigation, for investigative
support and for fingerprint identification activities. Selective
decreases are planned in the Law Enforcement Assistance
Administration (phaseout of grant programs) and in the U.S.
Marshall's Service (for transfer of responsibilities for support
of the District of Columbia Superior Court to the District
government).
• The Department of Labor—A planned increase of 300
workyears reflects the full year effect of personnel to be
added in the latter part of 1981, primarily to assure sufficient




SPECIAL ANALYSIS D

281

workplace health and safety inspections and provision of
equal employment opportunity by government contractors.
• The Department of Transportation—The largest component of
a net increase of 300 workyears is for an additional 200 air
traffic controllers to meet growing aviation demands. Other,
smaller increases are associated with new enforcement responsibilities involving the regulation of hazardous wastes
and for managing an expanding mass transit grant program.
• The Department of the Treasury—An increase of 3,200
workyears, nearly all in the Internal Revenue Service for
increased staff to: process tax returns, collect revenues under
the Crude Oil Windfall Profits Tax Act, continue emphasis on
IRS revenue production programs (especially, collection of
unpaid tax accounts), and begin the first phase of a major
conversion of computers used for processing tax returns in the
IRS service centers.
• The Environmental Protection Agency—The increase of 500
workyears is for implementation of the newly-enacted Comprehensive Environmental Response Compensation and Liability Act of 1980. The act establishes systems of notification,
emergency response, enforcement, liability and compensation
for hazardous substance spills and uncontrolled hazardous
waste sites. A broad-based cleanup effort will be initiated.
• The Veterans Administration—The increase of 200 workyears
is for staffing of new medical facilities and for increased debt
collection activities.
• The Nuclear Regulatory Commission—An increase of nearly
200 workyears is due primarily to an expanded inspection
program that will provide a Federal presence at all nuclear
power plants that are either operating or under construction.
Additional staff will be needed for increased inspection of fuel
facilities and shipments of special nuclear materials as well
as expanded efforts in waste management.
CIVILIAN EMPLOYMENT END-OF-YEAR

This part of the analysis of Federal civilian employment displays
employment as of the end of each fiscal year, i.e., the actual or
estimated count as of September 30.
Table 1-2 shows Government-wide Federal civilian employment,
exclusive of the indirect hire component of the statutory limitation,
since indirect hire employees (i.e., persons hired under overseas
master labor contracts) are not Federal employees. Estimates for
indirect hire employment are, however, reflected in a footnote.
Information on Postal Service employment (including that of the
Postal Rate Commission) is also shown, together with data for the
legislative and judicial branches and for active duty military personnel.




282

THE BUDGET FOR FISCAL YEAR 1982
Table 1 - 2 . TOTAL FEDERAL EMPLOYMENT END-OF-YEAR
September 30
Description

Executive branch (less Postal Service):
Full-time permanent
Other than full-time permanent

1980
actual

1981
estimate

1982
estimate

1,866,773
266,963

1,873,600
237,400

1,879,500
252,000

2,133,736

2,111,000

2,131,500

535,050
125,035

532,800
127,800

527,000
124,300

660,085

660,600

651,300

27,535

28,000

28,000

2,821,356

2,799,600

2,810,800

2,050,127
39,375

2,065,400
39,800

2,093,600
39,500

Subtotal, military personnel

2,089,502

2,105,200

2,133,100

Total, executive branch employment

4,910,858

4,904,800

4,943,900

Subtotal
Postal Service:
Full-time permanent
Other than full-time permanent
Subtotal
Exempt from c e i l i n g s 1
Subtotal, executive branch civilian employment 2 3
Military personnel on active d u t y : 4
Department of Defense
Department of Transportation (Coast Guard)

Legislative and judicial p e r s o n n e l : 5
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches
Grand total

32,779
21,998
54,777
4,965,635

1 Developmental positions under the worker-trainee opportunity program; disadvantaged summer and part-time workers under such Office of
Personnel Management programs as Summer Aids, stay in school, and Junior Fellowship; and certain statutory exemptions.
2 Excludes indirect hire foreign nationals working under master labor contracts overseas. Actual employment for 1980 was 74,570. Such
employment for 1981 is estimated to be 78,300.
3 For 1981 and 1982, reflects fractional counting of part-time permanent positions, pursuant to the provisions of Public Law 95-437.
4 Excludes reserve components.
5 1981 and 1982 estimates are not available for the legislative and judicial branches. Also, excludes members and officers of the Congress.

Note: Within the subtotal for executive branch civilian employment, the "other than full-time permanent" entries for 1981 and
1982 include adjustments to account for part-time permanent positions on a fractional basis, as required by the Federal Employees
Part-Time Career Employment Act of 1978 (Public Law 95-437).
FULL-TIME PERMANENT CIVILIAN EMPLOYMENT END-OF-YEAR

Table 1-3 shows actual 1980 full-time permanent employment
and estimated 1981 and 1982 employment—as of the end of each
fiscal year—for the major departments and agencies of the executive branch. The table also contains an estimate of the anticipated
lapse to take account of the fact that, on a Government-wide basis,
end-of-year employment has ranged, over the past 10 years, from
0.3% to 2.3% below the budget estimates. The estimates for 1981
and 1982 anticipate lapses of slightly under 0.7% for full-time
permanent employment.




283

SPECIAL ANALYSIS D

Table 1-3. SUMMARY OF FULL-TIME PERMANENT CIVILIAN EMPLOYMENT IN THE EXECUTIVE
BRANCH 1
(Excluding the Postal Service)
(End-of-year basis)
As of September 30
Agency

1979
actual

1980
actual

1981
estimate

1982
estimate

83,899
29,127
885,990
28,592
5,639
19,005
136,306
16,101
54,343
52,743
22,148
22,130
70,166
109,382
10,153
22,633
193,641

82,528
29,270
867,750
27,730
5,639
19,827
136,364
15,613
53,210
53,444
22,112
22,048
68,924
107,463
10,678
22,613
195,255

87,500
29,900
865,000
27,600
6,400
20,200
135,700
15,500
55,000
54,200
22,600
22,000
69,300
111,500
11,300
22,500
199,400

87,500
30,100
865,000
27,600
6,100
20,200
136,100
15,800
55,000
54,500
22,600
22,400
69,600
114,700
11,700
22,500
199,800

32,787

32,200
7,900
5,700
3,300
6,200
8,400
4,700
16,500
44,100

32,300
7,900
5,700
3,400

4,372
17,065
42,615

32,413
7,997
5,614
3,029
6,235
7,673
4,408
16,523
42,413

Subtotal
Contingencies 3

1,893,391

1,866,773

1,884,600

1,890,500

Subtotal
Expected lapse

1,893,391
1,893,391

Agriculture
Commerce
Defense—military functions
Defense—civil functions
Education 2
Energy
Health and Human Services 2
Housing and Urban Development.
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space Administration
Veterans Administration
Other:
General Services Administration
International Communication Agency
International Development Cooperation A g e n c y 2 .
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authority
Miscellaneous

Total
1
2
3

8,020

5,753
2,839
6,276

11,666

6,200

8,300
4,700
16,500
44,300

2,000

2,000

1,866,773

1,886,600

-13,000

1,892,500
-13,000

1,866,773

1,873,600

1,879,500

Excludes developmental employees under the worker-trainee opportunity program (WTOP) as well as certain statutory exemptions.
The 1979 entries for these agencies are allocations based on the employment of the agencies that preceded them.
Subject to later distribution.

PERSONNEL COMPENSATION AND BENEFITS

Direct compensation of the Federal work force includes base pay,
merit pay, cash incentive and performance awards, meritorious and
distinguished executive awards, 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 consist primarily of the Government's share (as employer) of health insurance, term life insurance,
and Federal retirement and old-age survivors' disability insurance.




284

THE BUDGET FOR FISCAL YEAR 1982

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
1982 are projected to reach $61.0 billion, excluding the Postal Service. The estimated costs for civilian and military pay raises for
1982 are covered by lump sum allowances in the 1982 Budget.
The administration is again proposing comprehensive legislation
to reform and improve Federal compensation systems and procedures. The proposal would broaden the principle of comparability
and relate Federal compensation more closely to compensation in
the non-Federal sector. Comparability as currently defined would
require an October 1981 pay increase estimated at 13.5%. Under
the proposed changes the comparability increases would be an
estimated 9.1% for military employees and 8.6% for civilian employees. As part of an overall effort to restrain inflation, the
budget estimates reflect a further reduction in the civilian employee pay raise, to 5.5%.
As required by law, the Commission on Executive, Legislative,
and Judicial Salaries has submitted recommendations to the President on salaries for Senators, Representatives, Federal judges, cabinet officers and other agency heads, and certain other officials in
the executive, legislative, and judicial branches. The statute requires the President to set forth, in the budget next submitted by
him after receipt of the report of the Commission, his recommendations for adjustment of these salaries. These recommendations
appear in Part VII of the 1982 Budget Appendix.




285

SPECIAL ANALYSIS D
Table 1-4. PERSONNEL COMPENSATION AND BENEFITS
[In millions of dollars]
Description

Civilian personnel costs:
Executive b r a n c h : 1
Direct compensation
Personnel b e n e f i t s 2 3
Subtotal
judiciary: 4

Legislative and
Direct compensation
Personnel benefits 3
Subtotal

1980
actual

1981
estimate

1982
estimate

43,928
7,615

47,878
8,637

49,174
8,883

51,543

56,515

58,057

786
75

884
87

939
93

861

971

1,032

Allowance for civilian pay r a i s e 7
Total, civilian personnel costs
costs:5

Military personnel
Direct compensation
Personnel benefits 6
Subtotal

1,901
52,404

57,486

60,990

26,958
1,989

31,404
2,504

32,371
2,640

28,947

33,908

35,011

28,947

33,908

37,839

81,351

91,394

98,829

Allowance for military pay raise
Total, military pay costs
Grand total, personnel costs

2,828

1 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 trie effects of general pay increases on Federal retirement systems, for employees in the legislative and judicial
branches as well as employees (nonpostal) in the executive branch. The transfers amounted to $2,788 million in 1980 and are estimated to be
$2,785 million in 1981 and $3,298 million in 1982.
3 Excludes transfers for interest on unfunded liability for executive, legislative, and judiciary branches, which amounted to $8,444 million in
1980, and are estimated to be $9,667 million in 1981 and $10,872 million in 1982, and, for 1982 - $ 7 1 2 million for the estimated effect of the
COLA adjustment proposal.
4 Excludes members and officers of Congress.
5 Excludes reserve components.
6 Excludes payments to current military retirees which amounted to $11,920 million in 1980 and are estimated to be $13,851 in 1981 and
$16,049 in 1982.
7 The allowances assume some absorbtion.




286

THE BUDGET FOR FISCAL YEAR 1982
GOVERNMENT EMPLOYMENT AND LABOR FORCE COMPARISONS

As shown on the following chart, Government employment—
Federal, State, and local—will comprise about 16.4% of the total
employed civilian labor force in 1982.
Within this segment, Federal civilian employment in the executive branch accounts for 2.8% of the total employed civilian labor
force in 1982, down from a high of 3.8% in 1968.
The percentage of the total employed civilian labor force attributable to State and local government has grown from 9.6% in 1962
to 13.6% in 1982.

Government Civilian Employment
PBtmnt

;

i & i

Fiscal Years
•Executive Branch




Civilian i m p k ^ m e r r t

Pmmt

Estimate

SPECIAL ANALYSIS D

287

GOVERNMENT EMPLOYMENT AND POPULATION COMPARISONS

As illustrated in the following chart and in table 1-5, the Federal
share of total governmental employment has declined significantly
over the last three decades, from 38.4% in 1952 to an estimated
17.0% in 1982. Employment for all government has been rising
steadily 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 1982.

Government Civilian Employment
Millions of Employees

•Executive Branch




288

THE BUDGET FOR FISCAL YEAR 1982
Table 1-5. GOVERNMENT EMPLOYMENT AND POPULATION, 1952-82
Government employment
Fiscal year

1952
1953
1954
1955
1956
1957
1958
1959
1960 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
1980 2
1 9 8 1 (est.)
1982 (est.)

2

Population

Federal
executive
branch 1
(thousands)

State and
local
governments
(thousands)

All
governmental
units
(thousands)

Federal as
percent of all
governmental
units

Total United
States
(thousands)

Federal
employment
per 1,000
population

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
2,823
2,821
2,800
2,811

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
10,372
10,896
11,286
11,713
12,114
12,282
12,704
13,050
13,308
13,445

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
13,255
13,719
14,061
14,560
14,962
15,114
15,493
15,870
16,131
16,266

38.4
37.2
34.4
33.4
31.9
30.8
29.5
28.8
28.1
27.7
27.6
26.7
25.4
24.5
24.4
24.8
24.4
23.9
23.0
21.8
20.6
19.7
19.6
19.0
18.7
18.0
17.8
17.5
17.3
617.1
617.0

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
217,422
219,247
221,180
222,672
224,744
226,883

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
12.8
12.7
12 6
12.4

7
7

8
8
8

1 Covers total end-of-year employment of 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 1952 through 1976 are as of June 30; for 1977 through 1981, 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.
7 Reflects fractional counting of part-time permanent positions, pursuant to the provisions of Public Law 95-437.
8 U.S. population data for 1980-1982 are the latest available from the Census Bureau. Revised estimates, based on the 1980 Census, were
not available in time for publication in this analysis.




PART 3

SELECTED
FEDERAL PROGRAMS

3H0-700

0 - 8 1 - 1 9




INTRODUCTION
Part 3 furnishes Government-wide program and financial information in selected program areas—civil rights and research and
development, designated J and K.
Special Analysis J (Civil Rights Activities) summarizes Federal
spending for civil rights activities, concentrating on compliance,
investigation, and enforcement efforts.
Special Analysis K (Research and Development) identifies Federal programs for the conduct of research and development, and for
the support of facilities related to such activities.
290




SPECIAL ANALYSIS J
CIVIL RIGHTS

ACTIVITIES

COVERAGE AND SCOPE

The Federal Government enforces or administers over 130 statutes and Executive orders prohibiting discrimination based on race,
color, sex, national origin, handicap, and social or economic status.
Discrimination is prohibited in major areas of American life—
employment, housing, voting, education, public accommodations,
access to credit, and jury service. In addition, discrimination may
not occur whenever Federal financial assistance of any kind is
involved e.g., health services, forestry projects, and public transportation.
Unfortunately, many of these laws are duplicative, or agency
enforcement jurisdiction overlaps. Therefore, in recent years (especially since 1977), the Federal Government has concentrated on
improving management of civil rights resources and program efforts by eliminating waste and duplication and ensuring consistent
interpretation of the laws and Executive orders.
Illustrative of this effort is the decision by the Director of the
Office of Management and Budget (OMB) to establish a unit within
his office to oversee the Federal civil rights effort. This unit,
through both the budget and the management oversight functions
of OMB, addresses crosscutting issues that affect the spectrum of
Federal civil rights efforts. During 1980, the OMB Civil Rights
Office substantially revised OMB's instructions to agencies for the
preparation of budget estimates to require, for the first time, detailed performance as well as expenditure information on civil
rights activities. This resulted in 67 more departments and agencies reporting civil rights expenditures for this special analysis
than had previously reported. Seventy-six more agencies reported
on their internal equal employment expenditures. As a result of
this expanded data base and the unit's oversight activities in 1980,
this analysis provides a much more accurate and detailed view of
civil rights expenditures and their effects. Performance reporting
will be further refined in 1981 to allow for more precise assessments of the cost effectiveness of civil rights activities in the 1983
special analysis.




291

292

THE BUDGET FOR FISCAL YEAR 1982

Number of Agencies
-120

Number of Agencies
120-

Agencies Reporting
Civil Rights Activities
I Agencies Reporting
Federal Sector Activities"
8 0 H

-100
•80
lilllllift

60-

60

40

-40

2 0 H

•Includes Agency

-20

m d Complaint Processing

Another illustration of this effort to manage civil rights resources more efficiently is the emphasis placed on "coordination"
and "leadership" of civil rights activity so that one, not several
agencies interpret the various laws and Executive orders. For example, in 1978, the Equal Employment Opportunity Commission
(EEOC) became the "lead" agency for equal employment through
the adoption of Executive Order 12067. Now, when the Departments of Energy or Education want to establish guidelines on how
handicapped workers should be accommodated, only EEOC provides official guidance.
Special Analysis J focuses first, on the enforcement of laws prohibiting employment discrimination. Second, the analysis focuses
on enforcement of laws prohibiting discrimination in federally assisted programs. In addition, it covers enforcement of Fair Housing
and Equal Credit Opportunity laws. Third, the analysis is expanded
this year to cover Federal programs that encourage the development of minority and female businesses, and those programs designed to assist communities in complying with civil rights requirements.




293

SPECIAL ANALYSIS D
^Pfc

£.ft

M

' mM

—A.

MM

$ Millions
MMnNI

Estimate

Fiscal Years

Employment
The principal statutes or Executive orders prohibiting employment discrimination are:
—Title VII of the Civil Rights Act of 1964, as amended, which
prohibits discrimination based on race, color, religion, sex or
national origin by public and private employers, unions, and
employment agencies.
—The Age Discrimination in Employment Act Amendments of
1978 (ADEA), which prohibit discrimination against persons
aged 40 through 70.
—The Equal Pay Act of 1963 (EPA), which prohibits discrimination in payment of wages based on sex.
—Executive Order 11246, as amended, section 503 of the Rehabilitation Act of 1973, section 402 of the Vietnam Veterans
Readjustment Act, which together require Federal contractors
to take affirmative action to assure equal employment opportunity regardless of race, color, sex, national origin, religion,
handicap, service-connected disability, or Vietnam era military
service.
In 1977, the President's Reorganization Project studied the administration of these laws by the 18 Federal departments and
agencies that had major equal employment responsibilities. The
study identified major problems of duplication and inconsistency in



294

THE BUDGET FOR FISCAL YEAR 1982

standards and procedures; lack of accountability; burdensome paperwork requirements, and inconsistent compliance, investigation
and enforcement procedures. Congress responded by approving Reorganization Plan No. 1, effective May 5, 1978. The Plan reduced
the number of departments and agencies responsible for equal
employment from 18 to 3, and established accountability mechanisms as depicted in table J-l.
Table J - 1 . COMPARISON OF EQUAL EMPLOYMENT AUTHORITIES BEFORE AND AFTER
REORGANIZATION PLAN NO. 1
Agency

Equal Employment Authorities
Program

Employees covered

Private and public nonFederal employers and
unions.
Equal Pay Act, Age Discrimination in Em- Private and public nonFederal employers and
ployment Act.
unions.
Title VII, Executive Order 11478, Equal Pay Federal Government
Act, Age Discrimination in Employment
Act, Rehabilitation Act.
Coordination of all Federal equal employment programs.*
Vietnam Veterans Readjustment Act, Reha- Federal contractors
bilitation Act.
Title VII

Executive Orders 1 1 2 4 6 , 1 1 3 7 5

Federal contractors

Title VII, Executive Order 11246, Selected Public non-Federal
employers.
Federal Grant Programs.
Federal contractors and
grantees.

Before

EEOC

After

EEOC

Labor ( W a g e and H o u r ) . . .
Civil Service Commission...
EEOC
Labor (OFCCP)
Commerce, Defense,
Energy, EPA, GSA,
HHS, ED, HUD,
Interior, SBA, DOT,
Treasury.

Labor
(OFCCP)

Justice

Justice

* A number of Federal grant statutes prohibit employment discrimination, or include other non-discrimination provisions having equal employment
implications. Any interpretations relating to employment by agencies enforcing these statutes must be coordinated with the EEOC.

In addition, Executive Order 12067 assigned the Equal Employment Opportunity Commission (EEOC), responsibility for eliminating duplication, conflict, and inconsistency by developing uniform
standards, regulations, definitions, and procedures. Since the Executive order was issued, EEOC has reviewed more than 130 proposed issuances to assure consistency and clarity. These reviews
have led to significant increases in:
—Joint issuances by agencies providing uniform guidance to employers covered by more than one statute;
—Multiagency use of common reporting forms and other interagency data sharing which eliminates duplication and reduce
reporting burdens on the public; and
—Agency sharing of data on complaints and findings of discrimination to eliminate duplicative reviews and investigations.




SPECIAL ANALYSIS D

295

During 1980, the EEOC surveyed over 1,300 employers to obtain
their recommendations on current EEO enforcement.
Federal Employment—Each Federal department and agency is
responsible for taking affirmative action to prevent discrimination
based on race, color, religion, sex, national origin, age, or handicap.
In addition to EEOC's lead responsibility to coordinate equal
employment opportunity policies and procedures under Reorganization Plan Number 1, the Office of Personnel Management (OPM) is
responsible, under the Civil Service Reform Act, for coordinating
agency implementation of the Federal Equal Opportunity^ Recruitment Program (FEORP). FEORP requires agencies to make special
efforts to increase the number of minorities and women applying
for positions where they are underrepresented.
Significant progress has been made in making the requirements
applying to Federal Government and private employers consistent.
Since implementation of Reorganization Plan Number 1, for example, the Uniform Guidelines on Employee Selection Procedures
used by Federal agencies, and the development and implementation of affirmative action plans by Federal agencies now parallel
the requirements placed upon private, State, and local employers.
Through application of affirmative recruitment and merit selection principles, the representation of minorities and women in
Federal employment has increased steadily without increases in
total number of Federal employees. For example, while full-time
permanent civilian employment in the Executive branch has decreased by 2.4 percent since 1977, the representation of women and
minorities has increased by 2 percent and 2.2 percent respectively.
From October 1, 1976 through March 30, 1980, Federal agencies
hired more than 225,000 Vietnam era veterans. During the first
half of 1980, Vietnam era veterans represented 20 percent of all
Federal hires, compared with 15.5 percent in 1976.
Progress has been made in removing barriers to the employment
of handicapped persons. Medical standards unrelated to successful
job performance have been eliminated. Procedures for remedying
discrimination based on handicap in Federal employment have
been established. Legislation authorizing Federal agencies to
employ readers and interpreters, and to provide other auxiliary
aids for disabled employees has enabled the Federal Government to
more fully utilize the skills and qualifications of handicapped persons. Finally, an Executive order was signed that allows agencies to
convert mentally retarded and severely disabled employees to permanent positions after two years of successful service.
Steps have been taken to improve the cost effectiveness of Federal discrimination complaint procedures. During 1980, the EEOC
initiated a pilot program similar to the rapid charge processing
procedures pioneered by EEOC in the private sector. The pilot
procedures emphasize early resolution of allegations of discrimina-




296

THE BUDGET FOR FISCAL YEAR 1982

tion through informal conference. In the pilot program, 260 out of
400 complaints were closed by the end of the fiscal year. Compared
with traditional time-consuming investigations, more complaints
were resolved in shorter periods of time to the satisfaction of all
parties. For example, charges closed through voluntary settlements
and withdrawals increased from 43.3 percent to 60.6 percent, while
the percentage of closed cases involving voluntary relief for complainants increased from 22.8 percent to 41.4 percent. Also, the
average processing time dropped from an average of 440 days to
100 days. Additionally, the EEOC eliminated a large backlog of
Federal complaint appeals that it had inherited.
The military services continue to reflect an increasing number of
minorities and women within their ranks. Over 163,000 women
serve on active duty as the services strive toward a goal of 254,000
women by 1985. The percentage of minority enlisted personnel
approached 30 percent, which is greater than their percentage in
the overall population. Minorities and women are participating in
ROTC programs in greater numbers and they are being selected for
military jobs and positions of greater responsibility. Forty-five minorities and seven women currently hold flag and general rank.
Private sector equal employment opportunities.—Since 1977,
EEOC has planned and implemented several major improvements
in its organization and procedures. Improvements included a new,
expedited procedure for resolving charges of discrimination filed
under title VII, and increased cooperation with State and local
deferral agencies. In addition, EEOC:
—Achieved and sustained a permanent reduction in its backlog
of title VII charges. By the conclusion of 1980, 65 percent of
the backlog that existed in January 1979, had been eliminated.
Settlements of these charges involved over $36 million in benefits;
—Resolved over 85 percent of the new charges in initial face to
face factfinding conferences. The time required to resolve
charges of discrimination has been reduced from an average of
2 years to 3 months;
—Closed 17 percent more charges than it received annually.
During 1980, EEOC received 45,000 charges and resolved
50,000; and
—Increased the remedies through conciliation from 14 percent to
42 percent. Average benefits increased from $1,400 per person
to $3,600. During 1980, 29,000 persons received $43 million in
backpay and other financial benefits.
During 1980, EEOC continued its progress in processing title VII
charges. It filed 247 suits to enforce title VII, and legal settlements
produced $18 million in financial benefits.
EEOC's first full year of enforcement responsibility for ADEA
and the Equal Pay Act (EPA) was 1980. EEOC resolved 5,800




SPECIAL ANALYSIS D

297

ADEA cases, and filed 53 suits under the Act. There were 1,650
cases resolved under EPA; 314 compliance reviews were initiated
by the EEOC; and 93 suits were filed to enforce the Act. Efforts
were made to increase productivity further and eliminate the
burden and cost of investigating the same charge twice. This included the EEOC's implementation of procedures for processing
title VII charges that also allege ADEA or EPA violations.
Major changes have also occurred in enforcement of laws and
Executive orders prohibiting discrimination by Federal contractors.
Reorganization Plan No. 1 transferred over 1,000 employees from
11 Federal agencies to the Department of Labor's Office of Federal
Contract Compliance Programs (OFCCP). Before this consolidation,
each agency had its own regulations, interpretations, and procedures. Additional confusion resulted from the Department of
Labor's separate enforcement of contractual requirements relating
to handicapped workers and disabled and Vietnam era veterans.
Since program responsibility was divided among 11 compliance
agencies based solely on industry, Federal contractors were often
required to deal with three or more compliance agencies. Preconsolidation compliance reviews frequently concentrated on minutia
and the petty details of "paper compliance," resolving no major
problems while creating an unnecessary workload for Federal contractors.
Since October 1978, OFCCP has developed and trained all personnel in review and investigative procedures that focus on major
compliance issues. All contractual equal employment requirements
are now handled in a single review. As evidence of this shift in
focus, financial settlements recovered for identified victims of discrimination quadrupled during the 2 years following consolidation,
or from $4 million in 1978 to over $16 million during 1980.
During 1980, OFCCP completed 2,632 compliance reviews and
1,726 complaint investigations. These actions affected personnel
policies and practices for approximately 1,050,000 workers. Discriminatory policies or practices were identified in 113 reviews, and
appropriate remedies were obtained or are being negotiated. Potential discrimination issues were identified in an additional 467 reviews, and investigations to resolve them are being completed.
Major initiatives by OFCCP to increase cost effectiveness and to
decrease the burden of compliance on the public include:
—A program designed to link contractors having employment
opportunities with federally funded programs that will train
persons in the skills they need. This should increase employment of Vietnam era veterans, minorities, women, and the
handicapped, while increasing the cost effectiveness of both the
contract compliance and federally assisted training programs.




298

THE BUDGET FOR FISCAL YEAR 1982

OFCCP has established 541 linkages benefiting 1,751 employees
to date.
—A program to help small contractors comply with equal employment requirements by eliminating inappropriate paperwork and other burdens. OFCCP tested this program in 1980,
and will implement it nationwide in 1981.
—Cooperative seminars with private industry designed to promote voluntary compliance with equal opportunity requirements. During 1980, 650 representatives of Federal contractors
participated in these sessions.
—A comprehensive compliance manual, which was made available to contractors and the public.
—A major outreach program that brought construction contractors, unions, and civil rights groups together as a committee to
recommend changes in OFCCP's procedures for the construction industry. Changes in current OFCCP procedures based on
two committee's recommendations will be issued in 1981. Similar cooperation efforts have been completed or are underway
with other employers.
The Women's Bureau of the Department of Labor was responsible for yet another initiative. During 1980, it completed a major
demonstration project showing that women can successfully perform a wide range of jobs in the coal industry which have traditionally been held by men. The Bureau also made significant improvements in its regional offices which will enhance its ability to
identify major developemtns affecting the economic status of
women.
During 1980, the Civil Rights Division of the Department of
Justice initiated 23 employment discrimination suits and settled 17
suits through consent decrees. These suits primarily involve alleged
patterns and practices of employment discrimination by State and
local governments. Settlements negotiated by the Department addressed such problems in State and local governments employing a
total of more than 1,150,000 persons.
Nondiscrimination in Federally Assisted Programs
Four statutes apply to almost all agencies providing Federal
financial assistance: title VI of the 1964 Civil Rights Act; title IX of
the Education Amendment of 1972, as amended; section 504 of the
Rehabilitation Act of 1973, as amended; and the Age Discrimination Act of 1975. These laws are enforced by each Federal agency
granting financial assistance. In addition, an agency may be responsible for enforcing an antidiscrimination statute that applies
only to its programs. For example, section 401 of the Energy Reorganization Act of 1974 prohibits sex discrimination in Department




299

SPECIAL ANALYSIS D

of Energy programs not covered by any other sex discrimination
prohibition.
Until recently, there were no procedures to ensure that all of
these statutes were interpreted uniformly and enforced consistently. No agency was responsible for ensuring that interpretations of
these statutes were consistent with other civil rights laws. As
previously mentioned, in 1978 EEOC was designated as the overall
coordinator of the employment discrimination aspects of all of
these statutes. To close the gap in the nonemployment areas, Executive Order 12250 was issued in 1980. It designated the Attorney
General as the overall coordinator for the interpretation and implementation of titles VI and IX, section 504, and all other statutes
prohibiting discrimination in federally assisted programs or activities based on race, color, national origin, handicap, religion, or sex.
Discrimination based on age could not be included because the
statute assigns this authority to the Department of Health and
Human Services (HHS).
Table J - 2 . COMPARISON OF EQUAL OPPORTUNITY AUTHORITIES (OTHER THAN EMPLOYMENT)
BEFORE AND AFTER EXECUTIVE ORDERS
Coordtn,ation

Enforcement agencies

Program/scope

Before

After

Title VI (federally assisted programs)

37 agencies

DOJ

Section 504 (federally assisted programs)

All agencies

HEW

Title IX (federally assisted education programs).... 28 agencies

None

15 agencies

None

Age Discrimination Act (federally assisted pro- 37 agencies
grams).

HHS

Title VIII (housing)

15 agencies

HUD

HUD*

Equal Credit Opportunity Act (credit)

13 agencies

FRB

FRB

126 program specific provisions
assistance programs).

(individual

DOJ

HHS

*Prior to issuance of the Executive order, HUD was designated the coordinating agency for title VIII but lacked the authority necessary to
assure meaningful coordination.

The Departments of Education and Justice have the primary
responsibility for assuring nondiscrimination in education programs and activities.
In 1980, the Office for Civil Rights (OCR) of the Department of
Education (ED) received 3,354 complaints of discrimination and
2,750 complaints were resolved. About 121,000 persons benefited as
a result of the resolutions. During 1981, it is anticipated that 4,090
complaints will be received, 4,452 will be resolved and 201,000
persons will benefit.
During 1980, the Department initiated 96 and closed 208 compliance reviews. Estimates for 1981 indicate that 120 reviews will be
initiated and 221 will be closed.




300

THE BUDGET FOR FISCAL YEAR 1982

OCR also helps recipients to comply voluntarily with civil rights
laws and regulations. ED estimates that 9.5 million persons will
benefit from the results of this technical assistance.
During 1980, Justice continued to focus on the desegregation of
school districts in nonsouthern metropolitan areas, reinforcing the
requirements for full desegregation of northern and western school
districts that had previously practiced unlawful segregation. This
was in addition to its efforts to enforce court-ordered desegregation
in Southern States. Other major litigation involves desegregation of
higher education in Mississippi and Louisiana. Justice is defending
the Department of Education's efforts to enforce the law regarding
higher education systems in North Carolina, Maryland, and Georgia. In addition, Justice is also suing two universities alleging the
denial of equal educational and athletic opportunities for female
students.
During 1980, the Department of Justice's coordination unit assisted two major departments in making major program improvements. Previously, each subunit of the Departments of Energy and
Labor was individually responsible for enforcing civil rights requirements regarding grants that they awarded. This resulted in
considerable duplication and inconsistency. Now, both departments
have established central offices to enforce these requirements regarding all grants awarded by these agencies. In addition, the
Department of Labor is developing a comprehensive regulation
detailing requirements of all applicable civil rights laws. This will
enable recipients of Federal financial assistance to find, in one
document, requirements that were previously scattered throughout
several regulations.
During 1981, Justice will continue to address the problems that
led to the issuance of the Executive order enhancing its coordination responsibility. It will work to centralize enforcement responsibility in agencies where it remains diffused among subunits. Responsibility for enforcement among agencies will be more clearly
divided, so that recipients of Federal financial assistance are not
subject to compliance activities of several different agencies. Guidelines and procedures requiring Federal agencies to develop consistent regulations will be issued, and other steps will be taken to
assure consistency in enforcement actions, investigations, and compliance reviews among agencies. The Department of Justice is also
developing recordkeeping, reporting, and data sharing requirements to increase cooperation among agencies, and reduce unnecessary burdens on grantees.
Fair Housing
The Fair Housing Act of 1968, as amended, prohibits discrimination based on race, color, religion, sex, or national origin in the
sale, rental, or financing of housing or provision of brokerage services. The Department of Housing and Urban Development (HUD)




SPECIAL ANALYSIS D

301

investigates complaints alleging such discrimination, and attempts
to resolve violations of the Act through informal conference, conciliation, and persuasion. The Department of Justice files suit to
enjoin patterns and practices of discrimination prohibited by the
Act. Other Federal departments and agencies are responsible for
administering their housing and urban development programs in a
manner that affirmatively promotes fair housing. Like the areas of
employment and federally assisted programs, there have been significant advances in improving cost effectiveness and eliminating
duplication in fair housing enforcement.
During 1980, HUD initiated three major programs to increase its
cost effectiveness:
—Under the Act, complaints are referred to State and local fair
housing agencies with statutory authority substantially equivalent to the Act. HUD has implemented a program of technical
and financial assistance which will increase the number of
referral agencies from 32 to 83 by 1982. This will allow more
complaints to be handled at the State and local level.
—HUD's new "rapid response" procedures significantly shortened the time required to process complaints by focusing on
early discussion and resolution of issues. Based on the success
of these procedures in 5 regions, HUD will extend them to its
other 5 regions in 1981.
—In 5 of its 10 regions, HUD formed systemic teams to address
complaints of patterns and practices of discrimination. This
approach will be extended to the other 5 regions in 1981.
During 1980, HUD received 3,039 complaints and closed 2,890.
There were 494 successful conciliations out of 703 attempts to
resolve complaints through conciliation. Resolutions generally included actions to eliminate any discriminatory practices found as a
result of the complaint, as well as relief for individual complainants.
During 1981, HUD will begin to implement a new Executive
order assigning it leadership and coordinating responsibility for
Fair Housing similar to the EEOC's for equal employment opportunity. HUD will require that agencies develop consistent regulations
to assure that their programs affirmatively further the purposes of
the Fair Housing Act. HUD will also complete issuance, during
1981, of a full set of substantive title VIII regulations that will, for
the first time, provide authoritative guidance to the public on the
requirements of the Fair Housing Act. These actions will eliminate
duplication and inconsistencies in the fair housing efforts of Federal agencies, and promote more uniform application of the Act by
state and local jurisdictions.
During 1980, the Department of Justice, the other major agency
responsible for fair housing, filed several suits alleging pattern and
practice violations of the Act. These suits alleged prohibited prac-




302

THE BUDGET FOR FISCAL YEAR 1982

tices such as refusal to sell or rent housing based on race, sex, or
religion; zoning to exclude housing because of the race of potential
residents; and failure to count the income of women on the same
basis as the income of men in determining whether to make housing available to applicants.
A major obstacle still remains to cost effective enforcement of
the Act. Neither HUD nor Justice has the authority to seek legal
or other sanctions to enforce the rights of individuals under the
Act when conciliation fails. Meaningful sanctions would greatly
enhance HUD's ability to negotiate voluntary remedies.
Equal Credit Opportunity
More serious resource efficiency problems are posed by the present structure for enforcing the Equal Credit Opportunity Act of
1974. This Act prohibits discrimination in all aspects of credit
transactions. Lending institutions cannot discriminate because of
an individual's race, color, national origin, sex, marital status, or
derivation of all or part of their income from public assistance.
This Act vests enforcement responsibility in 13 different departments and agencies. Information submitted by the agencies themselves indicates that very few complaints under the Act receive
more than perfunctory attention, and that resources devoted to
enforcing the Act are scattered too widely to be effective.
During 1981, authority for coordinating enforcement of this Act
will be reexamined. In addition, an in-depth assessment will be
made of the resources expended on enforcing the Act and the
results obtained. Reduction in the number of agencies presently
responsible for enforcing the Act and reassignment of coordination
responsibility will be seriously considered.
Voting
The Voting Rights Act of 1965 prohibits discrimination in registration and voting based on race, color, membership in a language
minority group, or age. The Act also requires that jurisdictions
submit all proposed changes in voting practices or procedures to
either the U.S. District Court for the District of Columbia or the
Attorney General for review. During 1980, Justice received 2,422
submissions, involving 7,312 voting changes. These figures represent an increase over 1979 of 26.5 percent and 113.8 percent, respectively. Justice objected to 32 proposed changes, including a
redistricting plan that would have guaranteed a white majority in
the Selma, Ala., city council.
FEDERAL PROCUREMENT INITIATIVES

Federal procurement totals $100 billion per year. Several statutes and Executive orders require departments and agencies to




SPECIAL ANALYSIS D

303

encourage increased participation by minority and women-owned
businesses in Federal contracting and subcontracting. Diversification of the supplier base stimulates competition, increases productivity, creates jobs and leads to long-term cost savings critical to
America's economic health. The Office of Federal Procurement
Policy (OFPP) within OMB coordinates these efforts by working
closely with the Minority Business Development Agency (MBDA)
at Commerce and the Small Business Administration (SBA).
Significant accomplishments in furthering utilization of minority
and women-owned businesses include:
—Each Federal agency with procurement authority has established an Office of Small and Disadvantaged Business Utilization.
—All firms with Federal contracts exceeding $10,000 in value are
required to make efforts to include small businesses and those
owned by socially and economically disadvantaged persons
(largely minority) in all aspects of contract work. Those with
contracts exceeding $500,000 in value are required to develop
written plans and percentage goals for subcontracting with
minorities. A consolidated form was developed to provide an
efficient cost-effective means for collecting information.
—Federal loans, loans guarantees, and grants to minority business enterprises by SBA have increased 110 percent from $850
million in 1977 to $1.8 billion in 1979. In 1979, SBA made $163
million in direct loans and $240 million in guaranteed loans to
socially and economically disadvantaged individuals. For 1980,
these figures were $172 million for direct loans and $261 million for guaranteed loans. SBA is also targeting direct and
guaranteed loans to socially and economically disadvantaged
persons, the handicapped, and women. Under section 8(a) of
the Small Business Act, SBA will make available up to 100
percent guaranty loans to recipients of section 8(a) contracts.
MBDA coordinates Federal minority business development programs with specific emphasis on enterprise development,
policy and market development and research and information.
For 1982, the MBDA budget of $65 million will permit it to
continue its existing services and focus on assisting medium
and larger sized minority firms to diversify and strengthen
their business potential.
—Procuring agencies are required to set procurement goals for
utilization of minority-owned businesses as part of a comprehensive goal setting process that includes utilization of goals
for women business owners, small business owners and Labor
Surplus Areas (LSA) businesses also. SBA, MBDA, and OFPP
cooperated with the agencies in this process. As a result,
awards of contracts to minority-owned businesses rose from
$1.1 billion, or 1 percent of total procurements in 1977, to $3




304

THE BUDGET FOR FISCAL YEAR 1982

billion or 3 percent of total 1980 procurements. For 1981, the
goal is $4.2 billion. If this rate can be maintained, the goal of
reaching 10 percent by 1990, endorsed by the White House
Conference on Small Business and sanctioned by President
Carter, can be achieved. Next year, the goal setting process
will be refined further and institutionalized as part of the
OMB budget process.
—Executive Order 12138, issued on May 18, 1979, required greater involvement of women-owned businesses in Federal procurement. As a result of this and other efforts to increase involvment of women in Federal (procurement) total contracts
awarded to female owned firms increased from $40.5 million in
1977 to over $212 million in 1980. The SBA's Office of Women
Business Enterprise is responsible for coordinating efforts to
provide management and financial assistance and to increase
utilization of women business enterprises throughout the Government.
—Standardized efforts to increase utilization of minority, women,
handicapped, and socially and economically disadvantaged entrepreneurs will be included in the Uniform Procurement
System (UPS) now in preparation under the leadership of
OFPP. The UPS will also simplify the procurement process
making significant management improvements to expedite the
acquisition and distribution of goods and services.
Table J-3. CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND AGENCY
(In millions of dollars)
1980 actual

Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
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
Equal Employment Opportunity Commission
Commission on Civil Rights
Office of Personnel Management
Small Business Administration
All other Executive agencies
(U.S. Postal Service)
(Legislative B r a n c h — G A O , GPO)
Total

1981 estimate

15.0
6.2
127.6
40.5
3.9
32.5
16.8
11.2
33.0
56.6
1.6
9.6
9.7
•130.8
11.6
4.4
2.2
*39.6
2 (27.7)
2 (1.3)

16.4
8.5
136.9
43.5
5.2
36.1
28.5
16.7
37.0
60.7
1.8
11.8
11.2
*143.3
12.0
4.5
2.4
147.1
2 (30.1)
2 (.5)

552.8

623.6

1982 estimate

16.4
9.2
146.3
51.1
6.0
44.9
27.4
18.8
40.0
59.2
1.9
12.5
12.1
*156.3
13.9
6.2
2.9
^l.l
2 (32.7)
2 (.6)
676.2

•Estimated total internal equal employment opportunity outlays are not included in EEOC's outlay figures as in previous special analyses. Actual outlays are
now included in each agency's total.
1 Includes outlays by 29 agencies.
2 U.S. Postal Service and Legislative Branch outlays appear in the Annexed Budget and are included here for memorandum purposes only.




SPECIAL ANALYSIS I
RESEARCH AND DEVELOPMENT
This analysis summarizes the funding of research and development (R. & D.) across all departments and agencies. It consists of
two parts. The first highlights the R. & D. programs and trends in
the 1982 budget. The second describes in more detail the R. & D.
programs of the 15 agencies whose 1982 obligations account for
99% of total Federal funding for R. & D.
The Federal Government does not budget separately for R. & D.
Rather, R. & D. programs are reviewed primarily in the context of
the missions of individual agencies and funded on the basis of their
importance in meeting those missions. However, during the budget
process, the total Federal support for R. & D. and particularly for
basic research is reviewed and adjustments are made to insure that
the overall level of support is consistent with the Federal role in
advancing science and technology in the national interest.
Federal R. & D. ranges from support for basic research to discover new scientific knowledge and applied research to use scientific
knowledge in meeting specific needs to the development and demonstration of specific devices, systems or methods. These activities
meet needs in three broad categories:
• Direct Federal needs—where the Government is the primary
user of the R. & D. (e.g., national defense).
• General economic and social needs—where the major responsibility lies with the Government because other sectors do not
have sufficient incentive or resources to make adequate investments (e.g., basic research).
• Specific national needs—where the Government augments
private sector investments to accelerate R. & D. in a particular area of national concern (e.g., energy R. & D.).
PART I. HIGHLIGHTS AND TRENDS

The 1982 budget reaffirms the Administration's commitment to
provide for growth in the support of basic research as an investment in the Nation's long-term economic growth. Obligations for
the conduct of basic research are estimated to be $5.9 billion in
1982. This represents an increase of $739 million, 14.4% over the
1981 dollar level, or 4.3% growth above projected inflation.
Obligations for the conduct of all R. & D. (including basic research)
and R. & D. facilities are estimated to total $44.2 billion in 1982, an
305
340-700

0 - 8 1 - 2 0




306

THE BUDGET FOR FISCAL YEAR 1982

increase of $7.1 billion or 18.9% over 1981. Obligations for R. & D.
facilities are estimated to be $2.4 billion in 1982.
Table K - l . TOTAL FEDERAL FUNDING FOR CONDUCT OF R. & D. AND RELATED FACILITIES
(In billions of dollars)
Outlays

Obligations
1980
actual

Conduct of R. & D
R. & D. facilities
Total

1981
estimate

1982
estimate

1980
actual

1981
estimate

1982
estimate

31.7
1.6

35.2
1.9

41.7
2.4

30.4
1.5

34.0
1.9

39.6
2.3

33.2

37.1

44.2

31.9

35.9

42.0

CONDUCT OF RESEARCH AND DEVELOPMENT

The 1982 budget includes $41.7 billion in obligations for the
conduct of R. & D., an increase of $6.5 billion over 1981. Included
within this total is support for the conduct of basic research, but
not the funding for R. & D. facilities which is reported separately
in this analysis.
Table K - 2 . CONDUCT OF RESEARCH AND DEVELOPMENT BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)
Obligations

Outlays

Department or agency

1980
actual

1981
estimate

1982
estimate

1980
actual

1981
estimate

1982
estimate

Defense-military functions
National Aeronautics and Space Administration
Energy
Health and Human services
(National Institutes of Health)
National Science Foundation
Agriculture
Interior
Transportation
Commerce
Environmental Protection Agency
Labor
Nuclear Regulatory Commission
Agency for International Development....
Veterans Administration
Education
All o t h e r 1

13,943

16,226

20,033

13,451

15,874

18,925

5,084
4,737
3,790
(3,182)
888
687
438
374
341
348
215
190
119
133
132
264

5,422
5,167
3,964
(3,350)
1,015
775
465
413
365
364
153
216
120
147
141
273

6,589
5,642
4,285
(3,596)
1,157
871
496
474
411
345
330
232
230
163
154
324

4,711
4,682
3,518
(2,954)
837
659
453
377
355
388
150
179
106
132
123
269

5,130
4,932
3,676
(3,163)
926
754
465
387
375
343
251
208
117
140
139
289

6,207
5,734
3,964
(3,397)
1,027
854
485
424
405
347
303
223
134
155
143
320

31,682

35,226

41,734

30,389

34,002

39,648

Total, conduct of R. & D

1 Includes the Departments of Housing and Urban Development, Justice, Treasury, and State; the Tennessee Valley Authority, the Smithsonian
Institution, the Corps of Engineers, the Federal Emergency Management Agency, the U.S. Office of Personnel Management, the Library of Congress,
the Consumer Product Safety Commission, the Arms Control and Disarmament Agency, the Federal Communications Commission, the Advisory
Committee on Intergovernmental Relations, and the Federal Trade Commission.

As shown in table K-2 above, the increase in funding for the
conduct of R. & D. is reflected in the 1982 budgets of almost all the




SPECIAL ANALYSIS D

307

agencies. Included within this increase are additional funds to
cover cost increases due to inflation. However, in addition to these
cost increases, the 1982 budget would provide a real growth on the
order of 8.0% over 1981 in governmentwide funding for R. & D.
Highlights of the programs of major R. & D. agencies are presented below:
Department of Defense.—Obligations for total conduct of R. & D.
by the Department of Defense will rise to $20.0 billion, an increase
of $3.8 billion or 23% over 1981. The total conduct of R. & D. by
the Department of Defense will account for approximately half of
total Federal funding for R. & D. In addition to providing for
anticipated increased costs due to inflation in 1982, the budget
provides for significant real growth in defense R. & D. obligations
over 1981. This increase is generally across all activities and includes:
• Additional funds for the development of strategic weapons,
mainly for the M-X intercontinental ballistic missile, from
$3.2 billion in 1981 to $4.1 billion in 1982;
• Increased support for the development of various tactical
weapon systems, including for example prototypes for new
fighter aircraft, antisubmarine helicopters and a new class of
attack submarines; and
• Growth in dollar support for basic research by 16% over 1981
consistent with the continuing need to provide the scientific
base for meeting future defense needs.
National Aeronautics and Space Administration.—Obligations for
conduct of R. & D. in NASA are estimated to total $6.6 billion in
1982, $1,167 million or 22% over 1981. The budget provides for
continued development of the Space Shuttle, and procurement of a
fleet of Space Shuttle orbiters to meet national space transportation needs in areas such as space science, communications, remotesensing of the Earth's environment and natural resources, and
defense. It also provides for:
• Initiation of the Venus Orbiting Imaging Radar mission
(VOIR) that will be launched in 1986 to obtain fundamental
knowledge of the nature and origin of Venus;
• Continued support for major ongoing projects initiated in
recent years, e.g., the Space Telescope and the Galileo mission
to Jupiter;
• Increased support for projects to enhance significantly the
application of space technology for practical uses including
ways to use space technology to improve the understanding of
the Earth's geology, ocean and climate, and its agriculture;
and
• New projects in aeronautical R. & D., e.g., development of a
Numerical Aerodynamic Simulator to advance the state-of-




308

THE BUDGET FOR FISCAL YEAR 1982

the-art of aircraft aerodynamic design through computerized
modeling.
Department of Energy.—Obligations for the conduct of R. & D.
by the department are estimated to total $5.6 billion, an increase of
$475 million over 1981. Obligations for the support of R. & D. facilities increase sharply from $1.4 billion in 1981 to $1.8 billion in 1982.
The R. & D. budget covers a broad mix of programs to serve the
various objectives of the department:
• In the national defense program, increased support is provided for the development of nuclear weapons, and of new
technologies related to monitoring nuclear weapons treaties
and safeguarding, storage and disposal of nuclear materials.
• In the general science programs, real growth is proposed for
basic research to study fundamental forces and constituents
of matter in nuclear and high energy physics.
• In the energy programs of the department, significant real
growth is provided for the long-term program of fusion
R. & D. and for the buildup of large coal liquefaction and
gasification demonstrations, which accounts chiefly for the
increase in support for R. & D. facilities in the 1982 budget.
Modest increases or reduced funding are proposed for nearer
term technologies for which commercial acceptance is expected
to be accelerated significantly by the decontrol and rapid rise of
energy prices.
Department of Health and Human Services.—Obligations for the
conduct of R. & D. in the Department of Health and Human
Services (HHS) are estimated to total $4.3 billion in 1982, a $321
million increase over 1981. The HHS R. & D. programs represent a
broad based effort in biomedical and life sciences. The largest
component of the HHS budget for R. & D. is the National Institutes of Health (NIH). The 1982 budget proposal for NIH programs
maintains a strong national effort in biomedical research, increasing from $3.4 billion in 1981 to $3.6 billion in 1982. In 1982, NIH
plans to give continued emphasis to basic and applied research in
such areas as nutrition, genetic research, diabetes, radiation and
other environmental hazards, aging and senile dementia.
National Science Foundation.—Obligations for the conduct of
R. & D. by the National Science Foundation are estimated to total
$1,157 million in 1982 including $1,057 million for the support of
basic research. This total represents an increase of $142 million or
14% over 1981. In addition to a large increase in R. & D. facilities
funding for upgrading university research instrumentation, the 1982
budget provides for:




SPECIAL ANALYSIS D

309

• Special emphasis on research support in engineering and computer science as well as in the mathematical and physical
sciences; and
• Continuation and buildup of ocean drilling programs that will
provide the scientific framework for future resource exploration.
Interagency R. & D. programs.—Among the R. & D. programs
proposed in the 1982 budget are a number of interagency efforts
that illustrate the many areas in which agencies cooperate in
research and development to assure effective overall use of Federal
funds.
R. & D. plays an important role in increasing industrial productivity and strengthening the Nation's economy. Therefore, the 1982
budget provides for new or expanded programs in several agencies
for the economic revitalization of the Nation. The key features of
this thrust are:
—The emphasis on governmentwide support for real growth in
basic research;
—Increased emphasis through the National Science Foundation
on cooperation in research by industrial, university and government scientists;
—Increased support for innovative research in the small hightechnology firms; and,
—Initiation of a university research equipment upgrading program at the National Science Foundation. This is complemented by an engineering and computer science training equipment
upgrading program as part of the National Science Foundation's science and engineering education effort.
Also contributing to economic revitalization and productivity
over the long term are the following three interagency programs:
• Cooperative automotive research.—The government/industry
program in basic automotive research proposed in 1981 will
continue in 1982 with support from both the Government and
the automobile industry. The research program, through the
joint efforts of industry and government agencies, e.g., Department of Transportation and the National Science Foundation, will contribute to the automotive technologies of the
future. The Government share of the costs of the program,
provided in the budget of the Department of Transportation
for fiscal year 1982, is estimated to be $17 million, with
matching funds to be provided from industry.
• Experimental computer science.—Special emphasis will be provided in 1982 by the Department of Defense and the National
Science Foundation to strengthen experimental computer science in academic institutions. Computation and communications form a large and growing component of the economic,




310

THE BUDGET FOR FISCAL YEAR 1982

intellectual, and military strength of the Nation, and the
results of this research will help to maintain U.S. supremacy
in these areas in the future. The two agencies are expected to
obligate approximately $19 million in 1982 for this effort.
• Microelectronics and submicron science and technology.—Programs of the Department of Defense, the National Science
Foundation and the National Bureau of Standards in the field
of microelectronics and submicron science and technology,
begun in 1980 and strengthened in 1981, will be continued in
1982. These research programs will assist in the further development of submicron technology that is important to 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 smallscale devices and structures, such as in biomedical and chemical research. Combined obligations for these programs across
the three agencies are estimated to total about $69 million in
1982.
Other significant interagency efforts that are supported in 1982
include:
• Geological Applications Program (GAP).—The GAP program
represents a significant new initiative in the 1982 budget
involving coordinated research activities in the U.S. Geological Survey of the Department of the Interior and the National
Aeronautics and Space Administration. Under the GAP program, measurement techniques based on remote sensing developed by NASA will be tested in mineral appraisal projects
conducted by the U.S. Geological Survey. NASA and USGS
geologists will jointly develop new models and analyze
remote sensing and ground truth data to provide an overall
evaluation of the utility of space techniques for mineral resource assessment. Obligations for this program are expected
to total $19 million in 1982.
• Agriculture and resources inventory surveys through aerospace
remote sensing (AgRISTARS).—Five agencies will continue efforts to assess the value of space remote sensing data in two
areas: obtaining early warnings and timely quantitative estimates of crop conditions and improving worldwide agricultural production forecasting capabilities. This program features
the development of improved yield models using satellite-obtained weather, soil moisture and crop spectral data. The
Departments of Agriculture, Commerce, Interior, and NASA
and AID are the participating agencies. Total obligations for
this program are estimated to be $54 million in 1982.
• National Oceanic Satellite System (NOSS).—In 1982 development of NOSS will continue as a joint effort involving the




SPECIAL ANALYSIS D

311

National Aeronautics and Space Administration and the Departments of Defense and Commerce. This satellite system
will provide global ocean data for use in marine weather
forecasting and climate studies, marine transportation, and
defense applications. Obligations for this program are estimated to be $95 million in 1982.
• Minority research apprenticeship program.—A joint effort
among the National Science Foundation, the National Institutes of Health, the National Aeronautics and Space Administration, the Environmental Protection Agency, and the Departments of Agriculture, Energy, and Defense, this program
is intended to stimulate broader interest in minority communities in science and engineering and to establish individual
working relationships between high school students and
active researchers. In 1980, over 1,300 students participated
and over 200 research centers were involved. The participating agencies plan to obligate $5 million for this program in 1982
to support more than 2,000 students.
CONDUCT OF BASIC RESEARCH

Included within the funding for R. & D. is support for the conduct of basic research. Obligations for the conduct of basic research
are estimated to increase from $5.1 billion to $5.9 billion in 1982,
an increase of 14.4%, providing a growth of 4.3% in real terms.
The Federal Government continues to support about 70% of the
Nation's basic research effort. Research in such fields as chemistry, physics, biology, astronomy, materials, oceanography, and
Earth sciences precedes and underlies new inventions, advances in
health care, nutrition and agricultural production, many new products of commerce, and new technologies for defense, space, energy,
and environmental protection.
Many institutions outside the Federal Government also support
basic research, including major corporations, universities and private foundations. However, as a whole, these institutions do not
provide sufficient support because of limited resources (as in the
case of universities and private foundations) or because the benefits
from basic research are long term and of general applicability and
cannot be fully captured by individual firms. Therefore, the Federal Government continues to play a key role in the support of basic
research in the broad interest of the Nation.
The allocation of funds in the 1982 budget for basic research
recognizes the need not only to maintain a vigorous national research effort in all areas of scientific inquiry as provided through
programs of the National Science Foundation, but also to strengthen basic research in specific areas of national concern and Government responsibility (e.g., defense). Special emphasis is also being




312

THE BUDGET FOR FISCAL YEAR 1982

given in several of the agencies for strengthening basic research in
the physical sciences and engineering because of the importance of
these areas in industrial productivity and economic revitalization.
Table K-3 summarizes Federal support for the conduct of basic
research by agency.
Table K - 3 . CONDUCT OF BASIC RESEARCH BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)1
Obligations
Department or agency

Health and Human Services
(National Institutes of Health)
National Science Foundation
Energy
Defense-military functions
National Aeronautics and Space Administration
Agriculture
Interior
Smithsonian Institution
Commerce
Education
Veterans Administration
Transportation
Environmental Protection Agency
All o t h e r 2
Total

Outlays

1980
actual

1981
estimate

1982
estimate

1980
actual

1981
estimate

1982
estimate

1,758
(1,639)
812
523
539

1,887
(1,759)
923
591
605

2,053
(1,909)
1,057
710
704

1,657
(1,530)
768
526
476

1,742
(1,641)
842
586
540

1,911
(1,795)
946
709
632

559
275
79
40
29
18
14

681
367
99
53
41
24
18
17
13
25

519
259
76
39
32
18
15

14
21

555
322
85
44
33
18
16
12
15
16

15
20

526
309
82
43
35
20
16
6
17
20

614
362
96
50
41
23
18
12
15
25

4,682

5,121

5,861

4,419

4,782

5,452

Amounts reported in this Table are included in Totals for conduct of R. & D.
Includes the Departments of Justice and Labor; the Veterans Administration, the Tennessee Valley Authority, the Federal Emergency
Management Agency, the Corps of Engineers, the Federal Trade Commission, and the Library of Congress.
1

2

FUNDING OF R. & D. AT COLLEGES AND UNIVERSITIES

Within the $41.7 billion proposed for R. & D. in 1982, $5.1 billion
will be obligated by Federal agencies for the conduct of research
and development in colleges and universities (including medical
schools). More than two-thirds of the direct support of R. & D. (not
including funds that flow to colleges and universities through national laboratories or other intermediaries) in these institutions is
provided by the Federal Government.
Scientists at universities and colleges are important performers
of R. & D., particularly of basic research. Universities and colleges
spend more than one-half of all basic research funds in the Nation,
with most of the financing being provided by the Federal Government. The Department of Health and Human Services and the
National Science Foundation are the largest sponsors.
The real growth in basic research funding provided for in the.
1982 budget will significantly benefit academic researchers. The
budget also provides special emphasis on industry-university cooperative research to encourage joint efforts by industrial and aca-




313

SPECIAL ANALYSIS D

demic scientists in addressing scientific problems of mutual interest.
It is recognized that the effective conduct of research in universities and colleges depends not only on funds provided for research,
but also on modern research instrumentation and facilities. Therefore, the 1982 budget provides for a special emphasis, through the
National Science Foundation, on upgrading university research instrumentation and facilities. This and other efforts of the Government related to R. & D. facilities are reported in the section on
R. & D. facilities.
Table K-4 summarizes Federal R. & D. support at universities
and colleges by agency.
Table K - 4 . FUNDING OF RESEARCH AND DEVELOPMENT IN UNIVERSITIES AND COLLEGES
(In millions of dollars)1
Obligations
Department or agency

Health and Human Services
(National Institutes of Health)
National Science Foundation
Defense-Military Functions
Energy
Agriculture
National Aeronautics and Space Administration
Education
Agency for International Development....
Commerce
Interior
Environmental Protection Agency
Transportation
All o t h e r 2
Total

1980
actual

Outlays

1981
estimate

1982
estimate

1980
actual

1981
estimate

1982
estimate

2,076
(1,897)
666
451
293
221

2,185
(2,011)
761
528
312
241

2,354
(2,159)
868
639
351
283

1,961
(1,779)
620
430
291
206

2,007
(1,857)
708
503
310
238

2,213
(2,042)
807
608
352
272

171
65
53
45
43
47
19
41

188
71
60
44
43
50
20
39

204
79
68
44
44
40
23
54

147
55
37
43
40
31
19
37

169
65
44
42
40
40
18
37

184
68
50
43
42
36
21
51

4,190

4,541

5,053

3,915

4,219

4,747

Amounts reported in the table are included in totals for Conduct of R. & D.
Includes the Departments of Labor, Justice, Housing, and Urban Development, State, and Treasury; the Nuclear Regulatory Commission, the
Smithsonian Institution, the Corps of Engineers, the Federal Emergency Management Agency, the U.S. Office of Personnel Management, the
Veterans Administration, the Arms Control and Disarmament Agency, the Tennessee Valley Authority, and the Consumer Product Safety Commission.
1

2

R . & D . FACILITIES

The successful conduct of R. & D. is significantly dependent on
the instrumentation and facilities that are available to the research community. In addition, many R. & D. programs require the
building of demonstration plants or testing and evaluation facilities. Equipment and facilities support is needed for the conduct of
R. & D., but should be distinguishable from the funds allocated for
the conduct of R. & D. Therefore, during the budgetary process,
support for R. & D. facilities is reviewed separately but is coordinated with decisions on funds for the conduct of R. & D.




314

THE BUDGET FOR FISCAL YEAR 1982

Obligations for R. & D. facilities in 1982, including the construction or renovation of facilities, acquisition of major equipment and
construction or modification of plants, will amount to $2.4 billion.
The majority of the funds for R. & D. facilities are for applied
research and development projects and demonstrations. Included in
the 1982 budget, for example, are funds for:
• The buildup in support of several coal liquefaction and coal
gasification demonstration plants by the Department of
Energy.
• Continuing support for major ongoing high energy physics
projects by the Department of Energy.
• Design and development by NASA of the Numerical Aerodynamic Simulator, for advancing the state-of-the-art of aircraft design.
• Modification and modernization of NASA wind tunnels to
increase their productivity.
The 1982 budget also proposes funds to support basic research
facilities that will upgrade the Nation's capability and capacity to
seek new knowledge at the frontiers of science, for example:
• Initiation of a $75 million program in the National Science
Foundation for the support of modern scientific apparatus
and instrumentation at universities needed to replace outdated equipment and pursue forefront research in many fields of
science and engineering.
• 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;
• Initial funding by the National Science Foundation of a special 25-meter telescope to be located at Mauna Kea, Hawaii.
The telescope will be the world's most powerful millimeter
wave telescope to be used by astronomers to study star formation and the evolution and structure of the Galaxy.
Table K-5 summarizes Federal support for R. & D. facilities by
major departments and agencies.




315

SPECIAL ANALYSIS D

Table K - 5 . RESEARCH AND DEVELOPMENT FACILITIES BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)
Obligations
Department or agency

1980
actual

Energy
Defense-military functions
National Aeronautics and Space Administration
National Science Foundation
Agriculture
Health and Human Services
(National Institutes of Health)
All Others 1
Total

1,021
208

Outlays

1981
estimate

1982
estimate

1,410
236

1,763
280

1980
actual

968
205

1981
estimate

1982
estimate

1,382
204

1,718
230

159
19
57
32
(30)
64

115
11
37
61
(29)
53

137
95
40
36
(15)
88

140
18
28
77
(76)
57

156
11
53
43
(37)
65

157
81
39
49
(36)
76

1,560

1,922

2,438

1,493

1,915

2,349

1 Includes the Department of Transportation, Interior, and Commerce; the National Science Foundation, the Veterans' Administration, the
Tennessee Valley Authority, the Agency for International Development, the Consumer Product Safety Commission, and the Smithsonian Institution.

PART II. AGENCY R. & D. PROGRAMS

Summaries follow of the R. & D. activities of the 15 agencies that
support more than 99% of federal funded R. & D.
DEPARTMENT OF DEFENSE

The Department of Defense plans to obligate a total of $20.0
billion for the conduct of R. & D. in 1982, an increase of $3.8
billion, or 23% over 1981. The total is larger than that of any other
Federal agency and makes up about 48% of the R. & D. funding in
the 1982 budget.
In 1982, funding for basic research will be increased by $99
million, or 16%, to a total of $704 million. Funding for new
R. & D. facilities will be increased by $44 million over 1981 to $280
million in 1982.
The purposes of the department's R. & D. are to develop new
strategic and tactical weapons and supporting systems, to avoid
technological surprise by potential enemies, and to be aware of
technological options for future systems, in order to advance the
state of the Nation's security. The department's major R. & D.
efforts include:




316

THE BUDGET FOR FISCAL YEAR 1982

Technology base and advanced technology development—Real
growth is included in funding for basic research, including research
in electronics, materials research, environmental research, computer science, information sciences, behavioral research, and research
on lasers and particle beams.
Strategic programs.—Full-scale development of the M-X intercontinental ballistic missile will continue. Work also will be continued
on ballistic missile technology and systems integration, ballistic
missile defense, and space defense systems. Options are being explored for a Trident follow-on missile, a second-generation airlaunched cruise missile, and a new manned bomber.
Tactical programs.—The Air Force is developing submunitions
for use by interdiction forces, avionics for precise delivery of munitions at night and in all weather conditions, ground and airlaunched cruise missiles, the C-X transport aircraft, and prototypes for new fighter aircraft. The Navy continues development of
the LAMPS III anti-submarine helicopter, a sea-launched cruise
missile, a new class of attack submarine, an advanced lightweight
anti-submarine torpedo, and undersea surveillance systems. The
Army is nearing completion of development of a larger XM-1 tank
gun and is continuing development of new anti-tank missiles. The
Army also is beginning development of a lightweight tank and a
long-range artillery rocket system.
Intelligence and communication, program management and support.—Work on enhancement of strategic communications will be
continued, as will upgrading of tactical communications. Increased
emphasis will be placed upon the integration of command networks
for both strategic and tactical forces. Work will be continued on
the use of technology to reduce manufacturing and maintenance
costs and to extend the life and capability of existing weapon
systems.
NATO cooperation.—To promote greater efficiency and standardization within the alliance: (1) the U.S. and 10 allies have agreed to
lessen restrictions on defense trade so that U.S. and European
contractors may compete to develop and produce defense goods for
use by nations in the alliance; (2) the U.S. and European nations
are arranging to license the domestic production of particular foreign-developed systems; and (3) by seeking to divide responsibility
for development of selected families of weapons systems the U.S.
and NATO allies aim to achieve R. & D. savings that may be
applied to other new defense systems.
Table K-6 provides the details of the Department of Defense
military R. & D. funding.




317

SPECIAL ANALYSIS D
Table K - 6 . DEPARTMENT OF DEFENSE—MILITARY RESEARCH AND DEVELOPMENT
(In millions of dollars)
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
Total conduct of basic research, included
above
R. & D. facilities
Total obligations
Conduct of R. & D
R. & D. facilities

OUTLAYS

Total, outlays

1981
estimate

1980
actual

1982
estimate

2,235
618
2,250
5,296
1,162
1,914
468

2,534
613
3,248
5,630
1,522
2,081
598

2,998
796
4,093
6,955
1,958
2,618
615

13,943

16,226

20,033

(539)
208

(605)
236

(704)
280

14,151

16,462

20,312

13,451
205

15,874
204

18,925
230

13,656

16,078

19,155

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

The entire NASA budget constitutes support for research and
development. The budget plan for the conduct of R. & D. will
increase by $1,167 million in 1982 to a total of $6.6 billion, and the
plan for R. &. D. facilities by $22 million to a total of $137 million.
Space transportation.—The testing and procurement of a fleet of
four Shuttle Orbiters will continue in 1982. In addition, the budget
provides funds for long-lead procurement to maintain the option to
buy a fifth Shuttle Orbiter if needed. Because of its unique capability to be reused and to allow repair, service and retrieval of satellites in space, the Shuttle will provide greater flexibility and cost
savings for both civil and military space programs. The First
Manned Orbital Flight is planned for March 1981. NASA plans to
achieve an operational capability to launch and land Shuttle Orbiters from the Kennedy Space Center in Florida in late 1982 or early
1983 and from the Vandenberg Air Force Base in California during
1984. The 1982 budget also provides for continuing the design and
development of the Solar Electric Propulsion System (SEPS) which
will provide a very low thrust, solar powered propulsion system
suitable for some possible future very long duration space missions.




318

THE BUDGET FOR FISCAL YEAR 1982

Space science.—The 1982 budget provides funds to continue several major ongoing space science projects and to undertake new
missions.
In space astronomy, the Space Telescope now well underway is
expected to be launched by the Shuttle in 1985. The telescope, from
an Earth orbit well above the obscuring effects of the Earth's
atmosphere, will be capable of viewing objects as far away as 60
billion light-years. In addition, fabrication work will continue on
astronomy experiments to be flown inside the European-built
Spacelab in the Shuttle and on the International Solar Polar
mission. The Gamma Ray Observatory (GRO) will be initiated in
1981 with design and fabrication continued in 1982. The GRO will
be launched in 1986 to study objects in the universe in the gamma
ray spectral region.
In planetary exploration, the Galileo mission to Jupiter will continue in the fabrication phase for separate launches of its two
major components planned for 1985. In addition, the 1982 budget
provides for the initiation of the Venus Orbiting Imaging Radar
mission (VOIR). VOIR will fly advanced microwave instruments in
orbit around Venus to permit for the first time photographing and
mapping the surface of Venus through the planet's heavy clouds.
The 1982 budget also provides for U.S. participation in an international activity called Comet Halley Watch in 1986 to observe Comet
Halley through terrestrial telescopes.
Space and terrestrial applications.—The 1982 budget continues to
emphasize the application of space technology to national needs.
The Landsat-D satellite, scheduled for launch in the third quarter
of 1982, is expected to enhance the experimental use of space
platforms for a variety of applications, such as crop forecasting and
mineral exploration. The Landsat-D series of satellites is expected
to provide the continuity of Landsat data for domestic and foreign
users through the 1980's. In addition, NASA's program in upper
atmospheric research will be expanded to start ground and space
system studies, and instrument design and testing for a future
satellite mission to study the interactions among the chemistry,
radiation, and dynamics of the upper atmosphere. In other applications areas (e.g., communications, materials processing in space),
the research base will be enhanced to demonstrate new technology
and techniques for future flight missions.
Aeronautical research and technology.—Aeronautical research
and technology programs will continue to advance technology for
greater fuel efficiency, safety and reduced noise in future civil
aircraft and to maintain the U.S. technological lead in the field of
aeronautics. A significant initiative included in the 1982 budget is
the design and fabrication of the Numerical Aerodynamic Simulator—a computer system significantly more powerful than commer-




319

SPECIAL ANALYSIS D

cially available systems—to advance the state-of-the-art of aircraft
aerodynamic design through computerized modeling. The new
system also would contribute to research on weather and climate
modeling and computational chemistry. Further emphasis has been
placed in the 1982 budget on aircraft energy efficiency through a
new program, cost-shared with industry, to demonstrate technology
that would allow the use of weight-saving composite materials in
aircraft primary structures such as wings and fuselages.
Table K-7 provides the details of NASA's R. & D. funding.
Table K - 7 . NATIONAL AERONAUTICS AND SPACE ADMINISTRATION—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Program and type of activity

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 activity
Research and program management
Total, conduct of R. & D
Total conduct of basic research, included
above
R. & D. facilities
Total, budget plan
Conduct of R. & D
R. & D. facilities

OUTLAYS

Total, outlays

1980
actual

1981
estimate

1982
estimate

2,385
600
344
116
308
3
332
996

2,681
563
365
111
276
4
341
1,081

3,304
757
488
141
324
4
435
1,136

5,084

5,422

6,589

(559)
159

(555)
115

(681)
137

5,243

5,537

6,726

4,711
140

5,130
156

6,207
157

4,851

5,286

6,364

DEPARTMENT OF ENERGY

The Department of Energy is the major Federal agency for the
support of energy R. & D. by DOE also supports a general science
program largely for basic research in high energy physics and
nuclear sciences and 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 $5.6
billion in 1982, an increase of $475 million over 1981. Obligations
for research facilities including funds for the buildup of energy
demonstration projects will total $1.8 billion in 1982, an increase of
$353 million over 1981.




320

THE BUDGET FOR FISCAL YEAR 1982

Energy.—The Department supports a broad R. & D. program
across all major energy technologies to complement extensive private investments. Obligations for the conduct of energy R. & D. are
estimated to increase from $3.4 billion in 1981 to $3.7 billion in
1982.
The 1982 budget provides for an increased emphasis on R. & D.
related to solar and fusion technology. This reflects the Administration's belief that these technologies can, in time, make a significant contribution as environmentally attractive, renewable energy
supplies. Solar applications will help to establish cost and performance goals in the marketplace and to facilitate market development. Emphasis in solar technology will include systems development for strengthening the technological base, research and development in photovoltaics and solar thermal electric, and support for
international solar projects.
The increase in the magnetic fusion program reflects increased
confidence in this high-potential-payoff technology. The bulk of these
funds will be used to strengthen the science and technology base for
successful technology development. Funds will also be provided
to plan for a Fusion Engineering Device which will explore the
problems that must be solved if fusion is to become a viable energy
source.
R. & D. on other non-nuclear technologies will also be increased
in 1982. R. & D. on coal processes continues to emphasize development of new techniques for converting coal to liquid and gaseous
fuels and improvement of coal combustion technologies. Support
for basic and longer term R. & D. has been maintained, even with
the budgetary pressures of large demonstration projects. Improvements in coal liquefaction science are expected from fundamental
studies of coal structure, chemistry, mechanisms of hydrogen transfer, catalysts, and improved instrumentation and reaction diagnostics. Exploratory research in indirect liquefaction to produce hydrocarbons similar to gasoline from synthesis gas will be expanded.
R. & D. on nuclear technologies will focus on safety and waste
management research. The Department in cooperation with the
Nuclear Regulatory Commission will conduct technical investigations associated with disabled reactors. This will permit a better
understanding of such accidents as occurred at Three Mile Island
and will help to prevent them in the future. The disabled Three
Mile Island plant will serve as a source of useful data to aid this
research.
In the conservation program, studies and analyses of diverse
building types will be conducted to provide information on energy
savings from conservation measures. In industrial conservation,
R. & D. on waste heat reduction, industrial cogeneration, and process efficiency improvements should contribute to further energy




SPECIAL ANALYSIS D

321

savings. In transportation conservation, developmental activities
will continue on electric and hybrid vehicles and advanced automobile engines.
In the basic energy sciences, support for nuclear science, chemistry, engineering, materials science, and mathematics will be increased significantly in real terms in order to strengthen the longterm scientific and technical base for future advances in energy
technologies.
General science.—The general science programs of the Department of Energy include high energy and nuclear physics, life
sciences research and nuclear medicine applications. The research
effort will be increased above the 1981 level to permit increased
use of existing facilities and thus permit further exploration of the
subnuclear particles and nuclear structures.
Obligations for these general science programs are estimated to
increase from $384 million in 1981 to $445 million in 1982. More
than half of this increase is to cover anticipated inflation.
National defense.—The nuclear weapons programs will support
the continued development and production of new nuclear weapons. These programs also support the development of improved
technologies for monitoring nuclear weapons treaties and of improved methods for safeguarding nuclear materials. Increased efforts are proposed to develop improved technologies and methods
for the safe storage and disposal of radioactive wastes produced by
the national defense programs. Efforts will also continue to develop
improved propulsion reactors for naval vessels.
Obligations for these activities are proposed to increase from $1.4
billion in 1981 to $1.5 billion in 1982 to assure an effective long
term overall nuclear weapons program.
Facilities.—The increase in obligations for R. & D. facilities, from
$1.4 billion in 1981 to $1.8 billion in 1982, covers all DOE programs:
energy, general science, and national defense.
The energy R. & D. budget includes funds to continue construction of two solvent-refined coal demonstration plants and of a high
Btu gas demonstration plant. The construction of these demonstration plants accounts for most of the increase in 1982 over 1981.
The general science program includes funds for continuation of
the Isabelle accelerator at the Brookhaven National Laboratory
and the Energy Saver project at the Fermi National Laboratory. In
addition, 1982 funds will be used to continue the Tevatron project
at Fermilab and the Argonne Tandem Linear Accelerator system
(ATLAS) project at Argonne National Laboratory.
Table K-8 provides the details of the R. & D. funding of the
Department of Energy.

340-700

0 - 8 1 - 2 1




322

THE BUDGET FOR FISCAL YEAR 1982
Table K - 8 . DEPARTMENT OF ENERGY—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Type of activity

OBLIGATIONS
Conduct of R. & D.:
Energy
General sciences
National defense
Total, Conduct of R. & D
Total conduct of basic research, included
above
R. & D. facilities
Total, obligations
Conduct of R. & D
R. & D. facilities

OUTLAYS

Total, outlays

1980
actual

1981
estimate

1982
estimate

3,265
340
1,132

3,422
384
1,361

3,678
445
1,519

.4,737

5,167

5,642

(523)
1,021

(591)
1,410

(710)
1,763

5,757

6,577

7,405

4,682
968

4,932
1,382

5,734
1,718

5,651

6,314

7,451

DEPARTMENT OF HEALTH AND HUMAN SERVICES

The Department of Health and Human Services (HHS) obligations in 1982 for the conduct of R. & D. will increase by $321
million above the 1981 level to $4.3 billion. Within this total, basic
research funding will increase by 9% to $2.1 billion. Obligations for
R. & D. facilities will be $36 million.
More than 80% of the department's R. & D. funds are devoted to
the National Institutes of Health (NIH) whose primary mission is
to advance through biomedical research the Nation's capabilities
for the prevention, diagnosis, and treatment of disease. The level of
R. & D. obligations by NIH in 1982 is estimated to be $3.6 billion,
an increase of $246 million above the 1981 level of $3.4 billion. This
increase will insure stability and continuity in the biomedical research enterprise, permitting approximately 5,000 new and competing awards to individual researchers or research teams. Among the
most significant activities to be supported are:
• Studies of the cause and prevention of diseases associated
with such environmental agents as chemicals and radiation;




SPECIAL ANALYSIS D

323

• Studies to provide a better understanding of the role of nutrition in cancer, cardiovascular disease, childhood development,
and aging;
• Research in the neurosciences and genetics, including areas
related to neurological disorders such as Huntington's disease
and spinal cord injury;
• Increased research on reversible causes of mental deterioration in the elderly;
• Emphasis on research into the causes, treatments, and prevention of diabetes; and
• Emphasis on development of procedures for the conduct of
recombinant DNA research.
R. & D. programs in health-related research also are supported
by several other agencies within the department. The 1982 funding
will permit limited expansion of research efforts of the Alcohol,
Drug Abuse, and Mental Health Administration, the Food and
Drug Administration, the Centers for Disease Control, the Health
Services Administration, the Health Care Financing Administration, and the Office of the Assistant Secretary for Health. Among
these efforts are:
• Continuing studies of mental disease and neurological disorders, biomedical factors and health effects of drug abuse, and
causes and consequences of alcohol abuse;
• Continuing support of research designed to back up the Food
and Drug Administration's regulation of food, drug, biological,
and radiological products;
• Studies by the National Institute for Occupational Safety and
Health to develop criteria on toxic materials and other workplace hazards;
• Community health research involving primarily the community health center and maternal and child health programs;
and
• Studies to test alternative methods of payment for hospitals
and physicans, to evaluate the impact of Medicare and Medicaid on the health care system, and possible changes in coverage and payments for community health centers.
The department's obligations for R. & D. in human services
programs will be increased by $20 million to a total of $115 million.
These funds will be devoted to research related to the missions of
the Office of Human Development Services and the Social Security
Administration and to policy research conducted in behalf of departmental management.
Table K-9 provides the details of the R. & D. funding of the
Department of Health and Human Services.




324

THE BUDGET FOR FISCAL YEAR 1982

Table K - 9 . DEPARTMENT OF HEALTH AND HUMAN SERVICES—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Program areas and organizational units

OBLIGATIONS
Conduct of R. & D.:
Health:
National Institutes of Health
Alcohol, Drug Abuse, and Mental Health Administration
Centers for Disease Control
Food and Drug Administration
Health Care Financing Administration
Office of Assistant Secretary for Health
Health Services Administration
Health Resources Administration
Subtotal, Health
Human Services:
Office of Human Development Services
Social Security Administration
Departmental Management
Subtotal, Human Services
Total, conduct of R. & D
Total conduct of basic research, included
above
R. & D. facilities
Total, obligations
Conduct of R. & D
R. & D. facilities

OUTLAYS

Total, outlays

1980
actual

1981
estimate

1982
estimate

3,182

3,350

3,596

235
87
75
46
31
30
5

237
87
75
50
45
26

277
96
81
56
48
16

3,691

3,869

4,170

52
23
24

47
26
23

42
48
25

98

95

115

3,790

3,964

4,285

(1,758)
32

(1,887)
61

(2,053)
36

3,821

4,025

4,321

3,518
77

3,676
43

3,964
49

3,595

3,719

4,013

NATIONAL SCIENCE FOUNDATION

The National Science Foundation supports long term fundamental research in all fields of science and engineering, selected applied research, and efforts to improve the teaching of science and
engineering. Its role is particularly important because it is the only
Federal agency whose primary objective is to maintain and enhance the vigor of the national basic research effort. Its budget is
designed to assure that governmentwide support of fundamental
research is balanced among different scientific disciplines.
NSF obligations for the conduct of R. & D. will be increased from
$1,015 million in 1981 to $1,157 million in 1982, an increase of 14%.
An additional $95 million will be obligated for research facilities in
1982, including $75 million for a new program to upgrade and
modernize university research instrumentation.
In its support of basic research in 1982, the Foundation plans to
provide increased emphasis on support for the mathematical and




SPECIAL ANALYSIS D

325

physical sciences and for fundamental engineering and computer
sciences—disciplines that underlie advances in productivity and
contribute to economic revitalization in the long term. Special emphasis will also be placed on other programs that contribute to
national economic revitalization over the long term and further
promote research cooperation among industry, government, and
universities. Total funding for the conduct of basic research will
increase from $923 million in 1981 to $1,057 million in 1982, an
increase of 15% or about 4% in real terms.
Additional highlights of the Foundation's 1982 budget include:
• Initiation of a 25-meter telescope sensitive in the millimeter
wavelength region of the electromagnetic spectrum to permit
observation of molecular species in outer space not previously
observed from Earth.
• A buildup in support for the Ocean Margin Drilling program
to obtain fundamental scientific information that would provide a framework for future resource exploration.
• Expansion of the University-Industry Cooperative Research
program to support joint research ventures by university and
industry scientists.
• Expansion of the Small Business Innovation Research program to provide support to small high-technology firms for
research on innovative new concepts that could then attract
private venture capital for commercialization.
DEPARTMENT OF AGRICULTURE

Nearly all of the R. & D. funded by the Department of Agriculture is conducted by three agencies: the Science and Education
Administration, the Forest Service, and the Economics and Statistics Service. In 1982, these agencies expect to obligate 98% of the
Department's R. & D. funding which will be increased from $775
million in 1981 to $871 million, an increase of $96 million, or 12%.
The Science and Education Administration plans to obligate $674
million in 1982, about 77% of the department's funding for the
conduct of R. & D. In turn, the Forest Service and the Economics
and Statistics Service expect to obligate $144 million and $40 million, respectively, or together about 21% of the department's
R. & D. funds.
The 1982 budgets for each of these agencies contain several areas
of emphasis for R. & D. funding:
• The Science and Education Administration will support research on food production, needs of action and regulatory
agencies, enhancement of natural resources, tropical and
subtropical agriculture, and beneficial uses of aerospace
technology.




326

THE BUDGET FOR FISCAL YEAR 1982

• The Forest Service will emphasize research on more efficient
reforestation practice, rehabilitation of desert land, air and
water quality management, recreation, genetics, silviculture
and timber management.
• The Economics and Statistics Service will support research
related to data collection and management of natural resources, farm sector economic indicators, agricultural markets
and food system regulation, and yield modeling and domestic
crop estimation.
DEPARTMENT OF THE INTERIOR

R. & D. activities of the Department of the Interior stem from
two broad responsibilities: (1) encouraging wise development of the
national mineral, water, land, and recreation resources and (2)
managing those resources on the public lands in the public interest.
The department expects to obligate in 1982 a total of $496 million for the conduct of R. & D., an increase of $31 million, or about
7% over 1981. For 1982, the department's research objectives include:
• Accurate appraisal of national mineral resources, with emphasis upon new or improved methods and instruments for
mineral exploration on land and in the continental margins.
• Development of basic data on geologic principles and processes, terrain and foundation conditions.
• Application of environmental resource data to public decisionmaking in urban areas, and application of data acquired by
satellite to the Earth sciences and the analysis of marine
resources.
• Investigation of new technologies for surface and underground mining, with emphasis upon improved environmental
control and mine safety.
• Studies on extraction, processing, and use of nonenergy minerals designed to assure an adequate supply of raw materials
to meet expanding national needs.
• Continuation of studies on the efficient allocation and conservation of scarce water and water-related resources.
• Studies of the causes and effects of geologic and environmental hazards such as earthquakes, volcanoes, ground failure,
acid rain, and toxic wastes.
DEPARTMENT OF TRANSPORTATION

Obligations for the conduct of research and development for the
Department of Transportation are estimated at $413 million for
1981 and $474 million in 1982. The Department's R. & D. program
is oriented toward providing the information and new technology




SPECIAL ANALYSIS D

327

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 Department's 1982 budget includes:
• $131 million for the Federal Aviation Administration to continue engineering work on the national air traffic control
system and to maintain the thrust toward emerging technology needed for a nationwide network of flight services stations. R. & D. activities will be undertaken to address the
issue of replacement computers at enroute air traffic control
centers. Advances in technology are expected to enhance
safety of air travel, reduce delays, and expand airport capacity.
• $91 million for the National Highway Traffic Safety Administration for motor vehicle, traffic safety, auto fuel economy,
and statistical and analytical research. Fuel economy research will concentrate on improved engines and drivetrains.
A fuel conservation research program will aid in driver practices to conserve energy.
• $83 million for the Urban Mass Transportation Administration to assist in the development of improved mass transportation systems, equipment, and procedures.
• $32 million for the Research and Special Programs Administration for emphasis on advanced transportation technology,
transportation of hazardous materials and pipeline transportation of gas and hazardous liquids. Direction and support for
the Cooperative Automotive Research Program being conducted by the U.S. Government and the automotive industry will
also be provided.
• $48 million for the Federal Highway Administration to conduct research programs in highway planning, construction,
and safety and in commercial motor carrier safety. A major
goal will be increased highway, vehicle, driver, and pedestrian
safety.
• $46 million for the Federal Railroad Administration with
principal emphasis upon safety research. Other increases in
the agency's effort will be devoted to improvements in freight
and passenger systems and in the Transportation Test Center
for work on electrification of the Facility for Advanced Service Testing (FAST) track.
• $30 million for the U.S. Coast Guard to support research to
maintain and improve search and rescue systems, environmental protection, vessel safety, aids to navigation, port
safety and security, and polar and domestic icebreaking.




328

THE BUDGET FOR FISCAL YEAR 1982
DEPARTMENT OF COMMERCE

The principal objectives of the R. & D. programs in the Department of Commerce are to continue to improve the Nation's environmental prediction and warning capabilities, support generic
technology to strengthen the competitive position of U.S. industry,
including the maritime industry, encourage technological advancement through improved performance and measurement standards,
and develop a better understanding of marine environment, especially the long-term effects of pollution.
The Department of Commerce obligations for R. & D. will be
increased from $365 million in 1981 to $411 million in 1982, an
increase of $46 million. Most of the increase will fund expanded
R. & D. programs in the National Oceanic and Atmospheric Administration and the National Bureau of Standards. In 1982 the
National Bureau of Standards will obligate $96 million, an increase
of $12 million or 14% over 1981 for R. & D. programs. The National Oceanic and Atmospheric Administration obligations for R. & D.
will grow from $196 million in 1981 to $229 million in 1982. Highlights include:
• Research at NBS on the fundamental sciences that underlie
future standards and measurement techniques to improve industrial productivity.
• Expanded support for NOAA research on acid rain pollution
and on improved methods of forecasting, detecting, and tracking weather systems and violent storms.
Other agencies within the Department of Commerce also maintain smaller research and development programs: The Bureau of
the Census, Economic Development Administration, Maritime Administration, Office of Productivity, Technology and Innovation,
the Patent and Trademark Office, and the National Telecommunications and Information Administration. R. & D. funding for these
agencies in 1982 will total $86 million.
ENVIRONMENTAL PROTECTION AGENCY

EPA conducts research and development in support of the agency's regulatory and enforcement mission to protect human health
and the environment. The R. & D. program provides information
on health and environmental criteria and the technological basis
for developing environmental control standards. The program also
provides measurement methods and quality assurance techniques
for the accurate and reliable quantification of environmental conditions for assessments, EPA program implementation, and standards enforcement. Total obligations for the conduct of R. & D. will
decrease from $364 million in 1981 to $345 million in 1982; the
reduction largely reflects completion of major regulatory efforts




SPECIAL ANALYSIS D

329

and a phasing of future research toward review and refinement of
regulations. The following are some highlights of the R. & D. program for 1982:
• The energy program, which includes R. & D. related to the
impact and regulation of fossil fuel combustion and synthetic
fuels, is projected at a level of $102 million in 1982, a decrease
of $11 million from 1981. This figure includes an increase of
$9 million to support research on acid deposition as part of a
major governmentwide effort to assess the sources and effects
of acid rain.
• The 1982 request for air quality research reflects a reduction
of $5 million below 1981, to a level of $69 million, due to a
phase-down of the R. & D. effort on diesel particulates and to
reductions in research on other particulate and gaseous pollutants as well as on oxidants. The 1982 request for the water
quality program is $57 million, a reduction of $7 million
below 1981. This figure includes a reduction of $3 million,
which is primarily associated with a shift from conventional
water quality research to higher priority work on hazardous
wastes. This reduction is coupled with reductions in the area
of industrial wastewater research reflecting the near completion of the court-mandated schedule for completing waste
water effluent guidelines.
• Overall, solid and hazardous waste R. & D. would increase by
$7 million to $32 million in 1982. The resources shifted from
water quality research will accelerate by $3 million the R. & D.
support to EPA's activities related to the identification of the
environmental impact of mismanaged hazardous waste sites,
and the permitting, and listing or delisting of hazardous
wastes.
• The 1982 R. & D. program on safe drinking water increases
$2 million over 1981, to a level of $31 million. Shifts within
the program will permit the establishment of a new groundwater effort totaling $3 million to yield information on the
movement and chemical interactions of contaminants that
may reach drinking water supplies.
• The 1982 request for pesticides R, & D. totals $7 million, a
decrease of $3 million, while the request for Toxic Substances
shows a net decrease of $2 million to a level of $38 million.
The fiscal year 1982 program in Toxic Substances will include
the establishment of a quality assurance program directly
tailored to the Agency's regulatory and operational activities
in this area.




330

THE BUDGET FOR FISCAL YEAR 1982
DEPARTMENT OF LABOR

Over 90% of the Department of Labor's R. & D. funding in 1982
is devoted to research programs in welfare reform, positive adjustment assistance for economically displaced workers, youth employment, and other activities under the Comprehensive Employment
Training Act (CETA).
The department expects to obligate a total of $330 million for the
conduct of R. & D. in 1982, more than twice the 1981 level. The
1982 funding includes welfare reform, $174 million; positive adjustment assistance, $50 million; youth employment, $63 million, and
other activities, $43 million. The increase in 1982 for the Department largely reflects funding for continuation of the welfare
reform demonstrations funded from other sources in previous
years.
Among the department's research objectives for 1982 are:
• Implementation of 10 to 12 demonstration projects to assist
workers displaced by rising imports or other economic
changes.
• Assessment of the impact of departmental regulations on productivity.
• Continuation of the pilot program in employment opportunities which provides job search assistance and federally assisted work and training opportunities to persons eligible for
welfare.
• Continuation of the analysis of the Continuous Longitudinal
Manpower Survey (CLMS) to assess in more depth the immediate and long-term benefits accruing to participants in employment and training programs.
• Expansion of the program to explore labor-management relations and the collective bargaining process.
THE NUCLEAR REGULATORY COMMISSION

The Nuclear Regulatory Commission is authorized to support
and perform research in civil uses of nuclear materials and facilities consistent with public health and safety, environmental quality, and national security. A major share of NRC's effort is devoted
to the use of nuclear energy to generate electric power. Its research
objective is to provide safety and analytical methods adequate to
the need for public and private confidence in NCR's licensing procedures and regulatory work.
In 1982, NRC's obligations for the conduct of R. & D. will be
increased from $216 million to $232 million, an increase of $16
million. The budget request reflects a redirection of research priorities: several research programs are being completed and new pro-




SPECIAL ANALYSIS D

331

grams are being started, emphasizing lessons learned from the
accident at Three Mile Island.
Work will be curtailed, for example, in loss-of-coolant and transient research, but will be increased in plant operational safety,
severe accident research, systems and reliability analysis and waste
management.
AGENCY FOR INTERNATIONAL DEVELOPMENT

Obligations of the Agency for International Development for the
conduct of R. & D. will be $230 million in 1982, nearly twice the
1981 level of $120 million.
This large increase reflects the administration's increased recognition of the importance of R. & D. in addressing the development
problems faced by the Third World.
Research and development activities in AID consist mainly of
applied research to solve specific problems associated with basic
human needs development, and of social and economic research
aimed at improving U.S. and host country understanding of the
major obstacles to such development.
Most of AID's 1982 R. & D. funds will be devoted to three critical
problems: (1) food production, with an emphasis on effective developing country efforts to overcome the growing food crisis; (2) population growth, emphasizing methods of controlling increasing population growth rates in the developing countries; and (3) energy
supply, emphasizing renewable and non-conventional energy
sources critical for development to proceed.
VETERANS ADMINISTRATION

The Veterans Administration will obligate $163 million, an increase of $16 million, for the conduct of R. & D. in 1982, emphasizing medical, rehabilitative, and health services research. Among
new areas to be studied are the health effects of Agent Orange and
a pilot program in preventive health care.
VA's effort in medical research is an intramural, biomedical
program designed to benefit patients through increased quality and
effectiveness of health care delivery. The program includes special
research on alcoholism and geriatrics.
In rehabilitative research, the VA works to develop and test
prosthetic, orthopedic, and adaptive equipment for improving the
care and rehabilitation of disabled eligible veterans, including amputees, paraplegics, and the blind.
The health services research program supports projects at VA
health care facilities to improve the delivery and accessibility of
health services to veterans.




332

THE BUDGET FOR FISCAL YEAR 1982
DEPARTMENT OF EDUCATION

The primary missions of the Department of Education's programs in R. & D. are to further educational equity and to improve
the practice of education. In 1982, the Department expects to obligate a total of $154 million for the conduct of R. & D., an increase
of $13 million above 1981.
Of the 1982 total, nearly 86% will be obligated by three agencies;
the National Institute of Education, $84 million; the National Institute of Handicapped Research, $35 million; and the Office of Special Education and Rehabilitative Services, $13 million.
The National Institute of Education (NIE) will support research
in the areas of teaching and learning, educational policy and organization, and improvement and dissemination of practice. The 1982
budget for NIE will:
• Continue the momentum of the grant programs in such areas
as reading, writing, cognitive development, desegregation,
postsecondary education, organization and management, and
minorities and women in research.
• Support the regional R. & D. educational labs and centers.
• Begin selected studies on such topics as improved teaching,
testing, evaluating, black colleges, and rural education.
• Expand programs to complement the Office of Educational
Research and Improvement initiatives in basic skills learning,
science, mathematics, local education improvements (with an
urban emphasis), and international/multicultural learning.
Studies initiated by the National Institute of Handicapped Research will concentrate on better equipment, devices, and systems
suitable for improving rehabilitation of the handicapped with focus
on the severely handicapped. These activities complement continuing R. & D. under the Office of Special Education and Rehabilitation Services.
Funds obligated by the Office of Special Education and Rehabilitative Services will be devoted to innovation and development in
education for the handicapped and rehabilitation services. Program
objectives include the development and testing of instructional materials and the evaluation of standardized tests for handicapped
persons. The program responds to Presidential and congressional
mandates to encourage equal educational and rehabilitation opportunities for the handicapped.
The Department also supports R. & D. in such areas as vocational and adult education, language studies, bilingual education demonstrations, and education policy centers. Obligations for these efforts will amount to $22 million in 1982.




333

SPECIAL ANALYSIS D
OTHER AGENCY PROGRAMS

An additional 15 agencies will obligate a total of $324 million in
1982, an increase of $51 million above the 1981 total, but amounting to less than 1% of all federally funded programs in R. & D.
The programs of these agencies, like those of the 15 agencies providing the majority of R. & D. support, are closely related to the
agencies' missions.
Among the agencies in this category that expect to increase their
obligations for R. & D. in 1982 are the Departments of Justice and
Housing and Urban Development, the Smithsonian Institution, the
Federal Emergency Management Agency, the Army Corps of Engineers (civil functions), and the Tennessee Valley Authority.
SUPPLEMENTARY INFORMATION

The following table provides additional information on the longterm trends in Federal R. & D. funding.
Table K - 1 0 . TRENDS IN CONDUCT OF R. & D.
(Obligations in billions of dollars)
Year

Defense1

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
1979
1980
1 9 8 1 (estimate)
1 9 8 2 (estimate)
1

Includes military-related programs of the Departments of Defense and Energy.




All other

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
13.6
15.1
17.6
21.6

Total

.3
.3
.4
.5
.6
.8
1.1
1.5
2.1
3.1
4.7
6.4
7.3
7.8
7.9
7.6
7.2
7.3
7.4
7.6
7.8
8.4
9.3
10.4
12.1
13.8
15.4
16.6
17.6
20.2

3.1
2.9
2.5
3.0
3.9
4.6
6.7
7.6
9.1
10.3
12.5
14.2
14.6
15.3
16.5
15.9
15.6
15.3
15.5
16.5
16.8
17.4
19.0
20.8
24.0
26.4
29.0
31.7
35.2
41.7