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A I

ANALYSES

BUDGET OF THE
UNITED STATES
GOVERNMENT
FISCAL YEAR 1984

E X E C U T I V E O F F I C E OF 1 HE PRESIDENT
O F F I C E OF M A N A G E M E N T A N D B U D G E T

THE BUDGET DOCUMENTS
Budget of the United States Government, 1984 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, 1984 is designed for use by the general public. It
provides a more concise, less technical overview of the 1984 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, 1984—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. Information is also provided on certain activities whose
outlays are not part of the budget totals.
Special Analyses, Budget of the United States Government, 1984 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

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

1-1
A-l
B-l

PART 2. ANALYSES OF THE BUDGET TOTALS
C. Funds in the budget
D. Investment, operating, and other Federal outlays
E. Borrowing and debt
F. Federal credit programs
G. Tax expenditures
H. Federal aid to State and local governments
I. Civilian employment in the executive branch

2-1
C-l
D-l
E-l
F-l
G-l
H-l
1-1

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

3-1
J-l
K-l

iii

PART 1

ALTERNATIVE VIEWS OF
THE BUDGET

1-1

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. 1109(a)). 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.
1-2

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
Since interest in the longer term budget outlook and in the longrange effects of the President's budget proposals has increased
substantially in recent years, current services estimates are being
provided for the 4 years beyond the budget year. These long-range
current services estimates are based on the same concepts as the
budget year current services estimates.
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, or inflation rates. As a result, if different economic assumptions were used, it would be very difficult to separate the

'Summary comparisons are in the Budget of the United States Government, Fiscal Year 1984, Part 3.

A-1

A-10

THE BUDGET FOR FISCAL YEAR 1984

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 result in different economic conditions than would occur under the budget
proposals. 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, in the 1984 Budget
Table A - l . SUMMARY OF ECONOMIC ASSUMPTIONS
(Calendar years)

Gross national product (in billions of current dollars)
Change in constant dollar GNP (percent
change, year over year)
Inflation measures (percent change, fiscal
year over fiscal year):
GNP deflator
Consumer Price Index
Federal nondefense non-pay purchases
deflator
State and local purchases deflator
Unemployment rate (percent, fourth quarter)
Interest rate, 91-day Treasury bills (percent)
Federal pay raise, October (percent)

1982

1983

1984

1985

1986

1987

1988

3,058

3,262

3,566

3,890

4,232

4,599

4,995

-1.8

1.4

3.9

4.0

7.0
7.2

5.0
4.9

5.3
4.7

4.9
4.5

4.7
4.7

4.5
4.5

7.0
7.5

5.0
6.3

5.3
6.4

4.9
6.1

4.7
5.9

4.5
5.7

10.5

10.4

9.5

8.5

7.8

7.0

6.2

10.7
4.0

8.0
6.5

7.9
6.1

7.4
6.0

6.8
5.7

6.5
5.6

6.1
5.5

THE CURRENT SERVICES CONCEPT

The current services estimates are neither recommended
amounts nor forecasts as to what the budget results for 1983-1988
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 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 for the next 5 years?"
The 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 generally reflect the ex-

SPECIAL ANALYSIS A

A-ll

pected costs of continuing ongoing Federal programs at 1983 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. (The major exception to this approach is for the
Department of Defense, as described below.) In general, the 1983
level on which the current services estimates are based is that
which is authorized or implied by enacted 1983 appropriations or
continuing resolutions. The estimates allow for the future implications of current law, and for anticipated changes of a relatively
uncontrollable nature (as distinct from policy changes)—such as
increases in the number of social security retirees.
The current services estimates 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 proposals.
Specific guidelines for this year's detailed programmatic estimates are:
—For the Department of Defense—military, the estimates for
1983 are based on the enacted levels resulting from last year's
actions by the Congress. For 1984-87, the estimates are those
presented by the administration and used by the Congress in
last year's budget deliberations. The 1988 estimates were developed consistent with this baseline. This baseline is believed to
be the most useful one for measuring the effects of policy
changes in the defense area.
—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 are assumed
to support the same program levels or to be funded at the
same real (constant-dollar) amounts as in 1983 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

A-10

THE BUDGET FOR FISCAL YEAR 1984

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.
—Outlays for Federal pay are assumed to increase at rates comparable to private sector pay. The pay raise assumptions are
shown in table A-1.
—Interest on the public debt is estimated on the basis of the
current services deficits 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 the projection period, 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
future tax changes will occur as scheduled under current law.
Provisions that are clearly temporary in nature are assumed to
expire.
Table A-2. CURRENT SERVICES TOTALS
(In billions of dollars)

Budget authority
Receipts
Outlays
Deficit ( - )

1982
actual

1983

1984

779.9

828.4

617.8
728.4

597.5
806.1

1985

1986

1987

1988

954.8

1,056.3

1,152.5

1.245.7

1,370.4

648.8
880.3

713.3
966.4

780.9
1,051.7

849.1
1.140.8

926.7
1,227.0

-110.6 -208.5 -231.5 -253.1 -270.8 -291.7 -300.4

Memorandum:
16.4
16.9
17.1
14.2
13.6
15.1
17.3
Off-budget outlays
Deficit ( - ) including off-budget outlays. - 1 2 7 . 9 - 2 2 5 . 4 - 2 4 8 . 5 - 2 6 7 . 3 - 2 8 4 . 4 - 3 0 8 . 1 - 3 1 5 . 4

SPECIAL ANALYSIS A

A-ll

CURRENT SERVICES TOTALS

Current services outlays are estimated to be $880.3 billion in
1984, 9.2% higher than in 1983, and budget authority is estimated
to be $954.8 billion, an increase of 15.3% over 1983. Outlays are
projected to grow at an average annual rate of 8.7% from 1984 to
1988. Receipts for 1984 are estimated to increase 8.6% on a current
services basis, from $597.5 billion in 1983 to $648.8 billion in 1984.
Receipts are projected to grow at an average annual rate of 9.3%
from 1984 to 1988. The resulting 1984 current services deficit is
$231.5 billion, $22.9 billion higher than the $208.5 billion deficit for
1983. The deficit is projected to increase during the projection
period to a peak of $300.4 billion in 1988.
Receipts.—Table A-3 shows receipts by major source on a current services basis. Current services receipts are projected to increase by $51.3 billion from 1983 to 1984 and by $277.9 billion from
1984 to 1988, largely due to assumed increases in incomes resulting
from both real economic growth and inflation.
Individual income taxes are estimated to increase by $10.6 billion
from 1983 to 1984 on a current services basis. This growth of 3.7%
is the effect of increased collections resulting from rising personal
incomes and the provisions of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), partially offset by the individual
income tax reductions provided in the Economic Recovery Tax Act
of 1981 (ERTA). The reductions in individual income taxes provided
in ERTA are estimated to increase from $65.9 billion in 1983 to
$104.5 billion in 1984. Individual income taxes are projected to
grow at an average annual rate of 9.9% between 1984 and 1988, to
$430.8 billion.
Corporation income taxes on a current services basis are estimated to grow by $16.6 billion or 47.1% from 1983 to 1984. This growth
is the net effect of higher corporate profits, increased collections
due to the tax revisions and improvements in collection and enforcement provided in TEFRA, and the accelerated cost recovery of
capital expenditures provided in ERTA. Corporation income taxes
are projected to increase at an average annual rate of 14.3% from
1984 to 1988.
Social insurance taxes and contributions are estimated to increase by $21.4 billion on a current services basis between 1983 and
1984, and by an additional $108.5 billion between 1984 and 1988.
The estimates reflect assumed increases in total wages and salaries
paid; scheduled increases in the combined employer-employee
social security (OASDHI) tax rate to 14.1% on January 1, 1985 and
to 14.3% on January 1, 1986; and annual increases in the social
security taxable earnings base to $47,100 in 1988.

A-10

THE BUDGET FOR FISCAL YEAR 1984

On a current services basis, excise taxes are estimated to increase by $3.1 billion or 8.3% from 1983 to 1984. This growth is in
large part due to the increases in excise taxes on airport and
airway users, cigarettes, and telephone service provided in TEFRA;
and the 5 cent per gallon increase in the excise tax on gasoline and
diesel fuel, and other provisions of the Highway Revenue Act of
1982. This growth is partially offset by a $1.5 billion decline in
windfall profit taxes from $13.8 billion in 1983 to $12.2 billion in
1984. Excise taxes are projected to decline by $3.7 billion between
1984 and 1988 to an estimated $36.6 billion. This is in large part
due to the expiration of the temporary doubling of cigarette excise
taxes effective October 1, 1985; the termination of telephone excise
taxes effective January 1, 1986; and the continued decline in windfall profit tax receipts to $9.2 billion in 1988. The 1988 estimate
assumes extension of the airport and airway trust fund taxes that
are scheduled to expire December 31, 1987.
Other receipts (estate and gift taxes, customs duties, and miscellaneous receipts) are projected to decline on a current services
basis by $0.4 billion from 1983 to 1984 and to increase by $1.5
billion from 1984 to 1988, largely as a result of increased economic
activity.
Table A-3. CURRENT SERVICES RECEIPTS BY SOURCE
(In billions of dollars)

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

1982
actual

1983

1984

1985

1986

1987

1988

297.7
49.2
201.5
36.3
33.0

285.2
35.3
210.3
37.3
29.4

295.8
51.9
231.7
40.4
29.0

321.4
60.8
260.7
40.8
29.6

348.0
75.7
290.9
36.7
29.5

383.0
85.8
314.0
36.3
30.0

430.8
88.6
340.2
36.6
30.6

617.8

597.5

648.8

713.3

780.9

849.1

926.7

Outlays.—The level of outlays necessary to continue ongoing Federal programs and activities at 1983 levels without policy changes
is estimated at $880.3 billion in 1984. The increase in current
services outlays from 1983 to 1984 is $74.2 billion, or 9.2%. Between
1984 and 1988 current services outlays are projected to increase at
an average annual rate of 8.7%.
Table A-4 shows current services outlays by function. Estimates
by agency are presented in table A-5. The outlay increases from
1983 to 1984 are 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,
increased borrowing requirements.

A-ll

SPECIAL ANALYSIS A
Table A-4. CURRENT SERVICES OUTLAYS BY FUNCTION
(In billions of dollars)
1982
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 servicesHealth
Income security
Veterans benefits and services
Administration of justice
General government
General purpose fiscal assistance
Net interest
Allowances:
Civilian agency pay raises
Increased employer share, employee retirement
Contingencies for uncontrollable programs
Undistributed offsetting receipts:
Employer share, employee retirement
Rents and royalties on the Outer Continental Shelf.
Federal surplus property disposition
Total outlays
Memorandum:
Off-budget outlays
Total, including off-budget outlays

187.4
10.0
7.1
4.7
12.9
14.9
3.9
20.6
7.2
26.3
74.0
248.3
24.0
4.7
4.7
6.4
84.7

Current services
1983
estimate

214.6
11.7
7.8
4.6
12.0
21.7
2.0
21.9
7.4
26.8
82.3
282.8
24.5
5.3
5.9
6.4
89.0

1984
estimate

253.7
12.8
8.1
4.1
11.2
15.3
2.1
26.1
7.2
27.1
92.9
289.7
26.1
5.5
5.9
7.2
105.2

1984
administration
proposals

245.3
13.2
8.2
3.3
9.8
12.1
.4
25.1
7.0
25.3
90.6
282.4
25.7
5.5
6.0
7.0
103.2

1.9

-7.0
-6.2

-8.2
-11.8

-8.9
-11.9

-.4

1984
difference

-8.4
.4
.2
-.7
-1.4
-3.2
-1.6

-.9
- . 2
-1.8

-2.3
-7.3
- . 3*
.1
-.2
-2.0

-1.9
.9
-9.9
-11.9

-.9

-1.0

-l

728.4

806.1

880.3

848.5

-31.8

17.3
745.7

16.9
823.0

17.1
897.3

14.0
862.5

-3.0
-34.8

*$50 million or less.

Table A-6 shows the major components of the changes in current
services outlays between 1983 and 1984. Outlays for income security programs are estimated to rise by $6.9 billion, from $282.8
billion in 1983 to $289.7 billion in 1984 due to automatic cost-ofliving increases in many benefit programs, increases in the number
of beneficiaries, and higher earnings records for new retirees.
Social security outlays are estimated to increase by $12.1 billion
and unemployment compensation outlays are estimated to decrease
by $6.2 billion between 1983 and 1984. Outlays for the remaining
income security programs are estimated to grow by $1.1 billion on
net. Table A-7 shows caseload projections for these and other
major benefit programs and other selected programmatic assumptions.
Under the administration's February 1982 policy, outlays for the
military functions of the Department of Defense in 1984 would
have been $38.2 billion higher than enacted 1983 levels.

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-5. CURRENT SERVICES OUTLAYS BY AGENCY
(In billions of dollars)

lSbz

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
Education
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
Memorandum:
Off-budget outlays
Total, including off-budget outlays

Current services
1983
estimate

1.4
.7
.1
6.1
36.2
2.0
182.9
3.0
14.1
7.6
251.3
14.5
3.9
2.6
30.7
2.2
19.9
110.5
5.1
6.0
23.9
20.0
13.1

1.5
.8
.1
7.1
45.6
2.0
208.8
2.9
14.4
8.8
276.4
15.0
4.0
3.0
41.2
2.3
21.1
117.6
4.4
6.7
24.4
21.5
12.5

-29.3
728.4
17.3
745.7

1984
estimate

1984
administration
proposals

1984

difference

-36.2

1.6
.9
.1
7.6
39.1
2.0
247.0
2.7
14.3
9.5
296.6
15.1
3.9
3.0
34.8
2.6
25.3
136.2
4.1
6.9
26.0
23.6
13.0
1.9
-37.6

1.6
.9
.1
7.9
35.0
1.7
238.6
2.2
13.5
8.8
288.8
13.7
3.6
3.3
34.3
2.6
24.4
135.0
4.1
7.0
25.7
23.2
11.4
.9
-39.6

806.1

880.3

848.5

-31.8

16.9
823.0

17.1
897.3

14.0
862.5

-3.0
-34.8

*
*

.3
-4.1
-.4
-8.4
-.5
-.8
-.6
-7.8
-1.3
-.3
.3
-.5
*

-.9
-1.2
-.1

-.3
-.5
-1.6
-.9
-2.0

*$50 million or less.

Current services outlays for medicare are estimated to increase
by $8.5 billion between 1983 and 1984, largely as a result of increases in medical care prices and utilization. Medicaid outlays are
estimated to increase by $1.7 billion for the same reason.
Other major increases in current services outlays between 1983
and 1984 include an increase in net interest of $16.2 billion and
$4.2 billion for transportation programs.
The $6.4 billion decline in current services outlays for Agriculture between 1983 and 1984 results from a sharply lower estimate
of outlays required in 1984 for price supports and related Commodity Credit Corporation programs.

A-ll

SPECIAL ANALYSIS A

Table A-6. CHANGE IN CURRENT SERVICES BUDGET AUTHORITY AND OUTLAYS, 1983 TO 1984
(In billions of dollars)
Budget
authority

1983 current services estimate
1983-84 changes:
National defense-.
Department of Defense—Military
Other national defense
Subtotal, National defense
Income security:
Social security
Federal employee retirement and disability.
Unemployment compensation
Housing assistance
Food and nutrition assistance
Other income security programs
Subtotal, income security
International affairs
General science, space, and technology
Energy programs
Natural resources and environment
Agriculture
Commerce and housing credit
Transportation programs
Community and regional development
Education
Training and employment
Social and other labor services
Medicare and medicaid
Other health programs
Veterans programs
Net interest
Allowances for civilian agency pay raises
Undistributed offsetting receipts
All other programs, net

828.4
46.2
1.1
47.3
29.5
1.0*
7.6
-.3
-.7
37.1
.6
.2
.3
-.4
-7.2
.8
1.9
.2

24.4
.4
1.2
16.2
2.0
-1.2

1.3

Subtotal, changes

126.4

1984 current services estimate

954.8

Memorandum:
1983 off-budget current services estimates...
Changes in off-budget entities
1984 off-budget current services estimates...
Total, including off-budget entities

29.8
4.6
34.3
989.2

*$50 million or less.

Budget authority.—Current services budget authority is estimated to total $954.8 billion in 1984, $126.4 billion more than in 1983.
Increases in budget authority between 1983 and 1984 generally
reflect the higher funding levels that would be necessary to maintain 1983 services levels in real terms in 1984. 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.

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-7. CASELOADS AND PROGRAMMATIC ASSUMPTIONS
Fiscal years
1983

Beneficiaries (annual average, in thousands):
Social security (OASDI)
Railroad retirement1
Federal civil service retirees
Military retirees
Veterans compensation
Veterans pensions
Gl bill
Disabled coal miners
Supplemental security income
Maintenance assistance (AFDC)
Food stamps
Housing subsidy recipients (HUD)
Medicaid
Medicare:
Hospital insurance
Supplementary medical insurance
Automatic benefit increases (percent):
Social security and veterans pensions
(July)
:
Federal employee retirement (March) 2 :
Over 62
Under 62
Food stamps (October)
Interest rate (91-day bills, percent, fiscal
years) 4
Unemployment rate (percent, annual average,
fiscal years):
Total
Insured 5
Strategic petroleum reserves fill (millions of
barrels) 6

1984

1985

1986

1987

1988

36,026
990
1,394
1,423
2,616
1,745
804
435
3,452
10,967
21,950
3,671
22,233

36,444
976
1,452
1,454
2,612
1,660
652
413
3,361
10,905
21,540
3,923
22,584

37,051
963
1,505
1,484
2,608
1,585
565
394
3,280
10,782
20,630
4,081
22,584

37,732
949
1,558
1,512
2,605
1,535
458
373
3,207
10,703
19,820
4,180
22,584

38,436
934
1,616
1,539
2,604
1,495
386
354
3,143
10,608
19,150
4,283
22,584

39,120
919
1,674
1,565
2,601
1,455
322
334
3,085
10,521
18,450
4,377
22,584

29,185
28,742

29,682
29,265

30,225
29,841

30,831
30,464

31,459
31,087

32,068
31,684

5.1

4.8

4.5

4.7

4.5

4.6
3.3
0.4

4.9
3.6
4.7

4.4
3.3
5.6

4.7
4.7
4.6

4.5
4.5
4.4

4.5
4.5
4.6

8.0

7.6

6.9

6.6

6.2

10.7
5.4

10.1
4.9

9.1
4.3

8.3
3.9

7.5
3.6

6.7
3.2

80.3

61.5

45.2

90.6

44.8

End of year.
2 Under current law, benefit increases for retired Federal employees will occur in April 1983, May 1984, and June 1985. Thereafter, the
increases would occur in March of each year.
3 The increase based on the actual December 1982 CPI is 3.9%.
"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.
5 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.
6 Annual petroleum fill.
1

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 1983 and 1984 are also shown in table A-6.
Increases in budget authority of $37.1 billion for income security
and $24.8 billion for health are primarily due to higher social
security and medicare trust fund receipts and higher medicaid
costs.

A-ll

SPECIAL ANALYSIS A
Table A-8. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)
1982
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
Net interest
Allowances:
Civilian agency pay raises
Increased employer share, employee retirement
Contingencies for uncontrollable programs
Undistributed offsetting receipts:
Employer share, employee retirement
Rents and royalties on the Outer Continental Shelf..
Federal surplus property disposition
Total budget authority..

218.7
15.3
7.1
3.3

Current services
1983
estimate

11.2

244.5
16.3
7.9
3.7
11.2

18.8
6.4
21.3
6.6
25.9
78.9
254.2
25.0
4.7
5.0
6.4
84.7

5.1
26.7
6.8
26.4
67.6
280.5
25.0
5.2
5.8
6.4
89.0

20.8

1984
estimate

291.8
16.8
8.1
4.1
10.8
13.6
5.9
28.6
7.0
27.8
92.3
317.7

26.2

5.5
6.0
7.2
105.2

1984
administration
proposals

1984
difference

280.5

-11.3

16.8

8.5
2.9
8.9
13.5
7.6
27.8
6.1
25.6
91.7
284.2
26.1
5.6

-8.2

-6.2

-11.8

7.0
103.2

828.4

-33

-2
-2.0

-8.9
-11.9

-9.9
-11.9

954.8

900.1

-.4
779.9

- 2

6.1

2.0

-7.0

-1
-1

-1.0

-54.7

* $50 million or less.

A $46.2 billion increase in budget authority for the Department
of Defense—Military baseline reflects the increase in pay for military and civilian personnel and increases in defense purchases that
would have occurred under the administration's February 1982
policy. Budget authority for net interest increases by $16.2 billion
because of higher borrowing requirements.
Other major changes in current services budget authority include a $2.0 billion increase for allowances for civilian agency pay
raises; a $0.6 billion increase in education programs; a $1.9 billion
increase in transportation programs; and a $1.2 billion increase for
veterans programs.

380-700

O -

83 -

2 QL : 3

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-9. CURRENT SERVICES BUDGET AUTHORITY BY AGENCY
(In billions of dollars)
Current services
actual

1983
estimate

1.4
.7
.1
8.5
40.6
1.8
213.8
3.0
14.7
7.9
246.2
20.1
3.7
2.6
27.2
2.6
20.5
111.3
3.7
6.0
24.9
32.6
15.2

1.5
.8
.1
9.7
44.3
1.7
238.4
2.9
14.2
8.4
252.4
12.3
3.8
2.9
36.4
2.7
25.9
117.8
3.7
6.8
25.0
36.0
16.7

-29.3
779.9

Total budget authority

1984
estimate

1984
administration
proposals

-36.2

1.6
.9
.1
10.1
37.3
1.9
284.7
2.7
14.8
10.0
305.2
20.3
3.9
3.0
36.1
2.8
27.8
136.3
3.8
7.0
26.1
37.3
16.8
2.0
-37.6

1.6
.9
.1
9.8
39.2
1.4
273.4
2.1
13.1
8.9
285.2
4.1
3.4
3.4
36.3
2.9
27.0
135.1
3.6
7.1
26.1
38.3
15.6
.9
-39.6

828.4

954.8

900.1

1984
difference

*
_ *

-.3
1.9
-.5
-11.3
-.6
-1.7
-1.1
-20.0
-16.2
-.5
.4
.2
.1
— .8
-1.2
-.2
.1
_ *

1.0
-1.2
-1.0
-2.0
-54.7

*$50 million or less.

DIFFERENCES

BETWEEN

CURRENT

BUDGET

SERVICES

ESTIMATES

AND

PROPOSALS

The administration's budget proposals differ from the current
services estimates in four broad ways:
—The budget proposals include an immediate freeze on pay, costof-living adjustments, aggregate discretionary spending and a
variety of reimbursement formulas and payments.
—The budget proposals include a broad program of structural
reform of entitlements and transfer payments focused on
health care, social security solvency, and means-tested benefits.
—The budget proposals include defense savings due to lower
inflation, the 1984 pay freeze, and various program economies.
—The budget proposals include various revenue proposals that
would increase revenues above the current services level
during 1984-1988. Also included is a standby revenue mechanism designed to trigger in if the deficit remains above 2%% of
gross national product in 1986 and beyond.

A-ll

SPECIAL ANALYSIS A

For 1983, the estimates of budget authority under the administration proposals exceed current services by $19.0 billion. The administration proposals include the recommendation of the National
Commission on Social Security Reform for a lump-sum payment to
the social security trust funds of $20.5 billion in 1983. Outlays
under the administration proposals are $0.9 billion below current
services. The 1983 receipts estimate under the administration proposals are below current services by less than $0.1 billion. The
deficit under administration proposals is $0.8 billion lower than
that under current services.
For 1984, the administration estimate of outlays is $31.8 billion
below the current services level, and budget authority is $54.7
billion below the current services level. The current services receipts level for 1984 is $10.9 billion below the administration's
estimate of $659.7 billion. The 1984 current services deficit of
$231.5 billion exceeds the administration's estimated deficit by
$42.7 billion.
By 1988, the current services estimates of budget authority and
outlays exceed the administration budget request by $118.7 billion
and $100.1 billion, respectively. The 1988 receipts estimate under
the administration proposals exceeds the current services estimate
by $83.6 billion. The deficit for 1988 under the administration
proposals is estimated to be $183.7 billion lower than the current
services deficit for that year.
Table A-10. SUMMARY OF CURRENT SERVICES AND PROPOSED BUDGET TOTALS
(In billions of dollars)
1982
actual

Budget authority:
Current services
Effect of proposalsAdministration budgetReceipts:
Current services
Effect of proposalsAdministration budgetOutlays:
Current services
Effect of proposals ..
Administration budget..
Deficit (— >:
Current services
Effect of proposals..
Administration budget..
Off-budget outlays:
Current services
Effect of proposals ..
Administration budget..,
*$50 million or less.

779.9

Estimate
1983

1984

1986

1987

779.9

828.4
19.0
847.4

954.8
-54.7
900.1

1,056.3
-59.0
997.4

1.152.5
-72.9
1.079.6

1,245.7
-83.0
1.162.7

617.8

597.5

617.8

597.5

648.8
10.9
659.7

713.3
11.0
724.3

780.9
61.0
841.9

849.1
67.3
916.3

728.4

806.1
-.9
805.2

880.3
-31.8
848.5

966.4
-47.9
918.5

1.051.7

1.140.8
-82.4
1,058.4

728.4
-110.6
-110.6
17.3
17.3

-62.1

989.6

-208.5 - 2 3 1 . 5 - 2 5 3 . 1 - 2 7 0 . 8 - 2 9 1 . 7
0.8
58.9
123.2
149.6
42.7
-207.7 -188.8 - 1 9 4 . 2 - 1 4 7 . 7 - 1 4 2 . 1
16.9
.1
17.0

17.1
-3.0
14.0

14.2
-3.7
10.5

13.6
-4.1
9.4

16.4
-6.8
9.6

A-10

THE BUDGET FOR FISCAL YEAR 1984

Receipts.—As shown in table A - l l , the administration's estimate
of receipts for 1983 is the same as the current services level of
$597.5 billion.
Current services receipts for 1984 are estimated at $648.8 billion,
$10.9 billion below the administration's estimate. The proposed bipartisan social security plan, designed to ensure the future solvency of the social security trust funds, accounts for $8.2 billion of the
increase in 1984 receipts above the current services level. Other
legislative proposals, which include the taxation of employer-paid
health insurance premiums in excess of a specified level, increases
in contributions to Civil Service retirement, tax incentives for the
redevelopment of economically distressed areas, a tuition tax
credit, and a jobs tax credit for the long-term unemployed, increase
receipts by an additional $2.9 billion.1 These increases are partially
offset by the effect of the administration's proposed October 1983
Federal employee pay freeze, which reduces Federal employee retirement contributions by $0.3 billion below the current services
level.
By 1988 the administration's legislative proposals, including a
proposed contingency tax plan, are estimated to increase receipts
$83.9 billion above the current services level.
Table A - l l . ESTIMATED EFFECT OF PROPOSED LEGISLATION AND ADMINISTRATIVE ACTION ON
RECEIPTS
(In billions of dollars)
1984

1985

597.5

648.8
-.3
648.5

713.3
-.3
713.1

780.9
-.3
780.6

849.1
-.3
848.8

926.7
-.3
926.4

597.5

8.2
2.3
1.2
-.1
-.2
-_. *2

8.9
6.0
2.1
-.8
-.8
-.1
- . 2*

10.7
8.0
1.9
-1.1
-.8

22.3
10.7
1.7
-1.1
-_. *8

5.8
4.4
2.3
-.4
-.5
-.2
- . 1*

11.2

11.3

1983

Current services receipts estimates
Administrative action 1
Receipts under existing legislation
Proposed changes:
Bi-partisan social security plan
Taxation of health insurance premiums
Contributions to Civil Service Retirement..
Enterprise zone tax incentives
Tuition tax credit
Jobs tax credit
Higher education tax incentive
Other
Subtotal of above changes

_ *

Contingency tax plan
Total proposed changes
Receipts under existing and proposed legislation

1986

1987

_ *

1988

- . 3*

-.4
*

15.3

18.5

32.5

46.0

49.0

51.4

_ *

11.2

11.3

61.3

67.5

83.9

597.5

659.7

724.3

841.9

916.3

1,010.3

*$50 million or less.
^ h e effect of the proposed October 1983 Federal employee pay freeze on Federal employee retirement contributions.

'A more detailed discussion of the administration's receipts proposals is presented in the Budget of the United
States Government, Fiscal Year 1984, Part 4, "Budget Receipts."

SPECIAL ANALYSIS A

A-ll

Outlays.—Table A-12 shows the major differences between the
administration's budget and current services for outlays by
function.1
—The administration proposals for national defense would
reduce outlays below the defense baseline by $8.4 billion in
1984. By 1988 defense outlays would be $11.0 billion below the
defense baseline.
—The administration proposals for the Commodity Credit Corporation's price support programs would reduce outlays below
current services by $3.1 billion in 1984. By 1988 outlays for
these programs would be $5.3 billion below current services.
—The administration proposals for ground transportation would
reduce outlays below current services by $1.0 billion in 1984.
By 1988 outlays for these programs would be $3.5 billion below
current services.
—The administration proposals for education programs would
reduce outlays below current services by $0.8 billion in 1984.
By 1988 outlays for these programs would be $4.0 billion below
current services.
—The administration proposals for training and employment and
social services programs would reduce outlays below current
services by $1.0 billion in 1984. By 1988 outlays for these
programs would be $3.5 billion below current services.
—The administration proposals for medicare would reduce outlays below current services by $1.7 billion in 1984. By 1988
outlays for medicare would be $9.0 billion below current services.
—The administration proposals for medicaid and other health
programs would reduce outlays below current services by $0.6
billion in 1984. By 1988 outlays for these programs would be
$3.5 billion below current services.
—The administration proposals for social security embody the
proposals recommended by the National Commission on Social
Security Reform. The proposals would reduce social security
outlays below current services by $4.1 billion in 1984. By 1988
these proposals would reduce social security outlays by $5.7
billion.
—The administration proposals for Federal employee retirement
and other general retirement and disability would reduce outlays below current services by $1.2 billion in 1984. By 1988
outlays for these programs would be $4.4 billion below current
services.
1 A more detailed discussion of the administration's budget authority and outlay proposals is presented in the
Budget of the United States Government, Fiscal Year 1984, Part 5, "Meeting National Needs: The Federal
Program by Function."

A-10

THE BUDGET FOR FISCAL YEAR 1984

—The administration proposals for food and nutrition and housing assistance and other income security programs would
reduce outlays below current services by $1.9 billion in 1984.
By 1988 outlays for these programs would be $4.7 billion below
current services.
—The administration's proposed 1984 pay freeze for Federal employees reduces allowances for civilian agency pay raises by
$1.9 billion in 1984. By 1988, outlays would be reduced by $2.4
billion.
—The administration proposals would reduce the budget deficit
by $42.7 billion below current services in 1984. By 1988 the
deficit would be $183.7 billion lower. These reductions and
other proposals would reduce net interest outlays below current services by $2.0 billion in 1984. By 1988 net interest
outlays would be $32.9 billion lower.
—Reductions below current services in other budget functions
primarily reflect the effects of the aggregate discretionary program freeze proposed by the administration.
In total, the administration proposals would reduce outlays below
current services by $31.8 billion in 1984. By 1988 budget outlay
savings would be $100.1 billion.
The combined effects of the administration's on- and off-budget
outlay and receipts proposals would reduce the total deficit below
current services by $45.7 billion in 1984. By 1988 these proposals
reduce the total deficit by $189.5 billion. The cumulative deficit
reduction between 1983 and 1988 including off-budget savings is
$582.2 billion.
Table A-12. DIFFERENCES BETWEEN CURRENT SERVICES AND ADMINISTRATION BUDGET REQUEST
(Outlays; in billions of dollars)

Current services estimates
Differences:
National defense:
Department of Defense—Military
Other
Subtotal, national defense
International affairs:
Foreign economic and financial assistance
International security assistance:
Military assistance
Other
Subtotal, international security
assistance

1986

1987

1988

966.4

1,051.7

1,140.8

1,227.0

- 8_. *4

-8.0
-0.1

-9.1
-0.1

- 1 0 . 4*

- 1 1 . 1#

-8.4

-8.1

-9.2

-10.4

-11.0

-0.1

-0.2

1983

1984

1985

806.1

880.3

_ *
_ *

*
•

0.1
0.2

0.1
0.2*

0.3
-0.2

0.4
-0.4

0.4
-0.5

0.4
-0.7

0.2

-0.1

-0.3

SPECIAL ANALYSIS A

A-ll

Table A-12. DIFFERENCES BETWEEN CURRENT SERVICES AND ADMINISTRATION BUDGET REQUEST—
Continued
(Outlays; in billions of dollars)
1984

1983

Conduct of foreign affairs
Foreign information and exchange activities
International financial programs

0.1

1985

1986

1987

1988

0.2

0.1

0.2*

0.3
-0.2

0.3
-0.3

0.2
-0.5

_ *

-0.5

_ *

Subtotal, international affairs

0.3

0.4

0.5

0.3

General science, space, and technology....

0.2

0.3

0.4

0.3

0.2

-0.1

-0.7

-1.0

-0.9

0.1

-1.4

-1.5

-1.8

-2.0

-2.2

-0.6

-3.1
-0.1

-5.9
-0.2

-6.8
-0.3

-7.6
-0.3

-5.3
-0.4

-0.6

-3.2

-6.1

-7.0

-7.9

-5.7

-0.1

-0.7
-0.6
-0.3

-1.5
-0.6
-0.3

-1.3
-0.6
-0.3

-1.3
-0.6
-0.4

-1.4
-0.5
-0.5

-0.1

-1.6

-2.4

-2.2

-2.4

-2.5

*
*
*

-1.0
0.2
- 0 . 1*

-1.3
0.5
-0.2
0.1

-1.8
0.6
-0.2
0.1

-2.5
0.7
-0.2
0.1

-3.5
0.8
-0.3
0.1

-0.9

-1.0

-1.3

-1.9

-3.0

_ *

-0.2

-0.5

-0.8

-1.2

-1.6

_ *

- 0 . 1*

-0.8
-0.6
-0.4

-1.7
-0.9
-0.8

-2.5
-1.2
-1.1

-3.3
-1.4
-1.4

-4.0
-1.7
-1.7

-0.1

-1.8

-3.4

-4.8

-6.1

-7.4

*
_*
*

-1.7
-0.3
-0.1
-0.2

-3.1
-0.9
-0.5
-0.4

-4.7
-0.7
-1.0
-0.7

-6.7
-0.7
-1.2
-0.9

-9.0
-0.7
-1.6
-1.2

-2.3

-4.9

-7.1

-9.6

-12.4

-2.1

-4.1
-0.8

-4.6
-1.8

-4.9
-1.1

-5.4
-1.8

-5.7
-1.4

Energy
Natural resources and environment
Agriculture:
Farm income stabilization
Agricultural research and services
Subtotal, agriculture
Commerce and housing credit:
Mortgage credit and thrift insurance
Postal service
Other advancement of commerce
Subtotal,
credit

commerce

and

housing

Transportation:
Ground transportation
Air transportation
Water transportation
Other transportation
Subtotal, transportation
Community and regional development
Education, training, employment, and social
services:
Education
Training and employment
Social services and other
Subtotal, education, training, employment, and social services.,.
Health:
Medicare
Medicaid
Other health care services
Other health
Subtotal, health
Income security:
Social security
Other general retirement and disability

A-10

THE BUDGET FOR FISCAL YEAR 1984

Table A-12. DIFFERENCES BETWEEN CURRENT SERVICES AND ADMINISTRATION BUDGET REQUEST—
Continued
(Outlays; in billions of dollars)
1984

1983

Federal employee retirement and disability
Unemployment compensation
Housing assistance
Food and nutrition assistance
Other income security
Subtotal, income security
Veterans benefits and services:
Income security for veterans
Hospital and medical care for veterans.. .
Other
Subtotal, veterans benefits and serv-

1988

- 1 . 6*

- 2 . 3*

- 3_. 1*

0.1

0.1
-1.1
-0.9

-1.5
-1.2

-0.3
-1.7
-1.3

-0.8
-1.8
-1.4

-1.3
-1.9
-1.4

-0.3

-7.3

-10.3

-11.0

-13.4

-14.8

*
*

- 0_. 3*

- 0 . 4*

-0.5
0.1

-0.7
0.2*

-0.8
0.2*

_ *
_ *

_ *

-0.3

-0.4

-0.5

-0.6

0.2*
-0.2

0.2
0.1
-0.2

0.1
0.1
-0.3

0.1
0.1
-0.4

_ *

-0.1

-0.2

-0.3

-0.1
_*

0.1*

0.2
_ *

0.2
-0.1

-0.1

0.1

-0.2

-0.6

-0.8

-1.1

-1.3

-2.0

-6.1

-12.5

-22.1

-32.9

-1.9

-2.1

-2.2

-2.3

-2.4

General purpose fiscal assistance
Net interest

1987

- 1 . 1*

Subtotal, administration of justice

Subtotal, general government

1986

- 0 . 4*

1.8
-0.2
_ *

Administration of justice:
Federal law enforcement activities
Federal correctional activities
Other

General government:
Central fiscal operations
Other

1985

-0.1

Allowances:
Civilian agency pay raises
Increased employing agency payments
for employee retirement
Subtotal, allowances
Undistributed offsetting receipts:
Employer share, employee retirement
Federal surplus property disposition
Subtotal, undistributed offsetting receipts

0.9

1.9

-0.9

-0.2

-0.3

-0.4

-0.5

-0.9
-0.2

-2.2
-0.2

-2.4
-0.2

-2.5
-0.2

-2.6
-0.2

-1.1

-2.4

-2.6

-2.7

-2.8

Total, differences

-0.9

-31.8

-47.9

-62.1

-82.4

-100.1

Budget request

805.2

848.5

918.5

989.6

1,058.4

1,126.9

*$50 million or less.

A-ll

SPECIAL ANALYSIS A

TABLE A—13. OFF-BUDGET FEDERAL ENTITIES, DIFFERENCES BETWEEN CURRENT SERVICES AND
ADMINISTRATION BUDGET REQUEST
(Outlays; in billions of dollars)
1983

1984

16.4

15.1

-0.9

-1.2

-0.2

-2.2

-0.5

0.4

0.4
-0.2
-2.5
-0.1
-0.2

0.3
-0.4
-3.4
-0.1
-0.2
_ *

0.1
-0.7
-3.5
-0.2
-0.2
_*

-0.2
-0.9
-3.7
-0.2
-0.2

-0.1

-2.6

-4.0

-4.6

-5.3

-3.0

-3.7

-4.1

-6.8

-5.8

14.0

10.5

9.4

9.6

9.2

0.2

-2.1

0.1
17.0

Total differences

1988

13.6

Subtotal, Federal Financing Bank...

Budget proposals

1987

14.2

16.9

0.2

1986

17.1

Current services estimates
Differences:
Strategic petroleum reserve
Federal Financing Bank:
Foreign military sales credit
Agricultural credit insurance fund
Rural housing insurance fund 1
Rural development insurance fund
Community development grants
Railroad rehabilitation and improvement
Small business loans

_ *

1985

- 2_. 4*

_ *

*$50 million or less.
small part of the difference in rural housing insurance fund off-budget outlays is due to a proposed change in accounting treatment of
sales and repurchases of certificates of beneficial ownership (CBO's). Under the budget proposals, these sales (and repurchases) of financial
assets would be treated as agency borrowing (and repayment of borrowing) by the Farmers Home Administration from the Federal Financing Bank
(FFB) rather than as on-budget offsetting receipts ana off-budget FFB outlays.

Off-budget outlays.—The budget proposals for off-budget outlays
are $3.0 billion lower than the current services estimates in 1984
due primarily to a decrease in estimated sales of certificates of
beneficial ownership (CBO's) by the rural housing insurance fund
(RHIF) to the Federal Financing Bank. Lower sales are estimated
because of a proposed decrease in RHIF direct loans under the
rural housing block grant to the States proposed in the budget.
The budget estimates for the strategic petroleum reserve outlays
are as much as $2.2 billion lower than the current services estimates during 1983-1988 because of the revised fill strategy proposed by the administration.
The proposed termination of the community development loan
guarantee program reduces outlays for this program by $0.2 billion
below the current services estimates for 1985-88.
Increases above the current services estimates for foreign military sales credit activities reflect the administration's overall proposal to increase security assistance in support of U.S. foreign
policy.
Tables A-14 and A-15 provide a more detailed comparison (by
function, subfunction, and program) of the President's budget request for 1984 with the current services budget authority and
outlay estimates.

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM
(In millions of dollars)
1982
actual

050 NATIONAL DEFENSE
051 Department of Defense—Military
053

Atomic energy defense activities

054 Defense-related activities:
Existing law
Proposed legislation
Subtotal, Defense-related activities
Deductions for offsetting receipts
Total budget authority
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
Multilateral development banks
International organizations
Agency for International Development
Public Law 480—Food aid
Peace Corps
Refugee assistance
Other
Offsetting receipts
Subtotal, Foreign economic and financial assistance
152 International security assistance:
Economic support fund
Foreign military sales credit
Military assistance
Other
Offsetting receipts

Current services

1984
administration
proposals

1983
estimate

1984
estimate

213,751

238,449

284,652

273,400

4,737

5,700

6,778

219

371

364

429
-100

219

371

364

329

218,704

244,521

291,794

280,503

1,262
215
1,847
1,000
105
423
61
-361

1,292
249
1,805
1,028
109
395
65
-434

1,361
262
1,902
1,052
113
344
68
-469

1,618
190
1,871
1,052
109
344
148
-466

4,552

4,509

4,633

4,868

2,919
800
179
221
-199

2,661
1,175
290
76
-155

2,802
1,237
305
80
-112

2,949
1,000
747
108
-112

-4

3,919

4,047

4,313

4,692

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

1,183
466
43

1,226
519
45

1,261
608
47

1,392
602
48

Subtotal, Conduct of foreign affairs

1,693

1,790

1,916

2,042

583

652

688

832

3,268
1,424
-80

2,748
2,700
-82

2,664
2,800
-84

2,457
2,100
-84

4,612

5,366

5,380

4,473

Subtotal, International security assistance

154

Foreign information and exchange activities

155 International financial programs:
Export-Import Bank
Foreign military sales trust fund (net)
Offsetting receipts
Subtotal, International financial programs
Deductions for offsetting receipts
Total budget authority

-92

-94

15,267

16,272

16,838

16,813

A-ll

SPECIAL ANALYSIS A

Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

250 GENERAL SCIENCE, SPACE, AND TECHNOLOGY
251 General science and basic research:
National Science Foundation programs
Energy-related general science programs
Smithsonian scientific information exchange activities.
Subtotal, General science and basic research

1.006
529*

Current services
1983
estimate

1.099
535*

1984
estimate

1.154
573*

1984
administration
proposals

1.297
645*

1,535

1,635

1,727

1,943

253

Space flight

3,601

4,109

4,023

4,049

254

Space, science, applications, and technology

1,392

1,568

1,581

1,638

255

Supporting space activities

544

610

817

830

Deductions for offsetting receipts

-10

-9

7,063

7,913

8,139

8,451

2,764
84
-1,045
279

2,573

2,410

2,069

-1,447
1,265

-1,013
944

-1,020
942

Total budget authority
270 ENERGY
271 Energy supply:
Research and development
Uranium enrichment
Petroleum reserves
Power marketing
Incentives for non-conventional fuel production
Subtotal, Energy supply

2,083

2,391

2,340

1,992

272

Energy conservation

168

299

407

274

Emergency energy preparedness

191

242

531

159

276

Energy information, policy, and regulation

889

882

877

725

Deductions for offsetting receipts
Total budget authority
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Navigation fees (proposed)
Existing law
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
Offsetting receipts
Proposed legislation
Subtotal, Conservation and land management

-71

-78

-81

3,261

3,736

4,074

2,869

3,998

3,987

3,894

-438
3,689

3,998

3,987

3,894

3,251

1,723
506
174
570
101
-510

1,931
421
231
594
301
-735

1,887
434
244
612
310
-914

1,587
431
282
413
255
-914
-25

2,565

2,744

2,573

2,028

A-10

THE BUDGET FOR FISCAL YEAR 1984

Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

303 Recreational resources:
Federal land acquisition
Urban park grants and historic preservation funds.
Operation of recreational resources
Proposed legislation
Subtotal, Recreational resources
304 Pollution control and abatement:
Regulatory, enforcement, and research programsProposed legislation
Hazardous substance response fund
Oil pollution funds
Sewage treatment plant construction grants
Subtotal, Pollution control and abatement
306

Other natural resources

Deductions for offsetting receipts..
Total budget authority
350 AGRICULTURE
351 Farm income stabilization:
Commodity price support and related programsProposed legislation
Crop insurance
Agricultural credit
Other programs and administrative expenses
Proposed legislation
Subtotal, Farm income stabilization
352 Agricultural research and services:
Research programs
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programs
Proposed legislation
Economic intelligence
Other programs and administrative expenses
Offsetting receipts
Subtotal, Agricultural research and servicesDeductions for offsetting receipts
Total budget authority

Current services
1983
estimate

1984
estimate

176
33
1,052

257
26
1,186

269
28
1,252

1,262

1,468

1,549

1,045

1,019

1,059

188
12
2,400

201
3
2,430

197
3
2,570

3,645

3,653

3,829

1,590

1,489

1,604

-1,860

-2,131

-2,635

11,199

11,210

10,815

16,063

17,858

10,491

425
639
63

529
682
63

397
896

17,191

19,132

11,849

657
316
118

710
329
125

740
347
133

289

277

285

161
120
-74

168
180
-87

174
187
-95

1,586

1,701

1,770

-14
18,763

- 2

20,831

- 2

13,617

A-ll

SPECIAL ANALYSIS A

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

1982
actual

370 COMMERCE AND HOUSING CREDIT
371 Mortgage credit and thrift insurance:
Mortgage purchase activity (GNMA)
Proposed legislation
Mortgage credit (FHA)
Housing for the elderly or handicapped
Rural housing programs (FmHA)
Proposed legislation
National Credit Union Administration

1983
estimate

1984
estimate

1984
administration
proposals

1,101

249

203
710
2,004

183
564
1,630

127
628
2,107

249
-248
127
436
1,508
1 3,556
66

4,055

2,409

3,140

5,694

707

789

1,010

760
-360

707

789

1,010

400

570
275

884
211

675
219

184
631

218
544

191
617

498
193
5
206
561

1,660

1,857

1,701

1,464

-2

- 1

6,419

5,054

5,851

7,556

8,723

13,181

13,801

213
3,584
1,968
70

236
4,397
1,013
67

259
5,095
1,002
66

13,811
80
258
3,967
889
58

14,559

18,892

20,222

19,062

402 Air transportation:
Airways and airports (FAA)
Aeronautical research and technology
Air carrier subsidies
Regulation

3,157
516
86
26

4,136
553
48
24

4,519
575
51
21

5,031
589
51
21

Subtotal, Air transportation

3,785

4,761

5,165

5,692

2,513

2,461

2,605

415
11

526
12

516
12

-58
2,543
-7
506
11

2,939

2,999

3,133

2,995

Subtotal, Mortgage credit and thrift insurance
372 Postal Service:
Existing law
Proposed legislation
Subtotal, Postal Service
376 Other advancement of commerce:
Small business assistance
Technology utilization
Proposed legislation
Economic and demographic statistics
Other
Subtotal, Other advancement of commerce
Deductions for offsetting receipts
Total budget authority
400 TRANSPORTATION
401 Ground transportation:
Highway systems
Proposed legislation
Highway safety
Mass transit
Railroads
Regulation
Subtotal, Ground transportation

403 Water transportation:
Coast Guard user fees (proposed)
Marine safety and transportation (Coast Guard)
Proposed legislation
Ocean shipping
Regulation
Subtotal, Water transportation

A-10

THE BUDGET FOR FISCAL YEAR 1984

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

1982
actual

407

Other transportation

Deductions for offsetting receipts
Total budget authority
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
Community development block grants
Urban development action grants
Rental rehabilitation grants (proposed)
Urban homesteading
Other programs
Proposed legislation
Subtotal, Community development
452 Area and regional development:
Rural development
Economic development assistance
Indian programs
Regional commissions
Tennessee Valley Authority
Offsetting receipts
Subtotal, Area and regional development
453 Disaster relief and insurance:
SBA disaster loans
Disaster relief
National flood insurance fund
Other
Subtotal, Disaster relief and insurance
Deductions for offsetting receipts
Total budget authority
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Education for the disadvantaged
Special programs and populations
Proposed legislation
Indian education
Impact aid
Education for the handicapped
Vocational and adult education
Proposed legislation
Other
Proposed legislation

1983
estimate

1984
administration
proposals

1984
estimate

110

114

116

-116

-87

-85

21,256

26,676

28,551

27,780

3,456
474

3,456
440

3,677
468

361

12
459

12
380

3,500
196
150
12
368
-26

4,291

4,367

4,538

4,200

590
224
1,156
159
129
-274

777
192
1,135
173
176
-277

922
238
1,152
184
126
-291

890
18
1,080
75
-286

1,984

2,177

2,330

1,777

302

130
71
55

71
57

62
363

256

128

-34

6,604

6,766

6,962

6,071

3,041
537

3,168
534

3,361
566

343
466
1,069
742

334
480
1,110
824

345
511
1,178
873

206

207

218

3,014
479
50
250
465
1,110
7
493
162

500

Subtotal, Elementary, secondary, and vocational education

- 1

6,403

6,658

7,052

6,030

A-ll

SPECIAL ANALYSIS A

Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

502 Higher education:
Guaranteed student loan program
Proposed legislation
Self-help grants (proposed)
Student financial assistance (existing law)
Institutional aid

Current services
1983
estimate

1984
estimate

1984
administration
proposals

3,074

2,200

2,169

3,570
757

3,569
739

3,794
759

2,169
-122
2,714
854
587

7,401

6,508

6,722

6,202

999

1,029

1,019

867

2,984

3,789

4,011

4,368
-87

277
281
757
88

282
271
824
94

287
888
92

1,074
86

4,386

5,260

5,278

5,441

600

643

664

682

2,400
952

2,450
1,037

2,500
1,103

2,500

378
465

359
560

377
616

1,037
3
601

1,718
132
49

1,767
129
48

2,345
130
49

2,193
110
31

Subtotal, Social services

6,094

6,350

7,119

6,475

Deductions for offsetting receipts

-29

-42

-58

-57

25,854

26,406

27,796

25,640

55,237

47,223

65,998

-3,855

-4,355

-5,010

18,084

14,869

21,101

65,998
338
-5,010
160
21,101
-300
1,196
165
2,773
-495

Subtotal, Higher education
503

Research and general education aids

504 Training and employment:
Employment and training assistance
Proposed legislation
Older Americans employment
Work incentive program
Federal-State employment service
Other
Subtotal, Training and employment
505

Other labor services

506 Social services:
Social services block grant
Rehabilitation services
Proposed legislation
Community service programs
Family social services
Services for children, youth, and families, the elderly and
other special groups
Domestic volunteer programs
Other social services

Total budget authority
550 HEALTH
551 Health care services:
Medicare
Proposed legislation
Medicare premiums and collections
Proposed legislation
Medicaid
Proposed legislation
Health block grants
Proposed legislation
Other health care services
Proposed legislation

1,362
4,004

4,064

2,899

Subtotal, Health care services

73,469

61,801

86,350

85,927

552 Health research:
National Institutes of Health research
Other research programs

3,450
394

3,791
437

3,967
461

3,868
479

3,844

4,228

4,428

4,347

Subtotal, Health research

A-10

THE BUDGET FOR FISCAL YEAR 1984

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

1982
actual

1983
estimate

1984
estimate

1984
administration
proposals

553 Education and training of health care work force:
Research training
Clinical training
Other

192
239
63

211
233
37

220
210
40

209
138
18

Subtotal, Education and training of health care workforce

494

481

469

365

689

712

736

348

362

370

754
-2
366
-4

1,037

1,074

1,106

1,113

-28

-27

78,859

67,556

92,326

91,725

146,207

161,948

191,458

5,195
1,878

5,656
1,666

5,983
1,836

163,047
10,383
5,913
1,775
-37
46

153,316

169,308

199,323

181,127

31,921

35,104

36,255

345

336

228

36,255
1,456
228
-17

32,266

35,440

36,483

37,922

21,177

30,034

30,062

29,892

12,245
1,491

5,846
1,351

13,234
1,552

554 Consumer and occupational health and safety:
Consumer safety
Proposed legislation
Occupational safety and health
Proposed legislation
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
Special benefits for disabled coal miners
Proposed legislation
Other
Subtotal, General retirement and disability insurance
602 Federal employee retirement and disability:
Retirement and disability programs
Proposed legislation
Federal employee workers' compensation
Proposed legislation
Subtotal, Federal employee retirement and disability....
603

Unemployment compensation

604 Housing assistance:
Subsidized housing
Public housing operating subsidies
Rural housing block grants (proposed)
Indian housing (proposed)
Other housing assistance
Subtotal, housing assistance
605 Food and nutrition assistance:
Food stamps and aid to Puerto Rico
Proposed legislation
Child nutrition and other programs
Proposed legislation
Subtotal, Food and nutrition assistance

139

112

119

-2,319
1,636
850
76
154

13,876

7,308

14,906

397

11,286

12,815

12,492

4,498

4,932

4,908

12,492
-766
4,889
-313

15,784

17,747

17,400

16,302

A-ll

SPECIAL ANALYSIS A

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

1982
actual

609 Other income security:
Supplemental security income
Proposed legislation
AFDC and related assistance
Proposed legislation
Earned income tax credit
Refugee assistance
Low income home energy assistance
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
Proposed legislation
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
Construction
Medical administration, research, and other
Subtotal, Hospital and medical care for veterans
704

1983
estimate

7,769

8,459

7,511

6,007

8,223

8,243

1,201
689
1,875
228

1,205
578
1,986
252

1,123
485
1,875
273

Subtotal, Other veterans benefits and services
Deductions for offsetting receipts
Total budget authority

380-700 0 -

83 -

3 QL : 3

1984
administration
proposals

7,511
341
8,243
-732
1,123
485
1,300
268

17,770

20,704

19,511

18,539

254,188

280,541

317,684

284,178

9,590

9,463

10,331

4,048

3,827

3,950

140
1,164
31
9
-473

141
1,187
26
6
-445

149
1,209
23
7
-433

9,856
238
3,950
-113
149
1,209
23
7
-433

14,510

14,205

15,237

14,887

1,964

1,666

1,392

1,392
-20

1,964

1,666

1,392

1,371

7,101
490
211

7,693
567
212

8,072
572
225

8,079
886
223

7,802

8,472

8,868

9,188

-82

-90

702

728

Veterans housing

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

1984
estimate

672

732
- 1

709

742

771

776

-3

24,982

24,999

26,175

26,129

A-10

THE BUDGET FOR FISCAL YEAR 1984

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

1982
actual

750 ADMINISTRATION OF JUSTICE
751 Federal law enforcement activities:
Organized crime drug enforcement (OCDE)
General investigation (FBI)
Narcotics violation investigation (DEA)
Alcohol, tobacco, and firearms investigation (ATF)
Border enforcement activities (Customs and INS)
Protection activities (Secret Service)
Other enforcement
Subtotal, Federal law enforcement activities
752 Federal litigative and judicial activities:
Civil and criminal prosecution and representation
Federal judicial activities
Representation of indigents in civil cases
Subtotal, Federal litigative and judicial activities
753

Federal correctional activities

754 Criminal justice assistance:
Existing law
Proposed legislation
Subtotal, Criminal justice assistance
Deductions for offsetting receipts
Total budget authority
800 GENERAL GOVERNMENT
801 Legislative functions
802 Executive direction and management:
Existing law
Proposed legislation
Subtotal, 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:
Personal property
Records management
Other
Proposed legislation
Subtotal, General property and records management
805

Central personnel management

1983
estimate

1984
estimate

1984
administration
proposals

773
243
142
974
204
323

128
853
255
147
1,067
249
345

99
885
264
157
1,089
273
349

106
1,056
276
157
1,118
282
354

2,658

3,045

3,116

3,348

553
735
241

604
840
241

644
933
256

658
934

1,529

1,685

1,833

1,592

423

404

423

523

140

137

145

72
92

140

137

145

165

-32

-26

4,718

5,245

5,491

5,602

1,172

1,252

1,328

104

109

114
-2

104

109

113

2,672
-148
323

3,043
-152
462

3,159
-175
430

3,292
-179
424

2,847

3,353

3,413

3,537

20
81
285

37
88
329

60
90
337

61
87
351
2

386

454

487

502

141

149

151

A-ll

SPECIAL ANALYSIS A

Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

806 Other general government:
Territories
Indian affairs
Treasury claims
Other
Subtotal, Other general government
Deductions for offsetting receipts
Total budget authority
850 GENERAL PURPOSE FISCAL ASSISTANCE
851 General revenue sharing:
General revenue sharing payments
Administration
Subtotal, General revenue sharing
852 Other general purpose fiscal assistance:
Payments and loans to the District of Columbia
New York City loan guarantee program
Payments to States from Forest Service receipts
Payments to States from receipts under the Mineral
Leasing Act
Other payments to States and counties from Federal land
management activities
Payments-in-lieu-of taxes
Payments to territories and Puerto Rico
Other

192
22
285
8

Current services
1983
estimate

170
9
406
8

1984
estimate

183
9
406
33

1984
administration
proposals

150
18
405
34

507

592

631

607

-177

-143

-167

-184

4,970

5,753

5,951

6,055

4,567
6

4,567
7

4,758
7

4,567
8

4,573

4,574

4,765

4,574

449
1
243

543

544

145

269

269
995

654
96
368
7

616
96
399
6

1,123
96
411
6

73
96
410
6

Subtotal, Other general purpose fiscal assistance

1,819

1,805

2,450

2,394

Total budget authority

6,392

6,379

7,215

6,969

117,190

127,700

146,000

144,500

-16,067

-15,752

-15,992

-15,992
-870

-16,067

-15,752

-15,992

-16,862

1,789
-12,235
-5,981

1,904
-14,155
-10,702

1,586
-15,258
-11,142

1,586
-15,141
-11,031
128

-16,427

-22,953

-24,814

-24,458

84,697

88,995

105,193

103,180

900 NET INTEREST
901 Interest on the public debt
902 Interest received by trust funds:
Existing law
Proposed legislation
Subtotal, interest received by trust funds
908 Other interest:
Interest on refunds of tax collections
Interest on loans to the Federal Financing Bank
Other
Proposed legislation
Subtotal, Other interest
Total budget authority

A-10

THE BUDGET FOR FISCAL YEAR 1984

Table A-14. CURRENT SERVICES BUDGET AUTHORITY BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

Current services
1983
estimate

920 ALLOWANCES
921 Civilian agency pay raises
926

1984
estimate

1984
administration
proposals

1,967
949

Increased employer share, employee retirement

927 Contingencies for relatively uncontrollable programs
928

Contingencies for other requirements
Total budget authority

950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement:
Existing law
Proposed legislation
Subtotal, Employer share, employee retirement
953 Rents and royalties on the Outer Continental
Shelf

-8,214

-8,924

-8,648
-1,205

-7,020

-8,214

-8,924

-9,853

-6,250

-11,793

-11,895

-408

-803

-408

-803

-1,003

-13,270

-20,414

-21,621

-22,750

779,926

828,438

954,818

900,110

-1,003

Subtotal, Federal surplus property disposition

Total budget authority

949

-7,020

954 Federal surplus property disposition:
Existing Law
Proposed legislation

Total budget authority

1,967

*$500 thousand or less.
large part of the difference between current services and the administration request for rural housing insurance fund budget authority is
due to a proposed change in accounting treatment of sales and repurchases of certificates of beneficial ownership (CBO's). Under the budget
proposals, these sales (and repurchases) of financial assets would be treated as agency borrowing (and repayment of borrowing) by the Farmers
Home Administration from the Federal Financing Bank (FFB) rather than as on-budget offsetting receipts and off-budget FFB outlays.

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM
(In millions of dollars)

liJOZ

actual

050 NATIONAL DEFENSE
051 Department of Defense—Military
053

Atomic energy defense activities

054 Defense-related activities:
Existing law
Proposed legislation
Subtotal, Defense-related activities
Deductions for offsetting receipts

Current services

1984
administration
proposals

1983
estimate

1984
estimate

182,850

208,800

246,985

238,600

4,309

5,471

6,422

263

370

324

387
-100

263

370

324

-4

287
-4

187,418

214,641

253,730

245,305

1,063
238
1,524
929
103
382
-22
-361

1,266
205
1,715
1,028
109
401
26
-434

1,361
237
1,746
1,052
113
366
27
-469

1,407
205
1,773
1,052
108
366
41
-466

3,856

4,316

4,433

4,487

2,299
501
176
330
-199

2,684
880
206
221
-155

2,792
1,165
292
244
-112

2,944
1,006
490
270
-112

3,107

3,835

4,381

4,598

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

1,045
544
41

1,145
512
46

1,346
606
47

1,352
602
48

Subtotal, Conduct of foreign affairs

1,630

1,704

1,999

2,001

571

640

688

828

1,173
-204
188
-166
-80

1,192
-196
500
-141
-82

1,460
-166
400
-173
-84

1,433
-147
400
-173
-84

911

1,272

1,438

1,430

-92

-94

9,982

11,675

12,847

13,250

Total outlays
150 INTERNATIONAL AFFAIRS
151 Foreign economic and financial assistance:
Multilateral development banks
International organizations
Agency for International Development
Public Law 480—Food aid
Peace Corps
Refugee assistance
Other
Offsetting receipts
Subtotal, Foreign economic and financial assistance
152 International security assistance:
Economic support fund
Foreign military sales credit
Military assistance
Other
Offsetting receipts
Subtotal, International security assistance

154

Foreign information and exchange activities

155 International financial programs:
Export-Import Bank
Special defense acquisition fund
Foreign military sales trust fund (net)
Other
Offsetting receipts
Subtotal, International financial programs
Deductions for offsetting receipts
Total outlays

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1982
actual

1983
estimate

1,099
507

1984
estimate

1984
administration
proposals

1,066
547*

1,160
573*

1,231
634*

1,607

1,613

1,732

1,865

253

Space flight

3,543

4,034

4,018

4,028

254

Space, science, applications, and technology

1,457

1,517

1,572

1,601

255

Supporting space activities

473

605

770

766

Deductions for offsetting receipts

-10

-9

7,070

7,760

8,084

8,250

3,295
-473
-951
1,227
52

2,953
32
-1,383
1,101
50

2,600
40
-1,011
591
69

2,409
40
-1,017
590
69

Subtotal, Energy supply

3,150

2,752

2,289

2,090

Energy conservation

518

673

520

343

Total outlays
270 ENERGY
271 Energy supply:
Research and development
Uranium enrichment
Petroleum reserves
Power marketing
Incentives for non-conventional fuel production

272
274

Emergency energy preparedness

191

334

470

228

276

Energy information, policy, and regulation

886

878

855

726

-71

-78

-81

4,674

4,560

4,052

3,306

4,032

3,989

3,885

-438
3,743

4,032

3,989

3,885

3,305

1,932
467
119
576
163
-510

1,883
404
141
592
289
-735

1,900
412
160
642
321
-914

1,653
411
180
564
284
-914
-25

2,746

2,574

2,521

2,153

Deductions for offsetting receipts
Total outlays
300 NATURAL RESOURCES AND ENVIRONMENT
301 Water resources:
Navigation fees (proposed)
Existing law
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
Offsetting receipts
Proposed legislation
Subtotal, Conservation and land management

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

303 Recreational resources:
Federal land acquisition
Urban park grants and historic preservation funds..
Operation of recreational resources
Proposed legislation
Subtotal, Recreational resources.

Current services
1983
estimate

1984
estimate

349
69
1,059

384
61
1,247

399
55
1,250

1,477

1,693

1,705

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

1,172

1,059

1,061

77
7
3,756

168
3
3,100

235
3
2,810

Subtotal, Pollution control and abatement

5,012

4,330

4,109

1,526

1,554

1,620

-1,860

-2,131

-2,635

12,934

12,008

11,206

11,652

18,859

12,394

219
1,370
48

310
732
64

327
781
65

13,289

19,965

13,567

667
307
123

707
328
128

725
347
133

317

281

285

153
107
-74

170
191
-87

173
189
-95

1,599

1,717

1,757

306

Other natural resources

Deductions for offsetting receipts
Total outlays
350 AGRICULTURE
351 Farm income stabilization:
Commodity price support and related programsProposed legislation
Crop insurance
Agricultural credit
Other programs and administrative expenses
Proposed legislation
Subtotal, Farm income stabilization.
352 Agricultural research and services:
Research programs
Extension programs
Marketing programs
Proposed legislation
Animal and plant health programs
Proposed legislation
Economic intelligence
Other programs and administrative expensesOffsetting receipts
Subtotal, Agricultural research and servicesDeductions for offsetting receipts
Total outlays

-14
14,875

- 2

21,680

15,322

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1982
actual

370 COMMERCE AND HOUSING CREDIT
371 Mortgage credit and thrift insurance:
Mortgage purchase activities (GNMA)
Proposed legislation
Mortgage credit (FHA)
Housing for the elderly or handicapped
Rural housing programs (FmHA)
Proposed legislation
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
Existing law
Proposed legislation
Subtotal, Postal Service..
376 Other advancement and regulation of commerce:
Small business assistance
Technology utilization
Proposed legislation
Economic and demographic statistics
Other
Subtotal, Other advancement of commerce..
Deductions for offsetting receipts
Total outlays
400 TRANSPORTATION
401 Ground transportation:
Highway systems
Proposed legislation
Highway safety
Mass transit
Railroads
Regulation
Subtotal, Ground transportation..
402 Air transportation:
Airways and airports (FAA)
Aeronautical research and technology..
Air carrier subsidies
Regulation
Subtotal, Air transportation.
403 Water transportation:
Coast Guard user fees (proposed)..
Marine safety and transportation
Proposed legislation
Ocean shipping
Regulation
Subtotal, Water transportation...

1983
estimate

1984
estimate

1,504

1,019

1,417

-237
742
1,247

-329
255
1,611

-1,528
51
2,079

-1,440
-588

-2,020

-12

-2,300
-898
20

1,216

-622

-700

-716
16

707

789

1,010

707

789

1,010

933
249

839
209

700
237

185
577

215
575

605

1,943

1,837

1,742

200

-1

- 2

3,865

2,003

2,051

7,934

8,806

12,324

269
3,930
2,126

237
3,940
1,551
65

248
4,301
1,270
65

14,326

14,597

18,208

2,891
563
84

3,531
566
55
24

4,029
577
51
21

3,564

4,176

4,678

2,070

2,453

2,603

614
11

594
12

523
12

2,696

3,059

3,138

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

198/:
actual

407

Other transportation

1983
estimate

120

1984
estimate

117

1984
administration
proposals

118

-116

-87

-85

20,560

21,865

26,057

25,145

3,792
388
12
392

3,525
488
20
456

3,529
516
12
440

3,526
512
12
412
-38

Subtotal, Community development

4,583

4,490

4,497

4,425

452 Area and regional development:
Rural development
Economic development assistance
Local public works
Coastal energy impact assistance
Indian programs
Regional commissions
Tennessee Valley Authority
Other programs
Offsetting receipts

917
412
40
29
1,078
341
192
1
-274

1,163
319
30
18
1,076
274
200
-277

1,033
239
30
11
1,154
232
130
-2
-291

1,043
151
30
11
1,125
212
130
-2
-286

2,735

2,803

2,535

2,415

-302
115
-18
85

-194
222
44
67

-179
220
63
55

-193
220
63
56

-119

138

158

146

Deductions for offsetting receipts
Total outlays
450 COMMUNITY AND REGIONAL DEVELOPMENT
451 Community development:
Community development block grants
Urban development action grants
Urban homesteading
Other programs
Proposed legislation

Subtotal, Area and regional development
453 Disaster relief and insurance:
SBA Disaster loans
Disaster relief
National flood insurance fund
Other programs
Subtotal, Disaster relief and insurance
Deductions for offsetting receipts
Total outlays
EDUCATION, TRAINING, EMPLOYMENT, AND
SOCIAL SERVICES
501 Elementary, secondary, and vocational education:
Education for the disadvantaged
Special programs and populations
Proposed legislation
Indian education
Impact aid
Education for the handicapped
Vocational and adult education
Proposed legislation
Other
Proposed legislation

- 1

-34

7,165

7,397

7,156

6,951

2,954
751

3,031
514

3,143
547

339
546
1,141
818

337
576
1,128
773

333
520
1,167
815

230

217

228

3,016
498
6
270
499
1,160
781
20
188

500

Subtotal, Elementary, secondary, and vocational education

- 1

6,780

6,577

6,752

6,437

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

502 Higher education:
Guaranteed student loan program
Proposed legislation
Self-help grants (proposed)
Student financial assistance (existing law)
Institutional aid

Current services
1983
estimate

1984
estimate

1984
administration
proposals

3,023

2,284

2,134

2,733
751

3,637
820

3,741
647

2,134
-102
407
3,038
608

6,507

6,741

6,522

6,084

1,040

1,121

1,056

999

4,110

3,724

3,870

269
235
731
119

278
315
812
97

211
286
888
92

3,595
-87
211
26
886
87

5,464

5,227

5,347

4,719

589

633

660

680

2,567
780

2,571
1,038

2,500
1,063

387
389

421
565

382
600

2,500
213
798
100
590

1,637
136
55

1,753
132
52

2,082
130
52

2,032
113
47

Subtotal, Social services

5,950

6,530

6,808

6,394

Deductions for offsetting receipts

-29

-42

-58

-57

26,300

26,787

27,088

25,256

50,423

57,360

66,542

-3,855

-4,355

-5,010

17,446

19,408

21,155

66,535
-1,856
-5,010
160
21,155
-293
850
107
3,349
-137

Subtotal, Higher education
503

Research and general education aids

Other labor services

506 Social services:
Rehabilitation services and reseach for the handicapped
Social services block grant
Proposed legislation
Community service programs
Family social services
Services for children, youth, and families, the elderly, and
other special groups
Domestic volunteer programs
Other social services

Total outlays
550 HEALTH
551 Health care services:
Medicare
Proposed legislation
Medicare premiums and collections
Proposed legislation
Medicaid
Proposed legislation
Health block grants
Proposed legislation
Other health care services
Proposed legislation
Subtotal, Health care services
552 Health research:
National Institutes of Health research
Other research programs
Subtotal, Health research

1,304
4,338

4,083

2,916

68,350

76,496

86,908

84,860

3,470
478

3,757
447

3,967
462

3,828
452

3,948

4,204

4,429

4,281

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1982
actual

1983
estimate

1984
estimate

1984
administration
proposals

553 Education and training of health care work force:
Research training
Clinical training
Other

195
374
101

202
319
59

220
208
40

204
176
35

Subtotal, Education and training of health care workforce

670

580

467

414

698

728

762

336

361

367

762
-2
363
-3

1,034

1,089

1,128

1,119

-28

-27

74,017

82,342

92,905

90,647

154,144

170,324

182,388

5,717
1,980

6,127
1,816

6,388
1,841

-67

-32

-26

182,388
-4,140
5,786
1,780
-37
-26
-132
42

161,805

178,272

190,633

185,661

19,616

21,250

22,941

264

218

228

-492

-612

-636

22,941
-362
228
-17
-636

554 Consumer and occupational health and safety:
Consumer safety
Proposed legislation
Occupational safety and health
Proposed legislation
Subtotal, Consumer and occupational health and safetyDeductions for offsetting receipts
Total outlays
600 INCOME SECURITY
601 General retirement and disability insurance:
Social security (OASDI)
Proposed legislation
Railroad retirement
Special benefits for disabled coal miners
Proposed legislation
Pension Benefit Guarantee Corporation
Proposed legislation
Other
Subtotal, General retirement and disability insurance
602 Federal employee retirement and disability:
Retirement and disability programs
Proposed legislation
Federal employee worker's compensation
Proposed legislation
Federal employees life insurance fund
Subtotal, Federal employee retirement and disability
603

Unemployment compensation

19,388

20,856

22,532

22,153

23,756

35,020

28,778

28,774

6,880
1,008

7,937
1,582

8,981
1,516

155

'257

275

8,532
1,520
280
40
450

8,043

9,776

10,772

10,823

11,014

12,825

12,496

4,565

5,008

4,930

12,496
-757
4,878
-295

15,579

17,833

17,426

16,322

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1982
actual

609 Other income security:
Supplemental security income
Proposed legislation
AFDC and related assistance
Proposed legislation
Earned income tax credit
Refugee assistance
Low income home energy assistance
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
Proposed legislation
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
Construction
Medical administration, research, and other
Subtotal, Hospital and medical care for veterans
704 Veterans housing:
Loan guaranty revolving fund
Direct loan revolving fund
Other (HUD Participation Trust Fund)
Housing program receipts
Subtotal, Veterans housing
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 outlays

1983
estimate

1984
estimate

7,677

8,760

7,509

7,990

8,224

8,263

1,201
1,011
1,687
206

1,205
632
1,963
249

1,123
521
1,898
268

1984
administration
proposals

7,509
341
8,263
-732
1,123
521
1,398
265

19,773

21,032

19,581

18,688

248,343

287,789

289,723

282,422

9,276

9,687

10,290

3,879

3,954

3,940

140
925
64
-102
-473

141
954
61
-87
-445

148
986
54
-88
-433

9,855
198
3,940
-68
148
986
54
-88
-433

13,710

14,264

14,898

14,593

1,947

1,624

1,350

1,350
-20

1,947

1,624

1,350

1,329

6,851
444
221

7,561
494
235

7,974
702
232

7,981
688
231

7,517

8,290

8,908

8,900

183
-62
-19

-192
-174
-16
-82

261
-25
-16
-90

102

-464

130

646

703

729

733
- 1

682

744

771

776

-3

23,955

24,455

-3
26,053

-3
25,724

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
Current services

1982
actual

Federal correctional activities

754 Criminal justice assistance:
Existing law
Proposed legislation
Subtotal, Criminal justice assistance
Deductions for offsetting receipts
Total outlays
800 GENERAL GOVERNMENT
801 Legislative functions
802 Executive direction and management:
Existing law
Proposed legislation
Subtotal, 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 managementReal property
Personal property
Records management
Other
Proposed legislation
Subtotal, General property and records management
805

Central personnel management

1983
estimate

1984
estimate

1984
administration
proposals

737
225
137
933
198
299

104
856
250
145
1,064
244
353

99
853
258
155
1,073
268
347

103
1,021
269
155
1,096
276
354

2,529

3,017

3,053

3,276

541
716
259

592
835
242

631
925
256

646
924
21

1,516

1,669

1,813

1,592

364

424

457

466

294

189

154

148
36

294

189

154

184

-32

-26

4,671

5,273

5,451

5,491

1,177

1,253

1,316

1,324

104

106

113
-2

104

106

112

2,513
-148
291

3,031
-152
456

3,146
-175
419

3,278
-179
408

2,656

3,334

3,389

3,507

-92
70
73
283

86
37
90
335

-137
60
88
340

-137
61
85
354
2

334

549

350

365

136

139

150

152

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

806 Other general government:
Territories
Indian affairs
Treasury claims
Other
Subtotal, Other general government
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:
Payments and loans to the District of Columbia
New York City loan guarantee program
Payments to States from Forest Service receipts
Payments to States from receipts under the Mineral
Leasing Act
Other payments to States and counties from Federal land
management activities
Payments-in-lieu-of taxes
Payments to territories and Puerto Rico
Other

Current services
1983
estimate

1984
estimate

1984
administration
proposals

250
18
285
-49

233
13
406
-23

195
8
406
115

178
18
405
116

504

628

723

717

-177

-143

-167

-184

4,726

5,863

5,868

5,993

4,569
6

4,567
7

4,758
7

4,567
7

4,575

4,573

4,765

4,574

439*

543*

544

243

145

269

269
995

653
96
381
6

615
96
402
7

1,123
96
411
6

73
96
410
6

Subtotal, Other general purpose fiscal assistance

1,818

1,809

2,449

2,394

Total outlays

6,393

6,382

7,215

6,968

117,190

127,700

146,000

144,500

-16,067

-15,752

-15,992

-15,992
-870

-16,067

-15,752

-15,992

-16,862

1,789
-12,235
-5,981

1,904
-14,155
-10,701

1,586
-15,258
-11,142

1,586
-15,141
-11,031
128

-16,427

-22,952

-24,814

-24,458

84,697

88,995

105,193

103,180

900 NET INTEREST
901 Interest on the public debt
902 Interest received by trust funds:
Existing law
Proposed legislation
Subtotal, Interest received by trust funds
908 Other interest:
Interest on refunds of tax collections
Interest on loans to the Federal Financing Bank
Other
Proposed legislation
Subtotal, Other interest
Total outlays

A-ll

SPECIAL ANALYSIS A
Table A-15. CURRENT SERVICES OUTLAYS BY FUNCTION AND PROGRAM—Continued
(In millions of dollars)
1982
actual

Current services
1983
estimate

920 ALLOWANCES
921 Civilian agency pay raises
926

Increased employer share, employee, retirement

927

Contingencies for relatively uncontrollable programs

928

1984
administration
proposals

1,888
949

Contingencies for other requirements
Total outlays

950 UNDISTRIBUTED OFFSETTING RECEIPTS
951 Employer share, employee retirement:
Existing law
Proposed legislation
Subtotal, employer share, employee retirement
953

1984
estimate

Rents and royalties on the Outer Continental
Shelf

1,888

949

-7,020

-8,214

-8,924

-8,648
-1,205

-7,020

-8,214

-8,924

-9,853

-6,250

-11,793

-11,895

-408

-803

954 Federal surplus property disposition:
Existing law
Proposed legislation

-1,003

Subtotal, Federal surplus property disposition

-408

-803

-1,003

Total outlays

-13,270

-20,414

-21,621

-22,750

Total outlays

728,375

806,060

880,270

848,483

* $500 thousand or less.
'A large part of the difference between current services and the administration request in rural housing insurance fund outlays is due to a
proposed change in accounting treatment of sales and repurchases of certificates of beneficial ownership (CBO's). Under the budget proposals,
these sales (and repurchases) of financial assets would be treated as agency borrowing (and repayment of borrowing) by the Farmers Home
Administration from the Federal Financing Bank (FFB) rather than as on-budget offsetting receipts and off-budget FFB outlays.

SPECIAL ANALYSIS B
FEDERAL

TRANSACTIONS

IN T H E

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 appropriations action on existing or new programs and for changes
in tax legislation.
—It is a report to the Congress and the people on how the Government has spent the funds entrusted to it in past years.
No single budget concept can satisfy all these purposes fully. The
budget document and related Treasury reports provide complete,
detailed information on the finances of the Federal Government
and on the tax and spending programs proposed by the President.
For study of aggregate economic activity, however, the national
income and product accounts (NIA) of the United States provide
the most useful measures. This special analysis shows Federal finances as measured in the NIA. The analysis is divided into three
major sections. The first shows the size, composition, and trends in
Federal sector receipts and expenditures. Additional details will be
published in the February 1983 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, 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
FEDERAL SECTOR RECEIPTS AND

EXPENDITURES

Table B-1 shows Federal sector NIA receipts, expenditures, and
deficits for 1982-84.

B-i

380-700

0 -

83 -

4 QL

A-10

THE BUDGET FOR FISCAL YEAR 1984
Table B-1. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA
(In billions of dollars)
Description

1982 actual

RECEIPTS
Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals.
Contributions for social insurance
Total receipts..
EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises..
Wage disbursements less accruals

1983 estimate

303.0
50.1
50.7
214.4

293.1
50.5
55.2
229.1

618.2

627.9

250.1
(173.0)
(77.1)
310.8
(304.8)
(6.0)
83.4
82.5

279.0
(199.4)
(79.6)
348.6
(342.2)
(6.4)
86.9
92.4
22.1

12.8

Total expenditures..
Deficit ( — )

739.7

829.0

-121.5

201.1

Note: The estimates for 1983 and 1984 are preliminary; any revisions will be published in the February 1983 issue of the Survey of Current
Business.

Trends in Federal sector receipts.—Table B-1 divides receipts into
four major categories, which are also illustrated in the chart on the
distribution of Federal sector receipts by category. Table B-2
shows, at 10-year intervals, 3-year averages of Federal sector receipts by category as a percent of the gross national product (GNP)
for the early years of four decades to provide a perspective relative
to the 1984 levels of receipts. For the earlier periods, 3-year averages were used in order to eliminate the impact of annual fluctuations and to permit greater focus on trends.
Table B-2. FEDERAL SECTOR RECEIPTS AS A PERCENT OF GNP
Description

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

1951-53
average
actual

1961-63
average
actual

1971-73
average
actual

1981-83
average
estimate

ilSol
no/i
octimato
collmdlc

8.2
6.0
3.0
2.1

8.6
4.1
2.6
3.7

8.7
3.1
1.8
5.3

9.9
1.8
1.8
7.7

8.7
1.7
1.7
7.5

19.3

18.9

21.2

19.7

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. Traditionally, increases in income, because

A-ll

SPECIAL ANALYSIS A

of both real growth and inflation, would automatically increase
these receipts. Indeed, since personal income taxes are progressive,
these receipts normally grow at a faster rate than personal income.
Periodically over the past three decades tax reductions were enacted that offset part of the increase in effective tax rates resulting
from the progressive tax structure. However, the Economic Recovery Tax Act of 1981 has drastically altered these circumstances.
That act provided for across-the-board tax reductions and—starting
in 1985—indexing of income tax brackets, the zero bracket amount,
and the personal exemption to inflation. As a result, personal tax
and nontax receipts will increase at a much slower rate in the
future than the increases that normally would have been called for
under pre-existing tax law.

Distribution of Federal Sector Receipts by Category
Percent
100

Percent:
100

Indirect Business Tax ^
and Nontax Accruals;

4 0

: P e r s o r ^ l T^ax a n d N o n t a x ^Receipts

20 *

I'liMwVjj'i'iiiViYi'w'iii'iiil
• fiimi

Yma-

7 . ; •; . ;; • ~ ; < - *

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.

A-10

THE BUDGET FOR FISCAL YEAR 1984

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.
Provisions of the Economic Recovery Tax Act of 1981 designed to
stimulate investment further accelerated this trend toward a relative reduction in corporate profits taxes.
Indirect business tax and nontax accruals.—These receipts are
composed of excise taxes, customs duties, and various miscellaneous receipts such as the windfall profit tax, 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. Despite this
relative decline, the use of excise taxes as user charges to finance
Federal programs such as highways and airways makes this an
important source of financing certain specialized programs in 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. The combined
effect of the tax reductions provided by the Economic Recovery Tax
Act of 1981 and the social security tax increases under current
laws—including the coverage of Federal civilian employees under
hospital insurance taxes for the first time—dramatically reinforce
this trend toward social insurance collections rising relative to
total NIA receipts.
Major tax changes.—In 1981 the Congress enacted one of the
most sweeping sets of changes in tax law ever enacted: the Eco-

SPECIAL ANALYSIS A

A-ll

nomic Recovery Tax Act of 1981. This budget proposes some major
changes in social insurance taxes and some relatively small additional tax changes—most of which will affect years beyond 1984—
but almost all of the changes in tax receipts reflected herein due to
legislation arise from the effects of the Economic Recovery Tax Act
of 1981, the Tax Equity and Fiscal Responsibility Act of 1982, and
from changes in the social security tax rates and base that occur
automatically under current law.
The Economic Recovery Tax Act of 1981:
—Marginal individual income tax rates were reduced by 5% on
October 1, 1981 and 10% on July 1, 1982. They will be reduced
an additional 8 % effective July 1, 1983 from the levels called
for under prior law.
—Other major changes affecting personal taxes include reducing
the maximum marginal income tax rate to 50%, reducing the
maximum effective tax rates on capital gains, allowing taxpayers who do not itemize deductions to deduct charitable contributions, permitting taxpayers who are covered by retirement
programs to open tax-exempt individual retirement accounts,
and significantly reducing estate and gift tax liabilities.
—Corporation income taxes were reduced through imposition of
lower tax rates on the first $50,000 of corporate taxable
income, faster write-offs under depreciation allowances, and
liberalization in provisions permitting less profitable corporations to transfer tax benefits to more profitable ones. These tax
reductions were partially offset by increases in the proportion
of taxes that corporations must deposit on a current basis.
The Tax Equity and Fiscal Responsibility Act of 1982:
—This included a 10% income tax withholding on interest and
dividend income.
—Modified many provisions affecting corporate profit taxes.
—Provided for temporary increases in selected excise taxes.
—Increased Federal employment taxes effective January 1983.
—Extended coverage of medical (hospital insurance) taxes to Federal civilian employees.
Other tax changes:
—Last month the Congress, at the urging of the President, enacted a 5 cent per gallon increase in motor vehicle fuel taxes to
provide user charge financed increases in money available for
highway and mass transportation grants-in-aid.
—Under previously enacted legislation, the Federal social security taxable earnings base increased from $32,400 in calendar
year 1982 to $35,700 in 1983 and is estimated to increase to
$37,800 in 1984. The social security tax rate also rose in 1982 to
13.4%. The next scheduled increase is to 14.1% in 1985, but
under the recommendations of the bi-partisan social security

A-10

THE BUDGET FOR FISCAL YEAR 1984

plan this increase is recommended to be accelerated to January 1, 1984.
—Under the administration's proposals, the employee contribution to the civil service retirement fund will rise from the
present 7% to 9% in 1984 and 11% in 1985. Similar increases
are proposed for matching payments by employing agencies.
Such employer and employee contributions are counted as NIA
social insurance contributions.
Additional details about enacted and proposed tax changes can
be found in Part 4 of the 1984 Budget on a unified budget basis;
additional detail on an NIA basis will be published in the February
1983 Survey of Current Business.
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 in spending since 1956. As can be seen, major
shifts in the composition of Federal sector expenditures occur over
time. Until recently, for example, for most years since the Korean
war, defense purchases of goods and services were 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. This budget reflects
the President's continuing efforts to reverse the relative decline in
our Nation's defense capability that accompanied these reductions.
Defense purchases are expected to total 24.1% of Federal sector
expenditures in 1983 and 26.1% in 1984; they were 22.0% in 1981,
and 23.3% in 1982.
As with Table B-2, table B-3 shows four decades of historical
data on 3-year averages compared to the 1984 recommended distribution.
Defense purchases and .foreign transfer payments are, of course,
largely devoted to the conduct of our national defense and foreign
affairs. In 1951-53 defense purchases were 10.9% of GNP; 1951 was
the first year of the Korean war. Foreign transfer payments in
1951-53 averaged 0.8% of GNP. The total of these—11.7%—reflects
roughly the cost of the conduct of external affairs. The years 1961-

A-ll

SPECIAL ANALYSIS A

Distribution of Federal Sector Expenditures by Category
Percent

1 9 5 6

6 1

Percent

6 6

7 1

7 6

Fiscat Years

Table B - 3 .

8 4

Estimate

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

8 1

1951-53
average
actual

1961-63
average
actual

1971-73
average
actual

1981-83
average
estimate

1984
estimate

10.9
1.7
2.6
.8
.8
1.3

8.9
2.1
4.6
.4
1.4
1.2

6.4
2.3
6.8
.2
2.9
1.3

5.7
2.5
10.1
.2
2.9
2.6

6.6
2.1
10.1
.2
2.6
3.1

18.2

19.3

20.6

24.5

25.1

63, a post-Korean war peacetime period, reflected a signficantly
lower level of defense expenditures relative to the GNP than was
prevalent prior to the Korean war. In that period, defense purchases and foreign transfers combined were equal to 9.3% of GNP.
Even though the 1971-73 period included some spending for the
Vietnam war, defense purchases and foreign transfers were down
to 6.6% of GNP. In the 1981-83 period, defense purchases plus
foreign transfer payments are estimated to be equal to 5.9% of the

A-10

THE BUDGET FOR FISCAL YEAR 1984

GNP—well below the 1971-73 average—but in 1984 they are expected to total 6.8% of GNP.
Over the past several decades, spending on most other expenditure categories—especially nondefense purchases, domestic transfer
payments, and grants-in-aid—has risen dramatically relative to
GNP. 1951-53 spending for everything except defense purchases
and foreign transfer payments was equal to 6.6% of GNP; in 198183 such spending is estimated to equal 18.6% of GNP. The current
effort to strengthen our national defense capability and to simultaneously reduce the size of the Government relative to the economy
will have a noticeable effect by 1984. In that year, defense purchases and foreign transfers are estimated at 6.8% of GNP while
all other spending is estimated to be equal to 18.3% 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)
1979
actual

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

1980
actual

1981
actual

1982
actual

1983
estimate

1984
estimate

47.9
60.3

51.5
75.1

58.8
87.8

66.3
106.7

70.1
129.3

72.5
156.5

108.2

126.5

146.6

173.0

199.4

229.0

26.7
29.2

28.9
34.4

31.2
40.3

32.3
44.8

33.6
46.0

34.3
39.2

55.9

63.3

71.5

77.1

79.6

73.5

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 international security
assistance, defense stockpiles, civil defense, and nuclear weapons
programs carried out by other agencies.
The budget calls for an increase in defense purchases of $29.6
billion in 1984 over 1983. This increase more than offsets the
impact of inflation, thus continuing the recent trend of rising
defense purchases in real terms. The pattern of real defense spending has altered significantly over the past decade. From a Vietnam

SPECIAL ANALYSIS A

A-ll

peak in 1968, real defense purchases declined each year until 1976.
Between 1976 and 1978 such purchases remained relatively stable,
and starting in 1979 began the rise that is continuing in this
budget.
Nondefense purchases of goods and services.—This category
covers the goods and services purchased by Federal nondefense
agencies. These include such programs as operation of national
forest, park, and recreation areas; space exploration; promotion of
commerce; acquisition and disposal of agricultural commodities;
construction of flood control and navigation projects; operation of
the Federal airway system; a wide variety of medical, energy,
space, and other scientific research; the capital outlays of Government enterprises; Federal law enforcement; and operation of veterans hospitals. Table B-5 shows these purchases by agency for the
years 1975 to 1984, reflecting the agency structure in the 1984
Budget.
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 1984—such sales may exceed new purchases. The
decline of these purchases in 1983 and 1984 is partially due to
disposition of commodities through the payments-in-kind program.
The value of these commodities are reflected in the current deficit
estimates in table B-8.

Table B-5—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
Education activities
Energy activities
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
0.4
1.8
5.0
(3.3)
(1.7)
0.7
1.9
1.3
0.7
0.7
3.0
(0.8)
(1.7)
(0.5)
2.6
(1.6)
(1.0)
0.5
3.2
4.1
(3.6)
(0.5)

1976

1.1
2.6
(0.2)
(0.9)
(1.5)
0.9
2.2
0.3
2.2
5.4
(3.7)
(1.8)
0.5
2.4
1.4
0.9
0.9
3.2
(0.9)
(1.8)
(0.5)
2.7
(1.7)
(1.0)
0.5
3.6
4.7
(3.9)
(0.7)

1977

1.4
5.4
(2.7)
(1-1)
(1.7)
1.0
2.3
0.3
3.0
5.9
(3.8)
(2.1)
0.5
2.5
1.6
1.1
1.0
3.6
(1.0)
(2.0)
(0.6)
2.9
(1.8)
(1.1)
0.6
3.9
5.2
(4.6)
(0.7)

1978

1.5
4.4
(0.8)
(1.2)
(2.3)
1.1
2.6
0.3
4.5
6.5
(4.4)
(2.0)
0.6
2.7
1.7
1.2
1.2
4.0
(1.1)
(2.2)
(0.7)
3.2
(1.9)
(1.2)
0.6
3.9
5.8
(5.1)
(0.7)

Estimate
1979

1.6
2.7
(-1.0)
(1.5)
(2.2)
1.2
3.0
0.4
4.8
6.8
(4.6)
(2.3)
0.7
3.2
1.9
1.7
1.4
4.3
(1.3)
(2.3)
(0.8)
3.5
(2.1)
(1.4)
0.8
4.1
6.2
(5.4)
(0.7)

1980

1.8
5.5
(1.0)
(1.8)
(2.7)
1.9
3.3
0.4
3.5
7.9
(5.4)
(2.5)
0.5
3.7
2.1
1.9
1.5
4.8
(1.4)
(2.5)
(0.9)
4.1
(2.3)
(1.7)
0.9
4.7
7.1
(6.3)
(0.8)

1981

1.8
5.8
(1.2)
(1.9)
(2.8)
1.5
3.2
0.6
8.2
8.6
(6.0)
(2.6)
0.4
3.7
2.3
1.8
1.5
5.1
(1.6)
(2.7)
(0.8)
4.3
(2.4)
(1.9)
1.0
5.3
7.6
(6.8)
(0.8)

1982

2.1
13.2
(8.0)
(1.9)
(3.3)
1.5
3.0
0.7
5.4
8.8
(5.9)
(2.9)
0.2
3.6
2.4
2.1
1.8
5.3
(1.8)
(2.5)
(1-0)
4.2
(2.5)
(1.7)
1.0
5.9
8.1
(7.4)
(0.7)

1983

2.4
10.7
(5.4)
(2.0)
(3.3)
1.6
3.0
0.8
4.9
9.4
(6.2)
(3.2)
0.3
3.9
2.8
1.9
1.9
6.1
(2.1)
(3.0)
(1.0)
5.0
(3.0)
(2.0)
0.9
6.6
8.9
(8.2)
(0.7)

1984

2.5
4.0
(-0.7)
(1.7)
(3.0)
1.5
2.5
0.7
4.2
9.1
(6.1)
(3.0)
0.2
3.8
3.1
1.8
2.2
6.5
(2.2)
(3.4)
(0.9)
5.4
(3.3)
(2.1)
0.9
6.8
9.5
(8.6)
(0.9)

All other
National Science Foundation
Nuclear Regulatory Commission
OPM: Employee health benefits and imputed employee retirement contributions
Postal Service
Tennessee Valley Authority
United States Information Agency
Imputed bank service charges
Other
Total

5.3
(0.3)
(0.1)

5.5
(0.3)
(0.2)

6.0
(0.3)
(0.2)

6.7
(0.3)
(0.3)

7.7
(0.4)
(0.3)

7.9
(0.4)
(0.4)

8.8
(0.4)
(0.4)

7.9
(0.5)
(0.4)

8.5
(0.5)
(0.5)

8.8
(0.5)
(0.5)

(0.7)
(0.7)
(1.0)
(0.2)
(0.5)
(1.9)

(0.9)
(0.7)
(1.1)
(0.3)
(0.3)
(1.7)

(1.0)
(0.4)
(1.2)
(0.3)
(0.5)
(2.0)

(1.3)
(0.3)
(1.5)
(0.3)
(0.6)
(2.1)

(1.4)
(0.4)
(2.0)
(0.3)
(0.4)
(2.4)

(1.7)
(0.4)
(1.7)
(0.4)
(0.3)
(2.6)

(2.0)
(0.5)
(1.5)
(0.4)
(0.4)
(3.2)

(2.1)
(0.4)
(1.0)
(0.5)
(0.4)
(2.6)

(2.3)
(0.7)
(0.6)
(0.5)
(0.4)
(3.0)

(2.3)
(1.0)
(0.4)
(0.7)
(0.4)
(3.0)

37.7

40.7

48.4

52.6

55.9

63.3

71.5

77.1

79.6

73.5

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w
I

A-10

THE BUDGET FOR FISCAL YEAR 1984

The Department of Health and Human Services and the Veterans Administration are normally the two largest agencies in terms
of nondefense purchases. Their combined spending is projected to
be 25% of the total in 1984. In 1984 the combined nondefense
purchases for health care and research by the two agencies is
estimated at $14.7 billion, nearly 80% of the total purchases for the
two agencies. Most of their remaining purchases are for administering income security transfer programs. Both the National Aeronautics and Space Administration with $6.8 billion in 1984 nondefense purchases and the Energy activities with $4.2 billion in 1984
nondefense purchases conduct major research and development
programs. The Transportation Department's $6.5 billion of 1984
nondefense purchases are mainly for the operation of the Federal
Aviation Agency and the Coast Guard. The Corps of Engineers has
an estimated $2.5 billion in 1984 nondefense purchases which,
along with the Tennessee Valley Authority's $0.4 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-6 shows, spending on human resources programs—especially income security programs—dominates domestic
transfer payments. This spending is expected to continue to rise in
1984, largely due to demographic and economic conditions—increases in the covered population and cost-of-living adjustments.
Social security accounts for 48.8% of total domestic transfer payments in 1984, while medicare accounts for another 18.0%, unemployment assistance for 7.6%, Federal civilian and military employee's retirement and disability for 11.4%, and veterans benefits for
4.7% 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. The great bulk of domestic transfer payments is
for income support and characterized by automatic eligibility of
coverage and automatic benefit increases with price changes. For
these programs the demographic and economic conditions completely dominate the growth patterns, and the rate of growth is
quite substantial for all years shown herein. However, the budget
proposes some reductions from levels otherwise determined by
automatic eligibility, and for those programs that are less fully
automatic—primarily in the education, training, employment, and
social services function in the human resources grouping, and in
the non-human resources functions—the budget proposes significant restraint in the spending levels.

Table B-6. 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
Subtotal, Income security
Health:
Medicare
Other
Subtotal, Health
Education, training, employment, and
social services:
Education
Training, employment, and social services
Subtotal, education, training, employment, and social services ...

Actual
1973

1975

1974

1977

1976

Estimate
1979

1978

1980

1981

1982

1983

1984

2.1

53.2
2.6
5.6
5.6
1.0
1.9
2.7

.2
.2

.3
.1

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

61.8

72.9

95.5

111.9

120.2

127.0

139.8

167.2

194.7

216.9

246.1

247.5

9.0
.4

10.9
.4

14.1
.5

16.9
.6

20.7
.6

24.2
.6

28.1
.7

33.8
.7

41.1
.8

49.0
.7

55.7
.7

63.0
.6

9.4

11.4

14.6

17.4

21.3

24.8

28.7

34.5

41.9

49.7

56.3

63.6

1.3

1.9

2.5

2.9

3.5

4.6

5.5

5.2

5.4

4.9

1.1

1.0

1.5

1.9

2.4

3.0

3.6

4.4

5.7

6.6

6.2

6.4

5.8

46.6
2.4
4.5
4.9
.9

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
.6
.2

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

99.4
4.2
12.2
9.9
1.6
5.2
5.7
.8
.7
.1

113.7
4.7
14.5
16.4
1.8
5.7
7.9
1.3
.8
.6

134.1
5.2
17.4
17.6
1.7
6.4
9.8
1.3
.9
.2

149.6
5.6
19.2
22.0
1.7
6.9
9.6
1.2
.9
.4

161.9
6.0
20.8
34.7
1.6
7.3
11.2
1.2
1.0
.4

171.2
5.7
22.1
26.8
1.5
7.5
10:1
1.1
1.0
.3

Table B-6. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS—Continued
(In billions of dollars)
Description

Actual
1974

1973

1975

1977

1976

Estimate
1979

1978

1980

1981

1982

1983

1984

9.7

10.4

12.8

14.3

13.3

13.5

14.0

14.4

15.5

16.2

16.3

16.4

82.5

96.3

124.8

146.0

157.9

168.9

186.9

221.8

258.8

288.9

325.2

333.4

4.3
.4

5.0
.5

6.2
.4

7.2
.6

8.1
.6

9.0
.7

10.1
.8

11.8
1.1

13.6
1.1

14.8
1.1

16.0
1.0

16.3
1.1

Total functions not included in
human resources grouping....

4.7

5.6

6.6

7.8

8.7

9.8

10.9

12.8

14.7

15.9

17.0

17.4

Total domestic transfer payments

87.2

101.8

131.4

153.8

166.6

178.7

197.8

234.6

273.4

304.8

342.2

350.9

Veterans benefits and services
Total, human resources programs
ALL OTHER FUNCTIONS
National defense (military retired pay)
All other functions

1 Includes

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

Note—Excludes the transition quarter.

SPECIAL ANALYSIS A

A-ll

Grants-in-aid.—These expenditures help State and local governments to provide general public services and to finance programs
for the needy. Table B-7 shows detail on grants-in-aid by budget
function and major activity. Grant expenditures are discussed in
greater detail in Special Analysis H of this document. While the
definition of Federal aid used in that analysis differs somewhat
from that used in the NIA, the two sets of data largely overlap.
Special Analysis H explains the relationship between the series.
There is a substantial degree of substitutability between grantsin-aid and domestic transfer payments and—to a lesser degree—
nondefense purchases. For example, low-income veterans could be
eligible for free medical care under medicaid (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.)
One of the major thrusts of this administration is to reduce both
the level and complexity of Federal grant programs, and to surrender to State and local governments tax sources that they may tap
to finance from their own revenues those portions of programs
currently financed by grants that they choose to retain. Despite
this general effort to reduce the growth rates in grants-in-aid, there
is one major administration initiative for expanding Federal
grants-in-aid. This initiative—a major increase in highway construction and mass transportation grants—was enacted by the Congress last month and will have a major effect starting next year.

w
I

Table B - 7 . FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID
(In billions of dollars)

Description

Actual
1974

1973

1975

1977

1976

Estimate
1979

1978

1980

1982

1981

1984

1983

HUMAN RESOURCES PROGRAMS
Income security:
Public assistance cash 1
Child nutrition and other food programsOther

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
3.6
3.0

8.4
4.4
4.3

7.9
4.2
4.6

8.1
4.8
4.5

7.4
4.4
4.0

7.5

7.1

7.7

9.2

10.4

10.8

11.3

13.8

17.1

16.7

17.4

15.8

4.6

5.8

6.8

8.6

9.8

10.6

12.4

13.9

16.8

17.3

19.3

20.7

1.7

2.0

2.4

2.9

2.8

3.1

3.2

2.9

3.0

6.3

7.8

9.2

11.4

12.7

13.4

15.1

16.7

19.9

20.5

22.2

23.7

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

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

7.3
8.5
5.0

7.4
7.1
5.4

6.9
3.8
5.3

6.9
3.5
6.0

6.6
3.5
5.9

Subtotal, education, training, employment, and social services....

8.7

8.4

11.7

13.9

15.4

20.0

21.6

20.7

19.9

16.1

16.4

16.0

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

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

22.5

23.3

28.7

34.5

38.5

44.2

48.1

51.3

57.0

53.5

56.2

55.7

1.1

2.0

2.3

2.9

4.1

3.9

4.7

5.3

4.9

4.8

4.0

3.6

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Community and regional development:
Local public works
Block grants
Other

1.6

2.0
1.8

2.9
2.4
1.5

3.1
1.7

.4
4.0
1.9

.1
4.3

4.1

1.1

3.9
1.0

3.9
.7

2.6

2.7

2.8

1.0
2.4

2.6

2.7

2.8

3.4

4.4

6.8

6.4

6.3

5.9

5.2

4.9

4.7

5.3

5.8

7.5

7.7

8.1

9.5

11.8

12.2

10.8

12.1

15.7

6.6

6.1

6.1
.........

6.2

6.8

5.1

4.6

1.3

1.7
.5

1.1

1.3

1.2

7.0

6.5

6.6

6.7

9.0

8.9

7.8

7.9

6.2

5.8

5.7

5.8

1.9

2.2

2.6

2.8

2.6

4.1

3.9

3.3

4.0

4.6

Total other functions..

17.9

18.4

19.7

23.0

27.7

30.4

31.0

35.4

33.1

29.9

30.7

34.4

Total grants-in-aid

40.4

41.6

48.4

57.5

66.3

74.7

79.1

86.7

90.1

83.4

86.9

90.1

Subtotal, community and regional
development
Transportation.
General purpose fiscal assistance.General revenue sharing
Anti-recession fiscal assistanceOther
Subtotal, general purpose fiscal
assistance
All other functions

*50 million or less.

1.6

Note—Excludes the transition quarter.

W
I

B-18

THE BUDGET FOR FISCAL YEAR 1984

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 9.9% in 1981 and an estimated 12.2% in 1984.
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 $17.6 billion
in 1982, over five times 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 1982
they totaled $3.7 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-8 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
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

SPECIAL ANALYSIS A

A-ll

largest Government enterprises are the Commodity Credit Corporation, the Postal Service (which is not now included in the budget),
and the Tennessee Valley Authority. The large swing in the Postal
Service deficit in 1982 is largely due to postal rate increases.
Table B-8 shows the composition of this aggregation by major
category.

Table B - 8 . SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES
(In billions of dollars)
inscription

Subsidies:
Commodity Credit Corporation
Rural housing insurance fund
Other Department of Agriculture
Maritime
Housing (HUD)
Railroad and mass transit
Other 1

Actual
1974

1973

1975

1977

1976

Estimate
1979

1978

1980

1981

1982

1984

1983

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
.9
.4

0.6
.4
.3
.5
2.9
1.3
.3

2.3
.4
.4
.5
3.5
1.4
.3

2.0
.6
.3
.5
4.3
1.5
.6

0.5
.6
.3
.6
5.1
2.0
.5

1.4
.8
.3
.5
6.7
2.2
.1

1.6
1.4
.2
.5
7.7
2.0
.1

6.9
1.3
.3
.5
9.1
1.9
.1

6.4
1.2
.4
.4
9.8
1.3
.1

7.4

5.4

4.4

5.0

6.4

8.9

9.9

9.5

12.0

13.5

20.0

19.6

1.3
1.7
-.2
-.3
-.1

1.0
2.2
-.3
-1
-.1

.3
2.5
-.3
-2
-.2

.2
2.6
-.4
-.2
-.2

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

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

1.3
1.0
-.8
-.2
-.3

1.6
2.1
-1.1
-.4
-.3

1.9
1.7
-1.0
-.4
-.4

2.2
-.9
-.5
-.6

4.4
1.5
-1.0
-.3
-.9

2.9
2.1
-1.3
-.5
-.5

-.1
-.2

-.2
-.4

-.2
-.5

-.2
-.6

-.2
-.4

-.3
-.6

-.3
-.8

-.3
-.7

-.7

-.2
-.8

-.5
-1.1

-.4
-1.3

Subtotal

1.8

2.2

1.5

1.2

1.0

-.8

2.1

1.1

Total subsidies less current
surplus

9.2

7.6

6.0

6.2

6.9

9.7

9.9

10.5

13.1

12.8

22.1

20.7

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 other 2

* $50 million or less.
1 Includes subsidies by the disaster loan fund of $0.7 billion in 1973.
2 Includes wage disbursements less accruals.
Note.—Excludes the transition quarter.

SPECIAL ANALYSIS A

A-ll

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.
QUARTERLY ESTIMATES

Table B-9 presents quarterly NIA receipts and expenditures (at
seasonally adjusted annual rates) for 1982 to 1984. 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-9 are the best available
estimates of the quarterly NIA receipts and expenditures consistent with the 1984 budget, but should be used with clear recognition
of their limitations.

Table B - 9 . FEDERAL RECEIPTS AND EXPENDITURES IN THE NIA, QUARTERLY, 1982-84
(In billions of dollars; seasonally adjusted at annual rates)
Actual
Description

Estimated

Oct.-Dec.
1981

Jan-Mar.
1982

Apr-June
1982

July-Sept.
1982

Oct.-Dec.
1982

Jan.-Mar.
1983

Apr-June
1983

July-Sept.
1983

Oct.-Dec.
1983

Jan.-Mar.
1984

Apr-June
1984

July-Sept.
1984

300.9
59.1
57.2
208.4

299.9
46.5
48.7
214.9

305.8
45.2
49.8
216.2

295.6
49.8
50.8
217.5

299.3
50.8
50.7
217.4

293.1
50.7
53.0
230.2

300.2
50.5
59.7
234.8

295.9
49.8
58.8
237.8

296.9
51.5
58.7
241.9

299.4
56.0
59.2
268.2

305.2
61.7
59.5
271.2

319.2
68.3
59.8
273.9

625.7

609.9

617.0

613.7

618.2

627.0

645.2

642.3

649.0

682.8

697.6

721.2

250.5
(166.9)
(83.6)
300.7
(294.0)
(6.6)

249.7
(166.2)
(83.5)
303.2
(297.2)
(6.0)

244.3
(176.2)
(68.2)
312.8
(307.0)
(5.8)

259.0
(182.7)
(76.3)
327.4
(321.8)
(5.6)

276.1
(188.9)
(87.2)
344.0
(337.0)
(7.0)

278.9
(196.2)
(82.7)
346.5
(340.5)
(6.0)

272.8
(202.1)
(70.7)
350.6
(344.4)
(6.2)

288.0
(210.3)
(77.7)
352.2
(345.8)
(6.4)

300.9
(219.7)
(81.2)
348.3
(341.8)
(6.5)

302.4
(226.2)
(76.2)
359.8
(353.3)
(6.5)

297.8
(232.3)
(65.5)
360.9
(354.4)
(6.5)

308.9
(237.8)
(71.1)
361.5
(355.0)
(6.5)

83.6
79.0

83.0
79.6

85.0
82.8

82.0
88.7

84.2
88.2

86.5
90.8

88.1
93.6

89.2
97.0

89.5
100.7

90.0
104.6

90.1
108.5

90.4
112.6

13.6
.1

12.7
.2

11.6

12.6

23.4

20.1

20.3

24.5

21.4

20.3

19.7

21.4

727.4

728.3

736.6

769.7

815.9

822.8

825.4

850.9

860.8

877.1

877.0

894.8

-101.7

-118.4

-119.6

-156.0

-197.8

-195.8

-180.2

-208.6

-211.8

-194.3

-179.4

-173.6

RECEIPTS
Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals....
Contributions for social insurnce
Total, receipts
EXPENDITURES
Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic (to "persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Wage disbursements less accruals
Total expenditures
Deficit ( - )

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.

A-ll

SPECIAL ANALYSIS A
RELATIONSHIP

OF T H E B U D G E T

TO T H E F E D E R A L

SECTOR

NIA

Table B-10 shows the major differences between the budget and
the Federal sector of the NIA. These differences are explained
below.
Table B - 1 0 . RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIA
(In billions of dollars)
1980
actual

1981
actual

1982
actual

1983
estimate

1984
estimate

517.1

599.3

617.8

597.5

659.7

8.6
7.0
-6.6
-1.2
.2

9.7
8.0
-1.1
-1.3
.1

10.7
9.3
-18.2
-1.6
.2

12.2
11.7
8.2
-1.7

14.0
13.9
-.3
-1.9
.2

525.1

614.7

618.2

627.9

685.6

576.7

657.2

728.4

805.2

848.5

Lending and financial transactions
-10.3
8.6
Government contribution for employee retirement (grossing)...
Other netting and grossing
7.0
-.2
Defense timing adjustment
2.8
Bonuses on Outer Continental Shelf land leases
-4.4
Geographic exclusions
Other
-3.2

-7.4
9.7
8.0
-1.8
7.8
-4.5
-2.5

-5.3
10.7
9.3
-1.2
2.7
-4.6
-.3

-3.8
12.2
11.7
-1.7
8.3
-4.8
1.9

-3.8
14.0
13.9
-2.5
7.9
-4.9
4.2

666.5

739.7

829.0

877.3

RECEIPTS
Total budget receipts
Government contributions for employee retirement (grossing)..
Other netting and grossing
Adjustment to accruals
Geographic exclusions
Other
Federal sector, NIA receipts

EXPENDITURES
Total budget outlays

Federal sector, NIA expenditures

577.0

*$50 million or less.

Lending and financial transactions.—Conceptually, the national
income and product accounts measure the Nation's current income
and production, and therefore do not include transactions, such as
loans, that are an exchange of existing assets and liabilities rather
than current income or production. Loan transactions have a significant economic impact, affecting income and output, but they
are analyzed more appropriately within a financial market framework, such as provided by the flow-of-funds data of the Federal
Reserve Board. Special Analysis E (Borrowing 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-10 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 are not loans, but are financial transactions excluded from the NIA; and (c) Special Analysis F includes

B-18

THE BUDGET FOR FISCAL YEAR 1984

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.
Similarly, noncompulsory insurance premiums under the supplementary medical insurance program (totaling $4.4 billion in 1984)
and similar but much smaller noncompulsory hospital insurance
premiums are classified as offsetting collections (negative outlays)
in the budget but they are classified as social insurance contributions 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).

SPECIAL ANALYSIS A

A-ll

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.
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
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

B-18

THE BUDGET FOR FISCAL YEAR 1984

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 - l l . FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1 9 7 3 - 8 4
(In billions of dollars)
Actual

Description

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
Total expenditures,
income basis

national

Excess of receipts ( + ) or expenditures (—), national income basis
*$50 million or less.

Estimate

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

107.4
41.2

122.7
43.4

127.5
41.8

137.2
52.5

166.4
58.9

186.5
67.3

222.6
76.1

250.1
70.0

291.7
70.9

303.0
50.1

293.1
50.5

304.1
59.4

20.7
71.5

21.4
84.2

22.2
91.9

24.3
101.0

24.5
116.2

27.2
133.3

29.1
153.1

34.7
170.3

55.7
196.3

50.7
214.4

55.2
229.1

59.3
262.8
CO

240.7

271.6

283.4

314.9

365.9

414.3

480.8

525.1

614.7

618.2

627.9

685.6

M
O

>
r
>

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

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

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

125.1
(84.4)
(40.7)
156.8
(153.8)
(3.0)

139.8
(91.4)
(48.4)
169.8
(166.6)
(3.2)

150.4
(97.8)
(52.6)
182.2
(178.7)
(3.5)

164.1
(108.2)
(55.9)
201.8
(197.8)
(4.1)

189.8
(126.5)
(63.3)
239.4
(234.6)
(4.8)

218.1
(146.6)
(71.5)
279.2
(273.4)
(5.7)

250.1
(173.0)
(77.1)
310.8
(304.8)
(6.0)

279.0
(199.4)
(79.6)
348.6
(342.2)
(6.4)

302.5
(229.0)
(73.5)
357.4
(350.9)
(6.5)

40.4
15.7

41.6
19.6

48.4
21.7

57.5
25.2

66.3
28.4

74.7
33.5

79.1
40.6

86.7
50.6

90.1
66.2

83.4
82.5

86.9
92.4

90.1
106.6

9.2
-.5

7.6
.2

6.0
.4

6.2

6.9

9.7

9.9*

10.5

13.1
-.1

12.8
.1

22.1

20.7

255.7

278.2

328.8

370.7

411.2

450.4

495.6

577.0

666.5

739.7

829.0

877.3

-14.9

-6.6

-45.4

-55.8

-45.3

-36.1

-14.8

-51.9

-121.5

-201.1

-191.7

Note—Excludes the transition quarter.

t
K!

GO
GO

W
i
to

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 Analyses E (Borrowing and Debt) 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) explains the operation of the credit budget, which applies budgetary controls on
Federal lending activities. The Special Analysis Provides information on direct loans, guarantees of private loans, and loans of
Government-sponsored enterprises. It also includes aggregate measures of total credit supplied to the public and credit raised from the
public under Federal auspices.
Special Analysis G (Tax Expenditures) provides a discussion of
revenues 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).
2-2

SPECIAL ANALYSIS C
FUNDS IN THE BUDGET
This analysis provides information on the two major fund groups,
Federal and trust, that together after deducting interfund transactions, as shown in Table C-1, comprise the budget totals.
Table C - 1 . BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(In millions of dollars)
Description

1982
actual

1983
estimate

1984
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

442,116
-3,132
-17,287
-12,444

422,301
-7,097
-23,903
-14,357

450,243
-5,752
-24,340
-15,406

409,253

376,945

404,745

289,030
-1,858
-17,033
-1,732

338,155
-3,267
-17,982
-2,152

357,081
-4,481
-19,941
-2,450

268,407

314,755

330,210

-59,894

-94,206

-75,253

617,766

597,494

659,702

558,976
-3,132
-17,287
-12,444

648,403
-7,097
-23,903
-14,357

655,965
-5,752
-24,340
-15,406

526,113

603,047

610,467

282,778
-1,858
-17,033
-1,732

319,761
-3,267
-17,982
-2,152

340,140
-4,481
-19,941
-2,450

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

262,155

296,361

313,269

-59,894

-94,206

-75,253

728,375

805,202

848,483

-110,609

-207,708

-188,781

C-1

B-18

THE BUDGET FOR FISCAL YEAR 1984

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.
Amounts collected by the Federal Government from the public
that arise from the exercise of governmental or sovereign powers
are treated as budget receipts. Gifts and contributions to the Government are also included in this category.
Amounts collected from other Government accounts or from
transactions with the public that are of a business-type or marketoriented nature, such as the sale of services or goods 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 1984, the Federal
fund budget receipts are estimated at $404.7 billion and outlays are
estimated at $610.5 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 receipts 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.

1 Additional information on budget receipts and offsetting collections is provided in Part 7 of the Budget of the
United States Government, Fiscal Year 1984.

SPECIAL ANALYSIS

A-ll

Table C - 2 . FEDERAL FUND RECEIPTS AND OUTLAYS
(In millions of dollars)
1982
actual

Description

1983
estimate

1984
estimate

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

297,744
49,207
28,670
7,991
8,824
16,817

285,194
35,286
25,630
6,114
8,789
15,932

295,589
51,770
25,336
5,902
9,107
17,042

409,253

376,945

404,745

1,361
700
95
5,886
36,213
2,046
182,849
2,948
14,080
7,578
65,779
14,491
3,955
2,585
8,762
2,318
10,371
111,055
5,029
6,026
23,517
24,719

1,524
816
102
6,787
44,920
1,966
208,920
2,906
14,396
8,711
90,302
14,853
4,079
2,955
18,539
2,437
10,345
119,542
4,242
6,713
23,923
26,269

1,581
903
109
7,476
34,933
1,667
238,595
2,359
13,496
8,822
70,450
13,737
3,589
3,262
10,721
2,669
9,884
137,526
3,873
6,973
25,192
24,598
949

-6,250

-11,793
-408

-11,895
-1,003

526,113

603,047

610,467

-116,860

-226,102

-205,721

OUTLAYS BY AGENCY
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President
Agriculture
Commerce
Defense—Military
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
Allowances 1
Undistributed offsetting receipts-. Rents and royalties
on the Outer Continental Shelf
Federal surplus property disposition
Total outlays, Federal funds
Excess of outlays ( — )

•Includes allowance for increased employing agency payments for employee retirement.

Obligations.—The obligations (net) for Federal funds are estimated at $646.2 billion for 1984, as set forth in table C-3. These
transactions flow largely from budget authority for Federal funds
of $640.3 billion for the year, although some flow from prior years'
budget authority.

380-700

0 -

83 -

6 QL :

B-18

THE BUDGET FOR FISCAL YEAR 1984
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
Agriculture
Commerce
Defense—Military
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:
Increased employing agency payments for employee retirement
Undistributed offsetting receipts:
Rents and royalties on the Outer Continental Shelf...
Federal surplus property disposition
Total

1982
actual

1983
estimate

1984
estimate

1,397
716
93
5,301
39,984
1,915
205,751
2,898
14,423
10,115
63,697
39,964
3,738
2,534
8,292
2,355
10,527
111,203
3,281
5,898
23,798

1,609
823
101
7,928
40,596
1,749
235,063
3,059
14,604
8,790
85,288
29,647
4,126
2,980
18,618
2,615
10,458
119,582
4,096
7,380
24,417

1,596
913
111
7,911
32,457
1,411
266,444
2,602
12,731
8,665
70,139
25,256
3,422
3,288
11,318
2,701
8,658
137,551
3,392
7,140
25,540

1,946
306
1
15,623
707
389
6,157

2,064
256
884
16,920
789
430
7,231

1,708
-703
219
16,211
400
350
6,746
949

-6,250

-11,793
-408

-11,895
-1,003

576,759

639,903

646,226

Balances of Federal fund budget authority.—Table C-4 shows the
balances of budget authority carried forward in Federal funds at
the end of each fiscal year. To the extent that valid Government
obligations have been incurred and remain unpaid, amounts sufficient to pay them (obligated balances) may be carried over into the
next year. Unobligated balances may be carried forward in accordance with specific provisions of law, usually in order to permit
completion of major procurement or major construction programs
that are fully funded, to provide funding for activities of a continuing nature (such as research and development), for financing loan
programs, for standby emergency purposes, or for reserves for losses
and debt redemption.

A-ll

SPECIAL ANALYSIS A

Public enterprise funds.—The public enterprise funds conduct a
cycle of business-type operations, primarily with the public, on
behalf of the Government. These funds are usually supplied with
capital from the general fund, and in a few cases they may borrow
from the public or from the Federal Financing Bank (FFB). These
funds also obtain capital by selling financial assets to the FFB.
Data on public enterprise funds are included net of collections in
tables C - l through C-4. Additional information on the gross outlays and applicable collections are shown in table C-5.
Collections of public enterprise funds are estimated at $53.3 billion in 1984, and gross outlays are planned to total $67.0 billion,
resulting in net outlays of $13.7 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 a cycle of
business-type operations and are normally stated net of collections.
Cash operations.—Trust fund receipts are estimated at $330.2
billion in 1984, with outlays planned at $313.3 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 1982-84, trust funds have excesses of receipts of
the following amounts (in millions of dollars):
1982
actual

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

1983
estimate

1984
estimate

268,407
262,155

314,755
296,361

330,210
313,269

6,252

18,393

16,941

Table C - 4 . FEDERAL FUND BALANCES OF BUDGET AUTHORITY
(In millions of dollars)
ueparimeni or oiner unu

Legislative branch
The Judiciary
Executive Office of the
President
Funds appropriated to the
President
Agriculture
Commerce
Defense—Military
Defense—Civil
Education
Energy

Start 1982
Obligated

208
56

End 1982
Obligated

Unobligated

244
8

217
63

245
6

20
24,320
12,651
1,683
86,147
734
10,924
8,151

End 1983

Unobligated

22,729
16,291
1,409
107,512
684
11,246
7,178

302
70

End 1984

Unobligated

146
2

15
19,728
1,272
362
26,430
336
1,761
6,099

Obligated

21,577
1,339
362
34,548
412
1,944
1,121

23,859
11,945
1,190
133,672
837
11,453
7,244

Obligated

316
80

Unobligated

138
1

15
20,883
1,829
187
38,467
317
1,067
360

24,281
9,469
939
161,521
1,080
10,688
7,087

20,665
2,141
186
45,421
39
1,361
191

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table C - 4 . FEDERAL FUND BALANCES OF BUDGET AUTHORITY—Continued
(In millions of dollars)
End 1982

Start 1982

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
Railroad Retirement
Board
All other independent
agencies
Total

End 1983

Unobligated

Obligated

End 1984

Obligated

Unobligated

12,827

655

10,625

684

5,610

230

5,300

126

260,454
2,520
460
2,413
567
10,548
339

12,655
624
119
1,142
100
1,818
25,521

205,721
2,152
394
1,707
561
10,613
2,085

71,346
644
171
1,737
136
2,059
29,419

216,393
2,150
419
1,434
738
10,727
2,126

55,308
282
112
385
50
1,223
29,532

224,933
1,970
445
1,750
770
9,501
2,132

34,946
232
188
817
49
875
29,580

12,414

1,107

9,967

2,009

9,821

1,422

9,340

1,419

1,457
2,507

550
2,123

1,322
2,737

661
2,498

1,989
3,230

113
2,236

2,156
3,578

71
1,944

8,877

Obligated

8,978

Unobligated

8,963

Obligated

Unobligated

8,331

149

9,240

1,043

8,934

2,196

8,678

2,209

9,381

636

766

346

1,045

716

464

820

496

105

135

5,202

2,975

3,218

2,908

3,097

2,508

3,049

2,634

466,284

115,650

428,909

185,880

460,301

165,945

491,856

152,944

*500 thousand or less.

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

Applicable collections
Description

Funds appropriated to the President:
Foreign assistance
Agriculture:
Commodity Credit Corporation
Farmers Home Administration:
Rural housing insurance fund
Agricultural credit insurance
fund
Rural development insurance
fund
Federal Crop Insurance Corporation ...
Commerce
Education
Energy
Health and Human Services
Housing and Urban Development:
Government National Mortgage Association

1983
estimate

1984
estimate

217

253

306

10,308

19,004

27,733

19,564

7,803

2,684

8,538

9,411

4,922

10,822

10,600

12,099

12,193

11,332

12,880

2,032
351
100
179
1,490
70

1,757
254
101
186
2,329
74

2,278
273
169
200
2,925
46

2,444
454
177
215
1,543
91

2,398
328
147
208
2,375
122

2,826
394
151
126
2,859
76

2,470

2,524

2,101

3,936

3,501

2,640

1983
estimate

1984
estimate

122

142

7,422

9,471

7,292

1982
actual

A-ll

SPECIAL ANALYSIS A
Table C - 5 . PUBLIC ENTERPRISE FUND TRANSACTIONS—Continued
(In millions of dollars)
Applicable collections
Description

Urban renewal programs
Low-rent public housing
Federal Housing Administration
Fund
Other
Interior:
Bureau of Reclamation
Other
Labor
Transportation
Treasury
Veterans Administration
Other independent agencies:
Export-Import Bank
Federal Emergency Management
Agency
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolving fund
National Credit Union Administration
Small Business Administration
Tennessee Valley Authority
All other not included above
Total
Offsetting collections from the public
Offsetting collections from other accounts

Gross outlays

1983
estimate

1984
estimate

33
984

17
1,007

8
1,007

1,840
425

2,199
987

382
24
157
174
742
1,132

1982
actual

1983
estimate

1984
estimate

122
963

87
1,109

58
1,143

2,732
1,232

1,603
1,132

1,870
1,258

1,185
1,268

386
26
177
198
162
1,600

439
27
291
113
174
1,047

374
18
90
209
214
1,185

386
36
146
288
2
1,183

439
35
133
115
2
1,236

3,108

3,452

3,951

4,281

4,644

5,385

293

447

503

305

517

584

1,168
63

1,521
71

1,377
71

577
66

624
71

661
71

213
1,435
4,112
430

231
1,437
4,662
465

245
1,465
4,805
577

201
1,850
5,590
205

251
1,766
6,012
222

261
1,462
5,815
378

49,018

54,266

53,289

67,797

78,280

66,975

(32,725)

(39,008)

(41,641)

(16,293)

(15,259)

(11,648)

Table C - 6 . OUTLAYS AND RECEIPTS OF TRUST FUNDS
(In millions of dollars)
Outlays
Description

1982
actual

Receipts

1983
estimate

1984
estimate

1982
actual

1983
estimate

1984
estimate

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

155,964
5,389
884
990
19,673
24,282
50,423
8,035
1,512

170,491
6,846
724
1,015
21,325
35,700
57,262
8,642
2,172

180,761
7,605
707
1,040
22,653
30,800
64,681
11,953
2,533

148,027
4,855
774
1,195
31,979
20,491
55,238
7,822
674

172,233
6,385
722
1,213
35,180
32,000
59,533
9,552
2,776

175,943
7,732
707
1,232
37,786
31,800
66,338
12,465
3,096

4,569
12,028
1,070
-2,040

4,567
12,800
1,421
-3,204

4,567
13,800
1,574
-2,534

4,567
11,839
1,569

4,567
12,300
1,693

4,567
13,400
2,015

Subtotal
Intrafund transactions

282,778
-1,858

319,761
-3,267

340,140
-4,481

289,030
-1,858

338,155
-3,267

357,081
-4,481

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table C - 6 . OUTLAYS AND RECEIPTS OF TRUST FUNDS—Continued
(In millions of dollars)
Outlays

Receipts

Description

1982
actual

1983
estimate

1984
estimate

1982
actual

1983
estimate

1984
estimate

Proprietary receipts from the public
Receipts from off-budget Federal entities

-17,033

-17,982

-19,941

-17,033

-17,982

-19,941

-1,732

-2,152

-2,450

-1,732

-2,152

-2,450

262,155

296,361

313,269

268,407

314,755

330,210

Total

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):
1981
actual

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

1982
actual

1983
estimate

1984
estimate

9,348

9,959

8,899

8,013

188,737
1,015

194,697
765

214,153
765

231,970
765

199,100

205,421

223,817

240,748

A summary of the balances by fund is presented in table C-9.
The amounts include both amounts on deposit with the Treasury
(open-book balances) and investments in U.S. securities. These balances include both obligated and unobligated balances. The balances on a budget authority basis 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 1984, 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.

A-ll

SPECIAL ANALYSIS A
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

1982
actual

1984
estimate

1983
estimate

143,467
2,071

147,760
1,057

160,901
1,363

1,646

1,778

1,911

843

1,138
20,500

1,385
10,383

148,027

172,233

175,943

2,917
83
1,820
35

2,685
18
2,223
1,459

2,704
-66
2,513
2,581

4,855

6,385

7,732

491
283*

567
155*

608
136*

774

722

707

722
473

768
445

799
433

1,195

1,213

1,232

4,205
7,939

4,362
9,468

4,370
10,232

18,094
1,732
10

18,967
2,028
8

19,682
2,039
7
1,456

31,979

35,180

37,786

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

16,600
1,181
2,710

19,523
628
6,816
5,033

24,072
425
7,303

Subtotal, unemployment trust fund

20,491

32,000

31,800

Health insurance trust funds:
Social insurance taxes and contributions
Premiums and other charges

34,301
3,855

35,976
4,355

39,338
5,010

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 repayable advances)
Subtotal, railroad retirement account
Black lung disability trust fund:
Excise taxes
Advances from general fund
Other receipts
Legislative action required
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
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
Subtotal, Federal employees retirement funds..

-37

348

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table C - 7 . TRUST FUND RECEIPTS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
1982
actual

Description

Interest on Federal securities
Federal payment as employer for employee retirement:
Entities included in budget
Entities excluded from budget
Other (mainly receipts of special Federal payments)
Proposed legislation
Subtotal, health insurance trust funds

1983
estimate

1984
estimate

2,303

2,155

1,623

397

934
124

1,168
169

14,381

16,118
-129

18,692
338

55,238

59,533

66,338

6,744
1,079

8,469
1,083

11,420
1,045

7,822

9,552 | _

12,465

Highway trust funds:
Excise taxes
Interest on Federal securities
Subtotal, highway trust funds
Airport and airway trust fund:
Excise taxes
Interest on Federal securities

133
542

2,299
477

2,637
459

674

2,776

3,096

4,567

Foreign military sales trust fund

11,839

12,300

13,400

Other trust funds (nonrevolving)

1,569

1,693

2,015

289,030
-1,858
-17,033
-1,732

338,155
-3,267
-17,982
-2,152

357,081
-4,481
-19,941
-2,450

268,407

314,755

330,210

Subtotal, airport and airway trust fund
State and local government fiscal assistance trust
fund: Deposits for general revenue sharing

Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal entities
Total receipts
*$500 thousand or less.

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
Proposed for later transmittal under existing legislation
Subtotal, Federal old-age, survivors, and disability insurance trust funds
Railroad retirement account:
Benefit payments and claims

1984
estimate

1983
estimate

1982
actual

152,054
1,820
2,090

166,625
3,200
2,722
-2,056

154,328
4,396
2,412
-4,140
23,765

155,964

170,491

180,761

5,296

5,640

5,381

A-ll

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

Repayment of benefit advances
Administrative expenses and other
Subtotal, railroad retirement account
Black lung disability trust fund:
Benefit payments
Federal administrative expenses
Interest on advances
Supplemental now requested
Legislative action required

1982
actual

1984
estimate

1983
estimate

50
42

1,159
47

2,169
55

5,389

6,846

7,605

578
36
270

447
35
188
54

501
37
206
-37

884

724

707

990

1,015

1,040

19,003
637
33

20,729
558
38

22,363613
39
-362

19,673

21,325

22,653

21,837
228
2,217

27,782

26,995
870
2,935

24,282

35,700

30,800

49,150
1,273

55,959
1,403
-100

65,061
1,476
-1,856

50,423

57,262

64,681

8,035

8,619
58
-35

12,232

8,035

8,642

11,953

Airport and airway trust fund

1,512

2,172

2,533

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

4,569

4,567

Foreign military sales trust fund

12,028

12,800

13,800

Other trust funds (nonrevolving)

1,070

1,421

1,574

-2,040

-3,204

-2,534

282,778

319,761

340,140

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
Supplemental now requested
Subtotal, unemployment trust fund
Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation
Subtotal, health insurance trust funds
Highway trust funds (mainly grants to States):
Current
Supplemental now requested
Legislative action required
Subtotal, highway trust funds

Trust revolving funds
Subtotal

2,609
5,309

-279

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table C-8. TRUST FUND OUTLAYS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
1982
actual

Description

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

1984
estimate

1983
estimate

-1,858
-17,033
-1,732

-3,267
-17,982
-2,152

-4,481
-19,941
-2,450

262,155

296,361

313,269

Total outlays

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

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
1981 actual

1982 actual

1983 estimate

27,238
1,986
112
8,612
85,025
14,365
21,842
9,259
4,719

19,302
1,280
2
8,817
97,333
10,745
26,657
9,046
3,881

33,482
516
9,015
111,187
7,349
16,491
9,956
4,486

1,255
4,746
2,232
17,708

1,253
4,558
2,798
19,748

1,253
4,058
3,072
22,952

199,100

205,421

223,817

Note—The following table reconciles balances on a budget authority basis with the cash balances shown above.

1982

1981
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
Hazardous substance response trust fund
Inland waterways trust fund
Other
Retained as permanent endowment
Balance available on a cash basis

1984

1983

220,914

229,983

255,049

276,816

-760
-18,487
-15,653

-756
-18,697
-17,077

-1,322
-23,570
-19,777

-1,571
-26,809
-21,877

- 1

98
3,774
9,034
78
22
70
6

119
2,844
8,600
229
55
108
6

139
3,376
9,438
371
100
1
6

155
3,342
9,813
457
375
35
6

199,100

205,421

223,817

240,748

SPECIAL ANALYSIS A

A-ll

Table C - 1 0 . TRUST REVOLVING FUND TRANSACTIONS
(In millions of dollars)
Offsetting collections
Description

Total trust revolving funds
Receipts from the public
Receipts from other accounts
1

1984
estimate

6,331
3,380
573

7,922
3,071
592

8,901
2,735
620

5,800
1,940
505

7,066
771
545

8,449
715
559

10,284

11,585

12,256

8,245

8,382

9,723

(5,136)
(5,149)

(5,354)
(6,231)

(5,283)
(6,973)

1982 actual

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

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

Gross outlays

1983
estimate

1982
actual

1983
estimate

1984
estimate

SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER FEDERAL
OUTLAYS
This analysis divides Federal spending into two categories: that
which is of an investment nature and that which is for operating
and other purposes. There has been a growing interest in public
capital investment and, in response, this analysis has been redesigned from earlier years and additional data have been provided.
The major focus of the presentation continues to be spending for
investment purposes, which is defined as outlays designed to yield
benefits in future years. Such spending includes the acquisition of
physical or financial assets, which yield a stream of services or
financial returns over a number of years, as well as expenditures
for research and development or education and training, which
provide less tangible long-term benefits. Table D-1 summarizes
Federal outlays—both on- and off-budget—that are classified as
being of an investment nature.
Federal investment-type outlays are made for a wide range of
purposes, from foreign assistance loans to purchases of agricultural
commodities under the price support program to grants State and
local governments for physical investments (such as highway construction) to investment in major weapons systems. This analysis
has been redesigned this year to present these diverse investments
in historical perspective. While the basic tables are similar to those
in previous years, a section has been added showing long-run
trends in Federal outlays for public physical capital investment.
The data in this analysis are shown in considerable detail. However, data classification problems are sufficiently great that often
these data are approximate. One problem, for example, arises in
the case of programs where the recipients are free to utilize the
Federal outlay for either investment-type or current purposes (e.g.,
general revenue sharing). In such cases, this analysis classifies all
of the outlays in the category where most of the outlays are expected to occur. Another classification problem arises because some
programs could logically be put into more than one subcategory.
For example, grants for construction of education facilities not only
finance the acquisition of physical assets but also are an element in
providing education and training. In cases such as this, the outlays
are classified in the subcategory that is most "capital-like" and
therefore appears first in the tables. This order begins with loans

D-1

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table D - l . SUMMARY OF TOTAL 1 FEDERAL INVESTMENT-TYPE OUTLAYS, 1981-84
(In billions of dollars)
1981

Loans and financial investments:
On-budget
Off-budget
Subtotal
Construction and rehabilitation:
National defense
Nondefense:
Grants to State and local governments
Other
Subtotal
Acquisition of major equipment:
National defense
Nondefense
Subtotal
Conduct of research and development:
National defense
Nondefense
Subtotal
Conduct of education and training:
Grants to State and local governments
Other
Subtotal
Other (including commodity inventories):
National defense
Nondefense
Subtotal
Total
1

1982

1983
estimate

1984
estimate

5.7
21.0

11.9
14.3

8.0
14.3

2.1
5.9

26.7

26.3

22.3

8.1

2.8

3.6

4.7

5.6

22.1
7.7

20.1
7.2

20.2
7.1

23.6
7.0

32.7

30.8

32.1

36.2

36.3
1.0

44.7
1.5

56.5
1.7

70.2
0.9

37.3

46.2

58.2

71.1

16.9
17.2

19.8
14.9

24.7
14.0

29.3
13.9

34.2

34.7

38.7

43.2

14.4
11.7

10.5
11.1

9.9
10.9

9.6
9.7

26.1

21.6

20.8

19.2

0.6
10.2

0.7
10.8

0.7
9.3

1.1
7.4

10.8

11.4

10.1

8.5

167.8

170.9

182.1

186.2

Includes off-budget outlays.

and moves to construction and rehabilitation, acquisition of major
equipment, conduct of research and development, etc. Consequently, for example, the conduct of research and development does not
include the cost of research facilities, because such facilities are
included in the construction and rehabilitation of physical assets.
COMPOSITION

OF F E D E R A L

INVESTMENT

Lending and financial investments.—The Federal Government
conducts a wide variety of credit activities ranging from loan insurance to foreign assistance and export promotion loans. Federal
direct loans are a form of investment, even though many of them
are not intended to be profitable. Indeed, as is discussed in Special
Analysis F ("Federal Credit Programs") there are major subsidy

SPECIAL ANALYSIS A

A-ll

elements connected with most Federal credit programs. Federal
credit is discussed in detail in the Budget and in Special Analysis
F.
Construction and rehabilitation of physical assets is one of the
largest components of Federal investment spending. As Table D - l
shows, the great bulk of Federal outlays in this category are in the
form of grants to State and local governments to finance construction or rehabilitation of physical assets, rather than being for
assets acquired by the Federal Government itself. Table D-2 shows
the broad programmatic composition of these grants, while Special
Analysis H ("Federal Aid to State and Local Governments") discusses all Federal grants in detail.
Acquisition of major equipment is composed almost entirely of
investment in national defense weapons systems. National defense
spending is discussed in greater detail in the national defense
section of Part 5 of the budget document.
Federal outlays for the conduct of research and development are
devoted to increasing our basic scientific knowledge and to meeting
other related Federal needs. In recent years these outlays have
been almost evenly split between defense and nondefense spending.
However, by 1984 the national defense component is estimated to
increase to 68% of the total. Over the past two decades space
research and technology has been the largest component of nondefense outlays for the conduct of research and development, but by
1982 it was overtaken by health research. The decline in outlays
for space research is due to the conclusion of the major research
and development phase for the space shuttle. Major research and
development programs are discussed in the appropriate functions
in Part 5 of the Budget, while Special Analysis K discusses Federal
research and development.
Federal outlays for the conduct of education and training are
intended to increase the knowledge and skills of our people. Most
of these outlays are grants to State and local governments to assist
in the operation of educational institutions, or income transfers to
students under the student assistance and veterans readjustment
benefits programs. Federal outlays for education and training are
discussed in Part 5 of the Budget.
The other investment category is composed of an assortment of
activities, primarily the acquisition of major commodity inventories
(for the farm price support program and the strategic petroleum
reserve) and programs such as Census Bureau activities designed to
add to our information base.
FEDERAL INVESTMENT IN PUBLIC WORKS AND RELATED ASSETS

Traditionally the budget documents have contained a significant
amount of historical information that could be used to analyze

B-18

THE BUDGET FOR FISCAL YEAR 1984

major trends affecting specialized segments of Federal investmenttype spending. For example, historical data for education and
training outlays are available as part of the functional tabulations,
historical data on credit are shown in Special Analysis F, historical
data on grants appear in Special Analysis H, and historical data on
research and development are shown in Special Analysis K. However, Special Analysis D has not included historical data showing
investment-type spending over time.
In order to remedy this shortcoming, the Office of Management
and Budget has developed a new set of historical tables entitled
"Federal Outlays for Major Physical Capital Investment/' which
provide historical data related to Special Analysis D. This historical data base does not cover all Special Analysis D investment-type
spending. It concentrates on investment in publicly-owned physical
assets (including grants to State and local governments for physical
investments) but also supplies some historical data on outlays for
the conduct of research and development. The new data series
include almost all Federal outlays for construction and rehabilitation and for acquisition of major equipment. However, since these
data focus on public physical capital acquisition, they exclude a few
items (such as ship construction subsidies) that are used for private
investment. Table D-2 provides information from this data base
showing Federal outlays for public physical investment at 5-year
intervals from 1945 to 1980 and annually from 1980 to 1984; Table
D-3 summarizes the same data in constant prices and as a percent
of the gross national product (GNP). Additional data are available
upon request.

Table D - 2 . FEDERAL OUTLAYS FOR MAJOR PUBLIC PHYSICAL CAPITAL INVESTMENT

(In billions of dollars)
1950

1945

Assets acquired by the Federal Government:
National defense:
Military procurement
Military construction and family housing
Atomic energy defense

1955

I960

1965

1970

1975

1980

1981

1982

1983
estimate

1984
estimate

53.8
2.5

1.5
0.2
0.4

12.8
1.7
1.5

13.3
2.1
1.7

11.8
1.3
1.1

21.6
1.3
0.7

16.0
1.8
0.9

29.0
2.5
1.4

35.2
2.6
1.8

43.3
3.0
2.6

55.2
4.1
2.6

68.2
4.5
4.1

56.3

2.1

16.1

17.2

14.2

23.6

18.7

33.0

39.6

48.8

61.9

76.8

0.2
0.1

0.9
0.4
(*)

0.8
0.3
(*)

1.0
0.8
0.1

1.4
1.4
0.2

1.5
0.8
0.2

3.0
1.4
0.4

4.3
2.7
0.7

4.6
2.8
1.0

3.5
3.6
1.3

4.5
2.6
1.6

4.1
2.9
0.8

Subtotal, nondefense

0.2

1.3

1.1

1.9

3.0

2.5

4.8

7.7

8.5

8.7

7.8

Total Federal assets

56.5

3.4

17.2

19.1

17.3

26.1

23.5

40.7

47.9

57.3

70.6

84.6

*
0.1

0.4*

0.6*

2.9
0.1
0.1
*

4.0
0.1
0.6

4.3
0.2
1.6

4.6
1.0
2.5

9.0
2.6
5.8

8.8
3.1
5.6

7.7
2.9
5.2

8.5
3.3
4.8

11.8
3.8
4.6

Subtotal, national defense
Nondefense:
Construction and rehabilitation:
Water and power projects
Other
Acquisition of major equipment

Grants to State and local governments for physical capital investment:
Transportation:
Highways
Urban mass transportation and airports
Community and regional development
Natural resources and environment:
Pollution control facilities
Other
All o t h e r 2
Total grants for physical capital investment 2
Total public assets financed by the Federal Government

*
*
*
*

0.2
56.7

*
0.2

*
0.1

0.1
0.1
0.2

0.2
0.2
0.6

1.9
1.9
0.5

4.3
0.6
0.2

3.9
0.6
0.2

3.8
0.3
0.3

3.1
0.3
0.3

2.8
0.1
0.5

0.5

0.8

3.3

5.0

7.1

10.9

22.5

22.1

20.2

20.3

23.7

3.9

18.0

22.4

22.3

33.2

34.4

63.2

70.2

77.4

90.9

108.3

Table 0 - 2 . FEDERAL OUTLAYS FOR MAJOR PUBLIC PHYSICAL CAPITAL INVESTMENT ^Continued
(In billions of dollars)
1945

1950

1955

I960

1965

1970

1975

1980

1981

1982

1983
estimate

1984
estimate

62.0
28.9

76.8
31.4

Memorandum
56.3
0.4

National defense
Nondefense

2.1
1.8

16.1
1.9

17.2
5.2

14.2
8.0

23.6
9.6

18.7
15.7

33.1
30.2

39.6
30.6

48.8
28.6

•Excludes outlays for private asset acquisition (such as ship construction subsidies) and major commodity inventories (agricultural commodities and the strategic petroleum reserve).
2 Includes National Guard shelters and civil defense grants classified in the national defense function.
*$50 million or less.

Table D - 3 . SUMMARY COMPARISONS OF FEDERAL OUTLAYS FOR MAJOR PUBLIC PHYSICAL CAPITAL INVESTMENTS
1945

1950

I960

1955

1965

1970

1975

1980

1981

1982

1983
estimate

1984
estimate

In billions of constant (fiscal year 1972 = 100) dollars
Assets acquired by the Federal Government:
National defense
Nondefense
Subtotal
Grants to State and local governments for physical capital
investment:
Transportation
Community development and housing
Natural resources and environment
All other
.
Subtotal grants
Total

138.9
0.5

3.7
2.4

26.7
1.8

23.4
2.6

18.4
3.9

25.9
2.8

16.5
3.7

18.1
4.1

19.7
4.0

21.8
3.7

26.2
3.7

31.3
3.2

139.5

6.1

28.5

26.0

22.3

28.7

20.2

22.2

23.7

25.5

29.9

34.5

0.1
0.3*

0.9*

1.0
0.1

6.0
0.9
0.2
0.2

5.2
1.9
0.4
0.6

4.0
1.8
1.7
0.4

5.5
2.7
2.3
0.1

5.3
2.5
2.0
0.1

4.6
2.2
1.8
0.1

4.8
1.9
1.4
0.1

5.9
1.8
1.1
0.2

0.3

4.6
0.2
0.1
0.2

0.4

1.0

1.4

5.2

7.3

8.1

7.9

10.6

9.8

8.7

8.2

9.0

139.9

7.0

30.0

31.2

29.6

36.9

28.1

32.8

33.5

34.2

38.1

43.5

*
*

As a percent of Gross National Product
Assets acquired by the Federal Government:
National defense
Nondefense
Subtotal
Grants to State and local governments for physical capital
investment:
Transportation
Community and regional development
Natural resources and environment
All other
Subtotal
Total
* $50 million or less.
10.005 percent or less.

25.94
0.10

0.77
0.50

4.23
0.29

3.45
0.39

2.16
0.46

2.43
0.26

1.26
0.33

1.28
0.30

1.38
0.30

1.61
0.28

1.94
0.27

2.20
0.22

26.05

1.28

4.51

3.83

2.62

2.70

1.59

1.58

1.67

1.89

2.21

2.42

0.02
0.05
i
i

0.18
i
i
i

0.16
0.01
0.01
0.04

0.60
0.02
0.02
0.03

0.62
0.09
0.02
0.02

0.47
0.17
0.04
0.06

0.37
0.17
0.15
0.04

0.45
0.22
0.19
0.01

0.41
0.19
0.16
0.01

0.35
0.17
0.13
0.01

0.37
0.15
0.11
0.01

0.45
0.13
0.08
0.01

0.07

0.18

0.22

0.67

0.76

0.73

0.87

0.77

0.66

0.64

0.68

26.11

1.46

4.73

4.50

3.38

3.43

2.32

2.47

2.45

2.55

2.85

3.10

B-18

THE BUDGET FOR FISCAL YEAR 1984

These tables reveal a number of significant facts:
• National defense physical capital investment is currently increasing not only in current dollars but in real (constant
price) terms and as a percent of GNP. The constant dollar
totals are now well above the lowest levels immediately
before and after the Vietnam war and will soon surpass the
levels in the post-Korean war period.
• Direct Federal investment in nondefense physical assets is
clearly affected by trends in defense investment. At times of
defense buildup—such as the Korean war, the Vietnam war,
and the current period—these investments tend to be relatively constrained. In turn, in periods of defense reduction these
investments have grown.
• Grants for physical capital investment grew rapidly in real
(constant dollar) terms and as a percent of GNP between 1945
and 1965. Between 1965 and 1980 grants grew overall in real
terms but the composition shifted significantly; transportation
grants declined in real terms and as a percent of GNP while
non-transportation grants grew rapidly. The budget program
calls for a significant real expansion for transportation related grants in 1984 (financed out of new user charges) but
accompanied by significant real reductions of grants for other
forms of physical investment.
CAPITAL BUDGETING

The Federal Government has never had a capital budget, which
would finance capital or investment-type programs separately from
current expenditures. From time to time, proposals have been
made that the Federal Government adopt a capital budget. A discussion of the applicability of capital budgeting to the Federal
budget is included in Part 6 of the Budget. In analyzing this issue
it is important to recognize the fundamental difference between
capital planning and capital budgeting.
Under a capital budget the basic system of accounting for capital
investments would be changed. Outlays for new capital would be
recorded in the capital budget while all other spending would be
reflected in an operating budget.
Capital planning, on the other hand, involves systematic analysis
of the optimum use of capital resources in combination with other
resources to meet perceived needs in the most cost-effective
manner. This is a standard practice within the Federal Government under the present budget system. For example, the Veterans
Administration projects medical caseload needs and assesses the
adequacy of present and possible future physical facilities and
other resources to meet them. The Department of Defense has a
systematic procedure for analyzing weapons systems needs and

SPECIAL ANALYSIS A

A-ll

costs. Because resources are finite, the Department must make
tradeoffs between research and development, systems acquisition,
and operating expenses in deciding how best to meet these needs.
Even for areas where the Federal Government finances major investments but generally does not own the resulting facilities—such
as highways and pollution control facilities—the Federal Government normally has planning processes designed to match the available resources and needs. Hence, the Government's capital planning processes are integrated into agency budget planning processes, where they can be evaluated in the context of program goals
and alternative means of achieving those goals. The estimates reflected in this analyses are the product of agency capital planning
but not of an overall capital budget.
DETAILED DATA

PRESENTATION

The succeeding tables in this analysis are like those that have
traditionally been presented. They distribute total Federal Government outlays (budget and off-budget) into a number of different
classifications, primarity focused on the size and composition of
investment-type spending, but also showing the composition of noninvestment outlays.
The following tables provide two basic displays of investment and
non-investment spending. Table D-4 is a summary table showing
the data split between national defense spending and civil (i.e.,
nondefense) spending, with Table D-6 providing detailed data for
the same categories. Table D-5, on the other hand, is a summary
table identifying separately grants and loans to State and local
governments separately from all other Federal outlays, with Table
D-7 providing additional details on the same data base.
The classification structure used in compiling information is designed primarily to distinguish investment-type outlays from current outlays. Consequently, it does not provide a ready source of
information on the total outlays or other forms of assistance affecting particular sectors of the economy. For example, the category
"aids to agriculture, commerce, and transportation" includes current benefits, such as subsidies for operating expenses of air, water,
and rail transportation, but it does not include related subsidies for
the construction of private merchant ships, which are investmenttype outlays included under "acquisition of major equipment." Nor
does it include assistance provided by the Federal Government
through loan guarantees, tax expenditures, or other methods. Although not measured in this analysis, guaranteed loans, tax expenditures, and other provisions of the tax code are methods by
which the Federal Government can affect the type and amount of
public and private investment. Federally guaranteed loans, for ex-

B-18

THE BUDGET FOR FISCAL YEAR 1984

ample, are substitutes for direct loans and can result in the creation of certain assets in place of others.1
CURRENT

PROGRAM

TRENDS

Investment-type programs.—Total investment-type outlays are estimated to increase from $182.1 billion in 1983 to $186.2 billion in
1984. A total of $8.1 billion in 1984 outlays are for loans and
financial investments, $107.3 billion are for the acquisition, construction, or rehabilitation of physical assets, and $70.9 billion are
for the conduct of education, training, research and development,
and other investment-type programs. Defense investment-type outlays, which account for 57% of total investment-type outlays, are
primarily for the acquisition of major equipment and other physical assets and for the conduct of research and development. Civil
programs are primarily for construction and rehabilitation of physical assets, the conduct of education and the training, and the
conduct of research and development.
Table D - 4 . SUMMARY OF INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS
(In millions of dollars)
1982
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

1983
estimate

1984
estimate

3,558

4,728

5,560

44,664
19,809
666

56,544
24,673
745

70,199
29,277
1,077

68,697

86,690

106,113

15,022

16,222

16,857

61,533
42,165

66,989
44,868

74,045
48,290

Subtotal, current programs

118,720

128,079

139,192

Total, national defense

187,418

214,769

245,305

11,932
27,066
1,398
14,850
21,570
3,787
3,279

8,021
27,333
1,640
14,032
20,748
4,052
3,509

2,125
30,567
803
13,909
19,203
2,193
3,369

83,881

79,335

72,170

343,328
8,215

384,096
8,965

400,581
8,099

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

Civil:
Investment-type programs:
Loans and financial investments
Construction and rehabilitation
Acquisition of major equipment
Conduct of research and development
Conduct of education and training
Commodity inventories and other physical assets.
Other investment-type programs
Subtotal, investment-type programs
Current programs:
Provision of benefits
Social services and related programs

1 Additional information on guaranteed loan programs and tax expenditures can be found in Special Analysis
F, "Federal Credit Programs" and Special Analysis G, "Tax Expenditures," respectively.

A-ll

SPECIAL ANALYSIS A

Table D - 4 . SUMMARY OF INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

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

1984
estimate

1983
estimate

14,997

23,604

20,887

513
6,646
7,378
84,697
7,995

1,675
6,594
7,035
88,936
10,301

1,301
7,199
7,897
103,180
10,529

473,770

531,206

559,675

-16,694

-20,107

-28,667

Total, civil

540,957

590,433

603,177

Budget total

728,375

805,202

848,483

14,333
3,989

14,262
1,809

5,947
1,961

Subtotal, current programs
Unclassified

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

-990

767

1,681

17,331

16,839

9,589

745,706

822,041

858,071

B-18

THE BUDGET FOR FISCAL YEAR 1984

Table D - 5 . SUMMARY OF FEDERAL OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL
PROGRAMS
(in millions of dollars)
1982
actual

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

1984
estimate

1983
estimate

20,504
10,521
340

20,629
9,874
316

24,028
9,551
254

31,365

30,819

33,834

40,136
7,325

45,439
7,977

45,885
7,209

1,461
6,682
601
623

1,421
6,635
517
729

758
7,257
525
458

Subtotal, current programs

56,829

62,718

62,092

Total, grants-in-aid

88,194

93,537

95,926

10,420

6,678

608

10,472
46,062

11,778
58,184

12,444
71,002

3,972
34,370
11,054
4,864

4,248
38,411
10,882
5,026

2,648
42,948
9,665
5,134

110,793

128,529

143,841

318,215
889

354,878
988

371,554
891

13,537

22,183

20,129

61,607
6,777
84,697
49,940

68,123
6,517
88,936
54,941

74,974
7,372
103,180
58,675

535,662

596,567

636,775

Subtotal, investment-type programs
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
Acquisition 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
Budget total
Addendum (Direct Federal programs):
Off-budget Federal entities:
Loans
Other investment-type programs
Aids to agriculture, commerce, and transportation
Total, off-budget Federal entities
Total, including off-budget

646,455

725,095

780,616

-16,694

-20,107

-28,667

728,375

805,202

848,483

14,333
3,989

14,262
1,809

5,947
1,961

-990

767

1,681

17,331

16,839

9,589

745,706

822,041

858,071

SPECIAL ANALYSIS A

A-ll

Loans and financial investments.—A loan creates a financial
asset. If made at competitive market rates, the value of the asset is
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. Loans to foreign borrowers are an increase in financial assets held by the United States. Most foreign
loans are for economic development programs or for the promotion
of U.S. exports, including military equipment and farm commodities.
Physical assets.—The benefits provided by the construction and
rehabilitation of physical assets and by the acquisition or major
equipment are of a long-term nature, while commodity inventories
are for reserves rather than for use. 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 (because of the
different focus of Tables D-2 and D-3, to the extent feasible, outlays for investments in private physical assets were excluded from
these tables). Total outlays for physical assets—including acquisition of major commodity inventories—are estimated at $110.2 billion in 1984; of the amount $76.6 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.
Commodity inventories include crops acquired as part of the farm
price support program and also oil purchases for the strategic
petroleum reserve. These are not included in Tables D-2 and D-3
investments.
Conduct of research and development—Research and development increases the Nation's base of knowledge. Total outlays for
the conduct of research and development are estimated at $43.2
billion in 1984. All of the increase in 1984 over 1983 is for national
defense, reflecting the Administration's commitment to strengthening the Nation's defense. Nondefense outlays for the conduct of
research and development decline slightly. Outlays for the conduct
of health, energy, and space technology research and development

B-18

THE BUDGET FOR FISCAL YEAR 1984

account for approximately one-half of nondefense research and
development outlays in 1984. Within the total of spending for research and development there is a significant increase in 1984 for
basic research, with emphasis on the support of research in the
physical sciences. See Special Analysis K (Research and Development) for additional details.
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, such as scholarships,
and for grants to institutions and to State and local governments.
Outlays are estimated at $19.2 billion in 1984, of which $9.6 billion
are grants to State and local governments.
Collection of information.—This category includes outlays for collection of information, censuses, and topographic or other natural
resource surveys. Outlays are estimated at $1.5 billion and $1.3
billion in 1983 and 1984, respectively.
International development.—Non-loan foreign assistance for general international economic development is included in this category. These outlays, which are expected to benefit U.S. interests by
enhancing the economic development of friendly foreign nations,
are estimated to be $2.3 billion in 1984.
Current programs.—Programs that provide benefits in the current year are divided into several subcategories as briefly discussed
below. Some outlays classified as current may in part by 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 the means for future benefits. Total outlays for
current programs are more than three-quarters of 1984 estimated
outlays. $139.2 billion of current outlays in 1984 are for defense
programs and $559.7 billion for civil programs.
Outlays for "provision of benefits" is the largest category of
current outlays in the budget. The total of these outlays is estimated to increase from $384.1 billion in 1983 to $400.6 billion in 1984.
Social security and other disability and retirement benefits constitute the largest element in these category; they are estimated to
total $204.7 billion in 1984. Other major outlays in this category
include for medicaid, medicare, unemployment, and food and nutrition programs.
Current outlays for "social services and related programs" are
those for human development and child welfare services and employment programs. Outlays in 1984 are estimated to be $8.1 billion, for which $7.2 billion are of grants to State and local governments.

A-ll

SPECIAL ANALYSIS A

"Aids to agriculture, commerce, and transportation" include
price support subsidies and small business and transportation programs. Outlays for these programs are estimated to increase from
$15.0 billion in 1982 to $23.6 billion in 1983 and then decrease to
$20.9 billion in 1984.
Other current outlays are largely for operation of the Federal
Government, including the repair, maintenance, and operation of
physical assets (primarily defense related); regulation and law enforcement; net interest; and other administrative or operating expenses. Because proprietary receipts from the public—such as receipts from the sale of electric power, the sale of publications and
reproductions, and the sale of timber and other natural land products—are offsets against the outlays to which they most nearly
apply, in some cases net outlays are negative.
Unclassified.—The unclassified category includes the undistributed offsetting receipts and most payments from the Government
to itself and the associated offsetting collections. Outlays for this
category are estimated to be $—20.1 billion in 1983 and $ — 28.7
billion in 1984.
Table D - 6 . INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS
(In millions of dollars)
1982
actual

National defense investment-type programs
Construction and rehabilitation of physical assets:
Military construction
Family housing
Atomic energy defense activities
Subtotal, construction and rehabilitation of physical assets
Acquisition of major equipment:
Procurement
Atomic energy defense activities and other
Subtotal, acquisition of major equipment
Other physical assets
Conduct of research and development:
Defense military
Atomic energy and other
Subtotal, research and development
Other investment-type programs
Subtotal, investment-type programs

1983
estimate

1984
estimate

2,811
174
573

3,944
157
627

4,153
339
1,068

3,558

4,728

5,560

43,234
1,431

55,104
1,440

68,174
2,026

44,664

56,544

70,199

538

541

799

18,363
1,447

22,126
2,547

27,258
2,019

19,809

24,673

29,277

128

204

277

68,697

86,690

106,113

14,938
85

16,130
91

16,770
86

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

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table D - 6 . INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

1983
estimate

15,022

16,222

61,309
223

66,705
284

61,533

66,989

41,707
458

44,612
256

42,165

44,868

Subtotal, current programs

118,720

128,079

Total, national defense

187,418

214,769

1,913
6,084
1,453
689
-304
-98
424
282

1,753
3,962
320
492
97
-271
59
447
-171

10,430

6,688

1,409
93

1,309
25

1,502

1,333

7,731
2,588

8,552
2,751
835
169
3,525
1,507
3,103
2,153
1,129
2,349

Subtotal, provision of benefits
Repair, maintenance, and operation of physical assets:
Department of Defense, Military
Other
Subtotal, repair, maintenance, and operation of physical assets
Other current programs:
Military personnel
Other national defense
Subtotal, other current programs

Civil investment-type programs
Loans:
International affairs
Agriculture
Mortgage credit and thrift insurance
Aids to commerce
Transportation
Disaster relief
Other community and regional development
Education
Other
Subtotal, loans
Other financial investments:
International development
Other
Subtotal, other financial investments
Construction and rehabilitation of physical assets:
Highways
Mass transportation
Air transportation
Water 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
Subtotal, construction and rehabilitation of physical assets
Acquisition of major equipment:
Transportation
Other
Subtotal, acquisition of major equipment

-12

666

109
3,792
1,620
3,759
2,363
1,222

2,148
577
490

688
573

27,066

27,333

420
997

456
1,184

1,398

1,640

SPECIAL ANALYSIS

A-ll

Table D - 6 . INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

Conduct of research and development:
General science, space and technology:
NASA
NSF
Other general science
Subtotal, general science, space, technology
Energy activities
Transportation:
Department of Transportation
NASA
Subtotal, transportation
Health:
NIH
All other health
Subtotal, health

1983
estimate

1984
estimate

2,697
1,020
401

1,854
986
434

1,867
1,119
510

4,118

3,274

3,496

3,330

2,950

2,517

341
523

350
531

445
554

864

882

999

3,435
906

3,737
934

3,808
952

4,340

4,671

4,760

Agriculture

696

734

747

Natural resources and environment

838

859

753

All other research and development

664

663

636

14,850

14,032

13,909

6,030
6,444
120

6,198
6,194
179

5,695
6,130
88

Subtotal, Education activities

12,594

12,571

11,913

Veterans readjustment benefits
Training and employment programs
Health training
Other education and training

1,975
4,195
1,052
1,753

1,664
3,708
928
1,878

1,360
3,561
817
1,551

21,570

20,748

19,203

Commodity inventories and other physical assets:
Commodity inventories:
Agriculture
Other

1,376
40

1,509
20

222

Subtotal, commodity inventories

1,417

1,529

222

2,370

2,523

1,972

3,787

4,052

2,193

1,372
1,907

1,426
2,083

1,308
2,061

3,279

3,509

3,369

Subtotal, conduct of research and development
Conduct of education and training:
Education activities:
Higher education
Elementary, secondary, and vocational education
Other

Subtotal, conduct of education and training

Other physical assets
Subtotal, commodity inventories and other physical assets
Other investment-type programs:
Collection of information
International development
Subtotal, other investment-type programs

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table D - 6 . INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

1983
estimate

1984
estimate

83,881

79,335

72,170

134,655
17,399

148,444
17,102

158,616
17,220

Subtotal, Social Security

152,054

165,546

175,836

Civil Service.Retirement and survivor benefits
Disability benefits

15,356
3,381

16,738
3,689

17,712
3,981

18,737

20,427

21,693

Railroad retirement and disability benefits

5,389

6,846

7,605

Veterans disability benefits

9,456

9,864

10,240

Other retirement and disability benefits

2,069

2,017

1,934

187,705

204,700

217,308

3,879
49,150
17,391
538
22,310
7,883
15,178
6,884
6,646
8,024

3,909
55,859
19,326
447
29,997
9,323
17,478
7,862
6,847
8,165

3,873
63,205
20,799
1,115
27,402
10,222
15,904
6,943
5,932
7,621

137,881

159,212

163,016

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

6,439
1,666
135

7,116
1,544
221

7,518
1,269
223

Subtotal, direct provision of services

8,240

8,880

9,010

2,037
1,273
6,192

2,560
1,403
7,340

2,390
1,476
7,382

9,502

11,303

11,248

343,328

384,096

400,581

1,562
1,254
2,567
2,831

1,693
1,433
2,571
3,268

1,997
1,149
2,500
2,453

Subtotal, investment-type programs.,
Civil current programs
Provision of benefits:
Retirement, survivor, and disability benefits.Social Security:
Retirement and survivor benefits
Disability benefits

Subtotal, Civil Service

Subtotal, retirement, survivor, and disability benefits
Other provisions of benefits:
Veterans pension 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

Administrative expenses:
Social Security retirement and disability
Medicare
Unemployment compensation, assistance payments, and other
Subtotal, administrative expenses
Subtotal, provision of benefits
Social services and related programs:
Human development services
Employment programs
Social services block grant
Other

SPECIAL ANALYSIS

A-ll

Table D-6. INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

Subtotal, social services and related programs

1983
estimate

1984
estimate

8,215

8,965

8,099

5,373
707
288
533
3,400
2,060
1,773
864

13,218
789
396
802
2,622
2,474
1,973
1,330

12,019
400
397
617
1,825
2,549
1,770
1,311

14,997

23,604

20,887

665
211
-319

772
-70
-458

518
-300
-720

556

245

-502

-2,777

-3,067

-2,712

2,734

4,497

4,515

513

1,675

1,301

4,569
645
1,433

4,567
685
1,343

4,567
701
1,931

6,646

6,594

7,199

1,007
938
693
602
345
-1,997
651
609

939
1,008
723
609
301
-3,171
805
694

881
1,036
728
533
262
-2,582
1,023
699

2,848

1,908

2,582

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

2,512
1,502
348
168

2,996
1,651
393
86

3,239
1,573
420
84

Subtotal, law enforcement activities

4,530

5,127

5,315

7,035

7,897

128,063

144,500

Aids to agriculture, commerce, and transportation:
Agriculture
Postal Service
Small business assistance
Mortgage credit and thrift insurance
Ground transportation
Air transportation
Water transportation and waterways
Other
Subtotal, aids to agriculture, commerce, and transportation
Repair, maintenance, and operation of physical assets:
Natural resources.Water resources
Conservation and land management
Recreation resources and other
Subtotal, natural resources
Energy (net of offsetting receipts)
Other (net)
Subtotal, repair, maintenance, and operation of physical assets
General purpose fiscal assistance:
General revenue sharing
Other general purpose grants-in-aid
Shared revenues
Subtotal, general purpose fiscal assistance
Regulation, control, and law enforcement:
Regulatory and inspection activities:
Natural resources and environment
Transportation
Health
Energy
Agriculture
Savings institutions
Tax collections
Other
Subtotal, regulatory and inspection activities

Subtotal, regulation, control, and law enforcement
Net interest:
Interest on the public debt

117,190

B-18

THE BUDGET FOR FISCAL YEAR 1984
Table D - 6 . INVESTMENT, OPERATING, AND OTHER FEDERAL OUTLAYS—Continued
(In millions of dollars)
1982
actual

1983
estimate

1984
estimate

-16,427
-16,067

-16,349
-22,778

-16,862
-24,458

84,697

88,936

103,180

1,713
1,196
2,808
897

2,595
1,310
3,462
707

2,926
1,401
3,632
1,090

6,615

8,074

9,049

2,540

3,616

4,110

-1,159

-1,389

-2,630

1,381

2,227

1,480

Subtotal, current programs

473,770

531,206

559,675

Unclassified:
Employer share, employee retirement
Offshore oil receipts
Medicare premiums
Other unclassified

-7,020
-6,250
-3,855
431

-8,214
-11,793
-4,229
4,128

-9,853
-11,895
-4,850
-2,069

-16,694

-20,107

-28,667

Total, civil

540,957

590,433

603,177

Budget total

728,375

805,202

848,483

14,333
208
93
3,687
1

14,262
15
22
1,771
2

5,947
37
54
1,866
4

18,322

16,072

7,908

-855
18
-154

897
-14
-116

1,766
2
-87

Subtotal, current programs

-990

767

1,681

Total, off-budget Federal entities

17,331

16,839

9,589

745,706

822,041

858,071

Interest received by trust funds
Other interest
Subtotal, net interest
General Administration:
International affairs
Legislative branch
Other general government
Other
Subtotal, general administration
Other current programs:
International security assistance
Other
Subtotal, other current programs

Subtotal, unclassified

Addendum:
Off-budget Federal entities (civil):
Investment-type programs:
Loans (see Table D - 7 )
Constructon and rehabilitation (Postal Service)
Acquisition of major equipment (Postal Service)
Major commodity inventories (Strategic Petroleum Reserve)
Other investment
Subtotal, investment-type programs
Current:
Aids to agriculture, commerce, and transportation:
Postal Service
Railways
Other

Total, including off-budget
* $500 thousand or less.

A-ll

SPECIAL ANALYSIS A

Table D - 7 TOTAL OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS
(In millions of dollars)
1982
actual

Grants-in-aid
Investment-type programs:
Construction and rehabilitation of physical
assets:
Highways
Mass transportation
Other transportation
Pollution control and abatement
Other natural resources and environment
Community development block grants
Other community and regional development
Other construction

1984
estimate

1983
estimate

7,730
2,588
339
3,756
314
3,792
1,379
253

8,549
2,696
582
3,100
255
3,525
1,266
310

11,754
2,859
987
2,800
146
3,526
1,095
517

20,151

20,284

23,683

Acquisition of equipment and other physical assets...

353

345

Conduct of research and development

290

294

238

3,332
7,189

2,912
6,962

2,843
6,708

10,521

9,874

9,551

31,365

30,819

33,834

17,391
4,460
6,646
4,873
3,285

19,326
5,769
6,847
5,923
3,260

20,799
5,220
5,932
6,320
3,225

Subtotal, construction and rehabilitation of
physical assets

Conduct of education and training:
Employment and training assistance
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 and other

3,482

4,314

4,387

40,136

45,439 i

45,885

987
1,494
2,567
2,276

1,149
1,629
2,571
2,628

930
1,933
2,500
1,846

Subtotal, social services and related programs

7,325

7,977

7,209

Aids to agriculture, commerce, and transportation:
Transportation
Other

1,457
3

1,418
3

756
2

Subtotal, aids to agriculture, commerce, and
transportation

1,461

1,421

758

Subtotal, provision of benefits
Social services and related programs:
Employment programs
Human development services
Social services and child welfare services
Other

380-700

0 -

83 -

8 QL :

B-18

THE BUDGET FOR FISCAL YEAR 1984

Table D - 7 . TOTAL OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1982
actual

Repair, maintenance, and operation of physical
assets

1984
estimate

1983
estimate

439

541

372

4,569
1,433
681

4,567
1,343
725

4,567
1,931
759

6,682

6,635

7,257

Regulation, control, and law enforcement

601

517

525

Other current programs

184

188

Subtotal, current programs

56,829

62,718

62,092

Total, grants-in-aid

88,194

93,537

95,926

1,913
73
6,084
687
1,453
-12
-304
424
228
-125

1,753
96
3,962
491
320
97
-271
447
-404
187

2,145
93
-2,157
108
148
42
-215
295
244
-95

10,420

6,678

608

General purpose fiscal assistance:
General revenue sharing
Shared revenues
Other
Subtotal, general purpose fiscal assistance

Loans
International affairs
Energy supply
Agriculture
Commerce and housing credit
Mortgage credit and thrift insurance
Transportation
SBA disaster loan fund
Education
Veterans
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

1,502

1,333

1,515

3,527
2,220
1,055
2,148
436
551
536

4,693
2,062
967
2,349
480
601
626

5,515
1,922
875
2,173
660
775
522

Subtotal, construction and rehabilitation of
physical assets

10,472

11,778

12,444

44,664
1,398

56,544
1,640

70,199
803

46,062

58,184

71,002

Commodity inventories

1,955

2,070

1,021

Other physical assets

2,017

2,178

1,627

34,370

38,411

42,948

Acquisition of major equipment:
National defense
Other
Subtotal, acquisition of major equipment

Conduct of research and development

SPECIAL ANALYSIS

A-ll

Table D - 7 . TOTAL OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1982
actual

Conduct of education and training:
Assistance to veterans
Higher education
Elementary and secondary education
Employment and training assistance
Health training
Other

1983
estimate

1984
estimate

2,384
5,969
490
803
634
772

2,092
6,123
423
729
494
1,022

1,797
5,665
375
658
378
792

11,054

10,882

9,665

Collection of information

1,343

1,430

1,318

International development

2,019

2,263

2,301

110,793

128,529

143,841

152,054
54,553
49,150
6,439
1,708
22,310
10,339
4,604
6,864
1,201
2,973

165,546
59,284
55,859
7,116
1,564
29,997
11,293
5,205
7,851
1,205
2,970

175,836
62,202
63,205
7,518
1,289
27,402
10,318
5,845
6,938
1,123
3,018

2,037
1,273
2,709

2,560
1,403
3,025

2,390
1,476
2,995

6,020

6,989

6,860

318,215

354,878

371,554

889

988

891

5,373
707
288
532
1,944
2,060
1,191
1,442

13,218
789
396
802
1,208
2,474
1,337
1,960

12,019
400
397
617
1,072
2,549
1,316
1,760

Subtotal, aids to agriculture, commerce, and
transportation

13,537

22,183

20,129

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

61,533
74

66,989
1,134

74,045
929

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 and other
Subtotal, administrative expenses
Subtotal, provision of benefits
Social services and related programs

B-18

THE BUDGET FOR FISCAL YEAR 1984

Table D - 7 . TOTAL OUTLAYS FOR GRANTS-IN-AID, LOANS, AND DIRECT FEDERAL PROGRAMS—
Continued
(In millions of dollars)
1982
actual

Subtotal, repair, maintenance, and operation
of physical assets

1984
estimate

1983
estimate

61,607

68,123

74,974

6,777

6,517

7,372

Net interest

84,697

88,936

103,180

Other current programs:
Military personnel
Other national defense
Other

41,707
422
7,811

44,612
216
10,113

46,750
1,482
10,443

49,940

54,941

58,675

Subtotal, current programs

535,662

596,567

636,775

Total, direct Federal programs

646,455

725,095

780,616

-7,020
-6,250
-18,193
14,769

-8,214
-11,793
-19,576
19,475

-9,853
-11,895
-22,223
15,304

-16,694

-20,107

-28,667

728,375

805,202

848,483

130
-42
102
14,142

88
-43
173
14,045

59
-21
171
5,739

14,333

14,262

5,947

Regulation, control, and law enforcement

Subtotal, other current programs

Unclassified:
Employer share, employee retirement
Offshore oil receipts
Non-compulsory medicare premiums
Other unclassified
Subtotal, unclassified
Budget total
Addendum (Direct Federal):
Off-budget Federal entities:
Investment-type:
Loans:
Energy
Transportation
Community and regional development
Other
Subtotal, loans
Other investment-type programs

3,989

1,809

1,961

18,322

16,072

7,908

32,655

30,334

13,855

-855
18
-154

897
-14
-116

1,766

Subtotal, current

-990

767

1,681

Total, off-budget Federal entities

17,331

16,839

9,589

Total, including off-budget

745,706

822,041

858,071

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

-87

SPECIAL ANALYSIS E
BORROWING AND DEBT
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 guarantees and other assistance 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 by foreign residents, agency borrowing, agency
investment in Federal securities, the statutory debt limitation,
Government-guaranteed borrowing, and borrowing by Governmentsponsored 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 borrowing 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, "Federal Credit Programs/' 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 and the
economy of the programs contained in the 1984 Federal budget.
BORROWING AND REPAYING

DEBT

The Federal Government issues debt for two principal reasons.
First, it issues debt to the public, largely in order to finance the
Federal deficit. Second, it issues 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
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.

E-1

B-18

THE BUDGET FOR FISCAL YEAR 1984

Federal debt has been issued by the Treasury and is called "public
debt/' but a small portion has been issued by other Government
agencies and is called "agency debt." 2
Borrowing from the public—whether by the Treasury or by an
agency—has a significant impact on financial markets and the rest
of the economy, and is consequently an important concern of Federal fiscal policy. Borrowing from the public includes borrowing
from the Federal Reserve Banks as well as borrowing from commercial banks, foreign central banks, other financial institutions
and businesses, and individuals. The term "borrowing from the
Federal Reserve Banks" does not imply that the Treasury sells
debt securities directly to the Federal Reserve. Instead, the Federal
Reserve normally buys securities in the open market. In the past
the Federal Reserve was able to buy securities directly from the
Treasury only under exceptional circumstances and in amounts
limited by statute. The statutory authority for even these exceptions expired in 1981.
For most purposes borrowing from the Federal Reserve Banks
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 Banks 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 Banks 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 Banks 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 1982 through
1986. In 1982 the total Federal borrowing (net of the refunding of
securities)—i.e., the rise in gross Federal debt—was $143.0 billion.
The issue of debt to Government agencies was $8.1 billion, and the
issue of debt to the public was $135.0 billion. Of the increase in
debt held by the public, $10.0 billion was purchased by the Federal
Reserve System and $125.0 billion by the rest of the public. As a
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.

SPECIAL ANALYSIS A

A-ll

result of this borrowing, Federal debt held by the public increased
to $929.4 billion at the end of 1982. Gross Federal debt was $1,147.0
billion.
Table E - 1 . FEDERAL BORROWING
(In millions of dollars)
Borrowing or repayment (—) of debt
Description

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

1983
estimate

Debt outstanding, end of year

1984
estimate

1985
estimate

1986
estimate

144,181 237,020 222,784
-263
-189
-1,134

NA
NA

1,601,839
4,500

NA
NA

143,046 236,757 222,595 239,142 201,913

1,606,339

2,047,394

1982 actual

8,348
-295

21,766 : 19,605
-11
-9

8,054

21,757

1984
estimate

1986
estimate

NA
NA

257,775
1,136

NA
NA

35,295

45,662

258,912

339,869

134,993 215,000 203,000 203,847 156,251

1,347,427

1,707,525

NA
NA

10,031
124,961

NA
NA

19,594

NA
NA

'Agency investment in 1985 and 1986 is estimated as equal to the total trust fund surplus.
NA=Not available.

Borrowing from the public has fluctuated widely in the past
decade, largely in response to fluctuations in the economy. It rose
from $3.0 billion in 1974 to $82.9 billion in 1976 primarily because
of the 1974-75 recession and its aftermath, and it then fell to $33.6
billion in 1979 as the economy recovered. Borrowing rose again in
1980 and 1981 as the economy experienced further recession and
economic slowdown.
The borrowing from the public rose still again in 1982, to $135.0
billion, and is estimated to increase greatly in 1983 to $215.0 billion
before declining by a small amount to $203.0 billion in 1984. These
massive amounts of borrowing reflect in part the temporary but
nonetheless substantial effects of recession and disinflation. The
decline in real GNP and the sharp decrease in inflation reduce
money incomes, which reduces tax receipts; the decline in real
GNP and the rise in unemployment increase outlays for unemployment benefits and certain other programs; and the lag between the
decline in inflation and the fall in nominal interest rates sustained
very large and rapidly rising outlays for interest on the Federal
debt. The effects of disinflation are all the more striking as a
reason for the growth of borrowing compared to earlier years,
because the acceleration of inflation during the previous period
raised receipts more than outlays and thus temporarily kept down
the level of borrowing. Besides these economic effects, the massive

B-18

THE BUDGET FOR FISCAL YEAR 1984

amounts of borrowing reflect a structural imbalance between receipts and outlays, which is discussed in detail in Part 3 of the
Budget.
The economic assumptions behind these estimates are presented
in Part 2 of the Budget. The assumptions for 1983 are a forecast of
the economy. The assumptions for 1984 and later years, however,
are not intended as precise forecasts of future economic conditions.
Instead, they are trend projections, consistent with the economic
policy objectives of this Administration, that assume steady progress in reducing unemployment, inflation, and interest rates, and
in sustaining strong real economic growth. 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 at the levels currently planned. Under
these assumptions, the total Government deficit does not decline
substantially until 1986, at which time the borrowing from the
public declines correspondingly.
BORROWING AND GOVERNMENT DEFICITS

Table E-2 shows the relationship between borrowing from the
public and 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. The other means of financing
are:
• a decrease in Treasury's operating cash balances or in other
kinds of cash or monetary assets;
• an increase in monetary liabilities for checks outstanding,
accrued interest payable to the public, etc.;
• an increase in deposit fund balances, which are discussed on
pages E-19 to E-20, together with their effect on the means of
financing; and
• seigniorage, which is the face value of minted coins less the
cost of their production.
All of these other means of financing except seigniorage are
changes in Government asset or liability accounts and so may be
either positive or negative. In most years they add up to a positive
total amount, in which case they finance part of the deficit. Sometimes, however, they add up to a negative total amount, in which
case they, like the deficit, must themselves be financed by borrowing from the public. In 1982 the Government borrowed $135.0
billion from the public. Almost all of this amount, $127.9 billion,

A-ll

SPECIAL ANALYSIS A

was used to finance the Government deficit. The remaining $7.1
billion was used to finance the other means of financing, which had
a negative total amount.
Table E - 2 . MEANS OF FINANCING THE FEDERAL DEFICIT 1
(In millions of dollars)
1986
estimate

1982 actual

1983 estimate

1984 estimate

1985 estimate

-110,609
-17,331

-207,708
-17,045

-188,781
-14,042

-194,197 -147,692
-10,462
-9,447

-127,940

-224,754

-202,822

-204,660 -157,139

-11,911

7,200

4,130
338
390

1,475
572
507

376
-1,201
647

813

888

-7,053

9,754

-178

813

888

Total, requirements for borrowing from
-134,993
the public

-215,000

-203,000

215,000

203,000

Description

Budget surplus or deficit ( - )
Deficit ( - ) of off-budget Federal entities 2
Total, surplus or deficit ( - )
Means of financing other than borrowing from
the public:
Decrease or increase ( - ) in cash and
monetary assets
Increase or decrease ( - ) in liabilities for:
Checks outstanding, etc. 3
Deposit fund balances 4
Seigniorage on coins
Total, means of financing other than
borrowing from the public

Change in debt held by the public

134,993

-203,847 -156,251
203,847

156,251

'Several amounts have been assumed to be zero during 1984-86 because they are usually small and cannot be estimated accurately.
2 The off-budget Federal entities consist of the Rural Electrification and Telephone revolving fund, Rural Telephone Bank, SPR petroleum account,
Federal Financing Bank, Postal Service fund, one program of the U.S. Railway Association, and Synthetic Fuels Corporation.
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.
4 Does not include investment in Federal debt classified as debt held by the public.

The 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 balances, 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 single year and are 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.
Nevertheless, these other accounts did require a significant
amount of borrowing from the public in 1982 in order to be financed. This was due to the large increase in Treasury's operating
cash balance at the end of the year, which, as explained in a later
section, was needed to anticipate a possible delay in the extension
and increase of the statutory debt limit. As a result, Treasury's
cash balance on September 30, 1982, was larger than needed for
normal operations. The counterpart to the increase in cash balances during 1982 is the plan for a large decrease during 1983.
Since this is a means of financing for the Government, it will allow
borrowing in 1983 to be less than the size of the deficit.

B-18

THE

BUDGET

FOR

FISCAL

Y E A R

1984

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. The outlays of the budget and the offbudget entities combined must be in balance with receipts in order
for the Government not to have to borrow from the public (aside
from the relatively small effects of the other means of financing).
The amount of debt issued to Federal agencies depends largely
on the surpluses of the trust funds, which own 90% of the Federal
debt held by Government agencies. Agency investment in Federal
securities and the total trust fund surplus during 1981-84 are
compared in the table below (in billions of dollars):
1981
actual
Agency investment in Federal

debt.

Total trust fund surplus

1982
actual

1983
estimate

1984
estimate

10.3

8.1

21.8

19.6

6.8

6.3

18.4

16.9

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 cash assets not
currently invested.3
SIZE

A N D

G R O W T H

FEDERAL

DEBT

Gross Federal debt has risen substantially over the past half
century, from $16.9 billion in 1929 to $1,147.0 billion at the end of
1982. Table E-3 compares the trends since 1954 in gross Federal
debt and the amounts of debt held by Government accounts, the
public (including the Federal Reserve Banks), and the Federal Reserve Banks. During this period the gross Federal debt increased
over four times, with a fifth of the increase being held in Federal
Government accounts (primarily trust funds) rather than being
owed to the public. In the quarter century from the end of 1957 to
the end of 1982, gross Federal debt and debt held by the public
both increased at an average annual rate of 5.9%. Federal debt
held by the public apart from the Federal Reserve Banks rose a
little more slowly, at an average annual rate of 5.7%, with the
Federal Reserve Banks buying a large quantity of Federal debt in
the market and thereby expanding the reserves of the banking
system and increasing the Nation's money stock.
3 These "open book balances" are small relative to trust fund holdings of Federal debt, as shown in Special
Analysis C, "Funds in the Budget."

A-ll

SPECIAL ANALYSIS A
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

364.2
380.6
411.8
433.9
443.1
474.4

61.6
59.5
54.0
50.6
51.1
49.5

1960
1961
1962
1963
1964
1965
1966
1967
1968
1969

290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1

53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7

237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5

26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1

210.7
211.4
218.7
222.4
222.8
222.5
222.5
220.8
238.4
225.4

497.9
509.3
548.2
578.0
618.2
659.5
724.1
777.3
831.3
910.6

47.6
46.8
45.3
44.0
41.7
39.7
36.6
34.4
35.0
30.7

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

968.8
1,031.5
1,128.8
1,252.0
1,379.4
1,479.9
1,640.1
1,729.0
1,862.8
2,091.3
2,357.7

29.4
29.5
28.7
27.4
25.1
26.8
29.3
28.8
29.6
29.2
27.3

914.3
1,003.9
1,147.0
1,383.7
1,606.3
1,845.5
2,047.4

199.2
209.5
217.6
239.3
258.9
294.2
339.9

715.1
794.4
929.4
1,144.4
1,347.4
1,551.3
1,707.5

120.8
124.5
134.5
NA
NA
NA
NA

594.3
670.0
794.9
NA
NA
NA
NA

2,573.9
2,871.8
3,033.0
3,193.7
3,488.7
3,806.7
4,144.6

27.8
27.7
30.6
35.8
38.6
40.8
41.2

1970 2
1971
1972
1973 3
1974
1975
1976 4 .
TQ
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986

estimate
estimate
estimate
estimate

NA=Not available.
•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.
2Gross 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.
3A 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.
4Gross 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.

B-18

THE BUDGET FOR FISCAL YEAR 1984

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 chart below, 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, especially to finance World War II, and borrowing by other sectors was
restricted by low incomes and poor credit-worthiness during the
depression and by controls and scarcities during the war.

From 1945 to 1974, however, private debt increased as a proportion of total credit market debt in every single year, and likewise,
in every single year but one, the Federal debt held by the public
(including the Federal Reserve Banks) decreased as a proportion of
the total. During this period the average annual rate of growth was
1.1% for Federal debt held by the public, 10.0% for State and local
debt, and 9.7% for private credit market debt. By 1974, Federal
debt held by the public had declined to 17% of total credit market
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 A

A-ll

debt, and private debt had risen to 74% of the total. As a result of
these trends, Federal debt, though still important, became a relatively much smaller influence on the financial markets than it had
been at the end of World War II.
This uninterrupted trend ended in 1975 because of the large
Federal deficit caused by 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 recessions and other
factors during 1980-83 led to further increases in the percentage.
As a result of these events, Federal debt held by the public has
fluctuated within the range of 17-20% since 1970. Federal debt as a
percentage of total credit market debt was 19% at the end of 1982,
which is the same as in 1972.
During the same period following World War II, Federal debt
decreased relative to gross national product (GNP). As shown in
table E-3, debt held by the public equalled 61.6% of GNP at the
end of 1954 but declined steadily to 25.1% by the end of 1974. Since
then, however, primarily due to recessions, debt held by the public
has fluctuated as a percentage of GNP, at the same time as it has
fluctuated as a percentage of total credit market debt. As a result,
Federal debt held by the public as a percentage of GNP has fluctuated within the range of 25-31% since 1969. The percentage was
30.7% at the end of 1982, which is higher than in any other year
since 1969. Because of the reasons outlined in a preceding section,
Federal borrowing is estimated to be very large in 1983 and the
following years. As a result, debt held by the public is estimated to
rise to 38.6% in 1984 and 41.2% in 1986.
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 12.1%
in calendar years 1980-82 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 increased by four times between
1954 and 1982, table E-4 shows that the interest paid on this debt
increased by 19 times.
As a result, interest payments to the public have tended to grow
faster than GNP over this entire period. In the late 1950's interest
paid to the public was equal to 1.4% of GNP, whereas by 1970 it
had risen to 1.6% and by 1982 it had reached a record high of
3.2%. This percentage is estimated to rise further in 1983 and 1984
despite decreases in market interest rates, because of the large
borrowing necessary to finance the Federal deficit.

E-24

THE BUDGET FOR FISCAL YEAR 1.984
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
Banks2

Other

GNP

Total
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
1.37
1.43
1.35

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

1.62
1.53
1.44
1.50
1.50
1.49
1.44
1.50
1.52
1.55

8.73
7.96
7.40
7.78
7.80
8.29
7.75
7.39
7.09
7.70

1970
1971
1972
1973
1974
1975
1976
TQ
1977
1978
1979

20.0
21.6
22.5
24.8
30.0
33.5
37.7
8.3
42.6
49.3
60.3

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

15.6
16.3
16.6
18.5
22.4
24.7
28.7
7.6
33.0
39.2
48.3

3.5
3.7
3.7
4.3
5.5
6.1
6.3
NA
6.8
8.0
9.6

12.2
12.6
12.9
14.2
16.9
18.6
22.5
NA
26.2
31.2
38.6

1.61
1.58
1.47
1.48
1.62
1.67
1.75
1.77
1.77
1.87
2.05

7.99
7.78
7.20
7.53
8.30
7.42
7.73
7.96
8.07
8.54
9.59

75.2
96.0
117.5
128.4
144.8

14.8
17.1
19.9
20.6
21.5

60.4
78.9
97.7
107.8
123.3

12.5
13.4
15.7
NA
NA

47.9
65.5
82.0
NA
NA

2.35
2.75
3.22
3.38
3.53

10.22
11.63
13.10
13.11
14.29

1980
1981
1982
1'983 estimate
1984 estimate

'Total interest significantly exceeds the outlays for the net interest function in the budget, because the net interest function includes collections
of interest and interest paid to trust funds as offsets to outlays.
2 These figures are approximate. For most years they are estimated as the average of calendar year amounts. The 1982 estimate is tentative.
3 Includes both budget outlays and off-budget outlays. A historical series of outlays is published in the Budget, Part 9, table 24.
NA=Not available.

Interest paid to the public as a percentage of total Federal outlays
does not show the same sustained trend over the period as a whole. In
recent years, however, this percentage has also been rising steadily
and substantially. In 1982 interest paid to the public was 13.1% of
total outlays, which was much higher than the 7.2% just 10 years
before or the 8.1% just 5 years before. This percentage is estimated
to remain at 13.1% in 1983 but to rise to 14.3% in 1984. Thus, the

SPECIAL ANALYSIS A

A-ll

importance of interest on the debt relative to either GNP or Federal outlays is now both high and rising.
Since the end of World War II the composition of the Federal
debt has changed. Until a few years ago an increasingly large
proportion of marketable securities had a short maturity. One
contributing factor was the statutory ceiling of 4%% that has been
maintained since 1918 on the interest rate for Treasury bonds.
Long-term market rates exceeded 4 K% after 1965, so after that
year the ceiling 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, 1982, the amount of notes
outstanding with an original maturity over 5 years was $185.0
billion, of which $105.4 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 434%. In 1973 those bonds
held by Government accounts and the Federal Reserve Banks were
exempted from the interest rate limit, and since 1976 the amount
of the exemption for other bonds has been raised in eight steps to
$110 billion. The last increase to the exemption was from $70
billion to $110 billion, enacted in September 1982. The $70 billion
limit had been exhausted in February 1982, so from then until
September the Treasury was unable to issue any bonds. As of
December 31, 1982, $97.5 billion of the bonds outstanding had been
sold since the change of law in 1971, of which $75.4 billion were
held by the public exclusive of the Federal Reserve Banks. The
effective interest rates ranged from 6.1% to 15.8%.
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 4 years.
DEBT HELD BY FOREIGN RESIDENTS

During most of American history the debt of the Federal Government 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 1.0% of the total debt held by the public.

E-24

THE BUDGET FOR FISCAL YEAR 1.984

In the following years the debt held by foreign residents 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.
Table E-5. FOREIGN HOtDINGS OF FEDERAL DEBT
(In billions of dollars)
Debt held by the public
Fiscal year

Total

Foreign1

Borrowing from the
public
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
121.0
125.1

50.9
82.9
18.0
53.5
59.1
33.6

9.2
3.8
4.9
20.9
25.5
4.1

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
1981
1982

715.1
794.4
929.4

126.4
135.5
146.4

70.5
79.3
135.0

1.3
9.2
10.8

60.4
78.9
97.7

11.9
16.0
17.6

Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be small.
Borrowing from the public is defined as equal to the change in debt held by the public from the beginning of the year to the end, except to
the extent that the amount of debt is changed by reclassification. Reclassifications 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.
1

Foreign holdings began to grow much faster starting in 1970.
This change arose in part out of decisions by foreign monetary
institutions to intervene in foreign exchange markets. Because 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. Thus, the exchange market
intervention by foreign monetary institutions often acted to increase their official reserves of dollars. 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
was the massive current account surpluses of some countries, par-

SPECIAL ANALYSIS A

A-ll

ticularly the OPEC nations, since 1974. The counterpart to these
surpluses was the acquisition of financial assets, and the financial
assets acquired in the United States largely took the form of U.S.
Government securities.
Both of these factors became less important in 1982. Many foreign countries drew down their dollar reserves to finance intervention in the foreign exchange market, and the aggregate OPEC
current account surplus was eliminated. At the same time, the
financial strains in the world economy apparently led foreign holders of dollars to increase their preference for the maximum safety
of U.S. assets such as Government securities, relative to U.S.
dollar-denominated bank deposits in the Eurocurrency market. As
a result, increased foreign holdings of U.S. Government securities
in 1982 primarily reflected a shift in the composition, rather than
the size, of aggregate foreign dollar asset holdings.
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 1982 foreign holdings of Treasury
debt had reached $146.4 billion, which was 16% of the total debt
held by the public. Because of the rising interest rates, the interest
paid on foreign holdings of debt grew much faster than did the
foreign holdings themselves. The proportion of total interest paid
to foreign residents grew in roughly the same way as did the
proportion of the total debt held by foreigners.
In the years before 1970, when debt held by foreign residents was
relatively small, borrowing from the public was approximately the
same as borrowing from the domestic public. Since 1970, though,
borrowing from the domestic public has in some years been quite
different from total borrowing. As table E-5 shows, borrowing from
foreign residents was nearly all or a major part of total borrowing
from the public during 1970-73 and 1977-78, although it was only
8% during the past 4 years. For the period since 1970 as a whole,
borrowing from foreign residents was 21% of borrowing from the
public.
Most of the Federal debt held by foreign residents is owned by
foreign central banks or other official institutions and is denominated in dollars. Beginning in December 1978, however, the Treasury 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
acquired foreign currencies for use in intervention operations. No
securities of this kind have been sold since January 1980, and the
last issue will mature in July 1983.

380-700

9 QL

E-24

THE BUDGET FOR FISCAL YEAR 1.984
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, and
the disbursement of the proceeds from net borrowing is an outlay.
Borrowing by the off-budget Federal entities is treated in the same
manner as any other agency borrowing, although the outlays from
disbursing the borrowed money are not included in the budget
totals.
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 $1.6 billion or by one-quarter. The agency debt outstanding at the end of 1984 is less than 1.0% of gross Federal debt.
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 are to assist and
coordinate agency borrowing and guaranteed borrowing and to
reduce the cost to the Government of some of its borrowing operations. It has 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 $2.9 billion from the FFB in
1982 and are estimated to borrow $2.4 billion in 1983 and $3.7
billion in 1984. Under proposed legislation, this group of agencies
includes the Rural Housing Insurance Fund (which is part of the
Farmers Home Administration) as of the beginning of 1984. The
5 FFB purchases of guaranteed obligations are shown in table E - l l . The operations of the FFB are discussed
in some detail in Special Analysis F and in the Budget, Part 6.
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.

SPECIAL ANALYSIS A

A-ll

Table E-6. AGENCY BORROWING 1
(In millions of dollars)
Borrowing or repayment ( - ) of debt
Description

Borrowing from the public:
Agriculture: Farmers Home Administration2
Defense
Education activities:
College housing loans2
Higher education facilities 2
Health and Human Services2
Housing and Urban DevelopmentFederal Housing Administration
Housing for elderly or handicapped2
Government National Mortgage Assoc.2
Revolving fund (liquidating programs)2
Transportation: Coast Guard
Veterans Administration2
Export-Import Bank
Postal Service
Small Business Administration2
Tennessee Valley Authority
Total, borrowing from the public..
Borrowing from other funds:
Agriculture: Farmers Home Administration2
Defense
Education activities:
College housing loans2
Higher education facilities2
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 Administration2
Small Business Administration2.
Total, borrowing from other funds..

1982
actual

-31
-110

1983
estimate

-131

1984
estimate

-107

-7
-30
-82

Debt end
1984
estimate

141
129
242
61
5

-54

-59

-115
-24

66
52
240
44
*

-358

-69

-12

-254

-178

— 81
-840

309

250
93
1,725
3,363

-28
-19

118
24

- 6

209
47
5

-27
-15

134
45
188
34
269
63

- 1 6

-104
- 2 2

-74
-295

-9

-11

1,136

-1,134

-263

-189

4,500

Borrowing from Federal Financing Bank:
Agriculture: Farmers Home Administration: Rural Housing
insurance Fund 3
Export-Import Bank
National Credit Union Central Liquidity Facility
Postal Service
Tennessee Valley Authority
United States Railway Association

1,545
29
-67
1,375
-23

1,164
40
-67
1,300
-46

333
1,458
40
933
1,000
- 1 8

26,904
16,576
210
2,087
14,585
127

Total, agency borrowing from Federal Financing
Bank

2,858

2,390

3,746

60,489

Total, agency borrowing included in gross Federal
debt
ADDENDUM

* $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.
3 Under proposed legislation, the certificates of beneficial ownership sold by the Rural Housing Insurance Fund to the FFB will be reclassified as
agency debt at the beginning of 1984. This reclassification increases the amount of agency debt held by the FFB by $26,571 million as of the
beginning of 1984 but does not constitute borrowing from the FFB.

E-24

THE BUDGET FOR FISCAL YEAR 1.984

certificates of beneficial ownership previously sold by this fund
to the FFB are to be reclassified as agency debt at that time,
as explained on page E-29. This reclassification increases the
amount of agency debt held by the FFB by $26.6 billion but does
not constitute agency borrowing from the FFB. Upon enactment of
this legislation, the historical series of agency debt held by the FFB
and agency borrowing from the FFB will be revised retroactively to
be consistent with this treatment and with budget concepts.
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 8 years or is scheduled to take place
in the future. The change in agency debt outstanding is therefore
determined almost entirely 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. The Treasury component would be
correspondingly less.
By the end of 1984, $2.0 billion of agency debt, or over 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. A total of $2.2 billion, or nearly one-half 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 $153 million of agency debt will be family housing mortgages assumed by the Department of Defense (and Coast Guard)
under programs almost entirely terminated about two decades ago.
The remaining agency debt—$200 million, or 4% of the total—will
have been issued by the Federal Housing Administration, which
conducts the only program that has normally continued to borrow
from the public. It issues debentures as payment for insurance
claims on defaulted loans, so these securities could not be 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 the figures
on agency borrowing and debt and from the discussion of this
subject both in this special analysis and in all other parts of the
budget documents.

SPECIAL ANALYSIS A

A-ll

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. Since these are debt
transactions, purchases are not counted as budget outlays and redemptions are not counted as budget receipts.
Net investment by trust funds and other Federal agencies
reached a high of $19.7 billion in 1979. In 1980 and 1981, however,
due to recessions and certain structural factors, agency investment
declined to about $10 billion, and in 1982, as shown in table E-7, it
was $8.1 billion. Agency investment is estimated to rise to around
$20 billion in 1983 and 1984.
Total agency holdings of Federal securities will reach an estimated $258.9 billion by the end of 1984. This will comprise 19% of the
gross Federal debt. One major trust fund—the civil service retirement and disability trust fund—will account for nearly half of total
agency holdings and will have accounted for about four-fifths of
total agency investment during 1982-84. All the trust funds together will account for 90% of the holdings at the end of 1984. Nearly
all of the holdings in Government accounts will be Treasury debt,
and the holdings of agency debt will continue to decline by small
amounts.
The trust funds financed by the social security tax—old age and
survivors insurance (OASI), disability insurance (DI), and health
insurance (HI)—disinvested $5.2 billion in 1982. This was the seventh consecutive year of disinvestment by these three funds as a
whole. The financial conditions differ markedly among these funds,
with OASI having the most severe short-term problems. Without a
change to current law, OASI would be unable to pay full benefits
on a timely basis starting in July 1983.
The Administration supports the bipartisan solution recommended by the National Commission on Social Security Reform for OASI
and DI. This solution would restore the financial solvency of social
security. The Commission recommended a number of changes in
taxes, benefits, and the timing of the Federal payment for noncontributory military service credits. These recommendations (together
with several minor proposals), which are discussed in Parts 3,4, and 5 of the
Budget, are reflected in table E-7 and throughout the rest of the budget
estimates. The Commission's recommendations would increase the cash
resources of OASI by $19.6 billion in 1983 and $10.2 billion in 1984 and
would increase the cash resources of DI by $2.2 billion and $2.7
billion. As a result, investment by these three funds combined rises
by $8.2 billion from 1982 to 1983 instead of dropping sharply. These
individual fund figures do not include interfund borrowing. OASI
has borrowed $12.4 billion from HI and $5.1 billion from DI in 1983

E-24

THE BUDGET FOR FISCAL YEAR 1.984
Table E-7. AGENCY INVESTMENT IN FEDERAL SECURITIES
(In millions of dollars)
Investment or disinvestment ( - )
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 fundHousing and Urban DevelopmentFederal 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
Veterans Administration:
National service life insurance trust fund
Other trust funds
Other Federal funds
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 Service fund 2
Railroad Retirement account: Trust fund
Other Federal funds
Other trust funds
Other off-budget Federal entities
Other deposit funds 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
actual

1983
estimate

1984
estimate

— 11,223
3,360
2,658
2,053

13,629
568
-11,233
1,048

-12,246
8,028
152
1,506

366
-252
137
726
-3,882

302
203
157
1,367
-3,048

1,460

-436
-843

1,207

-118

608

160

260

182
-428
1,124
512
564
172

240
20
56
1,441
602

233
18
43
2,324

223
28
36
2,025
716

12,126
549
591
-723
276
623

13,501
856
-1,032
-709
212
456

14,806
452
-952
-99
342
741

- 2

4
8,348

21,766

19,605

-5
-100

-50
-7

-18

- 2 2

-4
-7

-11
-100

Total, investment in agency debt..

-295

Total, investment in Federal debt.

8,054

21,757

19,594

1,022

1,967
19,456
-1,032
1,367

3,158
17,817
-953
-428

-11

MEMORANDUM
Investment
Investment
Investment
Investment

by
by
by
by

Federal funds
trust funds
off-budget Federal entities
deposit funds 3

* $500 thousand or less.
•Investment in 1983 and 1984 is estimated as equal to interest collections.
2 Off-budget Federal entity.
3 Only those deposit funds treated as Government accounts.

5,710
591
731

SPECIAL ANALYSIS A

A-ll

and is estimated to borrow additional amounts from DI in 1984.
Because of this borrowing between funds, the amounts of investment
or disinvestment displayed in table E-7 for the individual funds do not
reflect the underlying financial conditions of the respective funds.
The Commission's recommendations' add large cash resources to
the funds in 1984, though not as much as in 1983. At the same
time, the shortfall under current law is higher in 1984 than in
1983. Consequently, while the combined level of investment of
these funds in 1984 is much higher than would be possible under
current law, it is not as high as in 1983. Partly as a result of this,
no single factor dominates the change in total agency investment
from 1983 to 1984 in the way that the change from 1982 to 1983 is
dominated by the effects of the Commission's recommendations on
the combined investment of OASI, DI, and HI. Much of the decline
in investment by these three funds in 1984 is offset by a $4.2 billion
rise in investment by the unemployment insurance trust fund. This
higher investment is primarily due to improved economic conditions, which increase unemployment insurance payroll tax receipts
and reduce unemployment compensation benefits.
A comparatively small amount of Federal debt is held by deposit
funds. Deposit funds are amounts held by the Federal Government
as an agent for others (such as State income taxes withheld from
Federal employees' salaries and not yet paid to the States); cash
collections awaiting determination as to their final disposition; and
other sums held temporarily before being refunded or paid into
some other fund. Deposit fund balances are thus not the property
of the Federal Government, and changes in balances are not included in the budget totals.
Most deposit funds consist of uninvested balances, but a few
funds are invested in Treasury debt and collect interest on their
investments. Since a deposit fund is not Federal property, its holding of Federal debt is normally treated as d&bt held by the public
rather than as debt held by a Government account. However, the
investments of three deposit funds are treated as agency investments rather than as debt held by the public. One of these is a
relatively small account that has the same characteristics as a
trust fund. The other two deposit funds contain receipts from rents
and royalties on the Outer Continental Shelf, the title to which is
in dispute between the Federal Government and the States. Until
title is settled, these amounts are being held in deposit funds. The
balances of these funds were first invested in Federal debt in 1980,
when they acquired $2.1 billion of Treasury securities. They acquired $2.0 billion in 1981, and, as shown in table E-7, they acquired $0.7 billion more in 1982 and are estimated to hold $5.7
billion at the end of 1984. The Treasury concluded that the Federal
claim on these receipts is sufficiently strong that it would be more

E-24

THE BUDGET FOR FISCAL YEAR 1.984

accurate to classify them as Government holdings of Federal debt
rather than as debt held by the public.
Increases in deposit funds, when they are not invested in Federal
debt, increase Treasury cash balances without affecting the Government deficit or debt. Therefore, they provide a means of financing the deficit without borrowing from the public. Such increases
appear as one of the "means of financing other than borrowing" in
tables E-2 and E-9. Decreases in uninvested deposit fund balances
have the opposite effect.
Deposit fund investment in Federal debt is defined to be borrowing from the public under the normal rule, according to which the
deposit funds are treated as part of the public. Consequently, under
the normal rule a deposit fund investment decreases the deposit
fund balances available to finance the deficit by means other than
borrowing from the public. This is shown as a decrease in liabilities
for deposit fund balances in table E-2 and E-9.
However, when deposit fund holdings are treated as holdings by
a Government account, the investment of deposit fund balances in
Federal debt is an agency investment. Debt held by the public is
therefore unchanged. Consequently, this transaction does not
reduce the amount of balances available to finance the deficit by
means other than borrowing from the public. This transaction does,
however, increase the gross Federal debt and the debt subject to
statutory limit (as shown in table E-9).
LIMITATIONS ON FEDERAL DEBT

Statutory limitations have normally been placed on Federal debt.
Until World War I, the Congress ordinarily authorized a specific
amount of debt for each separate issue. Beginning with the Second
Liberty Bond Act of 1917, however, the nature of the limitation
was modified in several steps until it developed into a ceiling on
the total amount of most Federal debt outstanding. 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 fiscal year 1968 under the Participation Sales Act of
1966; and
• other debt issued by Federal agencies that, according to explicit statute, is 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
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.

SPECIAL ANALYSIS A

A-ll

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 nearly
one-third 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
finance power facilities in 1959. The limit was $750 million. Subsequently, in order to enable TVA to finance additional facilities,
Congress raised the limit several times. It is now $30 billion. The
Postal Service is limited to $10 billion of securities outstanding and
$2 billion of annual borrowing. Proposed appropriation bill limitations would restrict its annual borrowing to $1 billion in 1984 and
would require that any borrowing for operating expenses during
1984 be limited to half this amount and 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
Gross Federal debt subject to statutory limit
Other debt subject to limit, and adjustments
Total, debt subject to limit

1983
estimate

1984
estimate

929,427
217,560

1,144,427
239,317

1,347,427
258,912

1,146,987

1,383,744

1,606,339

606

388
88
250
1,725
1,030
1

264
18
250
1,725
1,030

153
6
250
1,725
1,030

4,087

3,894

3,770

1,142,900
14

1,379,850
14

1,602,569
14

1,142,913

1,379,864

1,602,583

1982
actual

* $500 thousand or less.
•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 debt subject to the general statutory limit is a
very small amount of matured principal and interest. This is not
defined as part of gross Federal debt. To derive the debt subject to

E-24

THE BUDGET FOR FISCAL YEAR 1.984

limit from the gross Federal debt also requires a very small accounting adjustment.
The amount of debt subject to limit is compared in table E-8
with the gross Federal debt and the Federal debt held by the
public. The debt subject to limit was $1,142.9 billion at the end of
1982 and is estimated to rise to $1,602.6 billion by the end of 1984.
These amounts are three to four times as large as 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.
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. Congress passed two more such acts in 1982.
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. Because the debt subject to limit has been more than
$400 billion, new legislation has been required no later than the
date when each temporary increment expired. Three times in
recent years the temporary increment 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 auctions of new securities
and all sales of savings bonds. Such a situation creates uncertainty
in the securities market and forces the Treasury to take actions
that produce administrative costs.
The statutory debt limit was formerly raised only by normal
legislation. In September 1979, however, an alternative method of
enacting statutory debt limits was established by statute. The purpose of the change was for the House of Representatives to vote on
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 previously had the effect

SPECIAL ANALYSIS A

A-ll

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 usually been a part of the process that establishes a debt limit.
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 new
procedure relates 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. The debt limit may still be changed by ordinary
legislation, and both methods have been used since the new procedure went into effect.
The statutory debt limit was raised by ordinary legislation to
$985 billion on February 7, 1981, for the period ending September
30, 1981. On May 20, 1981, the Congress adopted the first budget
resolution for fiscal year 1982. The section revising the totals for
1981 declared that the appropriate debt limit for the rest of the
1981 fiscal year was $999.8 billion; the section on the 1982 totals
declared that the appropriate debt limit for the 1982 fiscal year
was $1,079.8 billion. Two joint resolutions were thus deemed to
have passed the House. The Senate did not take action until September 29, 1981, when it passed both resolutions. Because of uncertainty over when Congress would act, the Treasury had to briefly
postpone one auction of Treasury bills. The President signed the
resolutions on September 30, so the debt limit was raised to $999.8
billion for September 30 and $1,079.8 billion for the period from
October 1, 1981, through September 30, 1982. The increase for
September 30, even though just for a single day, was necessary to
permit all the transactions that would ordinarily take place on
that day.
The debt limit of $1,079.8 billion was not enough for the entire
fiscal year 1982. The date when the debt limit would be reached
was difficult to predict with exactness, and the Congress did not
take final action until the amount of debt came very close to the
limit. Because of uncertainty over when the debt would reach the
limit and when Congress would act, the Government securities
market felt disruptions and the Treasury was forced to alter its
plans for debt management. One issue of notes was postponed, and
offerings of bills and other notes were reduced in order to ensure
that the Government would stay under the limit. On June 22, 1982,
Congress passed the first budget resolution for fiscal year 1983,
which declared that the appropriate debt limit for the rest of fiscal

E-24

THE BUDGET FOR FISCAL YEAR 1.984

year 1982 was $1,143.1 billion. A joint resolution establishing this
as the debt limit was deemed to have passed the House, was passed
by the Senate the next day, and was signed into law on June 28.
The same budget resolution also declared that the appropriate
debt limit for fiscal year 1983 was $1,290.2 billion. It was uncertain
whether Congress would act on this resolution before October 1,
when the limit was scheduled to fall to $400 billion. Consequently,
Treasury borrowed virtually up to the debt limit at the end of
September, most importantly by issuing $7.0 billion of notes and
bonds that under normal circumstances would have been issued in
early October. This enabled Treasury to accumulate as much cash
as possible in late September so that it could pay the Government's
bills for as long as possible in October in the event that the debt
limit was not extended on time; and this also ensured that Treasury would not auction notes and bonds in late September that it
could not legally issue on the date due in early October. However,
the Senate passed the debt limit bill on September 23, and it was
signed into law on September 30. The new limit of $1,290.2 billion,
though, is substantially under the $1,379.9 billion of debt subject to
statutory limit that is estimated to be outstanding at the end of
1983. Therefore, a further increase will be necessary before September 30, 1983, in order for the Federal Government to meet its
obligations.
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 size of 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 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 or 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, analogous 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."

SPECIAL ANALYSIS A

A-ll

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 the trust
fund surpluses are mostly invested in securities issued by Federal
funds, and these securities are defined as Federal debt. If the trust
funds have $1 billion more of tax receipts, the Treasury has to sell $1
billion less of debt to the public but it has to issue $1 billion more of debt
to the trust funds. Therefore, the trust fund surplus does not reduce the
need for the Federal funds to issue debt in order to finance the Federal
funds deficit. Federal funds borrowing consists almost exclusively of
the Treasury selling debt securities that are subject to the statutory
limit. As a result, the Federal funds deficit must generally be financed
by an increase in debt subject to statutory limit.
The deficits of the off-budget Federal entities are generally financed in the same way as the Federal funds deficit. Therefore, 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 or deposit 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 total 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 (however, if the sum of these other means of
financing is negative, then these other means comprise a further
amount that has to be financed.)9 A small portion may be financed
by the Federal funds or off-budget entities (or certain deposit
funds 10) selling their investments in Federal debt. Another small
portion may be financed by these funds or entities issuing debt that
is not subject to the statutory limit. The remainder of the amount
to be financed can only be financed by selling debt subject to the
statutory limit. This ordinarily comprises most of the total. Thus,
the sum of the deficits of the Federal funds and the off-budget
Federal entities approximately determines the increase in debt
subject to statutory limit.
In 1982, for example, the total Federal funds and off-budget
deficit to be financed was $134.2 billion. The means of financing
other than borrowing required an additional $6.5 billion of financing by debt subject to limit, primarily because of the increase in
cash discussed previously. The Federal funds, the off-budget entities, and certain deposit funds increased their holdings of Federal
debt by $2.3 billion, which had to be financed by still further
borrowing in the same way as their deficits had to be financed; and
they decreased their debt outstanding that was not subject to limit

E-24

THE BUDGET FOR FISCAL YEAR 1.984

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
Means of financing other than borrowing:
Decrease or increase ( - ) in cash and monetary assets
Increase or decrease ( - ) in liabilities for:
Checks outstanding, etc
Deposit fund balances2
Seigniorage on coins
Total, means of financing other than
borrowing
Decrease or increase ( - ) in investments in
Federal debt by Federal funds, off-budget entities, and deposit funds 3
Increase or decrease ( - ) in Federal funds and
off-budget entity debt not subject to limit

1982
actual

1983
estimate

1984
estimate

1985
estimate

1986
estimate

-116,860 -226,102 -205,721 -229,493 -193,354
-9,447
- 1 7 , 3 3 1 - 1 7 , 0 4 5 -14,042 - 1 0 , 4 6 2
-134,191 -243,147 -219,763 -239,955 - 2 0 2 , 8 0 1

-11,911

7,200

4,672
338
390

412
572
507

-500
-1,201
647

813

888

-6,511

8,691

-1,054

813

888

-2,343

-2,302

-1,777

-1,037

-193

-124

Total, requirements for borrowing subject to debt limit
-144,083 -236,951 -222,719 -239,142 -201,913
Change in debt subject to limit but not part of
Federal debt, and adjustments
Change in debt subject to limit

11
144,095

236,951

222,719

239,142

201,913

* $500,000 or less.
'Several amounts have been assumed to be zero during 1984-86 because they are usually small and cannot be estimated accurately.
2 Does not include investment in Federal debt securities classified as debt held by the public.
3 Only those deposit funds treated as Government accounts.

by $1.0 billion, which had to be replaced by an equal amount of
debt that was subject to limit. Therefore, a total of $144.1 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 uninvested cash assets 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 uninvested cash
assets of the trust funds is recorded as an increase in the liabilities
of Federal funds for checks outstanding, etc. (i.e., an increase in the
liabilities of Federal funds to trust funds). This increases the Federal funds means of financing other than borrowing, which in turn
reduces the requirement for borrowing subject to the statutory
9The amounts for means of financing other than borrowing exclude the 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 table E - 9 they are all assumed to be in liabilities for checks outstanding, etc.
10Only those deposit funds treated as Government accounts.

SPECIAL ANALYSIS A

A-ll

limit. The uninvested cash assets of the trust funds do not usually
change a great deal from year to year. By law the trust fund
surpluses must generally be invested in Federal debt, and during
1973-82 the increase in trust fund holdings of Federal debt
equalled 96% of the cumulative trust fund surplus. Consequently,
the effect of the trust fund surplus on debt subject to limit is
minor.
Since the trust fund holdings of Federal debt are included almost
entirely in debt subject to limit, but not in debt held by the public,
the amount of debt held by the public is substantially less than the
amount of debt subject to limit. Since the trust funds as a group
almost always have a surplus, the change in debt held by the
public from one year to the next is almost always less than the
change in debt subject to limit. As can be calculated from table
E-8, during 1983 and 1984 the debt subject to limit is estimated to
increase by $459.7 billion, whereas the debt held by the public is
estimated to increase by $418.0 billion.
The present analysis helps to demonstrate the difficulty in preventing a continual rise in the Federal debt. Table E-2 showed that
the Government would have to borrow from the public even if the
budget were exactly balanced, because it would have to finance the
deficit of the off-budget Federal entities. Table E-9 shows that the
debt subject to statutory limit would almost surely continue to rise
even if the total Government deficit were exactly zero and, as a
result, the debt held by the public remained constant (that is, even
if the budget had a surplus, and this surplus was large enough so
that the budget and off-budget outlays were together just in balance with receipts). In order to keep constant the debt subject to
limit, the following condition must be met as an approximation:
the Federal funds portion of the budget must have a surplus, and
this surplus must be as large as the off-budget deficit. If this
condition is met, the "amount to be financed" in table E-9 would
be zero, and (as an approximation) the requirements for borrowing
subject to the debt limit would be zero. Because the trust funds
almost always have a surplus, a balance in the budget (plus the offbudget entities) would imply that there would still be a deficit in
the Federal funds (plus the off-budget entities). Therefore, it is
more difficult to have a balance in the Federal funds plus the offbudget entities than it is to have a balance in the budget plus the
off-budget entities; and, in consequence, it is more difficult to prevent a rise in the debt subject to statutory limit than in the debt
held by the public.
This can be illustrated by comparing the borrowing from the
public in table E-2 with the borrowing subject to the debt limit in
table E-9. From 1983 to 1986, borrowing from the public decreases
by $58.7 billion, in line with the decline in the total Government

E-24

THE BUDGET FOR FISCAL YEAR 1.984

deficit. Table E-9 shows, however, that borrowing subject to the
debt limit decreases by only $35.0 billion. This difference is primarily because a large part of the reduction in the total Government
deficit is accounted for by a $27.3 billion increase in the trust fund
surplus. This reduces borrowing from the public by an equal
amount but does not reduce the need to issue debt subject to the
statutory limit.
This analysis also applies to the difficulty in preventing a continual rise in the gross Federal debt. Gross Federal debt is nearly the
same as debt subject to statutory limit, as explained in the previous section. Therefore, the same approximate condition is necessary in order to prevent a continual rise in gross Federal debt: the
Federal funds portion of the budget must have a surplus, and this
surplus must be large enough so that the Federal funds and the offbudget entities are together in balance.
FEDERALLY ASSISTED BORROWING

The effect of the Government on borrowing in the credit market
arises not only from its own borrowing to finance Federal operations but also from its assistance to certain borrowing by the
public. Federally assisted borrowing is of two principal types: Government-guaranteed borrowing, and borrowing by Governmentsponsored enterprises.
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 another term for guaranteed lending.
Guaranteed loans include most loan asset sales made by Federal
agencies. Loan assets are loans that an agency has made to the
public and for which repayments are still owed. 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 budget outlays caused by the direct
loans are offset by the amount of the sales of 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

SPECIAL ANALYSIS A

A-ll

classified as Federal debt according to the recommendations of the
President's Commission on Budget Concepts.11 The Commission
concluded that, as a means of financing outlays, there is no difference between an agency selling securities labeled "certificates of
beneficial ownership," the same agency selling securities labeled
"debt," and the Treasury selling securities labeled "debt." 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 the Farmers Home Administration before FFB was established are still outstanding and continue to mature. The net amount of sales to the
FFB less repayments (i.e., the increase in certificates outstanding
held by the FFB) is shown below for 1981-84 (in millions of dollars):
1981
actual

Farmers Home Administration
Rural Electrification and Telephone revolving fund

10,860
683

1982
actual

4,915
528

1983
estimate

4,171
565

1984
estimate

560
465

Under proposed legislation, the certificates of beneficial ownership sold by one of the funds comprising the Farmers Home Administration—the Rural Housing Insurance Fund—will be treated
as agency debt as of the beginning of 1984. This reclassification
increases the amount of agency debt outstanding held by the FFB
by $26.6 billion at the beginning of 1984; and it reduces the amount
of guaranteed loans outstanding held by the FFB by an equal
amount. This reclassification does not, however, constitute agency
borrowing from the FFB, nor does it constitute the repayment of
guaranteed loans. Borrowing by the Rural Housing Insurance Fund
from the FFB during 1984 is shown in the addendum to table E-6
as $333 million. Upon enactment of this legislation, the historical
series for budget outlays, agency debt held by the FFB, and agency
borrowing from the FFB will be revised retroactively to be consistent with this treatment and with budget concepts.
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 loan guarantees is to support housing, but in recent
years guarantees have increasingly been used for other purposes.
As shown subsequently in table E - l l , primary guaranteed borrowing (which excludes guarantees of loans previously guaranteed and
also direct loans made by one Federal agency and guaranteed by
11 Report of the President's Commission on Budget Concepts (Washington: U.S. Government Printing Office,
1967), pp. 8, 47-48, and 54-55.

380-700

0 -

83 -

10 QL : 3

E-24

THE BUDGET FOR FISCAL YEAR 1.984

another) was $20.9 billion in 1982 and is estimated to be $55.8
billion in 1983 and $48.9 billion in 1984. Special Analysis F presents detailed data on guaranteed loans and loan asset sales.
The other type of federally assisted borrowing is borrowing by
Government-sponsored enterprises. These enterprises 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.12 Therefore the transactions of these
enterprises are not included within the Federal budget, and their
debt is not part of gross Federal debt.
The seven Government-sponsored credit enterprises are essentially financial intermediaries. They borrow in the securities market
and lend 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, the Federal Home Loan Banks,
and the Student Loan Marketing Association are required to obtain
Treasury approval of the terms and timing of specific offerings.
The Student Loan Marketing Association (SLMA) borrowed exclusively from the Federal Financing Bank from the time of FFB's
establishment until May 1981.13 Since that time SLMA has also
sold notes to the public, without a guarantee, and beginning in
1982 has borrowed from the public to finance all of its increase in
debt outstanding above $5.0 billion. The three enterprises regulated
by the Farm Credit Administration—the Banks for Cooperatives,
Federal Intermediate Credit Banks, and Federal Land Banks—now
borrow by issuing consolidated Farm Credit bonds and notes rather
than securities under their separate names.
Government sponsorship of these enterprises has given them
various direct benefits. These benefits differ from one enterprise to
another and from one type of debt security to another, but they
generally include such advantages as the following: the debt securities can be held by federally regulated financial institutions in a
number of cases where other private securities or State and local
securities are not eligible; the enterprises are exempt from Federal
Ibid., pp. 29-30.
is the only Government-sponsored enterprise whose new securities can be guaranteed by the Government and therefore bought by the FFB. The Secretary of Education has authority to guarantee SLMA securities
issued prior to October 1, 1984.
12

13 SLMA

SPECIAL ANALYSIS A

A-ll

income taxation; the interest on their debt securities is exempt
from State and local income taxation; and the enterprises are
perceived to have a special relationship with the Federal Government. Because of these benefits, the Government-sponsored enterprises can borrow at interest rates only slightly higher than the
interest rates paid by Treasury on Federal debt. Furthermore, 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 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
1983-84 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 or repaying its debt to them.
Borrowing by Government-sponsored enterprises has recently
risen to much higher levels than before. Until 1978 the largest
amount of borrowing by this sector as a whole had been $14.9
billion in 1974. Borrowing increased sharply to $24.1 billion in
1978, however, and then grew further to $27.5 billion in 1980 and
$38.6 billion in 1981. Borrowing in 1982 expanded to $47.8 billion,
and the Government-sponsored enterprises estimate that it will
increase to $53.8 billion in 1983 and $54.7 billion in 1984.
This large growth in borrowing is due primarily to the three
Government-sponsored enterprises that borrow to support housing
through the mortgage market: the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation
(FHLMC), and the Federal Home Loan Banks (FHLB). During
1982-84 they borrow 82% of the total funds raised by sponsored
enterprises, whereas in previous years they borrowed on the average only 64%.
In 1981, as shown in table E-10, the FHLB alone predominated
in Government-sponsored borrowing. It borrowed more than half of
the total funds raised by sponsored enterprises in that year, and its
increase in borrowing over 1980 ($14.6 billion) was more than the
increase in borrowing by the sector as a whole. This borrowing was
used to meet the demand for advances by the FHLB's member
savings institutions, primarily savings and loan associations, which
borrowed much more from the FHLB than they repaid.

E-24

THE BUDGET FOR FISCAL YEAR 1.984
Table E-10. BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES
(In millions of dollars)
Borrowing or repayment ( - )
Description

Education activities: 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

1981
actual

1982
actual

1983
estimate

Debt
outstanding
end 1984
estimate

1984
estimate

2,223

2,325

1,404

1,175

9,472

4,342

19,251

27,813

24,870

128,622

737
1,921
6,819

-423
-258
5,427

1,252
1,991
5,181

1,104
2,535
5,968

11,055
25,549
57,652

21,029
1,847

3,216
17,430

-2,197
17,836

-270
18,647

58,377
77,256

38,917

46,968

53,280

54,029

367,984

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

280

-881

-500

-700

2,481

Total, borrowing by Government-sponsored enterprises

38,637

47,849

53,780

54,729

365,503

Total

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

The pattern of sponsored borrowing has shifted, however, away
from the FHLB and toward FNMA and FHLMC. This is summarized in the table below, which shows the change in the level of
borrowing from one year to the next (in billions of dollars):
1983
estimate

1984
estimdte

-17.8
Federal Home Loan Banks
30.5
Federal National Mortgage Association and Federal Home Loan Mortgage Corporation...
-4.6
Other

-5.4
9.0
2.8

1.9
-2.1
1.0

8.1

6.3

0.7

1982
actu3t

Total

The FHLB's borrowing fell by $17.8 billion in 1982, from $21.0
billion to $3.2 billion. This was due to a decrease in its net loans to
savings institutions of $18.1 billion. Its advances were large, but
the repayment of its advances rose greatly and was even larger.
The decrease in FHLB borrowing was more than offset by a $30.5
billion increase in FNMA and FHLMC borrowing combined. As
explained in Special Analysis F, "Federal Credit Programs/' this
was due in large part to the FHLMC greatly expanding its program
of mortgage-backed participation certificates and FNMA introducing its own program of mortgage-backed securities. Both of these
programs purchase conventional mortgages, package them into
pools, and sell participation certificates in these pools. FHLMC and
FNMA estimate that they will expand their programs further in

SPECIAL ANALYSIS A

A-ll

1983, by enough to raise their borrowing $9.0 billion, and will
maintain nearly the same lev4 of borrowing in 1984. Thus, support
for the mortgage market by Government-sponsored enterprises has
shifted away from direct loans to savings institutions (FHLB) and
toward mortgage purchases (FNMA and FHLMC) from mortgage
banking companies and financial institutions.
Borrowing by the other Government-sponsored enterprises is not
estimated to change so greatly. FHLB borrowing is estimated to
decrease further in 1983, but to a much smaller extent than in
1982, and then to rise a little in 1984. The Farm Credit Banks and
Student Loan Marketing Association, in total, estimate that they
will increase their borrowing by small amounts in both years.
The Federal Government provides a different kind of assistance
to State and local government borrowing than it does to other
borrowers through loan guarantees and Government-sponsored enterprises. It exempts the interest on State and local debt from
Federal income tax. This reduces the interest rate these governments have to pay and thereby encourages them to borrow larger
amounts. Tax exemption has also been extended to certain bonds
nominally issued by a State or local government to raise funds for
private purposes. These private purpose bonds, such as industrial
development bonds, now comprise nearly half of all new long-term,
tax-exempt issues. In 1982 the total tax-exempt borrowing estimated in the Federal Reserve flow-of-funds accounts was $46.2 billion,
of which $3.3 billion was also guaranteed by the Federal Government. Tax-exempt borrowing is discussed further in Special Analysis F, "Federal Credit Programs/' and, from a different perspective,
in Special Analysis G, "Tax Expenditures/'
TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING

Table E - l l summarizes Federal and federally assisted borrowing.
Federal borrowing from the public is presented in total. 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 net amounts 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.
This is because 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.
About three-fifths of Federal and federally assisted borrowing
each year during 1982-84 is made up of Federal borrowing to
finance the budget deficit. Another portion is made up of Federal
borrowing to finance the off-budget deficit, most of which is ac-

E-24

THE BUDGET FOR FISCAL YEAR 1.984

Table E - l l . NET BORROWING BY GOVERNMENT, GOVERNMENT-GUARANTEED BORROWERS, AND
GOVERNMENT-SPONSORED ENTERPRISES
(In billions of dollars)
Borrowing or repayment ( - )
Description

Federal borrowing from the public 1
Guaranteed borrowing2
Less increase in guaranteed loans held by Federal agencies:
Federal Financing Bank
Government National Mortgage Association
Primary guaranteed borrowing3
Borrowing by Government-sponsored enterprises4
Less increase in holdings of Federal debt
Less increase in Government-sponsored debt held by Federal
agencies:
Federal Financing Bank
Tennessee Valley Authority
Less increase in holdings of guaranteed loans.Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation
Farm Credit Banks
Student Loan Marketing Association5
Net Government-sponsored borrowing
Total, Federal and federally assisted borrowing

1982
actual

1984
estimate

1983
estimate

Debt
outstanding
end 1984
estimate

135.0

215.0

203.0

1,347.4

34.8

69.4

59.0

533.6

14.2
-.2

14.2
-.6

10.2
-.1

94.4
3.4

20.9

55.8

48.9

435.8

47.8
2.6

53.8
-.4

54.7
-.3

365.5
3.8

.7
.1
- 1_. 0*

5.0
.1
-.7

-1.2

1.6

1.4

1.2

36.9
.1
1.0
.1
4.5

43.8

53.5

55.0

314.0

199.7

324.3

306.8

2,097.2

_ *

_*
_*

* $50 million or less.
'See table E-l.
2This line is the same as "guaranteed loans (net)" in table F-9 of Special Analysis F. To avoid double counting, it is calculated net of
guarantees of loans previously guaranteed and guarantees of Federal agency debt.
3 "Primary guaranteed borrowing" in this table is the same as "primary guaranteed loans" in table F-9.
4 From table E-10.
5 The increase in holdings of guaranteed loans by the Student Loan Marketing Association is subtracted out on this line only to the extent that
SLMA borrows from the public. To the extent that SLMA borrows from the FFB, the increase in holdings of guaranteed loans is ultimately
financed by Federal borrowing and the loans are therefore classified as direct loans rather than guaranteed loans. This amount is subtracted out
above as an increase in Government-sponsored debt held by Federal agencies.

counted for by the Federal Financing Bank's purchases of guaranteed obligations. As shown in table E - l l , the FFB is estimated to
buy one-quarter of the total increase in guaranteed obligations
outstanding during these years. Since the 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 1982-84 comprises 67% of total Federal and federally assisted borrowing; Federal debt held by the public at the end
of 1984 is 64% of the total Federal and federally assisted debt
outstanding.
The following chart depicts the trends in Federal and federally
assisted borrowing from 1966 to 1984. The series are volatile, and
the fluctuations are dominated by Federal borrowing, which is
driven primarily by the Federal deficit. The fluctuations in the
Federal deficit, in turn, are strongly related to the pattern of

SPECIAL ANALYSIS A

A-ll

recession and recovery. Total Federal and federally assisted borrowing increased steadily and substantially from $80.8 billion in
1979 to $199.7 billion in 1982. Federal and federally assisted borrowing is estimated to increase still further to $324.3 billion in
1983, largely due to a rise in Federal borrowing. In 1984 all three
types of Federal and federally assisted borrowing are estimated to
level off, and the total is estimated to decline by a small amount.

As the chart shows, Federal and federally assisted borrowing is
now a great deal higher than a decade ago. Much of the increase
parallels the growth in the economy and in the total funds raised
by the non-financial sector through borrowing in the credit market.
However, total Federal and federally assisted borrowing has increased as a proportion of the total funds raised. This proportion
increased from 17% during 1960-69 to 21% during the first half of
the 1970's and 27% during the second half. In 1980 and 1981 the
proportion was higher still, reaching 34% and 33% in those 2
years, respectively; and in 1982 the proportion rose sharply to 49%.
Thus Government programs have recently influenced the allocation of funds raised in financial markets more than they did in the
preceding years.

SPECIAL ANALYSIS F
FEDERAL CREDIT PROGRAMS
Federal and federally assisted credit programs play a significant
role in the functioning of the Nation's economy and financial markets. This credit assistance is 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. Upon assuming office, the Administration took immediate steps to revise the excessive growth
trends of Federal credit activity. An interagency Cabinet-level
group was formed and undertook a comprehensive review of the
Government's direct and guaranteed loan programs in order to
shape a consistent credit policy. Although legislative success has
been limited, Administration proposals for credit budget discipline
have served to increase awareness of the serious effects Federal
credit activity have had on the Nation's economy and financial
markets. In the 1984 Budget, the Administration continues its
strong commitment to control the growth of Federal credit and to
strengthen the credit budget framework by proposing a 9% decrease below the 1983 levels.
Much like Federal expenditures on goods and services or transfer
payments, credit programs change the allocation of resources and
the distribution of income. But these programs are not without
cost. Recent experience has shown that these programs preempt
private sector investment resources, and this absorption has an
inhibiting effect on productivity and economic growth. Moreover,
Federal credit distorts the market's assessment of true risk and
return.
This special analysis presents basic information on Government
credit programs and plans over the budget period. It summarizes
major trends in the credit activity of the Federal Government and
Government-sponsored enterprises and presents the estimates of
direct loans and guaranteed loans by major program groupings,
agencies, and enterprises from 1982 through 1988.
Reporting on Federal credit activities in the budget has expanded considerably in recent years. This year will be the first publication of long range credit budget estimates. Part 5 of the Budget
presents information about major credit programs in the context of
the budget functions for meeting national needs. Part 5 also shows
the lending activities of the Federal Financing Bank according to

F-l

E-24

THE BUDGET FOR FISCAL YEAR 1.984

function. Part 6 examines the debt transactions of the Federal
Government, the oulays of off-budget Federal entities, loan guarantees, and Government-sponsored enterprises. Part 7 describes the
credit budget and its place in the budget process. The Budget
Appendix shows details and descriptions of the lending activities of
individual budget accounts. Special Analysis E, "Borrowing and
Debt" analyzes Federal borrowing and debt in some detail.
FORMS OF FEDERAL CREDIT

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. 1 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. 2 Tax-exempt bonds are obligations with
exemption from Federal income tax on the interest income they
produce, which allows them to be sold at interest rates below those
for taxable securities. The subsidy is the difference between the
tax-exempt and taxable interest rates.
An element of subsidy is involved in all forms of Federal credit
since assistance is given on terms or conditions more favorable
than would have been available in private capital markets. A
subsidy is provided, in general, because the Federal Government
accepts risks that lenders in private capital markets are unwilling
to bear or would bear only at higher interest rates than the Federal Government charges. Because interest subsidies reduce the cost
of borrowing to the recipient, they are equivalent to cash grants to
the borrower. In a wide variety of instances, Federal assistance of
comparable value can be provided with either cash payments,
credit assistance, or tax preferences. The subsidy is most easily
recognized when Federal credit assistance provides an interest rate
lower than could be provided in private capital markets. The subsidy is less visible if the Federal credit assistance provides for a
lower interest rate from a private lender, longer maturities, higher
loan-to-value ratios, or greater liquidity than would have been
available in private capital markets.
1 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.
2 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 A
TRENDS AND

A-ll

DIRECTIONS

Table F - l summarizes data on Federal participation in domestic
credit markets during the last decade. It measures the volume of
Federal and federally-assisted credit relative to total lending and
borrowing in U.S. credit markets by nonfinancial sectors.3 This
table uses two measures of Federal participation—lending (funds
advanced) and borrowing (funds raised).
Net funds advanced in a given year are the difference between
the amount of loans outstanding at the beginning and at the end of
that year. The total amount of funds advanced under Federal
auspices has risen over four fold in the last decade, reaching $87.6
billion in 1982 and is estimated to reach $115.2 billion in 1984. The
Federal participation rate for total funds advanced in U.S. credit
markets reached a high for this decade of 21.8% in 1980. However,
estimates for 1983 suggest that net funds advanced will increase
substantially over 1982 primarily due to the expected surge in
demand for guaranteed loans in housing programs and lending by
Government-sponsored enterprises, both of which are discussed in
later sections of this Special Analysis.
The other measure of Federal participation is funds raised (borrowed) under Federal auspices, which includes funds raised for
Federal loan guarantee 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 13% to 49%
of total borrowing over the past decade. The volatility is due primarily to swings in the budget deficit. This participation rate peaks
in 1982 due to increases in Federal borrowing from the public,
borrowing for guaranteed loans and Government-sponsored enterprise borrowing. Table F-12 summarizes the components of Federal
credit advanced and raised under Federal auspices.

3The Government-sponsored enterprises are financial intermediaries, whereas the data in table F-l for total
funds raised are defined as only including nonfinancial sectors. Financial institutions are excluded to avoid
double counting. Nevertheless, the Government-sponsored enterprise borrowing, as well as Federal borrowing
from the public and guaranteed loans, is properly compared with total funds raised. This is because the
Government-sponsored enterprise borrowing stands as a proxy for the borrowing by nonfinancial sectors that is
intermediated by the sponsored enterprises. The Federal assistance to Government-sponsored enterprises assists
the ultimate non-financial borrowers whose loans are purchased or otherwise financed by the sponsored
enterprises.

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

Estimates

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

Total funds advanced in U.S. credit markets 1
Advanced under Federal auspices
Direct loans:
On-budget
Off-budget
Guaranteed loans
Government-sponsored enterprise loans
Federal participation rate (percent)

198.2
26.1

187.5
25.5

177.9
27.0

243.1
26.9

64.8
6.7

308.3
36.7

383.4
58.4

426.4
72.9

366.4
79.9

427.2
86.5

408.7
87.6

130.9

115.2

0.9
0.1
16.6
8.5
13.2

3.3
0.8
10.3
11.2
13.6

5.8
7.0
8.6
5.6
15.2

4.2
6.7
11.1
4.9
11.1

1.1
2.6
-0.1
3.1
10.3

2.6
9.0
13.5
11.7
11.9

8.6
11.2
13.4
25.2
15.2

6.0
13.6
25.2
28.1
17.1

9.5
14.7
31.6
24.1
21.8

5.2
20.9
28.0
32.4
20.2

9.1
14.3
20.9
43.4
21.4

5.2
14.4
55.8
55.5

-0.3
10.4
48.9
56.2

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

198.2
46.5
19.3
16.6
10.6
23.5

187.5
24.2
3.0
10.3
10.9
12.9

177.9
64.8
50.9
8.6
5.3
36.4

243.1
98.1
82.9
11.1
4.1
40.4

64.8
19.3
18.0
-0.1
1.4
29.8

308.3
79.0
53.5
13.5
12.0
25.6

383.4
93.9
59.1
13.4
21.4
24.5

426.4
80.7
33.6
25.2
21.9
18.9

366.4
123.5
70.5
31.6
21.4
33.7

427.2
142.1
79.3
28.0
34.8
33.3

408.7
199.7
135.0
20.9
43.8
48.9

324.3
215.0
55.8
53.5

306.8
203.0
48.9
55.0

12.2
38.3

16.5
42.0

11.4
38.4

20.9
47.8

3.8
10.5

20.5
57.2

24.4
82.8

27.3
100.2

30.0
109.9

32.5
119.0

42.9
130.5

(2)
(2)

19.3
58.7

22.4
40.7

21.6
76.2

19.7
119.0

16.2
23.1

18.6
99.5

21.6
118.3

23.5
108.0

30.0
153.5

27.9
174.6

31.9
243.6

(2)
(2)

29.6

21.7

42.8

49.0

35.6

32.3

30.9

25.3

41.9

40.9

59.4

(2)

MEMORANDUM
Tax exempt credit
Funds advanced under Federal auspices, plus tax exempt creditFederal participation rate, including tax exempt credit
(percent)
Funds raised under Federal auspices, plus tax exempt credit
Federal participation rate, including tax exempt credit
(percent)
1
2

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

(2)

(2)
(2)

(2)

1984

(2)

(2)
(2)

(2)

s
1
>

CO
00

SPECIAL ANALYSIS A

A-ll

A further form of Federal Government involvement in the credit
market is the granting of tax exemption for the interest income on
State and local government debt securities. This includes securities
that finance both general government and private purpose securities, such as industrial development bonds. Tax exempt status induces purchasers of these securities to accept lower pretax yields
than they demand for taxable securities. In this way, State and
local governments receive an interest subsidy, and the Federal
Government forgoes tax revenues. Because of the interest subsidy
and its effect on the allocation of credit towards State and local
borrowers, this tax exemption has many of the characteristics of
the forms of Federal participation in credit markets shown in
Table F - l . It differs, however, in that the choice of borrowers is not
governed by the regulations of a Federal or federally chartered
entity. The only means of Federal control over this lending is
revision of the U.S. tax code. The memorandum to F - l shows the
growth of tax exempt credit, and how the Federal participation
rates would change if tax exempt credit were included.
The following sections of this special analysis discuss changes in
on-budget and off-budget direct lending, guaranteed lending, and
lending and borrowing by Government-sponsored enterprises in
detail.

E-24

THE BUDGET FOR FISCAL YEAR 1.984

The following chart shows the growth of Federal and federally
assisted credit outstanding in the last decade. Since 1972, the total
amount of loans outstanding has risen by $524 billion, from $241
billion, to $765 billion in 1982, an increase of 217%.

Federal and Federal Assisted Credit Outstanding
$ Billions

$ Billions

- 1,000

1,000L o a n s by
GovernmentSponsored
Enterprises

800-

800

600

600-

Guaranteed
Loans

400-

-400

-200

200*
Direct Loans
(on a n d off
budget)

0«
1 9 7 2 74

SPECIAL ANALYSIS A

A-ll

THE CREDIT BUDGET

Four years ago, budgeting for Federal credit was significantly
improved through the initiation of the credit budget. This framework has enabled the annual activity of many loan programs to be
controlled for the first time, and has provided a means of making
decisions on credit programs in the context of all Federal credit
and other budget activity. The credit budget supplements the regular budget during the executive formulation and transmittal of the
President's program and during subsequent congressional action. It
is designed to control individual program levels through appropriation bill language limiting the gross amount of direct loan obligation and loan guarantee commitments to be extended.
The credit budget totals.—The credit budget total for 1982 is
$101.3 billion, which is substantially below both the 1981 and 1983
totals. The sharp decline in 1982 is largely due to the effect of the
recession and high interest rates on demand-based housing programs in the Department of Housing and Urban Development and
the Veterans' Administration. These mortgage programs decreased
by 30% between 1981 and 1982.
Table F-2. THE CREDIT BUDGET TOTALS
(In billions of dollars)
1981
actual

Direct loan obligations-.1
Federal Financing Bank
Commodity Credit Corporation
All other
Total obligations
Guaranteed loan
Mortgage guarantees
Low rent public housing
Export-Import Bank
Commodity Credit Corporation
All other

1982
actual

1983
estimate

1984
estimate

1985
estimate

1986
estimate

15.1
5.9
32.5

13.6
11.5
22.5

15.1
11.9
22.1

14.4
8.0
16.4

14.9
5.6
16.9

15.3
5.6
16.5

53.5

47.6

49.1

38.8

37.4

35.3
18.5
7.4
2.0
13.3

24.6
13.3
5.8
1.6
8.4

64.5
14.6
8.0
4.8
10.8

59.7
14.7
10.0
3.0
11.3

60,2
16.5
10.0
3.0
11.6

60.8
18.1
10.0
3.0
11.2

76.5

53.7

102.7

98.7

101.0

103.1

130.0

101.3

151.8

137.6

138.4

140.5

44.1
30.3

36.4
28.2

68.2
27.0

58.6
21.8

58.6
20.4

58.6
17.1

commitments.-2

Total commitments
Total credit budget
MEMORANDUM
Secondary loan guarantee commitments
Guaranteed loans held as direct loans

Excludes purchases of loan assets by the Federal Financing Bank and repurchases of direct loans by agencies from the FFB.
Excludes commitments for guarantees of loans previously guaranteed (secondary guarantees) and for guarantees by one Government account of
direct loans made by another Government account. These totals shown in the memorandum.
1

For 1984, the administration is proposing that the credit budget
decrease by $14.2 billion below the 1983 totals. This represents a
9% decrease. Small changes in 1985 and 1986 over 1984 are due to
proposed increases in guaranteed student loans, low rent public
housing, and Veterans' Administration mortgage guarantees.

E-24

THE BUDGET FOR FISCAL YEAR 1.984

Major changes in the credit budget totals between 1983 and 1984
are shown in the table below.
Table F-3. MAJOR CHANGES IN THE CREDIT BUDGET TOTALS
(In billions of dollars)
Direct loan
obligations

Credit budget totals, 1983
Changes:
International security assistance
CCC price supports and related programs
Farmers Home Administration
Education programs
Federal Housing Administration
Government National Mortgage Association..
Veterans' housing programs
Export-Import Bank
Small Business Administration
Rural Electrification Administration
Other
Total change

49.1

-3.8
-3.6

-0.5

-0.2

-0.5
-1.7
-10.2

Credit budget totals, 1984

38.8
MEMORANDUM

GNMA mortgage-backed securities (secondary guarantees).

More detail on the proposed changes in the credit budget are in
the later sections of this special analysis.
Nature of the credit budget.—The credit budget consists of all
direct loan obligations and loan guarantee commitments of Federal
agencies. It is based on four principal concepts, all of which are
intended to present the total amount of credit activity clearly and
to facilitate legislative and administrative control.
First, the credit budget makes no distinction between budget
agencies and off-budget entities. All direct loan and loan guarantee
programs of the Government are included.
Second, the credit budget totals are based on gross levels of
credit activity, without offsets for repayments. By excluding repayments, the credit budget measures the current level of program
activity, and thereby enables control to be based on new activity,
which is where the Government has discretion.
Third, the credit budget is based on direct loan obligations and
guaranteed loan commitments. Obligations for direct loans are contracts requiring that the Government disburse a loan immediately
or at some future time. Commitments for guaranteed loans are
agreements entered into by the Government to guarantee a loan
when the borrower or lender fulfills stipulated preconditions. Both
concepts define the point at which the Government becomes legally
bound to extend credit, which is the point most amenable to executive and legislative control.

SPECIAL ANALYSIS

A-ll

Fourth, guaranteed loan totals are based on the full principal of
the loan, even if the contingent liability (i.e., the amount covered
by the guarantee) is partial. Initially, the guaranteed loan totals
only included the contingent liabilities. This was changed last year
so that the credit budget would reflect the full impact of Federal
credit on the economy more accurately. There are only a few
programs where less than the full principal is guaranteed. The
following, table shows the differences in loan guarantees outstanding between the contingent liability and full principal.
Table F-4. DIFFERENCE BETWEEN CONTINGENT LIABILITY AND FULL PRINCIPAL FOR OUTSTANDING
GUARANTEED LOANS
(In millions of dollars)
1982 actual

1983 estimate

1984 estimate

48,798
108,779

56,492
125,844

64,707
144,158

Veterans Administration mortgage guarantees-.
Contingent liability
Full principal
Federal Housing Administration mortgage insurance:
Contingent liability
Full principal
All other loan guarantees programs:
Contingent liability
Full principal

138,866
142,252

167,459
171,422

193,110
197,747

293,763
296,412

344,843
347,571

363,668
366,219

Total outstanding:
Contingent liability
Full principal

481,427
547,443

568,794
644,837

621,485
708,124

Some adjustments are required in calculating the credit budget
totals to eliminate double-counting of loans involved in intragovernmental financing transactions. First, secondary guarantees, i.e.
guarantees of loans that have a prior guarantee from another
agency, are deducted from the gross guaranteed loan total. Second,
guarantees by one agency of direct loans disbursed by another
agency, usually the Federal Financing Bank (FFB), are deducted
from the guaranteed loan total and shown only as direct loans.
Third, loan assets sold by agencies to the FFB, and guarantees of
those loan assets, are not included in credit budget totals, because
the original loans are already recorded as direct loans of the originating agency. Fourth, a deduction for repurchases of loan assets
by agencies from the FFB is introduced this year to eliminate one
further form of double-counting. This occurs primarily in direct
loan totals of the Farmers Home Administration (FmHA), which
sells loans as loan assets to the FFB and then after a period of
time, repurchases these loan assets. More detail on the operation of
the FFB is in Table F-8.

380-700 0 -

83 -

11 QL : 3

E-24

THE BUDGET FOR FISCAL YEAR 1.984

Appropriation limitations.—Limitations on new direct loan obligations and guaranteed loan commitments are proposed for enactment in the appropriation language for the budget accounts that
support credit programs. Unlike appropriations of budget authority, appropriation limitations are not the source of authority to
make obligations or commitments; rather, they place a ceiling on
that authority. Because authority is provided in authorizing legislation, and for direct loan programs in appropriations of budget authority, these programs can extend credit even if there is no appropriation limitation. Without the appropriation limitations the
annual activity of many credit programs would neither be limited
by annual congressional action nor be limited in the context of
total credit activity.
Appropriation limitations are proposed for programs amounting
to about two-thirds of the credit budget totals. The remainder are
programs for which a limitation on annual activity is deemed
unsuitable. Several kinds of programs are exempt from appropriation bill limitations. For these programs, control is generally exercised through authorizing legislation.
The first type of exemption is for clear entitlements to qualified
applicants, such as veterans mortgage guarantees. This exemption
prevents control where none can exist without changing the basic
nature of the programs. The programs in this category are similar
to those budgetary activities considered relatively uncontrollable,
many of which also are not acted on in annual appropriations.
Several programs are exempted by policy decisions because of
unique circumstances. For example, no additional constraint is
placed on temporary advances that are authorized for some guaranteed loan and insurance programs, because the advances often
avoid more costly claims by guaranteed lenders or insured institutions.

SPECIAL ANALYSIS A

A - l l

Table F-5—CREDIT BUDGET PROGRAMS EXEMPT FROM APPROPRIATION ACT LIMITATIONS
(In millions of dollars)
Guaranteed loan commitments

Direct loan obligations
1982
actual

Programs under appropriations control
Programs exempt from appropriations control:
Entitlement and mandatory programs:
CCC price support and related programs...
Agricultural disaster lending
Public housing
Veterans mortgage insurance
Other veterans program
Guaranteed student loans
Policy exemptions:
National Credit Union Administration
Pension Benefit Guaranty Corporation
Diplomatic emergencies
Public Law 480 export sales
CCC export credit
Federal Highway Administration
Federal Railroad Administration
Tennessee Valley Authority
NASA satellite leases
Small Business Administration 1
Financing transactions:
Guarantees and repurchases of CBO's
(FmHA and REA)
Federal Financing Bank
Defaulting guaranteed loans:
International assistance
FHA mortgage insurance
Guaranteed student loans
VA mortgage insurance
Other
Subtotal, exempt programs
Less-. Deductions to eliminate double counting..
Total, credit budget

1983
estimate

1984
estimate

23,973

24,459

20,422

11,454
2,217
905

11,152
2,000
1,000

5,685
1,540
1,000

154

159

166

105*
1
777

119
3
1
750

115*

1982
actual

1983
estimate

73,218

134,940

13,284
5,983

14,637
18,637

6,895

6,778

1,551

4,800

26
4,513
146

17
5,412
205

12,630

11,408

1
768

683

7,388
17,985

6,909
17,384

6,682
13,694

217
284
464
719
57

253
298
570
689
1,400

306
231
424
719
1,056

1,019

-20,018

43,601

42,925
-18,317

32,493
-14,088

45,107
-64,599

62,943
-95,216

47,556

49,067

-38,827

53,726

102,667

•$500,000 or less.
1 Congress did not enact an appropriation limitation on SBA programs. The Administration is re-proposing limitations for 1983 and 1984.

The third type of exemption is for intragovernmental financing
transactions, such as guarantees of certificates of beneficial ownership issued by the Farmers Home Administration and the Rural
Electrification Administration, as well as all activity of the Federal
Financing Bank. Since the loans in these cases are controlled
through annual appropriation bill limitations, they need not be
limited at the financing stage.
Fourth, direct loans that arise from payment of claims on defaulted guaranteed loans are exempted for all credit programs.
Payment of these default claims is mandatory.
Table F-5 provides a complete listing of programs proposed to be
exempt from appropriation limitations in the 1984 credit budget.

E-24

THE BUDGET FOR FISCAL YEAR 1.984
DIRECT

LOANS

Direct loans are made by both on-budget agencies and off-budget
Federal entities. They are financed from a variety of sources including taxation, borrowing, and loan repayments.4 (For a discussion of off-budget Federal entities, see Part 6 of the Budget) Table
F-6 shows loan activity by the headings "obligations" and "loan
disbursements," "net outlays" and "outstandings". Obligations are
firm written agreements by the Government to extend direct loans.
Obligations in a given year need not always result in an equal
volume of new direct loans since the conversion of obligations to
loans can take time, and some prospective borrowers to whom
obligations are made do not convert the obligations into borrowing.
Loan disbursements, in turn, are the loans actually made in the
specified year. They are primarily the sum of disbursements to
make new loans but also include disbursements to pay guarantee
claims.5 Net outlays are equal to the sum of all transactions that
alter total loans outstanding, i.e. new loans less repayments of
loans,6 liquidation of collateral, loan write-offs, 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 total direct loans are expected to decrease by $3.9
counted as budget outlays. Net outlays of direct loans by off-budget
Federal entities, although similar to on-budget net outlays, are
excluded by law from the budget totals.
Net outlays of direct loans are expected to decrease by $3.9
billion from 1982 to $19.6 billion in 1983, and are expected to fall
still further, to $10.1 billion by 1984. The decreases are the result
of a general reduction in lending activity, particularly by the Small
Business Administration, whose direct business loan program is
proposed to be ended, and by the Government National Mortgage
Association, whose mortgage purchase activities are proposed for
termination in 1984. Another contribution to low net loan outlays
in 1984 results from the sale of a large amount of housing loan
assets to the public by the Veterans Administration and the Department of Housing and Urban Development.
Reductions in direct loan obligations of $10.2 billion between
1983 and 1984 are primarily in the Commodity Credit Corporation,
4 Taxation and borrowing are in many cases indistinguishable sources of funds for a specific program.
However, the treatment of loan repayments differs from program to program.
5 Upon default of a loan guarantee, the Government generally assumes ownership of the guaranteed loan. The
lender is reimbursed for the amount of the guarantee, while the borrower owes the Federal Government directly
rather than the original lender. Claims paid under insurance or guarantee programs are considered as direct
loans until the acquired loans or collateral are paid off or liquidated. Proceeds of liquidation are considered
repayments and realized losses are writeoffs.
6 Loan repayments and receipts from the sale of loans are generally netted from gross loan disbursements in
determining net loan outlays, rather than being counted as budget receipts.
'The volume of loans outstanding is 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.

SPECIAL ANALYSIS A

A-ll

the Farmers Home Administration's rural housing insurance fund,
the Rural Electrification Administration (REA), and the Small
Business Administration (SBA).
The Commodity Credit Corporation request for direct loan obligations of $8 billion for 1984 reflects a reduction of $3.8 billion from
the estimated 1983 level. This reduction in lending is primarily due
to the administration's new payment-in-kind program, in which
farmers are offered, at no cost to them, surplus commodities held
in CCC reserves or owned by CCC, in exchange for reducing their
production of wheat, feed grains, rice or cotton.
A decrease in the direct loan obligations of the rural housing
insurance fund of $3.1 billion is proposed as part of the rural
housing block grant to the States.
The 1984 request for REA insured loans for the rural electric and
telephone program reflects a reduction of $526 million from the
estimated 1983 obligation level. The reduction is due to an anticipated increase in supplemental financing from the National Rural
Utility Cooperative Finance Corporation and other sources to satisfy a part of the capital requirements of the rural electric systems.
REA guaranteed loan originations financed by the Federal Financing Bank (FFB) are reduced by $1.4 billion to $3.3 billion in 1984.
The Administration is proposing to eliminate subsidized direct
loans in SBA's Business Loan and Investment Fund with the exception of $41 million in direct financing for minority enterprise small
business investment companies. The remaining request for direct
loans, $472 million, is for anticipated defaulting guarantees.

Table F-6. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)
1982

Agency or program

Estimate
1984

1983

1985

1987

1986

ON-BUDGET AGENCIES
Funds Appropriated to the President:
International Security Assistance:
Economic Support Fund

366
632

481
465

468
478

718
718

Outstandings

5,204

5,620

6,040

6,764

7,482

8,200

Obligations
Loan disbursements

800
501
-116
310

1,175
880

1,000
1,006

1,000
1,000

214

141

1,000
998
-62
78

1,000
1,000
-20
28

217
217

253
253

306
306

344
344

188

381
381

206

436
436

230

539

703

891

1,097

1,327

435
415

412
437

12,076

12,140

406
406
-108
11,916

406
406

100
12,010

406
406
-116
12,024

11,756

4,199
4,172
4,325
4,325

4,264
4,352
3,465
3,465

3,979
4,018
5,395
5,395

4,065
4,000
4,157
4,157

4,012
4,000
1,250
1,250

3,992
4,000
385
385

Obligations
Loan disbursements

Net outlays
Foreign Military Sales Credit..

Net outlays

Outstandings
Guarantee Reserve Fund..

Obligations
Loan disbursements

Net outlays

652

141

Outstandings
International development assistance..

Obligations
Loan disbursements,

Net outlays

Outstandings
Agriculture:
Farmers Home Administration:
Agricultural Credit:
Program level
Repurchases of loan assets-

Obligations
Loan disbursements,
Obligations
Loan disbursements

Net outlays

416
377

-241

416

-96

131

-420

420

— 74

164

-132

724

718
718

718

-30

718
718

718

-159

795

375

243

3,454
3,378
2,370
2,370

3,377
3,492
2,685
2,685

316
1,445

688
620

515
380

494
320

537
300

447

-160

-159

270

596

100

-143

-302

568
1,022
475
475

518
822
505
505

360
686
980
980

406
503
595
595

362
384
30
30

355
353

599
348

153

173

Obligations
Loan disbursements.

11,500
11,629

11,877
11,877

8,040
8,040

5,600
5,600

358

5l,600
5,600

1,300

5,100
5,100

1,200

4,800
4,800

Outstandings

12,484

16,867

14,842

15,200

16,500

17,700

17,800

777
712

590

750
750

548

768
768

768

768
768

768

768
768

768

768
768

531

768
768

768

8,307

8,839

9,387

10,155

10,923

11,691

12,459

-110

-120

-110

Outstandings
Rural Housing
Program level
Repurchases of loan assets.

Obligations
Loan disbursements.
Obligations
Loan disbursements.

Net outlays

Outstandings
Rural Development:
Program level
Repurchases of loan assets.

Obligations
Loan disbursements.
Obligations
Loan disbursements.

Net outlays

Outstandings
Commodity Credit Corporation price support and related loans.

Net outlays
Public Law 480 long-term export credits

Obligations
Loan disbursements.

Net outlays

Outstandings
Commerce:
Economic Development Administration

Obligations
Loan disbursements.

Net outlays
Education

-378

— 132

6,325

14
101

-104

-177

4,382

-40

326

-108

-2,025

-203

-495

-83

M
O
>

100

Outstandings

891

851

648

538

418

308

197

Obligations

504

570

424

524

574

649

749

>
>
tr1
m
h-H
Ul

I
h-i
Cn

Table F-6. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Estimate

Agency or program

Loan disbursements

Net outlays

Outstandings
Energy-

Health programs..

Housing and Urban Development:
Low-rent public housing

654

294

9,859

10,329

4
4

40
40

498

1988

1987

574

649

749

207

273

376

10,623

62
10,685

10,892

11,165

11,541

40
40

44
44

46
46

47
47

49
49

Outstandings

132

175

220

267

Obligations
Loan disbursements

Net outlays.....

27
41

-9

47
34

16
16

13
13

9
9

3
4

Outstandings

921

945

947

950

948

938

926

Obligations
Loan disbursements

905
905

1,000
1,000

750
750

500
500

250
250

100
100

162

120

1,985
2,732

504
2,154

3
2,038

3
3

Obligations
Loan disbursements

-21

-42

-1

-45

-10

-25

-12

-25

Net outlays

-259

-640

Outstandings

4,074

3,433

3,366

2,199

1,264

1,222

1,180

Obligations
Loan disbursements.

1,153
1,178

1,061
1,229

-107

766
1,215

-582

822
1,087

-665

840
915

-776

880
890

-622

934
857

-384

Outstandings

8,980

8,873

8,291

7,627

6,851

6,230

5,846

Net outlays
Interior.,

691

470

1986

Net outlays

Outstandings

Other Housing programs..

622

1985

641

Obligations
Loan disbursements

Net outlays
Government National Mortgage Association.

1984

1983

Obligations

631

-68

-1,167

-943

-43

-42

441

472

508

543

573

582

584

Obligations
Loan disbursements...

44
63

102
101

Net outlays

Outstandings

569

625

663

684

94
72

81
69

62
71

57
78

55
55

Loan disbursements...

Net outlays
Outstandings
Transportation:
Railroad programs.

Other

Veterans Administration:
Housing loans and default claims

Obligations
Loan disbursements...

Net outlays

Outstandings

434

459

495

538

558

579

593

Obligations
Loan disbursements...

720
720

691
691

721
721

735
735

753
753

737
737

755
755

Net outlays
Outstandings
Insurance policy and other loans

Loans to the District of Columbia.

Obligations
Loan disbursements...

259

234

163

1,906

1,516

1,774

2,008

2,171

2,238

2,373

154
154

158
158

164
164

167
167

169
169

167
167

164
164

251

-390

135

Net outlays

-23

-14

-15

-17

-10

Outstandings

1,462

1,448

1,434

1,419

1,404

1,387

1,377

285
285

295
295

115
115

Obligations
Loan disbursements...

117

116

-34

-36

-39

-42

Outstandings

1,684

1,799

1,883

1,849

1,813

1,774

1,732

Obligations
Loan disbursements...

3,516
2,583

3,830
2,911

3,830
3,505

3,830
3,242

3,830
2,940

3,830
2,959

763

915

1,216

3,830
3,256

757

574

296

320

16,565

17,480

18,696

19,453

20,027

20,323

20,643

Net outlays
Export-Import Bank

Net outlays
Outstandings

Table F-6. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued

Federal Deposit Insurance Corporation..

Federal Home Loan Bank Board..

Obligations
Loan disbursements..
Outstandings

705

-31
624

-333
291

-11
280

-64
217

37
37

-173

-75

709

537

461

-101
360

-62
299

Obligations
Loan disbursements..

104
104

119
119

115
115

118
118

116
116

114
114

Outstandings

149

191

225

261

299

337

Obligations
Loan disbursements..

683
903

750
786

513
470

483
443

444
407

379
348

Outstandings

Tennessee Valley Authority..

654

1987

1986

758

Net outlays
Disaster loans..

-51

1985

Outstandings

Net outlays
Small Business Administration:
Business and investment loans-

296

274

Obligations
Loan disbursements..

1984

1983

Net outlays

Net outlays
National Credit Union Administration..

Estimate

1982

Agency or program

Obligations
Loan disbursements..

-86

-251

393

151

3,096

3,247

2,996

237
299

440
362

440
396

Net outlays

-371

-332

-274

Outstandings

6,073

5,741

5,467

77
76

267

324

Obligations
Loan disbursements..

Net outlays

Outstandings

88
57

-248

-249

-276

2,627

2,378

2,102

440
396

-252

-234

—217

5,215

4,981

4,764

99
98

134
134

123
123

379

121
121
18

441

475

493

Other agencies and programs.

Subtotal, on-budget agencies

Net outlays

-224

Outstandings

1,091

14
38
7
1,098

Obligations

40,057

39,633

30,383

26,900

22,972

21,348

25,597

Loan disbursements,

33,896

34,220

27,991

21,754

20,995

19,851

19,456

-329

-285

1,356

1,850

1,217

Obligations
Loan disbursements.

Net outlays
Outstandings

15
45

9,107

5,162

1
16

-9

-3

-8

1,089

1,086

1,083

1,075

1,067

100,220

105,382

105,054

104,648

106,004

107,854

109,071

1,099
1,048

1,101
1,060

575
940

575
792

575
718

575
698

575
855

OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving fund

Obligations
Loan disbursements.

Net outlays
Outstandings
Rural Telephone Bank.

Obligations
Loan disbursements.

Net outlays
Outstandings
Federal Financing Bank 2

United States Railway Association,

Obligations
Loan disbursements.

130

-106

-204

-268

-119

9,774

9,861

9,920

9,814

9,611

9,343

9,224

185
112

185
185

102

173

171

170

166

163

159

1,173

1,345

1,516

1,686

1,852

2,015

2,174

26,232
13,602

26,465
15,056

21,771
14,365

20,350
14,861

17,090
15,288

16,607
15,763

21,226
15,975

Net outlays

14,155

Outstandings

96,519

Outstandings

9,145

7,990

7,752

7,759

94,378

103,524

111,514

119,266

127,025

-64

-21
37

14,239

Obligations
Loan disbursements.

Net outlays

10,192

110,758

-42
123

Table F-6. DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
1982

Agency or program

Obligations

1984

1985

1986

1987

1988

27,751

22,531

21,110

17,850 j

17,367

21,986

16,646

17,015

16,302

Loan disbursements

14,762

14,345

14,435

15,490

15,838

16,191

Net outlays

10,400

9,209

7,953

107,588

122,023

105,852

115,061

-12,630
-12,630

-11,408
-11,408

-7,406
-7,406

-7,387
-7,387

-6,908
-6,908

47,556

49,067

Outstandings
Less loan asset sales to the Federal Financing Bank 3

27,516

1983

Subtotal, off-budget Federal entities

to
o

Estimate

Obligations
Loan disbursements

7,648

7,800

123,014

130,661

138,460

-5,489
-5,489

-1,801
-1,801

-843
-843

-5,252
-5,252

-6,681
-6,681

-5,096
-5,096

-1,661
-1,661

-821
-821

-5,054
-5,054

38,827

37,425

37,359

37,051

37,278

32,205

29,395

27,007

33,724

34,833

26,165

19,597

10,071

8,924

9,309

9,498

9,016

219,709

229,018

238,515

247,531

Net outlays
Outstandings
Less repurchases of loan assets from the Federal Financing Bank

Obligations
Loan disbursements

Net outlays
Outstandings
Grand total, net direct loans

Obligations
Loan disbursements

Net outlays
Outstandings

207,808

227,406

210,906

•$500,000 or less.
1 Negative outstandings occur in this account because the inventory of loans at FmHA is insufficient to cover the outstanding balance of CBO's held by FFB.
2 Net outlays for the FFB in 1984 have been adjusted to reflect the reclassification as Federal agency debt of the sales of CBO's to the FFB by the Rural Housing Insurance Fund. Due to this reclassification, net outlays of FFB in 1984 do not
reflect the net change in the outlays of RHIF and the end-of-year balance of $26,572 million also is not reflected in the grand totals of outstandings for 1984 through 1988.
3 To avoid double counting, new loan assets purchased from agencies by the Federal Financing Bank are deducted. The amounts of the loan assets are already recorded as direct loans by the originating agency. This deduction affects new

obligations and loan disbursements only.

«
M
W
a

%
3»

I
W
>
w
oo

SPECIAL ANALYSIS A

A-ll

L O A N ASSET SALES AND OTHER L O A N OFFSETS

Loan asset sales are sales of direct loans to the public or the
FFB. In most cases, the agency selling the loan also guarantees it.
In the unified budget, loan asset sales are treated as offsets to
agency outlays, which is the same way that loan repayments are
treated. 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 other than the
original seller, while the Federal Government continues to bear the
risk of default of the borrower.
Traditionally, loan asset sales meant selling of title to the loans
to the public. However, since the creation of the FFB, most loan
assets are sold by on-budget accounts to the off-budget FFB, converting them from on-budget direct loans to off-budget loans.
The largest volume of loan assets are certificates of beneficial
ownership (CBO's) sold by the Farmers Home Administration
(FmHA) and Rural Electrification Administration (REA) to support
their direct loan programs. CBO's are backed by pools of direct
loans rather than by an individual loan. When a CBO is sold, the
ownership of the specific loans is retained by the originating
agency, and the agency continues to incur the servicing costs and
to fully assume the risk of default on the loans. The President's
Commission on Budget Concepts recommended that the sale of
such securities be treated as borrowing, arguing 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." In these two cases, however, legislation requires that CBO's be treated instead as loan
assets.
A third form of loan asset sale occurs when direct loans have
been acquired through payments of guarantee claims upon default,
or through sale of collateral. They may be sold subsequently to the
public, usually with guarantees attached.
The final form of loan asset transaction is the "tandem" plan of
the Government National Mortgage Association (GNMA). Under
this program, designated types of mortgages are purchased at
below-market yields and then resold to the private market. In
order to find willing purchasers, they have to be sold at prices
sufficiently low to afford a normal return to investors. This program is proposed for termination in 1984.
Table F-7 shows all loan offsets—asset sales, repayments, other
capital recoveries, non-cash adjustments, and other offsets. These
amounts are counted against the volume of new loans extended to
derive net loan outlays. Table F-6, as shown previously, displays
new direct loan disbursements and net direct loan outlays; table F-7

E-24

THE BUDGET FOR FISCAL YEAR 1.984

provides a four-way distribution of those loan offsets that are the
difference between these two measures of direct lending. The fourway 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 title to direct loans (or CBO's)
from the agency to the FFB. For an on-budget agency, this
reduces the recorded budget outlays by the amount of the sale
but raises the off-budget outlays of the FFB by an equal
amount. For an off-budget entity, sales to the FFB reduce the
recorded off-budget outlays of the selling entity and raises 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 to reduce the loan principal and
thereby reduce indebtedness. They are counted as a reduction
in direct loans outstanding.
—Non-cash adjustments are non-cash accounting entries to take
cognizance of losses, write-offs, or other adjustments in cases in
which the recorded value of the loans is greater than the
amount of money collected or collectable on the loans.
Table F-7. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS
(In millions of dollars)
Actual
1982

Agency or program

Agriculture:
Public Law 480.

Commodity Credit Corporation..

Agriculture credit insurance fund..

Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments..
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments.,
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments..
non-cash adjustments

Estimates
1983

1984

187

219

220

5,334
10

5,976
1,519

6,302
3,763

5,380

4,300

5,291

3,497
-138

4,056
-116

4,358
-104

SPECIAL ANALYSIS A

A-ll

Table F-7. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS—Continued
(In millions of dollars)
Agency or program

Rural housing insurance fund 1

Rural development insurance fund

Education:
Guarantees of SLMA obligations

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

Loan guarantee revolving fund

Export-Import Bank

Loan asset sales to-.
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to.the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB

Estimates

Actual
1982

1983

17
5,170

16
5,335

1,196
-257

1,357
-354

1,446
-339

1,535

1,191

1,644

97
-3

117
-3

132
-2

198
-217

247
-27

360

8
16

6
6

-2

1984

129

245

264

64
233

67
166

71
359

546

792

1,107
205

1,100
210

1,047
130

10
41
2

34
2

20
2

338

744

377

-5
295

-5
69

E-24

THE BUDGET FOR FISCAL YEAR 1.984

Table F-7. LOAN ASSETS SALES, LOAN REPAYMENTS, AND OTHER LOAN OFFSETS—Continued
(In millions of dollars)
Actual
1982

Agency or program

Small Business Administration

Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments

1984

1,732
89

1,996

2,289

829
351

938
391

972
419

1,570
10,843

1,453
6,941

16,109
2,081

17,264
4,377

1,806

1,397

116
870

102
603

2,133
12,102

3,376
10,843

2,849
6,941

14,334
1,514

16,226
2,951

17,367
4,981

528

565

465

441

462
21

452

528

565

465

441

462
21

452

2,133
12,630

3,376
11,408

2,849
7,406

14,775
1,514

16,688
2,972

17,819
4,981

Subtotal, on-budget agencies exclud- Loan asset sales to:
the public
485
ing tandem plans.2
the FFB
12,102
Repayments and adjustments.repayments and prepayments
14,222
non-cash adjustments
285
Housing and Urban Development (GNMA):
Loan asset sales to:
Tandem Plan Sales—FHA/VA mortgages
the public
1,649
the FFB
Repayments and adjustments:
repayments and prepayments .. .
112
non-cash adjustments
1,229
Subtotal, on-budget agencies with Loan asset sales to:
tandem plan.
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments

Estimates
1983

OFF-BUDGET FEDERAL ENTITIES
Rural electrification and telephone revolving Loan asset sales to.the public
fund.
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Subtotal, off-budget Federal entities.... Loan asset sales to:
the public
the FFB
Repayments and adjustments:
repayments and prepayments
non-cash adjustments
Grand total

Loan asset sales to:
the public 3
the FFB 4
Repayments and adjustments:
repayments and prepayments.,.
non-cash adjustments

'See explanation of accounting change for the rural housing insurance fund in the following section on the Federal Financing Bank.
All loans sold, except conventional tandem plan sales, are guaranteed upon sale ami 'iefiected in the guaranteed loan totals in Table F-9.
The "public" includes Government-sponsored enterprises such as FNMA and FHLMC, which are among the principal purchasers of HUD and VA
mortgages.
4 See Table F - 8 for detail of FFB purchases.
2
3

SPECIAL ANALYSIS A
T H E FEDERAL FINANCING

A-ll
BANK

The Federal Financing Bank began operations in May 1974 and
has been a significant factor in financing Federal credit activities.
The bank is administered by the Treasury Department. By law, its
transactions are excluded from the budget totals. Hence, its lending transactions are not counted as budget outlays, although it is
part of the Federal Government and finances its operations
through borrowing by the Treasury.
The FFB was designed to serve as a financial intermediary for
the efficient financing of obligations issued, sold or guaranteed by
Federal agencies. The FFB performs three functions, two of which
generate Federal outlays that are excluded from the budget. First,
most loan assets are now sold to the FFB rather than to the public.
This converts the loans from outlays of the originating agencies to
off-budget FFB outlays. Second, the FFB makes loans directly to
borrowers whose obligations are guaranteed by a Federal agency.
These guaranteed loans are in effect converted into off-budget
direct loans. The FFB assures the efficient financing of these guaranteed loans and reduces borrowing costs.
Third, agencies authorized to borrow from the public generally
borrow from the FFB instead. Borrowing by agencies from the FFB
does not result in FFB outlays just as borrowing by agencies from
the Treasury does not result in Treasury outlays. The use of the
proceeds from 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. The Treasury can finance its lending to the FFB by
borrowing at lower interest rates than the agencies would have to
Pay.

Table F-8 lists the activities of the FFB for 1982 through 1988 by
agency and account. The first set of entries lists FFB purchases of
agency loan assets. The second set of entries lists FFB direct loans,
i.e. disbursements of loans guaranteed by Federal agencies. The
addendum lists borrowing (debt issues) by on-budget agencies and
off-budget entities from the FFB.
The FFB's net outlays from lending are expected to remain at
the 1982 level of $14.2 billion in 1983 and decrease to $10.2 billion
in 1984. A major part of the $4.0 billion decrease is due to a
proposed $3.1 billion reduction in direct loans of the rural housing
insurance fund (RHIF) of the Farmers Home Administration, as
part of the rural housing block grant to the States. This reduction
in program level reduces the amount of estimated sales of certificates of beneficial ownership by RHIF to the FFB to fund the
program. In addition, outlays from asset sales by the agricultural
credit insurance fund (ACIF) of the Farmers Home Administration

380-700

0 -

83 -

12 QL :

F-26

THE BUDGET FOR FISCAL YEAR 1984

are reduced by $0.9 billion due to a proposed decrease in lending
levels of the ACIF.
FFB outlays in 1984 are also reduced by $0.3 billion by proposed
legislation that requires the certificates of beneficial ownership
sold by RHIF to be treated as Federal agency debt beginning in
1984.
Net outlays are projected to further decline from $9.1 billion in
1985 to $7.8 billion in 1988 due to decreases in asset sales by the
rural development insurance fund (RDIF) of the Farmers Home
Administration. Other decreases are in FFB loan guarantee originations by the foreign military sales credit program and programs
of the Rural Electrification Administration.
Table F-8. FFB ACQUISITIONS (in millions of dollars)
Actual
1982

Agency or program

Estimate
1983

1984

1985

1986

1987

1,034
-216
23,764

-236

Purchase of loan assets from:
Overseas Private Investment Corporation:
New acquisitions

Net outlays

- 5

Outstandings

Farmers Home Administration (USDA):
Agricultural credit insurance fund:
New acquisitions

Net outlays

Outstandings

Rural housing insurance fund:
New acquisitions

Net outlays

Outstandings

Rural development insurance fund:
New acquisitions

Net outlays

Outstandings
Rural
Electrification
Administration
(USDA):
New acquisitions

Net outlays

Outstandings
Medical facilities guarantees (HHS):
New acquisitions

Net outlays

Outstandings
Health
Maintenance
(HHS):
New acquisitions

Net outlays
Outstandings

5,380

4,300

23,412

24,247

5,170

5,335

23,921

26,571

1,535

6,403

1,055

835

5,291

-104

3,994

-163

24,143

23,979

1,191

1,644

1,010

7,089

7,753

8,169

149

23,527

2,800 2,650

1,060

686

664

415

278

199

248

199

8,416

8,615

480

528

565

465

480

3,124

3,689

4,154

4,634

5,122

5,618

-5

154

149

144

139

134

129

6
5

119

123

124

528

496

Organizations
17

15
133

-19
114

124

F-27

SPECIAL ANALYSIS F
Table F-8. FFB ACQUISITIONS (in millions of dollars)—Continued
Actual
1982

Agency or program

Small business development loans(SBA):
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): 2
New acquisitions

Net outlays
Rural
Electrification
Administration
(USDA):2
New acquisitions

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

Net outlays
Outstandings

1987

-10

-10
26

-10

11,408

7,406

5,489

1,801

843

5,439

4,697

1,009

717

501

443

57,236

61,933

36,371

37,088

37,588

38,031

3,084

2,288

4,712

4,163

4,436

2,848

4,187

4,436

3,495

3,436

3,265

14,284

18,471

21,965

25,401

28,667

4,645

3,260

4,591

4,707

3,958

3,926

4,436

3,260

3,939

5,345

16,282

21,627

26,217

30,924

34,882

38,808

5,000

340

700

700
5,000

energy

340
340

Low-rent public housing (HUD): 2
New acquisitions

Net outlays

696

Outstandings

Outstandings...

1986

12,630

Outstandings

Net outlays

-10

1985

Net outlays

Community
development
(HUD): 2
New acquisitions

1984

11,436

Outstandings

Alternative fuels and other
(Energy):
New acquisitions

-9

Estimate
1983

1,624

591

2,216

-37
2,179

-27

-29

-31

2,152

2,122

2,091

-18

-105
247

-120
127

- 1

grants
179

225

119

134

117

236

370

352

Loans to territories (Interior):
New acquisitions

Net outlays
Outstandings
Railroad programs (DOT): 2
New acquisitions

E-24

THE BUDGET FOR FISCAL YEAR 1.984
Table F-8. FFB ACQUISITIONS (in millions of dollars)—Continued
Agency or program

Net outlays
Outstandings
Federal Buildings Fund CBI's3 (GSA):
New acquisitions

Net outlays
Outstandings
Satellite leases (NASA):
New acquisitions

Estimate

Actual
1982

1983

-13

-16

1,052

1,074

1,061

1,047

1,035

1,019

1,003

-9

-10

-11

-13

-14

8
522

513

146

205

Net outlays

120

175

Outstandings

758

933

Small business investment companies
and other SBA:2
New acquisitions

1988

1987

1986

1985

1984

503

493

-140
793

-90
703

482

-91
612

469

-102
510

456

-113
397

215

375

Net outlays

151

258

290

280

270

260

250

Outstandings

759

1,017

1,306

1,586

1,856

2,116

2,366

4,513

5,412

7,692

7,904*

Seven States Energy Corporation (TVA):
New acquisitions

6,258

7,217

193

181

6,790

336

116

151

1,258

1,451

1,632

1,749

1,835

1,986

-10

-11

-10

13,602

15,056

14,365

14,861

15,288

15,763

15,975

8,716

9,542

9,183

8,428

7,489

7,310

6,998

39,283

48,825

58,008

66,436

73,925

81,235

88,233

26,232

26,465

21,771

20,350

17,090

16,607

21,226

Net outlays

14,155 14,239 10,192

9,145

7,990

7,752

7,759

Outstandings

96,519 110,758

Net outlays
Outstandings
All other:
New acquisitions

Net outlays

Outstandings
Subtotal, direct loans (purchase of loans guaranteed
by agencies):
New acquisitions
Net outlays
Outstandings
Subtotal, all direct loans and purchases of agency loan assets:
New acquisitions

94,378 103,524 111,514 119,266 127,025

ADDENDUM
AGENCY BORROWING
By on-budget agencies:
Export-Import Bank:

Net change
Outstandings

Tennessee Valley Authority:

Net change

Outstandings

lf545
13,954

1,164

1,458

853

566

15,118

16,576

17,429

190

116

17,995

18,185

18,301

1,375

1,300

1,000

605

571

12,285

13,585

14,585

15,190

15,761

475

626

16,236

16,862

SPECIAL ANALYSIS A

A-ll

Table F-8. FFB ACQUISITIONS (in millions of dollars)—Continued
Agency or program

Estimate

Actual
1982

National Credit Union Administration-.
Net change
Outstandings

1983

Postal Service:
Net change
Outstandings

Total, agency borrowing:
Net change
Outstandings

1986

1987

1988

170

210

250

290

330

370

333
26,904

Outstandings

-46

-23

Outstandings

1985

130

Rural housing insurance fund:
Net change
By off-budget Federal entities:
U.S. Railway Association:
Net change

1984

192

145

-18
127

-476

-61

-150

26,428

26,368

26,218

26,068

—13

114

125

138

152

—67

933

-107

1,221

1,154

2,087

1,980

1,873

1,766

1,659

2,858

2,391

3,746

902

1,020

461

539

27,782

30,172

60,489

61,392

62,412

62,873

63,412

*$500.000 or less.
'Net outlays for the FFB in 1984 have been adjusted to reflect the reclassification of the sales of CBO's to the FFB by the Rural Housing
Insurance Fund as Federal agency debt. Due to this reclassification, net outlays of FFB in 1984 do not reflect the net change in the outlays of
RHIF. The end-of-year balance of $26,572 million also is not reflected in the grand totals of outstandings for 1984 through 1988.
2 FFB activity for this account is not identical to the entries in Part 8 of the Budget, "Budget Accounts listing*', due to timing differences
between recognition of FFB budget authority and commitments to guarantee loans that are financed through the FFB (shown here as FFB new
acquisitions.).
3 Certificates of beneficial interest.

LOAN

GUARANTEES

Loan guarantees are agreements in which a Government agency
pledges 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 in a few programs 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.
Loan guarantees are designed to allocate economic resources to
particular uses by providing credit at more favorable terms than
would otherwise be available in the private market. In cases where
the loan guarantee recipients are not sufficiently creditworthy to
borrow without Federal assistance, the guarantee reallocates credit
toward federally selected uses, increasing the total volume of credit

E-24

THE BUDGET FOR FISCAL YEAR 1.984

channeled into these uses. This leaves a smaller supply of credit to
be allocated to those potential borrowers who do not receive assistance, and increases the interest rate to these borrowers. However,
the guarantee does not always change the allocation of credit.
Some beneficiaries of loan guarantee programs would have been
able to secure the funds privately, without Government support.
For example, guaranteed mortgage credit might be used to finance,
at a lower cost, a house that would have been purchased anyway;
although there is a marginal interest rate at which the house
would not be bought and the loan not made. In such a case, the
guarantee does not alter the allocation of credit resources. It does,
however, provide a subsidy to the borrower.
The loan guarantee is used in widely varying programs. The
guaranteed loan may be made to individuals, businesses, State and
local governments, or foreign governments. The guaranteed commitment 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, though none of the principal. Contractual agreements, including guarantees of private leases, contracts to make subsidy payments over extended periods, and debt
service grants may be used by the recipients as collateral for
borrowing, but such indirect activity is not accounted for as loan
guarantees. Most loan assets sold by Federal agencies have a Federal guarantee.
Guaranteed loans are not reflected in 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 loan guarantee programs
were traditionally small, partly because most of the loans were
protected with liens on marketable property. Some of the newer
loan guarantee programs, however, such as certain programs in
SBA, have had greater losses.
Data for guaranteed loans for 1982 through 1988, organized by
agency or program, are presented in table F-9. Even though in
some cases the Government guarantees less than the total amount
of the loan, the table includes the full amount of the principal.
This is done in order to accurately reflect Federal intervention in
the credit market, since the Government guarantee influences
whether the loan is made at all.

SPECIAL ANALYSIS A

A-ll

Commitments for new guaranteed loans are agreements by the
Government to guarantee loans upon the prospective borrowers'
and lenders' fulfillment of specific conditions. 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 prospective borrowers to whom commitments
are made do not ever convert the commitments into borrowing. Net
loans guaranteed are equal to the amount of new guaranteed loans
less repayments and other adjustments. The net amount is also
equal to the difference in guaranteed loans outstanding at the end
and at the beginning of the year.

Table F-9. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)
Agency or program

Funds Appropriated to the President:
International security assistance....

Actual 1982

Commitments
New guaranteed loans

Net lorn guaranteed
Outstandings
International development assistance..

Commitments
New guaranteed loans

Net loans guaranteed
Outstandings
Agriculture:
Farmers Home Administration
Agricultural Credit:
Program level

Commitments
New guaranteed loans

Net loans guaranteed ..
Guarantees of loan assets sold to FFB.

Outstandings
Commitments
New guaranteed loans .

Net loans guaranteed
Outstandings

Rural Housing:
Program level.

Guarantees of loan assets sold to FFB.

Commitments
New guaranteed loans

3,084
2,923

Estimate
1984

1983

1986

1987

2,268

4,163
3,538

2,828

4,436
4,869

4,167

4,436
4,286

11,693

14,521

3,495

3,435

18,688

22,182

25,618

4,436
4,447
3,265
28,883

221
198

270
295

300
350

314
300

321
300

327
314

4,436
4,425

163

252

293

381

307

1,128

1,380

1,673

2,054

2,361

2,668

57
77

-187

131
117

-32

106
121

-48

106
106

1,132
5,380
5,380

1,100
4,300
4,300

1,052
5,290
5,290

-105

-163

-215

—237

23,412

24,247

24,142

23,979

23,764

23,527

17
4

13
0

4
0

1,055

835

Net loans guaranteed

-272

-70

Outstandings
Commitments
New guaranteed loans

1,068
5,170
5,187

998
5,335
5,351

Net loans guaranteed. , .

1985

2,800

2,650

861
1,913
3,994
3,994

100

396

1,098
0
13

1,494
0
0

-1,075

838
1,034
1,034

-241

1,253
0
0

-33

805
149
149

-231

1,022
0
0

23,921

26,571

Commitments
New guaranteed loans,
Net loans guaranteed.,
Outstandings
Commitments
New guaranteed loans
Net loans guaranteed.
Outstandings

139
424
-11
3,387
1,535
1,535
1,060
6,403

300
537
-61
3,326
1,191
1,191
686
7,089

0
240
—275
3,051
1,644
1,644
664
7,753

0
0

-456
2,595
1,010
1,010
415
8,168

-609
1,986
278
278
248
8,416

-799
1,187
199
199
199
8,615

-1,122
65
428
428
428
9,043

Commitments
New guaranteed loans
Net loans guaranteed.
Outstandings

1,551
1,625
645
2,650

4,800
4,815
3,389
6,038

3,000
3,000
-412
5,626

3,000
3,000
-126
5,500

3,000
3,000
-500
5,000

3,000
3,000

5,000

Commitments
New guaranteed loans,
Net loans guaranteed.,
Outstandings
Commitments
New guaranteed loans
Net loans guaranteed.
Outstandings

5,112
4,195
4,053
17,001
528
528
528
3,124

4,745
5,453
5,444
22,445
565
565
565
3,689

3,360
4,710
4,690
27,135
465
465
465
4,154

3,360
4,836
4,341
31,476
480
480
480
4,634

3,360
4,106
3,959
35,435
488
488
488
5,122

3,360
4,088
3,925
39,360
496
496
496
5,618

3,360
4,612
3,925
43,285
506
506
506
6,124

Commitments
New guaranteed loans,
Net loans guaranteed.,
Outstandings

14
14
— 70
632

-82
550

-80
470

-80
390

-80
310

-60
250

-80
170

Outstandings
Rural Development:
Program level....

Guarantees of loan assets sold to FFB

Commodity Credit Corporation export credit.

Rural Electrification Administration
Program level

Guarantees of loan assets sold to FFB

Commerce:
Economic development assistance,

Table F-9. GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Actual 1982

Agency or program

National Oceanic and Atmospheric Administration.

Commitments
New guaranteed loans..

Net loans guaranteed...
Outstandings
Education activities.

Commitments
New guaranteed loans..

Net loans guaranteed...
Outstandings
Energy..

Commitments
New guaranteed loans..

Net loans guaranteed...
Outstandings
Defense: military..

Commitments
New guaranteed loans..

27
27
— 18

Net loans guaranteed...

25
25

-11

-12

-11

— 11

177

165

154

143

6,895
6,580

6,778
6,593

7,391
7,198

7,858
7,656

8,354
8,143

8,692
8,477

5,685

2,900

2,300

1,700

1,600

27,700

30,600

32,900

34,600

36,200

37,700

2,040

153
54

172
272

272

2,156

2,210

2,482

20
15

2,499

2,514

20
15

2
2

254
246

187

181
126

185
185

151

181
181
145

175
175

137

782
25

217
217

1,500

2,529
3

178

134

1,542

1,676

1,802

1,953

2,098

2,235

Commitments
New guaranteed loans..

13,284
26,862.

14,637
28,503

14,709
29,500

16,493
31,661

18,146
31,432

18,474
30,102

Outstandings

20,770

22,989

24,867

26,528

27,959

28,062

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

1987

1986

189

Outstandings
Commitments
New guaranteed loans..

1985

174

Net loans guaranteed...
Health and Human Services:
Health programs

Estimate
1984

1983

Net loans guaranteed...

3,247

2,219

1,878

1,661

1,432

103

Federal Housing Administration..

Commitments
New guaranteed loans
Net loans guaranteed.
Outstandings

18,576
12,733
6,807
142,252

45,900
39,673
29,169
171,422

39,800
36,489
26,325
197,747

39,800
36,378
25,266
223,013

39,800
36,398
24,440
247,453

39,800
36,412
23,448
270,901

39,800
36,425
22,599
293,500

GNMA: Mortgage-backed securities-

Commitments
New guaranteed loans.
Net loans guaranteed.,
Outstandings

36,382
13,515
10,901
115,537

68,250
35,240
28,063
143,600

58,650
39,100
30,900
174,500

58,650
39,100
22,833
197,333

58,650
39,100
29,603
226,936

58,650
39,100
26,885
253,821

58,650
39,100
25,568
279,389

Commitments
New guaranteed loans,
Net loans guaranteed.,
Outstandings

28
64
24
143

16
16
2
145

19
19
13
158

30
30
6
164

31
31
6
170

33
33
6
176

34
34
6
182

Commitments
New guaranteed loans
Net loans guaranteed.
Outstandings

637
1,050
609
7,176

600
400
125
7,301

600
400
125
7,426

600
400
125
7,551

600
400
125
7,676

600
400
125
7,801

600
400
125
7,926

Commitment
New quaranteed loans
Net change
Outstandings

62
243
169
2,996

128
131
-81
2,915

15
15
-94
2,821

15
15
-122
2,699

0
0

-213
2,486

0
0
—87
2,399

-87
2,312

Commitments
New guaranteed loans
Net loans guaranteed.,
Outstandings

600
600
507
1,444

-156
1,288

-154
1,134

-140
994

-133
861

-137
724

-122
602

Interior ..

Transportation:
Federal ship financing fund..

Other transportation programs..

Treasury:
Guarantees of New York City notes..

Table F - 9 . GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Actual 1982

Agency or program

Chrysler Corporation loan guarantee program

Biomass energy development..

NASA: Long term satellite leases.

Veterans Administration (housing)

Export-Import Bank..

National Credit Union Administration..

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings

1,200

Estimate
1983

1984

1985

1986

1987

1,200

686

758

205
205
175
933

37
37
-140
793

-90
703

-91
612

-102
510

5,983
5,542
5,171
108,784

18,648
16,995
17,075
125,858

19,875
18,641
18,314
144,172

20,355
20,320
18,759
162,931

20,994
20,996
19,391
182,322

21,311

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings

5,832
2,921
-914
6,069

8,000
4,670
490
6,559

10,000
5,560
510
7,069

10,000
6,020
320
7,389

10,000
6,230
190
7,579

10,000

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings

34
34

30
30
-5
100

28
-3
98

24
24
-10
82

22
22

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings
Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings
Commitments
New guaranteed loans..
Net change
Outstandings

1,200

686
686
146
146

120

-12

106

- 6

21,260
19,736
202,058
6,400
130
7,709

-14
68

Small Business Administration:
Business loan guarantees....

Disaster Loan fund

Pollution control bond guarantees.

Tennessee Valley Authority

Other agencies and programs.

Subtotal, guaranteed loans (gross)

Less secondary guaranteed loans: 1
GNMA guarantees of FHA/VA/FmHA pools.

Commitments
New guaranteed loans.
Net loans guaranteed..
Outstandings

2,019
2,727
-30
9,947

2,650
2,800
-249
9,698

2,650
2,360
-390
9,308

Commitments
New guaranteed loans.
Net loans guaranteed..
Outstandings

6
6
3
11

—3
8

-3
5

-2

Commitments
New guaranteed loans.
Net loans guaranteed..
Outstandings....

50
50
50
306

150
150
150
456

Commitments
New guaranteed loans.
Net loans guaranteed.
Outstandings

4,513
4,513
336
1,258

Commitments
New guaranteed loans,
Net loans guaranteed.
Outstandings

2,300
1,980
-585
8,723

1,000
860
-1,335
4,893

1,700
1,460
-1,050
7,673

1,000
860
-1,445
6,228

-1
2

150
150
150
606

150
150
150
756

150
150
150
906

150
150
150
1,056

150
150
150
1,206

5,412
5,412
193
1,451

6,258
6,258
181
1,632

6,790
6,790
116
1,749

7,217
7,217
86
1,835

7,692
7,692
151
1,986

7,904
7,904

204
115
22
1,444

229
159
90
1,535

182
99
1,634

-57
1,576

-145
1,431

-164
1,267

-164
1,103

Commitments
New guaranteed loans,
Net loans guaranteed.
Outstandings

118,325
102,056
45,671
547,327

197,882
168,142
97,454
644,781

179,155
167,087
89,875
708,085

179,956
168,748
79,640
787,725

178,875
165,524
81,259
868,984

178,675
184,139
163,905
169,356
74,768
77,251
946,235 1,021,002

Commitments
New guaranteed loans.
Net loans guaranteed.,
Outstandings

36,382
13,515
10,901
115,537

68,250
35,240
28,063
143,600

58,650
39,100
30,900
174,500

58,650
39,100
22,833
197,333

58,650
39,100
29,603
226,936

58,650
39,100
26,885
253,812

-2

1,986

58,650
39,100
25,568
279,389

Table F - 9 . GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT (in millions of dollars)—Continued
Actual 1982

Agency or program

Subtotal, guaranteed loans (net)

Less guaranteed loans held as direct loans: 2
By budget agency (GNMA)

By off-budget Federal Financing B a n k 3

Total, primary guaranteed loans

Memorandum:
Callable capital contributions to international financial organizations 5

I
CO
oo

Estimate
1983

1984

1985

1986

1987

1988

81,943
88,541
34,770
431,789

129,632
132,902
69,392
501,181

120,505
127,987
58,975
533,585

121,306
129,648
56,807
590,392

120,225
126,424
51,656
642,048

120,025
124,805
50,366
692,414

125,489
130,256
49,200
741,613

Commitments
New guaranteed loans
Net loans guaranteed ,
Outstandings

1,985
2,731
-241
4,067

501
2,151
-626
3,428

2,035
-68
3,360

-1,168
2,192

-934
1,258

-43
1,215

-41
1,174

Commitments
New guaranteed loans
Net loans guaranteed
Outstandings

26,232

26,465

21,771

20,350

17,090

16,607

21,226

14,155
96,519

14,239
110,758

10,192
94,378

9,145
103,524

7,990
111,514

7,752
119,266

7,759
127,025

Commitments
New guaranteed loans , .
Net loans guaranteed
Outstandings

53,726
85,810
20,856
331,204

102,667
130,751
55,779
386,995

98,734
125,952
48,851
435,847

100,957
129,648
48,830
484,676

103,135
126,424
44,599
529,276

103,419
124,805
42,657
571,933

104,262
130,256
41,481
613,414

Commitments
New guaranteed loans
Net loans guaranteed .
Outstandings

2,340
2,340
2,340
16,079

2,415
2,415
2,415
18,494

2,863
2,863
2,863
21,356

2,863
2,863
2,863
24,219

2,863
2,863
2,863
27,082

2,863
2,863
2,863
29,944

2,863
2,863
2,863
32,807

Commitments
New guaranteed loans
Net loans guaranteed
Outstandings

H
E
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ADDENDUM
Guaranteed loans held as direct loans by Government sponsored enterprises:
Federal National Mortgage Association
Commitments
New guaranteed loans..
Outstandings
Federal home loan banks..

Federal Home Loan Mortgage Corporation.

Farm Credit Administration.

Student Loan Marketing Association.,

Total Enterprise holdings..

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings
Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings

245
245
-1,025
38,767

813
813
-671
38,096

-1

-2

- 8

1,030

751
751
-1,156
36,940

-10

1,020

-11

1,009

(4)
(4)

(4)

(4)
(4)

(4)

(4)
(4)
(4)

(4)
(4)

(4)

(4)
(4)

(4)

(4)
(4)

(4)

(4)
(4)

(4)

116

(4)

Commitments
New guaranteed loans..
Net loans guaranteed...
Outstandings

2,051
2,051
1,684
1,714

2,181
2,181
1,833
3,547

2,154
2,154

(4)
(4)

4,428

Commitments

2,342

2,994

New guaranteed loans..
Net loans guaranteed...

2,342
696
41,712

Outstandings..

(4)

116

(4)

(4)
(4)

(4)

Commitments
New guaranteed loans..
New loans guaranteed..
Outstandings

46
46

(4)
(4)

(4)

(4)
(4)

(4)

2,905

(4)

2,994
1,150

2,905
-288

(4)

42,863

42,575

(4)

881

(4)

'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.
guaranteed loans are acquired by a budget account, they become direct loans and are counted as such in Table F-6. They are therefore deducted from totals in this table.
3 Net outlays for the FFB in 1984 have been adjusted to reflect the reclassification as Federal agencv debt of the sales of CBO's to the FFB bv the Rural Housing Insurance Fund. Due to this reclassification, net outlays of FFB in 1984 do
not reflect the net change in the outlays of RHIF; and the end-of-year balance of $26,572 million also is not reflected in the grand totals of outstandings for 1984 through 1988.
4 Not estimated.
'Callable capital subscriptions by the United States and other member countries provide backing for borrowings in U.S. and overseas capital markets. These subscriptions would be called only to meet the obligations of the Bank when other
resources were exhausted. To date, there has never been a need to call upon these resources.
8 When

GA
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F - 50

T H E BUDGET FOR F I S C A L Y E A R 1984

The addition of loan guarantees for each program yields a total
termed "guaranteed loans (gross)" in the table. The amount includes some double counting. Elimination of the double counting
requires two adjustments. The first adjustment deducts loans previously guaranteed, i.e. secondary guaranteed loans. They occur, for
example, in the case of the GNMA mortgage-backed securities
program, which guarantees securities that are backed by pools of
federally guaranteed or insured loans held by the seller. This deduction yields a total termed "guaranteed loans (net)." 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 is termed "primary guaranteed loans."
An addendum to the table shows guaranteed loans purchased by
Government-sponsored enterprises.
Net loans guaranteed are expected to increase significantly between 1982 and 1984, from $20.9 billion in 1982 to $48.9 billion in
1984. This increase is due primarily to improved economic conditions reflected in lower interest rates. In 1982, there was a significant decrease in net loans guaranteed from previous levels of $32
billion in 1980 and $28 billion in 1981. This reduction in loan
activity was due primarily to the recession and its aftermath.
Although affecting all Government guaranteed loan activity, the
housing programs were especially sensitive to the high interest
rates reflected in the 29% decrease in activity between 1981 and
1982. As the housing industry recovers from its depressed 1982
level, a surge in activity is expected in 1983 and 1984 with an
estimated increase between 1982 and 1984 in net guaranteed loans
of $20 billion in the FHA mortgage insurance program and $13
billion in the Veterans' Administration mortgage insurance program.
Major increases in Export-Import Bank guaranteed loans are due
to an expanding market in exports and a reluctance by private
lenders to increase their international loan portfolio as well as an
expanded guaranteed loan program for export trading companies
scheduled to begin in 1983. Decreases in REA reflect lower demand
in the electric market, reducing the need for assistance to REA
borrowers.
FUNCTIONAL AREAS SUPPORTED BY FEDERAL CREDIT ASSISTANCE

New direct loan disbursements and new loans guaranteed by
function are shown in table F-10. The largest Federal credit activity occurs in commerce and housing credit, international affairs,
and veterans benefits. These three functions are expected to comprise 63% of new obligations and commitments in 1984. Part 5 of
the Budget discusses Federal credit activities by function together
with Federal outlays.

SPECIAL A N A L Y S I S F

F - 55

Part 5 of the Budget also presents new direct loan obligations
and new commitments for guaranteed loans as well as net change
and outstandings by function. Table F-10 supplements the Part 5
credit tables by presenting the volume of new direct loans disbursed and new loans guaranteed by function.

380-700

Table F - 1 0 . NEW DIRECT LOAN DISBURSEMENTS AND NEW GUARANTEED LOANS BY FUNCTION
(In millions of dollars)

Actual 1982

Function

Direct loan disbursements
Guaranteed loans

International affairs ( 1 5 0 )

Direct loan disbursements
Guaranteed loans

General science, space and technology ( 2 5 0 )

National defense ( 0 5 0 )

Estimate
1984

1983

1985

1986

1988

1987

7,890
6,042

9,585
8,503

10,631
10,779

10,581
10,606

10,570
10,955

10,268
11,161

10,287
11,209

Direct loan disbursements
Guaranteed loans

146
146

205
205

37
37

Energy \( 2t l7v0/)

Direct loan disbursements
Guaranteed loans

9,825
11,276

10,680
12,170

10,131
11,705

10,540
12,126

10,875
11,831

11,322
12,296

11,684
12,536

Natural resources and environment ( 3 0 0 )

Direct loan disbursements
Guaranteed loans

Agriculture ( 3 5 0 )

Direct loan disbursements
Guaranteed loans

6,097
7,082

8,467
9,232

1,372
8,412

1,449
7,100

7,316
4,140

8,566
3,255

7
7,424

Direct loan disbursements
Guaranteed loans

1,253
18,018

73
45,863

5,568
36,992

2,644
38,534

2,194
38,032

2,048
37,444

1,833
37,457

Transportation ( 4 0 0 )

Direct loan disbursements
Guaranteed loans

151
1,293

201
531

109
415

99
415

55
400

Community and regional development ( 4 5 0 )

Direct loan disbursements
Guaranteed loans

-199
2,104

102
1,912

-1,160
2,090

-501
1,040

677
309

756
232

521
462

Education, training, employment and social services ( 5 0 0 )

Direct loan disbursements
Guaranteed loans

1,322
6,580

691
6,593

654
7,198

498
7,656

574
8,143

649
8,477

749
8,860

UMV,o/

Commerce and housing credit ( 3 7 0 )

Health ( 5 5 0 )

Direct loan disbursementsGuaranteed loans

24
217

18
242

9
181

8
185

9
181

4
175

Income security ( 6 0 0 )

Direct loan disbursements.
Guaranteed loans

906
26,862

1,005
28,503

1,002
29,500

752
31,661

503
31,432

253
30,102

103
30,000

Veterans benefits and services ( 7 0 0 )

Direct loan disbursementsGuaranteed loans

874
5,542

849
16,995

885
18,641

902
20,320

923
20,996

905
21,260

920
21,730

General government ( 8 0 0 )

Direct loan disbursementsGuaranteed loans

12
48

General purpose fiscal assistance ( 8 5 0 ) . .

Direct loan disbursementsGuaranteed loans

285
600

295

115

Direct loan disbursementsGuaranteed loans

28,640
85,810

32,205
130,751

29,395
125,954

Total new loans in the credit budget..

ui
^
M
O

27,007
129,649

33,724
129,648

34,833
124,805

26,165
130,256

1 New guaranteed loans for this function have been adjusted for guaranteed loans held as direct loans by GNMA. When guaranteed loans are acquired by a budget account, they become direct loans, and are counted as such in this table. The
deduction for GNMA eliminates overlap with direct loans.

>
>

r><

m
w

I
CO

F - 50

T H E BUDGET FOR F I S C A L Y E A R 1984
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 are independent of Federal control to a
substantial degree. Since they are privately owned, 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 tradition
they consult with the Treasury Department in planning the marketing of their debt. Government-sponsored enterprises include the
Student Loan Marketing Association (SLMA), the Federal National
Mortgage Association (FNMA), three components of the Farm
Credit System, (Banks for cooperatives, Federal intermediate credit
banks, and Federal land banks) and the Federal Home Loan Bank
system (FHLBS) which includes the Federal Home Loan Banks and
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
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. The sole exception, SLMA,
borrowed exclusively from the FFB from the inception of the FFB
until 1982. It now raises all its additional funds in private markets.
Sale of capital stock and retained earnings provide only a very
small portion of the resources that these enterprises used for lending.
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 funds to member institutions, in this case savings and loan associations.8 These enterprises provide liquidity to
primary lenders in times of tight monetary conditions, by either
purchasing loans from the primary lenders or by making advances
8 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 include this GNMA program
within the definition of Government-sponsored enterprises, but that is not done here because GNMA is part of
the Federal Government. GNMA data for this activity appear as entries in Table F-9, Guaranteed Loans.

SPECIAL A N A L Y S I S F

F - 55

to the primary lenders. These loans and advances are then paid
back as monetary and financial conditions improve. In recent
years, this former group of enterprises, such as Federal home loan
banks, has expanded its role by seeking to draw new funds into
mortgage markets at all times. By borrowing additional funds
themselves, they can provide more funds to the primary mortgage
lending institutions.
Table F - l l shows the lending and borrowing of Governmentsponsored enterprises for 1982 through 1984. Total gross lending
and borrowing are adjusted to avoid the double counting that
arises from loans between enterprises and between enterprises and
the Federal Government. The deductions in the table remove this
double counting.
Lending by Government-sponsored enterprises has been growing
rapidly in recent years. This trend will continue in 1983 and 1984,
according to the plans of FHLMC and FNMA. Both enterprises are
greatly expanding their new programs of conventional mortgagebacked securities beginning in 1982. The new securities are packaged
by mortgage lenders and guaranteed by FHLMC and FNMA in a way
that is similar to the GNMA program. FHLMC deals primarily in
conventional mortgages. In contrast, historically, FNMA purchased
mainly F H A / V A mortgages for its portfolio. However, with the
advent of FNMA's conventional mortgage-backed securities program in late 1981, FNMA has shifted its primary business away
from F H A / V A mortgages to conventional mortgages. This leaves
GNMA as the major secondary market outlet for F H A / V A mortgages. Net lending by the FHLB's is expected to fall sharply during
1983 and rise only slightly during 1984. This decrease in 1983 is
due to anticipated high repayments. The gross level of 1983 advances by FHLB's are also expected to grow. The activity of the
other Government-sponsored enterprises is expected to remain relatively stable during 1983 and 1984.
The economic assumptions on which the estimates in table F - l l
rest are not necessarily the same as the Administration's economic
forecast, which is used for the budget. Special Analyis E discusses
the borrowing of Government-sponsored enterprises in detail.

F - 50

THE BUDGET FOR FISCAL Y E A R 1984

Table F - l l . CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES
(In millions of dollars)

Enterprise

Actual 1982

Estimate
1983

LENDING (Funds Advanced)
Obligations
New transactions.
Net change
Outstandings

2,066
2,066
1,689
6,019

2,294
2,294
1,928
7,947

Obligations
New transactions.
Net change
Outstandings

14,644
10,464
9,159
68,841

12,467
14,730
11,791
80,632

Obligations
New transactions.
Net change
Outstandings

13,300
8,200

8,100

19,000
17,000
16,800
24,900

Obligations
New transactions.
Net change
Outstandings

23,951
23,951
-337
9,092

29,367
29,367
1,394
10,486

Federal intermediate credit banks..

Obligations
New transactions.
Net change
Outstandings

18,619
18,619
-114
21,775

21,059
21,059
2,305
24,080

Federal land banks-

Obligations
New transactions.
Net change
Outstandings

8,976
8,976
6,053
50,506

9,486
9,486
6,043
56,549

Obligations
New transactions.
Net change
Outstandings

45,538
45,538
2,411
70,717

41,138
41,138
-2,943
67,774

-244
5,166

1,000
1,000
579
5,745

Student Loan Marketing Association

Federal National Mortgage Association:
Corporation accounts

Mortgage-backed securities..

Farm Credit Administration:
Banks for cooperatives....

Federal Home Loan Bank system:
Federal home loan banks

Federal Home Loan Mortgage Corporation:
Obligations
Corporation accounts
New transactions.
Net change
Outstandings
Participation certificate pools :

Subtotal, lending (gross).

Less loans between sponsored enterprises.Federal home loan banks to FHLMC

Obligations
New transactions.
Net change
Outstandings

8,100

26,995
17,834
17,227
35,146

21,000
20,700

18,261
53,407

Obligations

154,109

156,811

New transactions.
Net change

135,648
43,944

156,774
56,158

Outstandings..

275,361

331,519

-882
2,990

-500
2,490

Obligations
New transactions.
Net change
Outstandings

F - 55

SPECIAL ANALYSIS F

Table F - l l . CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES—Continued
(In millions of dollars)

Enterprise

Actual 1982

Less secondary funds advanced from Federal
sources:
SLMA from FFB 2
Obligations
New transactions.
Net change
Outstandings
TVA to FNMA

Obligations
New transactions.
Net change
Outstandings

Less guaranteed loans held as direct loans by:
Obligations
Federal National Mortgage Association
New transactions.
Net change
Outstandings
Federal home loan banks

Federal Home Loan Mortgage Corporation

700
5,000

Estimate
1983

5,000

245
245
-1,025
38,767

813
813
-671
38,096

Obligations
New transactions.
Net change
Outstandings

-1

Obligations
New transactions.
Net change
Outstandings

1,030

-10
1,020

Obligations
New transactions.
Net change
Outstandings

46
46
46
116

116

Obligations
New transactions.
Net change
Outstandings

2,051
2,051
1,684
1,714

2,181
2,181
1,833
3,547

Obligations

151,687

153,817

New transactions.
Net change

133,226
43,350

153,780
55,508

Outstandings..

225,579

281,086

Student Loan Marketing Association

Net change
Outstandings..

2,325
6,893

1,404
8,297

Federal National Mortgage Association 3 .

Net change
Outstandings..

19,251
75,938

27,813
103,752

Net change
Outstandings..

-423
8,699

1,252
9,951

Federal intermediate credit banks

Net change
Outstandings..

-258
21,023

1,991
23,014

Federal land banks

Net change
Outstandings..

5,427
46,503

5,181
51,684

Net change
Outstandings..

3,216
60,844

-2,197
58,647

Farm Credit Administration

Student Loan Marketing Association 2

Total credit advanced

- 8

BORROWING (Funds Raised)

Farm Credit Administration:
Banks for cooperatives

Federal Home Loan Bank system:
Federal home loan banks

F - 50

THE BUDGET FOR FISCAL Y E A R 1984

Table F - l l . CREDIT ADVANCED AND RAISED BY GOVERNMENT-SPONSORED ENTERPRISES—Continued
(In millions of dollars)
Enterprise

Federal Home Loan Mortgage Corporation.
Subtotal, borrowing (gross)

Actual 1982

Net change.
Outstandings..
Net change
Outstandings..

Less borrowing from other sponsored enter- Net change
prises.
Outstandings..
Less borrowing from Federal sources:
Net change
SLMA from FFB 2
Outstandings..

17,430
40,744

Estimate
1983

17,836
58,610

46,968

53,280

260,674

313,955

-882

-500

3,681

3,181

700
5,000

5,000

Net change
Outstandings..

80
80

Total borrowing from the public and Net change
Government.
Outstandings..
Less investments in Federal securities.Investments in Federal securities
Net change
Outstandings..
Less borrowings for guaranteed loans held as
direct loans by:
Net change
Federal National Mortgage Association
Outstandings..

47,070

53,780

251,913

305,694

2,594
4,547

-447
4,100

-1,025
38,767

—671
38,096

-1

FNMA from TVA..

Federal home loan banks

Net change
Outstandings..

Federal Home Loan Mortgage Corporation.

Net change
Outstandings..

1,030

1,020

Farm Credit Administration

Net change
Outstandings..

46
116

116

Net change
Outstandings..

1,625
1,893

1,404
3,297

43,837

53,505

205,476

258,980

Student Loan Marketing
Total credit raised

Association :

Net change
Outstandings..

-10

^11 new transactions are loans purchased from FHLMC corporation accounts.
2 Until recently, all SLMA lending has been financed through the FFB, and therefore has been counted above (table F-6) as direct loans. All
SLMA loans are student loans guaranteed by the Federal Government. They have, therefore been counted above (table F-9) as guaranteed loans.
The first deduction eliminates the overlap of this table with the direct loan table. The second deduction removes the non-FFB financed remainder
of SLMA, to eliminate overlap with the guaranteed loan table.
3 Loans purchased at discount are recorded at their acquisition cost.

SUMMARY OF CREDIT ADVANCED AND RAISED UNDER FEDERAL
AUSPICES

The credit advanced and raised under Federal auspices is summarized in table F-12. Credit advanced by direct and guaranteed
loan programs reached $44 billion in 1982. This lending level is
estimated to increase to $75 billion in 1983, and fall to $59 billion
in 1984. Loans by Government-sponsored enterprises will increase
by $12 billion in 1983, increasing slightly in 1984. Outstanding

F - 55

SPECIAL A N A L Y S I S F

credit advances to the public under Federal auspices are expected
to total $984 billion by the end of 1984.
Net credit raised under Federal auspices totaled $87.6 billion in
1982, and is expected to reach to $130.9 billion in 1983, and to
decrease to $115.2 billion in 1984.
Table F - 1 2 . SUMMARY OF CREDIT ADVANCED AND CREDIT RAISED UNDER FEDERAL AUSPICES
(In billions of dollars)
Actual
1982

Estimate
1983

LENDING (Credit advanced)
Direct loans:
On-budget agencies (from table F - 6 )

Net change....
Outstanding-

9.1
100.2

5.2
105.4

Net c h a n g e Outstanding...

14.3
107.6

122.0

Net change....
Outstanding-

20.9
331.2

55.8
387.0

Total Federal Government credit advanced ... Net change.
Outstanding

44.3
539.0

75.4
614.4

Loans by Government-sponsored enterprises (from Table. Net c h a n g e F-ll).
Outstanding...

43.4

55.5

Off-budget entities (from table F - 6 ) .

Primary guaranteed loans (from table F - 9 )

14.4

225.6

281.1

Net change.

87.6

130.9

Outstanding

764.6

895.5

Net change....
Outstanding...

135.0
929.4

215.0
1,144.4

loans Net change....

20.9

55.8

Outstanding-

331.2

387.0

Net change.
Outstanding

155.9

Total, credit advanced to the public under
Federal auspices.
BORROWING (Credit raised)
Federal borrowing from the public
Guaranteed
above).

borrowing

(same

as guaranteed

Total Federal Government credit raised

Borrowing by Government-sponsored enterprises (from Net change....
Table F - l l ) .
Outstanding...
Total, credit raised from the public under Net change.
Federal auspices.
Outstanding

270.8
1,260.6 1,531.4
43.8

53.5

205.5

259.0

199.7

324.3

1,466.1 1,790.4

F - 50

T H E BUDGET FOR F I S C A L Y E A R 1984
T A X - E X E M P T 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. 9 The resulting subsidy to borrowers has
normally been a saving of 25 to 35 percent of the taxable interest
rate on long-term obligations.
The tax exemption reallocates credit resources to the assisted
borrowers, just as do Federal direct loans and loan guarantees.
Borrowers aided by tax exemption gain a position of preferred
access to credit resources over competing taxable borrowers, just as
do borrowers with other forms of Federal credit assistance, although in a different form.
During the first half century of income tax, tax exemption was
confined mainly to State and local government borrowing for
public purposes. During the 1960's, however, tax-exempt financing
was increasingly made available for certain private uses. State or
local governments typically establish authorities that function as
financial institutions in providing tax-exempt financing to private
borrowers. The authorities transfer their exempt status to the private borrowers' debt obligation, or lend the proceeds of the issue to
the borrower. The State or local government typically is not responsible for the payment of interest and principal in the event of
default. The 1968 and 1969 tax acts made bonds issued for use by a
private trade or business taxable, but a number of exceptions were
permitted that have allowed major growth of tax-exempt financing
for some private users.
Table F-13 shows that the sale of tax-exempt bonds used for
private purposes has increased greatly in recent years. Tax-exempt
bonds issued for five private activities—owner-occupied and rental
housing, private non-profit hospitals, student loans, pollution control facilities, and businesses financed with "small-issue" industrial
development bonds (IDB's)—will reach an estimated $42.6 billion of
new obligations in calendar year 1984. These private purpose bonds
will account for 43% of total new long-term tax-exempt issues,
compared with only 24% of total long-term issues just eight years
earlier. State and local government debt and private purpose bonds
that could not otherwise be identified or classified are included in
the total of other tax-exempt bonds. Refunding bonds typically are
used to refinance public projects under different terms than the
original bonds, often with lower interest rates.
In calendar year 1982, estimated total new tax-exempt issues
increased by $32.1 billion above 1981 to $87.2 billion. Almost all of
this growth occurred in housing bonds and State and local government debt issues. Lower mortgage interest rates partly explain the
growth in single and multiple family housing bonds. However, the
authority to use tax-exempt bonds for single family housing con9 Tax exemption is a tax expenditure, the subject of Special Analysis G, "Tax Expenditures." It includes a
discussion of revenue losses attributable to special provisions of the tax code, including specific types of taxexempt bonds.

SPECIAL A N A L Y S I S F

F - 55

struction is expected to expire at the end of 1983. As interest rates
declined in 1982, projects typically financed with tax-exempt bonds
became more feasible. With the expectation that interest rates will
continue to fall through 1984, State and local authorities are likely
to issue more bonds to finance new public facilities and projects
that were postponed earlier when interest rates were very high.
The significant growth of private purpose bonds has contributed
to a reduction in the relative advantage of tax-exempt financing.
While long-term tax-exempt bonds have traditionally had a cost
advantage of between 25 and 35 percent over taxable bonds, the
cost advantage currently is between 10 and 20 percent on securities
with 20-year maturities. Tax-exempt yields must increase relative
to the yields on alternative investments in order to attract additional funds. The reduction in the cost advantage increases the
financing costs for all State and local government borrowing, including the costs for traditional public projects such as roads,
sewers, and schools.
In recent years, Congress has placed further restrictions on the
use of tax-exempt financing by private entities. The Omnibus Reconciliation Act of 1980 imposed a number of restrictions on the use
of tax-exempt credit for owner-occupied housing, including the
elimination of tax exemption for such bonds after 1983 as noted
above.10 Last year the Administration successfully proposed legislation to reduce the use of private purpose tax-exempt bonds through
several changes in the tax code. The Tax Equity and Fiscal Responsibility Act of 1982 required that most private purpose bonds be
approved by an elected public official after a public hearing, and
that assets of certain exempt private activities financed with taxexempt bonds after 1982 be depreciated using the straight-line
method rather than accelerated depreciation. The 1982 tax act also
eliminated the tax exemption for "small-issue" IDB's after 1986.
Table F-13 presents estimates of the annual tax revenue lost to
the Treasury from all tax-exempt bonds issued each year, the present value of the tax loss from these bonds, and the value of the
subsidy received by the borrower. The annual tax loss measures
the amount of reduction in receipts resulting from the issuance of
tax-exempt rather than taxable debt in that year. Further tax
losses occur over the entire life of the tax-exempt security. Therefore, the present value of the total tax loss is much larger than the
annual tax loss. The cost to the Treasury in lost tax revenue
exceeds the financial benefits to the borrower, because the lender
also receives a subsidy. Table F-13 also shows separately the
annual tax revenue loss and present value of the tax loss from
private purpose tax-exempt bonds.
10 However, most general obligation bonds to finance veterans' owner-occupied housing and bonds to finance
multi-family rental housing remain tax exempt.

F - 50

THE BUDGET FOR FISCAL Y E A R 1984

While direct and guaranteed loan programs are included in the
credit budget, tax-exempt credit is not. Although tax-exempt financing affects resource allocation and has efficiency costs similar
to other credit assistance, its current statutory structure gives it
entitlement status and its use is unilaterally elected by the borrower. Effective control can only be achieved through legislated
changes to the tax code.

Table F - 1 3 . TAX EXEMPT FINANCING: PRESENT VALUE OF TAX SUBSIDIES TO NEW ISSUES—(in billions of dollars)
Calendar years1
Estimated

Actual

Total new issues, long-term tax exempts
Private purpose tax-exempts
Housing bonds
Single-family mortgage revenue bonds
Multi-family industrial development bonds..
Veterans general obligation bonds
Private hospitals
Student loans
Pollution control
Small-issue industrial development bonds
Refundings
Other tax-exempt issues 2
Subsidy estimates (new issues o n l y ) : 3
All new issues:
Annual tax loss, all new issues
Present value, tax loss
Present value, borrower benefit
Private purpose issues only:
Annual tax loss
Present value, tax loss

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

23.6

23.9

24.2

30.5
4.9
1.4

35.0
8.3
2.7
0.7
1.4
0.6
1.9

46.9
13.2
4.5

49.1
15.9
7.1
3.4
2.5
1.2
2.2
0.3

48.4
25.0

7.8
2.7
1.6
2.4
0.6
2.5
7.4
1.9
21.5

54.5
28.6
14.0
10.5
2.2
1.3
2.8
0.5
2.5
8.8
1.6
24.3

55.1
25.1
5.6
3.6

87.2
41.6
15.0
10.0
4.5
0.5

1.2
28.8

1.6
5.1
13.8
4.0
41.6

95.8
45.1
17.9
11.0
6.0
0.9
6.7
2.0
5.2
13.3
5.0
45.7

)
)
)
)
)
)

0.9
0.6
1.4

2.0

1.6
22.0

L2
22.7

23.6

0.7
7.1
5.1

0.7
7.3
5.7

0.9
7.8
5.9

0.6

n
n

H
t1)

5.04
7.21
160.7
176.5

4.99
7.44
175.1
191.2

5.86
8.57
188.9
207.7

0.1
2.1

1.0

2.9

0.6

3.3

0.1

3.0
2.3
9.6
24.1

2.8

3.5
9.3
23.9

12.1

1.1

0.9
3.5
1.1
3.9
11.0

6.1

f1)
0.9
24.7

1.5
3.5
23.2

1.1
10.0

11.2

1.6
14.8
12.4

16.1
14.1

1.9
16.3
15.0

2.7
19.6
16.0

3.3
21.0
13.2

4.6
32.2
23.7

4.3
33.9
24.7

0.3
2.7

0.4
3.9

0.5
4.9

1.0
8.4

1.4
10.3

1.5
9.6

2.2
15.4

2.0
16.0

5.20

5.52
8.73
279.1
291.3

7.85
11.94
341.1
356.2

10.43
14.17
370.0
389.8

8.59
12.43
422.3
446.9

6.5

0.2
1.6

1.2

1.8

MEMORANDUM
AAA State and local bond yields, percent...
AAA Corporate bond yields, percent
Outstanding, long-term tax-exempt issuesOutstanding, all tax-exempt issues

6.42
8.83
205.2
223.8

5.66
8.43
225.0
239.5

8.02

251.3
262.9

5.92
9.63
308.2
321.1

7.50

10.81

481.0
508.0

* $50 million or less.
1 1975-81 estimates of tax-exempt volume and distribution and 1982-84 projections are by the Department of the Treasury, Office of Tax Analysis. Estimates are unavailable for private purpose tax-exempts before 1975.
2 Includes State and local government debt for public purposes and some private purpose debt that could not be identified or classified.
3Assumed: 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 and 1982-84 yields estimates by Office of Management and Budget.

I
Cn
CO

F - 50

T H E BUDGET FOR F I S C A L Y E A R 1984
INTEREST SUBSIDIES

Federal credit programs provide credit to selected borrowers on
more favorable terms than would otherwise be available in private
credit markets. These favorable terms result in a subsidy to the
borrower. The largest subsidy is usually in the form of a lower
interest rate, although other subsidies, such as longer maturities,
are commonly offered as well. For direct loans the subsidy arises
through formulas in law setting interest rates at a fixed ceiling or
tying them to fluctuations in some other rate. While risk is a
crucial factor in determining private interest rates, it may be
largely ignored in setting rates for Federal direct loan programs;
and therefore, the rates for comparable loans in the private market
will be higher. For guaranteed loans, the subsidy usually occurs
because the guarantee removes all risk of default facing the lender;
the lender is therefore willing to lend to the guaranteed borrower
at rates less than the market rate, not charging the borrower a
premium for risk.
This section presents estimates of the explicit subsidies provided
through lower interest rates for Federal direct loan programs and
one loan guaranteed program. The total interest subsidy in any
year is measured by estimating the difference between the interest
payments on a federally assisted loan and those the borrower
would otherwise have paid in the private market. The reduced
interest rate lowers payments throughout the life of a loan. The
measurement of the interest subsidy therefore requires that the
series of annual interest payment reductions be converted into a
single discounted present value. This capitalizes all future payments and allows comparison of the value of the federally assisted
and wholly private loan through a single number.
There is no generally accepted method for quantifying the present value of interest subsidies in Federal credit programs. Measurement of the total subsidy depends on an accurate assessment of
what the wholly private interest rate would have been. For many
Federal credit programs this private rate is impossible to determine, either because the risk of a Government-assisted loan is
unknown or because comparable loans are not made in the private
market. Federally assisted borrowers and projects are frequently
riskier than the private market would accept under any terms. To
make a rough estimate of the subsidy without complete private
rate information, two simplified approaches are used. The first
estimates the value of the subsidy to borrowers; the second, the
cost to the Government.
The first approach is intended to show the value of the subsidy to
the borrower. It compares Federal credit program interest rates
against private sector rates for comparable loans (see table F-14a).
In order to define comparable private rates, this approach relies on

SPECIAL A N A L Y S I S F

F - 55

relating Federal credit programs to broad categories of private loan
types rather than making a detailed analysis of individual program
characteristics.11 For example, the subsidies on Rural Electrification Administration loans are computed by comparing the average
REA interest rates against rates for recently offered shares of AAA
utility bonds. The private rates are proxies for the actual private
rate because they are calculated and compared at such a high level
of aggregation. For some programs the rates shown here are better
proxies than for others.
The second approach is intended to estimate the cost of the
interest subsidies to the Federal Government (see table F-14b). It
applies a single interest rate to all Federal credit programs: the 10year Treasury bond rate averaged over the last 6 months. The
estimates in table F-14b are less than the estimates in table F-14a
because the Government can borrow more cheaply than can private lenders. Thus, the value of the subsidy to the borrower is
larger than the cost of the loan to the Government.
The subsidy estimates are intended to provide an estimate of the
order of magnitude of interest subsidies, and to suggest the relative
distribution of subsidies among the programs. Neither method is
exact, and neither quantifies the total subsidy provided in Federal
credit programs.
The measurement of interest subsidies in these tables includes:
—the effect of the Federal Government making a direct loan at
an interest rate lower than a normal private borrower would
have to pay on a similar loan in the private market;
—the effect of the Federal Government paying part of the interest costs of a private loan.
The measurement of interest subsidies does not include:
—the value of the Government's assumption of risk on a direct
loan or the value of a loan guarantee;
—the effect of making credit available to unusually risky borrowers, under unusually risky terms (such as a higher loan to
value ratio or a long maturity), or for unusually risky ventures; i.e., the effect of not charging premiums that would be
adequate to cover probable losses on direct or guaranteed
loans;
—the effect of not charging fees or premiums that would cover
the administrative costs of the program.
Since the amount of interest rate reduction resulting from the
Government's assumption of risk on guaranteed loans is not measured, interest subsidies are calculated only for one loan guarantee
program, guaranteed student loans, where the Federal Government
directly contributes all or part of the interest payments on the
loan.
"Private sector rates are computed from data published in the Federal Reserve Bulletin.

F- 50

THE BUDGET FOR FISCAL Y E A R 1984

The sensitivity of interest subsidy estimates to assumptions.—
Estimates of interest subsidy in tables F-14a and F-14b are highly
sensitive to changes in assumptions. A single percentage point
change in the assumed private sector interest rate can substantially change the present value of the interest subsidy. For instance, if
the rate on a $100 million direct loan is 10% and the average
private sector interest rate on loans in the same category is also
10% (assuming that the discount rate is the same as the private
market interest rate), then there is no explicit interest subsidy. If,
however, the private market interest rate is assumed to be 12%
then the present value of the interest subsidy is $15 million; and if
the interest rate is assumed to be 15% then the present value of
the interest subsidy increases to $31 million.
The present value will also change dramatically depending on
the maturity and amortization plan. For instance, the present
value of the subsidy on a 10%, $100 million loan over 30 years at a
15% discount rate is $31 million. This subsidy would be only $18
million if the maturity were 10 years. With a 30-year maturity and
a 5-year grace period the subsidy would be $66 million, more than
twice the subsidy of a nondeferred loan.
Since the estimates are so sensitive to the assumptions they are
likely to change considerably from year to year, regardless of policy
changes. For example, a reduction in market interest rates will
lower the subsidy even if there is no policy change. Nevertheless,
the estimates of the interest subsidies in credit programs shown in
these tables can be used to indicate which programs are more
deeply subsidized than others, and the general magnitude of the
subsidies.

F - 55

SPECIAL A N A L Y S I S F

Table F - 1 4 a . INTEREST SUBSIDY VALUES FOR NEWLY COMMITTED FEDERAL CREDIT ASSISTANCE
(Dollar amount in millions)
Obligations or commitments

Average loan terms
Agency and programs

Percent

DIRECT LOANS
Funds Appropriated
to the
President:
Economic support
fund
Foreign military sales
credit
Functional
development
assistance
Agriculture:
Price support and
related programs....
Agricultural credit
Rural housing
Farm export
creditsPublic Law 4 8 0
Rural development
Rural telephone b a n k Rural electric and
telephone
Education:
Student financial
assistance
Student loan
insurance
College housing
Energy:
Bonneville Power
Administration
Health and Human
Services:
Health maintenance
organizations,, ,
Housing and
Urban
Development:
Federal Housing
Administration
Government National
Mortgage Assn
Housing for elderly
and handicapped....
Housing rehabilitation
Low rent public
housing
Transportation:
Highway p r o g r a m s 1 . . .
Rail programs
Veterans
Administration:
Housing programs
380-700

0 -

Years

1982

1983

Market rate discount
Market
rate

1984

Present value of subsidy stream
1982

1984

1983

3.0

40.0

366

481

468

12.5

241

317

308

10.5

15.0

800

1,175

1,000

12.5

121

103

2.8

33.1

398

409

387

12.5

252

259

245

10.6
9.2
3.0

0.7
10.0
33.0

11,500
4,199
3,454

11,877
4,264
3,377

8,040
3,979
308

14.0
14.0
13.0

292
744
2,203

302
755
2,154

204
705
196

3.6
7.4
11.1

31.5
40.0
35.0

111
568
185

750
518
185

768
360
185

12.5
12.2
14.5

453
208
41

438
189
41

448
132
41

4.9

35.0

1,099

1,101

575

14.5

649

650

340

5.0

10.0

175

179

18.0

7.5
3.0

7.0
30.0

289
40

391

424

18.0
13.4

78
25

106

115

0.2

19.9

14.5

12.0

20.0

15.5

10.0

20.0

284

341

288

13.4

7.5

40.0

1,985

504

12.5

739

187

9.2
3.0

40.0
20.0

819
49

634
84

476

14.5
13.5

285
27

221
46

166

6.6

905

1,000

13.5

3.5
3.4

10.0
20.2

69
43

50
102

10.6
14.7

3
24

2
57

12.0

29.0

720

691

721

13.0

14 QL

F - 50

THE BUDGET FOR FISCAL Y E A R 1984

Table F - 1 4 a . INTEREST SUBSIDY VALUES FOR NEWLY COMMITTED FEDERAL CREDIT ASSISTANCE—
Continued
(Dollar amount in millions)
Average loan terms
Agency and programs

Insurance policy
loans1
District of Columbia
Export-Import Bank
NCUA
Small Business
Administration:
Business loans
Disaster loans
Tennessee Valley
Authority
Other agencies and
programs
Federal Financing
Bank: Loans to the
public

Percent

Years

Grand total

1982

1983

Market rate discount

1984

Market
rate

Present value of subsidy stream
1982

30.0
30.0
12.0
.2

152
145
3,516
82

156
145
3,830
95

163
115
3,830
95

14.5
12.2
15.5
15.5

35
41
641

14.5
11.5

8.5
9.0

682
237

749
440

512
440

15.5
15.5

5.4

8.2

7.1

7.7

155

107

10.3

10.0

30,082

8.5

10.0

1984

1983

10.9
8.2
11.0
14.6

Total—Direct
loan
subsidies2
GUARANTEED LOANS
Education:
Student loan
insurance 2

Obligations or commitments

36
41
6 9 9*

37
33
6 9 9*

23
32

25
59

17
59

14.5

106

15.7

27,044

23,701

14.62

4,750

4,270

3,742

63,092

60,841

48,076

12,096

11,238

7,768

6,195

6,778

7,391

1,932

2,114

2,305

69,287

67,619

55,467

14,028

13,352

10,073

18.0

* $500 thousand or less.
'There is no specified maturity period. Forty years is used as a proxy for an indefinite maturity.
2 0nly explicit subsidies are represented; implicit subsidies arising from the Government's assumption of risks are not included. (See text)

F - 55

SPECIAL A N A L Y S I S F

Table F - 1 4 b . 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 and
related programs....
Agricultural credit
Rural housing
Farm export
credits—Public
Law 4 8 0
Rural development
Rural telephone b a n k Rural electric and
telephone
Education:
Student financial
assistance
Student loan
insurance
College housing
Energy:
Bonneville Power
Administration
Health and Human
Services.Health maintenance
organizations
Housing and Urban
Development:
Federal Housing
Administration
Government National
Mortgage Assn
Housing for elderly
and handicapped....
Housing rehabilitation.
Low rent public
housing
Transportation:
Highway p r o g r a m s 1 . . .
Rail programs
Veterans
Administration:
Housing programs

Percent

Years

Obligations or commitments

1982

1983

13% discount

1984

Annual
subsidy
per
$100
million

Present value of subsidy stream
1982

1984

1983

3.0

40.0

366

481

468

8.78

246

323

314

10.5

15.0

800

1,175

1,000

1.92

101

148

126

2.8

33.1

398

409

387

8.51

257

264

250

10.6
9.2
3.0

0.7
10.0
33.0

11,500
4,199
3,454

11,877
4,264
3,377

8,040
3,979
308

2.86
2.59
8.41

207
606
2,203

214
615
2,154

145
574
196

3.6
7.4
11.1

31.5
40.0
35.0

777
568
185

750
518
185

768
360
185

7.91
5.28
1.80

465
230
25

449
209
25

460
146
25

4.9

35.0

1,099

1,101

575

7.16

599

600

313

5.0

10.0

175

179

5.19

7.5
3.0

7.0
30.0

289
40

391

424

3.42
8.21

45
25

0.2

19.9

8.95

12.0

20.0

.85

10.0

20.0

284

341

288

2.48

7.5

40.0

1,985

504

5.17

786

199

9.2
3.0

40.0
20.0

819
49

634
84

476

3.59
7.40

225
26

174
44

131

6.6

0.2

905

1,000

4.29

3.5
3.4

10.0
20.2

69
43

50
102

3.16
7.19

7
22

3
52

12.0

29.0

720

691

721

.92

F - 50

THE BUDGET FOR F I S C A L Y E A R 1984

Table F - 1 4 b . 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

13% discount

1982

1983

1984

Annual
subsidy
per
$100
million

Present value of subsidy stream
1982

1983

1984

11.0
8.2
11.0
14.6

30.0
30.0
12.0
0.2

152
145
3,516
82

156
145
3,830
95

163
115
3,830
95

1.92
4.30
1.45
-1.13

22
47
310

23
47
337

24
37
337

14.5
11.5

8.5
9.0

682
237

749
440

512
440

-1.03
1.02

-36
13

-40
24

-27
24

5.4

8.2

4.77

7.1

7.7

155

107

106

3.74

10.3

10.0

30,082

27,044

23,701

1.85

3,099

2,786

2,441

63,092

60,841

48,076

9,716

8,935

5,747

6,195

6,778

7,391

1,051

1,150

1,254

69,287

67,619

55,467

10,767

10,084

7,000

Total—Direct
loan
subsidies2
GUARANTEED LOANS
Education
Student loan
insurance2
Grand total

8.5

10.0

3.04

* $500 thousand or less.
1 there is no specified maturity period. Forty years is used as a proxy for an indefinite maturity.
2Only explicit subsidies are represented; implicit subsidies arising from the Government's assumption of risks are not included. (See text).

PROPOSED LEGISLATION

The administration is seeking to reduce the amount of direct
loans and loan guarantees issued by the Federal Government. Its
primary method for accomplishing this goal is to reduce the appropriation bill limitations on credit programs, and in some cases to
propose termination of the programs. For several programs expected to continue operation, changes in authorizing law are being
sought that would reduce subsidies and Federal costs. This section
outlines the legislative proposals.
Legislation will also be introduced effecting the treatment of
Certificates of Beneficial Ownership (CBO's) in the Rural housing
insurance fund. This legislation involves removing the statutory
requirement that the proceeds from CBO's be treated as a sale of
an asset. With this change, CBO transactions will be treated in
accordance with the recommendations of the 1967 President's Com-

SPECIAL ANALYSIS F

F - 55

mission on Budget Concepts. Under the proposed legislation, the
issuance of CBO's will be considered borrowing rather than income
and the retirement of CBO's will be redemption of debt. The CBO's
outstanding at the start of 1984 will be reclassified as agency debt.
Also affecting RHIF is a proposal to transfer the assets, liabilities
and balances from the Self-help land development fund to RHIF.
Since there has been little loan activity in the land development
fund, it would be more efficient to consolidate all activity in RHIF.
The administration is again seeking legislation to help the Federal Housing Administration (FHA) keep abreast of recent changes in
housing finance and to reflect an expanding role for private mortgage insurers. The proposed legislation would remove the current
statutory ceilings on FHA-insured mortgages, allowing FHA to
insure variable rate mortgages. At the same time, the FHA regulation prohibiting FHA-insured homebuyers from being charged any
points will be eliminated. Points are interest charges that are paid
at the time a property is purchased and are used by lenders to
increase effective interest rates on FHA-insured mortgages. Currently, additional points cannot be charged to buyers directly.
Buyers may pay points indirectly, however, through increased
housing prices. The elimination of both the ceiling on interest rates
and the prohibition of buyer paying points is intended to help
mortgage markets operate more effectively and reduce artificially
high housing prices.
RECENTLY ENACTED LEGISLATION

This section summarizes legislation enacted during the second
session of the 97th Congress involving Federal credit programs.
Unlike the first session of Congress, there was no single major
piece of legislation dealing with a large number of credit programs.
The Export Trading Companies Act of 1982 establishes a guaranteed loan program administered by the Export-Import Bank to
creditors of export trading companies. These loans will be secured
by the companies export account receivables or inventories of exportable goods. The guaranteed loan will be made only if the Board
of Directors determines the private credit market is not providing
adequate financing or if the guarantees will promote trade that
would not occur otherwise. The Act specifies that the guaranteed
loans should ultimately promote exports from smaller, minority
businesses or agricultural concerns.
The Veterans Compensation, Education, and Employment
Amendments Act of 1982 initiates a user fee for veterans obtaining
Veterans Administration home loans. The amount of the fee is onehalf of 1% of the total loan amount. The fee will be paid either
before the loan is made or included in the loan amount.

F - 50

THE BUDGET FOR FISCAL Y E A R 1984

The Garn-St Germain Depository Institutions Act of 1982 is a
major step toward deregulating and restructuring the nation's financial system. It provides the means by which depository institutions can compete effectively in the financial community in the
highly competitive, less regulated environment of the future. Due
to the severity of financial problems that have faced the thrift
industry, the major provisions of the Act contain short-term and
long-range remedies to ensure the lasting viability of this vital
segment of our financial community. In particular, the Act establishes a three-year program whereby the FHLBB and the FDIC
may purchase net worth certificates from troubled depository institutions in exchange for promissory notes. The certificates would be
considered capital and for that reason would be included in the net
worth of the affected institution. Unless an institution defaulted,
there would be no monetary transaction between the FHLBB or
the FDIC and the depository institutions. The Act also allows the
Federal National Mortgage Association to issue preferred stock.
The Student Financial Assistance Technical Amendments Act of
1982 waives the Federal Government's position with respect to
other creditors in the event of bankruptcy by the Student Loan
Marketing Association (SLMA). Prior to 1982, SLMA obtained
funds from the Federal Financing Bank (FFB). However, as part of
a general Administration policy to limit Government-sponsored enterprise borrowing from the FFB, SLMA began to obtain funds
through private financial markets. Before passage of this Act, the
Federal Government would have equal claim with other creditors
in the case of bankruptcy. Congress felt this hampered SLMA
ability to raise money in private financial markets given the extensive FFB borrowing, therefore other creditors will have priority
over the Federal Government in the event of bankruptcy.
The Housing and Community Development Extension of Insurance Programs Act of 1982 continues the Federal Housing Administration's basic insuring authority to May 1983. Also, the Act allows
the Federal Home Loan Morgage Corporation to issue preferred
stock, thereby providing FHLMC parity with the Federal National
Morgage Association. FNMA was granted similar authority in the
Garn-St Germain Depository Institutions Act of 1982.
The District of Columbia Revenue Bonds for Educational Expenses Amendment of 1982 allows the District of Columbia to issue
revenue bonds for the purpose of financing student loans. The
possible reduction of student loans from other Federal sources
prompted this piece of legislation. Whether a bond issue is actually
made and particular guidelines of the program will be determined
by the District of Columbia.
The No Net Cost Tobacco Program Act of 1982 requires the
establishment of a capital fund by farm producer associations. This

SPECIAL A N A L Y S I S F

F - 55

fund should help insure that all loans made by the Commodity
Credit Corporation (CCC) would be paid in full. Beginning in 1982,
any producer benefiting from price supports must contribute to the
fund to be eligible for the program. In addition, any net gain from
the sale of loan tobacco will be retained by the CCC for application
against any losses.

SPECIAL ANALYSIS G
TAX EXPENDITURES
The Congressional Budget Act of 1974 (Public Law 93-344) requires a listing of a "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 liability."
The definition of tax expenditures used in this analysis is based
on the distinction between the "normal" or "reference" provisions
of the tax structure needed to make the tax operational, and the
"special" provisions that are exceptions to the reference tax provisions. Such exceptions are designed to further other objectives,
such as health care, export promotion, or employment of the handicapped. Their operation is, therefore, comparable to outlay programs, such as milk price supports and rent subsidies that also
provide a subsidy to particular activities. For this reason, the expressions "tax subsidies" and "tax expenditures" are often used
synonymously. Because the term "tax subsidies" is somewhat more
descriptive than "tax expenditures," the former will be used in the
remainder of this analysis.
The reference tax provisions are those which deal with the basic
structural features of the Federal income tax. These features include such concepts as the definition of income subject to tax;
taxable units and their threshold levels of taxability; the relationship between the taxation of corporations and their shareholders;
the tax rate schedules; the basic tax accounting rules; the treatment of international transactions; and the system of tax administration. All of these structural features must be dealt with in some
manner in order to have an operational income tax. In contrast to
such reference provisions, it would be possible to have a fully
operational income tax that did not contain any of the special
provisions that give rise to tax subsidies.
While the distinction between the reference and special provisions of the Code may be clear as general concepts, there are
numerous difficulties encountered when applying these concepts to
obtain an actual list of tax subsidies. The inclusion of wages in the
tax base is a clear example of a reference tax provision; the exclusion of fringe benefits is due to special provisions, and therefore
clearly constitutes a tax subsidy. On the other hand, a less clear

G-1

F- 50

THE BUDGET FOR FISCAL YEAR 1984

example is provided by the capital gains provisions, which apply to
a broad class of transactions and taxpayers, but are exceptions to
the general rules governing taxation of income from all other
sources. As explained more fully below, the capital gains provisions
are considered a tax subsidy.
ALTERNATIVE DEFINITIONS OF T A X

EXPENDITURES

While the current income tax is a useful reference standard, it is
not the only one that might be used. Some analysts would prefer
using a "pure income tax" under which the tax base is equal to an
individual's consumption plus the change in his net worth during a
year. Other analysts would prefer to use income used for consumption as the reference tax base for measuring tax subsidies. In this
latter view, income that is saved would not be taxed.
If the current tax system is compared with a pure income tax for
purposes of identifying tax expenditures, the list of tax expenditures would be quite different from the list presented in table G - l .
For example, the following would be considered tax expenditures if
the reference system were a pure income tax:
(1) the accelerated cost recovery system (ACRS);
(2) the exemption of tax on the imputed income from housing;
(3) the lack of inflation indexation of capital gains, taxation of
capital gains only upon realization and the 60-percent exclusion of long-term capital gains; and
(4) the double taxation of corporate dividends.
The first of these would be a tax expenditure because a pure
income tax would allow as a deduction only the economic depreciation on an asset—i.e., the true reduction in the value of the asset.
ACRS is a system designed to provide more rapid depreciation than
true economic depreciation.
The second of these, the exemption of the imputed income from
housing, arises from the fact that owner-occupied housing provides
income in kind to the owner. A house is a capital asset. The
difference between a house and a corporate bond is that the return
on the house is in the form of free rent whereas the return on the
corporate bond is in the form of cash. Nonetheless, both assets
return income and under a pure income tax, that income would be
taxed in the same manner. Thus, the value of the free rental
services provided by an owner-occupied home would be included in
a pure income tax base. However, a deduction for mortgage interest payments (indexed for inflation) would be allowed just as there
is a deduction for investment interest when one borrows money to
invest in a corporate bond. If the reference tax is a pure income
tax, the mortgage interest deduction would not be treated as a tax
expenditure. Instead, there would be a tax expenditure based on

SPECIAL ANALYSIS F

F- 55

the exemption of the imputed rent from the owner-occupied home,
adjusted for depreciation.
The case of capital gains is quite complicated. Under a pure
income tax, real accrued capital gains, i.e., accrued capital gains
adjusted for a purely inflationary rise in the value of an asset,
would be taxed just as any other income. Thus current law, when
compared to a pure income tax, has three tax expenditures with
regard to long-term capital gains. The first is that these gains are
not indexed. This is a negative tax expenditure, i.e., it may cause a
higher tax liability that would occur under a pure income tax.
Offsetting this, however, is the 60-percent exclusion of long-term
capital gains from adjusted gross income. This is the usual positive
tax expenditure resulting in lower tax liability. Finally, capital
gains are taxed only when realized, not as they accrue.
Under a pure income tax, all income would be taxed only once to
the recipient. Consequently, the double taxation of the corporation
income, when compared to a pure income tax, is a negative tax
expenditure. It may raise the tax liability above that which would
apply under a pure income tax.
If a tax on income used for consumption were used as the reference point, the list of tax expenditures is different from that which
would result from a pure income tax and from that which would
result from use of the normal provisions of the tax code as the
reference structure. The following provisions of current law would
be treated as tax expenditures if a pure consumed income tax were
used as the reference point:
(1) the nondeductibility of saving other than saving contributed
to individual retirement accounts and Keogh plans;
(2) the nontaxability of borrowing used for consumption; and
(3) the nontaxability of bequests consumed by recipients.
Under a consumed income tax, income that is saved would be
deducted from the tax base. Consequently, except for contributions
to IRA plans and pension plans, the nondeductibility of saving
under current law would constitute a negative tax expenditure.
Just as saving would be deducted from the tax base, borrowing
would be included in the tax base to the extent it is used for
consumption. If an individual borrows $1,000 in a year and uses
that $1,000 to increase consumption, a tax that is based on consumption would include that $1,000 in the tax base. Current law
has no such provision and thus the absence of a tax on borrowing,
if a consumed income tax were used as a reference point, would
constitute a positive tax expenditure.
Since a consumed income tax would allow accumulations of
wealth to be deductible because they are not consumption, the
corresponding treatment of consumption out of wealth requires
that such consumption be included in the tax base. Thus, an indi-

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THE BUDGET FOR FISCAL YEAR 1984

vidual who inherits wealth and consumes it over his lifetime would
have to include the bequest in his tax base. For example, if a
person inherited $1 million and proceeded to spend $150,000 a year
and, in doing so, reduced the principal amount, all of the $150,000
a year of consumption would be taxable. Under current law, consumption of wealth does not enter the tax base. Therefore, when
current law is compared with a consumed income tax, a positive
tax expenditure results from exclusion of spending out of inherited
wealth.
While there are valid arguments in favor of identifying and
measuring tax expenditures relative to a pure income tax or a
consumed income tax, the existing Federal income tax is the best
practical alternative available now for listing and computing the
amounts of existing tax subsidies. Consequently, the remainder of
this analysis is based on existing law.
THE RELATIONSHIP BETWEEN T A X SUBSIDIES AND OUTLAYS

Tax subsidies often have objectives similar to government programs funded through direct appropriations. There are numerous
examples of this. Direct expenditures and tax subsidies both reduce
the cost of ships; direct interest' subsidies and the issuance of taxexempt bonds both result in lower financing costs for eligible issuers of mortgage bonds and businesses. Similarly, State and local
governments benefit both from direct grant programs and from the
ability to borrow funds at tax-exempt rates. Individuals benefit
both from direct medicare payments and from the deductibility of
medical expenses for income tax purposes. And individuals also
benefit from social security payments as well as the exemption of
these payments from income tax.
This special analysis contains quantitative estimates of tax subsidies that can be used in conjunction with the consideration of
direct budget outlays. Like the listing of comparable direct oulays,
the listing of specific tax items implies neither approval nor disapproval of the special provisions of the tax system that authorize
them. Neither does it imply that only the special provisions are
worthy of analysis. Many features of the normal tax structure such
as the rates, exemption levels, and basic accounting rules, have
major effects upon the level and composition of economic activity
and the distribution of income. Thus, it is important that both the
reference tax structure and exceptions that provide tax subsidies
be subject to periodic analysis and review.
The Internal Revenue Code contains provisions relating to individual income, corporate income, estate and gift, excise, and employment taxes—all of which include special provisions that provide subsidies. Nevertheless, this analysis deals only with devi-

SPECIAL ANALYSIS F

F- 55

ations from the reference structure in the taxation of individual
and corporate income.
DEFINING T A X

SUBSIDIES

For a provision to involve a tax subsidy, two conditions are
necessary:
—The provision must be "special" in that it applies to a narrow
class of transactions or taxpayers; and
—There must be a "general" provision to which the "special"
provision is a clear exception.
If these two conditions are satisfied, the special tax provision
clearly has the characteristics of a direct outlay program—a program objective and a method of reimbursing program costs. Some
examples will illustrate the application of these conditions to specific provisions of the Federal incomp tax.
Under the general provisions of the income tax, interest received
from any source is includable in income subject to tax. However, a
special provision allows interest on obligations of State and local
governments to be excluded from taxable income. The exclusion is
therefore considered a tax subsidy. A second example is the allowance of deductions for homeowners' mortgage interest and property
tax payments. Under the general provisions of the Code, deductions
are not allowed for any expenses allocable to income that is exempt
from tax. However, the income from homeownership, that is, the
(imputed) gross rental value of owner-occupied housing, is exempt
from tax under the reference income tax rule requiring "realization." The special provisions that allow homeowners to reduce their
housing costs by deducting mortgage interest and property taxes
are, therefore, considered tax subsidies.
More difficult definitional issues are raised by the capital gains
provisions. These provisions apply to a very broad class of transactions and taxpayers, and they constitute the basic provisions governing the taxation of gains from the sale of capital assets held
more than one year. On these grounds it could be argued that the
capital gains provisions do not involve a tax subsidy. However,
under the capital gains provisions of the Code, income from the
sale of capital assets held more than one year is taxed in a different manner than income from any other source. Because the reference provisions for taxing income without regard to source are
more general than the capital gains provisions, capital gains are
retained on the list of tax subsidies.
A further illustration of the definition of tax subsidies is provided by the Accelerated Cost Recovery System (ACRS) provisions
enacted in the Economic Recovery Tax Act of 1981. Any income tax
requires a set of rules for determining how the cost of depreciable
assets is recovered. The ACRS provisions now constitute the gener-

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THE BUDGET FOR FISCAL YEAR 1984

al income tax rules for that purpose. To see this, one need only ask:
"If ACRS is 'special,' what is the 'general' tax accounting rule to
which ACRS is an exception?" The ACRS provisions are clearly a
divergence from any measure of economic income, but this is not a
criterion for designating a tax subsidy.
Because they set forth general rules, the ACRS provisions do not
appear in table G - l . They are, nevertheless, very important provisions of the reference tax structure, both because of their sizable
revenue cost as compared with prior law ($10.6 billion in 1982,
$16.7 billion in 1983, and $25.6 billion in 1984) and because of their
importance as investment incentives.
The treatment of ACRS may be contrasted with that of the
investment tax credit, which has very similar economic effects. The
investment credit is considered a tax subsidy because, unlike
ACRS, it does not deal with one of the basic structural elements of
the income tax.
Several other issues relating to the distinction between the reference structure of the income tax and tax subsidy provisions are
discussed below.
• Threshold income levels for tax liability.—The reference
structure includes those Code provisions that determine
threshold levels of income below which no tax liability is
imposed upon different types and sizes of taxpaying units.
These levels have been affected by legislated changes in the
dollar amounts allowed for personal exemptions and the
standard deduction in recent years. However, the additional
personal exemptions for taxpayers age 65 and over and for
the blind result in tax subsidies because they are special
provisions directed at demographic groups in special circumstances.
• The progressive rate schedules.—The progressive rate schedules for the individual and corporate income taxes are a part
of the reference tax structure, as would be proportional or
even regressive rate schedules. Tax subsidies do not result
because some income is taxed at lower rates than other
income. The income averaging provision of the Code for individuals is also part of the reference structure.
• Separate rate schedules for single and married taxpayers, married taxpayers filing separately, and heads of households.—
Existing provisions regarding the definition of taxpaying
units and the separate rate schedules for different kinds of
taxpayers are considered part of the reference tax structure.
The tax subsidy concept is not characterized by any specific
set of rate schedules applicable to particular kinds of tax
filing units. Similarly, the deduction for second earners, en-

SPECIAL ANALYSIS F

F- 55

acted in the Economic Recovery Tax Act of 1981, is part of the
reference tax structure.
• Forms of business organization.—The tax law recognizes different forms of business organizations, including corporations,
partnerships and Subchapter S Corporations, and individual
proprietorships. Generally, provisions of the tax law that accommodate different forms of business organization do not
result in tax subsidies 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.—The separate taxation of individuals and corporate entities is considered part of the reference tax structure.
• Deduction of business expenses.—The deduction of business
expenses is necessary to determine taxable income under the
reference rules of the tax code. Tax subsidies, therefore, do
not result from deductions for "ordinary and necessary" business expenses. No attempt is made in this analysis to determine whether certain expenses such as those for entertainment and meals not only should reduce the taxable income of
employers, but should also be included in the taxable income
of the employees receiving such in-kind benefits.
• Foreign tax credits.—The reference structure of the income
tax includes tax credits for foreign income taxes paid; this
prevents the double taxation of income earned abroad.
No estimates are made in this analysis for "negative tax subsidies" or tax penalties—that is, exceptions to the reference tax
structure 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 provisions. One example is the deductibility of gambling losses in excess of gambling gains only when
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 the credit for foreign taxes paid was denied taxpayers who cooperate with, or participate in, an international boycott.
MEASURING T A X

SUBSIDIES

Accounting for budget outlays on a functional or programmatic
basis, as in part 5 of the Budget, provides measures of the extent to
which the Federal Government influences the allocation of resources in the economy and for what purposes. The functional
purposes may be broadly divided into: (1) the provision of public
goods and services; (2) the provision of subsidies; and (3) the payment of transfers. Budget outlays for public goods and services
such as national defense and administration of justice, are used to
acquire labor and capital services directly used in the production of

F- 50

THE BUDGET FOR FISCAL YEAR 1984

such goods. Subsidies, such as those for school lunches and to
encourage the use of U.S. flag shipping, are intended to reduce
market prices below the cost of resources used to produce them.
Transfers, such as aid to families with dependent children and
revenue sharing, are intended to provide a level of income to
recipients they otherwise could not achieve.
Government receipts and outlays "reallocate resources" because
they change the composition of GNP from what it would be in
their absence. The decisions to provide public goods and services, to
subsidize certain prices (and hence outputs), and to make transfers
result in producing a menu of goods and services different from
what otherwise would be produced. This occurs because control
over resources is moved from the private sector to the public sector
either by taxation or by borrowing. Functional budget outlay figures, then, provide a basis for evaluating programs, and their total
serves as an index of the size of Government. The amount of
outlays measures the resource cost to the Federal Government of
accomplishing the program objective. Since GNP is a (gross) measure of the market value of goods and services, the ratio of total
budget outlays to GNP is commonly used as an indicator of the size
of Government relative to the private economy.
When functional budget outlay figures are used to aid in evaluating specific programs, it is essential that the outlay figures be both
consistent and comprehensive measures of resource costs. In this
regard, it is important that resource costs represent the pre-tax
price of resources. The market value of all goods and services
summarized in GNP not ony includes the effects of indirect taxes
(sales and property taxes) on market prices, but also the before-tax
incomes of suppliers of labor (wages) and capital (rent, interest, and
profit). Consistency of budget outlay figures requires that such
amounts also be stated in pre-tax magnitudes. Generally, budget
outlays for the purchase of goods and services used in the provision
of public goods are gross of taxes; the payments to vendors and
Government employees are gross income to the sellers out of which
taxes will be paid as determined by the reference tax law in effect.
Similarly, subsidy outlays in the budget generally enter the gross
incomes of sellers of subsidized goods and services, along with the
remainder of the sales proceeds realized by sellers as payment by
private purchasers of the subsidized goods.
In some instances budget outlays for goods and services or subsidies are exempted from tax by a special tax provision. When this
occurs, the outlay figure understates the resource cost of the program of which it is a part and is, therefore, not comparable with
other outlay amounts. For example, the budget outlays for certain
housing and meal allowances of military personnel are not includable in their incomes and therefore understate the cost of this

SPECIAL ANALYSIS F

F- 55

National Defense budget element. If this form of compensation
were treated under the generally applicable reference tax rule as
income taxable to the employee, the Defense Department would
have to make larger cash payments to its military personnel to
leave them as well-off after-tax and as they are now with nontaxable allowances. Only when the existing tax subsidy is added to the
tax-exempt budget outlay, is this element of National Defense expenditure comparable with other defense outlays.
Resource reallocation results from subsidies and transfers as
much as by special exceptions to reference tax law rules or the
expenditure of funds. Just as U.S. flag shipping is encouraged by
outlays authorized by the Congress, such shipping is also encouraged by special income tax provisions designed to reduce shipowners' cost of acquiring ships. A review of water transportation
programs would therefore be incomplete if no accounting were
made of shipping subsidies implemented through the tax system.
Similarly, a Federal budget accounting of aid provided to States
and to local governments would be incomplete if it did not include
amounts provided through tax exemption of interest received by
holders of bonds issued by State and local governments. Any total
of Federal Government expenditures that omits such tax subsidies
does not provide a comprehensive accounting of the resources reallocated by Federal Government fiscal measures.
The estimates of tax subsidies in table G-1 have been prepared
to conform to the objectives of functional budget accounting for
outlays. Thus, table G-1 figures are estimated as outlay equivalents, the magnitudes of which are consistent with direct budget
outlays. The estimated tax subsidy is therefore equal to the direct
expenditure of funds that would be required to accomplish the
same objective. The entries should be viewed as amounts that
should be added to functional budget outlays and restored to
budget receipts to provide a consistent and comprehensive display
of the resource reallocations produced by Federal fiscal measures.
The basic difference between the outlay equivalent and previous
revenue loss estimates is that these estimates reflect the fact that
payments would be subject to tax under the reference tax rules.
The following examples will clarify the difference in estimating
technique for major classes of tax subsidies.
1. Government outlays that are exempt from tax.—Certain housing and meal allowances for military personnel are not included in
the pre-tax incomes of military personnel. The conventional "revenue loss" estimate for this item computes the tax that would be
paid by military personnel if these payments had been taxable. By
contrast, the outlay equivalent recognizes that the intent of this
personnel policy is to attract and retain the existing military force
and that the equivalent taxable pay under the reference tax law

380-700

F- 50

THE BUDGET FOR FISCAL YEAR 1984

would therefore have to be sufficient to yield them an after-tax
(disposable) income large enough to permit the same housing and
meal expenditures they now enjoy. Since virtually all military
personnel have otherwise taxable incomes, the outlay equivalent
estimate exceeds the revenue loss estimate. Thus, the tax subsidy
estimate is now measured in a consistent manner with other Defense Department outlays.
2. Subsidies to reduce market prices.—The new incremental research and development (R&D) credit provides a subsidy for industrial R&D. A firm qualifying for the credit is not required to
include the credit in computing its taxable income, as it would if it
were to recieve such funds as a cash payment from the Government. The expenditure equivalent of the incremental R&D tax
credit is estimated as the amount of subsidy that would have to be
paid to firms for their qualified R&D expenditures and that would
reduce their costs as much as the tax credit. Again, this estimate of
the R&D tax credit expenditure equivalent is larger than the revenue loss amount.
Other tax subsidies that have the effect of reducing market
prices are paid by reducing the tax payments of the purchaser. For
example, the personal deduction allowed for medical insurance
obviously reduces the cost of medical insurance to its purchasers.
Under the reference tax rules, this deduction is unrelated to the
computation of individuals' (purchasers') taxable income. Further,
the full expenditure of the insured taxpayer enters the taxable
incomes of medical practitioners and others whose fees are covered
by the insurance. The expenditure equivalent of this subsidy is
therefore simply the reduction in tax payments of purchasers resulting from the preferential deduction. The present tax subsidy
estimate for this item is therefore made in the same manner as the
revenue loss estimate.
3. Capital subsidies.—The Government may subsidize the acquisition of capital in the private sector in either of two ways. It might
provide capital grants with respect to the acquisition of specified
classes of assets, or it might provide preferential loans to entities
acquiring particular assets. The investment tax credit for machinery and equipment is an example of a capital grant, similar to
construction subsidies paid shipowners who have ships built in U.S.
shipyards, or the furnishing of equipment to Government contractors.
In general, the beneficiary of a capital grant is not considered to
have contributed to the cost of the asset for tax purposes. The asset
is shown on the beneficiary's books at its net private cost. Thus,
depreciation of only the cost net of the subsidy is recovered. However, in the case of the investment tax credit, the private firm has
been allowed cost recovery deductions for the entire cost of credited

SPECIAL ANALYSIS F

F- 55

assets. Under the outlay equivalent computation, this additional
cost recovery is accounted for as an addition to the initial grant
(tax credit) to derive the expenditure equivalent. Beginning in January 1983, this grant will be reduced by half the amount of the
investment tax credit because the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) provides for a partial basis adjustment
for assets eligible for the investment tax credit.
Tax deferrals resulting from special accelerated capital cost recovery allowances are a form of Government lending. For example,
under the reference tax rules, investments for the discovery and
development of mineral deposits would be capitalized when incurred and recovered as depletion allowances as production takes
place from the deposits. Under special tax rules, however, these
investment expenditures are recovered as deductions when made,
reducing taxes when the investment is made, and increasing taxes
in later years. The deferral of tax, as compared with the tax
stream that would have occurred under reference tax rules, is an
interest-free loan. The expenditure equivalent of tax deferrals
shown in table G - l is comparable to the treatment of net lending
in the outlay section of the budget. Only net new lending (deferrals) is accounted for; the subsidy element attributable to a zero
interest rate on the deferral is not.
The tax subsidy estimates reported in table G - l were prepared
by the Treasury Department and are based upon income tax law
enacted as of December 31, 1982. The estimates show the expenditure equivalent of each special tax provision by fiscal year. Estimates of the tax subsidies resulting from the exclusion of Federal
Government payments to individuals from taxable income, are
based on estimates of payments shown elsewhere in the budget.
The estimating procedure for tax subsidies uses the same implicit
assumption that governs estimates of out-year budget outlays; viz,
that the existing tax structure and all other institutional determinants of resource costs are given. It is also assumed that aggregate
output and incomes remain at levels that 1984 budget estimates
are based upon.
The tax subsidy estimates presented in this Special Analysis,
including those computed on a "revenue loss" basis as shown in
table G-2, are not estimates of the increase in Federal receipts that
would accompany the repeal of the special provisions that give rise
to the tax subsidies. There are several reasons for these differences.
Tax subsidy estimates are based on the actual level of tax-subsidized activities; in some instances the level of these activities would
be expected to change dramatically if the tax subsidy were removed. Because of these behavioral changes, the revenue gain from
repeal of a provision may be much lower than the tax subsidy
figure. For example, realizations of capital gains could be expected

F- 50

THE BUDGET FOR FISCAL YEAR 1984

to drop if such gains were subject to tax at ordinary rates. Another
example would be the response to the taxation of a particular
employee fringe benefit such as employer-paid medical insurance
premiums that is currently untaxed. The expected response would
be a decrease in the amount of employer-paid medical premiums,
and a possible increase in the amount of other fringe benefits, such
as employers' pension contributions and educational assistance.
Note that there would be analogous behavioral responses if many
direct outlay programs were eliminated or curtailed. For example,
the removal of a price support for a particular agricultural commodity could be expected to lead to higher production of other
price-supported commodities. In such cases, the net reduction in
budget outlays would be less than the savings from the eliminated
(or curtailed) program.
A second reason for the difference between revenue loss and tax
subsidy estimates is the effect that repeal would have on the aggregate level of income and economic growth. For example, all receipts as well as expenditure figures in the budget are based on
projections of income and growth which assume the investment tax
credit, as currently enacted, will continue. If, however, the investment credit were repealed (or curtailed) without being replaced by
a comparable investment incentive, the current projections of
income and growth would have to be revised. Consistent with these
revisions, receipts and expenditure projections would also have to
be changed. The estimated net effect of repeal of the investment
tax credit on receipts, therefore, would not be equivalent to the tax
subsidy.
As is the case with estimates of proposed changes in tax law, tax
subsidy estimates are computed on a "cash-flow" basis. However,
for purposes of the present analysis, the estimates show the difference between tax subsidies under current law and tax subsidies
under the assumption that a law without the particular tax subsidy provision had always been in effect. These figures, therefore,
generally show larger amounts than would be saved in the first
years of transition to a tax law without the special provisions. The
estimates take into account any changes scheduled under existing
law, such as the phasing in or out of specific provisions.
Tax subsidy estimates cannot simply be added together to obtain
totals for functional areas or to obtain a grand total. Adding tax
subsidy amounts produces inaccurate totals because certain tax
subsidies affect the value of other tax subsidies. In some cases, the
reduction in tax subsidies from the simultaneous deletion of two
tax provisions items would be greater than the sum of the reductions from the separate deletion of the two items. For example, if
interest income from State and local government bonds were made
taxable and capital gains on home sales were not deferred, more

SPECIAL ANALYSIS F

F- 55

individuals would be pushed into higher tax brackets than if just
one of these sources of income was treated under the normal rules
of the tax code. The combined reduction in tax subsidies would be
greater than the sum of the two separate effects.
In other cases, the combined reduction in tax subsidies from the
deletion of two items would be smaller than the sum of the reductions considered separately. For example, if the deductibility of
mortgage interest payments and homeowner property taxes were
both repealed and the zero bracket amount (standard deduction)
were left unchanged, more individuals who now itemize their deductions would opt for the zero bracket amount than if only one
preference were repealed. The reduction in tax subsidies from simultaneously repealing both preferences would therefore be lower
than the sum of the two estimates obtained from repealing each
one separately.
In general, eliminating several itemized deductions at one time
would reduce tax subsidies by less than the sum of the reductions
measured by eliminating each item separately. This occurs because
more taxpayers would use the zero bracket amount. Conversely,
simultaneously eliminating many items that are exclusions from
adjusted gross income would reduce tax subsidies by more than the
sum of the individual reductions because more taxpayers would be
pushed into higher tax brackets.
Aside from these interaction effects, resources allocated to public
purposes would not necessarily be reduced by the total amount of a
group of tax subsidies if all the tax subsidy provisions in that group
were removed. Tax subsidies and other tax provisions have frequently been changed together or viewed as substitutes for one
another. Furthermore, a direct outlay might be substituted for a
tax subsidy. Thus, aggregating tax subsidies that took interactions
into account would simply indicate the total resources available for
some combination of cutting tax rates, increasing outlays, and
reducing the deficit. If a group of tax subsidy provisions were
removed, the overall effects on budget receipts and on resource
allocation and income distribution in the economy therefore
depend on the particular decisions made as to which changes in tax
rates and outlays—out of a limitless number of alternatives—were
used to compensate for their removal.
Finally, although personal and corporation income tax returns
continue to be the basic sources of data from which tax subsidy
estimates have been derived, estimates are not separately reported
for individuals and corporations. This is consistent with the treatment of outlays which are reported by function or by Agency (with
fiscal responsibility), not by whether the payee is a person or a
corporation.

F- 50

THE BUDGET FOR FISCAL YEAR 1984
T A X SUBSIDIES BY FUNCTION

Estimates of tax subsidies for 1982-84 are grouped together by
functional category in table G-1. Each tax subsidy has been classified in the functional category used for budget outlays into which it
most closely fits. Significant changes effected by provisions of the
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) are
noted within each category.
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 resident alien who is a
resident of a foreign country or who is present in one or more
foreign countries for a prescribed period is allowed special tax
relief on his foreign earnings. Beginning in 1982, the prescribed
period for physical presence abroad is 11 out of 12 months.
Beginning in 1982, the special deductions and exclusions formerly allowed taxpayers living abroad no longer apply. Instead, eligible
taxpayers in 1982 may exclude $75,000 per year of foreign earned
income and may exclude or deduct reasonable housing costs in
excess of one-sixth of the salary of a civil servant at grade GS-14,
step 1. The $75,000 exclusion increased to $80,000 in 1983 and
continues to rise by increments of $5,000 per year until it reaches
$95,000 in 1986. These provisions do not apply to persons who are
employed by the U.S. Government; however, they do apply to persons who are not U.S. Government employees but who are paid
from public funds. The tax-exempt status of certain allowances
received by Federal employees working abroad also results in tax
subsidies.
The profits of a domestic international sales corporation (DISC)
are not taxed to the DISC, but, instead, are taxed to the shareholders (usually parent corporations) when distributed or deemed distributed to them. For DISC's with more than $150,000 in otherwise
taxable income, the deemed distribution equals all income attributable to base period exports plus 50% of income attributable to
exports in excess of the base period exports. Beginning in 1983 the
deemed distribution to corporate shareholders increases to 57.5% of
taxable income. Base period exports equal 67% of average annual
exports during an earlier 4-year base period. For DISC's with less
than $100,000 in otherwise taxable income, the deemed distribution
for years beginning in 1983 equals 57.5% of total income. The baseperiod rule is phased-in for DISC's with taxable income between
$100,000 and $150,000.

SPECIAL ANALYSIS F

F- 55

Prior to enactment of TEFRA, a taxpayer computed the foreign
tax credit limitation separately for foreign oil-related income to
prevent the use of foreign taxes paid on oil-related income to offset
U.S. tax on other income, and vice versa. Creditable foreign taxes
cannot exceed 46% of foreign extraction income, and an unlimited
foreign tax credit carryover or carryback was provided for use
against taxes on foreign extraction income. However, if the extraction activities and sales of extraction assets resulted in a net loss in
any country, the amount of the loss was excluded from the computation of worldwide foreign oil extraction income for the year. As a
result, foreign taxes on extraction income had been used to offset
U.S. tax on foreign source nonextraction income. In order to
remove this unintended tax benefit, under TEFRA the per-country
extraction loss rule for taxable years after 1982 was repealed. Thus,
starting in 1983, a net loss in one country resulting from extraction
activities will reduce the amount of foreign oil-related income and
correspondingly reduce the amount of the foreign tax credit available.
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, however, in the year when
they are incurred rather than amortize them over several years.
The Economic Recovery Tax Act of 1981 added a credit for increasing research activities. The credit is equal to 25% of the increase in
research expenditures over average expenditures in a base period.
For 1983 and subsequent years, the base period is the preceding 3
years. The credit expires in 1985.
Energy.—Certain capital costs necessary to discover and develop
certain fuel 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 individual's minimum tax
to the extent that such costs exceed either cost depletion or 10-year
amortization. However, they 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.
Prior to TEFRA there were two minimum taxes; the "add-on
tax" and the "alternative tax." The add-on minimum tax was

F- 50

THE BUDGET FOR FISCAL YEAR 1984

repealed in 1982, but intangible drilling costs are still a preference
item for computing an individual's alternative minimum tax.
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, the cost of which
are capitalized when acquired. Unlike depreciation, however, percentage depletion is not 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 for oil and natural gas is available only to limited quantities of output of independent oil and gas producers and royalty
owners. In addition, the percentage depletion rate for oil and gas is
being phased out from 22% in 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. A credit of 40% of the first $10,000 of qualifying
expenditures is allowed for expenditures on solar and other renewable energy source property. The residential energy credits expire
on December 31, 1985.
In addition to the 10% investment tax credit for machinery and
equipment, a credit is allowed for business investments in specified
energy property. A 10% additional credit is allowed for biomass
property and qualified intercity buses; an 11% additional credit is
available for certain small-scale hydroelectric generating property;
and a 15% additional credit is allowed for solar, wind, ocean thermal and geothermal equipment. These credits also expire on December 31, 1985.
Prior to December 31, 1982, there were also additional 10%
credits allowed for alternative energy property (i.e., property using
fuel other than oil or natural gas); 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; cogenera-

SPECIAL ANALYSIS F

F- 55

tion equipment; alumina electrolytic cells; and equipment for producing natural gas from geopressurized brine. The additional investment credit can still be claimed for long term projects under
these provisions if the taxpayer completed all engineering studies
and applied for all required environmental and construction permits in connection with the project prior to January 1, 1983.
A $3 per barrel of oil-equivalent production credit is provided for
several forms of alternative fuels, but, as a general rule, it is not
available unless the price of oil drops below $29.50 (in 1979 dollars).
The credit is available without this price limitation for processed
wood fuel and steam produced from solid agricultural byproducts.
Gasohol is exempt from 4 cents of the 9 cents per gallon Federal
gasoline excise tax (effective April 1, 1983) and there is a corresponding production income tax credit for alcohol used as a fuel in
applications where the excise tax is not assessed. Certain small
scale hydroelectric generating facilities owned by a governmental
unit and facilities which produce steam or alcohol from solid waste
may be financed with tax-exempt industrial development bonds.
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 capitalized and
depreciated over the life of the asset. In addition, most nonfuelmineral extractors use percentage 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.
Beginning in 1982, ERTA made available a 25% credit for expenditures to restore certain historic structures. Subsequently,
TEFRA reduced the basis of the rehabilitation costs recoverable as
depreciation by one-half the amount of the credit. The credit replaces the special depreciation provisions formerly available for
historic rehabilitation.
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 rather than capitalized and recovered when the timber is cut. The $10,000 of costs are also eligible
for the 10% investment tax credit notwithstanding the nondepreciability of investments in timber stands.
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 inven-

F- 50

THE BUDGET FOR FISCAL YEAR 1984

tories held at the end of the year or for capital improvements that
are required to be capitalized under reference income accounting.
Capital gains treatment generally applies to the sale of livestock
and certain other agriculture products.
Commerce and housing credit.—This category includes a number
of tax subsidy provisions that also affect economic activity in other
functional categories. In general, provisions related to investment,
such as the investment tax credit, might alternatively have been
classified under the natural resources and environment, energy,
agriculture, or transportation categories.
In 1980 and 1981, an exclusion of $200 ($400 on a joint return)
was allowed for most dividend and interest income. Effective in
1982 the exclusion is reduced to $100 ($200 on a joint return) and
will apply only to dividend income.
The interest on "small issue" industrial development bonds
issued by State and local governments to finance private business
property is excluded from income subject to tax. In addition, interest on State and local government debt issued to finance belowmarket rate mortgages for owner-occupied housing is excluded
from income subject to tax. In general, the Omnibus Budget Reconciliation Act of 1980 restricts the use of mortgage subsidy bonds to
the financing of homes purchased by first-time buyers of dwellings
with prices below 110% of the average area purchase price and
places a State-by-State ceiling on the annual volume of such bonds.
While a total ban on mortgage subsidy bonds for single family
housing becomes effective January 1, 1984, general obligation
bonds to finance single-family housing for veterans is still allowed
for 1984 and later years.
TEFRA placed a reporting requirement on all private purpose
tax-exempt bonds, except mortgage revenue bonds. Industrial development bonds must be approved by an elected public official
after a public hearing. Depreciable property financed by certain
types of tax-exempt IDB's must be depreciated using the straightline method. Small-issue IDB's were prohibited from financing certain types of facilities, such as recreation or entertainment facilities, and a sunset on their tax exemption was set for December 31,
1986. TEFRA also liberalized the eligibility requirements for singlefamily mortgage revenue bonds.
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 stipulated fractions of their assets in "qualifying assets," primarily residential mortgages.

SPECIAL ANALYSIS F

F- 55

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 upon the death of the
insured.
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.
Sixty percent of net long-term gains from the sale of capital
assets may be excluded from income. However, the excluded 60%
of net long-term gains is treated as a preference item in computing
the "alternative minimum tax for individuals." This tax is applicable only if a taxpayer's regular income 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
carryforward. Net capital gains from sales or exchanges are taxed
at a maximum rate of 20%. This maximum rate is equal to the
40% inclusion rate times the maximum individual rate of 50%.
Corporations may elect a 28% alternative tax rate on capital
gains. The tax subsidy 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 2 years before or after the
sale. The "adjusted sales price" is the amount realized (gross proceeds less selling expenses) minus qualified "fixing up" expenses. If
a new house is constructed, it must be occupied within 2 years
after the sale.
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 $125,000 of
gain from the sale. This is a once in a lifetime election.
The gain on the sale of capital assets acquired by inheritance is
computed as the excess of the sale price over their value at the
time of the original owner's death, rather than as the excess over
their value at the time of acquisition by the original owner. The
estimate assumes that the difference in the computed gain would
be taxed as part of the capital gain in the year of sale.
The 10% investment tax credit is applied to the cost of qualifying
property (generally, tangible, depreciable personal property used in
a trade or business) in the 5-, 10-, and 15-year recovery classes
under the Accelerated Cost Recovery System (ACRS). Assets in the
3-year recovery class are entitled to a 6% credit. Notwithstanding

F- 50

THE BUDGET FOR FISCAL YEAR 1984

the reduction in cost of acquiring qualified property provided by
the credit, taxpayers formerly were able to recover the original
cost gross of the credit. Under the provisions of TEFRA, however,
beginning with property placed in service in 1983, the basis of an
asset must be reduced by one-half of the investment credit allowed
on the asset.
As a general rule, the credit cannot be claimed for investments
in land or buildings or for property used abroad. The credit may be
claimed as progress payments 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, through annual increments of 10 percentage points, to 90% by 1982. However, the percentage was scaled
back to 85% under TEFRA.
The 1981 Act also provided "safe harbors" for tax leases of
business machinery and equipment. Under these leases, depreciation and the investment tax credit are normally claimed by the
lessor, although the lessee is the actual user and owner of the
machinery or equipment. Safe-harbor leasing under TEFRA was
repealed after 1983. For the period between July 1, 1982 and January 1, 1984, a restricted form of safe-harbor leasing was put into
effect.
The Economic Recovery Tax Act of 1981 allowed financial institutions to issue special 1-year certificates that paid tax-exempt
interest until December 31, 1982. The interest rate on the certificates issued during any week was limited to 70% of the interest
rate on the last 52-week Treasury bills issued in a preceding week.
The total amount of interest that is exempt on these certificates for
an individual is limited to $1,000 ($2,000 on a joint return). Financial institutions were required to invest at least 75% of the proceeds from these certificates in housing or agricultural loans.
Transportation.—Certain companies that operate U.S.-flag vessels receive an indefinite deferral of income taxes on that portion
of their 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.
The Economic Recovery Tax Act of 1981 allows State and local
governments to issue tax-exempt obligations to finance the purchase of mass commuting vehicles.
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.

SPECIAL ANALYSIS F

F- 55

Rehabilitation expenditures may not exceed $20,000 per dwelling
unit and must exceed $3,000 to qualify. The Economic Recovery
Tax Act of 1981 increased the limit to $40,000 per dwelling unit if
the rehabilitation is on units which the tenants may purchase at a
price that limits the profit to the seller. This provision expires on
January 1, 1984.
The Economic Recovery Tax Act of 1981 also provides an investment tax credit for the rehabilitation of buildings that are used for
business or productive activities (other than for residential purposes). The credit is 15% of rehabilitation expenditures for buildings at least 30 years old and 20% for buildings at least 40 years
old. The basis of the rehabilitation recoverable as depreciation
must be reduced by the amount of the credit.
Education, training, employment, and social services.—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 subsidy.
Many employers provide employee benefits that are excluded
from employee income. The employers' 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 subsidy, 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.
For qualifying investment made prior to January 1, 1983, a corporation may claim an additional 1% investment tax credit if an
equivalent amount of its common stock is set aside in a 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.
Under the Economic Recovery Tax Act of 1981, the tax credit for
contributions to an ESOP is limited to a prescribed percentage of
total compensation paid to all employees under the plan. The percentage is one-half of 1% in 1983 and 1984, and three-quarters of

F- 50

THE BUDGET FOR FISCAL YEAR 1984

1% in 1985, 1986, and 1987. The ESOP credit expires in 1987.
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. Beginning in 1982
nonitemizers may also deduct a portion of charitable contributions.
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 current value of the asset without taxation
of the appreciation in value. Corporations may deduct charitable
contributions of up to 10% of their income beginning in 1982. Tax
subsidies 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.
Beginning in 1982, a 30% 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 $2,400 for one dependent and
$4,800 for two or more dependents are eligible for the credit. The
credit is equal to 30% of qualified expenditures for taxpayers with
incomes of $10,000 or less with the credit reduced by one percentage point for each $2,000 of income between $10,000 and $28,000.
The targeted jobs credit allows tax credits to employers for qualified wages paid to individuals certified as members of a "targeted
group." A credit of 50% of first-year wages and 25% of second-year
wages up to $6,000 of each employee's wages can be taken by the
employer to offset up to 90% of his tax liability. However, the
employer's deduction for wages is reduced by the amount of the
credit. The targeted jobs credit was scheduled to expire at the end
of 1982 but was extended by TEFRA until the end of 1984. Also,
the credit was expanded to include an 85% credit for up to $3,000
of wages paid for the summer employment of 16- and 17-year-old
disadvantaged youth.
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 subsidy.
Under TEFRA, for tax years beginning in 1983, the floor for
deductible medical expenses is increased from 3 percent to 5 percent of a taxpayer's adjusted gross income. In addition, the separate deduction for one-half (up to $150) of medical insurance premi-

SPECIAL ANALYSIS F

F- 55

um expenses is repealed. Beginning in 1984, the one percent of
adjusted gross income floor under the deductible amount of drug
expenditures is eliminated and only expenditures for prescription
drugs and insulin will be deductible.
Interest on State and local government debt issued to finance
private, nonprofit hospital construction is excluded from income
subject to tax.
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.
After 1982, a 50% tax credit is allowed for qualified clinical
testing expenses of drugs to treat certain rare diseases or conditions.
Income security.—Government transfer payments to individuals,
such as aid to families with dependent children, are generally
excluded from taxable income. They are like gifts which are not
taxed under the reference tax laws. Hence, these transfer payments are not considered tax subsidies. In contrast, the exclusion of
payments associated with employment such as unemployment compensation and social security benefits give rise to tax subsidies
since labor compensation is generally subject to tax.
If the sum of a taxpayer's adjusted gross income, unemployment
compensation and excludable disability income is over $12,000
($18,000 for a joint return), on or after January 1, 1982, under
TEFRA, the lesser of his unemployment benefits or one-half of the
amount over the $12,000 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 $15,000 per year.
Employees can deduct annual contributions of $2,000 (or 100% of
compensation, if less), or $2,250 on a joint return if one spouse has
no compensation. The investment income earned by pension funds
is not taxable when earned.
Under TEFRA, there were several changes made in the overall
limits on contributions and benefits for employees under qualified

F- 50

THE BUDGET FOR FISCAL YEAR 1984

pension plans. The maximum annual addition for profit-sharing
and other defined contribution plans was reduced from $45,475 to
$30,000. The maximum annual retirement benefit under a defined
benefit pension plan was reduced from $136,425 to $90,000. The
reduction in the overall limits was accompanied by a freeze on costof-living adjustments for three years. Cost-of-living adjustments
apply again in 1986 for all plans subject to the overall limitations
(qualified plans, Keogh plans, tax-sheltered annuities, and simplified employee pensions) based upon the social security benefit
index formula then in effect.
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 of older. The $2,500/$3,750 base is
reduced 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.
Beginning in 1983, under TEFRA, nonbusiness casualty and theft
losses will be deductible only to the extent that the total amount of
such losses (after reduction of a $100 floor for each separate loss)
exceeds 10% of the taxpayer's adjusted gross income.
The earned income credit, available to low-income workers with
minor dependents, is 10% of earned income up to $5,000 with a
phase-out 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 that offsets tax
liabilities is included as a tax subsidy.
Rental housing assistance for eligible families is provided
through State and local housing authorities. The Omnibus Budget
Reconciliation Act of 1980 restricts the use of tax-exempt bonds for
multifamily rental housing projects to those that include 20% (15%
in certain targeted areas) of units for low- and moderate-income
individuals.

SPECIAL ANALYSIS F

F- 55

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. Most of these
bonds are owned by commercial banks and casualty and property
insurance companies, but a substantial proportion is also held by
individuals who receive tax-exempt 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 certain private purpose facilities, such as hospitals or housing, 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 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.

380-700

F- 50

THE BUDGET FOR FISCAL YEAR 1984
Table G - 1 . OUTLAY EQUIVALENT ESTIMATES FOR TAX SUBSIDIES BY FUNCTION
(In millions of dollars)

Description

National defense:
Exclusion of benefits and allowances to Armed Forces personnel
Exclusion of military disability pensions
Total (after interactions)
International affairs:
Exclusion of income earned abroad by United States citizens
Deferral of income of domestic international sales corporations (DISC)
Total (after interactions)
General science, space, and technology:
Expensing of research and development expenditures
Credit for increasing research activities
Total (after interactions)
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 buses
Total (after interactions)
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
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
Total (after interactions)
Agriculture:
Expensing of certain capital outlays
Capital gains treatment of certain income
Total (after interactions)
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

Fiscal years
1982

1983

2,890
165
3,055

2,780
165
2,945

1,850
2,870
4,720

2,155
2,565
4,720

115
640
830

-1,160

3,285
45

1,830
45

3,065
600
310

2,545
730
275

1,060

-115

15
390
435

515
400

250
290
20
5
6,170

240
155
45
5
15
4,485

85
595

90
640

870
245
40
565

1,020
320
40
730

2,380

30
2,825

550
775
1,410

570
725
1,375

1,530
1,795
225

615
2,250
245

660

6,625
10,900
23,495

680

6,780
10,710
25,255

F- 55

SPECIAL ANALYSIS F

Table G - l . OUTLAY EQUIVALENT ESTIMATES FOR TAX SUBSIDIES BY FUNCTION—Continued
(In millions of dollars)

Description

Deductibility of property tax on owner-occupied homes
Exclusion of interest on State and local housing bonds for owner-occupied
housing
Capital gains (other than agriculture, timber, iron ore and coal)
Deferral of capital gains on home sales
Exclusion of capital gains on home sales for persons age 5 5 and over
Carryover basis of capital gains at death
Investment credit, other than ESOP's, rehabilitation of structures, energy
property, and reforestation expenditures
Safe harbor leasing rules
Amortization of start-up costs
Exclusion of interest on certain savings certificates
Reinvestment of dividends in public utility stock
Total (after interactions)
Transportation:
Deferral of tax on shipping companies
Exclusion of interest on State and local government bonds for mass
transit
Total (after interactions)
Community and regional development:
Five-year amortization for housing rehabilitation
Investment credit for rehabilitation of structures (other than historic)
Total (after interactions)
Education, training, employment, and social services:
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 ESOPs
Deductibility of charitable contributions (education)
Deductibility of charitable contributions, other than education and health....
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
Total (after interactions)
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)
Tax credit for orphan drug research
Total (after interactions)
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

Fiscal years
1982

1983

8,405

8,810

955
26,590
2,090
710
3,120

1,185
22,865
2,225
765
3,330

19,255
2,880
125
1,970
400
111,905

17,170
3,270
195
840
590
108,300

5
40

45
295
335

360
425

115
1,065
730
55
2,455
830
7,550
1,830

175
985
755
55
25
2,220
770
7,085
2,110

30
115
360
15,500

35
495
15,050

22,555
3,970
730
1,240
28,775

25,412
2,950
925
1,155
15
30,755

1,770
14,940
3,735
790
1,735
185
2,615

1,675
15,765
3,765
780
1,875
170
3,330

F-

THE BUDGET FOR FISCAL YEAR 1984

Table G - l . OUTLAY EQUIVALENT ESTIMATES FOR TAX SUBSIDIES BY FUNCTION—Continued
(In millions of dollars)

Description

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 c r e d i t 2
Exclusion of interest on State and local housing bonds for rental housing....
Deduction for motor carrier operating rights
Deduction for certain adoption expenses
Total (after interactions)
Veterans benefits and services:
Exclusion of veterans disability compensation
Exclusion of veterans pensions
Exclusion of GI bill benefits
Total (after interactions)
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 owneroccupied homes
Tax credit for corporations receiving income from doing business in United
States possessions
Total (after interactions)
Interest:
Deferral of interest on savings bonds

Fiscal years
1982

1983

1984

190

170

150

65,805
5,150

70,005
5,875

78,780
6,480

2,890
165
10
35
2,385
135
1,295
460
425
115
15
107,090

2,910
160
5
35
2,360
135
705
390
580
115
15
113,165

3,095
160
5
35
2,420
135
520
340
770
115
15
123,260

1,860
330
175
2,390

1,815
305
150
2,290

1,835
295
125
2,280

185

195

295

7,215

8,335

9,430

19,085

20,000

21,755

2,365
28,885

2,150
30,720

1,830
33,275

315

450

500

* $5 million or less. All estimates have been rounded to the nearest $5 million.
Hn addition, the exemption from the excise tax for alcohol fuels results in a reduction in excise tax receipts of $55 million in 1982, $80
million in 1983, and $90 million in 1984.
2 The figures in the table indicate the tax subsidies provided by the earned income tax credit. The effect on outlays is= 1982, $1,280 million;
1983, $1,205 million; 1984, $1,125 million.

F- 55

SPECIAL ANALYSIS F
PROPOSED CHANGES IN T A X

SUBSIDIES

The administration has proposed a number of tax revisions that
would introduce new tax subsidies or change the costs of existing
ones.
Tuition Tax Credit.—The administration proposes a nonrefundable credit for 50 percent of the tuition paid to private elementary
and secondary schools for taxpayers' qualified dependents. This
credit, which is subject to certain limitations, will be effective for
expenses incurred after July 31, 1983.
Enactment of the tuition tax credit will increase the 1984 revenue loss by $245 million. The corresponding outlay equivalent estimates are $100 million in 1983 and $630 million in 1984.
Enterprise Zone Program.—The enterprise zone proposal provides
tax incentives for the redevelopment of economically distressed
areas. Beginning in 1983, up to 25 small areas per year will be
designated "enterprise zones." Starting in 1984, businesses in the
zones will be entitled to exemption from tax for certain capital
gains, and to tax credits for capital investment, for increases in
employment, and for hiring disadvantaged employees. A tax credit
is also provided to employees in the zones.
These incentives will increase the 1984 revenue loss by $85 million. The corresponding outlay equivalent is $265 million in 1984.
Tax Treatment of Health Insurance Premiums.—Under current
law, cash compensation paid to employees is fully taxable for
income tax purposes, while compensation paid in the form of
health insurance benefits is nontaxable. The administration proposes that, effective January 1, 1984, employees be taxed on employer-paid health insurance premiums in excess of $175 per month
for family plans and $70 per month for individual plans.
This proposal is estimated to reduce revenue losses by $1,670
million in 1984. The corresponding outlay equivalent is $2,420 million in 1984.
Jobs Tax Credit for the Long-Term Unemployed.—The administration proposes a new tax credit for employers that hire individuals who have exhausted their regular and extended Unemployment Insurance (UI) benefits and who would have met the criteria
for Federal Supplemental Compensation (FSC) benefits.
This proposal is estimated to increase revenue losses by $27
million in 1983 and by $174 million in 1984. The corresponding
outlay equivalent estimates are $184 million in 1983 and $642
million in 1984.
Social Security Changes.—At present, social security benefits are
exempt from the Federal income tax. Under the proposed bipartisan plan, single taxpayers with more than $20,000 ($25,000 for
married couples filing a joint return) of adjusted gross income from

F- 50

THE BUDGET FOR FISCAL YEAR 1984

non-social security sources will be required to include in adjusted
gross income one-half of their social security benefits.
In addition, the combined employer-employee Old Age and Survivors and Disability Insurance (OASDI) payroll tax rate is currently
scheduled to increase from 10.8% to 11.4% on January 1, 1985 and
to 12.4% on January 1, 1990. Under the proposed plan the rate will
increase to 11.4% on January 1, 1984, 12.12% on January 1, 1988
and to 12.4%, as currently scheduled, on January 1, 1990. Employees would be allowed a refundable credit on their income tax equal
to their portion, .3%, of the rate increase accelerated to 1984.
The taxation of benefits will reduce revenue losses by $1,100
million in 1984. The corresponding outlay equivalent is $2,730 million in 1984.
The refundable tax credit will increase revenue losses by $145
million in 1984. The corresponding outlay equivalent is $3,225 million in 1984.
Tax incentives for higher education.—The Administration proposes that there be an exclusion from tax for earnings on savings
deposited in special accounts to pay future higher education expenses of dependent children. This exclusion, which will be subject
to certain limitations, will be effective January 1, 1984.
This proposal is estimated to reduce revenue losses by $13 million in 1984. The corresponding outlay equivalent is $35 million in
1984.
REVENUE LOSS ESTIMATES FOR " T A X

EXPENDITURES"

Table G-2, which follows, shows the estimated "revenue loss"
associated with each tax subsidy item for which an "outlay equivalent" estimate was provided in table G-1. As explained in the text
under the heading "Measuring Tax Subsidies," revenue loss estimates do not take into account the additional resources (if any)
that would be required to provide the same after-tax incentive if
the expenditure program were administered as a direct outlay
rather than through the tax system. As was also explained earlier,
these revenue loss estimates are not equivalent to estimates of the
increase in Federal receipts that would accompany the repeal of
tax subsidy provisions.

F- 55

SPECIAL ANALYSIS F
Table G - 2 . REVENUE LOSS ESTIMATES FOR "TAX EXPENDITURES" BY FUNCTION
(In millions of dollars)

Description

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)
General science, space, and technology:
Expensing of research and development expenditures
Credit for increasing research activities
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 c r e d i t 1
Energy credit for intercity buses
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
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
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 owner-occupied
housing
Capital gains (other than agriculture, timber, iron ore and coal)
Deferral of capital gains on home sales
Exclusion of capital gains on home sales for persons age 5 5 and over

Fiscal years
1982

1983

2,250
165

2,200
165

985
1,550

1,285
1,385

450
415

-870
645

3,430
25

1,520
30

410
205

1,850
505
180
15

250
360

430
330

205
220
15
5
10

195
125
40
5
10

50
405

55
440

825
185
20
335

975
270
20
370

545
610

560
615

2,160
1,640
150
405
4,535
10,825
23,305
8,360

445
2,120
170
405
4,805
10,765
25,065
8,765

905
18,020
1,625
585

15,890
1,480
535

1,110

F-

THE BUDGET FOR FISCAL YEAR 1984

Table G - 2 . REVENUE LOSS ESTIMATES FOR "TAX EXPENDITURES" BY FUNCTION—Continued
(In millions of dollars)

Description

Carryover basis of capital gains at death
Investment credit, other than ESOP's, rehabilitation of structures, energy
property, and reforestation expenditures
Safe harbor leasing rules
Amortization of start-up costs
Exclusion of interest on certain savings certificates
.....
Reinvestment of dividends in public utility stock
Transportation:
Deferral of tax on shipping companies
Exclusion of interest on State and local government industrial development bonds for mass transit
Community and regional development:
Five-year amortization for housing rehabilitation
Investment credit for rehabilitation of structures (other than historic)
Education, training, employment, and social services:
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 ESOPs
Deductibility of charitable contributions (education)
Deductibility of charitable contributions, other than education and health
Credit for child and dependent care expenses
Credit for employment of AFDC recipients and public assistance recipients
under work incentive programs
General jobs credit
Targeted jobs credit
Health:
Exclusion of employer contributions for medical insurance premiums and
medical care
Deductibility of medical expenses
Exclusion of interest on State and local hospital bonds
Deductibility of charitable contributions (health)
Tax credit for orphan drug research
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 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

Fiscal years
1982

1984

1983

1,995

2,180

2,370

16,455
3,333
75
935
130

12,985
2,990
120
1,665
365

14,585
2,795
180
320
415

45
250

55
335

65
365

100
1,070
655
40
20
1,390
835
7,595
1,175

155
995
680
40
25
1,250
775
7,145
1,520

220
950
725
20
25
1,375
840
7,190
1,765

40
80
235

25
290

465

16,365
3,945
680
1,245

18,645
3,105
865
1,170
10

21,300
2,630
1,055
1,205
15

1,780
14,825
3,725
790
1,730
185
2,500
155

1,690
15,685
3,765
780
1,870
170
3,260
145

1,660
16,680
3,870
735
2,090
165
3,020
135

45,280
2,835

49,700
3,755

56,560
4,230

2,035
120
10
35
2,385
135

2,100
115
5
35
2,365
135

2,250
120
5
35
2,410
135

*
*

SPECIAL ANALYSIS F

F- 55

Table G - 2 . REVENUE LOSS ESTIMATES FOR "TAX EXPENDITURES" BY FUNCTION—Continued
(In millions of dollars)

Description

Deductibility of casualty losses
Earned income credit 2
Exclusion of interest on State and local housing bonds for rental housing....
Deduction for motor .carrier operating rights
Deduction for certain adoption expenses
Veterans benefits and services:

Exclusion of veterans disability compensation
Exclusion of veterans pensions
Exclusion of Gl bill benefits

General government:

Credits and deductions for political contributions

General purpose fiscal assistance:

Exclusion of interest on general purpose State and local debt
Deductibility of nonbusiness State and local taxes other than on owneroccupied homes
Tax credit for corporations receiving income from doing business in United
States possessions

Interest:

Deferral of interest on savings bonds

Fiscal years
1982

1983

1984

920
455
395
140
10

575
385
530
75
10

380
330
710
75
10

1,855
330
180

1,825
310
150

1,830
295
130

180

190

200

6,885

8,000

9,105

19,160

20,060

21,770

1,375

1,245

1,075

135

435

475

* $5 million or less. All estimates have been rounded to the nearest $5 million.
'In addition, the exemption from the excise tax for alcohol fuels results in a reduction in excise tax receipts of $55 million in 1982, $80
million in 1983, and $90 million in 1984.
2The figures in the table indicate the effect of the earned income tax credit on receipts. The effect on outlays is: 1982, $1,280 million; 1983,
$1,205 million; 1984, $1,125 million.

SPECIAL ANALYSIS H
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

State and local governments have a vital constitutional role in
providing government services. The Federal Government contributes directly to that role by providing grants-in-aid and loans to
States and localities, and contributes indirectly through policies
designed to improve the economy.
The Federal Government's role in domestic programs grew very
rapidly over the last two decades. Between 1960 and 1981, outlays
for grant-in-aid programs increased at an annual rate of 13%—far
faster than the increase in the Federal budget or public sector
expenditures as a whole. During the same period, the number of
categorical grant programs nearly tripled. Associated with these
programs were numerous regulations and restrictions on how the
funds could be spent. As a result, the Federal Government imposed
its priorities on States and localities and assumed many of their
responsibilities.
A major goal of this administration has been to reduce Federal
involvement in activities that are more properly administered by
State and local governments. Over the past two years the administration has replaced many narrow categorical grant programs with
more flexible aid that has fewer restrictions on its use. The number
of narrow categorical grant programs has declined by 35%, from
428 in 1980 to 280 in 1982. A number of these were incorporated
into the nine block grants enacted in 1981. The block grants give
State and local governments considerably more discretion over the
use of Federal aid and contain much simpler administrative requirements than their predecessor programs.
The emphasis on shifting responsibility from Federal to State
and local governments continued in 1982. The Job Training Partnership Act replaced expiring Comprehensive Employment and
Training Act programs with a block grant to States. The block
grant combines activities previously financed through three categorical programs and strengthens the State role in providing employment and training programs.

f e d e r a l 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).

H-1

H-10

THE BUDGET FOR FISCAL YEAR 1984

A second major accomplishment in 1982 was enactment of the
Surface Transportation Assistance Act. The administration proposed this measure to help rebuild the Nation's deteriorating highway and transit systems. The infrastructure improvements that
this Act provides are critical not only to the economic well-being of
the Nation but to State and local economies as well.
The Act increases Federal support to States to complete final
segments of the interstate highway system, to repair existing interstate roadways, and to repair or replace unsafe bridges. Local aid
will be available for street repair and mass transit. Consistent with
this administration's goal of reducing Federal involvement in local
programs, the Act increases flexibility in the use of transportation
funds by State and local governments so that they can devise
transportation programs in response to their unique needs.
The administration proposes to reduce the Federal role in domestic programs further, primarily through a revised federalism initiative that would give State and local governments more discretion
over federally funded grant programs, five new block grants or
grant consolidations, and further reductions in narrow categorical
programs. The administration will also continue to simplify or
eliminate administrative requirements associated with Federal
grant programs through regulatory reform and management improvements.
Federal grant-in-aid outlays to State and local governments,
which were $88.2 billion in 1982, are estimated to increase to $93.5
billion in 1983, and $95.9 billion in 1984. The following chart shows
trends in outlays in major grant categories from 1974 to 1986.
General purpose and broad-based aid are expected to increase over
the next few years. Payments for individuals, such as medicaid and
nutrition assistance, are a large and growing part of grants-in-aid.
Grants for highways are expected to increase as a result of the
Surface Transportation Assistance Act of 1982. As a group, all
other grants are expected to decline through 1986.
THE FEDERALISM INITIATIVE

In January 1982, the administration announced a $50 billion
federalism program that would have returned responsibility for a
wide range of Federal assistance programs back to State and local
governments along with revenue sources to fund them. The initiative
proposed a more rational sorting out of fiscal and program responsibilities among levels of government, to bring about greater efficiency
in the administration of public programs.
Since then, Federal, State, and local officials have had numerous
meetings to work out the details of the federalism plan. Based on
these meetings, the initial program has been substantially im-

SPECIAL ANALYSIS F

F- 55

Federal Grants to State and Local Governments
r l 00

1 9 7 4

7 $

Fiscal Years

7 6

7 7

7 8

7 9

8 0

8 1

8 2

8 3

8 4

8 5

8 6

Estimate

proved and a revised federalism proposal will be sent to the Congress early in 1983.
The revised federalism proposal consolidates a number of separate broad-based and categorical grant programs into four block
grants:
—a State block grant that would combine a number of education,
social services, health, and community development programs;
—a local block grant that would merge the general revenue
sharing program with the entitlement portion of the community development block grant;
—a ground transportation block grant that would consolidate
several transportation programs; and
—a rural housing block grant to States for low income housing
construction and repair.
Between 1984 and 1988, State and local governments would
gradually assume responsibility for services associated with the
separate grant programs in the State, local, and transportation
block grants. States and localities would have discretion over the
pace at which they assume these responsibilities. Annual funding
for the three block grants would be set at the sum of 1984 enacted
levels for the consolidated programs in order to provide a stable
and predictable source of revenues while the transfer of responsi-

H-10

THE BUDGET FOR FISCAL YEAR 1984

bilities takes place. The distribution of funds to States and localities would be based on historical allocations and formulas.
After 1988, those State, local, and transportation block grant
programs that could be funded if commensurate Federal revenue
sources were returned to the States, would be phased out. A Presidential commission would be appointed to make recommendations
on revenue return issues.
''Details on the State, local, and transportation block grants are
now being worked out. Therefore, the grants-in-aid data in this
Special Analysis and elsewhere in the budget, do not take the
financial transactions of these three block grants into account. The
1984 budget does, however, include proposed budget authority of
$850 million in 1984 for the rural housing block grant.
N E W BLOCK GRANT AND GRANT CONSOLIDATION PROPOSALS

Several other new grant consolidation and block grant proposals
in this budget further consolidate categorical grants and give
States and local governments more flexibility and discretion over
the use of Federal funds. New grant consolidation and block grant
proposals are for:
Indian community development and housing.—This proposal creates a flexible block grant within the existing community development block grant program to assist Indian tribes in addressing their unique community development and housing
needs. Budget authority of $75 million is proposed for 1984,
which is $44 million more than is being allocated to Indian
tribes in 1983 for discretionary community development assistance.
Indian housing.—This proposal would consolidate programs administered by the Department of Housing and Urban Development, the Bureau of Indian Affairs, and the Indian Health
Service that support housing construction on Indian reservations. Budget authority of $76 million is requested for 1984, to
support the construction of 1,500 housing units.
General nutrition assistance.—This proposal combines the school
breakfast, child care^ feeding, and summer food service programs into one grant to States. The consolidation would give
States more flexibility in providing assistance for meals served
outside a school lunch setting. Proposed budget authority is
$535 million in 1984.
Older Americans program.—This proposal would consolidate programs authorized by the Older Americans Act into grant programs administered by the Department of Health and Human
Services (HHS). The consolidation would include activities currently funded by the elderly feeding program, administered by
the Department of Agriculture, and the Department of Labor's

SPECIAL ANALYSIS F

F- 55

community service employment program. Budget authority
proposed for 1984 is $998 million.
Primary care services.—This health block grant, enacted in 1981,
would be expanded to include black lung clinics, migrant
health, and family planning programs. Budget authority for
the proposal would be $460 million in 1984, an increase of $165
million over 1983 to cover the new programs. This increase is
the same amount of budget authority enacted for the three
programs in 1983.
CHANGES IN THE FEDERAL A I D PROGRAM

Summary of changes.—Table H-1 shows changes in grant programs from 1982 and 1983 and from 1983 to 1984 divided into two
categories: those grants that finance State or local payments for
individuals, and all other grants.
In total, grants that are subsequently paid as income support for
individuals—such as medicaid, nutrition assistance and housing
programs—are estimated to increase by $4.2 billion from 1982 to
1983 and by $0.6 billion from 1983 to 1984. The largest increases
between 1982 and 1983 are for the medicaid programs and for
programs that provide nutrition and housing assistance. Between
1983 and 1984 the largest increase is for medicaid programs. The
largest decreases are for assistance payments (aid to families with
dependent children), and for low income home energy assistance.
All other grants are expected to increase by $1.1 billion in 1983,
and by $1.8 billion in 1984. The major increase in both years is a
result of the Surface Transportation Assistance Act of 1982. Federal assistance to States and localities for highway programs is expected to increase by $0.8 billion in 1983 and by $3.2 billion in
1984.
Changes in major grant programs.—This section describes
changes in major grant programs. For a detailed list of these
programs, see Table H - l l .
Outlays for the Environmental Protection Agency's construction
grants program are estimated to be $2.8 billion in 1984, a decrease
of $0.3 billion from 1983. This program provides grants to both
State and local governments for the cost of constructing sewage
treatment plants. The decrease from 1983 reflects completion of
projects approved before 1982 and the concentration of funds on
currently existing pollution problems.
Budget authority of $173 million in 1984 is requested for grants
to support State regulatory, enforcement, and pollution control
activities. These grant programs include: air quality, water quality,
public water supply, underground injection control, hazardous

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table H - l . FEDERAL GRANT-IN-AID CHANGES, 1982-84
(Outlays in billions of dollars)
Outlays

Total grants, 1982 actual
Changes

Payments for individuals:
Medicaid
Nutrition assistance
Housing programs
Other

Subtotal payments for individuals.
Other programs:
Highway programs
Social service activities
Sewage treatment plant construction
Food donations (CCC)
Other
Subtotal, other programs
Total grants, 1983 estimate
Changes

Payments for individuals:
Medicaid
Assistance payments (AFDC)
Home energy assistance
Rural housing
Other

Subtotal, payments for individuals
Other programs:
Highway programs
Social service activities
Sewage treatment plant construction
Food donations (CCC)
Urban mass transit
Other
Subtotal, other programs
Total grants, 1984 estimate

1.9

1.2

1.0

0.1
4.2

0.8
0.5
-0.7
0.4

0.1
1.1

93.5
1.5
-0.7
-0.6

0.3
0.1
0.6

3.2
-0.3
-0.3
-0.2

-0.3
-0.3
1.8

95.9

wastes, pesticides certification and training, and pesticides enforcement.
Outlays for site specific cooperative agreements with States
under the hazardous substance response fund are estimated to be
$75 million in 1984, $38 million above the amount estimated for
1983.
Grants through the land and water conservation fund, the historic preservation fund and other programs formerly assisted States
and localities in the management of recreational and other resources. No new budget authority is requested for these programs
in 1984, although grants awarded in prior years will have outlays
in 1984 and 1985.
Estimated outlays for cooperative forestry grant programs will be
reduced from $23 million in 1983 to $2 million in 1984. Budget
authority for grants to States for fire protection and technical
assistance in forest management will not be requested in 1984;

SPECIAL ANALYSIS F

F- 55

however, funding will be proposed to provide for national data
collection, information dissemination and limited, specialized technical assistance to States on problems of national scope.
Grants and food donations in the agriculture function are made
through the Commodity Credit Corporation, the extension service,
and the cooperative State research service. Outlays for these programs are estimated to be $1.4 billion in 1983, and $1.1 billion in
1984.
Outlays for the Federal-aid highway program are estimated to be
$11.3 billion in 1984, $3.7 billion above the 1982 level. An increase
in the motor fuels tax, enacted as part of the Surface Transportation Assistance Act of 1981, will provide funds for a major expansion of Federal support to States and localities for the construction
and rehabilitation of highways, bridges, and mass transit systems.
Budget authority requested for highway traffic safety grants is
$148 million in 1984, a $7 million increase from 1983. Research and
development grants will be concentrated in areas most effective in
reducing accidents and injuries. Incentive grants to States, authorized by the Alcohol Traffic Safety Act of 1982, will help combat
drunk driving. In addition, highway legislation enacted in 1982
authorized $10 million in 1984 for a State grant program to enforce
Federal safety standards for trucks.
Budget authority requested for urban mass transit grant programs is $3.8 billion in 1984, $0.4 billion above the 1982 amount.
Beginning in 1984, the existing discretionary grant program will be
funded with one cent per gallon of the new motor fuels tax increase and will be used for capital projects. A new grant program
begins in 1983, financed by highway user taxes in the first year
and general funds thereafter. This program will distribute funds on
a formula basis for capital and operating projects in urban and
rural areas.
Outlays for grants-in-aid for airports are expected to increase
between 1983 and 1984 from $0.5 to $0.7 billion. Projects that
improve both commercial and non-commercial airport safety, increase airport capacity, or reduce noise, will receive the highest
priority for funding in 1984.
The community development block grant program will continue to
provide assistance to local governments, Indian tribes, and U.S.
Territories primarily through entitlement grants. Recipients have
considerable freedom in selecting projects under this program so
long as they are within the general guidelines of community and
economic development and (1) assist people with low and moderate
incomes, (2) prevent or eliminate slums and blight, or (3) address
urgent community development needs. For 1984, the administration proposes two major changes in this program: making new
housing construction an eligible activity and beginning a new
380-700

0 -

83 -

17 QL :

H-10

THE BUDGET FOR FISCAL YEAR 1984

Indian block grant. Budget authority proposed for 1984 is $3.5
billion, $44 million more than provided in 1983. The program is
currently planned for inclusion in the administration's revised federalism initiative.
The administration is proposing a rental rehabilitation grant
program to replace the current section 8 moderate rehabilitation
and rehabilitation loan fund programs. This new program will
leverage private capital in rehabilitating multi-family properties
and therefore be more efficient than the two programs it replaces.
Budget authority of $150 million is requested in 1984 for the rehabilitation of approximately 30,000 rental units for lower income
families.
The urban development action grant program provides discretionary grants to severely distressed cities and urban counties to supplement local government and private sector financing for major
economic development projects. The projects are designed to promote local economic revitalization, generate new jobs, and increase
local tax bases. New budget authority of $196 million is requested
for the program in 1984, in addition to carry over balances of $244
million in budget authority from 1983, for a total program level of
$440 million.
The administration has requested no funds in 1984 for the economic development assistance programs administered by the Economic Development Administration. Funds for State and local community and economic development programs are available through
grant programs administered by the Department of Housing and
Urban Development. Specialized assistance for rural areas will
continue to be available through the Farmers Home Administration.
Budget authority requested for elementary, secondary, and vocational education grant programs is $5.1 billion in 1984, $0.1 billion
below the 1983 request. Budget authority for the largest of these
programs, Chapter 1 of the Education Consolidation and Improvement Act, is proposed at $3.0 billion in 1984. The grant goes to
State and local education agencies to help them meet the additional costs of education for disadvantaged and handicapped students.
Budget authority requested for the State education block grant is
$0.5 billion in 1984, the same as in 1983. The State block grant,
enacted in 1981, combined about 30 categorical programs into a
single multi-purpose grant that gives States increased flexibility in
the use of funds for education programs.
Budget authority of $1.1 billion is also requested for grants to
States to help finance the additional costs of education for the
handicapped.
The impact aid program compensates local school districts that
are adversely affected by Federal activity. Budget authority of $465

SPECIAL ANALYSIS F

F- 55

million will be requested in 1984 for payments to approximately
1,700 school districts.
Budget authority for grant programs authorized by the Job
Training Partnership Act, is proposed at $3.5 billion in 1984. This
amount would maintain the level of training services financed
under CETA. Within this total, $1.9 billion is proposed for a block
grant to provide job training for economically disadvantaged youth
and adults. This program will help States improve the efficiency of
job training programs by coordinating Federal job training and
related State run programs.
The 1982 amendments to the Wagner-Peyser Act provided States
with greater flexibility in planning and operating State employment services. Beginning in 1984, each State's allotment will be
determined by a formula. The $858 million of estimated outlays in
1984 are equivalent to the 1983 level of $788 million, adjusted for
expected cost increases.
The work incentive program was started in 1978 to finance job
services, training, and public service employment to recipients of
aid to families with dependent children (AFDC). The program has
not proven to be cost effective and no budget authority is requested
for 1984. Applicants and recipients of AFDC will be required to
seek work as a condition of eligibility and can receive training
under the Job Training and Partnership Act programs.
For 1984, budget authority of $1.0 billion is requested for social
services for the elderly and other special groups. Grants are made
to state and area agencies on aging to assist in financing a range of
services to older Americans, particularly those with the greatest
economic need. Legislation will be proposed in 1984 to consolidate
many of these programs and to broaden the range of services to
include subsidized part-time employment and elderly nutrition programs.
In 1984, budget authority of $1.0 billion is requested for rehabilitation services with legislation to tie grant funding more closely to
successful program performance.
In 1981, a new social services block grant was enacted, combining
a number of social service programs and related activities. Budget
authority of $2.5 billion is requested for the program in 1984, $50
million more than requested for 1983.
No budget authority is requested for the community services
block grant program in 1984. States will have the flexibility to fund
community services activities under the social services block grant.
In 1984, $600 million in budget authority is requested for foster
care, adoption assistance, and a new child welfare services program,
that combines child welfare services and training.
Services for children, youth, and families are designed to improve
the quality of services for neglected, abused, homeless, or low-

H-10

THE BUDGET FOR FISCAL YEAR 1984

income children. Budget authority of $1.1 billion is requested for
these programs in 1984, an increase of $128 million from 1983.
The medicaid program continues to be the largest grant-in-aid.
This program supports State efforts to provide health services to
low-income residents. The Omnibus Budget Reconciliation Act of
1981 established target rates of medicaid cost increases to encourage States to limit the program's tremendous growth. The Congress
also adopted a number of the administration's proposals designed
to help States manage their programs more efficiently. The 1984
budget proposes additional measures to achieve cost savings. Despite estimated savings of $293 million in 1984, outlays for the
program are estimated to increase from $19.3 billion in 1983 to
$20.8 billion in 1984.
Four health block grants were enacted in 1981 to provide States
more flexibility in the use of these funds. They were for maternal
and child health; preventive health and health services; alcohol,
drug abuse, and mental health; and primary care. Budget authority
requested for these programs in 1984 is $1.4 billion, an increase of
$0.2 billion from 1983. This increase is due to an administration
proposal to expand the primary care services block grant to include
categorical programs for black lung clinics, migrant health, and
family planning.
Outlays for assistance payments (aid to families with dependent
children) and child support enforcement programs are expected to
be $8.2 billion in 1983, and $7.5 billion in 1984. Proposals to target
assistance on those in greatest need will result in savings for States
as well as for the Federal Government.
Outlays for the Federal share of State administrative expenses
for the food stamp program are estimated to be $689 million in
1984. The budget includes proposals to improve State administration of the program and to target benefits on those most in need.
Outlays for nutrition assistance for Puerto Rico are estimated to
be $825 million in 1984. This program replaced the portion of the
food stamp program that was for Puerto Rican residents.
The child nutrition program subsidizes meals for children in
schools, child care facilities, and other institutional settings. Outlays are estimated to be $2.8 billion in 1984, compared to $3.0
billion in 1983.
The special supplemental food program for women, infants, and
children (WIC) provides grants for nutritious food supplements to
low-income women and their young children to lessen health problems associated with inadequate diets during critical stages of child
development. The administration requests budget authority of $1.1
billion for WIC in 1984.
The Federal Government reimburses States for cash and medical
assistance, employment training, social services, State administra-

SPECIAL ANALYSIS F

F- 55

tive costs, and child welfare services to low-income refugees and
entrants who are not eligible for AFDC, medicaid, or general assistance. In 1984, the administration will request budget authority of
$466 million for a per capita grant assistance program to fund
States for refugee and entrant assistance.
To moderate the impact of rising energy costs on low-income
families, $1.3 billion in budget authority is proposed for low-income
home energy assistance in 1984. This is a $0.7 billion reduction from
1983. In an effort to direct these funds more precisely to lowincome persons, legislation is being proposed to revise the State
allotment formula. The new formula directs more funds to States
with severe winter climates and large low-income populations.
The administration is requesting budget authority of $90 million
in 1984 for a new criminal justice assistance grant program. The
program would provide training, technical, and financial assistance
to State and local criminal justice agencies, with a special focus on
the apprehension of violent and repeat offenders.
One of the largest grants is general revenue sharing; which provides assistance to local governments with virtually no restriction
on the use of funds. Outlays for the program, which the administration proposes to renew in 1983, are estimated to remain at $4.6
billion in both 1983 and 1984. Under the administration's federalism initiative, general revenue sharing would be combined with the
entitlement portion of the community development block grant
program, into a local block grant beginning in 1984.
Revenues are shared with State and local governments from
receipts received from timber and mineral sales on Federal lands.
These payments are proposed to be increased from $0.6 billion in
1983 to $1.1 billion in 1984. In addition, $96 million in payments-inlieu of taxes are proposed for 1984.
Additional information on many of these grant programs is in
Part 5 of the Budget
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 $1.9 billion in 1984, and $1.8 billion of new
guaranteed loans are estimated in 1984.
(More information on Federal credit activities is available in
table H-12 and in Special Analysis F.)
Tax Expenditures.—Federal aid to State and local governments is
also provided through tax expenditures. The two major tax expenditures are the deductibility of most State and local taxes and the
exclusion of interest on State and local securities from Federal
taxation.

H-10

THE BUDGET FOR FISCAL YEAR 1984

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 1984 tax expenditure for property taxes on owneroccupied homes is estimated to be $9.6 billion and the tax expenditure for other nonbusiness State and local taxes—primarily income
and sales taxes—is estimated to be $21.8 billion.
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 is $9.4 billion in 1984
for the exclusion of interest on State and local general obligation
bonds and public purpose revenue bonds.
Interest on State and local industrial revenue bonds is also tax
exempt. These bonds finance industrial and transportation projects,
pollution control facilities and housing. Tax expenditures in 1984
are estimated to be $2.6 billion for industrial facilities, $1.2 billion
for pollution control facilities, and $0.8 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. Although the eligibility requirements
for single family mortgage revenue bonds were liberalized by the
Tax Equity and Fiscal Responsibility Act of 1982, a ban placed on
the use of these funds in the Omnibus Budget Reconciliation Act of
1980 becomes effective January 1, 1984. The 1984 tax expenditure
is estimated to be $1.3 billion.
Interest on State and local bonds that finance hospitals, student
loans, certain energy facilities, and mass transit is also tax exempt.
Tax expenditures in 1984 for these items are estimated to be $1.1
billion, $0.2 billion, $20 million and $15 million, respectively.
Total Federal aid to State and local governments through tax
expenditures is estimated to be $54.5 billion in 1984.
The administration will propose an enterprise zone program that
would provide tax incentives for the redevelopment of economically
distressed areas. Beginning in 1983, up to 25 small areas per year
would be designated "enterprise zones." Starting in 1984, businesses in the zones would be entitled to exemption from tax for certain
gains, and to tax credits for capital investment, for increases in

SPECIAL ANALYSIS F

F- 55

employment, and for hiring disadvantaged employees. A tax credit
would also be provided to employees in the zones. The tax expenditure from this proposal is estimated to be $265 million in 1984.
(More information on tax expenditures is provided in Special
Analysis G. Special Analysis F contains additional information on
assistance from tax-exempt financing.)
FEDERAL GRANTS-IN-AID BY FUNCTION, AGENCY, AND REGION

Distribution of grants by function.—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.
In recent years the budget documents have included detailed
data for two years beyond the budget year to improved planning
for the longer term. Consequently, the discussions and data in
many parts of this budget include the 1984-86 planning period.
Consistent with that approach, this special analysis shows estimates through 1986 in many of the tables and on the chart on a
previous page.
Table H - 2 . FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
(In milions 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
1982
68

509
4,871
986
3
12,171
5,379
16,589
18,839
21,930
63
187
252
6,347

Estimate
1983

1984

1985

76
592
4,110
1,399
3
13,315
5,022
16,768
20,644
24,918
73
136
226
6,257

103
368
3,658
1,119
2
16,436
4,829
16,193
22,207
23,752
71
139
175
6,874

127
298
3,519
1,066

2
17,229
4,748
16,065
24,662
24,210
73
142
174
6,848

1986
162
262

3,293
1,076
2
17,778
4,593
16,053
26,879
24,966
76
84
165
7,080

88,194 93,537 95,926 99,162 102,468

Table H-2 shows a functional distribution of Federal grant-in-aid
outlays. The functional composition of grant outlays has changed
significantly over the years, as shown in table H-3. The most
dramatic growth has occurred in the health function, which increased from 3% of Federal aid in 1960 to an estimated 23% in
1984. Other changes occurred between 1960 and 1984 in education,

H-10

THE BUDGET FOR FISCAL YEAR 1984

training, employment, and social services programs which increased from 7% in 1960 to an estimated 17% in 1984. General
purpose fiscal assistance also increased with the addition of revenue sharing, from 2% in 1960 to an estimated 7% in 1984. Between
1982 and 1984 the largest change is expected to occur for transportation, which is estimated to increase from 14% to 17% of total
grant outlays. This increase is due to the enactment of the Surface
Transportation Assistance Act of 1982.
Table H - 3 . 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

1970

2
3
43
2
7
3
38
2
*

100

1980

1982

1983

1984

1985

1986

1
6
1
14
6
19
21
25
7
1

1
4
1
14
5
18
22
27
7
1

2
4
19
5
27
16
24
2
1

1
6
1
14
7
24
17
20
9
1

4
1
17
5
17
23
25
7
1

4
1
17
5
16
25
24
7

3
1
17
4
16
26
24
7
2

100

*0.5% or less.

Distribution of grants by agency.—Table H-4 shows grant outlays
by agency. The Department of Health and Human Services will
provide 38% of total estimated grant-in-aid outlays in 1984, far
more than any other agency.
Table H-4. FEDERAL GRANT-IN-AID OUTLAYS BY AGENCY
(In millions of dollars)
Agency

Funds Appropriated to the President
Department of Agriculture
Department of Commerce
Education Activities
Energy Activities
Department of Health and Human Services
Department of Housing and Urban DevelopmentDepartment of the Interior
Department of Justice
Department of Labor
Department of Transportation
Department of the Treasury
Environmental Protection Agency
Other
Total outlays.

Actual
1982

Estimate
1983

1984

414
6,764
488
7,185
356
34,254
9,206
1,590
168
5,567
12,105
4,883
4,079
1,135

382
8,240
390
7,319
405
36,702
10,052
1,519
108
5,790
13,248
4,909
3,387
1,086

333
7,776
235
7,087
175
36,611
10,479
1,912
113
5,696
16,369
4,917
3,116
1,107

88,194

93,537

95,926

SPECIAL ANALYSIS F

F- 55

Distribution of grants by region.—Table H--5 shows that Federal
aid on a per capita basis varies widely among regions. The thinly
populated Western States traditionally rank high because of highway construction grants and shared revenues from Federal land
holdings. For example, the Rocky Mountain States have the lowest
regional population density, extensive Federal land holdings and,
until recently, the highest per capita aid.
This effect has diminished in recent years as human resource
programs have grown relative to physical resource programs. General revenue sharing has also tended to equalize per capita figures
among the regions. Region VIII, which had per capita grants 24%
above the national average in 1972, now has grants only 8% above
the average, while Region V has risen from 21% below the average
to only 4% below. Grants to Region V have grown the most during
the period, averaging 10.8% per year.
Table H - 5 . DISTRIBUTION OF GRANTS BY REGION, SELECTED FISCAL YEARS
Dollars per capita
Federal Region

1. Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island
II. New York, New Jersey, Puerto Rico, Virgin Islands
III. Virginia, Pennsylvania, Delaware, Maryland, West Virginia, District of Columbia
IV. Kentucky, Tennessee, North Carolina, South Carolina,
Georgia, Alabama, Mississippi, Florida
V. Illinois, Indiana, Michigan, Ohio, Wisconsin, Minnesota
VI. Arkansas, Louisiana, Oklahoma, New Mexico, Texas
VII. Iowa, Kansas, Missouri, Nebraska
VIII. Colorado, Montana, North Dakota, South Dakota, Utah,
Wyoming
IX. Arizona, California, Nevada, Hawaii, other territories
X. Idaho, Oregon, Washington, Alaska
United States

1982 1 total
grants

1972

19822

Average
annual
percent
increase,
1972-82

5.5
13.5

173
203

437
475

9.5
8.7

10.4

155

419

10.2

13.5
16.5
7.9
3.8

149
127
159
130

340
362
305
319

8.4
10.8
6.6
9.2

2.9
10.8
3.5

200
188
199

411
372
427

7.3
6.9
7.7

88.2

161

379

8.7

Preliminary estimate, in billions of dollars.
2 Based on 1981 population. See "Federal Aid to States," Department of the Treasury, for additional information concerning State distribution of
Federal grants.
1

HISTORICAL PERSPECTIVES

In recent decades, Federal aid to State and local governments
has become a major factor in the financing of certain government
functions. The rudiments of the present system date back more
than 100 years to the Civil War. The Morrill Act, passed in 1862,
established the land grant colleges and instituted certain federally
required standards, as is characteristic of the present grant-in-aid
system. Federal aid was later initiated for agriculture, highways,

H-10

THE BUDGET FOR FISCAL YEAR 1984

vocational education and rehabilitation, forestry, and public health.
In the depression years, Federal aid was extended to meet income
security and other social welfare needs.
However, Federal grants did not become a significant factor in
Government expenditures until after World War II. In 1950, Federal grants to State and local governments were $2 billion, and by
1965 they had risen to $11 billion. In 1978 they increased to nearly
$78 billion, an average annual increase of 16% since 1965. In 1984
Federal grants are expected to be 11.3% of total Federal outlays
and 16.3% of domestic Federal outlays. Table H-6 shows historical
data for grant outlays since 1950.
Table H-6 also shows grants-in-aid as a percent of State and
local expenditures and as a percent of gross national product
(GNP). Grants as a percent of State and local expenditures increased from 15.3% in 1965 to 26.8% in 1978, declining to 22.1% in
1982. Grants increased as a percent of GNP from 0.9% in 1950 to a
peak of 3.7% in 1978, declining to 2.9% in 1982.
Table H - 6 . HISTORICAL TREND OF FEDERAL GRANT-IN-AID OUTLAYS
(Fiscal years; dollar amounts in millions)
Federal grants,as a percent of
Total
grants-inaid

Five-year intervals:
1950
1955
1960
1965
1970
1975
Annually:
1976
1977
1978
1979
1980
1981
1982
1983 estimate
1984 estimate
1985 estimate
1986 estimate
1

$2,253
3,207
7,020
10,904
24,014
49,834
59,093
68,414
77,889
82,858
91,472
94,762
88,194
93,537
95,926
99,162
102,468

Budget outlays
Total

Domestic1

State and
local
expenditures 2

Gross
National
Product

5.3%
4.7
7.6
9.2
12.3
15.4

8.8%
12.1
15.9
16.5
21.3
21.5

10.4%
10.1
14.7
15.3
19.2
23.0

0.9%
0.8
1.4
1.7
2.3
3.3

16.2
17.1
17.4
16.9
15.9
14.4
12.1
11.6
11.3
10.8
10.4

21.9
22.9
23.1
22.5
21.2
19.5
16.6
16.2
16.3
16.0
15.7

24.2
25.9
26.8
26.3
26.2
25.0
22.1
NA
NA
NA
NA

3.5
3.7
3.7
3.5
3.6
3.1
2.9
2.9
2.7
2.6
2.5

Excludes outlays for the national defense and international affairs functions.
defined in the national income and product accounts.
NA=Not available.

2As

The chart shows total governmental expenditures as a percent of
GNP since 1950. Federal expenditures including grants have increased as a percent of GNP from 16% in 1950 to 25% in 1982,
while State and local expenditures including grants have increased
from 7% in 1950 to 12% in 1982.

SPECIAL ANALYSIS F

F- 55

Government Expenditures as a Percent of GNP
Percent

Federal, State, and Local Governments

percent

Table H-7 shows the composition of grant-in-aid outlays since
1950 according to the categories of payments for individuals, capital investment, and other purposes. Almost half of estimated 1984
grants are to States and localities as payments for 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.
Table H-7 also shows the share of State and local capital expenditures financed by Federal grants or by revenues from State and
local own sources. The Federal share increased from 8.3% in 1955
to 23.9% in 1960 largely because of the initiation of Federal financing for the interstate highway system. The share increased from
24.6% in 1970 to 39.6% in 1980, increasing by more than half in
ten years. This rise was due in part to the rapid growth of Federal
aid in real terms—the major programs being highways, mass transit, community development block grants, and sewage treatment
plans—and in part to substantial real declines in State and local
spending from their own sources. In constant 1972 dollars, Federal
aid grew from $8.1 billion in 1970 to $10.6 billion in 1980, an
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.

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table H - 7 . COMPOSITION OF GRANT-IN-AID OUTLAYS
(Fiscal years; dollar amounts in millions)
Composition of grants-in-aid

Five year intervals:
1950
1955
1960
1965
1970
1975
Annually:
1976
1977
1978
1979
1980
1981
1982
1983 estimate
1984 estimate

Total
grants-inaid

Grants for
payments
for
individuals 1

Grants for
capital
investment 2

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

484
820
3,321
4,985
7,053
10,867

59,093
68,414'
77,889
82,858
91,472
94,762
88,194
93,537
95,926

21,023
23,860
25,981
28,765
34,174
39,934
40,744
44,978
45,531

13,475
16,109
18,316
20,043
22,464
22,132
20,480
20,606
23,685

Share of State and local
capital expenditures financed
byGrants-in-aid

Own source
revenues

512
764
1,220
1,988
7,938
21,526

8.4%
8.3
23.9
24.8
24.6
25.8

91.6%
91.7
76.1
75.2
75.4
74.2

24,595
28,445
33,592
34,050
34,834
32,696
26,970
27,953
26,710

31.1
41.1
41.1
40.0
39.6
39.0
37.9
NA
NA

68.9
58.9
58.9
60.0
60.4
61.0
62.1
NA
NA

*For an identification of accounts in this category, see Table H—11 and footnotes.
2 Excludes a small capital grant that is included as a payment for individuals.
NA=Not available.

average annual increase of 2.6%, while capital expenditures financed from State and local own sources declined from $26.0 billion in 1970 to $16.8 billion in 1980, an average annual decline of
4.2%.
Grants for capital investment are estimated to be $23.7 billion in
1984, 25% of total grants-in-aid.
GRANTS SIMPLIFICATION

The increase in grant expenditures since World War II was
accompanied by an increase in the number of grants designated for
specific purposes. This increase took place especially in the 1960's
and early 1970,s. These grants usually contained Federal legislative
and regulatory mandates, required matching funds from the recipient governments, and gave little discretion in their use to State
and local officials. They came to be known as categorical grants,
with complex administrative requirements to ensure that their
purposes were met.
To combat this trend and to devolve authority, general-purpose
and broad-based grants have been emphasized in recent years.
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 gov-

SPECIAL ANALYSIS F

F- 55

ernments considerable discretion within a broadly defined program
area, such as health or community development. In 1972 there
were virtually no general-purpose or block grants. For 1982, these
grants are estimated to be one-fifth of total grants-in-aid. Despite
the elimination of the State portion of general revenue sharing,
this percentage remains about one-fifth through 1986.
Most general-purpose and broad-based grants reduce or eliminate
the requirement that recipients match Federal funds with their
own. Despite the increase in these grants, matching requirements
for all grants as a whole have not changed significantly. In 1982,
State and local governments were estimated to provide approximately $1 of matching funds for $2.22 of Federal aid; this ratio is
expected to decline slightly in 1984. The decrease in matching
requirements for general-purpose and broad-based aid has been
partially offset by the significant growth in programs such as medicaid that require a larger than average matching share.
The chart shows that of all the grants to State and local governments in 1983 almost 90% of estimated obligations is concentrated in
only 20 programs. Nevertheless, there are 150 other categorical
grants with different matching requirements, timing difficulties,
complex application procedures, program duplication, and other
administrative problems.

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table H - 8 . OUTLAYS FOR GENERAL-PURPOSE, BROAD-BASED, AND OTHER GRANTS
(Dollar amounts in millions)
Estimate

Actual
1976

1980

1982

1983

1984

1985

1986

$6,243

$6,829

$4,569

$4,567

$516

907

1,765

1,941

1,878

2,501

2,475

2,708

516

7,150

8,594

6,510

6,445

7,068

7,042

7,275

983
128

3,902
83

3.792
661
48

3,525
1,115
35

3,526
1,299
440

3,474
1,357
451

3,497
1,357
451

1,930

558
1,698
2,251

622
2,144
2,763

546
1.793
2,567

572
1,639
2,571

499
1,415
2,500

478
1,886
2,600

468
1,886
2,700

233

554

818

1,685
390

1,961
414

1,396
476

1,349
689

1,298
972

2,855
31,001

6,172
45,771

10,332
72,546

11,482
70,202

11,832
75,260

11,551
77,307

12,284
79,836

12,629
82,564

34,372

59,093

91,472

88,194

93,537

95,926

99,162 102,468

1.5%
8.3%
90.2%

12.1%
10.4%
77.5%

9.4%
11.3%
79.3%

7.4%
13.0%
79.6%

6.9%
12.6%
80.5%

7.4%
12.0%
80.6%

7.1%
12.4%
80.5%

1972

General-purpose grants:

General revenue sharing
Other general purpose fiscal
assistance and TVA1
Subtotal, generalpurpose grants

Broad-based:

Community development
Health
State education block grants
School aid in federally affected
areas
Employment and training
Social services
Low-income home energy
assistance
Other

Subtotal, broad-based
grants
Other grants
Total
ADDENDUM: PERCENT OF
TOTAL

General-purpose grants
Broad-based grants
Other grants
Total

602

7.1%
12.3%
80.6%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

^ o r 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.

The chart also shows that there were 360 grants in 1981 and an
estimated 170 in 1983, a reduction of 190, or 53%. Most of the
decline is the direct result of the 9 new block grants enacted in
1981 and the elimination or consolidation of many small programs.
In view of the rapid growth of the number of grant programs since
the mid-1960's, this decline is a major improvement. This simplification of Federal aid has saved a significant number of hours for
State and local governments. Paperwork associated with the nine
block grants decreased by an estimated 5.4 million hours in 1982.
In addition to reductions in the number of categorical grant
programs, the administration has simplified or eliminated many
mandatory administrative or procedural requirements associated
with the Federal grants that remain. Regulatory reforms have
increased the efficiency of the intergovernmental grant-in-aid
system, and management improvements have strengthened the au-

SPECIAL ANALYSIS F

F- 55

thority of State and local elected officials over Federal financing
and development activities in their jurisdictions.
Regulatory Reform.—In January 1981, President Reagan established a Presidential Task Force on Regulatory Relief. The main
purpose of the Task Force has been to review existing regulations
and identify those that are burdensome, unnecessary, and counterproductive. During 1981, the Task Force designated over 100 existing regulations for review. Twenty-seven of these had a major
impact on State and local governments. In 1982 the Task Force
designated eight more regulations, bringing to 35 the number of
rules under review that affect State and local governments. Several
Federal agencies have also initiated reviews of requirements associated with their own grant programs that could hamper local efficiency and accountability and increase program costs.
Twenty-five reviews were completed during the past two years by
either the Task Force or by various Federal agencies. The reviews
have resulted in significant changes in existing regulations.
—The Department of Agriculture simplified cost accounting requirements for the national school lunch program, eliminating
nearly 12 million hours of administrative work each year.
—The Department of Education adopted new rules governing
Federal financial assistance to State and local education agencies. Paperwork requirements were reduced and schools were
freed of unnecessary Federal supervision, direction, and control.
—The Department of Health and Human Services revised medicaid rules to give States greater flexibility in administering the
program.
—The Department of Transportation modified standards for
highway repair work permitting States to establish their own
less costly procedures and criteria for resurfacing, restoration
and rehabilitation of existing highways.
Available data indicate that regulatory relief actions have saved
State and local governments at least $4 to $6 billion in initial costs
and at least $2 billion on an annual basis.
Over 25 other reviews are now underway in several agencies.
—The Environmental Protection Agency will continue to consolidate and simplify the rules for several EPA grant programs.
—The Office of Personnel Management proposes to simplify the
personnel procedures States must adopt in order to be eligible
for federally funded programs such as food stamps and medicaid. States will certify compliance instead of submitting detailed and repetitive reports.
—The Department of Health and Human Services intends to
modify its regulations governing State administered non-entitlement programs to reduce excessively detailed reporting re-

H-10

THE BUDGET FOR FISCAL YEAR 1984

quirements and elaborate cost accounting and recordkeeping
procedures.
The administration is also trying to simplify selected generally
applicable crosscutting requirements imposed on State and local
governments. Crosscutting requirements are policy requirements
and administrative management standards that apply to some or
all assistance programs. As a first step, a directory describing 60 of
these requirements was prepared for use by Federal agencies and
State and local governments. In addition, legislation was introduced and management reforms instituted, to improve relocation
assistance and real property acquisition policies and to improve
historical and archeological preservation requirements.
Management Improvement—This administration has tried to improve the management of intergovernmental assistance by providing more opportunity for consultation with State and local governments, by offering more reliable and timely information on actual
and prospective funding levels, and by streamlining the financial
management system for Federal aid. Selected actions taken include:
—Executive Order 12372, Intergovernmental Review of Federal
Programs, established a new procedure giving State and local
officials more access to and influence over Federal activities
that affect their jurisdictions. The order requires Federal agencies to use a State developed process for obtaining the views of
State and local officials. Federal agencies must accommodate
those views when possible.
—The Federal Assistance Awards Data System was established
to provide better information about current grant funding to
States. Data on all direct assistance awards are being provided
quarterly to the States and to the Congress.
—Budget Information for States, a report that is published soon
after the budget is released, provides State-by-State allocations
of the funding levels of the major formula grant programs for
the past, current, and budget year.
—Audit systems are being streamlined to place maximum reliance on audits made by State and local government. The
system calls for vigorous followup on audit findings and timely
collection of audit related debts.
—Steps are being taken to develop sound internal accounting
and administrative control systems to foster efficient management of grant programs and eliminate fraud and abuse. In a
series of regional meetings scheduled for this year, Federal
agencies will work with States to reduce waste and fraud in
jointly administered grant programs.
—Agencies are being encouraged to develop cash management
systems that will minimize or eliminate excess Federal cash

SPECIAL ANALYSIS F

F- 55

balances held by grant recipients. One agency has developed a
method that requires States to estimate when benefit checks
will be cashed and to draw funds at that time rather than
when checks are issued. At the same time, the Federal Government is trying to accelerate its reimbursements to State and
local governments.
—Agencies are in the process of delegating authority to State
and local recipients of Federal aid to establish their own procurement systems. State and local systems that meet Federal
standards are being certified in advance so that Federal involvement in procurement can be kept to a minimum.
OTHER SOURCES OF FEDERAL A I D 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 (NIPA) series (published in Special
Analysis B 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. Both series omit the following items that the
budget 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 NIPA 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. Because both Census and ^he NIPA 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 NIPA series
is grants to subsidize the operation of public enterprises, mainly
housing and transportation facilities. These are counted as subsi380-700

0 -

83 -

18 QL :

H-10

THE BUDGET FOR FISCAL YEAR 1984

dies by the Federal Government in the NIPA rather than as
grants. Table H-9 shows these and other minor differences among
the 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,
1978-81
(In billions of dollars)
1978

Budget (Special Analysis H)

Less principal exclusions:
Agricultural commodities
Geographical exclusions
Plus payments for research
Federal unemployment benefits and related
All other (net)

Federal payments (Census)

Less:

Low-rent public housing
Federal unemployment benefits and related
All other (net)

Grants-in-aid (national income and product accounts)

1979

1980

1981

77.9

82.9

91.5

94.8

-0.6
-1.6
2.2
1.2
0.1

-0.7
-1.8
2.4
0.8
-0.6

-1.1
-2.0
2.9
1.3
-1.8

-1.1
-1.8
3.2
2.6
-3.1

79.2

85.2

90.8

94.6

-2.3
-1.2
-1.0

-2.8
-0.8
-2.5

-3.3
-1.3
0.5

-3.9
-2.6
2.0

74.7

79.1

86.7

90.1

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 100
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
grants-in-aid. The Federal Register is published daily by the Government Printing Office and has current information on agencies
that are accepting applications for specific programs. This source
also provides information on eligibility criteria and application
procedures.
THE STATE AND LOCAL GOVERNMENT SECTOR OF THE NATIONAL
INCOME AND PRODUCT ACCOUNTS 3

The national income and product accounts (NIPA) 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 govern3Special Analysis B provides general information on the Federal sector of the national income and product
accounts.

SPECIAL ANALYSIS F

F- 55

ments 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 NIPA data and a
governments own budgetary accounting for receipts and expenditures. First, financial transactions and the purchase and sale of
land and other existing assets are excluded from NIPA data but
are generally included in budgetary data. Second, a large number
of transactions in the NIPA accounts are recorded on an accrual
basis, while many governments show transactions on a cash basis.
Third, NIPA data aggregate total State and local transactions,
whereas many governments separate their general fund from special funds. As a result of these differences, NIPA totals are not the
same as an aggregate of these governments' financial budgets.
However, the NIPA data do provide timely estimates of total State
and local fiscal transactions not otherwise available and if used
with care can provide helpful financial indicators.
NIPA State and local sector.—Table H-10 provides 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. These funds accumulate assets to pay for their future liabilities. Because 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.
It is reasonable for the operating account to be in deficit because
it includes capital expenditures, often financed through borrowing,
and the account was in deficit in the 1950's and 1960's. However, as
noted above, State and local governments have reduced real capital
investment that is generally financed from borrowing, and in most
cases are required by State constitutions or laws to finance current
operating programs from current revenues.
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 accu-

4 The operating account contains all transactions except those of social insurance funds, including expenditures for capital investment.

H-10

THE BUDGET FOR FISCAL YEAR 1984
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
1980
1981
1982 1

Expenditures

Social
insurance
funds

Total
sector

21.3
31.7
49.9
75.1
135.4
237.7

22.5
32.9
49.8
75.1
133.5
232.2

-1.2
-1.3
0.1

267.8
297.7
327.6
352.0
385.9
416.8
414.9

251.2
269.7
297.3
321.5
357.8
385.0
437.3

)

Operating
account

1.9
5.5

0.7
1.3
2.3
3.4
6.9
13.1

-1.9
-2.6
-2.2
-3.4
-5.1
-7.6

16.6
28.0
30.3
30.4
28.2
31.7
31.8

15.6
18.0
20.3
23.8
27.3
31.8
36.3

0.9
10.1
10.0
6.6
0.9
-0.1
-4.4

SEASONALLY ADJUSTED, ANNUAL RATES
1981:
1
II
Ill
IV
1982:
1
II
Ill

410.0
415.2
420.3
421.5

378.6
382.2
386.9
392.4

31.3
32.9
33.5
29.1

30.3
31.3
32.3
33.3

1.1
1.7
1.2
-4.2

424.2
434.3
440.5

396.5
402.2
408.2

27.7
32.1
32.3

34.5
35.7
36.9

-6.8
-3.6
-4.5

*$50 million or less.
1 Preliminary.

mulated during 1972-73 rather than enact new tax increases. The
operating account moved slightly into surplus in 1976 and this
surplus expanded significantly in 1977 and 1978. The operating
account has a surplus of $0.9 billion in 1980, a $0.1 billion deficit in
1981, and a $4.4 billion deficit in 1982.
DETAILED FEDERAL AID TABLES

The following two tables present detailed Federal aid data for
1982, 1983, and 1984. 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/J 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)
1983
estimate

1982
actual

1984
estimate

Function, agency and program

Functional
code 1

OUTLAYS

1982
actual

1984
estimate

1983
estimate

BUDGET AUTHORITY
National defense:

29
39

30
46

30
73

103

346
163

404
188

174
193

509

592

368

Department of Defense—Military:
National Guard centers construction
Federal Emergency Management Agency
Total, national defense

Energy:

Energy Activities: Energy conservation grants.
Tennessee Valley Authority
Total, energy

051
054

29
80

30
91

30
141

050

109

121

171

272
271

129

176

270

129

176

301
302
302
302

140
11
10
34

65
3
5
35

302
306

3
50

4
68

303
303
303
303
303
303

157

153

171

Natural resources and environment:

144
13
10
32

91
7
5
33

15
7
4
2

33
50

15
68

11
12

148
1
1
2
31
211

163
1
2
7
36

168

See footnotes at end of table.

Department of Agriculture:
Watershed and flood prevention operations,
Resource conservation and development
Forest research
State and private forestry
Department of Commerce:
NOAA—Coastal zone management
NOAA—Operations research and facilitiesDepartment of the Interior:
Fish and Wildlife Service Grants
Operation of the National Park System
National recreation and preservation
Park Construction
Urban park and recreation fund
Land and water conservation fund

Of
"d

s>
r

>
5
GO
HH

2
8

2
7

a
i

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1982
actual

1983
estimate

1984
estimate

Function, agency and program

197
24*

169
14*

66
6
6

62
11*

109
1

320
3,756
3

250
3,100
37

241
2,800
75

4,871

4,110

3,658

36*

Land acquisition
Historic preservation fund
Miscellaneous permanent appropriations
Office of Surface Mining, Reclamation, and Enforcement
Bureau of Mines
Youth conservation corps
Environmental Protection Agency:
Abatement, control, and compliance
Sewage treatment plant construction grants
Hazardous substance response trust fund
Total, natural resources and environment

Functional
code1

1982
actual

1983
estimate

1984
estimate

303
303
303
302
306
302

6
25*

5
26*

84
9

165

*
232

304
304
304

239
2,400
32

233
2,430
58

173
2,400
95

300

3,209

3,259

3,115

352
352
351
352

92
316
548
1

98
329
937
1

96
287
720
0

350

957

1,364

1,103

371
376

370

401
401

1
401

1
518

0
0

Agriculture:

129
307
548
1

132
328
937
2

136
295
688
0

986

1,399

1,119

1
2

Department of Agriculture:
Cooperative State research service
Extension service
Commodity Credit Corporation
Agricultural Marketing Service
Total, agriculture

Commerce and housing credit:

Department of Agriculture: Rural housing supervisory assistance grants
Department of Commerce: Minority business development
Total, commerce and housing credit

Transportation:

8
16

15
269

11
389

Department of Transportation:
Highway beautification
Interstate transfer grants—highways

7,590
21

8,216
12

130
138
80
3,782

2
65

80
119
207
3,740
55
527
5
3
66

11,303
13
9
4
71
122
25
3,416
242
745
15
3
67

12,171

13,315

16,436

339

Federal aid highways (trust fund)
Highway related safety grants
Motor carrier safety grants
Appalachian highway system
Other highway aid
National Highway Traffic Safety Administration..
Federal Railroad Administration
Urban mass transportation fund
Mass transportation capital fund
Airport and airway trust fund
National recreational boating safety
Research and special programs
Washington Metropolitan Area Transit Authority,
Total, transportation

401
401
401
401
401
401
401
401
401
402
403
407
401

8,137
10

12,425

27
203
70
3,464

2
52

3
141
2
3,494
779
800
45
4
52

400

12,843

18,263

452
452
453

150

125

199

476

13,542
10
10
79
0
148
2,600
1,250
994
45
4
52
18,732

Community and regional development:

304

201

110

248
1
133

3
210
6
3

1
208
5
3

165
2
2

323
40

235
30

147
30

10
16
1

3
5

5
1
4

132

10
3,792

3,525

See footnotes at end of table.

3,526

Funds appropriated to the PresidentAppalachian regional development programs
Appalachian housing fund
Disaster relief
Department of Agriculture:
Rural development planning grants
Rural water and waste disposal grants
Rural development grants
Rural community fire protection grants
Department of Commerce:
Economic development assistance programs
Local public works program
Drought assistance program
Regional development programs
Regional development commissions
NOAA: Coastal energy impact fund
Energy Activities:
Energy conservation grants
Department of Housing and Urban Development:
Community development grants

452
452
452
452
452
452
453
452
452
452

452
451

3,456

3,500

Table H—11. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1982
actual

1983
estimate

1984
estimate

101
6
388

71
6
488

20
4
1
17
4
14

4
1
1
17
13
16

19
13
16

5,379

5,022

4,829

50
3
512

Function, agency and program

Urban renewal programs
Other categorical programs replaced by block grants
Urban development action grants
Rental rehabilitation grants
Planning assistance
Neighborhood self-help development program
New Community Development Corporation
Department of the Interior: Bureau of Indian Affairs
Federal Emergency Management Agency
Neighborhood Reinvestment Corporation
Total, community and regional development

Functional
code1

451
451
451
451
451
451
451
452
501
451

1982
actual

1983
estimate

474

440

"-1
-1
17
1
14

17
13

450

4,587

4,307

504
503

3,028
466
495
78
92
1,061
952
728
74
3

3,028
475
458
51
62
1,099
1,037
809
60
3

Education, training, employment, and social services:

1
12

2,939
546
636
74
110
1,131
780
802
57
3
101
5

3,008
572
461
70
92
1,120
1,038
752
63
3
135
5

3,010
499
463
28
84
1,148
1,012
776
14

48
5

Department of Commerce:
Job opportunities program
Public telecommunications facilities, planning and construction
Education Activities:
Compensatory education for the disadvantaged
Impact aid
Special programs and populations
Indian education
Bilingual education
.
Education for the handicapped
Rehabilitation services and handicapped research
Vocational and adult education
Student financial assistance
Higher education
Libraries.....
Special institutions

501
501
501
501
501
501
506
501
502
502
503
501

222
2,567
1,531
13
389
240

299
2,571
1,660
9
565
352

26
2,500
1,951
7
590
98

3,295
56
38
24
685
131
172
23

2,912
61

2,843
47

11
778
38
137
29

26
832
130
28

Department of Health and Human Services:
Work incentives
Social services block grant
Human development services
Research and demonstration
Family social services
Community services
Department of the Interior:
Operation of Indian programs
Department of Labor:
Training and employment services
Community service employment for older Americans
Temporary employment assistance
State unemployment insurance and employment service operations....
Unemployment trust fund: Training and employment
Community Services Administration
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities

16,589

16,768

16,193

Total, education, training, employment, and social services.
Health:

595
120
656

553
179
492

17,391

19,326

161
90
110
954
20,799

42
5

56
4

54
5

18,839

20,644

22,207

See footnotes at end of table.

Special Action Office for Drug Abuse Prevention
Department of Agriculture: Food Safety and Inspection Service
Department of Health and Human Services:
Health resources and services2
Disease control
Alcohol, drug abuse, and mental health 2
Grants to States for health 2
Medicaid2
Department of Labor.Occupational Safety and Health Administration
Mine Safety and Health Administration
Total, health

504
506
506
506
506
506

267
2,400
1,621
8
465
340

257
2,450
1,674
8
560
348

2,500
2,120
3
601

501

504
504
504
504
504
506
503
503

2,382
62

3,030
62

3,469

19
716

22
778

31
1,014

172
29

137
28

130
26

500

15,564

16,539

16,565

554
554

35
6
71

553
551
551
551
551

421
142
432

415
153
439

18,014

14,795

1,358
20,738

554
554

47
4

52
5

54
6

550

19,091

15,890

22,266

CO
M
o

>
>
r

m
H-t
Ul

ffl

EC
i
00

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1983
estimate

1984
estimate

Function, agency and program

Functional
code1

1982
actual

1983
estimate

Income security:

20
7
415
769
780
19
3,021
1,115
165
12

7,734
435
1,961
554
1

280
15
8
365
689
825
19
2,786
1,090
77
5
7,059
413
1,396
452

"l55l"
5
1,968

4,815
40
1,520
6
1,889

24,918

23,752

4,388

Department of Agriculture:
Rural housing block grant 2
Rural housing for domestic farm labor 2
Mutual and self-help housing 2
Agricultural Marketing Service 2
Food stamp program 2
Nutrition assistance for Puerto Rico 2
Special milk program 2
Child nutrition programs 2
Special supplemental food programs (WIC) 2
Food donations program 2
Department of Health and Human Services:
Supplemental security income program 2
Assistance payments programs 2
Child support enforcement
Low income home energy assistance 2
Refugee and entrant assistance 2
Payments to States from receipts for child support
Department of Housing and Urban Development:
Subsidized housing programs 2
Indian housing 2
Payments for operation of low income housing projects
Congregate services program 2
Department of Labor: Unemployment trust fund
Total, income security

604
604
604
605
605
605
605
605
605
605

14
4
457
686
27
2,690
933
141

609
609
609
609
609
609

20
5,961

604
604
604
604
603

12,215

5,821

1,491

1,282

1,541

4
1,953

600

28,696

25,896

703

1,872
623
1

Veterans benefits and services:

Veterans Administration:
Medical care 2

13
395
622
825
19
3,004
1,090
160
12

7,719
450
1,984
545

Medical administration and miscellaneous operating expenses
Grants for construction of State extended care facilities 2
Assistance for health manpower training institutions
Grants for the construction of State veterans cemeteries
Total, veterans benefits and services
Administration of justice:

Department of Housing and Urban Development: Fair housing assistance
Department of Justice:
National Institute of Corrections
Justice assistance
Equal Employment Opportunity Commission
Total, administration of justice

703
703
703
705

12
16

4
18

700

751

754
754
751

4
73
18

4
68
19

5
90
18

750

118

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 permanent appropriations
Department of Defense—Civil: Water resources permanent appropriations
Energy activities-Payments to States under Federal Power Act
Department of the Interior:
Payments in lieu of taxes
Bureau of Land Management permanent appropriations
National wildlife refuge fund
Payments to States from receipts under the Mineral Leasing Act
Payments to U.S. territories
Internal revenue collections for the Virgin Islands
Department of the Treasury:
General revenue sharing

a>
^
w
o
r

806
806
806

88
99

70
96

59
88

800

186

166

147

852
852
852

243
6
1

145
6
1

269
6
1

852
852
852
852
852
852

96
639
13

96
601
13

96
58
13
995
60

851

4,567

>
>
r

225
5
ffi

ffi
00

Table H - l l . FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1982
actual

1983
estimate

1984
estimate

72
270
427

75
275
461

6,347

6,257

6,874

88,194

93,537

95,926

69
245
• 402

Function, agency and program

U.S. Customs Service
Internal revenue collections for Puerto Rico
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 14 in the Budget of the United States Government, 1984.
2 Programs included in the "Grants for payments to individuals" category shown in Table H-7.

Functional
code1

1982
actual

1983
estimate

1984
estimate

852
852
852

63
239
402

72
270
427

75
275
461

850

6,336

6,253

6,875

91,878

92,398

90,405

SPECIAL ANALYSIS F

F- 55

Table H - 1 2 . CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS 1
(In millions of dollars)
1982
actual

Function, agency and program

1984
estimate

1983
estimate

Direct Loans

Natural resources and environment:
Department of the Interior:
Bureau of Reclamation loan program

Drought emergency loan fund

Total, natural resources and environment

New loans
Net loans

30
24

25
20

40
35

Outstandings

331

351

387

New loans
Net loans

-6

—3

-3

Outstandings

New loans
Net loans

30
18

25
17

40
32

350

367

401

New loans
Net loans

24
24

8
8

16
16

Outstandings

196

25
25

8
8

16
16

235

243

258

955
-89

809
21

675
—108

-4

Outstandings

Agriculture and Commerce and housing credit:
Department of Agriculture:
Agriculture credit insurance fund and rural
housing insurance funds
New loans
Net bans
Transportation:
Department of Transportation:
Federal aid highways (trust fund)

Right-of-way revolving fund

Outstandings

New loans
Net loans
Outstandings

Total, transportation

New loans
Net loans
Outstandings

Community and regional development:
Department of Agriculture:
Rural development insurance fund
Department of Commerce.Drought assistance program

Coastal energy impact fund

- 1

New loans
Net loans
Outstandings

New loans
Net loans

153

4
94

New loans
Net loans

29
28

15
14

9
7

Outstandings

108

115

New loans
Net loans
Outstandings

173

22
-11

Outstandings

See footnotes at end of table.

Outstandings

Department of Housing and Urban Development:
New loans
Urban renewal programs
Net loans
Revolving fund (liquidating programs)

- 1

1
*

-20
442

-21
422

-22
400

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table H-12. CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS C o n t i n u e d
(In millions of dollars)
1982
actual

Function, agency and program

Total, community and regional development... New loans
Net loans
Outstandings..

1,005
-88

785

Education, training, employment and social services:
Education activities:
New loans
Student loan insurance fund and other
Net loans
Outstandings..

College housing loans..
Higher education facilities loan fund.,

New loans
Net loans
Outstandings..

New loans
Net loans

1983
estimate

4
4

Outstandings..

Income security:
Department of Housing and Urban Development:
New loans
Low-rent public housing
Net loans
General purpose fiscal assistance:
Other independent agencies-.
Loans to the District of Columbia-

Grand total, direct loans..
Guaranteed Loans

Agriculture and Commerce and Housing Credit:
Department of Agriculture.Rural housing insurance fund
Community and regional developmentDepartment of Agriculture:
Rural development insurance fund..

-4
86

48
14
1,218

45
9
1,227

-5
93

52
14

1,406

905

1,000

-21

Outstandings..

162

New loans...
Net loans

285
117

295
116

Outstandings..

1,684

1,799

New loans
Net loans

2,303
64

2,229
150

Outstandings..

New loans
Net loans
Outstandings..

New loans
Net loans

4,623

4,771

-1

Outstandings..

1,535
988
6,886

Outstandings..

7
-65
116

Department of Housing and Urban Development:
New loans
Urban renewal programs
Net loans
See footnotes at end of table.

793

Outstandings..

Total education, training, employment, and
social services
New loans
Net loans

839
9

1,191
669
7,555

3
-60

SPECIAL ANALYSIS F

F- 55

Table H-12. CREDIT ASSISTANCE TO STATE AND LOCAL GOVERNMENTS i — C o n t i n u e d
(In millions of dollars)
1982
actual

Function, agency and program

Community development loans

New loans
Net loans

1983
estimate

1984
estimate

90
43

155
119

182
134

117

236

370

Total, community and regional development... New loans

1,632

1,349

1,826

Net loans

966

728

768

7,119

7,847

8,615

Outstandings

General purpose fiscal assistance:
Department of the Treasury:
New York City loan guarantees

Grand total, guaranteed loans

New loans
Net loans

600
507

-156

-154

Outstandings

1,444

1,288

1,134

New loans
Net loans

2,233
1,472

1,350
572

1,827
614

Outstandings

8,585

9,156

9,770

* $500 thousand or less.
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"

SPECIAL ANALYSIS H
CIVILIAN

EMPLOYMENT

IN T H E

EXECUTIVE

BRANCH

This administration has a strong commitment to restrain Federal
civilian employment. Significant reductions have been achieved in
nondefense employment since the administration took office.
FULL-TIME EQUIVALENT OF TOTAL FEDERAL CIVILIAN
IN THE EXECUTIVE

EMPLOYMENT

BRANCH

Beginning with fiscal year 1982, control of executive branch
agency civilian employment was shifted to a full-time equivalent
(FTE) or workyear basis. (Section 904 of the 1982 Defense Authorization Act (Public Law 97-86) exempts the Department of Defense
from full-time equivalent employment controls. Postal Service employment, which by law is not subject to Presidential control, is
also excluded.)
Full-time permanent employment accounted, on an FTE basis,
for nearly 88% of the workforce in fiscal year 1982. The remainder
is made up of the full-time equivalent of part-time employees,
intermittent employees (those employed on an irregular basis), and
full-time temporary employees (generally, in positions occupied for
less than 1 year).
Table I - l is a tabulation of full-time equivalent employment
estimates for the major departments and agencies of the executive
branch.
The estimates in table I - l are related to employment ceilings
that constitute upper limits to employment levels. The table contains an estimated lapse to take account of the fact that, over the
past several years, actual nondefense employment has ranged from
0.7% to 3.3% below budget estimates. In 1982, the actual total was
3.3% below the 1983 Budget estimate for 1982. The estimates for
1983-1985 anticipate lapses of about 1.4%.

I-l
380-700

0 -

83 -

19 QL : 3

H-10

THE BUDGET FOR FISCAL YEAR 1984

Table 1-1. FULL-TIME EQUIVALENT OF TOTAL FEDERAL CIVILIAN EMPLOYMENT IN THE EXECUTIVE
BRANCH 1
(Excluding the Postal Service)
Fiscal year
1982 revised
Budget
estimate2

Agriculture
Commerce
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:
Agency for International Development
General Services Administration
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authority
United States Information Agency
Miscellaneous
Contingencies
Estimated nondefense lapse
Subtotal
Defense—military functions 4
Total

1982 actual 3

1983 estimate

1984 estimate

1985 estimate

121,000
36,300
32,100
6,600
18,700
154,000
15,700
81,700
54,400
21,600
22,900
68,100
124,300
12,900

111,853
32,437
31,263
5,639
17,920
141,548
14,609
73,220
53,876
19,184
23,545
60,340
115,829
11,450

111,000
35,400
30,600
5,500
16,700
142,000
14,000
74,900
56,900
19,400
23,900
62,600
127,100
10,900

108,900
33,100
28,900
5,300
15,800
137,900
12,700
73,500
58,200
19,300
24,400
62,500
126,300
10,400

106,900
33,800
28,900
5,200
15,800
134,000
12,700
73,500
58,800
18,800
24,400
62,500
126,000
10,400

22,700
209,600

22,430
215,321

22,000
217,100

22,000
219,000

22,000
220,600

5,600
32,800
3,400
6,600
9,100
4,700
44,700
7,600
45,000
1,000

5,385
30,168
3,468
5,996
8,708
4,340
41,230
7,805
40,118

5,400
29,600
3,400
5,900
8,900
4,300
40,600
8,100
40,400

5,300
29,100
3,400
5,800
8,900
4,100
39,600
8,500
40,100

5,100
29,100
3,300
5,800
8,900
3,900
40,000
8,500
39,900

-15,000

1,163,100
937,700

1,097,682
978,081

1,101,600
968,800

1,088,000
989,900

1,083,800
992,000

2,100,800

2,075,763

2,070,400

2,077,900

2,075,800

'Excludes developmental positions under the Worker-Trainee Opportunity Program (WTOP) as well as certain statutory exemptions.
2 As contained in the revised 1982 Budget, transmitted to the Congress in March 1981.
3 Data are estimated for portions of Defense-civil functions as well as for the Federal Reserve System, Board of Governors, the International
Trade Commission, and the Merit Systems Protection Board.
4 Section 904 of the 1982 Defense Authorization Act (Public Law 97-86) exempts the Department of Defense from full-time equivalent
employment controls. Data shown are estimated.

SIGNIFICANT CHANGES IN FULL-TIME EQUIVALENT EMPLOYMENT

Many agencies show decreases, in table 1-1, from the 1983 estimates to the corresponding estimates for 1984.
• Department of Health and Human Services (—4,100).—Employment will be reduced by eliminating excessive overhead
staff; continuing the community services closeout; decreasing
regulatory requirements for health and social services programs; and deregulating categorical grants and consolidating
selected grant programs.

SPECIAL ANALYSIS F

F- 55

• Department of Commerce (—2,280).—Decreases will result
from completion of the Economic and Agricultural Censuses,
the termination of the Economic Development Administration, and the phasedown or elimination of the National Oceanic and Atmospheric Administration marine and atmospheric related services and research activities. A planned increase
of about 100 workyears is intended to reduce backlogs in the
Patent and Trademark Office.
• Department of Agriculture (—2,050).—Decreases amounting
to nearly 1,900 workyears are planned for the Forest Service
for program reductions and expected increases in management productivity. Most of the balance of the decrease occurs
in the Soil Conservation Service and Food and Nutrition Service with a partial offset by a small increase for the Farmers
Home Administration to meet debt management requirements.
• Department of Defense—Civil Functions (—1,629).—Reductions are due to declining program levels resulting in cutbacks in real estate and construction management personnel
and the completion of 20-25 projects per year. Private sector
dredging capability is increasing, with correspondingly less
need for dredges operated by Federal employees.
• Department of the Interior ( — 1,338).—Decreases will occur
due to Bureau of Indian Affairs school closures and transfers,
streamlined research and regulatory processes, improved
operational efficiencies, and less labor intensive methods of
natural resource management. These reductions are partially
offset by increased staffing to operate and maintain the national park system.
• The Department of Housing and Urban Development
(—1,247).—This decrease results from both programmatic and
administrative changes. In the housing area, modernization
and operating subsidies have been combined with a simplified
formula mechanism. Both Section 8 and public housing construction have been largely eliminated. In the community
development area, programs have been combined and simplified, with greater devolution of program administration and
decision-making to States and localities. Federal Housing Administration employment will decrease due to privatization of
loan processing. Finally, a greater reliance on ADP operations
and contractual services and a streamlining of administrative
functions both at headquarters and in the field will reduce
administrative employment.
• Tennessee Valley Authority ( — 1,052).—A slowdown in the
growth of electricity demand has forced TVA to cancel and/or
defer construction on some nuclear generating units. This will

H-10

THE BUDGET FOR FISCAL YEAR 1984

lead to reductions of on-site construction workers and associated personnel such as engineers and administrative staff.
• Energy Activities (—884).—Employment will continue to decline for energy overhead, regulatory activities and near-term
research and development activities. This decline is consistent
with changes made in recent years to carry out the administration's emphasis on the importance of private sector initiatives to provide for our energy needs.
• The Department of the Treasury (—737).—Decreases will
occur as a result of streamlining various departmental functions. These will be partially offset by increases in the Internal Revenue Service to administer provisions of the Tax
Equity and Fiscal Responsibility Act.
• General Services Administration (—564).—Decreases will
occur agency-wide due to continuing management efficiencies.
• Environmental Protection Agency (—477).—Reductions reflect
increased operating efficiencies, accelerated delegation of environmental programs to states and completed regulatory activities. High priority enforcement and regulatory programs
are fully supported.
Some agencies show increases.
• Department of Defense—Military Functions (21,101).—Increases are related to the nation's commitment to maintain
an adequate, responsive defense posture. These increases are
in readiness-related areas such as maintenance support,
supply inventory control, medical care, weapons modernization programs, military construction, and sealift activities.
The estimates shown in table 1-1 include amounts for planned
contracting out of certain activities. If these plans are realized, the estimates would decrease by about 2,900 in 1983,
14,000 in 1984, and 26,500 in 1985.
• Veterans Administration (1,894).—Additional staff will be
used at new and modernized medical facilities, including six
outpatient clinics, two nursing homes, and five replacement
hospitals.
• United States Information Agency (463).—This increase will
improve the program quality of the Voice of America (VOA),
begin a major expansion and improvement of VOA broadcast
facilities, and, through a variety of activities, demonstrate to
people abroad the vitality and benefits of democracy.
• Department of State (418).—Additional staffing is needed for
growing consular, passport, and administrative services workloads; enhanced worldwide communications and information
systems; and additional reporting and analyses needs.

SPECIAL ANALYSIS F

F- 55

END-OF-YEAR EMPLOYMENT LEVELS

Another way to look at Federal employment is on the basis of
the number of employees on the rolls at the end of a fiscal year.
Total Federal civilian employment in the executive branch was
2,108,100 at the end of 1982, excluding 659,600 Postal Service employees. At the end of January 1981, when this administration took
office, nondefense total employment stood at 1,232,181, and on September 30, 1982, the corresponding number was 1,140,903; a decrease of 91,278 employees.
Table 1-2 shows Government-wide Federal civilian employment
as of the end of fiscal years 1980, 1981, and 1982. Postal Service
employment (including the Postal Rate Commission) is also shown,
together with data for the legislative and judicial branches and for
active duty military personnel.
Table 1-2. TOTAL FEDERAL EMPLOYMENT END-OF-YEAR
Description

September 30
1980 actual

1981 actual

1982 actual

1,866,773
266,963
(916,293)
(1,217,443)

1,851,045
264,949
(939,942)
(1,176,052)

1,833,687
252,026
(944,810)
(1,140,903)

2,133,736

2,115,994

2,085,713

535,050
125,035

543,504
119,664

546,019
113,602

660,085

663,168

659,621

27,535

26,963

22,400

2,821,356

2,806,125

2,767,734

2,050,127
39,375

2,082,183
39,819

2,108,612
38,248

Subtotal, military personnel

2,089,502

2,122,002

2,146,860

Total, executive branch employment

4,910,858

4,928,127

4,914,594

32,779
21,998

32,844
21,423

32,898
21,885

54,777

54,267

54,783

4,965,635

4,982,394

4,969,377

Civilian employment in the executive branch:
Full-time permanent
Other than full-time permanent
DOD-Military functions (total employment)
Non-DOD (total employment)
Subtotal
Postal Service:
Full-time permanent
Other than full-time permanent
Subtotal
Special categories 1
Subtotal, executive branch civilian employment
duty: 2

Military personnel on active
Department of Defense
Department of Transportation (Coast Guard)

personnel:3

Legislative and judicial
Full-time permanent
Other than full-time permanent

Subtotal, legislative and judicial branches
Grand total

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 reserve components.
3 Excludes members and officers of Congress.
1

H-10

THE BUDGET FOR FISCAL YEAR 1984
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 consists primarily of the Government's share (as employer) of health insurance, term life insurance,
and Federal retirement and old-age survivors' disability and health
insurance.
Also included are personnel costs for uniform allowances (when
paid in cash), cost-of-living and overseas quarters allowances, and,
in the case of military personnel, reenlistment bonuses.
This budget assumes no October 1983 pay increase for Federal
white and blue collar workers and military personnel. The final
decision on the level of the fiscal year 1984 pay increase will be
made in the late summer, as the law provides, after Presidential
review of the recommendations of the President's Pay Agent, the
Federal Employees Pay Council and the Advisory Committee on
Federal Pay, and after a review of the economic conditions prevailing then.
Legislation is proposed in the 1984 Budget to reform certain
aspects of the civil service retirement system:
• Annuity adjustment for retirement prior to age 65.—To be
phased in over a period of 10 years; employees age 55 or over
at enactment would not be affected.
• Cost-of-living adjustments (COLA).—The cost-of-living adjustment would be eliminated for 1984. Further, current law
limits COLA adjustments to one half of the CPI (for retirees
under age 62) through 1985. This change would be made
permanent.
• Increased employee deductions for retirement.—Employee retirement deductions would increase from 7 to 9% in 1984, and
to 11% in 1985.
• Increased employer contributions for retirement.—Employer
contributions for retirement would also increase to match the
increase in employee deductions described above. This would
include the U.S. Postal Service and the District of Columbia
government.
• Annuity calculations to be based on the highest 5 years of
earnings.—The current calculation base is the highest 3 years;
employees within 3 years of retirement eligibility would not
be affected.
• Modify replacement rates.—Currently, a formula is used that
determines the percentage of salary that is replaced by retirement benefits. For example, the replacement rate is now

SPECIAL ANALYSIS F

F- 55

56.25% of the final 3 years' salary for 30 years of service. This
proposal would alter this formula to reduce the replacement
rate, if necessary, in conjunction with other proposals, to
reduce the normal cost of the system to 22% of payroll and
enable employee contributions to be limited to 11% of salary.
Additional details concerning these proposals may be found in
Part 5 of the 1984 Budget of the United States.
As indicated in table 1-3, obligations for civilian personnel compensation and benefits in 1984 are projected to reach $65 billion,
excluding the Postal Service.
Table 1-3. PERSONNEL COMPENSATION AND BENEFITS
[In millions of dollars]
Description

1982 actual

1983 estimate

1984 estimate

Civilian personnel costs:

Executive branch: 1
Direct compensation
Personnel benefits 2
DOD-Military functions, civilian personnel:
Direct compensation
Personnel benefits

49,624
9,265

52,417
10,428

53,094
10,790

(21,846)
(2,281)

(22,720)
(2,659)

(23,299)
(3,277)

58,889

62,845

62,935

912
91

990
111

1,027
118

1,003

1,101

1,145

59,892

63,946

65,029

37,020
3,007

39,311
3,238

40,712
3,591

Total, military pay costs

40,027

42,549

44,303

Grand total, personnel costs

99,919

106,495

109,332

Subtotal
judiciary:3

Legislative and
Direct compensation
Personnel benefits 3
Subtotal

Total, civilian personnel costs
Military personnel costs:5

Direct compensation
Personnel benefits 6

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, retirement, and effective in calendar year 1983
Medicare Hospital Insurance, this amount includes transfers from general revenues to amortize the effects of general pay increases on Federal
retirement systems, for employees in the legislative and judicial branches as well as employees (nonpostal) in the executive branch. The transfers
amounted to $3,600 million in 1982 and are estimated to be $3,941 million in 1983 and $3,908 million in 1984.
3 Excludes members and officers of Congress.
4 Excludes reserve components.
5 Excludes payments to current military retirees which amounted to $14,941 million in 1982 and are estimated to be $16,155 million in 1983
and $16,806 million in 1984.
1

H-10

THE BUDGET FOR FISCAL Y E A R 1984
GOVERNMENT EMPLOYMENT AND LABOR FORCE COMPARISONS

As shown on the following chart, Government employment—
Federal, State, and local—will comprise about 15.9% of the total
employed civilian labor force in 1982.
Within this segment, Federal civilian employment in the executive branch accounts for 2.78% of the total employed civilian labor
force in 1982, down from a high of 3.82% 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 13.2% in 1982.

Years

* Executive Branch

SPECIAL A N A L Y S I S F

F- 55

GOVERNMENT EMPLOYMENT AND POPULATION COMPARISONS

As illustrated in the following chart and in table 1-4, the Federal
share of total government employment has declined significantly
over the last three decades, from 38.4% in 1952 to an estimated
17.4% in 1982. Employment for all government had been rising
steadily due to increases in State and local government employment, but began declining in 1981.

The ratio of Federal civilian employment to the total U.S. population is expected to be 11.9 per thousand in 1982, the lowest this
ratio has been during the thirty year span shown.

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table 1-4. GOVERNMENT EMPLOYMENT AND POPULATION, 1 9 5 2 - 8 2
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
1981 2
1982

Federal
executive
branch 1
(thousands)

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
2,787
2,768

Population

State and
local
governments
(thousands)

All
governmental
units
(thousands)

Federal as
percent of all
governmental
units

Total United
States
(thousands)

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
13,359
13,557
13,281
13,123

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
16,182
16,378
16,068
15,891

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
17.4
17.2
17.4
17.4

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
205,052
207,661
209,896
211,909
213,854
215,973
218,035
220,904
223,278
225,779
6 228,298
6 230,479
6 232,634

Federal
employment
per 1,000
population

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
13.4
13.1
13.3
13.2
13.0
12.6
12.6
12.5
12.4
12.1
11.9

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. 1, 1969, 42,000 civilian technicians of the Army and Air Force National Guard converted by law from State to Federal employment
status. They are included in the Federal employment figures in this table starting with 1969.
5 Data for 1952 through 1976 are as of June 30; for 1977 through 1982, as of Sept. 30.
6 U.S.
population data for 1980-1982 are the latest available from the Census Bureau.

PART 3

SELECTED
FEDERAL PROGRAMS

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.
3-2

SPECIAL ANALYSIS H
CIVIL RIGHTS ACTIVITIES
TO GIVE SUBSTANCE TO AMERICA'S COMMITMENT. . .
"The battle against discrimination still goes on, and much remains to be
done. But in a single generation, an entire Nation recommitted itself to the
cause of equal rights and used the full force of law to ban once and for all
racial bias in public education, in hiring, and in the voting booth. Nowhere
does history offer a parallel to this vast undertaking . . —PRESIDENT REAGAN,
March 23, 1982

Coverage and scope.—Equality of individual rights and opportunity are central to the American idea. Our national commitment to
assuring that these rights and opportunities apply equally to all
Americans has come to be embodied in approximately 130 Federal
statutes, in addition to the guarantees set forth in the Constitution
itself. These provisions address such basic areas as employment,
housing, education, access to credit and public accommodations; as
well as voting, jury service and other rights and responsibilities of
citizenship. They prohibit discrimination based on race, color, religion, sex, national origin, age, or handicap. The Federal involvement in implementing these statutes is broad: each of the 107
separate Federal agencies is responsible for assuring nondiscrimination in its own activities, and 37 agencies have some civil rights
enforcement responsibilities.
Since the first OMB Civil Rights Special Analysis was published
in 1971, Federal expenditures for civil rights programs have grown
apace.1 While a reflection of America's commitment to civil rights,
this growth was in past years too frequently regarded as the exclusive measure of its implementation. By 1981, it had become clear
that:
—Among the 130 Federal civil rights statutes, there was substantial duplication. This multiplied the number of agencies
1 There have been corresponding refinements in the data included in Special Analyses. In 1981, OMB
completed a major revision of the requirements for agency reporting of civil rights data which eliminated the
practice of reporting, as civil rights outlays, expenditures for such purposes as general management costs not
directly related to implementing civil rights requirements, and agency training and upward mobility costs not
attributable to the Federal Equal Opportunity Recruitment Program or other equal employment opportunity
requirements. The reporting schedule was also modified to assure that data for the previous year included
actual data for all four quarters of the fiscal year. While the elimination of extraneous expenditures has
increased the accuracy with which successive Special Analysis outlay figures depict the Federal Government's
commitment of resources to civil rights, these refinements reduced the comparability of the published figures
(e.g., the Defense Department reported that the deletion of general upward mobility expenditures alone reduced
its total reported civil rights expenditures for 1981 by $23.2 million dollars). To correct this problem, previous
year figures used in this Special Analysis reflect, insofar as possible, only expenditures for those activities
considered in this Special Analysis.

J-1

H-10

THE BUDGET FOR FISCAL YEAR 1984

charged with eliminating discrimination, but diminished their
collective effectiveness in doing so as resources were squandered in fruitless competition for jurisdiction.
—As the result of neglect or misguided paternalism, "civil
rights" activities in too many agencies became a synonym for
mismanagement and inefficiency not tolerated in line functions. And also for staff bickering: At times, an agency's highest incidence of discrimination complaints could be found in its
civil rights office.
—Several enforcement efforts were structurally flawed: their regulations were confusing and difficult to comply with; they continued to devote resources to clearly ineffectual procedures or
to problems long since corrected.2
—Some civil rights programs had strayed from the very principles they were intended to secure, subordinating their difficult
mandate of assuring nondiscrimination to the administrative
expedience of quotas. As these expedients were frequently as
poorly executed as they were conceived, they doubly injured
their intended beneficiaries: by creating the appearance of
preference, while at the same time denying essential protections against discrimination.
This administration has devoted serious attention both to the
management of these programs and to our examination of their
moral underpinnings. In all Federal civil rights programs, such
attention has reasserted the fundamental principle of equal treatment for all individuals, without regard to their race, sex, color,
religion, national origin, or condition of disability. For several, it
has focused overdue attention on longstanding management problems.
The analysis which follows reflects that attention and its seriousness: implicitly, in its emphasis on the improvements which have
already been secured; and explicitly in its assessment of the problems which remain to be overcome.
Perspectives on Federal civil rights outlays
In 1960, the Federal Government spent $1.7 million for civil rights
purposes. These expenditures were concentrated in the U.S. Commission on Civil Rights and the Departments of Justice and Labor.
The first Civil Rights Special Analysis published by OMB reported
that expenditures for such purposes had grown to $189.7 million in
1971. In 1980, Federal civil rights expenditures reached $512.6 million. Agencies spent $567.6 million on civil rights activities in 1982
and, given enactment of the President's proposed budget, agencies
will spend an estimated $634.1 million on these activities in 1984.
2 A more detailed discussion of these structural management, and regulatory problems can be found on pp. 1 9, Special Analysis J: Civil Rights Activities, Special Analyses, Budget of the United States Government, 1983.

SPECIAL ANALYSIS F

F- 55

Table J - 1 . FEDERAL CIVIL RIGHTS OUTLAYS*, 1980-1984
(In millions of dollars)

1980
1981
1982
1983
1984

(actual)
(actual)
(actual)
(estimated)
(proposed).

512.6
543.4
567.6
607.2
634.1

*Total outlays reported by Federal agencies for activities reflected in current reporting base. One of the agencies which reported in 1980 (the
Community Services Administration) has since been abolished. Due to improved reporting, several smaller Federal entities which did not report in
1980 have reported in subsequent years. Equivalent figures covering only agencies reporting in each of the years covered by this table are: 1980,
512.1; 1981, 541.6; 1982, 566.8; 1983, 606.3; 1984, 633.2.

As emphasized in the discussion above, however, the increased
expenditures effected and proposed by this Administration are not
a mere reflection of a longstanding trend:
—Not simply in their magnitude but in the context of the overall
budget itself, they represent a substantial increase in the priority accorded civil rights. Such increases are striking and indicative of real support in the current budgetary context, in contrast to increases in past years when all discretionary expenditures were rising.
—The increases proposed by the President represent realistic
commitments, not inflated promises. In 1982, actual civil rights
outlays by Federal agencies substantially exceeded estimates.3
This represents a sharp departure from past, grossly inflated
projections.
—This Administration is committed not simply to spending
money on civil rights, but to securing them. Civil rights programs have been judged on their merits, and not treated as the
budgetary equivalents of "sacred cows" to be increased or
maintained on a quota basis (only to be ignored during the
remainder of the year). As this analysis will demonstrate, expenditures for some civil rights4 programs have been increased,
some decreased, and many maintained at current levels. In
instances where additional savings at no loss in protections
remain to be achieved, this analysis does not hesitate to identify them.

3 The
agencies represented in the FY 1983 Special Analysis estimated that they would spend a total of $562.7
million on civil rights activities during 1982 and actually spent over $4 million more, a total of $566.8 million
(the estimate figure reflects corrections in figures for DOD and HUD while the actual expenditure figure
excludes agencies who reported this year but not last year; without these corrections, the difference would be
$40 million). Most previous estimates have substantially exceeded actual expenditures. For example, the equivalent estimate for 1979 was $555.6 million, but acutal reported expenditures were $469.1 million—over $86
million less.
4 Includes Federal efforts to assure: protection of basic constitutional and civil rights, nondiscrimination in
federally assisted programs and activities, equal employment opportunity, fair housing, equal credit; as well as
civil rights related research activities.

H-10

T H E BUDGET FOR FISCAL Y E A R

1984

T a b l e J - 2 — O U T L A Y S FOR P R I N C I P A L C I V I L R I G H T S E N F O R C E M E N T A G E N C I E S
(In millions of dollars)
Actual
1980
Civil R i g h t s D i v i s i o n ( D O J )
Equal E m p l o y m e n t O p p o r t u n i t y C o m m i s s i o n
O f f i c e o f Fair H o u s i n g a n d Equal O p p o r t u n i t y ( H U D )

1981

1982

Estimate
1983

Proposed
1984

25.6

14.5

16.7

17.2

18.6

130.8

134.2

137.6

147

153

18.4

21.7

24.6

34.1

30.4

O f f i c e f o r Civil R i g h t s :
Health a n d H u m a n Services

19.3

19.1

19.6

Education

43.3

45.3

44.3

44.6

Total*

58.8

62.6

64.4

63.9

64.2

50.6

48.1

42.5

43.8

47.4

O f f i c e o f Federal Contract C o m p l i a n c e P r o g r a m s ( D O L )

* These offices were one until 1980, and reliable data for that year is available only on a total basis. Education activities will be proposed for
reassignment to appropriate executive departments and agencies pursuant to reorganization legislation to be submitted at a later date.

PROTECTING THE CONSTITUTIONAL RIGHTS OF ALL
CITIZENS
. . T h e record s h o w s t h a t w e ' v e b e e n firm in protecting civil liberties ever
since w e entered office 2 0 m o n t h s ago . . .

In 1888, Frederick D o u g l a s s

ex-

pressed [our] c o m m i t m e n t [:] ' A g o v e r n m e n t t h a t can give liberty in its Constitution o u g h t to h a v e power to protect liberty in its administration'."—PRESIDENT REAGAN, S e p t e m b e r 15, 1982

The Constitution and laws of the United States guarantee to
each individual the right to security in one's person and property,
and to the free exercise of the fundamental rights of citizenship.
These guarantees, which apply irrespective of an individual's religion, national origin, race, color, or sex are the most important of
civil rights, for they are basic to all others. During 1982, the
Administration continued to restore emphasis to this most fundamental area of Federal civil rights responsibility.
The Department of Justice is primarily responsible for assuring
these protections. In addition to the guarantees embodied in the
Constitution itself, the Department enforces:
—Title 18 of the United States Code, which prohibits deprivations of rights and privileges guaranteed under the Constitution of the laws of the United States, including 18 U.S.C. 241
(conspiracy against the rights of citizens), 18 U.S.C. 242 (deprivation of rights under color of law), 18 U.S.C. 245 (interference
with federally protected rights), 18 U.S.C. 1581 (prohibition
against peonage), 18 U.S.C. 1584 (prohibition against involuntary servitude).
—42 U.S.C. 3631, which prohibits interference with housing
rights.
—30 other civil rights criminal statutes (in addition to those
cited above).
—The Voting Rights Act of 1965, as amended (42 U.S.C. 1973 et
seq.) and the Overseas Citizens Voting Rights Act (42 U.S.C.
1973 dd) which guarantees all qualified citizens the right to

SPECIAL ANALYSIS F

F- 55

register and vote without discrimination on account of race,
color, membership in a language minority group, age, or absence from legal residence).
—The Civil Rights of Institutionalized Persons Act of 1980 (42
U.S.C. 1997), which prohibits deprivations of the constitutional
rights of institutionalized persons.
During 1982, the Department of Justice's Federal Bureau of Investigation completed 7,983 investigations involving alleged violations of these fundamental rights, and the Bureau expects to perform in excess of 10,000 such investigations per year through 1984.
Other components of the Department of Justice completed 3,600
investigations of such violations in 1982, and the Department expects this number to increase to 3,800 in 1984.
The Bureau devoted $8.1 million and the equivalent of 189 full
time professional personnel (FTE's) to these investigations in 1982.
The President's request for 1984 provides for outlays of $11.5 million for the Bureau's efforts to assure these essential protections.
The Department's attorneys were equally active in enforcing
these guarantees in 1982. The Criminal Section of the Department's Civil Rights Division is responsible for prosecuting criminal
civil rights violations. During 1982, the section reviewed approximately 3,200 matters which had been investigated by the Federal
Bureau of Investigation and approximately 7,100 other inquiries
and complaints, and presented the results of 81 investigations to
Federal grand juries. As a result, fifty indictments were returned
and six informations were filed charging a total of 98 defendants.
Trials were conducted in 43 cases, resulting in the conviction of 23
defendants. An additional 25 defendants tendered guilty pleas. U.S.
Attorneys throughout the United States also prosecute such violations, and during 1982, the Department as a whole initiated prosecutions of 193 individuals for such violations, obtained 76 guilty
pleas and 27 convictions.
Also during 1982, the Criminal Section was particularly active in
assuring that civil rights were not abused by government officials
sworn to protect them. Forty-three of the 56 cases filed involved
possible violations of 18 U.S.C. 242 (deprivation of rights under
color of law) or Section 241 (conspiracy against the rights of citizens). Law enforcement officials were defendants in 34 of the 43
cases tried. Examples of cases successfully prosecuted by the Section in 1982 were those involving:
—a Hildago, Texas, police officer who arranged for the kidnapping of a U.S. citizen into Mexico;
—two former police officers and a civilian in Tyler, Texas, involved in a conspiracy to fabricate evidence and testimony in
State proceedings;

380-700

0 -

83 -

20 QL :

H-10

THE BUDGET FOR FISCAL YEAR 1984

—civil rights violations stemming from an incident where two
inmates in Louisiana died after being locked up for 15 hours in
a 32" x 70" x 78" metal "hot box."
—the sexual abuse of two female Mexican aliens by two border
patrol officers.
The section also secured the indictment of 17 persons alleged to
have held individuals in involuntary servitude or peonage, a dramatic increase over previous years:
Table J - 3 . INDIVIDUALS INDICTED UNDER STATUTES PROHIBITING PEONAGE AND INVOLUNTARY
SERVITUDE

Fiscal year—
198 0
198 1
198 2

5
1
17

Speaking in 1981 the President served notice on persons and
terrorist groups bent on violating the civil rights of individuals
that " . . . this country, because of what it stands for, will not stand
for your conduct. My administration will vigorously investigate and
prosecute those who, by violence or intimidation, would attempt to
deny Americans their constitutional rights". During 1982, the Civil
Rights Division continued to be especially active in redeeming the
President's pledge. The eight cases it brought against fourteen
defendants, involved a wide range of violence and intimidation:
including crossburning, vandalism, firebombings, and physical attacks. Through 1984, the Civil Rights Division will increase the
impact of the resources it devotes to criminal civil rights prosecutions by engaging in more joint prosecutions with local U.S. Attorneys. This combination of the former's specialized expertise and
the latter's familiarity with local court practices will deliver, with
even greater force, a national response to those who would ignore
the President's warning.
The Department's Community Relations Service was involved in
efforts to defuse racial, religious, and ethnic tensions before they
give rise to such denials of rights. The Service's activities during
1982, in cooperation with State and local officials, addressed the
entire spectrum of such unrest, including: racially motivated acts
with the potential for denying equal housing opportunity in California or free access to Federal parks in Massachusetts; tensions
involving Haitian or Indo-Chinese refugees in Florida, Puerto Rico,
Texas, and Minnesota; the activities of the Ku Klux Klan and
other hate groups in West Virginia and Connecticut.
The Civil Rights of Institutionalized Persons Act of 1980 was
designed to provide the Federal Government standing to sue in

SPECIAL ANALYSIS F

F- 55

cases of severe deprivations of the rights of institutionalized individuals. The Civil Rights Division's Special Litigation Section is
primarily responsible for the Justice's enforcement of this Act.
During 1982, the Section completed 21 investigations of alleged
violations of the Act. Six trials in which the Section participated
were completed, and all resulted in decisions sustaining the Government's position. In all, the Section obtained 13 consent decrees
and court orders enjoining violations of the Act, including: an order
in Puerto Rico prosecuting practices of confining mentally handicapped or physically ill inmates in isolation and subjecting juveniles to physical abuse; and an order requiring that female inmates
in Kentucky prisons be accorded the same treatment as male inmates.
The President has frequently described the right to vote as the
"crown jewel of our liberties". To assure that statutory protections
of this right are maintained and strengthened, the President signed
the Voting Rights Amendments of 1982 into law on June 29, 1982.
This legislation incorporated the longest extension of the Act's
provisions since its passage in 1965, as well as new language considerably expanding the protections afforded by the Act. As a
result of the Administration's efforts, the Act did not include language, included in earlier versions of the legislation, which could
have been interpreted to require proportional representation based
on race or national origin.
In addition, the Department of Justice was particularly active in
enforcing the Voting Rights Act and similar statutes during 1982.
The Civil Rights Division's Voting Rights Section initiated participation in 13 cases. Six concerned whether statewide redisricting
plans denied or abridged the right of minorities to vote in California, Georgia, Mississippi, New York, and Texas; one involved the
redistricting for the city council in Chicago; two sought to enforce
objections under Section 5 in local jurisdictions; two opposed
changes to at-large elections in South Carolina counties; and, two
involved attempts by individual counties to terminate the coverage
under the special provisions of the Voting Rights Act. Over 2,800
submissions of more than 13,300 voting changes were received
under Section 5 of the Act, more than any previous year of the
Act's existence, and 41 objections were made to submitted changes
including 15 objections to 24 statewide redisticting plans for more
than one legislative body. A total of 799 Federal observers were
assigned to five elections in three states, including the largest
number of observers ever assigned to a single election in the State
of Alabama. In addition, 139 persons were listed (registered) by
Federal examiners who were appointed to two counties in Georgia,
the first time since 1975 that Federal examiners have been used to
register voters under Section 7 of the Act. The Section also distrib-

H-10

THE BUDGET FOR FISCAL YEAR 1984

uted 2,500 copies of publications designed to assist local officials
and citizens in their voluntary efforts to assure compliance with
the Voting Rights Act.
The President's Budget provides for a substantial increase in
resources devoted to the task of assuring that the Presidential
election of 1984 is conducted in full compliance with the Voting
Rights Act and other Federal guarantees of the right to vote:
Table J - 4 . FEDERAL RESOURCES DEVOTED TO VOTING RIGHTS ENFORCEMENT
Actual

Department of Justice-.
Outlays (millions)
Professional FTE's
Office of Personnel Management:
Outlays (millions)
Professional FTE's

Estimate
1983

Proposed
1984

1981

1982

2.48
44

2.52
42

2.66
45

3.18
61

.3
10.2

1.0
20

1.1
26

In addition to the Department of Justice, the Office of Personnel
Management (OPM) provides observers to monitor compliance with
the Voting Rights Act. During 1982, OPM assigned 937 observers to
2 elections. During 1984, OPM expects to assign 1,350 observers to
10 elections in furtherance of the President's commitment to
assure that the "crown jewel of America's liberties" is not withheld
from the grasp of any American on the basis of race, color, or
membership in a language minority group.
TO ROOT OUT DISCRIMINATION BY GOVERNMENT
" M y administration will root out any case of government discrimination . . .
we will not retreat on the Nation's commitment to equal treatment of all
citizens."—PRESIDENT REAGAN, J u n e 29, 1 9 8 1

If government is to "assure liberty in its administration", it is
fundamental that government itself must not discriminate either
in its mandates or their execution. During 1982, the Administration continued efforts initiated in 1981 to eliminate invidious discrimination based on sex from the statutes and regulations of the
Federal Government itself, and to assist States in their efforts to
eliminate such provisions from their own mandates. It also continued efforts to identify and eliminate impediments to assuring nondiscrimination in the provision of federally assisted services and
benefits.
Eliminating invidious sex discrimination from Government mandates.-^ Aware that discrimination may too frequently be traced to
the mandates of Government itself the President moved swiftly to
address the problem. Pursuant to these efforts:
—Executive Order 12336, establishing the Task Force on Legal
Equity for Women, was issued. The Task Force is responsible

SPECIAL ANALYSIS F

F- 55

for identifying, in the regulations of every Federal agency,
provisions that mandate invidious discrimination based on sex.
—The Department of Justice reviewed Federal statutes to identify similar provisions.
—The Fifty States Project was initiated. This is a cooperative
effort to help every State and territory identify and eliminate
statutory provisions that discriminate against women.
—A Coordinating Council on Women was organized in the White
House to assure that Federal actions having a particular
impact on women are properly addressed by the administration.
Although the task is large and multifaceted, the first fruits of
this effort are already apparent. Omnibus legislation was introduced in the Ninety-seventh Congress to eliminate sexually discriminatory provisions identified by the Department of Justice
from the United States Code.
Nondiscrimination in federally assisted programs.—Since the
Federal Government is supported by taxes levied on citizens without discrimination, it is fundamental that activities it funds must
be conducted without discrimination. This principle is embodied in
a substantial body of legislation including in addition to numerous
program-specific statutory provisions prohibiting discrimination:
—Title VI of the Civil Rights Act of 1964 prohibits discrimination
in all federally assisted programs and activities based on race,
color, or national origin.
—Title IX of the Education Amendments of 1972 prohibits discrimination based on sex in federally assisted educational programs and activities.
—The Age Discrimination Act of 1975 prohibits discrimination
based on age in all federally assisted programs and activities.
—Section 504 of the Rehabilitation Act of 1973 prohibits discrimination on the basis of handicap in all federally assisted programs and activities.
As the Administration has previously noted,5 several problems
have diminished the effectiveness of efforts to assure that programs and activities assisted with Federal funds are open to all
without discrimination. Some are inherent in the piecemeal
manner in which the statutes were enacted:
—The absence of crosscutting provisions prohibiting federally
assisted programs and activities from discriminating based on
religion.
—A similar absence of protection against discrimination based
on sex, except in federally assisted education activities.

5 Pp. 10-15, Special Analysis J: Civil Rights Activities. Special Analyses, Budget of the United States Government, 1983.

H-10

THE BUDGET FOR FISCAL YEAR 1984

Others result primarily from the manner in which enforcement
of these protections has been organized and administered. The
frequency with which agency staffs have actually identified and
eliminated discrimination is disturbingly rare—largely because this
fundamental statutory mission has been subordinated to the pursuit of other agendas, or to agencies' self-interest in continuing to
provide assistance. Deficiencies in the way enforcement resources
have been allocated and applied have also played a substantial
role:
—The allocation of overall enforcement resources has frequently
failed to reflect the actual incidence of discrimination in the
various federally assisted programs.
—Largely as a consequence of this fundamental problem, agency
enforcement often emphasized technical trivia or focused on
areas such as equal employment which other agencies were
designated (and more qualified) to address; many recipients
were reviewed and investigated by several agencies while the
practices of others were never examined; and enforcement of
these statutes was frequently hampered by nonproductive reporting and other paperwork burdens.
To address the problem of lack of consistent protections against
discrimination based on religion or sex, the Administration proposed the inclusion of protections against discrimination on these
grounds in several titles of the Omnibus Budget Reconciliation Act
of 1981. As a result, for example, all of the Block Grants administered by the Department of Health and Human Services include
such prohibitions. In addition, the Administration has included
these protections in legislation that would implement Block Grants
in other areas. Congressional passage of these proposals would
extend basic protections against discrimination to many Americans.6
During 1982, the Administration also continued the more difficult task of restoring substance to the existing nondiscrimination
guarantees. When the "Infant Doe" case 7 made it apparent that an
untold number of infants with disabilities were being denied the
care and treatment necessary to sustain life, the President acted
quickly. Noting that "Our nation's commitment to equal protection
of the law will have little meaning if we deny such protection to
those who have not been blessed with the same physical and
6 As a matter of policy, the Administration has consistently moved to address such gaps in civil rights
protection through permanent legislation. This is because attempts to address them through reinterpretation of
Congressional mandates, be they administrative (e.g., with regard to tax exemptions for discriminatory institutions) or judicial (as some have urged the Administration to seek with regard to the coverage of title IX) are
never secure, as they may as easily be withdrawn through the same processes. The past tendency to avoid
legislative choices on civil rights issues (or, as in the case of employment quotas under title VII, to ignore
choices clearly made) has too frequently resulted in policies untempered by a full consideration of equally valid
concerns, or lacking the popular consensus required for success in a democratic society.
7 A highly publicized incident in which a child with disabilities born in Bloomington, Indiana died as the
result of the denial of life saving care.

SPECIAL ANALYSIS F

F- 55

mental gifts we too often take for granted", the President instructed the Attorney General and Secretary of Health and Human
Services (HHS) to take immediate steps to notify hospitals receiving Federal funds that Section 504's prohibitions against discrimination in the provision of services most definitely apply to those
services necessary to save and sustain lives. HHS's Office for Civil
Rights has adopted expedited complaint procedures to assure
timely and effective intervention in such cases, and is examining
hospitals' practices in this area during routine compliance reviews.
Also during 1982, the Department of Justice's Office of Justice
Assistance and Research (OJARS) initiated the first fund termination action to enforce section 504 in the history of that statute.
OJARS was ultimately able to negotiate a settlement of this
matter, which involved alleged discrimination on the basis of
handicap by a State Department of Corrections. The Administration also continued the sensitive process of reviewing the existing
Government-wide coordination regulations for section 504 to improve their consistency and to reflect recent Supreme Court decisions.8 This process has included extensive consultations with representatives of persons with disabilities, State and local governments and other recipients of Federal assistance.
Administrative enforcement of the other crosscutting provisions
similarly reflected the Administration's emphasis on returning to
the basics of nondiscrimination enforcement. The Department of
Agriculture, for example, concluded agreements designed to eliminate illegal segregation in the activities of two State Cooperative
Extension Services. This year, the Department is addressing allegations of similar illegal segregation in a third.
Substantial improvements were also effected in the largest of the
agency enforcement programs. The Department of Education's
Office for Civil Rights (OCR) undertook a wide range of reforms
designed to improve methods for allocating work and measuring
performance, reduce the amount of resources wasted on duplicative
or otherwise unnecessary paperwork, and eliminate unnecessary
levels of management review. The Office also moved to streamline
compliance procedures by implementing the Early . Complaint Resolution procedure. This procedure affords complainants and recipients an opportunity to resolve many complaints voluntarily before
costly investigations are initiated. This year, OCR will explore
ways in which the involvement of States in assuring compliance
with the nondiscrimination requirements it enforces can be en-

8 E.g., Davis v. Southeastern Community College (U2 U.S. 397 (1979)), in which the Court ruled that section
504 does not forbid the requirement of reasonable physical qualifications for admission to a program, and that
regulations under section 504 are unauthorized to the extent that they require modifications in a recipients
program beyond what is necessary to eliminate discrimination against an "otherwise qualified handicapped
individual". See also University of Texas v. Cameniseh (451 U.S. 390 (1981)).

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THE BUDGET FOR FISCAL YEAR 1984

Table J - 5 . OUTLAYS BY MAJOR ACTIVITY, ENFORCEMENT OF NONDISCRIMINATION IN FEDERALLY
ASSISTED SERVICES AND BENEFITS 1
[In millions of dollars]
Actual 1982

Activity:
Mediation
Complaint resolution
Preaward reviews
Compliance reviews and routine monitoring
Research,1 information dissemination, and technical assistance
Legal and administrative enforcement:
Department of Justice
All other agencies
Monitoring of consent decrees and compliance agreements:
Department of Justice
Department of Education
All other agencies
Policy development and implementation2
Interagency coordination:
Health and Human Services (Age Discrimination Act)....
Justice (all other statutes)

Estimated
1983

.02
30.9
4.3
19.1
8.5

.05
32.3
4.1
21.3
8.7

.58

.63
1.63

1.6

.24
1.56
.7
15.3
.09
2.2

.26
1.6
.6

16.8

.14
2.3

1 Includes expenditures of enforcement agencies only (research activities by the U.S. Commission on Civil Rights in this area are reported
separately). Outlays for equal employment activities under title VI and similar statutes, to the extent they are identifiable, are reported in the
section dealing with equal employment enforcement.
2 Includes expenditures for developing regulations and procedures, training program staff, internal program audit and evaluation activities, and
similar purposes.

hanced, identifying States with substantially equivalent laws and
the capacity to undertake civil rights compliance activities.9
As a result of these and other management improvements, the
Office reduced its workload of pending complaints by 27% and (in a
marked departure from past years) kept well ahead of its incoming
workload: during 1982, the Office for Civil Rights received 1,834
new complaints—and completed processing of 2,256. The Office also
made progress in eliminating backlog and "carryover" complaints
from past years: closing 1982 with 11 backlog and 69 carryover
complaints (compared with 25 and 113, respectively, at the end of
1981). In addition, the Office initiated 36% more compliance reviews, and completed 16% more, than during the previous year.
As discussed above, however, the most serious problems historically presented by this area of civil rights enforcement transcend
individual agencies. The Department of Justice, under Executive
Order 12250, is primarily10 responsible for addressing those crosscutting problems. The exceptional dispersal of responsibility in this
area (even when only the major crosscutting statutes coordinated
'Federal enforcement of title VI and similar requirements is one of the few major areas of civil rights
enforcement which does not currently use the capabilities of State and local agencies to assist in assuring
nondiscrimination. Such involvement has long been an essential feature of title VII enforcement, and the
Department of Housing and Urban Development has rapidly expanded the involvement of such agenices in
enforcing the Fair Housing Act. See below.
10 The Age Discrimination Act, for which coordination responsibility is assigned by statute to the Department
of Health and Human Services, is the only exception. Most enforcement of the Age Discrimination Act is
centralized. Under procedures funded by HHS, agenices forward all complaints under this Act to the Federal
Mediation and Conciliation Service, which resolves most of those complaints through mediation.

SPECIAL ANALYSIS

F- 55

by the Department of Justice are considered11 renders responsibility particularly difficult:
Table J - 6 . DISPERSION OF ENFORCEMENT AUTHORITY UNDER STATUTES REQUIRING
NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS
Number of
enforcement
agencies

Statute

Title VI, Civil Rights Act of 1964
Section 504, Rehabilitation Act of 1973
Title IX, Education Act Amendments of 1972

37
all
28

Both this dispersal, and the resources devoted to enforcing these
statutes, are expanding:
Table J - 7 . OUTLAYS AND PROFESSIONAL WORKYEARS FOR ENFORCEMENT AGENCIES,
NONDISCRIMINATION IN PROVISION OF FEDERALLY ASSISTED SERVICES AND BENEFITS
Actual
1982

1981

18
77

Agencies
Outlays (millions)

20
85.5

Estimate
1983

21
88.4

Proposed
1984

21
89.4

The Department of Justice has the difficult task of assuring that
these increases are not dissipated in procedures which are poorly
implemented or no longer serve a useful purpose. Traditional
preaward review procedures seem particularly ripe for reappraisal.
As noted below, in 1981 only about 2% of the preaward reviews
conducted by all agencies resulted in finding any deficiencies requiring correction before assistance could be awarded—and fewer
than % of 1% of these activities resulted in identifying and correcting any discriminatory practices. In 1982, which saw substantially
more preaward review activity, the percentage of noncompliance
findings of all kinds fell to 1.8%, and the percentage resulting in
correction of discriminatory practices to only % of 1%. That this
further deterioration was accompanied by a substantial increase in
reported preawards conducted exclusively through desk audits (reviews of written material submitted by applicants) suggests that
this is a particularly questionable use of resources.
Table J - 8 . PREAWARD REVIEWS AND RESULTS: NONDISCRIMINATION IN PROVISION OF FEDERALLY
ASSISTED SERVICES AND BENEFITS 1
Actual
1981

Agencies
Outlays (millions)

10
2.75

1982

12
4.3

Estimate

Proposed

1983

1984

13
4.1

13
4.7

" T h e Department of Justice also coordinates the enforcement of numerous program-specific statutes requiring nondiscrimination.

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THE BUDGET FOR FISCAL YEAR 1984

Table J - 8 . PREAWARD REVIEWS AND RESULTS: NONDISCRIMINATION IN PROVISION OF FEDERALLY
ASSISTED SERVICES AND BENEFITS '—Continued
Actual
1981

Professional FTE's
Total preawards completed
Onsite
Desk audit only
Compliance findings 1
Noncompliance findings 1
Total awards conditioned on corrective action
Noncompliance findings involving discrimination
Number of corrective action agreements resolving discrimination

Estimate
1982

76
15,953
6,150
9,803
13,980
332
322
56
54

74
30,795
4,124
26,671
30,238
557
547
69
61

1983

64
24,784
4,056
20,728
NA
NA
NA
NA
NA

1 Ability or inability of a potential recipient to comply with nondiscrimination requirements without additional action. Total numbers of findings
do not equal total reviews because some agencies use preawards only for targeting postaward activity.

Moreover, in 1981 all noncompliance findings of any kind were
made by only three of the 10 agencies conducting preaward reviews—and all discrimination findings by only two. Seven agencies
which reported conducting 14,613 preaward reviews (at a cost of
$1.8 million) found no deficiencies of any kind, and eight spent $2
million on preawards without a single one resulting in the correction of any discriminatory practices. While more agencies reported
that they identified deficiencies (mostly technical) during preaward
reviews during 1982, two agencies which reported that they had
conducted preaward reviews of all recipients of new assistance
(constituting 50% of preaward reviews reported by the Federal
Government as a whole) found no deficiencies of any kind—at a
cost of over half a million dollars and 14 professional FTE's. And
agencies that corrected no discrimination as a result of preawards
spend $1.2 million on that activity.
Postaward review procedures, or the manner in which they are
implemented, appear equally in need of reappraisal:
Table J - 9 . POSTAWARD REVIEWS AND RESULTS: NONDISCRIMINATION IN PROVISION OF FEDERALLY
ASSISTED SERVICES AND BENEFITS
Actual
1981

Agencies
Outlays (millions)
Professional FTE's
Total completed
Onsite
Desk audit only
Compliance findings
Noncompliance findings
Noncompliance findings involving discrimination
Number of corrective action agreements resolving discrimination

1.3
13.4
386
12,451
8,389
4,062
12,076
375
196
134

1982

14
17.6
422
1 27,355
14,867
1 12,488
26,856
499
313
311

Estimate

Proposed

1983

1984

17
19.5
435
14,658
12,976
1,682
NA
NA
NA
NA

16
20.3
434
14,266
12,605
1,661
NA
NA
NA
NA

1 12,310 of these reviews were reported by the Small Business Administration (SBA), which attributed the extraordinarily large number to the
completion of work completed in previous years. 11,738 of the reviews reported were desk audits based on a reporting requirement which has
since been disapproved by OMB. As a result, the number of desk audits will decrease in 1983 and 1984 to 1,000—but the number of onsite
reviews will increase from 572 in 1982 to 800 in each year. Of the reviews SBA reports it completed in 1982 (at a cost of $1.4 million), none
resulted in finding noncompliance of any kind.

SPECIAL ANALYSIS F

F- 55

Even when the problematic SBA desk audits are subtracted, the
rate at which even routine reviews resulted in the correction of
illegal discrimination was a disappointing two percent.
While the thesis that administratively targeted reviews are more
likely to identify and resolve discrimination than complaint investigations has become part of the conventional wisdom 12 in civil
rights enforcement, this would not appear to be the case in this
area:
Table J - 1 0 . INVESTIGATIONS COMPLETED AND RESULTS, NONDISCRIMINATION IN FEDERALLY
ASSISTED SERVICES AND BENEFITS
(1982 actual)

Total completed
Compliance findings
Noncompliance findings
Number resolved through written agreements to correct illegal discrimination

2,252
1,511
741
690

In addition to the enforcement anomalies discussed above, current arrangements for enforcing these statutes raise serious questions of cost effectiveness. The cost of interagency expenditures of
coordination of these statutes alone exceeds the enforcement expenditures of all but four of the agencies coordinated. In addition
to these expenses, there are the considerable outlays for administrative overhead and legal support necessary to maintain separate
programs in each agency.
The Civil Rights Division is working with the President's Task
Force on Regulatory Relief to develop revised coordination regulations to address these problems. The nature of the problems which
have historically characterized enforcement of these provisions,
however, suggest that substantial improvement in this area may
require basic reforms in the organization and structure of the
administrative enforcement of these provisions.
Judicial enforcement—The Department of Justice's Civil Rights
Division is primarily responsible for litigation enforcing these provisions. During 1982, the Civil Rights Division negotiated a consent
decree desegregating two state-run colleges in Louisiana, and an
agreed-up order was entered implementing a comprehensive program to ensure equal opportunity for men and women to participate in intercollegiate athletics at the University of Alaska. Consent decrees were also approved desegregating six junior colleges in
Mississippi, and the division commenced a trial on the merits in a

12For example, "Civil rights enforcement officials as well as this Commission, agree that activities targeted at
systemic discrimination, such as compliance reviews, are more effective and equitable enforcement mechanisms
that investigations of individual complaints"- The Federal Civil Rights Enforcement Budget, U.S. Commission on
Civil Rights, June, 1982, P. 65.

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THE BUDGET FOR FISCAL YEAR 1984

suit alleging that the Massachusetts Maritime Academy discriminates against women in admission.
As has previously been the case, much of the Division's activity
concentrated on eliminating de jure segregation in elementary and
secondary education. The Division worked with local elementary
and secondary school officials to develop plans effectively resolving
several longstanding cases. A stipulated desegregation plan for
Port Arthur, Texas was approved. Consent decrees modifying
orders were entered in cases involving Gadsden County, Florida,
Pointe Coupee Parish, Louisiana, Scott County, Mississippi, Omaha,
Nebraska, and Kansas City, Kansas. In another suit, a consent
decree was negotiated after the court found that the Ector County,
Texas school system was unconstitutionally segregated. In Mobile,
Alabama a consent decree which establishes a procedure for educational experts to make recommendations and for a committee of
parents and citizens to propose changes that would further school
desegregation.
During 1982, the Department continued to implement its new
policy for remedying de jure segregation. In past administrations,
the Department concentrated simply on substituting new patterns
of discriminatory assignment of students based on race and national origin for the old ones, through forced busing. Such mandates
not only excluded many students from the schools they wished to
attend based solely on their race or national origin, but also frequently reassigned students to schools which were not better than
those they had previously attended. The Department is now securing remedies which not only assure equal access to education,
regardless of race or national origin, but also assure access to
education of equal quality.
The Department has also widened the scope of the equal protection violations it seeks to eliminate. In addition to continuing to
investigate allegations of illegal discrimination in pupil assignment
during 1982, the Civil Rights Division also initiated investigations
of alleged discrimination based on race, color, or national origin in
the quality of education. Such violations, where found, will be
litigated in addition those involving de jure segregation. Due to
past neglect of this problem, the law in this area has yet to be
developed. The Civil Rights Division's careful but deliberate move
to address it thus not only places the Department on the frontier of
Constitutional interpretation and protection, but also promises to
open a new frontier of opportunities that may heretofore have been
illegally denied.13

13 In appellate litigation under these statutes, the Supreme Court's decision in North Haven v. Bell was most
significant. The Court's principal holdings in this case were that Title IX prohibits employment discrimination,
and that it applies to all programs or activities for which an institution receives Federal assistance. The
Department of Justice is applying these principles in other litigation involving Title IX.

SPECIAL ANALYSIS F

F- 55

TO REMOVE THE FINAL BARRIERS: SECURING EQUAL
TREATMENT
" I am for affirmative action; I am against quotas. I have lived long enough to
know a time in this country when quotas were used to discriminate, not end
discrimination/' —PRESIDENT REAGAN, January 19, 1982
ENFORCING EQUAL EMPLOYMENT OPPORTUNITY

The principal statutes and Executive orders prohibiting discrimination in employment are:
—Title VII of the Civil Rights Act, which prohibits employment
discrimination based on race, color, religion, national origin, or
sex.
—The Equal Pay Act (EPA), as amended, which prohibits discrimination in compensation based on sex.
—The Age Discrimination in Employment Act (ADEA), which
prohibits discrimination against persons aged 40 through 70
based on age.
—Executive Order 11246, as amended, Section 503 of the Rehabilitation Act of 1973, and Section 402 of the Vietnam Veterans Readjustment Act, prohibit employment discrimination by
Federal contractors based on race, color, sex, national origin,
religion, handicap, service-connected disability, or Vietnam era
military service, and require Federal contractors to take affirmative action to assure that such discrimination does not
occur.
In past administrations,14 a fundamental dilemma in the enforcement of these provisions was permitted to develop. Some programs intended to assure that all individuals are able to advance
regardless of their race, color, or national origin had degenerated
into quota systems—erecting new barriers to individual achievement on those very grounds. There is growing recognition that the
barriers to individual achievement created by quotas are not
simply the most obvious (if some persons are provided opportunities because of their group membership, other persons are denied
them on the same basis). By enabling others to cast doubt on their
experience and accomplishments, quotas may be creating highly
formidable barriers for their intended beneficiaries.15
The Department of Justice is responsible for litigating alleged
violations of Title VII, by public employers; and of Executive Order
"Joseph Califano, former secretary of HHS, reports being instructed by the President to "
review the work
of our subordinates, and 'get rid of all of those who are incompetent, except minorities and women.' " Joseph A.
Califano, Jr., Governing America, p. 341.
15E.g., in a recent interview Reginald E. Gilliam Jr., Vice Chairman of the Interstate Commerce Commission,
noted that blacks who manage to enter the system often face a "gauntlet of sniping and backbiting";
"This often takes the form of ignorant verbal dismissals of exceptional individuals with comments like 'he or
she wouldn't have gotten that position except for EEO'", Mr. Gilliam said, referring to affirmative action and
other policies designated to promote equal employment opportunity that followed the Civil Rights Act of 1964.
"All your degrees, your clerkships, your previous positions that often predate equal employment policies,
Oxford, whatever all may be explained away by 'EEO'. .". New York Times, December 28, 1982.

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THE BUDGET FOR FISCAL YEAR 1984

11246, as amended, by Federal contractors. The Department is also
responsible for litigating any equal employment issues arising
under Title VI and similar nondiscrimination provisions. Among
the agencies responsible for implementing equal employment statutes, the Department of Justice has lead in developing discrimination remedies which open doors to equal employment opportunity
without unjustly stigmatizing those who pass through them.
In 1981, the Department implemented a new approach to remedies for employment discrimination. In place of the employment
quotas of the past, the Department is requiring employers found to
have discriminated to institute specific, programs that assure that
members of the group previously excluded are considered for
future employment opportunities. The Department will also assure
that genuinely nondiscriminatory procedures are used in selecting
from the resulting pool of eligibles. These remedies will institutionalize the process of nondiscriminatory selection, and thus have a
longer lasting impact than court imposed numbers forgotten when
decrees have expired.
During 1982, the Civil Rights Division continued to refine this
new approach as it implemented a vigorous program of equal employment litigation. The Department filed six new pattern and
practice suits against public employers, including the Department's
first suit alleging such discrimination based on sex in higher education. The Department had 113 lawsuits in progress by the end of
1982. Overall, the Department's efforts resulted in the hire, promotion, or reinstatement of 1,400 identifed victims of discrimination
and $4.4 million in backpay for 1,000 persons. In addition, long
term remedies designed to assure future nondiscrimination were
implemented by 10 public agencies or institutions employing over
16,000 persons.
As in its other appellate activities, the Department's efforts regarding equal employment issues concentrated on restoring the
basic principle of nondiscrimination to the interpretation of the
laws. During 1982, for example, its appellate activity firmly established the right of persons employed by subsidaries of foreign corporations to be free from employment discrimination based on
race, color, religion, national origin, or sex. During 1983, the Department is moving to assure that corrective action mandated for
employment discrimination fully "makes whole" its victims without, in turn, creating new ones. In Firefighters v. Boston, currently
before the Supreme Court, the Department is defending this principle in regard to a court order which required the layoff of firefighters solely based on their race. Responding to the protests of
female, Hispanic, and white male police officers who face the prospect of being denied promotions they have earned based solely on
their race, the Department has also moved to intervene in a case

SPECIAL ANALYSIS F

F- 55

involving the New Orleans Police Department. Concurrently, the
Department of Justice has filed a brief with the Supreme Court
challenging the current practice of many pension plans of requiring different contributions, or providing different periodic payments, solely on the basis of the participants' sex. The Department's position in this case summarizes the thrust of its appellate
efforts in this and other areas: Title VII and similar civil rights
statutes protect all individuals, and require that employment and
other covered decisions be made on the basis of their individual
accomplishments and characteristics—not on presumptions based
solely on their race, sex, national origin, or other irrelevant factors.
The President's 1984 budget provides for outlays of $2.8 million
for the Department's equal employment enforcement activities in
1984. 1982 also saw continued improvements in the effectiveness of
the EEOC:
Although the number of charges received by EEOC dropped by
7%, the number of charges processed by EEOC dropped by less
than 4%—and the number of persons benefitted through charge
settlements increased by 36%, and the total dollar benefits obtained through such settlements increased by 10%.
Table J - l l . EEOC ADMINISTRATIVE COMPLAINT PROCESSING
1980

Total receipts
Total closures
Persons benefitted2 through settlements
Total dollar value of settlements (millions).
1
2
3

56,425
57,327
(3)
$57.3

1981

58,754
71,690
38,114
$91.7

1982

54,590
68,890
51,795
$101.1

Includes administrative processing of charges filed under Title VII, the Age Discrimination in Employment Act, and the Equal Pay Act.
Includes, in addition to backpay and other dollar settlements, reinstatement, hires, promotions, and other nonfinanciat relief.
No data available.

During 1982, the EEOC continued to involve State and local
agencies in resolving discrimination complaints. During 1982, the
Commission provided over 17.5 million in grants to State and local
nondiscrimination agencies, and deferred 38,800 charges to these
agencies for processing. During 1984, the EEOC will provide $18
million in grants to State and local agencies, and will defer 40,750
charges for processing at the State and local level.
Thus, the Administration has continued and expanded the improvements secured in the 1970's in EEOC's implementation of its
complaint processing and enforcement responsibilities. The Administration found, however, that many endemic management problems remained to be addressed. The General Accounting Office and
the Office of Personnel Management were asked to assist in the
effort to define those problems so that they might be corrected.
The GAO found that many of the same recordkeeping and financial management problems it had identified in 1976 continued to
exist in 1981. The Commission had no accurate records of the

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THE BUDGET FOR FISCAL YEAR 1984

money owed it and the personnel responsible for handling the
Commission's funds were poorly supervised and trained and their
duties were not adequately separated to preclude fraud and waste.
Compounding these difficulties, necessary financial management
audits were not being performed because the agency's internal
audit staff was too small to perform them. As a final result:
Table J - 1 2 . EEOC LEGAL ENFORCEMENT
Actual
1980

Total dollar benefits through case resolutions (millions)
Cases in progress (end of fiscal year)

$20.3
683

1981

$16.2
873

1982

$33.53
930

—The Commission's financial chaos posed the threat of "unnecessary cancellation of programmed activities, slippage of required programs, and even job losses for agency employees"
because it had no accurate knowledge of the funds available
for program purposes.
—Millions of dollars owed to the Commission were unavailable
for program activities. For example, some $1.1 million in travel
advances were outstanding, and "very little action [had been]
taken to collect or settle amounts that had been outstanding
for extended periods".
—The Commission's inability to pay its bills in a timely manner
cost it substantial amounts of discounts (available for timely
payment) which would have increased the impact of its outlays.
—Year-end financial expenditure reports for the previous two
fiscal years had been certified as correct, even though it
"should have been obvious to agency personnel that the figures
were incorrect".
In a separate audit of the Commission's Office of Review and
Appeals, the GAO examined 19 allegations involving . . . "a wide
range of alleged management and operating problems concluding
that many of the allegations made were valid". GAO also found
that the Commission's new leadership is "aware of the problems
and . . . taking action to address them".16
The OPM study, conducted in a headquarters division and two
district offices concluded that, in the units surveyed:
—"substantial overgrading" existed "and likely exists in other
parts of the agency."
—The supervisory structure was "excessive and expensive."
16 "Continuing Financial Management Problems at the Equal Employment Opportunity Commission," General
Accounting Office, May 17, 1982 inquiry into Alleged Operating and Management Problems in EEOC's Office of
Review and Appeals" on August 29, 1982.

SPECIAL ANALYSIS F

F- 55

—Management accountability procedures did not
. . account
for the 'quality' or the achievement of agency's overall objectives."
—A work environment "beset by acrimony, improper employee
conduct, poor performance, and favoritism".17
To aid in the elimination of these deficiencies on an agency-wide
basis, OPM will conduct a wider ranging survey in 1983.
The current Chairman of the EEOC, who assumed office in the
closing months of the fiscal year, has inherited the challenge of
addressing these longstanding problems. Chairman Thomas has
encouraged evaluation by GAO and OPM and partial parties, and
has rapidly implemented their recommendations. Much remains to
be done through 1984, and the Chairman currently has several
studies underway regarding how the agency's general operations
might be improved. After reviewing the deficiencies landed by
GAO and the administration's efforts to correct them, the Chairman of the Senate Committee responsible for oversight of the
Commission's activities observed that:
"This administration and this committee have been criticized for lack of
commitment to civil rights, yet . . . Our goal has been that of increasing
our efforts at pursuing those goals. Because we ask critical questions [and
take] the studies of GAO seriously, we are accused of being anti-civil rights.
I must question whether those who criticize are also the same as those who
would allow the conditions which the GAO reviewed at EEOC to continue
and thereby deny the services to the people who need the assistance for
which the agency was created?"

In addition to initiating action to resolve these management
problems, the Administration also took action to strengthen the
protections the EEOC is responsible for assuring under the Age
Discrimination in Employment Act. Emphasizing that "when it
comes to retirement the criterion should be fitness for work, not
year of birth", the President announced his support for legislation
eliminating mandatory retirement requirements in government
and private industry based solely on age.
The President's budget provides for outlays of $153 million for
the Equal Employment Opportunity Commission in 1984.
Of the Federal Government's efforts to assure equal employment
opportunities, the programs administered by the Department of
Labor's Office of Federal Contract Compliance Programs have most
starkly posed the dilemma referred to above. Established by Executive order over 20 years ago, OFCCP's basic premise was a simple
one: To expand equal employment opportunities for women and
minorities by requiring that Federal contractors act affirmatively
to assure that qualified minorities and women were recruited and
considered for vacancies, and that their procedures for filling those
""Personnel Management Evaluation Report: Personnel and administrated management in the U.S. Equal
Employment Opportunity Commission", May 1982.

380-700

H-10

THE BUDGET FOR FISCAL YEAR 1984

vacancies were nondiscriminatory in fact as well as precept.
During the 1970's, Congress expanded this "affirmative action"
mandate to include handicapped persons and Vietnam-era veterans. Contractors were required to develop plans detailing the recruitment and other efforts they would undertake to assure equal
opportunity. The administration found that this simple premise
had evolved into a regulatory morass, criticized both by Federal
contractors and the intended beneficiaries of OFCCP's regulations.
The most serious concerns involved OFCCP's requirements for
affirmative action plans:
—There was no clear answer to the basic question of what constituted compliance with the affirmative action requirements:
was compliance based on contractors' good faith efforts to recruit women and minorities and assure that employee selection
was nondiscriminatory, or did OFCCP disregard these considerations in a single-minded focus on whether employment goals
were met? Many believed that such goals, originally intended
as yardsticks of progress, had been distorted in practice into
quotas.
—Requirements for drafting the plans were, at once, overly prescriptive and insufficiently clear. Contractors were required to
produce voluminous affirmative action plans and supporting
data, with no assurance that the resulting product would be
found acceptable during a compliance review. Compliance reviews frequently degenerated into confrontations over which
job titles belonged in which "job group", or how the eight
factors for determining the "availability" of minorities and
women for jobs should be considered in arriving at overall
"availability" figures. Compliance with these (and related Federal) requirements generated an estimated $1 billion per year
in expenditures by employers among the "Fortune 500" 18
alone. The concepts of "job groups" and "availability" could be,
and frequently were, manipulated to justify failure to recruit
and employ qualified minorities and women.
—Requirements did not consider differences in the size of contractors or their individual establishments. The same level of
detail was required in an affirmative action plan for a contractor employing only 50 persons as for a contractor employing
thousands; and for a contractor's plan for a small retail sales
outlet as for the same contractor's plan for a large manufacturing plant.
—These frustrations with the requirements themselves were
compounded by OFCCP's adversarial approach to enforcing
them. The potential that contractors attempting in good faith
"Estimate by the Equal Employment Advisory Council cited in Daniel Seligman, "Affirmative Action is Here
to Stay", Fortune, April 19,1982, p. 156.

SPECIAL ANALYSIS F

F- 55

to comply might nevertheless be found in noncompliance was
inherent in the ambiguity of OFCCP's regulations, and was
frequently realized.
The Administration is continuing its review of OFCCP's regulations to develop revisions to these regulations which will eliminate
these problems, and restore the focus of OFCCP's efforts to assuring that Federal contractors make vigorous efforts, through recruitment, training, counseling and the like, to assure that minorities,
women, Vietnam era veterans, and persons with disabilities are
assured of every available employment opportunity consistent with
their skills, abilities, and aspirations.
While the work on reforming its regulations continued, OFCCP's
management completed important management reforms, including
consolidating several area offices to reduce overhead.
OFCCP completed 2589 complaint investigations and 3081 compliance reviews during 1982. Of these, 404 investigations and 1294
compliance reviews produced relief for identified victims of discrimination, including $7,149,733 backpay for 1133 persons. 17,614 identified victims of discrimination were placed in or restored to jobs.
The President's budget provides for outlays of $47.4 million for
OFCCP's nondiscrimination efforts in 1984.
In addition to those discussed above, other problems in Federal
EEO enforcement remain to be addressed.
The Uniform Guidelines on Employee Selection Procedures
(UGESP) require examination to assure they are not discouraging
the use of valid and job related employee selection devices.19
Review of these regulations, targeted by the President's Task Force
on Regulatory Relief, will continue in 1983.
In addition, there are continued problems duplication in Federal
EEO enforcement, including:
—While EEOC and OFCCP have periodically negotiated memoranda of understanding intended to preclude duplicate reviews
and investigations, this objective has yet to be achieved.
—The work of EEOC is also duplicated by yet other agencies,
operating under Title VI and other statutes requiring nondiscrimination in federally assisted programs. Significant progress
toward reducing this duplication will be made this year, with
the issuance of a joint regulation by EEOC and the Department of Justice providing for referral of many employment
discrimination complaints received by these agencies to the
EEOC for processing. However, a substantial number will still
be retained for investigation by the individual agencies. Many
of the complaints retained for investigation will be class actions—with a potential for overlap with the systemic activities
19 See, e.q., "Uniform Guidelines on Employee Selection Procedures Should Be Reviewed and Revised",
General Accounting Office, July 30, 1982.

H-10

THE BUDGET FOR FISCAL YEAR 1984

of the EEOC and (particularly with regard to colleges and
universities) those of the OFCCP as well.
—In addition to the problems inherent in duplication, the cost
effectiveness of these duplicate activities in identifying and
resolving discrimination is questionable:
Table J - 1 3 . EXPENDITURES AND OUTCOMES, EEO ADMINISTRATIVE ENFORCEMENT ACTIVITIES 1
1982 Actual
Other EEO
programs

EEOC

Total direct compliance outlays (millions) 1
Total persons receiving relief for discrimination as a result of activities2
Total value of financial settlements

$48.6
51,795
$101,194,695

$40.2
18,866
$7,262,392

1 Compares direct outlavs for EEOCs administrative processing of complaints with direct outlays for other programs' administrative processing of
complaints and conduct of pre and post award compliance reviews.
2 Includes all forms of relief, including hire, promotion, reinstatement, and other remedies in addition to backpay.

Civil Service Equal Employment Opportunity.—As the servant of
all Americans, and as an institution responsible for enforcing laws
requiring equal employment by other institutions, the Federal Government has a particular obligation to assure nondiscrimination in
its own employment. Moreover, especially in this period of reduced
resources, Federal agencies simply cannot afford to hire or promote
employees on any bases other than their job-related abilities and
demonstrated diligence in applying them. Congress has, therefore,
mandated that each Federal department and agency make special
efforts to assure that their employment decisions are made without
regard to race, color, religion, national origin, sex, age, or handicap; and the President has reiterated his determination that agencies implement this mandate.
Table J - 1 4 . TOTAL RESOURCES DEVOTED TO FEDERAL INTERNAL EQUAL EMPLOYMENT
Actual

Total Outlays (millions)
Total full time permanent internal EEO staff 1
Total other Federal work years 2

1981

1982

177.7
2,930

181.3
3,441

Estimate
1983

Proposed

184.3
3,517

203.9
3,542

1 Professional and clerical personnel employed full time in internal EEO activities.
2 Effort devoted to counseling, complaint, investigations, affirmative recruitment, and other activities by individuals not employed in internal EEO
positions.

Under the Equal Employment Opportunity Act of 1972, as
amended, the EEOC is responsible for coordinating these efforts. In
addition, OPM, under the Civil Service Reform Act, coordinates
agency efforts under the Federal Equal Opportunity Recruitment
Program (FEORP) to assure that qualified minorities and women
are among the applicants considered for positions in which they
have been determined to be underrepresented.
Despite the necessary economies which have been effected in
Federal employment, the representation of minorities and women

SPECIAL ANALYSIS F

F- 55

in Federal employment has not only remained stable, but has risen
somewhat:
Table J-15. PERCENTAGE REPRESENTATION OF MINORITIES AND WOMEN IN THE FEDERAL
WORKFORCE 1
Total Federal employment
Minorities

December 1980
July 1982 2

23.5
23.9

Women

39
39.3

Total full time white collar
employment
Minorities

November 1980
March 1982

20.9
21.5

Women

45.6
46

1 Nonpostal civilian employment. Produced from the Central Personnel Data File. "Total Federal Employment" data includes all work schedules.
Excludes agencies not covered by the CPDF such as: Architect of the Capitol, U.S. Botanic Gardens, Congressional Budget Office, Board of
Governors of the Federal Reserve System, Library of Congress, Office of the Vice President, Office of Technology Assessment, Postal Rate
Commission, Tennessee Valley Authority, the White House Office, the Central Intelligence Agency, the National Security Agency and most of the
Judicial Branch. "Full Time White Collar Employment" data also excludes agencies listed above.
2 Latest available figures.

During 1982, the Federal Government spent more on implementing EEO requirements in the civil service than on all external
enforcement of equal employment requirements by the two largest
enforcement agencies (EEOC and OFCCP) combined.
A substantial portion of this disparity is attributable to the extraordinary costliness of processing discrimination complaints
against Federal agencies contributed substantially to this disparity.
Federal entities devoted over $72 million and 2,215 professional
FTE's to processing EEO grievances in 1982, including $44 million
and 1,067 FTE's for processing formal complaints. While EEO counseling is usually performed as a collateral duty, most formal complaints are processed by personnel employed solely for that purpose.20
Table J - 1 6 . INTERNAL EEO COMPLAINT PROCESSING COSTS
(In millions of dollars)
Actual
1980

Counseling
Direct processing of complaints*
Total

1981

1982

Est. 1983

Proposed
1984

18.6
36.8

28.0
44

29.9
47.8

31.7
51.1

55.4

77.7

82.8

* Includes processing of formal complaints by agencies, and appellate processing by EEOC only. The Merit Systems Protection Board is
responsible for processing appeals of complaints which allege both discrimination and violations of other Federal personnel requirements. The MSPB
processes a substantial number of such appeals (778 in 1982 a figure expected to rise to 945 in 1984), the Board did not begin monitoring the
costs of these appeals on a separate basis until this year. Detailed information on MSPB's processing of these appeals will be included in next
year's Civil Rights Special Analysis.
20 An increasing number of agencies have, however, been required to report to private contractors to perform
such investigations. The Department of Agriculture alone spent $297 thousand for such investigations in 1982,
and expects that figure to reach $741 thousand in 1984. In addition, Federal agencies spent over $11 million on
legal expenses associated with EEO grievances, a figure expected to exceed $14 million in 1984.

H-10

THE BUDGET FOR FISCAL YEAR 1984

When the costs and results of internal EEO complaint processing
are compared with EEOC's record in the private sector (agencies
closed 15,759 complaints in 1982 at a direct cost of $44 million,
compared with EEOC's direct costs of $49 million to close 68,890
complaints), it is apparent that current arrangements and procedures for processing EEO complaints against Federal agencies are
needlessly expensive. While it is difficult to compute the costs of
processing on a complaint by complaint basis in large agencies
which process many complaints, these costs are starkly apparent in
the smaller entities subject to the procedures. For example, a complaint against the Pennsylvania Avenue Development Corporation
(which an EEOC complaints examiner recently concluded was
based on "assertions [that] are not only unsupported but are for the
most part based on unfounded speculation and unreasonable suspicions") has been in processing for two years. The case has required
PADC to expend $15,000 in salary and other costs (not including
additional costs for complaint counseling, performed for PADC
under an inter-agency agreement by the General Services Administration, and the complaints examiner provided by EEOC) and reproduce some 2000 pages.
Among the principle reasons for the extraordinary costliness of
these procedures are:
—There are twice as many steps in Federal as in private sector
complaint processing. Moreover, there are as many as four
administrative determinatons on the merits for Federal complaints, compared with only one in processing private sector
complaints. These multiple levels of review are largely designed to protect complainants against potential abuses of
agency self-processing.
—Most agencies have fixed numbers of staff designated to perform the complaint processing functions. As these staff are not
fungible among agencies, some agencies must hire private contractors to handle unexpectedly high workloads while other
agencies' staffs are idle.
—Due to the dispersal of processing staff among agencies, quality
of training and supervision varies considerably from agency to
agency, as does the quality and timeliness of complaint processing.
In addition, direct agency expenditures for implementing affirmative action requirements applicable to Federal agencies are continuing to rise substantially at the same time that placement opportunities are declining in most agencies:

SPECIAL ANALYSIS F

F- 55

Table J - 1 7 . DIRECT EXPENDITURES ON AFFIRMATIVE EMPLOYMENT PROGRAMS
Actual
1982

Total outlays (millions)

Estimate
1983

$57.9

$60.7

Proposed
1984

$62.9

Through 1984, the Administration will continue to examine ways
in which equal employment can be implemented in the Federal
Government with greater fairness and efficiency. As the Chairman
of the Equal Employment Opportunity Commission, Clarence
Thomas, has forcefully observed: "We cannot afford to base decisions on the same assumptions, year after year, about the nature of
the problem or the requirements for a solution. . . . We cannot
afford to devote significant time and energy to policies or programs
which effect no measurable progress".
Military Service equal opportunity.—During 1982, the Administration continued to improve the effectiveness of efforts to assure
equal opportunities for the over 2,000,000 men and women who
serve in the nation's armed forces. Over 1.5 million personnel
received training designed to promote equal opportunities and preclude such problems as sexual harassment. Programs designed to
assure consideration of qualified minority and women applicants
resulted in the recruitment of 11,698 female and 9,481 minority
officer candidates in 1982. As a result of these and similar efforts,
the percentage of military officers who are women has increased by
12%, and the percentage of officers who are members of minority
groups has increased by 11% since 1980:
Table J - 1 8 . PERCENTAGES OF MILITARY OFFICERS WHO ARE MINORITIES OR WOMEN
Percentage total
officers
1980

Minorities
Women

9.1
8.2

1982

10.1
9.2

Change
1980-82

+ 11
+ 12

These policies have also contributed to the continued-substantial
percentage of enlisted personnel who are members of minority
groups, and continued growth in the percentage who are women:
Table J - 1 9 . PERCENTAGES OF ENLISTED PERSONNEL WHO ARE MINORITIES OR WOMEN
Percent total enlisted
^ personnel
1980

Minorities
Women

30.3
8.5

1982

30.3
9

H-10

THE BUDGET FOR FISCAL YEAR 1984

Service in this nation's Armed Services has traditionally attracted persons of all backgrounds who wish to progress on the basis of
their individual abilities and accomplishments. This has been particularly true for members of minority groups, as the military has
frequently lead other institutions in eliminating barriers based on
race, national origin, and religion. Providing contemporary evidence for the President's observation that the concept of proportional representation has historically been used to exclude minorities, some have argued in recent years that the number of minorities in the military should be artificially restricted to reflect their
percentage in the population as a whole. In 1982, a Presidential
Task Force appointed to study military personnel issues reemphasized the Administration's rejection of this notion. In addressing
this issue, the panel aptly summarized the Administration's thrust
in all of the equal employment efforts discussed above:
Some observers express concern about the high proportion of blacks in the enlisted force, which is 22% . . . The population as a whole, in contrast, is 12% black.
[We] do not look on this as a problem. In a volunteer force, both blacks and nonblacks who can qualify have equal freedom to enlist. The fact that many blacks
volunteer is a tribute to their patriotism. Black servicemembers have served the
nation ably and honorably. It would be both unnecessary and unfair to move a
quota-based recruitment system to achieve some arbitrary notion of a proper racial
balance.
ENFORCING EQUAL HOUSING

OPPORTUNITY

Title VIII of 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 provisions of brokerage services. Two Federal agencies are primarily responsible for
enforcing Title VIII.
—The Department of Housing and Urban Development's Office
for Fair Housing and Equal Opportunity investigates complaints alleging violations of Title VIII. Where it concludes
that violations of Title VIII have occurred, HUD attempts to
resolve them through informal conference, conciliation, and
persuasion.
—The General Litigation Section of the Department of Justice's
Civil Rights Division brings suits to enjoin alleged patterns and
practices of discrimination prohibited by Title VIII. The Section brings cases based both on referrals by HUD and its own
investigations.
Title VIII provides for deferral for complaints filed with HUD to
State and local fair housing agencies with equivalent statutory
authority. During 1982 HUD continued its aggressive efforts to
expand involvement of State and local agencies in assuring Fair
Housing. HUD obligated over $5 million for direct grants and
technical assistance to help State and local agencies develop proce-

SPECIAL ANALYSIS F

F- 55

dures, train staff, and other measures necessary to develop the
capacity to process fair housing complaints. As a result, the
number of State and local agencies participating in charge processing grew from 42 to 61, an increase of 60%. Through 1984, HUD
expects to increase the number of participating State and local
agencies to 90—almost tripling the number in the program at the
beginning of 1981. Through 1984, the number of Title VIII complaints processed at the State and local rather than the Federal
level will further increase in 1984. The costs of the program, however, will decrease (to $3.7 million a year, mostly in grants to
defray the costs of complaint processing) because the initial high
outlays for start-up costs will no longer be necessary.
Table J - 2 0 . NUMBER OF STATE AND LOCAL AGENCIES WITH CHARGE PROCESSING AGREEMENTS

End of fiscal y e a r —
198 0
198 1
198 2
1983 (estimated)
1984 (estimated)

Number
32
42
67
70
90

During 1982, HUD invested similar "seed money" in local Community Housing Resource Boards. These Boards initiate affirmative marketing and other voluntary efforts to assure fair housing.
Some 613 of these Boards were in existence at the end of 1982, and
it is anticipated that an additional 50 will be organized in 1983.
Again, costs will decrease as the initial capacity building is completed: from obligations of $2.1 million in 1982 to $1 million in
1984.
Table J - 2 1 . TOTAL FAIR HOUSING COMPLAINTS PROCESS BY HUD AND STATE AND LOCAL AGENCIES
Total
closures

Percent
change,
1980-82

Year:
1980
1982

2,860
4,230

+ 48%

These investments in the abilities of the private sector and State
and local governments will reduce the incidence of violations which
give rise to complaints. Where complaints are filed, more will be
resolved by the States and communities in which the parties reside.
During 1982, for example, HUD referred 56.7% of the complaints it
received to State and local agencies for process (compared with
only 13% in 1980), and State and local agencies were responsible
for over 58% of all voluntary complaint settlements achieved under
Title VIII. As a result of this cooperation between HUD and State

H-10

THE BUDGET FOR FISCAL YEAR 1984

and local agencies, there has been a substantial increase in the
service provided to persons filing complaints under Title VIII, with
41% more complaints closed in 1982 than in 1980.
Table J - 2 2 . FAIR HOUSING COMPLAINTS REFERRED TO STATE AND LOCAL AGENCIES
Actual

Complaints received
Complaints referred

1980

1981

1982

3,039
410

4,209
1,661

4,726
2,679

The Department of Justice's Civil Rights Division is responsible
for litigating alleged pattern and practice violations of Title VIII.
During 1982, the Department settled 3 major housing discrimination cases and filed 2 new suits. The Division negotiated a consent
decree in a redlining suit brought under both the credit and housing statutes. This settlement provides comprehensive relief to
assure that persons living on American Indian Reservations in
Arizona will not be denied mortgage loans because the property
interest involved reservation land, and that applications by Indians
for nonhousing loans would be fairly evaluated. After a trial, the
Division obtained a favorable decision and remedial order in a case
involving a city in suburban Detroit which had violated the Fair
Housing Act by blocking construction of housing for low-income
and elderly persons in response to racially motivated opposition.
This Division is continuing its vigorous enforcement of Title VIII in
1983. In January, the Division filed a major suit alleging systemic
violations of the Fair Housing Act by the city of Cicero, Illinois.
The Department of Justice's appellate activity resulted in a Supreme Court ruling with particular significance for the future of
Title VIII enforcement. This ruling sanctioned the use of "testers"
in identifying the remaining vestiges of denial of fair housing
opportunities.
ENFORCING EQUAL CREDIT OPPORTUNITY

The Equal Credit Opportunity Act of 1974 (ECOA) prohibits discrimination in credit transactions based on race, color, national
origin, sex, marital status, age or derivation of part or all of one's
income from public assistance. The Act assigns administrative enforcement responsibilities to 12 different Federal agencies, and requires the Federal Research Board to coordinate their activities. In
addition, the General Litigation Section of the Department of Justice's Civil Rights Division is responsible for litigating alleged violations of ECOA.
Despite the wide dispersal of authority for enforcing ECOA and
other fair lending laws many of the problems of duplication pres-

SPECIAL A N A L Y S I S F

F- 55

ent in other areas of dispersed responsibility have been avoided in
the enforcement of these statutes. Because the structure for enforcing ECOA reflects the division of responsibility for the overall
regulation of financial institutions, agencies are able to review
compliance with ECOA and other financial regulations at the same
time. As the distinctions among financial institutions (which originally gave rise to separate regulatory bodies for the different
classes of institutions) have been substantially eroded in recents
years, the Administration is currently examining the extent to
which separate regulatory bodies continue to be required.
Since the passage of the ECOA, the Department of Justice's Civil
Rights Division has worked closely with Federal regulatory agencies and have filed significant suits challenging the nonhousing
lending practices of banks, small loan companies and retail creditors as well as the practices of real estate appraisers and mortgage
lenders. The suits include cases against large creditors—one defendant processes approximately 4,000,000 loan applications each
year—and will clearly have a substantial impact on the industry.
In addition to negotiating a consent decree in the "redlining" suit
(discussed above under Fair Housing), the Division also completed
the first trial on the merits of a government-initiated credit case,
and filed a suit alleging that the nation's third largest small loan
company is unlawfully discriminating on the basis of sex and martial status. A total of five Equal Credit suits were in progress at the
close of 1982.
The President's budget for 1984 provides for outlays of $700
thousand for ECOA litigation by the Department of Justice. As
several of the entities responsible for the administrative enforcement of ECOA and other fair lending requirements (e.g., the Federal Reserve Board, the agency designated by Congress to coordinate
enforcement of the Equal Credit Opportunity Act) are not required
to submit their budgets to OMB for review, no total outlay data for
administrative enforcement are available.
CIVIL RIGHTS RESEARCH: CONTINUING THE SEARCH FOR
NEW SOLUTIONS
"Let us issue a call for exciting programs to spring America forward toward
the next century, an America full of new solutions to old problems."—RONALD
REAGAN, June 29, 1981.

Congress established the Commission on Civil Rights in 1957 to
study the enforcement of laws guaranteeing civil rights regardless
of race, color, religion, or national origin. During the 1970's, the
Commission's mandate was expanded to cover civil rights issues
related to sex, age, and handicap. The President has announced his
support for extending the Congressional authorization of the Commission (due to expire this year) in his State of the Union Message.

H-10

THE BUDGET FOR FISCAL YEAR 1984

This is but one indication of the importance to this Administration
of the Commission's mandate to assure that the laws protecting
individuals against discrimination are faithfully executed.
Table J - 2 3 . U.S. COMMISSION ON CIVIL RIGHTS RESEARCH AND INFORMATION DISSEMINATION,
RESOURCE OUTLAYS BY PROGRAM AREA
Actual outlays
1980

Federal service EEO
Private sector EEO
Fair Housing
Nondiscrimination in provision of federally assisted services and benefits
Voting rights
Civil and Constitutional Rights
Minority business enterprise programs
Total

I1)
i1)
n
n
n
t1)

11,485

21981

1982

Estimated
1983

Proposed
1984

385
2,971
616

227
3,984
690

239
4,172
597

606
3,996
1,211

2,602
1,237
3,897
103

3,299
819
2,641
138

3,580
716
2,505
119

3,265
484
2,422
121

11,712

11,788

11,928

12,214

Prior to 1981, 0MB did not request a breakdown by research category.
2 Difference between total research outlays and total Commission outlays represents internal EEO expenditure for all years except 1981. In 1981,
the Commission reported $183 thousand in expenditures for processing complaints of civil rights violations of various kinds.
1

The Women's Bureau of the Department of Labor is continuing
to explore new approaches to addressing employment problems
affecting women, with particular attention to initiatives involving
the private sector and State and local governments. During 1982,
for example, the Bureau worked with private employers and State
and local governments on programs to improve opportunities for
women in construction apprenticeships, and to address the employment problems of female ex-offenders, displaced homemakers, and
older women.
BY PRECEPT AND EXAMPLE: TAKING RIGHTS
SERIOUSLY . . .
"Yes, there are differences over how to attain the equality we seek for all our
people. And sometimes, amidst all the overblown rhetoric, the differences tend
to seem bigger than they are. But actions speak louder than works. . . . "
PRESIDENT REAGAN, J u n e 2 9 , 1 9 8 2

Thus, the Federal involvement in assuring civil rights reflects a
national commitment to implementing our highest ideals. The Administration's accomplishments in restoring substance to this involvement are significant when judged by the traditional measures:
resources devoted to civil rights enforcement;21 management im21 The Administration has made equally significant progress in areas which are related to, but not covered, by
this Analysis. On December 17, 1982, President Reagan announced a plan to create and expand more than
120,000 new and existing minority businesses in the next ten years. Approximately $1.5 billion in credit
assistance and $300 million in management and technical assistance will be made available in support of this
effort. The Administration has also moved to strengthen historically black colleges and universities. The
President signed an Executive Order strengthening the Federal commitment to these institutions, and the
Administration has provided $9.6 million in additional Title III funding (an 8% increase). The Administration's
quick action to save Meharry Medical College (which has trained more than 40% of all black physicians) is
particularly worthy of note. The Administration not only provided several million dollars in assistance to the
medical school, but acted to expand Veterans' Administration's affiliation with it. Such expanded affiliation had
been sought by Meharry, without success, through several previous administrations.

SPECIAL ANALYSIS

F- 55

provements; cases and charges handled; actions brought; settlements reached; and compensation and opportunities restored to
wronged individuals.
But the Administration's most important contributions, and
those by which its commitment may best be measured, have been
its efforts to restore substance to the definition of the civil rights
which the Federal Government enforces. The Administration has
reaffirmed the original vision which lies at the heart of our national commitment: an America that is colorblind, gender-neutral, ethnically and religiously tolerant and diverse; an America which
judges individuals on the basis of their abilities. And it has reemphasized the clear meaning of the statutes intended to implement
this commitment: that these laws protect individuals against treatment based solely on their race, sex, color, national origin, religion,
or disability; and that they mandate equal access to opportunities
for all individuals.
Considerable progress remains to be achieved. Through 1984, this
Administration will neither diminish its reaffirmation of America's
commitment to equal treatment, nor shrink from the measures
required to give it effect as well as expression. And there will be
persons of good will who will continue to call for a return to
expedients which, for a time, were allowed to substitute for that
commitment. But the likelihood of debate on those measures will
continue to reflect, not a division of purpose, but the intensity of
our common national commitment.
Table J - 2 4 . CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND AGENCY
(In millions of dollars)
1982 actual

Department of Agriculture
Department of Commerce
Department of Defense
Department of Education1
Department of Energy 1
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
Veterans Administration
All other Executive agencies 2
(U.S. Postal Service) 3
(Legislative Branch—GAO, GPO) 3

15.3
3.7
117.0
45.3
3.1
27.1
24.6
10.3
39.9
52.6
.3
13.9
11.2
137.6
11.89
3.6
2.4
11.4
17.0
18.0
1.4

1983 estimate

17.0
4.4
125.0
45.0
3.4
27.9
34.0
10.4
43.7
54.5
.5
14.6
11.7
147.0
12.04
3.3
2.4
12.2
17.2
19.6
1.4

1984 estimate

17.7
4.4
133.9
45.3
3.7
28.8
30.4
10.5
46.9
58.7
.4
15.1
12.2
153.0
12.21
3.8
2.4
13.4
18.3
21.4
1.6

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table J - 2 4 . CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND AGENCY—Continued
(In millions of dollars)
1982 actual

Total

567.6

1983 estimate

1984 estimate

607.2

634.1

^ h e Education and Energy activities included under these accounts will be proposed for reassignment to appropriate executive departments and
agencies pursuant to reorganization legislation to be submitted at a later date.
2 Includes outlays by 49 agencies.
3 U.S.
Postal Service and Legislative Branch outlays appear in the Annexed Budget and are included here for memorandum purposes only.

Table J - 2 5 . TOTAL ESTIMATED FEDERAL CIVIL RIGHTS EXPENDITURES BY CATEGORY, FISCAL YEAR
1984
(In millions of dollars)

Federal Civilian Equal Employment Opportunity
Military Equal Opportunity
Private Sector and non-Federal Public Sector Equal Employment Opportunity
Fair Housing
Nondiscrimination, Federally Assisted Programs
Equal Credit Opportunity
Voting Rights
Other Civil and Constitutional Rights

203.9
51.8
211.5
28.4
94.2
5.3
4.8
30.8

Table J - 2 6 . TOTAL FULL-TIME PERMANENT CIVIL RIGHTS STAFF BY EXECUTIVE DEPARTMENT AND
AGENCY, FISCAL YEAR 1984 (ESTIMATE)
Total

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 DevelopmentDepartment 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
Veterans Administration
All other Executive agencies
(U.S. Postal Service)
(Legislative Branch—GAO, GPO)
Total..

Internal EEO

173
86
2,486
965
50
688

582
224
905
1,215

119
254
2,980
236
45
50
73
500
416
26
12,074

109
79
2,407
15
41
179
47
220
156
66
214
18

3
45
14
70
345
416
26
4,558

1 Agency totals for FTP Internal EEO and FTP External program staff in some cases are less than figures for total civil rights FTP because
some personnel have duties in both areas,
includes 917 FTP staff devoted to military service equal opportunity.

SPECIAL ANALYSIS F

F- 55

Table J - 2 7 . DISTRIBUTION OF PROFESSIONAL FTE's* AMONG PROGRAM CATEGORIES, EXECUTIVE
DEPARTMENTS AND AGENCIES, FISCAL YEAR 1984 ESTIMATE
Tots! FTE

Federal service equal opportunity
Military service equal opportunity
Private sector and non-Federal public sector equal employment opportunity
Fair housing
Nondiscrimination, federally assisted programs
Equal Credit Opportunity
Voting rights
Other Civil and Constitutional Rights
•Includes all professional FTE's devoted to the designated activities.

5,365
2,566
3,020
168
1,939.26
151
96
370

SPECIAL ANALYSISFF-55
RESEARCH AND DEVELOPMENT
This analysis covers the funding of research and development
across all departments and agencies with R&D programs of $10
million or more, representing over 99% of total Federal funds for
R&D. It consists of two sections. The first highlights the R&D
policies and trends in the 1984 budget. The second describes in
more detail the R&D programs of 13 agencies whose R&D obligations individually exceed $150 million.
PART I.

HIGHLIGHTS

Total Federal funding for research and development, including
R&D facilities, is proposed at $47.0 billion in 1984, an increase of
$6.9 billion or 17% above the 1983 level of $40.1 billion. Included
within the overall R&D funding is support for the conduct of basic
research, estimated to increase by 10%, from $6.0 billion in 1983 to
$6.6 billion in 1984, including an 18% increase in programs of the
National Science Foundation.
The Federal Government funds R&D activities to serve two
broad purposes:
• To meet specific Federal Government needs—where the principal user of the R&D is the Government itself—for example,
to ensure a strong national defense;
• To meet broad national needs—where the Federal Government supports R&D that the private sector lacks incentive to
invest in adequately, in the national interest—to help assure
the strength of the economy and the quality of life for all
people. Included in this category are, for example, agricultural and health research; support of basic research through
programs of the National Science Foundation and the general
science programs of the current Department of Energy; and
the pursuit of selected long-term energy technologies, such as
magnetic fusion.
The 1984 budget continues to reflect the established policies of
the Administration in funding R&D but further strengthens support in areas of major Federal responsibility. It provides for:
• Major increases across all R&D programs of the Department
of Defense;
• A significant increase in Government-wide support of basic
research with emphasis on support of research in the physical
K-L

380-700

H-10

THE BUDGET FOR FISCAL YEAR 1984

sciences and engineering. Advances in these fields are key to
future national defense and the long term competitiveness of
the U.S. economy, particularly in high technology industries.
• A number of major new initiatives, particularly in energyrelated programs, currently in the Department of Energy, and
in NASA that will significantly enhance the research productivity of the Nation's scientific community especially in basic
research. These include a new center for materials research
at the Lawrence Berkeley Laboratory, expansion of the National Synchrotron Light Source at Brookhaven National Laboratory, a new colliding beam facility at the Stanford Linear
Accelerator Center, and a numerical aerodynamic simulation
capability at NASA's Ames Research Laboratory.
• Continued reductions in Federal support of nearer-term R&D
and demonstration programs (e.g., in energy technologies).
For such programs the private sector, not the Federal Government, has the expertise and capability to select and fund the
advancement of technologies that can be successfully brought
into the marketplace. To complement private sector efforts,
the Federal Government's role is primarily to create an economic climate conducive to private investments, through such
measures as tax incentives and reductions in the burden of
regulations. Federal Government investments should be limited to longer term research and technology support which the
private sector does not have the economic incentive to provide
for adequately to serve the national interest.
The Administration will further seek, in 1984, to make more
effective use of increased research funds, particularly in the basic
sciences to:
• Attract the highest caliber scientists and engineers, particularly young faculty members, into research and encourage
and support them in their careers. These efforts will assist in
ensuring a high quality scientific workforce to meet needs of
the Nation both in the near and the long term;
• Encourage greater and more creative interaction among university, Government and industry scientists to bring the Nation's best scientific expertise together in addressing the most
challenging scientific and technical problems and opportunities; and
• Upgrade the scientific instrumentation of universities to enhance productivity and excellence in research and the training of scientists and engineers.
The 1984 budget also includes proposed efforts by the NSF and
the Department of Education to improve the teaching of science
and mathematics in the Nation's secondary schools. Though not
covered in this analysis, these efforts will help in improving the

SPECIAL ANALYSIS F

F- 55

capability of the future work force to contribute to economic
growth in an increasingly technological society.
Total obligations and outlays for the conduct of all Federal R&D
programs and for related facilities are shown in Table K - l .
TABLE K - l . TOTAL FEDERAL FUNDING FOR CONDUCT OF R&D AND RELATED FACILITIES
(In billions of dollars)
Obligations
1982 actual

Outlays

1983 estimate

1984 estimate

1982 actual

1983 estimate

1984 estimate

Conduct of R&D
R&D Facilities

36.4
1.2

38.9
1.2

45.8
1.2

34.5
1.3

37.7
1.2

42.7
1.1

Total

37.6

40.1

47.0

35.8

38.9

43.8

CONDUCT OF RESEARCH AND DEVELOPMENT

The 1984 budget includes $45.8 billion in obligations for the
conduct of R&D, an increase of $6.9 billion or 18% over 1983.
Highlights of the programs of the major R&D agencies that account for 93% of the proposed obligations for the conduct of R&D
by all agencies are presented below:
• Department of Defense (DOD).—Obligations for the conduct
of R&D by DOD are estimated at $29.9 billion in 1984, an
increase of $6.7 billion or about 29% above 1983. This represents 65% of the total Federal funds for R&D proposed for
1984. The increased funds are proposed for R&D largely related to advanced strategic systems such as the Peacemaker and
Trident II ballistic missiles. In addition, the Department
would also provide for increased emphasis on basic research
in such areas as materials and microelectronics, and advanced
technology development in such areas as very high speed
integrated circuits.
• National Aeronautics and Space Administration (NASA).—
Obligations for the conduct of R&D by NASA are estimated at
$2.5 billion in 1984, about equal to 1983. The 1984 request
would allow NASA to pursue a vigorous program of space
science, applications, and advanced technology for space projects and future aircraft. The 1984 budget proposes several
new initiatives such as a Venus Radar Mapper to provide a
map of the surface of Venus, a numerical aerodynamic simulation capability, and development of advanced composites for
large aircraft structures. Previously approved projects such as
the Space Telescope, and the Advanced Communications
Technology Satellite (ACTS) will be continued.

H-10

THE BUDGET FOR FISCAL YEAR 1984

• Energy Related Activities.1—Obligations for the conduct of
R&D programs currently in the Department of Energy are
estimated at $4.7 billion, about the same as in 1983. However,
basic research funding would be increased by $160 million, or
more than 18% over 1983. Increases are proposed to strengthen the nuclear weapons R&D program, to enhance support for
long-term energy research, and to maintain a strong national
basic science effort in high energy and nuclear physics. These
increases are offset by proposed reductions in support for
nearer-term energy technologies such as fossil and solar demonstrations, where reliance is placed on private sector support.
• Department of Health and Human Services (HHS).—Obligations for the conduct of R&D in HHS are proposed for an
increase of $100 million, from $4.3 billion in 1983 to $4.4
billion in 1984. This represents a 12% increase over the two
year period, 1982-1984. The National Institutes of Health
(NIH) account for about 87% of total R&D funding by HHS.
An increase of $71 million above 1983 is proposed for R&D
programs of NIH, including basic research in the biomedical
sciences.
• National Science Foundation (NSF).—R&D obligations by
NSF are expected to increase by $180 million, or 17%—to $1.2
billion in 1984. The additional funds will largely be devoted to
strenthening support of basic research in the mathematical
and physical sciences and engineering, that support long-term
economic growth. This increase also provides additional funds
for upgrading research instrumentation at universities.
Table K-2 summarizes Federal support for the conduct of R&D
by agency.
CONDUCT OF BASIC RESEARCH

The 1984 budget continues to reflect the Administration's view
that investments in basic research across all scientific disciplines
are critical to the long-term economic strength of the Nation and
the well-being of its citizens. Basic research in such fields as mathematics, physics, chemistry, and engineering provides the foundation, in the long term, for a strong national defense, and leads to
new discoveries and new technologies and industries that enhance
U.S. competitiveness, employment and the quality of life.
Federal Government funding for the conduct of basic research is
included within the total support for the conduct of R&D. In 1984,
obligations for the conduct of basic research are estimated at $6.6
billion, an increase of $594 million or 10% above the 1983 level.
1 These programs, along with other activities currently funded by the Department of Energy, will be proposed
for reassignment to other Executive departments and agencies.

SPECIAL ANALYSIS F

F- 55

TABLE K-2. CONDUCT OF RESEARCH AND DEVELOPMENT BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)
Obligations
Department or agency

1982
actual

Defense-Military Functions
20,576
4,758
Energy Related Activities
3,935
Health and Human Services
(3,432)
(National Institutes of Health)
National Aeronautics and Space Administration.. 3,084
975
National Science Foundation
798
Agriculture
Transportation
309
Interior
381
290
Commerce
Environmental Protection Agency
335
221
Nuclear Regulatory Commission
Veterans Administration
140
165
Agency for International Development
All other 1
388
Total

36,354

Outlays

1983
estimate

1984
estimate

1982
actual

1983
estimate

1984
estimate

23,179
4,712
4,316
(3,771)
2,506
1,060
850
393
373
312
241
210
165
152
391

29,882
4,713
4,416
(3,842)
2,473
1,240
849
519
329
227
208
200
163
161
418

18,201
4,974
3,978
(3,438)
3,220
1,014
808
349
392
285
336
209
138
179
426

21,847
5,012
4,262
(3,737)
2,386
1,002
839
376
411
315
295
210
157
200
425

26,844
4,911
4,339
(3,808)
2,421
1,137
848
451
348
249
250
200
156
152
433

38,860

45,796

34,509

37,735

42,741

Includes the Departments of Education, Justice, Labor, Housing and Urban Development and Treasury, the Tennessee Valley Authority, the
Smithsonian Institution, the Corps of Engineers, and the Federal Emergency Management Agency.
1

This increase will result in a "real" growth in the Governmentwide support of basic research of more than 4% above 1983.
For agencies primarily supporting basic reasearch in the physical
and engineering sciences, particularly DOD, NASA, NSF, and including the energy-related programs currently under DOE, the
increase in 1984 will be 15% over 1983.
Support for basic research in the life sciences, particularly in
NIH, has been growing significantly in recent years. The Administration is seeking, through emphasis on the physical and engineering sciences in the 1984 budget, to balance Federal support of basic
research across all major disciplines.
Enhanced support of basic research will further strengthen the
scientific capability of the Nation's universities whose researchers
receive about half of the total Federal obligations for basic research and conduct about half of all basic research performed in
the Nation.
Table K-3 summarizes Federal support for the conduct of basic
research by agency.

H-10

THE BUDGET FOR FISCAL YEAR 1984
Table K - 3 . CONDUCT OF BASIC RESEARCH BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)

Obligations
Department or agency

Agencies supporting primarily physical sciences and engineering:2
National Science Foundation
Energy Related Activities
Defense—Military Functions
National Aeronautics and Space Administration
Interior
Commerce
Other Agencies 3
Subtotal
Agencies supporting primarily life and other
sciences: 4
Health and Human Services
(National Institutes of Health)
Agriculture
Smithsonian Institution
Environmental Protection Agency
Veterans Administration
Education
Other Agencies 5
Subtotal
Total

Outlays

1983
estimate

1984
estimate

916
777
686

998
861
769

1,181
1,021
867

538
74
17
9

605
88
18
7

3,017

1982
actual

1983
estimate

1984
estimate

954
774
603

943
859
746

1,083
1,001
776

682
89
16
8

537
74
16
9

588
89
16
7

658
94
17
8

3,347

3,864

2,967

3,249

3,636

1,953
(1,840)
331
55
33
13
16
22

2,184
(2,049)
362
60
21
15
16
22

2,238
(2,086)
381
68
17
15
14
22

1,962
(1,835)
338
47
30
13
22
22

2,154
(2,022)
356
60
25
15
22
23

2,214
(2,068)
380
62
22
15
18
13

2,422

2,678

2,755

2,434

2,655

2,723

5,439

6,025

6,619

5,401

5,904

6,359

Amounts reported in this table are included in totals for conduct of R&D.
Includes mathematics and computer sciences.
Includes the Corps of Engineers, the Federal Emergency Management Agency, the Tennessee Valley Authority, and the Department of
Transportation.
4 includes psychology and social sciences.
5 Includes the Departments of Labor, Justice, and Treasury, and the Agency for International Development.
2

R&D FACILITIES

Excellence in research and development requires the availability
of modern facilities and equipment. Additional funding for research equipment and instrumentation is included in support for
the conduct of R&D including basic research. Funds identified separately by Federal departments and agencies for R&D facilities are
summarized in Table K-4.
Obligations for R&D facilities, which include primarily construction or renovation of general purpose laboratories and research
support facilities, would decrease by $54 million, to $1,195 million
in 1984.
Trends in the funding of R&D facilities generally reflect program
directions in agency support for the conduct of R&D as described
below.

F- 55

SPECIAL ANALYSIS F

Table K - 4 . RESEARCH AND DEVELOPMENT FACILITIES BY MAJOR DEPARTMENTS AND AGENCIES
(In millions of dollars)
Obligations
Department or agency

1982
actual

Energy Related Activities
Defense—Military Functions
National Aeronautics and Space AdministrationHealth and Human Services
(National Institutes of Health)
Agriculture
All other 1
Total

762
290
92
29
(20)
30
30
1,234

1983
estimate

619
323
160
60
(21)
38
49
1,249

Outlays
1984
estimate

1982
actual

804
232
109
38
(35)
30
40

501
438
156
29
(26)
26
45
1,195

1,253

1983
estimate

1984
estimate

623
289
136
31
(20)
45
34

532
349
129
35
(20)
22
48

1,158

1,114

'Includes the Departments of Transportation, Commerce, Interior, and Treasury, the Agency for International Development, Veterans
Administration, Tennessee Valley Authority, Smithsonian Institution and the National Science Foundation.

PART II. AGENCY R & D

PROGRAMS

Presented below are summaries of the R&D activities of the 13
agencies whose R&D obligations individually exceed $150 million.
DEPARTMENT OF DEFENSE

The Defense R&D program is oriented toward the development
of strategic and tactical weapons and supporting systems to provide
for the Nation's defense. DOD obligations for the conduct of R&D
in 1984 would total $29.9 billion, an increase of $6.7 billion over
1983. Within the total, funding for basic research would increase by
$98 million to $867 million in 1984. R&D facilities funding would
total $438 million, up from $323 million in 1983. Major R&D efforts
by DOD mission category in 1984 include:
Technology Base and Advanced Technology Development—The
purpose of these programs is to investigate promising new technologies and to avoid technological surprise by potential adversaries.
The Very High Speed Integrated Circuits program will continue to
push for further miniaturization of microelectronic devices. Increased attention also will be paid to human factors in the Defense
mission. Protection against chemical agents, aids for use in training of personnel and exploration of the relation between man and
machine will be stressed. Other areas of focus include information
processing, materials research, fault-resistant electronics and advanced computer languages.
Strategic Programs.—In addition to the Peacekeeper and Trident
II efforts, continued emphasis will be given to ballistic missile
defense, an advanced technology bomber and an anti-satellite
system. The communications and control systems that are needed
for these and existing systems will also receive increased emphasis.

H-10

THE BUDGET FOR FISCAL YEAR 1984

Tactical Programs.—Systems are under development that will
improve the capability of U.S. general purpose and theater nuclear
forces, and allow the rapid deployment of those forces wherever the
vital interests of the U.S. are threatened.
• The Army is continuing work on upgrades to the M - l tank
and Bradley Fighting Vehicle System and is increasing its
efforts on remotely piloted vehicles and some areas of air
defense.
• The Air Force is developing a deep strike interdiction version
of an existing fighter aircraft, a more reliable fighter engine,
an air-to-air missile and a new trainer aircraft for undergraduate pilot training.
• The Navy is developing a lightweight anti-submarine torpedo,
a new longer range anti-submarine missile and a new destroyer. Upgrades to current subsystems to improve detection,
tracking and targeting will also increase the capability of
major systems now in production.
Intelligence and Communications, Program Management and Support.—R&D on intelligence and communication systems will focus
on communication satellites, on radios that will work in the electronic noise of the battlefield, and on surveillance radars. Work
will also continue on the use of technology to reduce manufacturing costs and to extend the life and capability of existing defense
systems.
Table K-5. DEPARTMENT OF DEFENSE—MILITARY RESEARCH AND DEVELOPMENT
(In millions of dollars)
Type of activity

1982 actual

1983 estimate

1984 estimate

2,945
750
4,846
6,750
2,104
2,538
642

3,137
826
5,747
7,222
2,686
2,869
692

3,555
1,211
8,978
8,705
3,474
3,236
722

20,576

23,179

29,882

OBLIGATIONS

Conduct of R&D:
Research, development, test and evaluation:
Technology base
Advanced technology development
Strategic programs
Tactical programs
Intelligence and communications
Program management and support
Other appropriations
Total conduct of R&D
Total conduct of basic research, included above
R&D facilities
Total obligations

(686)
290

(769)
323

(867)
438

20,866

23,502

30,320

18,201
232

21,847
289

26,844
349

18,432

22,136

27,194

OUTLAYS

Conduct of R&D
R&D facilities
Total outlays

SPECIAL ANALYSIS F

F- 55

NATO Cooperation.—Cooperation in research and development
and joint production of new weapon systems will be pursued to
make the best use of Alliance resources. Funding for these activities is not identified separately in Table K-5 but is included in the
other categories listed in that table.
Table K-5 provides the details of the Department of Defense
military R&D funding.
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Through the programs of NASA, the Federal Government develops and operates the Shuttle based Space Transportation System
and makes investments in R&D that yield other new space technologies to improve the national security and the long term scientific
and technological strength of the Nation. NASA programs also
provide new knowledge about the Earth, the solar system, and the
universe.
Now that the Space Shuttle is in its operational phase, it is no
longer appropriate to classify all of NASA programs as R&D.
Therefore, the amounts shown for 1982, 1983, and 1984 for NASA
R&D exclude funding for Shuttle production and operation, tracking and data acquisition activities, and related institutional support.
In 1984, R&D obligations for the agency will decrease slightly
due to spending patterns on previously initiated projects, although
new obligational authority for R&D activities is projected to increase by $44 million. Basic research obligations by NASA in 1984
would amount to $682 million, an increase of $77 million over 1983.
Obligations for construction of R&D facilities in 1984 would total
$156 million.
Space Transportation.—With the initiation of Space Shuttle operations in November 1982, the major R&D phase of the Shuttle
program has been concluded. A fully operational and cost effective
Shuttle is essential to exploit space effectively and to help maintain U.S. leadership in space throughout this century.
Space Transportation R&D activities provided by the 1984 budget
include Shuttle modifications and improvements and continued development of two versions of the Centaur upper stage—a new high
energy upper stage for use with the Shuttle. Also included will be a
tethered satellite program to extend the use of the Shuttle to
conduct scientific experiments in the boundary region between
space and the Earth's upper atmosphere. The tethered satellite will
be an international cooperative program with the Italian government.

H-10

THE BUDGET FOR FISCAL YEAR 1984

Space Science.—In this area, spacecraft in flight are conducting
deep space astronomical observations from Earth orbit or exploring
the solar system.
• The High Energy Astronomy Observatory (HEAO), launched
in 1979, will continue operations and data analysis activities.
• Two Voyager spacecraft, launched in 1977, have successfully
encountered Jupiter and Saturn, and Voyager 2 will continue
on its way to Uranus for an encounter in 1986.
• The flight of several other smaller scientific satellites (e.g.,
International Ultraviolet Explorer) will be continued.
The 1984 budget supports continuation of the flight of these
satellites in space and the analysis of scientific data sent back to
Earth. It also provides for the retrieval and repair in orbit of the
partially disabled Solar Maximum Mission Satellite.
The proposed budget continues development of major flight projects to be launched in the future.
• The Space Telescope is planned for launch in 1985 and will
serve as a major astronomy facility for a 15- to 20-year period.
• The Gamma Ray Observatory is planned for launch in 1988
and will enhance basic research in high energy astrophysics,
providing new knowledge about objects in deep space.
• Spacelab astronomy experiments, designed for repeated use,
will be conducted on the Shuttle to improve our understanding of the Sun and the universe.
• Work is continuing on the Galileo mission to Jupiter; the
spacecraft is composed of two segments—an orbiter and a
probe to enter the upper atmosphere of Jupiter. The Galileo
orbiter and probe will be launched in 1986 and will arrive at
Jupiter in 1988 to carry out long-term studies of the planet,
its satellites, and its magnetosphere.
In 1984, funds are also proposed to initiate the Venus Radar
mapper project, for a 1988 launch, to map the planet. A new
Explorer class project for research in ultraviolet astronomy will
also be initiated, recognizing the potential of lower cost missions to
conduct important science experiments in space.
Space and Terrestrial Applications.—The 1984 budget continues
to support research that could lead to the broad application of
space technology to national needs. The 1984 budget proposes continued funding for space-related research activities to:
• Improve understanding of Earth resources, climate, weather,
and pollution;
• Advance knowledge in materials science and materials processing through low gravity experiments in space;
• Extend the capability for satellite communications to higher
frequencies than those employed with current satellites;

SPECIAL ANALYSIS F

F- 55

The 1984 budget reduction for Space and Terrestrial Applications
reflects decreasing obligations in two major projects that are nearing completion, Landsat and the Earth Radiation Budget Experiment (ERBE). However, the budget also includes increasing obligations for an Advanced Communications Technology Satellite
(ACTS), while funding for other continuing programs will be maintained at about the same level as in 1983.
Landsat D, the fourth in the series of experimental Earth observing satellites, was launched successfully in July 1982 and is performing satisfactorily. A follow-on satellite will be completed in
1984, ready to succeed Landsat D when needed. Space remotesensing technology, such as that employed by Landsat D, has the
potential to improve our ability to manage critical Earth resources.
The ERBE satellite will be launched by the Shuttle in 1984. The
program is designed to provide global measurements of the level of
solar and cosmic radiation absorbed by the Earth and also map
levels of ozone and other aerosols in the stratosphere. Such observation will help improve our understanding of the factors that
determine the Earth's climate.
TABLE K-6. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Type of activity

1982 actual

1983 estimate

1984 estimate

890
582
319
258
118
12
905

117
752
398
313
131
8
787

183
779
289
300
138
22
762

3,084

2,506

2,473

(605)
160

(682)
156

3,176

2,666

2,629

3,220
109

2,386
136

2,421
129

3,329

2,522

2,550

OBLIGATIONS

Conduct of R&D:
Space transportation systems
Space science
Space and terrestrial applications
Aeronautical research and technology
Space research and technology
Tracking and data acquisition
Research and program management
Total conduct of R&D
Total conduct of basic research, included above
R&D facilities
Total obligations

(538)
92

OUTLAYS

Conduct of R&D
R&D facilities
Total outlays

The development of the ACTS will be a joint venture of government and industry and will provide advanced, higher frequency,
satellite communications technology for use later in the decade.
Aeronautical Research and Technology.—The 1984 budget includes funds for a significant enhancement in new obligational

H-10

THE BUDGET FOR FISCAL YEAR 1984

authority for research in fundamental aeronautical disciplines such
as fluid and thermal physics, materials and structures, and propulsion. In addition, technology development at the concept, technique
or component level would also be enhanced. Planned obligations for
aeronautical R&D will decrease slightly in 1984 because of the
extraordinary rate of obligations against prior year authority experienced in 1983. New budgetary authority would increase from $280
million in 1983 to $300 million in 1984.
Funds are included for initiating in 1984, the development of a
numerical aerodynamic simulation capability which will further
the state-of-the-art of aerodynamic research and design and will
also be an important tool for research in areas such as climate
modeling and computational chemistry.
The 1984 budget also provides for research and technology development related to the use of composite materials in large aircraft
structures. These lightweight materials would result in longerrange and more efficient military and civil aircraft.
Agency-wide support activities.—Obligations for agency-wide support activities would remain at about the 1983 level. These programs include primarily NASA civil service and administrative
costs supporting R&D activities, construction and maintenance of
the agency's R&D facilities, and R&D addressing fundamental
space technology problems and opportunities common to a wide
spectrum of space programs.
Table K-6 provides the details of NASA's R&D funding.
ENERGY RELATED ACTIVITIES

Energy related R&D, currently supported by the Department of
Energy, covers a broad range of activities: a National Defense Program related to the development and testing of nuclear weapons: a
General Science Program of basic research in high energy physics
and nuclear sciences; and an Energy Program focused on long-term
R&D. Table K-7 provides summary information on the funding of
these programs.
Obligations for the conduct of energy related R&D (including
facilities) are estimated to total $5.2 billion in 1984, a decrease of
$117 million from 1983. Obligations in 1984 for R&D facilities,
including the construction or upgrading of laboratories and other
research support facilities, will amount to $501 million.
Obligations for the conduct of basic research, included in the
total for the conduct of R&D, are estimated to be slightly over $1
billion in 1984. This represents an increase of $160 million, or more
than 18% over the 1983 level. Within the basic research total, $82
million would be provided to initiate a number of major new projects in both the Energy Program and the General Science Pro-

SPECIAL ANALYSIS F

F- 55

gram, that will significantly improve the Nation's capacity for
basic research at the frontiers of science. These include:
• initiation of a national advanced materials research center at
the Lawrence Berkeley Laboratory to improve the linkages
among academic, national laboratory, and industry scientists
for the future advancement of high technology industries;
• expansion of the National Synchrotron Light Source at Brookhaven National Laboratory to meet the growing need of industry, national laboratories, and universities for this research tool;
• building on a rapid time scale, a linear colliding beam accelerator at the Stanford Linear Accelerator Center to demonstrate the feasibility of new techniques for very high energy
electron-positron collisions;
• upgrading of on-campus Van de Graaff accelerators at the
University of Washington and Yale University to maintain
the performance capabilities of two essential components of
the university based nuclear physics research program; and
• a $6 million university instrumentation procurement program
to provide large state-of-the-art equipment used in energyrelated research areas.
Highlights of the Energy related R&D activities by major programs are provided below:
The National Defense Program primarily supports the continued
development and testing of nuclear weapons. It also supports the
development of improved technologies for monitoring nuclear
weapons treaties and of improved methods for safeguarding nuclear materials. In addition R&D efforts will continue in developing
methods for the safe storage and disposal of radioactive wastes
resulting from weapons production, and research on improved propulsion reactors for naval vessels. Obligations for the National
Defense Program for the conduct of R&D will increase from $1.7
billion in 1983 to $1.9 billion in 1984. Funds for R&D facilities in
1984 include construction of the Waste Isolation Plant (WIPP) in
New Mexico for R&D on disposal of nuclear waste. Conduct of R&D
increases provide funds for staff additions to strengthen the national weapons laboratories, for increased weapons tests, and for increased research in the basic physics of nuclear weapons.
The General Science Program supports research in high energy
and nuclear physics. An increase of $90 million, to $643 million in
1984, for the conduct of basic research will continue support for
advanced accelerator concepts as well as for theoretical efforts to
understand the basic constituents of matter and energy and the
forces that govern their interaction. Because of the exceptional
research opportunities in high energy physics and the demonstrated excellence of the U.S. program, the Administration is committed

H-10

THE BUDGET FOR FISCAL YEAR 1984

to maintaining a strong national effort in this field. The 1984
budget request would provide for (a) increased utilization of existing accelerator facilities, (b) operation of the newly completed
(1983) Energy Saver Superconducting Synchroton at Fermilab in
the 500-1,000 GeV energy range, and (c) continuation of the construction at Fermilab of the Tevatron I and II projects which will
provide increased proton-fixed target and proton-antiproton colliding beam capabilities. Funds will also be provided for upgrading
accelerators at Yale University and the University of Washington
and for initiation of the Stanford Linear Collider (SLC).
The Energy Program is focused in 1984 on long-term R&D to
complement industry investments in new or improved energy technologies. It supports basic and generic research to enhance the
scientific base for future advances in these technologies and continues support for the development of selected technologies of a high
risk but potentially high payoff nature, such as magnetic fusion,
where significant private investment is unlikely. In addition, the
Energy Program includes research on the environmental and
human health effects of energy production technologies. Energy
Program obligations for the conduct of R&D would decrease from
$2.4 billion in 1983 to $2.2 billion in 1984, largely reflecting net
savings from proposed reductions in non-nuclear technology development and demonstration activities. Obligations for R&D facilities
in this area would be $152 million, a reduction of $84 million,
paralleling the reduction in the conduct of R&D.
In the basic energy sciences, funding for the conduct of R&D and
related facilities will increase by $67 million to $350 million in 1984
for research in such fields as nuclear science, chemistry, engineering, materials science, mathematics, biology, and geoscience. This
program provides the fundamental scientific and technical base for
future advances in technology development. In addition, it provides
support for the operation of several unique national facilities such
as the National Synchrotron Light Source (NSLS) at the Brookhaven National Laboratory, the High Voltage Electron Microscope at
Lawrence Berkeley Laboratory (LBL), and the Electromagnetic Isotope Separation Plant (calutrons) at Oak Ridge National Laboratory. In 1984 a national materials research center at LBL and an
upgrade of the NSLS facility will be initiated.
The 1984 budget will continue the redirection of the non-nuclear
R&D programs to limit federal support to long-term generic research and place greater reliance on the private sector for support
of nearer-term technology development. Obligations for the conduct
of R&D in the fossil, solar and conservation programs are expected
to be $302 million in 1984, a decrease of $405 million from 1983.
Funding for the conduct of fossil related R&D and associated
facilities would be $138 million in 1984, a decrease of $234 million.

SPECIAL ANALYSIS F

F- 55

The 1984 budget is focused on research to strengthen the technical
base for future fossil technology development. Support would continue to be provided in such areas as the chemistry of coal conversion, environmental controls, combustion research, and the understanding of the behavior of oil and gas reservoirs.
Research in support of solar energy, proposed at a level of $87
million, will emphasize materials development for a variety of
applications and continue to support research in the areas of solar
thermal, photovoltaics, biomass, and wind conversion. In 1983,
work on the international SOLERAS agreement will be completed.
Research to foster energy conservation will be focused on improved
understanding of energy losses in building systems, research on
alternative heat engines, and development of advanced technologies for electrical systems and energy storage. Technology demonstrations in industrial, transportation, and buildings and community systems conservation will be scaled down in 1984. Conduct of
R&D for energy conservation in 1984 would be $84 million.
The 1984 budget provides for a broad program of research in
fission and fusion energy sources R&D. In the magnetic fusion
program, funding of $467 million for the conduct of R&D and
associated facilities would enable the continuation of investigations, at about the 1983 program level, of key physics issues involved with confined plasmas and further research on superconducting magnets, high power radiofrequency electronics, advanced
materials development, and mathematical computer modeling
needed for fusion technology development.
Within the fission effort the breeder reactor program will be
funded at $603 million in 1984, maintaining a priority for the
design and construction of the Clinch River Breeder Reactor
(CRBR). In addition, long-range research will continue in support of
breeder technology. Total funding for the conduct of breeder R&D
will increase by $62 million over 1983. Other nuclear fission research areas such as nuclear fuel cycle, converter reactors systems,
and advanced nuclear systems are funded for conduct of R&D and
associated facilities at a level of $129 million for 1984.
Additional funds are proposed for nuclear safety and commercial
nuclear waste management research. For example, in cooperation
with the Nuclear Regulatory Commission, technical investigations
associated with the disabled Three Mile Island nuclear power reactor will be supported. The fission R&D program will also seek to
resolve technical issues associated with the construction of a permanent repository for nuclear waste. Obligations for these activities in 1984 will total $69 million.
Finally, the Energy Program supports R&D to determine the
biological and environmental effects of energy production and use.
The biological and environmental research R&D emphasizes the

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THE BUDGET FOR FISCAL YEAR 1984

health effects of radiation, the use of radiation in medical diagnosis
and therapy, and generic biological research related to radiation
and other cellular traumas. The level of obligation for such activities will be $158 million in 1984. This effort also supports research
to determine the relationship between the CO2 content of the atmosphere and the earth's climate changes. Funding in 1984 for CO2
studies will total $12 million.
Table K - 7 . ENERGY RELATED ACTIVITIES

(In millions of dollars)
Type of activity

1982 actual

1983 estimate

1984 estimate

1,526
500
2,731

1,727
553
2,432

1,905
643
2,165

4,758

4,712

4,713

(777)
762

(861)
619

(1,021)
501

OBLIGATIONS

Conduct of R&D:
National defense program
General science program
Energy program
Total conduct of R&D
Total conduct of basic research, included above
R&D facilities
Total obligations

5,519

5,331

5,214

4,974
804

5,012
623

4,911
532

5,778

5,635

5,443

OUTLAYS

Conduct of R&D
R&D facilities
Total outlays

'These programs, currently supported by the Department of Energy, will be proposed for reassignment to other Executive departments and
agencies.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

The Department of Health and Human Services (HHS) obligations in 1984 for the conduct of R&D would increase by $100
million over the 1983 level to a total of $4.4 billion. Within this
total, funding for basic research is estimated to be $2.2 billion.
Obligations for R&D facilities would total $29 million in 1984. This
represents a decline from the $60 million provided in 1983. The
higher level of obligations in 1983 was primarily due to the nonrecurring costs for a single large project—construction of the new
research headquarters for the Food and Drug Administration.
Health.—Over 87% of the Department's funds for the conduct of
R&D and over 93% of the Department's basic research funds would
be obligated by the National Institutes of Health (NIH) for biomedical research to advance the Nation's capabilities for the prevention, diagnosis, and treatment of disease. Several other agencies
within the Department—the Alcohol, Drug Abuse, and Mental
Health Administration, the Food and Drug Administration, the
Centers for Disease Control, the Health Resources and Services

SPECIAL ANALYSIS F

F- 55

Administration, the Health Care Financing Administration, and
the Office of the Assistant Secretary for Health—also support R&D
programs in health related research.
The National Institutes of Health (NIH) consist of 11 separate
Institutes which would obligate $3.8 billion in 1984 for the conduct
of R&D, an increase of $71 million above the 1983 level; over onehalf or $2.1 billion of NIH's total 1984 R&D budget would support
basic research. Among the most significant activities to be supported by NIH are:
• Basic research on cancer chemoprevention including studies
of nutritional factors; rehabilitation of patients with chronic
obstructive pulmonary disease; prevention of glaucoma; diagnostic imaging, and the biological response to mixtures of
chemicals;
• Clinical research where the emphasis is on intervention, including prototype development and refinement of products,
techniques, processes, methods, and practices;
• Expansion of cooperative clinical trials on the acquired immunodeficiency syndrome/Kaposi Sarcoma problems; isolated
systolic hypertension in the elderly; herpes simplex virus vaccine; and antiviral drugs against neonatal herpes, herpes encephalitis, herpes genitalis; the efficacy of interferon for controlling the frequency and severity of multiple sclerosis; gonococcal vaccines and the prevention of premature labor and
the role of folic acid in neural tube defects; and
• Greater emphasis on basic clinical research into the cause,
cure, and prevention of diabetes.
The Alcohol, Drug Abuse and Mental Health Administration
(ADAMHA) conducts studies on the causes, prevention and treatment of alcohol and drug abuse and mental disease and neurological disorders, with emphasis on improving knowledge of effective
prevention of these public health problems.
The 1984 budget proposes increases in levels for extramural research programs in biomedical, behaviorial and clinical areas. Obligations for ADAMHA would increase in 1984 to $314 million, an
increase of $36 million over 1983.
Specific research areas would address:
• Neurosciences, behavioral sciences, psychopharmacology, and
clinical investigations and evaluations of services to the mentally ill, with special emphasis on preventing and diagnosing
mental and emotional problems in children;
• Drug abuse among the Nation's youth, including studies on
the adverse health hazards of marihuana and cocaine; and
• Causes and consequences of alcohol abuse, particularly among
teenagers.

380-700

H-10

THE BUDGET FOR FISCAL Y E A R 1984

The Food and Drug Administration (FDA) supports research relevant to its mission of regulating food, drugs, and biological and
radiological products. In 1984, obligations for these activities are
estimated at $82 million.
The Centers for Disease Control (CDC) supports studies on the
epidemiology and control of communicable diseases and on health
promotion and disease prevention. In 1984, obligations for these
activities are estimated at $75 million.
Other Health Related Agencies within HHS would support research in areas such as how socioeconomic facts affect social security programs and the economy; survey methods and techniques for
analysis of health statistics; and the organization, delivery, and
financing of health services. This support will be provided through
programs of the Health Resources and Services Administration, the
Office of the Assistant Secretary for Health and the Health Care
Financing Administration.
Human Services.—The Department's obligations for R&D in
human services programs in 1984 would be $53 million, $11 million
below 1983. The proposed 1984 budget would support a variety of
developmental and social service research aimed at improving the
Head Start program; the quality of life for the elderly; knowledge
of child abuse and neglect; day care systems; family and community support systems and fostering independence for the disabled.
Table K-8 provides the details of the R&D funding of the Department of Health and Human Services.
NATIONAL SCIENCE FOUNDATION

The National Science Foundation (NSF) supports primarily basic
research in all scientific disciplines through grants to scientists and
engineers in academic institutions. NSF programs serve to advance
scientific knowledge. Foundation support is particularly important
because it complements the basic research programs of other agencies and assists in balancing Federal support for promising research across all fields of science and engineering.
The 1984 NSF budget includes $1.2 billion in obligations for the
conduct of R&D, an increase of $180 million or 17 percent above
1983. This would provide a growth of about 12 percent in addition
to cost increases due to inflation. Within this increase, support for
the conduct of basic research would increase by about 18 percent.
Specifically, the 1984 budget would:
• Provide special emphasis on disciplines such as mathematics,
materials science, astronomy, and electrical, computer, and
chemical engineering. Research in these disciplines has the
potential to make important contributions to the long term

SPECIAL ANALYSIS F

F- 55

Table K-8. DEPARTMENT OF HEALTH AND HUMAN SERVICES—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Type of activity and organizational units

1982 actual

1983 estimate

1984 estimate

3,432
243
73
75
12
29
16

3,771
278
77
70
10
30
16

3,842
314
82
75
1
30
18

3,879

4,252

4,362

26
17
13

23
26
15

11
31
11

3,935

4,316

4,416

(1,953)
29

(2,184)
60

(2,238)
29

3,964

4,376

4,444

3,978
38

4,262
31

4,339
35

4,015

4,292

4,374

OBLIGATIONS

Conduct of R&D:
Health:
National Institutes of Health
Alcohol, Drug Abuse, and Mental Health Administration
Food and Drug Administration
Centers for Disease Control
Health Resources and Services Administration
Health Care Financing Administration
Office of the Assistant Secretary for Health
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
Total outlays

OUTLAYS

competitiveness of the U.S. economy, particularly in high
technology dependent industries.
• Provide $180 million in 1984, an increase of 61% over 1983,
for upgrading research instrumentation primarily at universities. This sharp increase is included within the support for
the conduct of basic research. Along with funds provided for
this purpose in other agencies, the increase in the NSF
budget would enhance research productivity by helping to
alleviate the problem of growing obsolescence of research instrumentation at universities. It would also help ensure that
future scientists and engineers are trained in the use of
modern research instrumentation and techniques.
• Fund the continuation of the deep sea drilling project to
provide scientific geologic information related to the Earth's
crust, ocean sediments, geochemistry and paleontology.
In addition, the 1984 budget proposes increased funding in the
U.S. Antarctic program for improvement of logistic support. These
improvements are critical to the conduct of a safe and effective

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THE BUDGET FOR FISCAL YEAR 1984

research program and to the maintenance of an active and influential U.S presence in Antarctica.
DEPARTMENT OF AGRICULTURE

The Department of Agriculture supports research and development in several disciplines related to agriculture and forestry.
Obligations of the Department for the conduct of research and
development are estimated to total $849 million in 1984, a decrease
of $1 million from 1983. Of the total, $381 million would support
basic research, an increase of $19 million over the 1983 expected
obligations of $362 million.
The Department's 1984 budget is highlighted below by major
bureau:
The Agricultural Research Service (ARS) would obligate $458
million for research designed to produce new knowledge and technologies required to assure the continuing vitality of the Nation's
food and agriculture enterprise. This represents an increase of $12
million over 1983.
In 1984, increased emphasis would be placed on genetic engineering in the plant and animal sciences, human nutrition research,
and improved post-harvest technologies. In addition, a new program of post-doctoral fellowships in ARS laboratories would be
initiated. Short term applied research and development would continue to receive reduced Federal effort, since such activities are
more appropriately financed by the private sector.
The Cooperative State Research Service would obligate $222 million to maintain support of the cooperative program with institutions in 50 States, the District of Columbia, Puerto Rico, Guam, the
Virgin Islands, American Samoa and Micronesia engaged in research in agriculture, forestry, veterinary medicine, and the rural
home and the community. Also, the budget would continue the
competitive grants program in basic research important to increasing the efficiency of food production and improving human nutrition. For the first time, competitive grants for research in the
animal sciences would be made.
The Forest Service would obligate $101 million, a decrease of $4
million from 1983, to provide knowledge needed to manage and
protect forest and related rangeland resources to gain maximum
economic and social benefits from their use. Research would be
conducted on: genetics; silviculture and timber management; watershed management; wildlife, range and fish habitats; protection for
forest resources from fire and forest pests; surface environment
and mining; forest engineering and utilization; and economics of
forest commodity production, processing and distribution.
In addition, $68 million would be obligated in other departmental
programs for economic research, international cooperation and de-

SPECIAL ANALYSIS F

F- 55

velopment, transportation of commodities, nutrition information,
and statistical reporting.
DEPARTMENT OF COMMERCE

The Department of Commerce has responsibility for ocean science and engineering research, meteorological research and forecasting, and for maintaining measurement standards. The 1984
budget would continue these programs in the National Oceanic and
Atmospheric Administration (NOAA), the National Bureau of
Standards (NBS), and other areas of the Department.
Obligations for the conduct of R&D by the Department in 1984
are estimated at $227 million, a decrease of $86 million from 1983.
This decrease applies largely to relatively nearer term applied
research and development, more appropriately the responsibility of
the private sector.
National Oceanic and Atmospheric Administration (NOAA).—
NOAA would continue R&D programs to develop systems and components for nautical and aeronautical mapping and charting; ocean
engineering systems in support of NOAA ocean research and operational programs; better ways to conserve, protect, and manage the
Nation's fishery resources; new and improved fishing equipment to
protect endangered and/or threatened species; and timely and accurate meteorological, hydrologic, and oceanographic forecasting,
detecting and tracking systems for protection of life and property.
Obligations for the conduct of R&D by NOAA in 1984 would decrease from $194 million to $135 million. This reduction reflects
decreases in applied areas, more appropriately supported by the
private sector.
National Bureau of Standards (NBS).—R&D efforts for NBS are
aimed at developing and maintaining a system of measurement
required to support the Nation's industrial and scientific endeavors.
In 1984, NBS is expected to obligate $78 million for the conduct
of R&D. This represents a $16 million decrease from 1983. Funding
for the following programs would be terminated or reduced on the
grounds that such research can and should be supported by the
private sector: fire science and engineering ($6 million), building
research ($3 million), ADP standards ($6 million), and recycled oil
($1 million).
Other Commerce R&D Activities.—Funding for smaller research
and development programs in the Department of Commerce, which
include those in the Bureau of the Census, the Patent and Trademark Office, and the National Telecommunications and Information Administration, would be $14 million in 1984.

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THE BUDGET FOR FISCAL YEAR 1984
DEPARTMENT OF THE INTERIOR

The R&D activities of the Department of the Interior derive from
its broad-ranging responsibilities for management of the Nation's
natural resources, including developing energy and mineral resources, restoring and preserving wildlife habitats and wilderness
areas, and improving the quality of our water resources.
Obligations for the conduct of R&D for the Department of the
Interior for 1984 are estimated at $329 million. This represents a
decrease of approximately $44 million from the 1983 level, primarily in applied mining and applied geological research.
Almost 90% of the Department's 1984 funds for the conduct of
R&D would be obligated by the Geological Survey ($136 million),
Fish and Wildlife Service ($89 million), and Bureau of Mines ($68
million). Highlights of the 1984 research objectives of these and
other departmental programs are described below.
The Geological Survey undertakes research on the extent, distribution, and character of the Nation's natural resources and on the
geologic processes, structures, and hazards that affect the development and use of the land and physical environment. Research
priorities in 1984 would include continued development of:
• Accurate appraisals of land and mineral resources;
• New and improved methods of mineral exploration;
• An improved scientific basis for investigation and measurement of water resources; and
• Basic data on geologic principles and processes.
The Fish and Wildlife Service supports research performed in
the Service's laboratories and field stations, and through cooperative efforts with State fish and game departments. It also provides
Federal aid to States for research on restoration of fish and wildlife
resources. This research provides basic biological information about
species numbers, population dynamics, ecological relationships, and
habitat requirements. In 1984, the Service would support research
activities concerned with:
• The habitat of waterfowl, migratory birds, mammals and nonmigratory birds;
• Endangered and threatened species status, distribution and
threats;
• Impact of broad-scale environmental changes on fish and
wildlife populations and habitat; and
• Fish husbandry and aquaculture.
The Bureau of Mines conducts basic and applied research across
the minerals cycle to improve our understanding of the principles
of mining and minerals processing, and to reduce associated health
hazards. Reductions are proposed in applied research, particularly
in projects of a commercial nature which are more appropriate for
the private sector to support. Basic research is proposed to increase

SPECIAL A N A L Y S I S F

F- 55

by 22% through reallocations of funds from applied research projects. The 1984 budget reflects an increased emphasis on strategic
and critical minerals R&D activities and would stress:
• Long-range, high-risk research in extractive metallurgy technology that may result in new processing methods;
• Development of domestic source substitutes for imported strategic and critical minerals;
• Health-related research on the proper quality and quantity of
air flow in underground mines; and
• Longer-term, generic research on fire and explosion prevention, methane and underground control,' industrial hazards,
post-disaster survival and rescue, explosives, and systems engineering.
Other Departmental Programs would provide for:
• Development of technology to generate additional water supplies by cloud seeding techniques; and
• Development of new materials, planning tools, design and
construction techniques to solve problems arising in the development and operation of water resources projects.
DEPARTMENT OF TRANSPORTATION

The Department of Transportation's R&D program is oriented
toward providing the information and new technology needed for
its own operational (e.g., air traffic control) programs and for regulatory (e.g., automotive and aircraft safety standards) programs.
Obligations for the conduct of research and development by the
Department are estimated at $519 million for 1984, an increase of
$126 million over 1983. The Department's 1984 budget for R&D,
with explanations of major changes from 1983, is highlighted below
by agency.
The Federal Aviation Administration would obligate $304 million
in 1984. The proposed 1984 R&D obligations for FAA represent an
increase over 1983 of $161 million. A major portion of this increase
occurs in the advanced computer, aviation weather, communications and systems programs. This increase would allow greater
emphasis on engineering work to enhance the safety and efficiency
of the national air traffic control system, and on emerging technology to improve collision avoidance systems and enroute and terminal air traffic control systems.
The National Highway Traffic Safety Administration would obligate $57 million for motor vehicle research, traffic safety research
and demonstrations emphasizing safety belt usage, alcohol counter
measures, and for analytical studies. In 1984, a small increase is
planned for highway safety research in support of the safety belt
program. The National Accident Sampling System which provides

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THE BUDGET FOR FISCAL YEAR 1984

for the collection and analysis of nationally representative accident
and injury data would be continued.
The Urban Mass Transportation Administration would obligate
$46 million to assist in the development of improved mass transportation systems, equipment and procedures. Emphasis would be
placed on research aimed at improving the operation and maintenance of existing transit systems.
The Federal Highway Administration would obligate $49 million
to continue research programs in highway planning, design, construction, and maintenance to insure an effective and efficient
highway system. Research would also be conducted in identifying,
and correcting impediments to highway safety and on improving
truck safety.
The Federal Railroad Administration would obligate $17 million
to continue highest priority safety research. This would result in
more cost-effective safety compliance and enforcement techniques.
The Maritime Administration would obligate $13 million to improve the productivity and competitive posture of the U.S. maritime industries. This level is $4 million below the 1983 budget.
The U.S. Coast Guard would obligate $22 million to support
research to maintain and improve search and rescue systems, environmental protection, marine safety, aids to navigation, and the
enforcement of laws and treaties, and activities affecting all Coast
Guard missions. The proposed 1984 figure represents an increase of
$2 million above the 1983 level.
The Research and Special Programs Administration would obligate $5 million to support emergency preparedness and mobilization, hazardous materials and pipeline safety regulatory programs,
and long range university research.
The Office of the Secretary would obligate $7 million for broadbased policy research on domestic and international transportation
issues of importance to the Nation.
ENVIRONMENTAL PROTECTION AGENCY

The Environmental Protection Agency (EPA) conducts research
and development in support of the Agency's regulatory and enforcement missions. For 1984, EPA's R&D program will focus on
three major concerns: (1) better linkage of research to the Agency's
regulatory priorities; (2) greater attention to quality assurance to
improve the reliability of scientific data used in Agency decisions;
and (3) restructuring the Agency's long-range basic research program.
Total obligations for EPA's R&D program in 1984 are proposed to
be $208 million, a decrease of 14% from 1983. This reduction reflects completion of major research to support regulatory decisions

SPECIAL ANALYSIS F

F- 55

and reductions for development of pollution control technologies.
EPA's major research activities are highlighted below.
The acid rain/energy research program will be increased to understand better the phenomena of acid deposition. Specifically, a
comprehensive atmospheric field study will be initiated, dry deposition monitoring will be accelerated, and watershed research studies
will be expanded. Research in support of the Limestone Injection
Multistage Burner (LIMB) control technology will be continued.
The hazardous waste research program will support efforts on
land disposal of hazardous waste, post-closure monitoring of land
disposal facilities, screening protocols for hazardous wastes, and
research support for permitting hazardous waste disposal facilities.
The Superfund research program will maintain its research efforts at 1983 levels. However, funding will shift from engineering
activities to monitoring and environmental effects research which
are closely associated with current field work at hazardous waste
sites. Funds for this research program are derived from the Hazardous Substance Response Trust Fund which is funded primarily
by a tax on oil and chemical industries.
The drinking water research program will strengthen risk assessments, health research, and monitoring for the Drinking Water
Program. Resources for groundwater transport and fate research
are maintained at 1983 levels. Work will continue on revising the
Primary Drinking Water regulations.
The air research program will continue the development of comprehensive health risk assessments for hazardous air pollutants,
improve monitoring methods for sampling and analyzing non-criteria organic pollutants and improve air quality dispersion models.
The water quality research program will emphasize research on
ocean dumping and water-quality based pollution control requirements. In the municipal wastewater area, research will focus on
innovative and alternative wastewater treatment technologies and
more efficient sludge management techniques.
Industrial
wastewater research will be reduced reflecting completion of the
effluent guidelines effort and will be refocused to support the waste
water permitting program.
The toxic substances research program will increase development
of health risk assessment models. Total research funding is slightly
lower in 1984 reflecting the completion of a major monitoring
study and completion of engineering technical support for the
review of chemicals.
The interdisciplinary research program will continue to support
the Agency's research centers, long-term research grants, and development of economic benefits methods.

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THE BUDGET FOR FISCAL YEAR 1984
NUCLEAR REGULATORY COMMISSION

The Nuclear Regulatory Commission (NRC) performs 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 research connected with
the use of nuclear energy to generate electric power. Its research
objective is to provide safety and analytical methods for assuring
the quality of NRC's licensing procedures and regulatory work.
In 1984, NRC's obligations for the conduct of R&D are expected
to decrease from $210 to $200 million. This reduction from 1983 is
due primarily to the transfer of work at the Loss of Fluid Test
Facility (LOFT) to an international consortium. Key areas, such as
accident evaluation and mitigation and systems reliability analysis
will be strengthened. In addition, reactor safety research, principally on the Clinch River Fast Breeder Reactor, will be continued.
VETERANS ADMINISTRATION

The Veterans Administration (VA) conducts and administers
medical, rehabilitation, and health services research. In 1984 this
agency would obligate $163 million, for the conduct of R&D.
The VA intramural biomedical research program is designed to
benefit patients through increased quality and effectiveness of
health care delivery. Priorities for 1984 include special research on
Agent Orange, alcoholism, aging, and post-traumatic stress.
In rehabilitation research, the VA focuses on problems in the
field of prosthetics, orthotics, wheelchairs, spinal cord injury and
sensory aides for improving the care and rehabilitation of disabled
veterans, including amputees, paraplegics and the blind.
The health services research program supports projects at VA
facilities to improve the effectiveness, economy, and accessibility of
health care services. In addition, emphasis will be placed on research relevant to health care delivery to veterans and the services
provided to them.
AGENCY FOR INTERNATIONAL DEVELOPMENT

Research and development activities of the Agency for International Development (AID) consist mainly of applied research to
solve specific problems associated with basic human needs and
social and economic research aimed at improving U.S. and host
country understanding of the barriers to development.
Obligations of AID for the conduct of R&D are estimated at $161
million in 1984, an increase of $9 million over 1983.
Programs under AID reflect the administration's recognition of
the importance of R&D in addressing the problems faced by the
Third World.

SPECIAL ANALYSIS F

F- 55

The majority of AID's 1984 R&D funds will be devoted to three
critical problems: food production, with an emphasis on affecting
developing country efforts to overcome the growing food crisis;
population growth, emphasizing methods of controlling increasing
population growth rates in the developing countries; and energy
supply, emphasizing renewable and nonconventional energy
sources critical for development to proceed.
OTHER AGENCY PROGRAMS

An additional 9 departments and agencies (listed in table K-2,
footnote 1) would obligate an estimated $418 million in 1984, for
the conduct of R&D, an increase of $27 million over the 1983 total.
Obligations by these agencies amount to less than 1% of all federally funded programs in R&D. The programs of these agencies, like
those of other agencies discussed above, are closely related to the
agencies' missions.
Among the agencies in this category that expect to increase their
obligations for R&D in 1984 are the Smithsonian Institution, Housing and Urban Development, the Federal Emergency Management
Agency, the Tennessee Valley Authority, and the Departments of
Justice, Labor, and Treasury.
SUPPLEMENTARY

INFORMATION

Table K-9 provides information on the long-term trends in Federal funding for the conduct of R&D.

H-10

THE BUDGET FOR FISCAL YEAR 1984
TABLE K-9. TRENDS IN CONDUCT OF R&D
(Obligations in billions of dollars)
Defense1

195 3
195 4
195 5
195 6
195 7
195 8
195 9
196 0
196 1
196 2
196 3
196 4
196 5
196 6
196 7
196 8
196 9
197 0
197 1
197 2
197 3
197 4
197 5
197 6
197 7
197 8
197 9
198 0
198 1
198 2
1983 (estimate)..
1984 (estimate)..
1
2

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
17.8
22.1
24.9
31.8

All other

.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

17.2

2 14.3
2 14.0

2 14.0

Includes military-related R&D programs of the Departments of Defense and Energy.
Excludes NASA funding for shuttle production and operation, tracking and data acquisition activities, and related institutional support.

Full text of Budget of the United States Government, Special Analyses : Fiscal Year 1984

FRASER