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F ISCAL YEAR

2002

MID-SESSION REVIEW

BUDGET OF THE
UNITED STATES GOVERNMENT

August 22, 2001

The Honorable J. Dennis Hastert
Speaker of the House
of Representatives
Washington, DC 20515
Dear Mr. Speaker:
Section 1106 of Title 31, United States Code, requires that the President transmit to the
Congress a supplemental update of the Budget that was transmitted to the Congress earlier in the
year. This supplemental update of the Budget, commonly known as the Mid-Session Review,
contains revised estimates of the budget surplus, receipts, outlays, and budget authority for fiscal
years 2001 through 2011 and other summary information required by statute.
This report also includes the 0MB Sequestration Update Report to the President and
Congress for Fiscal Year 2002, as required by the Budget Enforcement Act of 1990 (BEA), as
amended. The report provides current estimates of the status of discretionary spending and the
discretionary spending limits. It also provides the status of pay-as-you-go legislation based on
reports transmitted to date. The report shows that, in the absence of changes in the caps and payas-you-go requirements, the law would require large automatic reductions in both discretionary
and mandatory programs. The Administration will work with Congress to ensure that no
unintended sequesters of spending occur.
Sincerely,

Mitchell E. Daniels, Jr.
Director

Enclosure

Identical Letter Sent to The President of the Senate

TABLE OF CONTENTS
Page

Transmittal Letter
Table of Contents ...............................................................................................................

i

List of Tables ......................................................................................................................

iii

List of Charts .....................................................................................................................

iv

Summary ............................................................................................................................

1

Maximum Debt Retirement and Projected Surpluses ....................................................

11

Medicare .............................................................................................................................

13

Economic Assumptions ......................................................................................................

17

Receipts ...............................................................................................................................

23

Spending .............................................................................................................................

25

Summary Tables ................................................................................................................

31

Appendix A: Basis of Social Security Tax Receipts in the Budget ................................

49

Appendix B: Sequestration Update Report to the President and Congress for 2002

53

GENERAL NOTES
1. All years referred to are fiscal years unless otherwise noted.
2. All totals in the text and tables display both on-budget and offbudget spending and receipts unless otherwise noted.
3. Details in the tables and text may not add to totals due to
rounding.
4. Web address: http://www.whitehouse.gov/omb/budget

i

LIST OF TABLES
Page

Mid-Session Review
Table 1.

Change in Budget Policy Surpluses .............................................................

4

Table 2.

Current Surplus Totals ..................................................................................

7

Table 3.

April and Mid-Session Budget Totals ...........................................................

8

Table 4.

Medicare Fully Funded Under All Budget Scenarios .................................

13

Table 5.

Economic Assumptions ..................................................................................

20

Table 6.

Change in Receipts ........................................................................................

24

Table 7.

Change in Outlays .........................................................................................

27

Table 8.

Estimated Spending from 2002 Balances of Budget Authority:
Discretionary Programs ............................................................................

31

Table 9.

Outlays for Mandatory Programs Under Current Law ..............................

32

Table 10.

Mandatory Proposals .....................................................................................

33

Table 11.

Effect of Proposals on Receipts .....................................................................

35

Table 12.

Outlays by Category ......................................................................................

37

Table 13.

Receipts by Source .........................................................................................

38

Table 14.

Outlays by Agency .........................................................................................

39

Table 15.

Outlays by Function ......................................................................................

40

Table 16.

Discretionary Budget Authority by Agency .................................................

41

Table 17.

Discretionary Budget Authority by Function ..............................................

42

Table 18.

Mid-Session Baseline Totals .........................................................................

43

Table 19.

Federal Government Financing and Debt ....................................................

44

Appendix A.

Basis of Social Security Tax Receipts in the Budget

Table A–1. On-Budget and Social Security Surpluses ...................................................
Appendix B.

50

Sequestration Update Report to the President and Congress
for 2002

Table 1.

Historical Summary of Changes to Discretionary Spending Limits ..........

56

Table 2.

Discretionary Spending Limits .....................................................................

58

Table 3.

Summary of 2001 Discretionary Appropriations .........................................

61
iii

Page

Table 4.

Status of 2002 Appropriations Actions .........................................................

62

Table 5.

Comparison of OMB and CBO Discretionary Spending Limits .................

64

Table 6.

Net Cost of Pay-As-You-Go Legislation Enacted as of
August 15, 2001 ........................................................................................

68

Pay-As-You-Go Legislation with Impact of $500,000 or Less
Enacted as of August 15, 2001 ................................................................

69

Table 7.

LIST OF CHARTS

Chart 1.

1

Chart 2.

Social Security Surpluses Alone Exceed Maximum Retireable Debt ...........

3

Chart 3.

Average Percentage Growth by Agency ..........................................................

6

Chart 4.

Medicare 2002 Shortfall ...................................................................................

14

Chart 5.

iv

Second Largest Surplus in History .................................................................

Medicare Long-Term Shortfall ........................................................................

14

SUMMARY
Despite a nearly stagnant economy, the
government’s finances are remarkably sound.
The budget’s enormous surpluses have allowed
us to deliver significant tax relief to working
Americans, providing badly needed fiscal stimulus to counteract the year-long slowdown
in the economy. Even while weathering the
slowdown and taking action on tax relief,
we continue to take in huge surplus revenues,
and to use the extra receipts to steadily
reduce the nation’s outstanding debt.
The current estimate for the 2001 surplus
is $158 billion, the second highest in history.
This is lower than the $281 billion surplus
estimated in the April Budget. The lower
surplus is due largely to the year-long
economic slowdown and the decision to incorporate immediate fiscal stimulus, in the Economic Growth and Tax Relief Reconciliation

Act. The 2002 surplus projection is $173
billion, compared to April’s $231 billion estimate. Over the 10 years from 2002 to 2011,
the surplus totals $3,113 billion, down from
the $3,433 billion estimated in April.
Both this year and next year, the overall
budget surpluses are equal to the surpluses
generated by Social Security payroll taxes
(and interest earnings). The President and
Congress are both committed to preserving
the Social Security surplus for debt reduction.
As a result, the additional surplus available
for new spending or further tax relief in
the next few years is limited. In order
to fully reserve the Social Security surplus
for debt reduction, any further initiatives
beyond those included in this review will
also have to be accompanied by offsets in
other areas.

Chart 1. Second Largest Surplus in History
Despite an Economic Slowdown
Billions of dollars

300
Current
Economic
Slowdown
Started 3rd
Quarter 2000

200
100
0
-100
Recessions

-200
-300
1969

1973

1977

1981

1985

1989

1993

1997

2001

1

2
Tax Relief for Working Americans
From the Administration’s first day in
office, President Bush worked to deliver on
his campaign promise of meaningful tax relief.
This package, which was originally crafted
to ensure long-term economic growth and
to return excess surplus funds to taxpayers,
became even more urgent as the extent
of the economic slowdown became apparent.
Congress moved with exceptional speed in
response to the President’s plan. On June
7, 2001 the President signed the Economic
Growth and Tax Relief Reconciliation Act
of 2001.
This historic measure of tax relief reduces
the bottom marginal tax rate from 15 percent
to 10 percent, delivering savings to every
income taxpayer, and reduces the top rate
to a maximum of 35 percent. It also doubles
the child tax credit from $500 to $1,000,
enhances incentives for investment in education, eliminates the marriage penalty,
phases out the death tax, and encourages
retirement saving.
Of immediate importance, the tax measure
includes a rebate provision that puts $38
billion in savings from the new 10 percent
bracket quickly and directly back in the
taxpayers’ hands. The rebate checks, which
taxpayers are receiving in the months of
July, August, and September, could not have
come at a better time to invigorate today’s
shaky economy. Economic growth has slowed
steadily for over a year to a point that
it has nearly stopped. The rebate checks
will help prevent further deterioration by
supporting consumer spending.
Reserving the Social Security Surplus for
Debt Reduction
A strong bipartisan consensus has arisen
in this country, and in the Congress, to
preserve very large surpluses as a threshold
condition of public finance. Both parties and
both the Legislative and Executive Branches,
in this Administration and the previous one,
have concurred in maintaining a surplus
at least the size of the Social Security
surplus.
Some would set the minimum surplus level
even higher, using as a target the artificial

MID–SESSION REVIEW

overage in the Medicare Part A trust fund.
This is a relatively modest difference, amounting to a question of whether the minimum
surplus should be more like 8.0 percent
or 9.5 percent of total receipts. It is also
a difference that is completely irrelevant
either to the level of future Medicare benefits
or to the health of the trust fund financing
those benefits, which will be exactly the
same size regardless of the level of the
overall budget surplus. (For further discussion,
see the Medicare section of this document.)
There are several reasons that the Social
Security surplus makes a good surplus target.
First, unlike Medicare, which costs much
more than it takes in, Social Security is
in true surplus for the moment. Second,
the Administration and a majority of Americans hope for reform that converts a portion
of Social Security receipts from mere IOUs
to real assets, owned by the worker who
paid those taxes. At that point, the notion
of a Social Security ‘‘lockbox’’ will take on
real, literal meaning.
The final reason for choosing this surplus
target is that it permits the Treasury to
achieve—with some room to spare—the maximum amount of debt retirement possible.
Over the next 10 years, Social Security
will take in excess funds of $2.5 trillion,
whereas maximum debt retireable without
incurring unjustifiable premium expenses is
between $2.0 trillion and $2.2 trillion. This
year, the Treasury will eliminate well over
$100 billion of existing debt, marking the
fourth year in a row of such reductions.
Further such reductions are scheduled for
each succeeding year. This is an important
accomplishment for which both political parties, both branches of government, and both
the current and prior administrations deserve
credit.
The update of the budget outlook in this
Mid-Session Review foresees continued large
surpluses above the size of the Social Security
surplus for all years in the budget horizon.
The President is determined to preserve surpluses at this level, and to continue using
these funds for the steady reduction of outstanding publicly held debt.

3

SUMMARY

Chart 2. Social Security Surpluses Alone
Exceed Maximum Retireable Debt
Trillions of dollars

4

All Other

3
Medicare Part A "Surplus"

2
Maximum Retireable Debt By 2011
Likely Range is $2.0 to $2.2 Trillion

Social Security

Debt At The End Of 2001

Trust Fund Surpluses 2002-2011

1

0

Changes in the Economic and Budget
Outlook Since April
Since the President submitted his budget
in April, the extent of the economic slowdown
has become more evident. In retrospect, its
length and depth are clear: the stock market
began to fall in March, 2000; manufacturing
employment in August, 2000; and GDP growth
in the third quarter of 2000. Overall, the
economy has grown at only a 1.3 percent

rate since the second quarter of last year,
including an estimated 0.7 percent annual
growth rate in the most recently completed
quarter. As discussed in a subsequent section
of this review, the Administration—and other
forecasters—believe that recent interest rate
cuts by the Federal Reserve, coupled with
the fiscal stimulus from the Economic Growth
and Tax Relief Reconciliation Act, will spur
the economy back to solid, sustainable growth
by next year.

4

MID–SESSION REVIEW

Table 1.

CHANGE IN BUDGET POLICY SURPLUSES
(In billions of dollars)
2001

2002

2002–2011

April budget estimate of total surplus ...............................................
Social Security surplus ....................................................................
Non-Social Security surplus ............................................................

281
159
122

231
175
56

3,433
2,583
850

Change since April:
Tax rebates and other enacted tax changes ...................................
Corporate tax timing shift ...............................................................
Medicare Reform policy ...................................................................
Tax proposals ....................................................................................
Defense requirements ......................................................................
Farm assistance and other policy ...................................................
Economic and technical adjustments ..............................................
Related debt service .........................................................................

–40
–28
3
................
–4
–5
–46
–1

–40
28
11
3
–11
–1
–44
–6

25
28
–37
43
–198
1
–46
–136

Total, change .................................................................................

–123

–59

–320

Current policy surplus .........................................................................
Social Security surplus 1 ..................................................................
Non-Social Security surplus 1 ..........................................................

158
157
1

173
171
1

3,113
2,538
575

1 The 2001 estimate is adjusted to assign $5.6 billion in prior year receipts to their correct year. See
text box on page 9 and Appendix A on page 49.

Economic weakness, coupled with the tax
rebate action that is designed to counteract
that weakness, results in a lower surplus
outlook this year and next year. In the
current year, economic revisions and technical
factors reduce the surplus $46 billion from
the April estimate, a difference of about
two percent of receipts. Tax rebates and
related provisions account for $40 billion,
a legislated shift in timing of corporation
income tax receipts reduces the surplus another $28 billion, and supplemental spending
for meeting national defense and other needs
uses $5 billion. This combination of factors
and a technical adjustment described below
still leaves a very small on-budget surplus
for 2001.
In 2002, economic and technical revisions
are slightly smaller than in 2001. The effect
of the tax relief provisions stays level at
about $40 billion, while the shift of corporate
receipts is recaptured. The net result is
a small on-budget surplus.
One factor artificially reducing the 2001
on-budget surplus from the April estimate
is an upward revision to the Social Security
trust fund due to reestimates of payroll
taxes paid in previous years. As explained
in the accompanying box, this practice has
the effect of inflating the current Social
Security surplus by adding credits during

2001 for taxes actually paid and collected
in 2000, 1999, and earlier years. This reduces
the apparent 2001 on-budget surplus by $6
billion. Correcting this distortion by assigning
the extra revenues to their appropriate year
makes clear that there is a small on-budget
surplus in 2001. OMB will review with the
Department of the Treasury the possibility
of prospective changes to record the adjustments in the correct years.
Over the full 10-year budget horizon, the
surplus outlook is relatively unchanged from
April. The unified surplus total for 2002
through 2011 is now estimated at $3,113
billion, down from the $3,433 billion estimated
in the April Budget. The largest factor in
the reduction is incorporating the outyear
implications of the Administration’s $18.4
billion defense amendment for 2002. This
is the first installment, totaling $209 billion,
of investment in restoring our national defense
capabilities after years of neglect. The tax
bill, because it was scaled back during Congressional consideration, increases the surplus
slightly relative to the April Budget (which
assumed the President’s proposals), while the
10-year economic and technical adjustments
reduce the surplus by $46 billion.
This update to the President’s budget increases the resources set aside for Medicare
modernization, and an integrated prescription

5

SUMMARY

drug benefit, to $190 billion over the period
2004 to 2011. This new estimate is consistent
with the Framework to Strengthen Medicare
that the President announced on July 12th
and is $37 billion more than was allocated
in total to additional Medicare spending in
the April Budget submission over 10 years.
The President’s April Budget proposed a
program to help low income seniors and
those with particularly high prescription drug
costs get immediate assistance while Congress
considered comprehensive reform. However,
with the President’s support, a consensus
is now building in Congress which focuses
on comprehensive Medicare modernization.
The President’s Framework to Strengthen
Medicare and his budget reflect this emerging
agreement, setting aside substantial resources
to meet this objective which could be implemented as soon as 2004. The Administration
is committed to continuing to work with
the Congress on enacting legislation to
strengthen Medicare consistent with the President’s framework.
Although the Administration is committed
to enacting comprehensive Medicare legislation
soon, the President believes we must help
seniors get the prescription drugs they need
at an affordable price now. That is why
the Administration has begun the voluntary
Medicare Prescription Drug Discount Card
program. This program will allow seniors
access to the same kinds of drug discounts
that other Americans with good private health
insurance currently receive. The President
believes that seniors, who face the heaviest
burden for prescription drug costs, should
not also have to pay the highest retail
prices for drugs. The discount card is not
a substitute for prescription drug coverage
in a reformed Medicare system, but it will
bring important relief to seniors who need
it beginning next year.
Of the current 10-year total surplus, $2,538
billion is from the Social Security trust
fund, down slightly from $2,583 billion in
April. As noted above, the Administration
is devoting as much of this amount as
possible to the reduction of publicly held
debt. After reserving the Social Security surplus, the remaining 10-year surplus is $575
billion, down from $850 billion in April,

with most of this difference attributed to
the $198 billion increase in spending on
national defense and the additional commitment to Medicare.
The Best Course Forward
The government’s finances are extremely
sound. Only persistent, long-term economic
weakness can threaten this position. Hence,
promoting a return to vigorous growth must
be our common objective. The best course
forward is clear: first, we must contain spending over the coming year.
Last year’s appropriations, agreed to 8
months ago by the last Congress and the
last President, contained the largest oneyear spending increase in history, about $50
billion over 2000. Obviously, a smaller surge
in spending last year would have ensured
a larger surplus today. The spending growth
rates of 1999 through 2001 cannot be repeated
if we are to preserve the on-budget surpluses
that we have all worked so hard to create.
Congress must limit this year’s appropriations
to the level of the 2002 Budget Resolution,
including the defense amendment recently
proposed by the President.
Second, Congress and the President must
work together to continue restraining total
spending in the next few years. Businesses,
states, cities, and families do not hesitate
to limit their spending when revenues diminish. The fifty state governments recently
reported that collectively they are lowering
spending growth from 8 percent last year
to a more sustainable 3-1/2 percent in 2002.
Spending in the federal domestic agencies
exploded during the last three years, including
growth of 45 percent at the Department
of Health and Human Services and 27 percent
at Department of Transportation. These departments can benefit from a period of digestion without great growth beyond these expanded levels.
The Administration is prepared where necessary to extend the principle of restraint
to its own high priority initiatives. The
Administration continues to propose several
tax initiatives from the April Budget, with
the effective dates delayed two years until
January 1, 2004. In addition, the Administration proposes to fund other initiatives that

6

MID–SESSION REVIEW

Chart 3. Average Annual Percentage Growth by Agency
Discretionary Program Level, 1998-2002

Percent

15

11.2
10.6

10
7.5
6.4

6.2

5.1

5.3

5.2

5

4.6

4.6

4.0
3.5

3.1

1.6

0
Agriculture

Defense
Commerce

Energy
Education

can not be delayed within the additional
discretionary resources provided in the budget
resolution, and will work with Congress to
revise these proposals as necessary to ensure
their enactment.
There are a number of other items that
may place demands on the budget. Consistent
with the requirements of the Budget Enforcement Act, action on these or other items
with additional costs to the budget must
be accompanied by provisions to offset the
costs to ensure that no automatic reductions
are triggered. Alternatively additional requirements could be funded within the discretionary
levels agreed to in the Congressional Budget
Resolution including the defense amendment
recently proposed by the President. Living
within these constraints will ensure that
the Social Security surplus is protected and
can be fully reserved for debt reduction.
Examples of these further requirements include:
• Farm bill. The costs of the farm bill now
moving through Congress, which restructures farm programs through the next sev-

HUD
HHS

International
Interior Assistance Justice

Labor

Treasury
Transportation

Veterans
Affairs

eral years, will have to be offset where
necessary to maintain on-budget surplus.
• Tax provisions. Several long-standing tax
credits and other provisions expire at the
end of 2001. The Administration supports
the extension of these provisions in a fiscally responsible manner and looks forward to working with Congress to achieve
that goal. These expiring provisions include Archer Medical Savings Accounts,
the work opportunity tax credit, the welfare-to-work tax credit, provisions dealing
with the minimum tax for individuals, and
the treatment of active financial services
income of foreign subsidiaries.
• Response to natural disasters. A high level
of disaster related needs could require
spending beyond the amounts assumed.
• Railroad Retirement Investment Trust. The
House-passed Railroad Retirement and
Survivors’ Improvement Act (HR 1140)
would authorize a new federal trust fund
to purchase stocks and bonds. The purchases could amount to $15 billion. Under

7

SUMMARY

long-standing budget scoring rules, these
purchases would be scored as outlays, the
same as purchases of stocks, bonds, and
any other asset by all agencies within the
federal government. However, section 105
of the House-passed bill directs OMB and
CBO not to score outlays for these purchases.
Regardless of how the purchases are
scored, Treasury would have to pay for
them in the same way—by using some of
the budget surplus that otherwise would
be used to redeem debt held by the public.
If all of the purchases were made in 2002,
they would exceed the non-Social Security
surplus by $14 billion. Treasury would
have to use $14 billion of the surplus generated by Social Security to finance the
remainder.

Table 2.

This Mid-Session Review presumes a policy
of fiscal restraint, but restraint does not
mean paralysis. The President’s management
initiatives and the on-going review of programs
at all levels will result in our ability to
do more with the same or similar resources.
In government, as in any business or family,
the burden of proof must be placed on
spending proponents to demonstrate the ongoing value received for whatever money is
being spent today. Any healthy organization
constantly searches for ways to redeploy
money from less efficient to more efficient
purposes, and it is past time for the federal
government to adopt this outlook. We expect
that improvements in managing resources
that are already underway will pay greater
dividends than the exclusive focus on incremental new resources. Excellence is defined
by continuing to raise the bar of performance
and achievement.

CURRENT SURPLUS TOTALS
(In billions of dollars)
2001

2002

Overall Surplus ........................................................
Social Security 1 ...................................................

158
157

173
171

Postal Service .......................................................
On-Budget 1 ..........................................................

–1
2

–3
4

Non-Social Security ..........................................

1

1

Examples of potential further requirements
•
•
•
•

Extend expiring tax provisions
Farm Bill
Funding for natural disasters
Railroad Retirement Investment Trust

1 The 2001 estimate is adjusted to assign $5.6 billion in prior year receipts to
their correct year. See text box on page 9 and Appendix A on page 49.

8

Table 3.

APRIL AND MID–SESSION BUDGET TOTALS
(In billions of dollars)

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2002–2006 2002–2011

April Budget:
Revenues .............................................................
Outlays ................................................................

2,137
1,856

2,192
1,961

2,258
2,016

2,339
2,077

2,438
2,169

2,529
2,224

2,643
2,303

2,771
2,398

2,910
2,490

3,058
2,593

3,233
2,706

11,755
10,446

26,370
22,938

Surplus ................................................................
Social Security ................................................
Non-Social Security ........................................

281
159
122

231
175
56

242
193
49

262
210
52

269
235
34

305
251
54

340
270
70

373
286
87

420
301
118

465
322
143

526
341
186

1,309
1,063
246

3,433
2,583
850

Mid-Session Review:.
Revenues .............................................................
Outlays ................................................................

2,013
1,855

2,135
1,962

2,220
2,025

2,328
2,111

2,463
2,208

2,553
2,272

2,668
2,354

2,797
2,447

2,941
2,543

3,095
2,648

3,245
2,761

11,698
10,578

26,444
23,331

Surplus ................................................................
Social Security 1 ..............................................
Non-Social Security 1 ......................................

158
157
1

173
171
1

195
192
2

217
211
6

254
236
19

281
249
32

314
266
47

350
280
70

398
293
105

447
311
136

484
328
157

1,119
1,059
60

3,113
2,538
575

Change:
Revenues .............................................................
Outlays ................................................................

–124
–1

–57
2

–38
9

–11
34

25
40

24
48

24
51

27
49

31
52

36
54

13
55

–58
132

74
393

Surplus ................................................................
Social Security ................................................
Non-Social Security ........................................

–123
–2
–121

–59
–4
–55

–47
–*
–47

–45
1
–46

–15
*
–15

–24
–1
–23

–26
–3
–23

–22
–6
–17

–21
–8
–13

–18
–11
–7

–42
–13
–29

–190
–4
–186

–320
–45
–275

* $500 million or less.
1 The 2001 estimate is adjusted to assign $5.6 billion in prior year receipts to their correct year. See text box on page 9 and Appendix A on page 49.

MID–SESSION REVIEW

9

SUMMARY

Accurate Accounting for Social Security
The President is committed to reserving the Social Security surplus for debt reduction and Social Security reform. It is evident that there is a widespread, bipartisan consensus that this is the right goal for fiscal policy this year and in the
years ahead.
Current estimates indicate the total budget surplus will be $158 billion in 2001,
or about $1 billion more than the Social Security surplus.
2001 Surplus Estimates
(In billions of dollars)

Total Budget Surplus .......................................................
Social Security Surplus ....................................................

158
157

Non-Social Security Surplus ............................................

1

On-budget Surplus ...........................................................
Postal Service Loss (off-budget) ......................................
Non-Social Security Surplus ............................................

2
–1
1

Given the heightened status, real and symbolic, of the Social Security surplus, it
is important to measure it accurately. Current budget practices potentially confuse
that measurement in two important ways.
First, the shorthand approach of using the off-budget surplus as a proxy for the
Social Security surplus combines Social Security transactions with those of the
Postal Service, the only other ‘‘off-budget’’ program. The Postal Service is supposed
to break even at a minimum, and in most past years it did. But in 2001 it is estimated to lose approximately $1 billion, so the true Social Security surplus is larger
than the off-budget figure by that amount.
Second, a large correction to prior year estimates of Social Security payroll tax
collections will be booked in 2001, crediting the trust fund balances with an additional $5.6 billion. This correction reflects the fact that the Social Security surplus
was larger than previously thought in 1998, 1999, and in 2000. (There is a lag of a
year or more before the necessary information is available to determine exactly
what portion of tax proceeds stemmed from Social Security payroll taxes.) Counting this revenue as though it had been paid in 2001 overstates the Social Security
surplus for this year.
Precise accuracy in determining the Social Security surplus in any year requires
comparing revenue to actual expenditures.* In 2001, the excess of Social Security
revenues over expenditures is $157 billion.
(See Appendix A for additional details).

* This correction has been made in this report for the sake of accuracy. Other official publications may use
the historical method and therefore report slightly different figures. OMB will review with the Department
of the Treasury the possibility of prospective changes to record the adjustments in the correct years.

MAXIMUM DEBT RETIREMENT AND
PROJECTED SURPLUSES
The Mid-Session Review (MSR) estimates
that federal budget surpluses will continue
to allow the government to repay historic
amounts of the publicly held debt. Since
its peak in 1997 at $3.8 trillion, the debt
held by the public has fallen by $363 billion
through the end of 2000. This review projects
that debt held by the public will fall to
$3.3 trillion at the end of the current year.
From 2002 through 2011, the MSR estimates
that surpluses will allow a total of $2.0
trillion to $2.2 trillion in debt repayment.
At the end of 2011, the debt will total
around $1.1 trillion, or 6.1 percent of gross
domestic product (GDP). This will be the
lowest ratio of debt to GDP since 1917.
As in the April Budget, the MSR projects
that before the end of the budget horizon,
the large budget surpluses will exceed the
amount of publicly held debt that is available
to be redeemed. While short-term Treasury
bills roll over constantly and hence can
be paid down easily, a significant amount
of Treasury debt is longer-term notes and
bonds that do not mature for as long as
30 years. Certain types of outstanding debt,
such as savings bonds, serve other public
policy purposes besides financing past government deficits and are expected to continue
to be issued for a number of years. The
amount of non-redeemable debt will depend
on many debt management decisions that
have not yet been made and will not be
made until the appropriate future occasions.
The MSR therefore makes a number of
simplified assumptions that are not intended
to prejudge future debt management decisions.
As of June 2001, there were $0.5 trillion
in bonds with maturity dates beyond 2011,
the end of the current 10-year budget horizon.
This review assumes that Treasury will diminish its auctions of notes and bonds over
the next few years, but that the remaining

auctions will add another $0.1 trillion in
securities with post-2011 maturity dates.
The MSR also assumes that nonmarketable
securities will total $0.5 trillion in 2011.
About three-quarters of these securities consist
of savings bonds and securities issued to
state and local governments to meet certain
tax requirements. The remainder includes
zero-coupon securities issued to foreign governments and the Resolution Funding Corporation, as well as securities held by the Federal
Thrift Savings Plan on behalf of federal
employees and retirees.
Treasury’s current program to repurchase
outstanding bonds before maturity will reduce
somewhat the amount of these long-maturity
securities that will remain outstanding in
2011. The MSR assumes that $35 billion
in buybacks will be settled in 2001 and
another $40 billion in 2002. While the buyback
program may well continue beyond that year,
at some point the remaining long-maturity
Treasury securities would acquire a scarcity
premium, making it financially unwise for
Treasury to continue the program.
The reduction in publicly held debt closely
tracks the size of the unified surplus, but
the two are not identical. Certain transactions
create cash requirements that are not included
in the measured surplus. These transactions
include increases in the government’s cash
balances, issues of student loans and other
federal direct loans, and premiums paid to
repurchase Treasury debt. These cash requirements are usually small in relation to the
surplus.
Because surpluses in 2010 and beyond
exceed the estimated amount of debt that
is available to be redeemed, running larger
surpluses does not result in additional debt
repayment. These amounts are instead assumed to accumulate as excess balances.
The Administration opposes investing such
11

12
balances outside the federal government on
the grounds that this would inevitably lead

MID–SESSION REVIEW

to unwarranted government interference in
the private economy.

MEDICARE TRUST FUNDS 1
Every dollar of Medicare funding is spent
on Medicare and Medicare alone in the
President’s budget.
The President’s budget fully funds both
the Medicare Hospital Insurance (HI) Trust
Fund and Medicare benefits for our nation’s
seniors and disabled, as required by law.
Under the President’s budget, the Medicare
HI Trust Fund balance will increase by
$537 billion, and Medicare spending will
reach the highest levels ever, nearly doubling
over the next 10 years. The President’s
budget protects the Medicare program for
future generations and continues the promise
of full financing of Medicare benefits.
In 2001 the Medicare HI Trust Fund,
which provides hospital insurance to seniors
and is funded by a payroll tax, will collect
$175 billion and spend $143 billion, yielding
a $32 billion surplus. Federal law requires
that this $32 billion overage be credited
to the Medicare HI Trust Fund. However,
the federal government does not keep actual
dollars in the Medicare Trust Fund, or any
other trust fund for that matter. Instead,
it lends the money to itself and issues
an IOU, in the form of a Treasury security,
to the trust fund.
In sum, over the period 2002 to 2011,
the projected HI accounting ‘‘surplus’’ of $537
billion is overwhelmed by the SMI’s shortfall
1 Trust fund estimates in this section refer to the Mid-Session
Review baseline.

Table 4.

of $1.14 trillion. There is actually a Medicare
shortfall in every year, with a total of
$603 billion over the next 10 years. The
President has proposed a unified trust fund
to make it easier to understand Medicare
finances.
The gap between Medicare’s dedicated receipts and spending will widen as the baby
boomers enter the program. Between now
and 2030 the number of persons age 65
and older is expected to increase rapidly
from 40 million to 77 million. Expenses
will also rise because healthcare costs are
expected to increase.
There is a common misperception that
there is a Medicare surplus and that Congress
must take action to preserve its assets.
There is no Medicare surplus. Any excess
cash collected from the payroll tax that
is not used to provide hospital insurance
is used for other Medicare spending such
as doctor bills, which are not fully covered
by premiums paid by beneficiaries. These
premiums cover only about 25 percent of
doctor bills and other costs paid from Medicare’s other trust fund, the Part B, or Supplementary Medical Insurance trust fund. Additional funds come from the general fund
of the government to cover Medicare’s remaining costs. In fact, in 2002, without this
general fund transfer, Medicare would face
a $48 billion shortfall.

MEDICARE FULLY FUNDED UNDER ALL BUDGET SCENARIOS
(Dollar amounts in billions)

Current
Projections

Alternative Projections

Unified Budget Surplus in 2002 .................

173

200

225

250

Total Medicare Spending in 2002 ..............

254

———— No change ————

HI Trust Fund Balance in 2002 .................

234

———— No change ————

Increase in Benefits Paid in 2011 Compared to 2002 ............................................

196

———— No change ————

HI Exhaustion Date ....................................

2029

———— No change ————
13

14

MID–SESSION REVIEW

Chart 4. Medicare 2002 Shortfall
Billions of dollars

300
250

Medicare Shortfall
$48 Billion

200

Insurance Premiums

Doctors

150

Home Health

Payroll Taxes

100

Hospitals
50
0

Income

Spending

Chart 5. Medicare Long-Term Shortfall
Medicare Outlays Exceed Dedicated Tax Receipts and Premiums
Trillions, constant 2000 dollars

5

4

3
Outlays

2

Shortfall

1
Dedicated Tax Receipts and Premiums

0
2000

2015

2030

2045

2060

2075

MEDICARE TRUST FUNDS

Myths About the Medicare Trust Fund
Today there is much confusion about Medicare spending and the Medicare Trust
Funds. Some contend that if the on-budget surplus is less than the size of the
Medicare Hospital Insurance (HI) ‘‘surplus,’’ this constitutes a ‘‘raid’’ on the HI
Trust Fund. This contention is factually false. Under the President’s budget the
Medicare HI Trust Fund is fully funded; there is no ‘‘raid.’’ And Medicare spending continues to rise, as required by law.
Despite the fact that neither Medicare spending nor solvency is affected by the
unified budget surplus, some have been misled by assertions that Medicare financing is shrinking. Some worry that this means Medicare won’t be there when
they need it. This is not true.
The facts are:
• The Medicare trust funds are completely unaffected by the enactment of the
President’s tax plan or the size of the government’s surplus. In other words the
trust fund balances would not be one cent larger if no tax cut had ever passed.
This is also true for the Social Security trust funds.
• The President’s budget increases Medicare spending $196 billion over the next
10 years, from $228 billion in 2002 to $423 billion in 2011.
• The President’s budget increases the Medicare HI Trust Fund balance by $537
billion over the next 10 years, rising from $200 billion in the beginning of 2002
to $737 billion at the end of 2011.
• According to the Medicare Trustees, Medicare is projected to remain solvent
until 2029.
• This will be true regardless of short-term fluctuations in budget surplus projections.
• The long-term solvency of Medicare depends not on the size of any annual surplus, but preservation of sustained economic growth, and on comprehensive reform of the Medicare program.

15

16

MID–SESSION REVIEW

Third party experts and commentators clarify that there is no relationship between Medicare trust fund balances and the unified budget surplus:
‘‘Does how you use the Medicare annual surplus have any effect on the solvency
of the Medicare program? No. [Ir]respective of how the Congress decides to use the
annual Medicare surpluses (e.g. tax cuts, spending increases, paying down the debt
held by the public), trust fund solvency will not be affected in any way.’’ David M.
Walker, Comptroller General of the United States and former Social Security and
Medicare trustee, 7/25/01
‘‘The image of raids on the Medicare and Social Security trust funds is false. The
surpluses in these trust funds reflect a temporary excess of payroll taxes over current benefits. When this occurs, the trust funds transfer their spare cash to the
Treasury, which gives them ‘special issue’ Treasury securities in return. The trust
funds get the securities regardless of how the Treasury uses the spare cash—
whether to repay publicly held federal debt or to pay the government’s bills. The
trust funds simply aren’t being raided.’’ Robert J. Samuelson, Newsweek, 7/16/01
‘‘Q.What can the government do with the surplus? A. It has to spend it, because
the federal government can’t park that much money in a bank without affecting
the financial markets. Q. [I]f we spend money intended for Social Security or
Medicare on other government programs, aren’t we raiding those programs? A. No.
Under government accounting rules, no matter if we use the Social Security and
Medicare payroll taxes for debt reduction or plain old spending, the programs receive an equivalent amount in interest-earning Treasury bonds. [N]o matter how
the money is used, the programs’ trust funds are unaffected because, in effect, they
are lending the money to the United States. Q. So does it make a difference
whether we use some of the Medicare funds for spending this year? A. Economically, it means virtually nothing in the short run. The government is still running
a substantial surplus and paying down debt, but because the U.S. economy is so
large, the amount of money involved is like pennies.’’ Glenn Kessler, Washington
Post, 7/22/01
‘‘When an individual buys a government bond, he or she has established a financial claim against the government. When the government issues a security to one
of its own accounts, it hasn’t purchased anything or established a claim against
some other person or entity. The key point is that the Trust Funds do not hold financial resources to pay benefits rather, they provide authority for the Treasury
Department to use whatever money it has on hand to pay them. . . .[T]he trust
funds themselves do not hold or receive money.’’ David Koitz, Congressional Research Service report, 3/20/01
‘‘They [trust funds] do not consist of real economic assets that can be drawn
down in the future to fund benefits. Instead, they are claims on the Treasury that,
when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund
balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.’’ President Clinton’s 2000 Budget, Analytical Perspectives, page
337

ECONOMIC ASSUMPTIONS
Introduction
For the past year, economic growth has
been sluggish, restrained by slower growth
of domestic and foreign demand. After a
period of unsustainably rapid growth, slower
growth was widely expected. The extent of
the slowdown, however, has been greater
than most forecasters anticipated.
Nonetheless, the economy appears poised
to recover. Most forecasters, including the
Administration, expect a return soon to solid,
sustainable growth. Monetary and fiscal policy
are acting in concert to provide a powerful
stimulus to growth in the coming months.
During the first six months of this year,
the Federal Reserve cut the federal funds
rate by 2-3/4 percentage points, the largest
reduction in such a short period since 1984.
Given the lags between changes in monetary
policy and its effects on the real economy,
interest-sensitive sectors are likely to strengthen during the second half of this year.
The recently enacted Economic Growth and
Tax Relief Reconciliation Act of 2001 is
likely to provide a boost to consumer spending
during the second half of this year and
into 2002. In the current quarter, households
will receive $38 billion in rebate checks
reflecting the lower tax liabilities associated
with the new, 10 percent tax bracket. Beginning next January, these lower liabilities
will be permanently reflected in lower income
tax withholding from paychecks. In addition,
income tax withholding schedules were lowered July 1st to reflect the first installment
of the phase-in of permanently lower marginal
income tax rates for those currently in the
28 percent bracket and higher. This change
is estimated to boost take-home pay by
$5 billion during the second half of this
year. With the prospect of permanently lowered income taxes, consumers are likely to
spend a significant part of this addition
to their disposable income.
While the economy has been battered by
a series of negative shocks, recent months
have seen some positive developments. Inven-

tory liquidation during the first half of this
year has helped reduce the excess stocks
that accumulated when sales slowed unexpectedly. When stocks have been cut enough,
increases in demand will require increases
in production. In addition, energy prices have
declined recently, after rising sharply in 1999
and 2000. Lower energy prices reduce overall
inflation, increase the purchasing power of
consumers, and boost the profits of most
industries. Finally, the stock market, which
fell sharply between March 2000 and April
2001, has recovered from its earlier lows.
The long-term economic outlook continues
to appear bright. The technological innovations
and business practice changes that helped
propel productivity growth to a new higher
trend during the last half of the 1990s
are likely to sustain strong productivity growth
into the future. Even during the current
slowdown,
productivity
growth
remains
healthy. Inflation remains low and under
control, which will enable businesses and
households to plan and invest for the long
haul.
Moreover, the reductions in marginal tax
rates enacted this year are likely to have
important positive effects in coming years
on the supply of labor and saving, which
will benefit long-term growth. In the interest
of cautious budgeting, however, the Administration has not built these long-term supplyside effects into its long-term economic assumptions, choosing instead to remain close
to consensus forecasts.
Recent Developments
Real Gross Domestic Product (GDP) is
estimated to have grown at only a 0.7
percent annual rate in the second quarter.
According to the initial estimate released
at the end of July, the principal restraint
on growth was weak business investment
in equipment and software, which fell at
a 14.5 percent annual rate in the second
quarter. Faced with unexpectedly sluggish
demand, excess capacity, falling profits, and
a more difficult equity-financing environment,
17

18
businesses have had to cut back or postpone
capital spending, especially for high-tech
equipment.
In contrast to business investment, consumer spending has held up well, increasing
at a 2.1 percent annual rate in the second
quarter. This is slower than consumption
was growing prior to the slowdown, but
unlike business investment, consumption continues to expand, with especially strong spending on consumer durables. Because the consumer accounts for two-thirds of GDP, the
willingness of households to continue spending
despite the stock market correction and recent
job losses has been key to maintaining positive
overall growth in recent quarters.
Residential investment, after adjustment
for inflation, also has supported overall growth
this year, rising at a 7.4 percent rate in
the second quarter, following a similar advance
in the first quarter. The swing from falling
residential investment in the second half
of last year to positive growth this year
reflects the upturn in housing starts. Homebuilding has been stimulated by relatively
low mortgage interest rates. During the first
six months of this year, the fixed rate
30-year mortgage averaged just over 7 percent,
more than one percentage point below the
rate a year earlier, and almost one percentage
point below the average rate during the
1990s.
Government spending on consumption and
investment, primarily at the state and local
level, has also added to demand and helped
keep real GDP rising. Real state and local
consumption and investment purchases rose
at a 7.5 percent annual rate in the second
quarter; federal purchases increased at a
1.6 percent rate. Changes in inventories and
in net exports in the second quarter had
very little impact on overall growth.
Inflation, which was already low, has abated
further as a consequence of slower growth
and falling energy prices. The Consumer
Price Index (CPI) rose at a 3.1 percent
annual rate in the second quarter, slightly
less than the 3.4 increase over the prior
year. The core CPI, which excludes food
and energy prices, rose at a 2.6 percent
rate in the second quarter, close to the
pace during the prior year. The GDP chain-

MID–SESSION REVIEW

weighted price index, a broader measure
of inflation than the CPI, rose at a 2.3
percent annual rate in the second quarter,
the same pace as during the preceding four
quarters.
Sluggish growth during the past year has
also begun to affect labor markets. Businesses
began to slow the pace of hiring during
the second half of last year and continued
to do so into the first quarter. During April
through July, private sector payrolls were
reduced by almost 400,000. The manufacturing
sector more than accounted for all of these
job losses. Since its recent peak in July
2000, the manufacturing sector has lost
840,000 jobs. The unemployment rate has
edged up from 4.0 percent in December
to 4.5 percent in June and July, but this
rate is still 2 percentage points below the
average unemployment rate of the past 25
years.
In financial markets, short-term interest
rates have fallen sharply this year in response
to the slowing economy and the Federal
Reserve’s reductions in the federal funds
rate. The 3-month Treasury bill rate fell
from 5.8 percent in December to 3.5 percent
in early August. In contrast, at the longerend of the maturity spectrum, interest rates
have been relatively steady this year. The
yield on the 10-year Treasury note was
5.2 percent in early August, the same level
as in December and 1.2 percentage points
below the average of the prior 10 years.
Together, the sharp drop in short-term rates
has shifted the yield curve from relatively
flat to upward sloping, a signal that investors
believe that economic growth will soon pick
up.
Equity prices have recovered from their
April lows in response to further easing
of monetary policy and investors’ expectations
that the economy and corporate profits are
likely to improve. Nonetheless, the major
indexes remain well below their levels at
the end of last year.
Revised Economic Assumptions
The economic projections for the Mid-Session
Review, summarized in Table 5, have been
revised from those used in the Administration’s 2002 Budget to incorporate recent devel-

ECONOMIC ASSUMPTIONS

opments and policy actions, notably the weaker economic growth and profits, the nearterm fiscal stimulus from the recently enacted
tax package, and the Federal Reserve’s easing
of monetary policy.2
The Mid-Session Review projections are
similar to those of private-sector forecasters
and, except for the near term, close to
those used for the 2002 Budget. The Administration projects economic growth to slow this
year to a greater extent than anticipated
earlier, and to recover next year. The longrun sustainable rates of GDP growth and
unemployment, which are maintained during
the second half of the 10-year projection
horizon, are the same as in the budget
projections. Beginning with 2002, the inflation
projection is nearly identical to that in the
Budget. Interest rates, however, are lower
than in the Budget assumptions, especially
short-term rates.
Real GDP, Potential GDP and Unemployment: The most important revision to the
economic assumptions is the lowered real
growth projection for this year. By the end
of the year and into 2002, however, real
growth is expected to increase significantly
as the fiscal and monetary stimulus takes
hold and as the cutbacks in capital spending
wane. During the outyears of the projection
period, real GDP is projected to rise 3.1
percent per year, the Administration’s estimate of the nation’s potential GDP growth
during this period. Over the 10 years, 20022011, real GDP growth averages 3.2 percent
per year, the same as in the April Budget,
and slightly below the Blue Chip consensus
2 The economic growth assumptions are based on data available
as of June, 2001. The Addendum to Table 5 adjusts the levels of
the Mid-Session Review assumptions for revisions to the National
Income and Product Accounts, released on July 27, covering the period from the first quarter of 1998 through the first quarter of
2001. The effect of these revisions was to restate real and nominal
GDP downward; the GDP inflation measure was hardly revised.
On the income side, by the first quarter of 2001 the level of corporate profits before tax was lowered while wages and salaries
were revised up by a slightly larger amount. Adjusting the MSR
assumptions for consistency with the revised historical data does
not affect the projections of receipts or outlays because these are
based on the economic assumption’s projections of growth rates of
GDP and incomes, not the projections of levels of these variables.

19
of private-sector forecasts published in March,
the latest consensus long-range projection.
As a consequence of slow growth this
year, the unemployment rate is forecasted
to edge up slightly. During 2002 and 2003,
as economic growth picks up, the unemployment rate is projected to move down again.
In 2004 and beyond, the unemployment rate
is projected to remain on a plateau of 4.6
percent, the same level as the private sector
consensus.
Inflation: The CPI and GDP measures
of inflation have been raised slightly in
2001 to incorporate recent data. For 2002
and beyond, the inflation projections are
virtually the same as in the Budget. For
2002-2011, the Consumer Price Index is projected to rise 2.5 percent per year on average;
the GDP chain-weighted price index is projected to increase 2.1 percent yearly. The
slower rise in the GDP measure reflects
the fixed weighting in the CPI; the higher
weights for housing in the CPI combined
with a relatively faster rise projected for
housing prices; and the lower weight for
computers in the CPI combined with a projected decline in computer prices. The 10year inflation projections are very close to
those of the private sector consensus.
Interest Rates: Short-term interest rates
this year have fallen significantly below the
levels projected in the Budget as a consequence of weaker-than-expected growth and
monetary policy actions. The yield on the
10-year Treasury note has also been below
the earlier budget projection. The Mid-Session
Review assumptions anticipate some rise in
the 91-day Treasury bill rate through the
end of 2002 as the recovery strengthens.
Thereafter, the rate is projected to remain
at 4.3 percent. During the last five years
of the projection period, this T-bill rate is
0.7 percentage point lower than assumed
in the budget. The yield on the 10-year
Treasury note is projected to remain at
5.2 percent, consistent with the historical
spread between short-term and long-term interest rates.

ECONOMIC ASSUMPTIONS

20

Table 5.

1

(Calendar years; dollar amounts in billions)
Actual
2000
Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars ....................................................................................
Real, chained (1996) dollars ................................................................
Chained price index (1996 = 100), annual average ..........................
Percent change, fourth quarter over fourth quarter:
Current dollars ....................................................................................
Real, chained (1996) dollars ................................................................
Chained price index (1996 = 100) .......................................................
Percent change, year over year:
Current dollars ....................................................................................
Real, chained (1996) dollars ................................................................
Chained price index (1996 = 100) .......................................................

Projections
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

9,963 10,364 10,937 11,575 12,228 12,880 13,553 14,263 15,009 15,794 16,619 17,488
9,318 9,474 9,776 10,122 10,468 10,800 11,133 11,476 11,829 12,194 12,569 12,956
107.0 109.5 111.9 114.3 116.8 119.2 121.7 124.3 126.9 129.5 132.2 135.0
4.2
1.7
2.4

6.0
3.7
2.2

5.8
3.5
2.2

5.5
3.4
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

7.1
5.0
2.1

4.0
1.7
2.3

5.5
3.2
2.2

5.8
3.5
2.2

5.6
3.4
2.1

5.3
3.2
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

Incomes, billions of current dollars:
Corporate profits before tax ................................................................
Wages and salaries ..............................................................................
Other taxable income 2 ........................................................................

926
4,769
2,281

796
4,989
2,372

969
5,272
2,418

1,020
5,621
2,507

1,104
5,951
2,589

1,164
6,270
2,693

1,182
6,572
2,788

1,202
6,888
2,887

1,224
7,224
2,994

1,254
7,589
3,107

1,291
7,969
3,226

1,337
8,370
3,326

Consumer Price Index (all urban): 3
Level (1982–84 = 100), annual average .............................................
Percent change, fourth quarter over fourth quarter .........................
Percent change, year over year ..........................................................

172.3
3.4
3.4

178.0
3.2
3.3

182.7
2.6
2.7

187.4
2.5
2.5

192.0
2.5
2.5

196.8
2.5
2.5

201.8
2.5
2.5

206.8
2.5
2.5

212.0
2.5
2.5

217.3
2.5
2.5

222.7
2.5
2.5

228.3
2.5
2.5

Unemployment rate, civilian, percent:
Fourth quarter level ............................................................................
Annual average ....................................................................................

4.0
4.0

4.8
4.6

4.7
4.8

4.7
4.7

4.6
4.6

4.6
4.6

4.6
4.6

4.6
4.6

4.6
4.6

4.6
4.6

4.6
4.6

4.6
4.6

Federal pay raises, January, percent:
Military 4 ...............................................................................................
Civilian 5 ...............................................................................................

4.8
4.8

3.7
3.7

4.6
3.6

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

3.9
3.9

Interest rates, percent:
91-day Treasury bills 6 ........................................................................
10-year Treasury notes .......................................................................

5.8
6.0

3.8
5.2

3.9
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

4.3
5.2

ADDENDUM: 7
Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars .................................................................................
Real, chained (1996) dollars ............................................................
Chained price index (1996 = 100), annual average .......................
Percent change, fourth quarter over fourth quarter:
Current dollars .................................................................................
Real, chained (1996) dollars ............................................................
Chained price index (1996 = 100) ...................................................

9,873 10,278 10,846 11,479 12,126 12,772 13,440 14,144 14,884 15,662 16,481 17,343
9,224 9,385 9,685 10,027 10,370 10,699 11,028 11,368 11,719 12,080 12,451 12,835
107.0 109.5 111.9 114.4 116.8 119.3 121.8 124.3 126.9 129.5 132.2 135.0
5.3
2.8
2.4

4.2
1.8
2.4

6.0
3.7
2.2

5.8
3.5
2.2

5.5
3.4
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

MID–SESSION REVIEW

5.8
3.4
2.3

ECONOMIC ASSUMPTIONS 1—Continued
(Calendar years; dollar amounts in billions)
Actual
2000

Projections
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Percent change, year over year:
Current dollars .................................................................................
Real, chained (1996) dollars ............................................................
Chained price index (1996 = 100) ...................................................

6.5
4.1
2.3

4.1
1.7
2.3

5.5
3.2
2.2

5.8
3.5
2.2

5.6
3.4
2.1

5.3
3.2
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

5.2
3.1
2.1

Incomes, billions of current dollars:
Corporate profits before tax ............................................................
Wages and salaries ..........................................................................
Other taxable income 2 ....................................................................

845
4,837
2,236

714
5,085
2,341

870
5,374
2,387

916
5,730
2,476

991
6,066
2,558

1,045
6,391
2,661

1,061
6,699
2,755

1,079
7,022
2,855

1,099
7,363
2,961

1,125
7,735
3,074

1,159
8,123
3,193

ECONOMIC ASSUMPTIONS

Table 5.

1,200
8,532
3,293

1 Based

on information available as of June 2001.
interest, dividend and proprietor’s components of personal income.
adjusted CPI for all urban consumers.
4 Percentages apply to basic pay only; additional rank-specific adjustments are proposed for 2002; adjustments for housing and subsistence allowances will be determined by the Secretary of Defense.
5 Overall average increase, including locality pay adjustments.
6 Average rate (bank discount basis) on new issues within period.
7 Assumptions adjusted to reflect revised historical series for GDP and incomes released by the Bureau of Economic Analysis in July 2001.
2 Rent,

3 Seasonally

21

RECEIPTS
The current estimates of receipts for 2001
and 2002 are below the April Budget estimates
by $124.2 billion and $57.0 billion, respectively. The current estimates are below the
April Budget estimates for 2003 and 2004,
but exceed the April Budget estimates in
2005 and subsequent years, resulting in a
net upward revision in receipts of $73.7
billion over the 10-year period 2002 to 2011.
These changes are the net effect of enactment
of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (Tax Relief Act),
modification of the Administration’s proposals
to reflect the Administration’s National Energy
Policy tax incentives and enactment of the
Tax Relief Act, revised economic projections,
and technical reestimates.
The Tax Relief Act, which was signed
by President Bush on June 7, 2001, provides
over $1.3 trillion in tax relief over the
11-year period 2001 to 2011. Because this
Act (1) provides individual income tax relief
beginning this year, with the first installment
provided through payments of advanced credits
and reduced withholding, which began in
July, (2) increases the child tax credit to
$600 beginning January 1, 2001, and (3)
delays the payment of estimated taxes by
corporations, otherwise due on September
17, 2001, until October 1, 2001, receipts
are reduced relative to the April Budget
proposals by $67.9 billion in 2001. However,
because the tax relief provided in this Act
is less than the relief proposed by President
Bush in the budget, receipts are increased
relative to the April Budget proposals by
$505.0 billion over the 10 years, 2002 through
2011.
The Administration’s policy initiatives are
estimated to reduce receipts by $0.6 billion
in 2002 and $314.2 billion over the 10year period 2002 through 2011. These initia-

tives include the Administration’s National
Energy Policy tax incentives, many of the
Administration’s April Budget proposals that
were not enacted in the Tax Relief Act,
and permanent extension of the provisions
provided in the Tax Relief Act that are
scheduled to expire in 2010.
Revised economic projections reduce receipts
by $21.2 billion in 2001 and $27.3 billion
in 2002. For the 10-year period 2002 to
2011, revised economic assumptions account
for $147.9 billion of the downward revision
in receipts. Collections of individual income
taxes and Social Security and Medicare payroll
taxes are reduced by $4.6 billion in 2001,
$13.6 billion in 2002 and $71.2 billion over
the 10-year period 2002 through 2011, in
large part due to lower levels of wages
and salaries in most years. Lower corporate
profits in most years reduce collections of
corporation income taxes by $14.1 billion
in 2001, $7.3 billion in 2002, and $25.7
billion over the 10 years, 2002 to 2011.
Lower levels of nominal and real GDP, which
affect excise taxes, and lower interest rates,
which affect deposits of earnings by the
Federal Reserve, also contribute to the reduction in receipts in each year. Customs duties
are lower in most years, reflecting lower
levels of imports than forecast for the April
Budget.
Technical adjustments reduce receipts by
$35.1 billion in 2001, $26.2 billion in 2002,
and declining amounts through 2004. Technical adjustments increase receipts in each
subsequent year, resulting in a net increase
in receipts of $30.8 billion for the 10-year
period 2002 to 2011. These technical adjustments are in large part attributable to revisions in estimating models and actual collection experience.

23

24

MID–SESSION REVIEW

Table 6.

CHANGE IN RECEIPTS
(In billions of dollars)

2001

April estimate .........................................
Revisions due to:
Enacted legislation, relative to April
proposals 1 ........................................
Proposed legislation 1 .........................
Economic assumptions .......................
Technical reestimates .........................

2002

2003

2004

2005

2006

2002–2006

2002–2011

2,136.9

2,191.7

2,258.2

2,338.8

2,437.8

2,528.7

–67.9
............
–21.2
–35.1

–3.0
–0.6
–27.3
–26.2

–14.8
–1.3
–9.8
–12.2

–2.5
–6.0
3.7
–6.4

32.1
–13.6
5.3
0.9

46.4
–20.5
–4.5
2.5

58.2
–41.9
–32.6
–41.4

505.0
–314.2
–147.9
30.8

–57.7

73.7

Total change ....................................

–124.2

–57.0

–38.0

–11.3

24.7

23.9

Mid-session estimate ..............................

2,012.7

2,134.7

2,220.2

2,327.5

2,462.5

2,552.6

1 Affects

both outlays and receipts; only the receipt effect is shown here.

SPENDING
Total outlays for 2001 are now estimated
to be $1,854.9 billion, $1.3 billion below
the April Budget estimate. The reduction
is the net effect of the Supplemental Appropriations Act, inaction on the Administration’s
Immediate Helping Hand prescription drug
program, enactment of relief for farmers,
and revised economic and technical assumptions. For 2002, the estimate of total outlays
has increased by $1.5 billion relative to
April to $1,962.1 billion. Increases related
to the Administration’s assessment of immediate defense needs and enactment of the
Economic Growth and Tax Relief Reconciliation Act are partially offset by reductions
resulting from economic and technical factors.
For the 10-year period 2002 through 2011,
the Administration now estimates total outlays
at $393.4 billion higher than in April. Enacted
legislation and revisions to Administration
policies increase the 10-year projections by
$412.9 billion. Changes due to revised economic and technical assumptions, on net,
reduce outlays by $19.5 billion for the period.
Policy changes
In total, policy changes increase total outlays
by $8.2 billion and $8.4 billion for 2001
and 2002, respectively. Over 10 years, outlay
changes resulting from policy differences total
$412.9 billion.
The Supplemental Appropriations Act increased 2001 outlays by $4.9 billion, largely
for additional needs of the Department of
Defense. The Agricultural Economic Assistance
Act, which provided relief for farmers affected
by continuing low prices for farm products,
increases outlays for 2001 by $5.5 billion.
The Economic Growth and Tax Relief Reconciliation Act included provisions that increased the refundable portion of the earned
income and child tax credits beyond what
was proposed in the April Budget, raising
outlays by $5.0 billion in 2002.
Congressional inaction on the Administration’s Immediate Helping Hand prescription
drug program reduces outlays by $2.5 billion

and $11.2 billion, in 2001 and 2002 respectively. On the other hand, new estimates
reflect the President’s Framework to Strengthen Medicare, announced on July 12. From
2004–2011, the Administration now proposes
to spend $190 billion for Medicare modernization efforts, including a prescription drug
benefit. This amount is up $37 billion from
the April Budget, and occurs in 8 years
rather than ten.
Upon taking office, the Administration discovered that the Defense Department (DOD)
had serious unmet needs in several critical
areas, such as readiness and health care.
As a result, the Administration requested,
on top of new funds in the 2001 supplemental,
an additional $18.4 billion in funding for
2002, increasing 2002 outlays by $9.5 billion.
The longer-term defense review, which will
establish funding requirements for future
years, is still ongoing. Pending the completion
of the defense strategy review, this Review
assumes a current services budget for DOD
in the outyears based on the proposed 2002
level, an increase in budget authority of
$209 billion over the next 10 years.
Revisions in Administration tax policy since
the April Budget have changed the composition of the proposed health tax credit, increasing the proportion that will be reflected
on the outlay side of the budget. In addition,
the effective date of the credit has been
delayed. On net, outlays for the credit have
increased by $22.5 billion over 10 years
as a result of these changes.
Debt service costs associated with policy
changes, including the tax rebates in the
Economic Growth and Tax Relief Reconciliation Act, increase outlays by $0.9 billion
in 2001 and $3.3 billion in 2002.
Economic assumptions
Revisions in economic assumptions, discussed earlier in this report, reduce outlays
by $1.6 billion in 2001 and $6.3 billion
in 2002. Over the 10-year period 2002 through
2011, however, outlay estimates increase by
25

26
a net of $21.8 billion due to revised economic
assumptions. Outlays are increased by higher
unemployment and inflation rates. Through
2005, these increases are more than offset
by lower interest rates that reduce debt
service costs. The savings from lower interest
rates gradually decreases as the total debt
being financed grows smaller. By 2009, lower
interest rates increase assumed outlays as
earnings on assumed escalating cash balances
are reduced.
Technical changes
For 2001, estimated outlays are $1.3 billion
lower than in April for technical reasons.
For 2002, technical changes increase outlays
by $1.5 billion. The following changes in
outlay projections all arise from technical
factors.
Discretionary programs.—Estimated outlays
for discretionary programs have decreased
by $2.2 billion and $4.2 billion in 2001
and 2002, respectively, relative to the April
Budget, to reflect revisions in expected rates
of spending appropriated funds. The Department of Justice expects to spend state and
local law enforcement grants more heavily
in 2001, shifting spending that was expected
in 2002. Training and employment programs
are expected to spend more slowly in both
2001 and 2002, while spending more rapidly
in 2003 and beyond. In addition, outlays
for the highway program have been reduced
for 2003 and beyond to reflect lower than
expected revenues to the Highway Trust
Fund.
Commodity Credit Corporation (CCC) farm
programs.—Spending on farm programs
through the Commodity Credit Corporation
is projected to increase by $2.2 billion in
2002 and $12.5 billion over the 10 years
2002 through 2011, relative to the April
Budget. These changes largely reflect increases
in projected demand for USDA commodity
loans and payments due primarily to increased
crop production estimates and slower price
recovery for certain commodities. The reduction shown for 2001 is primarily the result
of a reduction in the estimated subsidy
cost of loans made in previous years, which
is reflected here as required by the Credit
Reform Act.

MID–SESSION REVIEW

Postal service.—Administrative decisions to
postpone capital improvements and limit general operating expenses have reduced projections of outlays for the Postal Service by
$1.3 billion in 2001. The $0.5 billion reduction
in 2002 projected outlays is a result of
increased revenues from the July 2001 postage
rate increase. Projections for 2003 and beyond
continue to assume that the postal fund
achieves balance on an accrual basis.
Universal service fund.—The estimate of
spending from the universal service fund
has declined by $1.1 billion in 2001, reflecting
a decrease in expected collections in various
programs and a slower rate of spending
from obligated balances within the schools
and libraries program than had previously
been assumed.
Medicaid.—Projected outlay estimates for
Medicaid are $1.5 billion above the April
estimate for 2001, $0.6 billion for 2002,
and $30.0 billion higher for the 10-year
period 2002 through 2011 for technical reasons. This is primarily the result of higher
projections of state spending on nursing facilities, prescription drugs, managed care, and
inpatient facilities, offset in part by administrative actions aimed at improving Medicaid
program integrity. Because changes in economic assumptions have lowered Medicaid
outlay projections, the net change in Medicaid
outlays over the 10-year period is $25.4
billion.
Medicare.—Technical revisions reduce current estimates of Medicare outlays by $1.8
billion in both 2001 and 2002 relative to
the April estimate. Medicare outlays are
projected to be $29.4 billion lower over the
10-year period, 2002 through 2011 due to
technical factors. About half of this decrease
is driven by reductions in estimates for
physician fee schedule expenditures, reflecting
lower actual outlays for the year to date,
lower estimates for certain new preventive
services mandated by last year’s Benefits
Improvement and Protection Act, and a lower
performance adjustment for 2002. The remaining decrease reflects reductions in outpatient
hospital, home health, and managed care
payments offset slightly by increases for inpatient hospital, durable medical equipment
and lab payments. Including the impact of

27

SPENDING

revised economic assumptions, the total decrease in Medicare current law outlays over
the 10-year period is $44.2 billion.
Unemployment compensation.—As a result
of revised technical assumptions, outlays for
unemployment compensation have increased
by $1.7 billion for 2001 and $2.2 billion
for 2002 relative to the April estimates.
The assumed ratio of the insured unemployment rate to the total unemployment rate
has increased thereby increasing the projected
number of people eligible for benefits at
each level of total unemployment. Average
weekly benefits are also assumed to be greater
than projected in April.
Temporary Assistance for Needy Families
(TANF).—Technical revisions have increased
projections of TANF outlays by $1.3 billion
in 2001 and $1.1 billion in 2002. This increase
is due to states spending for the year to
date at a higher rate than previously estimated.
Social Security.—Estimated outlays for Social Security are lower than the April Budget
by $0.4 billion in 2001, $1.3 billion in 2002,
and $44.5 billion over 10 years as the
result of technical factors. The reduction
is primarily the result of updated demographic
Table 7.

projections contained in the 2001 Trustees
Report and additional actual experience
through March 2001. The downward technical
reestimates are partially offset by upward
reestimates for cost-of-living increases and
other economic factors so that the net change
in the program over 10 years is a decrease
of $25.5 billion.
Spectrum auction receipts.—Receipts from
the auction of electromagnetic spectrum, which
are recorded as offsets to spending in the
budget, are projected to be $1.2 billion lower
in 2002 and $1.0 billion higher in 2004
than in April. This reflects regulatory action
taken by the Federal Communications Commission, which shifts the expected receipts
from two major auctions.
Net interest.—Estimates of net interest outlays are $27.2 billion higher than in April
over the 10-year period 2002 through 2011,
primarily reflecting increased debt service
costs related to technical changes in receipts
and outlays. The Mid-Session estimates assume that the Treasury will buy back securities in face value amounts of $35 billion
in 2001 and $40 billion in 2002. The Budget
assumed $35 billion for 2001 and had no
buybacks for 2002.

CHANGE IN OUTLAYS
(In billions of dollars)

2001

2002

2003

2004

2005

2006

1,960.6

2,016.2

2,076.7

2,168.7

2,223.9

10,446.2

22,937.5

9.5
1.5
0.0

13.3
0.3
0.0

23.3
0.1
0.0

18.8
0.1
0.0

22.1
*
0.0

87.0
1.9
0.0

196.5
1.9
0.0

5.0
–0.1
–11.2
0.4
3.3

6.3
–1.9
–12.9
–0.6
4.5

5.7
–0.8
–0.8
–0.6
6.0

5.3
2.2
7.5
–0.4
7.4

7.6
3.5
8.2
–0.3
8.5

29.9
2.9
–9.2
–1.5
29.7

72.5
22.5
37.0
–2.0
84.4

8.2

8.4

8.9

32.9

40.9

49.6

140.7

412.9

April estimate ............................................ 1,856.2
Change due to:
Policy:
Defense review ................................
0.0
Supplemental ..................................
4.9
Farm assistance .............................
5.5
Earned income and child tax credits ..................................................
0.0
Health tax credit ............................
0.0
–2.5
Medicare modernization 1 ..............
Other ...............................................
–0.6
Debt service ....................................
0.9
Subtotal, policy ...................................

2002–2006 2002–2011

Economic assumptions:
Social Security .................................
Medicare ..........................................
Other mandatory programs ..........
Net interest:
Effect of rates and CPI ...............
Debt service .................................

0.3
*
0.8

2.3
–0.3
2.2

3.0
–0.5
3.0

2.4
–0.4
3.1

2.1
–0.3
2.9

1.5
–0.6
2.8

11.2
–2.0
14.0

19.0
–14.8
16.9

–3.0
0.2

–11.7
1.2

–10.6
2.0

–9.1
2.0

–6.8
1.7

–4.4
1.7

–42.5
8.6

–30.9
31.5

Subtotal, economics ............................

–1.6

–6.3

–3.1

–2.0

–0.4

1.2

–10.7

21.8

28

MID–SESSION REVIEW

Table 7.

CHANGE IN OUTLAYS—Continued
(In billions of dollars)
2001

Technical reestimates:
Discretionary programs:
Highways .....................................
State and local law enforcement
assistance .................................
Training and employment services ............................................
Other ............................................

2002

2003

2004

2005

2006

2002–2006 2002–2011

0.0

0.0

–1.7

–4.4

–5.6

–6.0

–17.7

–52.4

0.8

–0.9

0.0

*

0.0

0.0

–0.8

–0.8

–0.8
–2.2

–1.0
–2.4

0.4
–0.7

0.6
1.6

0.1
0.6

0.1
0.2

0.1
–0.7

0.6
–2.0

Total, discretionary programs ........
Commodity Credit Corporation .....
Postal service ..................................
Universal service fund ....................
Medicaid ..........................................
Medicare ..........................................
Unemployment compensation ........
TANF ...............................................
Social Security .................................
Spectrum auction receipts ..............
Other mandatory programs ...........
Net interest .....................................

–2.2
–2.4
–1.3
–1.1
1.5
–1.8
1.7
1.3
–0.4
0.4
–3.0
–0.4

–4.2
2.2
–0.5
0.6
0.6
–1.8
2.2
1.1
–1.3
1.2
–0.2
–0.4

–2.1
2.1
0.4
0.1
2.2
–2.4
1.1
1.0
–2.1
0.0
*
3.0

–2.2
2.6
0.5
0.6
2.5
–3.7
0.7
0.7
–2.8
–1.0
0.9
4.4

–4.9
1.9
0.5
0.2
2.7
–3.1
0.6
0.5
–3.5
0.0
0.1
4.0

–5.7
1.0
0.6
0.2
2.8
–2.4
0.6
*
–4.2
0.0
–*
4.1

–19.1
9.8
1.6
1.7
10.8
–13.4
5.1
3.5
–13.9
0.2
0.8
15.1

–54.6
12.5
5.1
3.1
30.0
–29.4
8.3
–1.0
–44.5
0.2
1.8
27.2

Subtotal, technical ..............................

–7.8

–0.6

3.4

3.1

–0.9

–3.0

2.0

–41.3

Total, changes ........................................

–1.3

1.5

9.2

34.0

39.6

47.7

132.0

393.4

Current estimate ....................................... 1,854.9

1,962.1

2,025.4

2,110.7

2,208.3

2,271.6

10,578.2

23,330.9

* $50 million or less.
1 The President proposed to add $153 billion over 10 years in the April Budget for Medicare modernization. This table
displays a $37 billion increase to the April Budget. In total the Mid-Session Review proposes to increase spending for
Medicare modernization by $190 billion.

SUMMARY TABLES

29

SUMMARY TABLES

Table 8. ESTIMATED SPENDING FROM 2002
BALANCES OF BUDGET AUTHORITY: DISCRETIONARY PROGRAMS 1
(In billions of dollars)

Total
Total balances, end of 2002 ..........................................................
Spending from 2002 balances:
2003 ............................................................................................
2004 ............................................................................................
2005 ............................................................................................
2006 ............................................................................................
Expiring balances, 2003 through 2006 .......................................
Unexpended balances at the end of 2006 ...................................

767.1
288.7
161.8
100.6
68.9
............
147.1

1 This table is required by section 221(b) of the Legislative Reorganization Act of 1970.

31

32

Table 9.

OUTLAYS FOR MANDATORY PROGRAMS UNDER CURRENT LAW 1
(In billions of dollars)
2000
Actual

Human resources programs:
Education, training, employment and social services .............
Health .........................................................................................
Medicare .....................................................................................
Income security ..........................................................................
Social security ............................................................................
Veterans’ benefits and services ................................................
Subtotal, human resources programs ...................................

10.3
124.5
194.1
206.5
406.0
26.3

Estimate
2001

9.0
140.3
214.2
220.0
429.9
22.8

2002

14.5
152.6
224.3
239.7
452.5
27.9

2003

15.0
170.3
235.8
248.2
474.4
29.9

2004

15.5
185.4
248.1
257.1
497.6
31.5

2005

16.0
201.0
267.4
268.5
522.9
35.7

2006

17.0
217.5
276.4
278.1
550.3
34.3

2007

17.8
235.7
297.0
284.5
580.4
33.3

2008

18.6
255.4
315.9
296.4
613.6
36.7

2009

19.6
276.7
336.3
306.0
651.5
38.7

2010

20.7
300.7
357.8
317.8
693.5
39.8

2011

21.8
324.4
387.0
333.9
738.4
40.8

967.8 1,036.1 1,111.5 1,173.6 1,235.1 1,311.5 1,373.5 1,448.7 1,536.7 1,628.8 1,730.3 1,846.3

Other mandatory programs:
International affairs ..................................................................
Energy ........................................................................................
Agriculture .................................................................................
Commerce and housing credit ..................................................
Transportation ...........................................................................
Undistributed offsetting receipts ..............................................
Other functions ..........................................................................

–4.1
–4.0
32.0
–1.3
2.1
–42.6
0.8

–6.3
–3.3
23.5
–6.8
2.2
–47.0
1.0

–3.3
–3.4
15.2
6.3
1.8
–48.5
3.2

–3.2
–3.2
11.6
5.6
2.0
–64.0
2.7

–3.3
–3.7
10.9
5.4
2.0
–64.2
4.1

–3.2
–3.6
10.2
4.6
1.9
–57.3
3.5

–3.2
–3.6
9.6
3.8
1.9
–59.2
3.5

–3.1
–3.5
9.3
5.4
1.9
–61.6
3.6

–3.0
–2.7
9.4
4.7
1.9
–64.5
3.7

–2.9
–2.4
9.6
5.3
2.0
–66.7
3.7

–2.9
–2.3
9.5
5.0
2.0
–69.8
3.8

–2.9
–2.3
9.6
5.1
2.0
–73.2
4.0

Subtotal, other mandatory programs ...................................

–17.0

–36.8

–28.8

–48.4

–48.8

–43.8

–47.2

–48.0

–50.5

–51.5

–54.8

–57.8

Total, outlays for mandatory programs under current
law ....................................................................................

950.8

999.3 1,082.7 1,125.2 1,186.4 1,267.7 1,326.3 1,400.7 1,486.2 1,577.3 1,675.5 1,788.6

1 This

table meets the requirements of Section 221(b) of the Legislative Reorganization Act of 1970.

MID–SESSION REVIEW

MANDATORY PROPOSALS
(In millions of dollars)

2001

2002

2003

2004

Allowance for Medicare Modernization ............ ............ ............ ............ 14,000
Health care tax credit ............................................ ............ ............ ............
419

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

–25

–13

2006

2007

2008

2009

2010

2011

20,000
4,104

21,000
5,517

22,000
5,910

25,000
6,061

27,000
6,224

29,000
6,392

32,000
6,564

55,000 190,000
10,040 41,191

–2

–2

28

13

1 .............. ..............

–42 ..............

............ ............ ............ –1,200 .............. .............. .............. .............. .............. .............. ..............
............

–1,200

–1,200

–218

–218

88

358

–1,203
1,203
–3

–1,208
1,208
–8

–335 ..............

–335

–218 ............ ............ .............. .............. .............. .............. .............. .............. ..............

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

–39

–2

49

80

134

92

44 .............. ..............

............ ............ ............ –1,201
............ ............ ............ 1,201
............ ............ ............
–1

–1
1
–1

–1
1
–1

–1
1
–1

–1
1
–1

–1
1
–1

–1
1
–1

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

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

2002–06 2002–11

–1
1
–1

–6

–6

–6

–6

–6

–6

–6

–6

–18

–48

–37

–60

–85

–107

–133

–163

–188

–208

–196

–996

............ ............ ............ ............ .............. .............. .............. ..............
............ ............ ............ ............ .............. .............. .............. ..............
............ ............ ............ ............ .............. .............. .............. ..............
............
19
–9
–12
–21
–26
–29
–34

–127
–275
–24
–37

–138
–280
–27
–36

–149 ..............
–286 ..............
–25 ..............
–40
–49

–415
–841
–76
–225

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

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

–10

............ ............
............
–198

–15

–5

–5

3,600 –5,100
–200
–200

–5 .............. .............. .............. .............. .............. ..............
–2,000
–200

–4,000 .............. .............. .............. .............. ..............
–200
–175
–150
–75
–25 ..............

–25

–25

–7,500
–998

–7,500
–1,423

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

–92

–97

–101

–106

–112

–118

–123

–129

–136

–143

–508

–1,157

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

–12

–41

–93

–194

–334

–410

–416

–421

–421

–421

–674

–2,763

33

Other mandatory proposals:
Agriculture:
Long-term recreation fee program with fouryear reauthorization ........................................
Energy:
ANWR, lease bonuses ..........................................
HUD
FHA mark-to-market extension ........................
Interior:
Use recreation fees to reduce NPS backlog
(NPS/FWS/BLM) ..............................................
ANWR, lease bonuses:
State of Alaska’s share:
Receipts .........................................................
Expenditure ..................................................
Federal share ....................................................
Treasury:
Modify and simplify EITC .................................
Veterans Affairs:
OBRA Extenders:
IRS income verification on means tested
veterans and survivors benefits ..................
Round-down disability benefits to nearest
dollar after COLA .........................................
Limit VA pensions to Medicaid recipients in
nursing homes (includes Medicaid offsets)
Continue current housing loan fees ................
Loan resale loss ................................................
Eliminate Vendee loan program .......................
Army Corps of Engineers:
Recreation user fee increase ..............................
FCC:
Shift spectrum auction deadlines and promote
clearing .............................................................
Analog spectrum lease fee .................................
FDIC:
State Bank examination fees:
Reduction in FDIC outlays ..............................
FEMA:
Phase out subsidized premiums for non-primary residences in the flood insurance program ..................................................................

2005

SUMMARY TABLES

Table 10.

34

Table 10.

MANDATORY PROPOSALS—Continued
(In millions of dollars)

2001

2002

2003

Reform flood insurance program for repetitive
loss properties that experience chronic flooding ...................................................................... ............ ............
OPM:
Extend higher agency contributions to the
Civil Service Retirement Fund ....................... ............ ............
Other:
Indirect impact of other proposals .................... ............ ............

2004

2005

2006

2007

2008

2009

2010

2011

2002–06 2002–11

–20

–30

–38

–43

–46

–49

–51

–53

–55

–131

–385

–469

–482

–449

–415

–380

–343

–306

–268

–222

–1,815

–3,334

–2

–4

–7

–7

–6

–3

–4

–4

–7

–20

–44

Total, other mandatory proposals ................... ............

–511

2,678 –7,286

–3,040

–5,151

–1,116

–1,153

–1,575

–1,584

–1,899 –13,309 –20,635

Total, mandatory proposals .................................. ............

–511

2,678

7,133

21,064

21,366

26,794

29,908

31,650

33,809

36,666

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

11

5

5

5

6

6

6

6

7

7

32

64

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

30

158

192

196

200

200

200

200

200

200

776

1,776

............
9
............ ............

46
400

58
300

60
60
60
150 .............. ..............

60
–200

60
–200

60
–200

60
–250

Fund with discretionary appropriations:
Education:
Expand teacher loan forgiveness .......................
HHS:
Child welfare preventative services ..................
Education and training for older foster children ...................................................................
Charity State tax credit, TANF outlays ...........
Interior:
Correct trust accounting deficiencies (individual Indian money investments) .................
Justice:
Radiation exposure compensation .....................

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

7 ............ ............ .............. .............. .............. .............. .............. .............. ..............

51,730 210,557

233
533
850 ..............
7

7

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

97

155

150

108

68

55

40

20

12

5

578

710

Total, fund with discretionary appropriations ............

154

764

705

519

334

321

106

86

79

22

2,476

3,090

MID–SESSION REVIEW

EFFECT OF PROPOSALS ON RECEIPTS
(In millions of dollars)

2001

2003

2004

2005

2006

2007

2008

2009

2010

2011

2002–2006 2002–2011

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

–527

–1,844

–3,252

–4,879

–6,569

–7,537

–7,568

–7,639

–5,623

–39,815

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

–195

–210

–225

–241

–258

–277

–299

–322

–630

–2,027

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

–100

–158

–154

–163

–173

–183

–206

–227

–412

–1,364

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

–18

–179

–209

–227

–244

–247

–250

–253

–406

–1,627

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

–2

–6

–6

–6

–6

–6

–6

–7

–14

–45

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

–174

–1,641

–3,445

–3,626

–3,930

–4,029

–4,131

–4,234

–5,260

–25,210

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

–346

–574

–1,150

–2,007

–2,365

–2,646

–2,945

–3,287

–2,070

–15,320

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

–423

–713

–782

–831

–878

–926

–980

–1,036

–1,918

–6,569

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

–22

–39

–45

–52

–60

–69

–81

–94

–106

–462

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

–79

–362

–431

–482

–510

–534

–567

–589

–872

–3,554

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

–370

–463

–490

–518

–529

–540

–557

–552

–1,323

–4,019

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

–88

–230

–161

–116

–85

–65

–50

–41

–479

–836

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

–4

–46

–202

–525

–987

–1,514

–2,020

–2,406

–252

–7,704

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

–154

–265

–281

–297

–306

–143

–34

–35

–700

–1,515

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

–236

–373

–364

–355

–344

–333

–321

–310

–973

–2,636

–49

–102

–115

–132

–155

–187

–231

–292

–270

–1,267

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

–1

–3

35

2002 Budget Proposals:.
Incentives for charitable giving:
Provide charitable contribution deduction
for nonitemizers ..........................................
Permit tax-free withdrawals from IRAs for
charitable contributions ..............................
Raise the cap on corporate charitable contributions .....................................................
Strengthen and reform education:
Allow teachers to deduct out-of-pocket classroom expenses .............................................
Assist Americans with disabilities:
Exclude from income the value of employerprovided computers, software and peripherals .............................................................
Invest in health care:
Provide refundable tax credit for the purchase of health insurance 1 .........................
Provide an above-the-line deduction for
long-term care insurance premiums ..........
Allow up to $500 in unused benefits in a
health flexible spending arrangement to
be carried forward to the next year ...........
Provide additional choice with regard to unused benefits in a health flexible spending
account .........................................................
Permanently extend and reform Archer
MSAs ............................................................
Provide an additional personal exemption to
home caretakers of family members .........
Help farmers and fishermen manage economic downturns:
Establish FFARRM savings accounts ...........
Increase housing opportunities:
Provide tax credit for developers of affordable single-family housing ..........................
Encourage savings:
Establish Individual Development Accounts
Protect the environment:
Permanently
extend
expensing
of
brownfields remediation costs ....................
Exclude gains from the sale of property for
conservation purposes ................................

2002

SUMMARY TABLES

Table 11.

36

Table 11.

EFFECT OF PROPOSALS ON RECEIPTS—Continued
(In millions of dollars)

2001
Energy policy proposals:
Modify treatment of nuclear decommissioning funds ...............................................
Extend and modify tax credit for producing
electricity from certain sources ..................
Provide tax credit for residential solar energy systems ................................................
Promote trade:
Extend and expand Andean trade preferences 2 .......................................................
Additional Energy Proposals:
Provide tax credit for purchase of certain hybrid and fuel cell vehicles 2 ............................
Provide tax credit for energy produced from
landfill gas ......................................................
Provide tax credit for combined heat and
power property ................................................
Provide excise tax exemption (credit) for ethanol ..................................................................

2003

2006

2007

2008

2009

2010

2011

2002–2006 2002–2011

–91

–160

–172

–181

–192

–202

–212

–223

–235

–247

–796

–1,915

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

–116

–203

–222

–125

–58

–59

–57

–55

–56

–58

–724

–1,009

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

–7

–15

–19

–25

–15

–10

–5 .............. .............. ................

–81

–96

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

–154

–214

–55 .............. .............. .............. .............. ................

–423

–423

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

–22

–81

–180

–358

–615

–1,026

–817

–108

–126

–179

–1,256

–3,512

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

–23

–51

–75

–103

–138

–156

–158

–161

–164

–66

–390

–1,095

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

–119

–197

–200

–212

–268

–126 ..............

6

5

5

–996

–1,106

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

............ ............ .............. .............. .............. .............. .............. .............. .............. –13,910
............ ............ .............. .............. .............. .............. .............. .............. .............. ..............
............ ............ .............. .............. .............. .............. .............. .............. .............. ..............
............
–1
–5
–10
–15
–20
–26
–32
–39
–45

–67,757 ...................
–4,639 ...................
–4,532 ...................
–890
–51

–81,667
–4,639
–4,532
–1,083

............ –271
–614 –1,215 –1,792 –2,475 –2,726 –3,226 –4,040
............ ............ .............. .............. .............. .............. .............. .............. ..............
............ ............ .............. .............. .............. .............. .............. .............. ..............

–26,651
–6,367
–2,371 ...................
–257 ...................

–47,894
–2,372
–196

Permanent extension of R&E tax credit .. ............ ............ ..............

70

74

Total effect of proposals 1 2 ............................. ............

–581

–1,255

2 Net

2005

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

Other Provisions that Affect Receipts:
Recover State bank supervision and regulation expenses (receipt effect) 2 ....................... ............

1 Affects

2004

–4,884
–1
61

–1,055

–3,431

–5,415

–6,543

–7,388

–8,019

–8,567

–9,168

–9,901

–49,586

76

80

84

88

92

96

101

105

384

866

–6,013 –13,581 –20,479 –25,243 –29,202 –31,779 –48,067 –138,029

–41,909

–314,229

both receipts and outlays; only the receipt effects are shown here. The outlay effects are shown in Table 10.
of income offsets.

MID–SESSION REVIEW

Expiring Provisions:
Permanent extension of provisions expiring in 2010:
Marginal individual income tax rate reductions .............................................................
Expanded child tax credit ..............................
Marriage penalty relief 1 ................................
Education incentives ......................................
Repeal of estate and generation-skipping
transfer taxes, and modification of gift
taxes .............................................................
Modifications of IRAs and pension plans .....
Other incentives for families and children ...

2002

OUTLAYS BY CATEGORY
(In billions of dollars)

2001
April estimates
Discretionary:
Defense ................................................
Non-defense ........................................

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

299.6
349.8

319.2
372.5

322.1
389.7

333.5
397.8

347.6
406.8

354.6
415.8

361.0
425.5

374.1
435.3

384.9
445.1

396.0
458.4

411.4
465.1

Subtotal, discretionary ...................
Mandatory:
Social Security ................................
Medicare ..........................................
Medicaid ..........................................
Other ................................................

649.4

691.7

711.8

731.2

754.5

770.4

786.5

809.5

830.0

854.4

876.5

430.0
216.0
128.9
225.6

451.6
226.4
142.4
260.3

473.5
238.6
152.7
264.3

498.0
252.2
166.0
267.8

524.3
279.1
180.5
285.7

553.0
292.2
196.4
284.8

584.1
314.0
213.6
296.2

618.0
335.6
232.2
312.3

656.2
358.4
252.6
323.9

698.3
384.3
274.6
336.2

743.6
419.2
297.9
349.4

Subtotal, mandatory ...................
Net interest .........................................

1,000.5
206.4

1,080.7
188.1

1,129.2
175.2

1,184.0
161.5

1,269.6
144.7

1,326.3
127.2

1,408.0
108.9

1,498.2
90.3

1,591.2
69.1

1,693.5
45.7

1,810.1
19.8

1,856.2

1,960.6

2,016.2

2,076.7

2,168.7

2,223.9

2,303.4

2,397.9

2,490.3

2,593.5

2,706.3

304.0
347.4

329.9
369.5

335.7
387.8

357.0
395.5

366.6
401.9

376.8
410.1

385.3
419.2

395.8
428.5

406.9
438.0

418.5
450.9

SUMMARY TABLES

Table 12.

430.5
457.4

Total, outlays .................................
Mid-session estimates:
Discretionary:
Defense ............................................
Non-defense .....................................
Subtotal, discretionary ...............
Mandatory:
Social Security ................................
Medicare ..........................................
Medicaid ..........................................
Other ................................................

651.4

699.4

723.5

752.5

768.5

786.9

804.5

824.3

844.9

869.4

887.9

429.9
214.2
130.3
224.9

452.5
224.3
143.0
262.4

474.4
235.8
155.1
262.6

497.6
262.1
168.9
264.9

522.9
287.4
183.6
294.8

550.3
297.4
199.3
300.6

580.4
319.0
216.5
311.6

613.6
340.9
234.8
326.7

651.5
363.3
255.3
338.7

693.5
386.8
277.1
351.8

738.4
419.0
300.7
366.9

Subtotal, mandatory ...................

999.3

1,082.2

1,127.8

1,193.5

1,288.8

1,347.6

1,427.4

1,516.0

1,608.8

1,709.2

1,825.1

Net interest .........................................

204.2

180.5

174.1

164.8

151.0

137.1

122.3

106.9

88.9

69.0

48.1

1,854.9

1,962.1

2,025.4

2,110.7

2,208.3

2,271.6

2,354.2

2,447.2

2,542.6

2,647.6

2,761.0

4.4
–2.4

10.7
–3.0

13.6
–1.9

23.5
–2.3

18.9
–4.9

22.2
–5.7

24.3
–6.3

21.7
–6.9

22.1
–7.1

22.5
–7.4

19.1
–7.7

Total, outlays .................................
Difference:
Discretionary:
Defense ............................................
Non-defense .....................................

2.1

7.6

11.7

21.2

14.0

16.5

18.0

14.8

14.9

15.1

11.4

–0.1
–1.8
1.4
–0.7

0.9
–2.2
0.6
2.1

0.8
–2.8
2.4
–1.7

–0.4
9.9
2.9
–3.0

–1.4
8.3
3.1
9.1

–2.7
5.2
2.9
15.8

–3.8
5.0
2.9
15.4

–4.4
5.3
2.6
14.4

–4.7
4.9
2.7
14.8

–4.8
2.5
2.5
15.6

–5.1
–0.2
2.8
17.5

Subtotal, mandatory ...................
Net interest .........................................

–1.2
–2.2

1.5
–7.6

–1.3
–1.1

9.5
3.3

19.2
6.4

21.3
9.9

19.4
13.4

17.9
16.6

17.6
19.8

15.8
23.3

15.0
28.3

–1.3

1.5

9.2

34.0

39.6

47.7

50.8

49.3

52.3

54.2

54.7

Total, outlays .................................

37

Subtotal, discretionary ...............
Mandatory:
Social Security ................................
Medicare ..........................................
Medicaid ..........................................
Other ................................................

38

Table 13.

RECEIPTS BY SOURCE
(In billions of dollars)
Estimates

2001
April estimates
Individual income taxes .................................................................
Corporation income taxes ..............................................................
Social insurance and retirement receipts .....................................
Excise taxes ....................................................................................
Estate and gift taxes ......................................................................
Customs duties ...............................................................................
Miscellaneous receipts ...................................................................
Total .............................................................................................
Mid-Session estimates
Individual income taxes 1 ..............................................................
Corporation income taxes ..............................................................
Social insurance and retirement receipts 1 ..................................
Excise taxes ....................................................................................
Estate and gift taxes ......................................................................
Customs duties ...............................................................................
Miscellaneous receipts ...................................................................
Total .............................................................................................
Difference
Individual income taxes .................................................................
Corporation income taxes ..............................................................
Social insurance and retirement receipts .....................................
Excise taxes ....................................................................................
Estate and gift taxes ......................................................................
Customs duties ...............................................................................
Miscellaneous receipts ...................................................................
Total .............................................................................................
1 The

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1,072.9
213.1
689.7
71.1
31.1
21.4
37.6

1,078.8
218.8
725.8
74.0
28.7
22.5
43.1

1,092.3
227.3
766.0
76.3
26.6
24.3
45.4

1,117.9
235.5
806.0
78.3
28.3
25.0
47.8

1,157.0
244.2
855.8
80.5
24.9
26.0
49.3

1,196.6
252.2
896.4
82.3
22.5
27.7
51.0

1,255.2
259.9
942.0
84.8
20.4
29.3
51.6

1,330.4
268.1
984.4
87.3
15.7
30.7
54.1

1,410.2
275.8
1,030.8
90.0
13.4
33.0
56.8

1,499.6
283.5
1,087.9
92.8
0.7
34.5
59.5

1,598.2
294.3
1,145.1
95.7
0.7
36.2
62.4

2,136.9

2,191.7

2,258.2

2,338.8

2,437.8

2,528.7

2,643.3

2,770.6

2,909.9

3,058.4

3,232.6

1,014.3
155.4
689.4
67.6
30.0
19.8
36.2

1,024.2
229.1
721.9
70.4
28.0
21.5
39.6

1,068.0
221.3
768.7
72.8
23.6
23.2
42.6

1,115.9
231.0
810.1
74.8
26.9
24.2
44.6

1,171.1
258.7
860.3
76.8
24.3
25.3
46.1

1,215.2
259.3
897.7
78.3
27.2
26.8
48.1

1,281.0
264.2
941.5
80.5
23.8
28.0
48.7

1,356.0
270.9
982.8
83.0
24.6
29.2
50.9

1,439.3
277.9
1,027.2
85.7
25.9
31.3
53.5

1,529.6
285.8
1,082.9
88.4
19.6
32.5
56.0

1,627.1
295.3
1,139.2
91.1
0.1
33.7
58.8

2,012.7

2,134.7

2,220.2

2,327.5

2,462.5

2,552.6

2,667.8

2,797.4

2,940.8

3,094.8

3,245.3

–58.6
–57.7
–0.2
–3.6
–1.1
–1.6
–1.4

–54.6
10.3
–3.9
–3.6
–0.7
–1.0
–3.5

–24.3
–6.0
2.7
–3.4
–3.0
–1.0
–2.8

–2.0
–4.5
4.0
–3.6
–1.4
–0.7
–3.2

14.1
14.5
4.5
–3.8
–0.6
–0.7
–3.2

18.6
7.2
1.3
–4.1
4.7
–1.0
–2.9

25.8
4.2
–0.5
–4.2
3.4
–1.3
–2.9

25.6
2.9
–1.6
–4.3
8.9
–1.5
–3.2

29.1
2.2
–3.6
–4.4
12.6
–1.7
–3.3

30.0
2.4
–4.9
–4.4
18.9
–2.0
–3.5

28.9
0.9
–5.9
–4.6
–0.5
–2.6
–3.5

–124.2

–57.0

–38.0

–11.3

24.7

23.9

24.5

26.9

30.9

36.4

12.8

2001 estimate is adjusted to correct for $5.6 billion in prior year receipts. See text box on page 9 and Appendix A on page 49.
MID–SESSION REVIEW

OUTLAYS BY AGENCY
(In billions of dollars)

2000
Actual

April estimates
2001

Legislative Branch ..............................
2.9
3.1
Judicial Branch ...................................
4.1
4.3
Agriculture ..........................................
75.7
69.6
Commerce ............................................
7.8
5.5
Defense—Military ...............................
281.2
283.9
Education .............................................
33.9
36.7
Energy ..................................................
15.0
16.7
Health and Human Services ..............
382.6
430.5
Housing and Urban Development .....
30.8
37.3
Interior .................................................
8.0
8.7
Justice ..................................................
19.6
20.7
Labor ....................................................
31.4
38.2
State .....................................................
6.8
9.3
Transportation ....................................
46.0
50.6
Treasury ..............................................
391.2
388.5
Veterans Affairs ..................................
47.1
45.2
Corps of Engineers ..............................
4.3
4.6
Other Defense Civil Programs ...........
32.9
34.4
Environmental Protection Agency .....
7.2
7.5
Executive Office of the President ......
0.3
0.3
Federal Emergency Management
Agency ...............................................
3.1
3.1
General Services Administration .......
*
0.6
International Assistance Programs ...
12.1
11.4
National Aeronautics and Space Administration ......................................
13.4
13.8
National Science Foundation .............
3.5
4.0
Office of Personnel Management .......
48.7
51.0
Small Business Administration .........
–0.4
–1.0
Social Security Administration ..........
441.8
463.0
Other Independent Agencies ..............
10.6
4.9
Allowances ........................................... ................ ................
Undistributed Offsetting Receipts .....
–172.8
–190.2
Total .................................................

1,788.8

1,856.2

2002

2003

2004

Mid-Session estimates
2005

2006

2001

2002

2003

2004

2005

2006

3.3
4.9
63.2
5.2
303.4
45.2
17.2
468.8
34.8
9.3
22.5
42.0
9.7
54.9
381.5
51.5
4.4
35.4
7.6
0.3

3.4
5.0
61.4
5.4
306.2
49.6
17.5
498.8
34.9
9.6
25.4
42.3
9.7
56.9
385.1
53.5
4.2
41.2
7.6
0.3

3.4
5.1
61.9
5.3
317.2
50.6
17.7
532.7
33.5
11.1
23.9
43.1
9.9
59.2
388.2
55.7
4.3
42.4
7.6
0.3

3.4
5.2
63.8
5.4
331.0
51.9
18.1
566.7
33.4
10.1
23.3
44.8
10.1
61.7
388.9
60.3
4.3
43.7
7.6
0.3

3.5
5.3
65.9
5.5
337.7
53.3
18.4
594.1
33.6
10.3
23.6
46.7
10.4
63.4
390.3
59.5
4.2
44.9
7.6
0.3

3.2
4.3
72.1
5.4
288.3
36.9
17.3
428.3
35.9
8.2
20.9
39.4
8.3
50.5
387.0
45.0
4.4
34.4
7.3
0.3

3.3
4.9
65.7
5.2
313.9
45.5
17.3
457.1
34.4
9.1
21.7
43.7
10.0
54.6
380.9
51.0
4.2
35.6
7.5
0.3

3.4
5.0
63.6
5.4
319.6
50.2
17.5
486.7
34.8
9.7
25.4
44.3
9.7
55.2
388.0
53.5
4.0
41.5
7.6
0.3

3.4
5.1
64.5
5.3
340.5
51.4
17.7
532.7
33.6
11.4
24.0
45.1
10.0
54.9
395.2
55.7
4.1
42.7
7.6
0.3

3.4
5.2
65.6
5.4
349.8
52.5
18.2
574.4
33.7
10.4
23.3
46.2
10.2
56.3
399.9
60.3
4.1
43.9
7.6
0.3

3.5
5.3
66.7
5.5
359.9
54.0
18.4
602.1
33.7
10.6
23.6
48.3
10.4
57.5
406.7
59.5
4.2
45.1
7.6
0.3

3.2
–0.2
12.1

3.0
0.3
12.4

2.7
0.4
12.5

2.4
0.4
12.4

1.9
0.3
12.7

3.4
0.6
11.3

3.2
–0.2
12.0

2.9
0.3
12.3

2.9
0.4
12.5

2.3
0.4
12.7

1.9
0.3
13.0

14.2
4.4
53.4
0.7
488.2
19.0
2.4
–201.8

14.7
4.5
56.3
0.6
511.5
16.8
3.9
–226.0

15.1
4.7
59.5
0.5
537.4
17.1
4.7
–251.0

15.4
4.7
62.8
0.5
567.7
17.8
5.4
–254.9

15.8
13.8
4.8
4.0
66.0
51.0
0.6
–1.0
595.5
462.6
17.7
1.4
5.7 ................
–275.8
–189.5

14.2
4.3
53.7
0.7
489.2
18.7
2.4
–201.7

14.7
4.5
56.7
0.6
512.6
17.6
3.3
–225.4

15.1
4.7
59.8
0.5
537.2
18.5
4.0
–250.0

15.4
4.7
63.1
0.5
566.6
18.2
4.9
–251.6

15.8
4.8
66.3
0.6
593.1
18.5
5.3
–271.0

1,960.6

2,016.2

2,076.7

2,168.7

1,962.1

2,025.4

2,110.7

2,208.3

SUMMARY TABLES

Table 14.

2,271.6

2,223.9

1,854.9

* $50 million or less.

39

40

Table 15.

OUTLAYS BY FUNCTION
(In billions of dollars)

2000
Actual

April estimates
2001

National defense .................................
294.5
299.1
International affairs ...........................
17.2
17.5
General science, space, and technology ................................................
18.6
19.7
Energy ..................................................
–1.1
–0.7
Natural resources and environment ..
25.0
27.4
Agriculture ..........................................
36.6
25.9
Commerce and housing credit ...........
3.2
–0.8
Transportation ....................................
46.9
51.1
Community and regional development ...................................................
10.6
10.6
Education, training, employment,
and social services ............................
59.2
65.3
Health ..................................................
154.5
175.3
Medicare ..............................................
197.1
219.3
Income security ...................................
247.9
262.6
Social Security .....................................
409.4
433.6
Veterans benefits and services ..........
47.1
45.4
Administration of justice ....................
27.8
29.4
General government ...........................
13.5
16.8
Net interest .........................................
223.2
206.4
Allowances ........................................... ................ ................
Undistributed offsetting receipts .......
–42.6
–47.7
Total .................................................

1,788.8

1,856.2

2002

2003

2004

Mid-Session estimates
2005

2006

2001

2002

2003

2004

2005

2006

319.2
21.0

322.1
21.3

333.1
21.5

347.2
21.6

354.0
22.2

303.6
16.6

329.8
21.4

335.5
21.4

356.5
21.7

366.0
22.1

376.2
22.6

20.8
–0.3
27.5
18.6
6.9
55.0

21.4
–0.1
27.7
15.0
4.7
57.5

22.2
–0.6
28.0
14.0
3.6
59.7

22.6
–0.4
28.4
14.1
3.5
62.1

23.1
–0.3
28.7
14.5
2.3
63.8

19.7
–0.3
26.6
28.9
–5.2
51.0

20.7
–0.4
27.1
20.7
6.4
54.8

21.4
–0.1
27.6
16.8
5.5
55.7

22.2
–0.6
28.1
16.2
4.9
55.3

22.6
–0.4
28.7
15.5
4.0
56.8

23.1
–0.3
29.0
14.9
3.2
57.9

11.7

11.3

10.8

10.5

10.1

10.8

11.8

11.3

11.1

10.5

10.2

76.6
201.5
229.9
275.7
455.1
51.6
32.3
16.3
188.1
2.4
–49.4

81.3
224.4
242.1
285.9
477.1
53.6
35.4
16.7
175.2
3.9
–60.4

82.6
243.3
255.9
295.9
501.6
55.8
35.5
18.4
161.5
4.7
–70.6

84.7
250.7
282.8
308.8
528.1
60.4
35.2
17.4
144.7
5.4
–58.9

87.2
64.2
264.8
173.8
296.0
217.4
317.1
265.1
556.8
433.5
59.6
45.1
35.8
29.7
17.6
17.2
127.2
204.2
5.7 ................
–62.4
–47.0

75.5
190.7
227.7
286.5
456.1
51.1
31.4
16.5
180.5
2.4
–48.7

82.1
212.0
239.3
296.7
478.0
53.6
35.4
16.9
174.1
3.3
–61.0

84.0
231.7
265.8
306.2
501.3
55.8
35.5
18.6
164.8
4.0
–72.4

85.4
251.8
291.1
318.4
526.7
60.4
35.2
17.6
151.0
4.9
–59.9

88.0
271.1
301.2
328.6
554.1
59.6
35.8
17.8
137.1
5.3
–63.8

1,960.6

2,016.2

2,076.7

2,168.7

1,962.1

2,025.4

2,110.7

2,208.3

2,271.6

2,223.9

1,854.9

MID–SESSION REVIEW

DISCRETIONARY BUDGET AUTHORITY BY AGENCY
(In billions of dollars)

2000
Actual

April estimates
2001

Legislative Branch ..............................
2.5
2.7
Judicial Branch ...................................
3.7
4.0
Agriculture ..........................................
17.1
19.3
Commerce ............................................
8.7
5.1
Defense—Military ...............................
287.3
296.3
Education .............................................
29.4
39.9
Energy ..................................................
17.8
19.7
Health and Human Services ..............
45.5
53.9
Housing and Urban Development .....
21.1
28.5
Interior .................................................
8.5
10.2
Justice ..................................................
18.8
20.9
Labor ....................................................
8.8
11.9
State .....................................................
7.8
7.5
Transportation ....................................
14.5
18.4
Treasury ..............................................
12.5
14.0
Veterans Affairs ..................................
20.8
22.4
Corps of Engineers ..............................
4.1
4.5
Other Defense Civil Programs ...........
0.1
0.1
Environmental Protection Agency .....
7.6
7.8
Executive Office of the President ......
0.3
0.3
Federal Emergency Management
Agency ...............................................
3.9
2.4
General Services Administration .......
–*
0.5
International Assistance Programs ...
13.6
12.9
National Aeronautics and Space Administration ......................................
13.6
14.3
National Science Foundation .............
3.9
4.4
Office of Personnel Management .......
0.2
0.2
Small Business Administration .........
0.9
0.3
Social Security Administration ..........
5.7
6.0
Other Independent Agencies ..............
5.8
6.3
Allowances ........................................... ................ ................
Total .................................................

584.4

634.9

2002

2003

2004

Mid-Session estimates
2005

2006

2001

2002

2003

2004

2005

2006

3.0
4.6
17.9
4.8
310.5
44.5
19.2
56.7
30.4
9.8
19.9
11.3
9.1
16.3
14.7
23.4
3.9
0.1
7.3
0.3

3.0
4.5
18.8
5.3
319.0
45.5
19.7
61.7
32.2
10.0
21.9
11.8
9.3
17.3
15.0
23.9
4.0
0.1
7.4
0.3

3.1
4.6
19.0
5.3
327.9
47.0
20.3
63.3
33.3
10.2
22.0
12.1
9.5
17.7
15.4
24.4
4.1
0.1
7.6
0.3

3.1
4.7
19.4
5.4
337.1
48.1
20.7
64.9
34.6
10.4
22.3
12.4
9.7
18.1
15.7
25.0
4.2
0.2
7.2
0.3

3.2
4.9
19.8
5.5
346.6
49.1
21.2
66.5
35.7
10.6
22.8
12.6
9.9
18.5
16.1
25.6
4.3
0.2
6.6
0.3

2.8
4.0
19.3
5.0
301.9
40.1
20.0
54.1
28.4
10.3
20.9
11.7
7.5
18.5
14.2
22.3
4.7
0.1
7.8
0.3

3.0
4.6
17.9
4.9
328.9
44.6
19.2
56.8
30.4
9.9
20.0
11.4
9.1
16.3
14.7
23.2
3.9
0.1
7.3
0.3

3.0
4.5
18.8
5.3
337.9
45.5
19.7
61.8
32.2
10.1
22.1
12.0
9.3
17.3
15.0
23.7
4.0
0.1
7.4
0.3

3.1
4.6
19.0
5.3
347.4
47.0
20.3
63.4
33.3
10.3
22.2
12.3
9.5
17.7
15.4
24.3
4.1
0.1
7.6
0.3

3.1
4.7
19.4
5.4
357.1
48.1
20.7
65.0
34.6
10.5
22.4
12.6
9.7
18.1
15.7
24.8
4.2
0.2
7.2
0.3

3.2
4.9
19.8
5.5
367.1
49.1
21.2
66.7
35.7
10.7
22.9
12.8
9.9
18.5
16.1
25.3
4.3
0.2
6.6
0.3

2.2
0.5
12.8

2.3
0.5
13.1

2.3
0.5
13.4

2.4
0.5
13.6

2.4
0.5
13.9

2.4
0.5
13.0

2.2
0.5
12.9

2.3
0.5
13.2

2.3
0.5
13.5

2.4
0.5
13.8

2.4
0.5
14.1

14.5
4.5
0.2
0.5
6.4
6.0
5.3

15.0
4.6
0.2
0.6
6.5
6.0
5.4

15.4
4.7
0.2
0.6
6.7
6.3
5.6

15.7
4.8
0.2
0.6
6.8
6.3
5.7

16.1
14.3
4.9
4.4
0.2
0.2
0.6
0.9
7.0
6.0
6.4
6.3
5.8 ................

14.5
4.5
0.2
0.5
6.4
6.1
5.4

15.0
4.6
0.2
0.6
6.5
6.0
5.0

15.4
4.7
0.2
0.6
6.7
6.2
5.1

15.7
4.8
0.2
0.6
6.8
6.3
5.3

16.1
4.9
0.2
0.6
7.0
6.4
5.5

660.6

685.1

702.7

720.1

679.8

704.0

722.2

740.1

SUMMARY TABLES

Table 16.

758.4

737.9

642.1

* $50 million or less.

41

42

Table 17.

DISCRETIONARY BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)

2000
Actual

April estimates
2001

National defense .................................
300.8
311.3
International affairs ...........................
23.5
22.7
General science, space, and technology ................................................
19.2
20.9
Energy ..................................................
2.7
3.1
Natural resources and environment ..
24.6
28.7
Agriculture ..........................................
4.7
5.1
Commerce and housing credit ...........
5.1
0.7
Transportation ....................................
15.2
18.9
Community and regional development ...................................................
12.2
11.0
Education, training, employment,
and social services ............................
44.4
61.1
Health ..................................................
33.8
38.9
Medicare ..............................................
3.0
3.4
Income security ...................................
31.6
39.5
Social Security .....................................
3.2
3.4
Veterans benefits and services ..........
20.9
22.5
Administration of justice ....................
27.1
30.0
General government ...........................
12.4
14.0
Allowances ........................................... ................ ................
Total .................................................

584.4

634.9

2002

2003

2004

Mid-Session estimates
2005

2006

2001

2002

2003

2004

2005

2006

325.1
23.9

333.9
24.4

343.2
24.9

352.7
25.5

362.5
26.0

317.1
22.7

343.7
24.0

353.0
24.5

362.8
25.0

372.7
25.6

383.1
26.1

21.2
2.8
26.4
4.8
–0.3
16.8

21.9
2.9
27.0
5.2
–0.1
17.8

22.4
3.1
27.6
5.2
–0.4
18.2

22.9
3.2
27.6
5.3
–0.5
18.6

23.5
3.3
27.4
5.4
–0.5
19.0

20.9
3.1
28.9
5.1
0.6
19.0

21.2
2.8
26.4
4.8
–0.1
16.8

21.9
2.9
27.1
5.2
–0.1
17.8

22.4
3.1
27.6
5.2
–0.4
18.2

22.9
3.2
27.7
5.3
–0.5
18.6

23.5
3.3
27.5
5.4
–0.5
19.0

10.4

10.7

10.9

11.1

11.3

11.6

10.4

10.7

10.9

11.1

11.3

65.4
41.0
3.5
42.8
3.5
23.5
29.8
14.8
5.3

67.1
45.7
3.5
45.1
3.6
24.0
31.9
15.0
5.4

69.0
46.9
3.6
46.7
3.7
24.5
32.3
15.4
5.6

70.7
48.1
3.7
48.3
3.8
25.1
32.8
15.7
5.7

72.3
61.1
49.4
38.8
3.8
3.4
49.6
39.7
3.8
3.4
25.7
22.4
33.5
30.0
16.0
14.2
5.8 ................

65.7
40.9
3.5
42.9
3.5
23.3
29.8
14.8
5.4

67.4
45.6
3.5
45.1
3.6
23.8
31.9
15.1
5.0

69.4
46.8
3.6
46.8
3.7
24.3
32.3
15.4
5.1

71.0
48.0
3.7
48.4
3.8
24.9
32.8
15.7
5.3

72.7
49.3
3.8
49.6
3.8
25.4
33.5
16.1
5.5

660.6

685.1

702.7

720.1

679.8

704.0

722.2

740.1

758.4

737.9

642.1

MID–SESSION REVIEW

MID–SESSION BASELINE TOTALS
(In billions of dollars)

2001
Discretionary:
Defense ........................................................................
Non-defense ................................................................

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2002–2011

304.0
347.4

317.1
368.6

325.5
387.3

336.8
398.0

351.0
406.2

357.5
416.4

363.7
427.8

376.5
439.2

387.3
450.7

398.4
462.6

413.9
474.9

3,627.8
4,231.6

Subtotal, discretionary ...........................................
Mandatory:
Social Security ............................................................
Medicare .....................................................................
Medicaid ......................................................................
Other ...........................................................................

651.5

685.7

712.7

734.7

757.2

773.9

791.5

815.7

838.0

861.0

888.8

7,859.4

429.9
214.2
130.3
224.9

452.5
224.3
143.0
262.9

474.4
235.8
155.1
259.9

497.6
248.1
168.9
271.8

522.9
267.4
183.6
293.8

550.3
276.4
199.3
300.3

580.4
297.0
216.5
306.9

613.6
315.9
234.8
321.9

651.5
336.3
254.9
334.6

693.5
357.8
276.7
347.5

738.4
387.0
300.3
362.8

5,775.1
2,946.0
2,133.1
3,062.5

Subtotal, mandatory ...............................................
Net interest .............................................................

999.3
204.2

1,082.7
180.2

1,125.2
173.1

1,186.4
162.7

1,267.7
147.1

1,326.3
130.6

1,400.7
112.8

1,486.2
93.8

1,577.3
72.1

1,675.5
47.7

1,788.6
19.7

13,916.7
1,139.8

Total, outlays .................................................................
Receipts ..........................................................................

1,855.0
2,012.7

1,948.7
2,135.3

2,011.0
2,221.5

2,083.8
2,333.5

2,172.0
2,476.1

2,230.9
2,573.1

2,305.0
2,693.0

2,395.8
2,826.6

2,487.4
2,972.6

2,584.3
3,142.9

2,697.2
3,383.4

22,916.0
26,758.0

Surplus ...........................................................................
On-budget surplus 1 ...................................................
Postal service surplus ................................................
Social Security surplus 1 ............................................

157.8
1.9
–1.3
157.1

186.6
18.0
–2.6
171.2

210.5
18.2
0.1
192.2

249.8
38.9
0.2
210.6

304.1
67.8
0.8
235.5

342.2
92.0
1.2
248.9

388.0
122.2
–0.1
265.9

430.9
150.3
0.7
279.9

485.2
191.4
0.9
293.0

558.6
247.3
1.1
310.2

686.2
357.7
1.4
327.1

SUMMARY TABLES

Table 18.

3,842.0
1,303.8
3.7
2,534.5

1 The

2001 estimate is adjusted to correct for $5.6 billion in prior year receipts. See text box on page 9 and Appendix A on page 49.

43

44

Table 19.

FEDERAL GOVERNMENT FINANCING AND DEBT
(In billions of dollars)
2000
actual

Financing:
Unified budget surplus ..............................................................................
Financing other than the change in debt held by the public:
Premiums paid (–) on buybacks of Treasury securities 1 ....................
Changes in: 2
Treasury operating cash balance .......................................................
Checks outstanding, deposit funds, etc. 3 ..........................................
Seigniorage on coins ...............................................................................
Less: Net financing disbursements:
Direct loan financing accounts ...........................................................
Guaranteed loan financing accounts .................................................
Total, financing other than the change in debt held by the public ...................................................................................................

Estimate
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

158

173

195

217

254

281

314

350

398

447

484

–6

–11

–10

..........

..........

..........

..........

..........

..........

..........

..........

..........

4
3
2

–2
–4
1

–5
1
1

..........
..........
2

–5
..........
2

..........
..........
2

..........
..........
2

–5
..........
2

..........
..........
2

..........
..........
2

–5
..........
2

..........
..........
2

–22
4

–31
–1

–4
–1

–17
1

–18
–*

–17
–*

–16
1

–16
1

–16
1

–16
1

–16
1

–15
1

–13

–48

–17

–15

–21

–16

–14

–19

–14

–14

–18

–13

223

110

155

180

196

239

267

295

337

385

429

471

–223
..........

–110
..........

–155
..........

–180
..........

–196
..........

–239
..........

–267
..........

–295
..........

–337
..........

–385
..........

–155
–274

–35
–436

–223

–110

–155

–180

–196

–239

–267

–295

–337

–385

–429

–471

5,601

5,727

5,829

5,935

6,040

6,125

6,201

6,266

6,303

6,310

6,568

6,963

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

–15
6

Total, debt subject to statutory limitation 8 .........................................
Debt Outstanding, End of Year:
Gross Federal debt: 9
Debt issued by Treasury ........................................................................
Debt issued by other agencies ...............................................................

5,592

5,717

5,819

5,926

6,031

6,115

6,192

6,256

6,294

6,300

6,558

6,954

5,601
28

5,727
27

5,829
27

5,935
26

6,040
25

6,125
23

6,201
22

6,266
20

6,303
20

6,310
20

6,568
20

6,963
20

Total, gross Federal debt ....................................................................
Held by:
Debt securities held as assets by Government accounts .....................
Debt securities held as assets by the public: 5
Debt held by the public ......................................................................
Less excess balances ...........................................................................

5,629

5,753

5,855

5,961

6,065

6,148

6,223

6,286

6,323

6,330

6,588

6,983

2,219

2,453

2,711

2,996

3,296

3,618

3,959

4,317

4,691

5,082

5,495

5,926

3,410
..........

3,300
..........

3,145
..........

2,965
..........

2,769
..........

2,531
..........

2,264
..........

1,969
..........

1,632
..........

1,248
..........

1,093
–274

1,057
–710

Net indebtedness 10 .........................................................................

3,410

3,300

3,145

2,965

2,769

2,531

2,264

1,969

1,632

1,248

819

348

Total, amount available to repay debt held by the public ........
Change in debt held by the public: 4 5
Change in debt held by the public ........................................................
Less change in excess balances .............................................................
Change in net indebtedness ...............................................................
Debt Subject to Statutory Limitation, End of Year:
Debt issued by Treasury ............................................................................
Adjustment for Treasury debt not subject to limitation and agency
debt subject to limitation 6 .....................................................................
Adjustment for discount and premium 7 ..................................................

* $500 million or less.
1 This table includes estimates for Treasury buybacks of outstanding securities only through 2002. These estimates assume that Treasury will buy back $35 billion (face
value) of securities in 2001 (in terms of settlements) and $40 billion in 2002. The premiums paid on buybacks are based on experience to date and the interest rates in the
economic assumptions.

MID–SESSION REVIEW

236

SUMMARY TABLES

2 A decrease in the Treasury operating cash balance (which is an asset) would be a means of financing a deficit and therefore has a positive sign. An increase in checks
outstanding or deposit fund balances (which are liabilities) would also be a means of financing a deficit and therefore would also have a positive sign.
3 Besides checks outstanding and deposit funds, includes accrued interest payable on Treasury debt, miscellaneous liability accounts, allocations of special drawing
rights, and, as an offset, cash and monetary assets other than the Treasury operating cash balance, miscellaneous asset accounts, and profit on sale of gold.
4 Indian tribal funds that are owned by the Indian tribes and held and managed in a fiduciary capacity by the Government on the tribes’ behalf were reclassified from
trust funds to deposit funds as of October 1, 1999. Their holdings of Treasury securities were accordingly reclassified from debt held by Government accounts to debt held
by the public, which affected the change in debt held by the public without affecting borrowing or the repayment of debt.
5 The amount of the unified budget surplus that is available to repay debt held by the public is estimated to be more than the amount of debt that is available to be redeemed in 2010 and subsequent years. The difference is assumed to be held as ‘‘excess balances.’’ (‘‘Excess’’ means in excess of the amounts held for operational and programmatic purposes.) The debt held by the public is the amount of Federal debt securities held by the public. The net indebtedness is the debt held by the public less the
excess balances.
6 Consists primarily of Federal Financing Bank debt.
7 Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discount on Government
account series securities.
8 The statutory debt limit is $5,950 billion.
9 Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost entirely measured at sales price plus amortized discount or less
amortized premium. Agency debt is almost entirely measured at face value. Treasury securities in the Government account series are measured at face value less unrealized discount (if any).
10 At the end of 2000, the Federal Reserve Banks held $511 billion of Federal securities and the rest of the public held $2,899 billion. Debt held by the Federal Reserve
Banks is not estimated for future years.

45

APPENDIX A.
Basis of Social Security Tax Receipts
in the Budget

47

BASIS OF SOCIAL SECURITY TAX RECEIPTS
IN THE BUDGET
Most budget receipts equal cash collections.
However, Social Security records the estimated
tax liability incurred, adjusted for the estimated timing of tax payments and for reestimates of tax liability in previous years.
Individual income taxes are a residual, after
subtracting the estimated Social Security employment tax liabilities from total cash collections of income taxes and employment taxes.1
Adjustments for reestimates of Social Security
tax liability amounted to $5.6 billion in
the first three quarters of 2001. In the
past, this has not concerned decision makers,
because it has no effect on the unified
surplus. However, it reduces the apparent
on-budget surplus for 2001 by $5.6 billion.
When the fiscal policy goal is defined as
avoiding a budget deficit excluding Social
Security, the inaccuracies of the traditional
estimation system can distort perceptions
about the success or failure of the Nation’s
fiscal policy.
Receipts as Estimated Liability.—By law,
the Social Security trust funds are credited
with amounts equal to the tax liability incurred. The budget records receipts equal to
the estimated tax liability, with the receipts
spread over the months that taxes are expected to be paid. If actual tax payments are
less than the estimated liability, the general
fund implicitly makes up the difference. The
initial estimate is based on the economic assumptions for the President’s budget at the
time the estimate is made. For example, the
receipts reported in the March 2000 Monthly
Treasury Statement were estimates of liability
prepared in December 1999, using the economic assumptions for the 2001 budget. Beginning about one year after the initial estimate,
as information about employers’ reports of
wages paid becomes available, adjustments are
made to correct for differences between the es1 Companies are not required to distinguish income taxes separately from employment taxes, when they remit tax withholdings
to Treasury. Therefore, while Treasury knows the total cash collections, it must estimate the amount of tax payments made for the
various purposes.

timated and actual tax liability incurred. For
example, the first adjustment for JanuaryMarch 2000 was made in March 2001. The
adjustments can be increases or decreases. Because wage reports trickle in over many years,
each adjustment reflects reestimates of tax liability for several years.
Budget Scoring of Adjustments.—(Reestimates of Social Security tax receipts are recorded as adjustments to current year receipts,
not as revisions to the published estimates for
the year in which the liability was incurred.) 2
About one-half of the June 2001 adjustment
reflected actual reported wage data for 2000,
one-third for 1999, and the remainder for all
prior years. As a result, the amount of employment taxes recorded in the budget do not correspond to either the tax liability incurred or
the taxes actually paid in that year. As explained above, the adjustments also affect the
amounts reported as individual income tax receipts. If employment tax receipts are adjusted
upwards, income tax receipts are automatically
reduced by the same amount.
On-budget Surplus Effect.—These adjustments have no effect on the unified budget
surplus, but they affect the Social Security surplus and the on-budget surplus by equal and
opposite amounts. If Social Security tax receipts for the current year are increased by
an adjustment for employment tax liability for
previous years, then income tax receipts for
the current year are decreased by the same
amount. This artificially inflates the Social Security surplus and decreases the on-budget
surplus. As a result, the reported on-budget
surplus for the current year is distorted by
the amount of the reestimates of employment
tax liability in previous years. The impact can
be large in comparison to the on-budget surplus. For the first three quarters of 2001, the
2 This correction has been made in this report for the sake of accuracy. Other official publications may use the historical method
and therefore report slightly different figures. OMB will review
with the Department of the Treasury the possibility of prospective
changes to record the adjustments in the correct years.

49

50

MID–SESSION REVIEW

adjustments raised the reported Social Security surplus and reduced the on-budget surplus
by $5.6 billion.
This raises the following question for policy
makers. If the fiscal policy target is set
in terms of the on-budget surplus, should

the success or failure of achieving the target
be affected by a scoring convention that
has nothing to do with actual tax collections
in that year? Or should the targets exclude
adjustments for events that occurred in prior
years?

TABLE A–1. ON-BUDGET AND SOCIAL
SECURITY SURPLUSES
(In billions of dollars)
2001
On-budget Surplus:
Current rule—adjustment recorded in 2001 ..........................
Assign receipts to year actually collected ...........................

–3.7
5.6

Real 2001 surplus ....................................................................

1.9

Social Security Surplus:
Current rule—adjustment recorded in 2001 ..........................
Assign receipts to year actually collected ...........................

162.7
–5.6

Real 2001 surplus ....................................................................

157.1

Postal Service (off-budget) .....................................................

–1.3

Unified Surplus:
Current rule—adjustment recorded in 2001:
On-budget surplus ................................................................
Social Security surplus ........................................................
Postal Service .......................................................................

–3.7
162.7
–1.3

Subtotal, unified surplus ..................................................

157.8

Real 2001 surplus:
On-budget surplus ................................................................
Social Security surplus ........................................................
Postal Service .......................................................................

1.9
157.1
–1.3

Subtotal, unified surplus ..................................................

157.8

Memorandum—Real Non-Social Security Surplus:
Real on-budget surplus .............................................................
Postal Service deficit .................................................................

1.9
–1.3

Real Non-Social Security Surplus ........................................

0.6

APPENDIX B.
Sequestration Update Report to the President
and Congress for 2002

51

I. OVERVIEW
The Budget Enforcement Act of 1997 (BEA
of 1997) extended and modified the expiring
enforcement requirements of the Budget Enforcement Act of 1990 (BEA of 1990). The
BEA of 1997 established limits, or ‘‘caps,’’
for discretionary spending through 2002. It
also extended the pay-as-you-go (PAYGO) requirement that legislation affecting direct
spending or receipts not result in net costs
to the Federal Government. The Transportation Equity Act for the 21st Century
(TEA–21) further modified the discretionary
spending limits and created new categories
for highway and mass transit spending. An
across-the-board reduction of non-exempt
spending, known as ‘‘sequestration,’’ enforces
compliance with these constraints.
Based on preliminary OMB scoring of the
latest House and Senate action for the 13
annual appropriations bills, if offsets are
not enacted or the caps are not raised,

a sequester of discretionary programs would
be required under current law as shown
in Table 4. In addition, if this year ended
with no further action on PAYGO, a sequester
of mandatory programs at the maximum
level achievable under current law would
be required as shown in Table 6. Notwithstanding the potential for sequestration in
2002, both appropriations set to be enacted
and authorizing legislation already enacted
this year are within the 2002 congressional
budget resolution framework. The current
PAYGO scorecard contains $16 billion of
costs in 2002 from legislation enacted last
year. The Administration will work with
Congress to ensure that no unintended sequesters of spending occur under current law
or through enactment of any other proposals
that meet the President’s objectives to reduce
the debt, fund priority initiatives, and grant
tax relief to all income tax paying Americans.

53

II. DISCRETIONARY SEQUESTRATION
REPORT
The Budget Enforcement Act (BEA) requires
that OMB issue reports after enactment of
individual bills on the scoring of those bills
and three times a year on the overall status
of discretionary legislation. This report provides OMB’s updated estimates, reflecting
legislation for which OMB has issued reports
as of August 15, 2001. As the BEA requires,
the estimates rely on the same economic
and technical assumptions as in the President’s 2002 budget, which the Administration
transmitted to Congress on April 9, 2001.
Discretionary programs are funded annually
through the appropriations process. The
scorekeeping guidelines accompanying the
BEA identify accounts with discretionary resources. The BEA limits—or caps—budget
authority and outlays available for discretionary programs each year through 2002.
For 2001 and 2002, the BEA specified a
single category for all discretionary spending.
The Transportation Equity Act for the 21st
Century (TEA–21) established two additional
categories for highway and mass transit outlays for 1999 through 2003. The Department
of the Interior and Related Agencies Appropriations Act, FY 2001 established a new
category for conservation spending with limits

on budget authority and outlays for 2002
through 2006. In addition to specifying overall
limits for the conservation category, the Act
also specifies levels of spending for six subcategories.
The statutory spending limits established
by the BEA are set to expire in 2002.
To maintain the viability of the caps as
a tool for fiscal discipline, the Administration
proposed in the President’s 2002 budget to
raise the 2002 discretionary spending limits
and extend them through 2005. Although
an agreement has not yet been reached
with the Congress on this proposal, the
Administration remains committed to ensuring
that the success of the caps is continued
in the future.
OMB monitors compliance with existing
discretionary spending limits throughout the
year. Appropriations that cause a breach
in the budget authority or outlay limits
would trigger an across-the-board reduction
(sequester) to eliminate that breach. The
BEA, however, does not require that Congress
appropriate the full amount available under
the discretionary limits. Table 1 summarizes
historical changes to the caps since 1990.

55

56

Table 1.

HISTORICAL SUMMARY OF CHANGES TO DISCRETIONARY SPENDING LIMITS
(In billions of dollars)
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

BA
OL

491.7
514.4

503.4
524.9

511.5
534.0

510.8
534.8

517.7
540.8

519.1
547.3

528.1
547.3

530.6
547.9

533.0
559.3

537.2
564.3

542.0
564.4

551.1
560.8

BA
OL
BA
OL
BA
OL

N/A
N/A
..........
..........
..........
..........

N/A
N/A
7.7
1.0
–0.5
–0.3

N/A
N/A
8.2
2.4
–5.1
–2.5

N/A
N/A
8.2
2.3
–9.5
–5.8

N/A
N/A
8.8
3.0
–11.8
–8.8

N/A
N/A
–0.6
–0.5
3.0
1.8

N/A
N/A
–0.4
–2.6
2.6
2.3

–6.9
6.8
3.1
–2.8
0.0
0.9

N/A
N/A
–0.2
–0.3
N/A
N/A

N/A
N/A
2.8
0.1
N/A
N/A

N/A
N/A
–0.1
–0.1
N/A
N/A

N/A
N/A
–3.3
–3.3
N/A
N/A

BA
OL
BA
OL
BA
OL

0.2
0.3
0.9
1.1
..........
..........

0.2
0.3
8.3
1.8
............
............

13.0
0.8
4.6
5.4
............
............

0.6
0.8
12.2
9.0
............
............

0.7
0.9
7.7
10.1
–15.0
–1.1

0.1
0.1
5.1
6.4
–0.1
–3.5

0.2
0.3
9.3
8.1
–0.1
–2.4

1.0
0.6
5.7
7.0
............
–1.5

19.4
1.1
31.9
22.9
N/A
N/A

1.0
0.7
43.6
35.8
N/A
N/A

0.6
1.2
0.0
20.3
N/A
N/A

..........
0.2
0.0
6.3
N/A
N/A

BA
OL
BA
OL

..........
..........
..........
2.6

3.5
1.4
............
1.7

2.9
2.2
............
0.5

2.9
2.6
............
1.0

2.9
2.7
............
............

............
1.1
............
............

............
0.5
............
............

............
0.1
............
1.2

N/A
N/A
............
............

N/A
N/A
............
0.8

3.2
N/A
............
2.4

N/A
N/A
..........
..........

BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL

1.1
3.9
44.2
33.3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

19.3
5.9
14.0
14.9
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

23.6
8.8
0.6
7.6
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

14.3
10.0
*
2.8
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

–6.7
6.8
*
1.1
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

7.5
5.4
............
............
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

11.6
6.3
............
............
............
............
N/A
N/A
N/A
N/A
N/A
N/A

2.9
12.3
............
............
............
............
N/A
N/A
N/A
N/A
N/A
N/A

51.1
23.7
N/A
N/A
............
............
–0.9
1.1
N/A
N/A
N/A
N/A

47.4
37.3
N/A
N/A
1.1
............
–0.9
2.6
N/A
N/A
N/A
N/A

3.7
23.8
N/A
N/A
0.0
............
–0.9
5.2
95.9
58.6
N/A
N/A

–3.3
3.3
N/A
N/A
..........
..........
–0.9
7.1
N/A
N/A
1.8
1.2

Total adjustments ........................................................................................

BA
OL

45.3
37.2

33.2
20.8

24.2
16.4

14.3
12.8

–6.7
7.9

7.5
5.4

11.6
6.3

2.9
12.3

50.2
24.9

47.6
40.0

98.8
87.6

–2.4
11.6

Update Report spending limits 5 ..............................................................

BA
OL

537.0
551.6

536.6
545.7

535.7
550.4

525.1
547.6

511.0
548.7

526.6
552.7

539.7
553.6

533.5
560.2

583.2
584.2

584.8
604.2

640.8
652.0

548.7
572.4

TOTAL DISCRETIONARY
Statutory Caps as set in OBRA 1990, OBRA 1993, and 1997
Bipartisan Budget Agreement .............................................................
Adjustment to 1998 OBRA limits to reach discretionary spending limits
included in the 1997 Bipartisan Budget Agreement ................................
Adjustments for changes in concepts and definitions ..................................
Adjustments for changes in inflation .............................................................
Adjustments for credit reestimates, IRS funding, debt forgiveness,
Arrearages, EITC, IMF, and CDRs ............................................................
Adjustments for emergency requirements .....................................................
Adjustment pursuant to Sec. 2003 of P.L. 104–19 1 .....................................
Adjustments for special allowances:
Discretionary new budget authority ...........................................................
Outlay allowance .........................................................................................
Subtotal, adjustments excluding Desert Shield/Desert Storm .............
Adjustments for Operation Desert Shield/Desert Storm ..............................
Rounding Adjustment .....................................................................................

Adjustment to reach spending limits mandated in P.L. 106–429 3 .............
Adjustment for conservation limits established by P.L. 106–291 4 .............

AAN/A = Not Applicable
* Less than $50 million.
1 P.L. 104–19, Emergency Supplemental Appropriations for Additional Disaster Assistance, for Anti-Terrorism Initiatives, for Assistance in the Recovery from the Tragedy that Occurred at
Oklahoma City, and Rescissions Act, 1995, was signed into law on July 27, 1995. Section 2003 of that bill directed the Director of OMB to make a downward adjustment in the discretionary
spending limits for 1995–1998 equal to the aggregate amount of reductions in new budget authority and outlays for discretionary programs resulting from the provisions of the bill, other than
emergency appropriations.
2 Sec. 8101(a) of P.L. 105–178, the Transportation Equity Act for the 21st Century (TEA–21), which was signed by the President on June 6, 1998, established two new discretionary spending
categories: Highway and Mass Transit. Sec. 8101(b) of TEA–21 provided for an offsetting adjustment in the existing discretionary spending limits.

OMB SEQUESTRATION UPDATE REPORT

TEA–21 Adjustment (Net) 2 ............................................................................

II. DISCRETIONARY SEQUESTRATION REPORT

3 Sec. 701 of P.L. 106–429, the Foreign Operations and Related Agencies Appropriations Act, 2001, included revised budget authority and outlay caps for 2001. In addition, this section provided
for a budget authority rounding adjustment of 0.5 percent, and also prohibited OMB from making adjustments in the Final Sequestration Report for emergency requirements.
4 Title VIII of of P.L.–291, the Interior and Related Agencies Appropriations Act, FY 2001, created a new conservation cagetory with limits on budget authority and outlays for 2002–2006.
5 Reflects combined Defense Discretionary, Non-Defense Discretionary, Violent Crime Reduction, Highway Category, Mass Transit Category, and Conservation Category spending limits.

57

58

OMB SEQUESTRATION UPDATE REPORT

Table 2.

DISCRETIONARY SPENDING LIMITS
(In millions of dollars)
2000

2001

2002

VIOLENT CRIME REDUCTION SPENDING
Preview Report Violent Crime Reduction Spending Limits ...............................
Adjustments for the Update Report:
No Adjustments ..............................................................................................................
Update Report Violent Crime Reduction Spending Limits ................................
Anticipated Adjustments for the Final Sequestration Report:
No Adjustments ..............................................................................................................
Anticipated Final Sequestration Report Limits ....................................................

BA
OL

4,500
6,344

N/A
N/A

N/A
N/A

BA
OL
BA
OL

..............
..............
4,500
6,344

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

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

BA
OL
BA
OL

..............
..............
4,500
6,344

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

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

BA
OL

..............
24,574

..............
26,920

..............
28,489

BA
OL
BA
OL

..............
..............
..............
24,574

..............
..............
..............
26,920

..............
..............
..............
28,489

BA
OL
BA
OL

..............
..............
..............
24,574

..............
..............
..............
26,920

..............
..............
..............
28,489

BA
OL

..............
4,117

..............
4,639

..............
5,275

BA
OL
BA
OL

..............
..............
..............
4,117

..............
..............
..............
4,639

..............
..............
..............
5,275

BA
OL
BA
OL

..............
..............
..............
4,117

..............
..............
..............
4,639

..............
..............
..............
5,275

BA
OL
BA
OL
BA
OL
BA
OL
BA
OL
BA
OL

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

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

1,760
1,232
540
..............
300
..............
160
..............
50
..............
150
..............

HIGHWAY CATEGORY
Preview Report Highway Category Spending Limits ..........................................
Adjustments for the Update Report:
No Adjustments ..............................................................................................................
Update Report Highway Category Spending Limits ............................................
Anticipated Adjustments for the Final Sequestration Report:
No Adjustments ..............................................................................................................
Anticipated Final Sequestration Report Limits ....................................................

MASS TRANSIT CATEGORY
Preview Report Mass Transit Category Spending Limits ...................................
Adjustments for the Update Report:
No Adjustments ..............................................................................................................
Update Report Mass Transit Category Spending Limits .....................................
Anticipated Adjustments for the Final Sequestration Report:
No Adjustments ..............................................................................................................
Anticipated Final Sequestration Report Limits ....................................................

CONSERVATION CATEGORY
Preview Report Conservation Category Spending Limits ..................................
Federal and State Land and Water Conservation Fund subcategory ..............
State and Other Conservation subcategory ............................................................
Urban and Historic Preservation subcategory ......................................................
Payments in Lieu of Taxes subcategory ..................................................................
Federal Deferred Maintenance subcategory ..........................................................

59

II. DISCRETIONARY SEQUESTRATION REPORT

Table 2.

DISCRETIONARY SPENDING LIMITS—Continued
(In millions of dollars)
2000

Coastal Assistance subcategory .................................................................................

2001

2002

BA
OL
BA
OL

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

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

440
..............
120
..............

BA
OL
BA
OL

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

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

..............
..............
1,760
1,232

BA
OL
BA
OL

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

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

..............
..............
1,760
1,232

BA
OL

580,289
569,224

640,803
617,507

546,945
537,091

BA
OL
BA
OL
BA
OL

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

N/A
N/A
..............
451
..............
2,434

..............
..............
..............
292
..............
..............

Subtotal, Adjustments for the Update Report .................................................

BA
OL

N/A
N/A

..............
2,885

..............
292

Update Report Other Discretionary Spending Limits .........................................

BA
OL

580,289
569,224

640,803
620,392

546,945
537,383

BA
OL
BA
OL
BA
OL

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

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

146
146
433
390
20
2

Subtotal, Adjustments for the Final Sequestration Report .........................

BA
OL

N/A
N/A

N/A
N/A

599
538

Anticipated Final Sequestration Report Spending Limits ..................................

BA
OL

580,289
569,224

640,803
620,392

547,544
537,921

Unallocated ......................................................................................................................
Adjustments for the Update Report:
No Adjustments ..............................................................................................................
Update Report Conservation Category Spending Limits ....................................
Anticipated Adjustments for the Final Sequestration Report:
No Adjustments ..............................................................................................................
Anticipated Final Sequestration Report Limits ....................................................

OTHER DISCRETIONARY SPENDING
Preview Report Other Discretionary Spending Limits .......................................
Adjustments for the Update Report:
Appropriations Enacted in P.L. 107–20, the 2001 Supplemental Appropriations
Bill ...............................................................................................................................
Contingent Emergency Appropriations Released ........................................................
Special Outlay Allowance ..............................................................................................

Anticipated Adjustments for the Final Sequestration Report:
EITC Tax Compliance Initiative ...................................................................................
Continuing Disability Reviews ......................................................................................
Adoption Incentive Payments .......................................................................................

60

OMB SEQUESTRATION UPDATE REPORT

Table 2.

DISCRETIONARY SPENDING LIMITS—Continued
(In millions of dollars)
2000

2001

2002

584,789
604,259
584,789
604,259
584,789
604,259

640,803
649,066
640,803
651,951
640,803
651,951

548,705
572,087
548,705
572,379
549,304
572,917

TOTAL DISCRETIONARY SPENDING
Preview Report Total Discretionary Spending Limits .........................................
Update Report Total Discretionary Spending Limits ..........................................
Anticipated Final Sequestration Report Spending Limits ..................................

BA
OL
BA
OL
BA
OL

N/A = Not Applicable.

Adjustments to discretionary limits.—
Table 2 shows how adjustments pursuant to
section 251(b) of the BEA of 1997 affect the
discretionary limits in 2000 through 2002.
Section 251(b)(2) of the BEA authorizes
certain adjustments after the enactment of
appropriations. Table 2 includes those adjustments that can be made now due to legislation
enacted to date. Table 2 also includes anticipated adjustments that would be made assuming enactment of 2002 appropriations bills,
although the Administration cannot determine
the actual adjustments that would be included
in the final sequestration report at the end
of this year’s session of Congress until all
appropriations are enacted. The section
251(b)(2) adjustments include:
Emergency Appropriations.—These adjustments include funding for amounts that the
President designates as ‘‘emergency requirements’’ and that Congress so designates in
law. Since the President submitted the 2002
budget in April, Congress has not enacted
any additional emergency spending for fiscal
year 2001.
The President has authorized the release
of some previously enacted emergency appropriations since the April Budget submission.
These funds will allow the Federal Emergency
Management Agency to carry out its mission
in response to natural disasters like Tropical
Storm Allison. While adjustments to the caps
were made for these funds in the Preview
Report, the effects of new estimates of the
rate at which these funds will be spent
are included here.

Additional Adjustments that Would Be
Made Contingent Upon Final Congressional Action.—Table 2 also shows how adjustments permitted under section 251(b) of
the BEA would affect the discretionary limits
if the following were included in 2002 appropriations bills.
Earned Income Tax Credit (EITC) Compliance Initiative.—The Balanced Budget Act
of 1997 authorized appropriations for the
Treasury Department to enforce EITC compliance and made specific allowance for adjustment of the caps by the appropriated amounts.
This funding is provided in order to reduce
the number of erroneous EITC claims, including the detection of erroneous claims and
enforcement of EITC eligibility rules. The
House-passed version of the 2002 Treasury
and General Government appropriations bill
provides $146 million for this initiative.
Continuing Disability Reviews (CDRs).—The
BEA authorizes adjustment of the caps by the
amounts appropriated for CDRs, which are
periodic examinations conducted to verify that
recipients of Social Security disability insurance benefits and Supplemental Security Income benefits for persons with disabilities are
still disabled. Cap adjustments are limited to
the exact levels of budget authority and outlays specified in the BEA, but the Administration has requested appropriations below the
level set for 2002. While the Congress has yet
to take up the 2002 Labor, Health and Human
Services, and Education appropriations bill,
OMB has included an adjustment of $433 million, the funding level in the 2002 budget requested for CDRs.

61

II. DISCRETIONARY SEQUESTRATION REPORT

Adoption Incentive Payments.—The Adoption
and Safe Families Act of 1997 authorizes
bonus payments to States that increase the
number of adoptions from the foster care
system. It provides for a discretionary cap
adjustment for appropriations up to $20 million annually in each of the years 1999
through 2003, because the cost of adoption
bonuses are assumed to be offset by reductions
in mandatory foster care costs. Again, OMB
has included an adjustment equal to the
level requested in the budget ($20 million
in budget authority) since the Congress has
not yet acted on the 2002 Labor, Health
Table 3.

and Human Services, and Education appropriations bill.
Summary of 2001 discretionary appropriations.—Table 3 summarizes the status of
enacted 2001 discretionary appropriations, relative to the discretionary caps. Enacted budget
authority and outlays for all categories for
2001 are within the specified cap levels. The
outlays cap for the other discretionary category
includes a special outlay adjustment made pursuant to section 251(b)(2)(B) of the BEA. This
section gives OMB the authority to adjust upward the outlay cap by up to 0.5 percent of
the total pre-adjustment level.

SUMMARY OF 2001 DISCRETIONARY
APPROPRIATIONS
(In millions of dollars)
BA

Outlays

Violent Crime Reduction Spending
Adjusted discretionary spending limits .................
Total enacted ........................................................
Spending over/under (–) limits ...............................

N/A
N/A
N/A

N/A
N/A
N/A

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

26,920
26,897
–23

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

4,639
4,639
................

Highway Category
Adjusted discretionary spending limits .................
Total enacted ........................................................
Spending over/under (–) limits ...............................
Mass Transit Category
Adjusted discretionary spending limits .................
Total enacted ........................................................
Spending over/under (–) limits ...............................

Other Discretionary Spending
Adjusted discretionary spending limits .................
Total enacted ........................................................
Spending over/under (–) limits ...............................

640,803
640,801
–2

620,392
620,392
................

Total Discretionary Spending—All Categories
Adjusted discretionary spending limits .................
Total enacted ........................................................
Spending over/under (–) limits ...............................

Status of 2002 discretionary appropriations.—Table 4 shows preliminary OMB scoring of the latest House and Senate action for
the 13 annual appropriations bills. If offsets

640,803
640,801
–2

651,951
651,928
–23

to discretionary spending are not enacted or
the caps are not raised, OMB estimates of
House and Senate action to date would exceed
the outlay limits in the conservation category

62

OMB SEQUESTRATION UPDATE REPORT

• Bills that have not been acted on are assumed to be funded at the 302(b) allocation.

and would exceed both the budget authority
and outlay limits in the other discretionary
category. Current OMB estimates of House action to date indicate that a sequester of approximately $192.8 billion in budget authority
and $115.7 billion in outlays would be triggered. Current estimates of Senate action, unless offset, would trigger a budget authority
sequester of approximately $192.4 billion, and
an outlay sequester of $115.5 billion.

• The spending limits shown for the House
and Senate have been adjusted upward for
the earned income tax compliance initiative included in the Treasury and General
Government appropriations bill and for
CDR and Adoption Incentive Payment levels requested in the budget.

OMB estimates of a sequester under House
and Senate action to date are based on
the following assumptions:
Table 4.

STATUS OF 2002 APPROPRIATIONS ACTION
(In millions of dollars)
House
BA

Senate

Outlays

BA

Outlays

DEFENSE DISCRETIONARY
Commerce, Justice, State and the Judiciary .....................
Defense .................................................................................
Energy and Water Development .........................................
Military Construction ..........................................................
Transportation .....................................................................
Veterans Affairs, HUD, Independent Agencies .................

567
300,209
14,034
10,152
340
143

546
294,026
13,958
9,447
340
156

Total, Defense Discretionary ...............................................

325,445

F
A
F
A
F
F

318,473

604
298,568
15,249
9,649
695
138

574
291,692
14,747
9,284
624
154

324,903

317,075

16,392
37,670
392
9,689
15,526
17,381
119,000
1,944
14,907
17,111
83,427
..................

16,807
38,798
412
9,959
15,761
17,685
107,513
2,029
18,578
16,548
89,891
691

333,439

334,672

C
A
F
A
F
F

NON-DEFENSE DISCRETIONARY
Agriculture and Rural Development ..................................
Commerce, Justice, State and the Judiciary .....................
District of Columbia .............................................................
Energy and Water Development .........................................
Foreign Operations ..............................................................
Interior and Related Agencies ............................................
Labor, HHS, and Education ................................................
Legislative ............................................................................
Transportation and Related Agencies ................................
Treasury, Postal Service, and General Government .........
Veterans Affairs, HUD, Independent Agencies .................
Deficiencies ...........................................................................

15,812
37,454
382
9,652
15,167
17,616
119,725
2,241
14,850
17,107
85,195
..................

16,733
38,829
401
9,960
15,692
17,815
106,224
2,293
18,545
16,514
89,964
445

Total, Non-Defense Discretionary .......................................

335,201

333,415

F
F
A
F
F
F
A1
F
F
F2
F
A

TOTAL OTHER DISCRETIONARY
Subtotal, Other Discretionary, excluding P.L. 107–20 .....
Total, 2002 effects of the 2001 supplemental appropriations bill (P.L. 107–20) ..........................................

660,646

651,888

658,342

651,747

73

1,549

73

1,549

Total, Other Discretionary Spending ..............................

660,719

653,437

658,415

653,296

Estimated Final Sequestration Report Other Discretionary Category Limits.

549,079

538,572

549,079

538,572

CONGRESSIONAL ACTION OVER/UNDER(–) LIMITS

111,640

114,865

109,336

114,724

C
C
A
F
C
F
A1
F
F
C2
F3
A

63

II. DISCRETIONARY SEQUESTRATION REPORT

Table 4.

STATUS OF 2002 APPROPRIATIONS ACTION—Continued
(In millions of dollars)
House
BA

Senate

Outlays

BA

Outlays

HIGHWAY CATEGORY
Transportation and Related Agencies ................................

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

28,491

Total, Highway Category .....................................................
Estimated Final Sequestration Report Highway Category Limits ......................................................................

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

CONGRESSIONAL ACTION OVER/UNDER(–) LIMITS

F

–9

28,493

28,491

–9

28,493

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

28,489

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

28,489

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

2

–9

4

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

5,272

F

MASS TRANSIT CATEGORY
F4

Transportation and Related Agencies ................................

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

5,271

Total, Mass Transit Category .............................................
Estimated Final Sequestration Report Spending Limits ..

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

5,271
5,275

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

5,272
5,275

CONGRESSIONAL ACTION OVER/UNDER(–) LIMITS

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

–4

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

–3

251
1,320

238
1,083

F4

CONSERVATION SPENDING CATEGORY
Commerce/Justice/State and the Judiciary ........................
Interior and Related Agencies ............................................

440
1,320

361
1,085

Total, Conservation Spending Category .........................
Estimated Final Sequestration Report Spending Limits ..

1,760
1,760

1,446
1,232

1,571
1,760

1,321
1,232

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

214

–189

89

CONGRESSIONAL ACTION OVER/UNDER(–) LIMITS

F
F

C
F

TOTAL, DISCRETIONARY SPENDING
Total, Discretionary Spending ............................................
Estimated Final Sequestration Report Discretionary
Spending Limits ...............................................................

662,479

688,645

659,977

688,382

549,304

572,917

549,304

572,917

CONGRESSIONAL ACTION OVER/UNDER(–) LIMITS

113,175

115,728

110,673

115,465

Key: S = Marked Up by the Subcommittee; C = Bill Reported Out by Committee; F = Bill Passed by House or by Senate; CN = Conference
Action has Occurred; E = Enacted bill; A = current 302(b) allocation
NOTE: OMB scoring of latest House and Senate action is preliminary
1 Estimates include numbers for House and Senate Continuing Disability Reviews and Adoption Incentive Payments.
2 Estimates include $146 million in BA and outlays for the Earned Income Tax Credit Initiative (EITC)
3 The Senate added an amendment on the Floor that would make $2.0 billion in emergency FEMA funding available upon enactment of
the bill. OMB assumes enactment prior to September 30th and, therefore, scores the BA in 2001—the fiscal year in which the funding becomes available. However, OMB assumes that the funding will not actually outlay until 2002.
4 The Administration, House, and Senate have proposed $1.35 billion in Mass Transit BA. However, this amount does not count towards
the Mass Transit nor any other cap. The Administration has proposed to score this BA in 2002 against a new cap for all Discretionary
spending.

Comparison of OMB and CBO discretionary limits.—Section 254(d)(5) of the BEA
requires that this report explain the differences between OMB and CBO estimates for
discretionary spending limits. Table 5 compares OMB and CBO limits for 2001 and 2002.
CBO uses the discretionary limits from OMB’s
preview report as a starting point for adjustments in its sequestration update report.

There is no difference between OMB and
CBO for estimates of budget authority limits
in 2001 and 2002. This is the first time
in several years that OMB has matched
CBO’s estimates of budget authority limits
and results primarily from OMB adopting
a scoring treatment of contingent emergencies
that matches with CBO’s policy.

64

OMB SEQUESTRATION UPDATE REPORT

Differences in 2001 outlay limits total $2,885
million, $2,434 million of which is due to
OMB’s adjustment of 2001 outlays by the
special outlay allowance. CBO did not make
a similar adjustment in its update report.
The remaining $451 million outlay limit difference in 2001, and all of the $21 million

outlay limit difference in 2002, results from
different technical assumptions about the
spendout of recently released contingent emergency appropriations for the Federal Emergency Management Agency that occurred since
the transmission of the 2002 budget to Congress.

Table 5. COMPARISON OF OMB AND CBO
DISCRETIONARY SPENDING LIMITS
(In millions of dollars)
2000

2001

2002

Violent Crime Reduction
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................

4,500
6,344

N/A
N/A

N/A
N/A

4,500
6,344

N/A
N/A

N/A
N/A

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

N/A
N/A

N/A
N/A

..............
24,574

..............
26,920

..............
28,489

..............
24,574

..............
26,920

..............
28,489

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

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

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

..............
4,117

..............
4,639

..............
5,275

..............
4,117

..............
4,639

..............
5,275

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

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

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

N/A
N/A

N/A
N/A

1,760
1,232

N/A
N/A

N/A
N/A

1,760
1,232

N/A
N/A

N/A
N/A

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

580,289
569,224

640,803
617,507

546,945
537,362

580,289
569,224

640,803
620,392

546,945
537,383

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

..............
2,885

..............
21

Highway Category
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................

Mass Transit Category
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................

Conservation Category
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................

Other Discretionary
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................

65

II. DISCRETIONARY SEQUESTRATION REPORT

Table 5. COMPARISON OF OMB AND CBO DISCRETIONARY SPENDING LIMITS—Continued
(In millions of dollars)
2000

2001

2002

Total Discretionary Spending Limits
CBO Update Report limits:
BA ......................................................
OL ......................................................
OMB Update Report limits:
BA ......................................................
OL ......................................................
Difference:
BA ......................................................
OL ......................................................
N/A = Not Applicable.

584,789
604,259

640,803
649,066

548,705
572,358

584,789
604,259

640,803
651,951

548,705
572,379

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

..............
2,885

..............
21

III. PAY–AS–YOU–GO SEQUESTRATION
REPORT
The BEA requires that OMB issue reports
after enactment of individual bills and three
times a year on the overall status of Payas-you-go (PAYGO) legislation. This report
provides OMB’s updated estimates, reflecting
legislation enacted as of August 15, 2001.
As the BEA requires, the estimates rely
on the same economic and technical assumptions as in the President’s 2002 budget,
which the Administration transmitted to Congress on April 9, 2001.
PAYGO enforcement covers all direct spending and receipts legislation. The BEA defines
direct spending as entitlement authority, the
food stamp program, and budget authority
provided by law other than in appropriations
acts.
The BEA requires that, in total, receipts
and direct spending legislation not result
in a net cost in any year. If such legislation
yields a net cost, and if the President and
Congress do not fully offset it by other
legislative savings, the law requires a sequester of non-exempt direct spending programs.
The BEA requires that OMB submit a
report to Congress that estimates the change
in outlays or receipts for the current year,
the budget year, and the following four
fiscal years resulting from enactment of
PAYGO legislation. The estimates, which must
rely on the economic and technical assump-

tions underlying the most recent President’s
budget, determine whether the PAYGO requirement is met. The PAYGO process requires that OMB maintain a ‘‘scorecard’’
that shows the cumulative net cost of such
legislation.
Table 6 presents OMB estimates of PAYGO
legislation enacted as of August 15, 2001.
In total, these bills have resulted in a
net cost of $75.0 billion for 2001 and a
net cost of $51.7 billion for 2002. As required
by the BEA, the 2001 total reflects only
Acts added to the scorecard after the OMB
Final Sequestration Report for Fiscal Year
2001 was issued. At the end of this session
of Congress, OMB will determine the need
for sequestration by combining the 2001 and
2002 totals. For legislation enacted as of
August 15, 2001, this calculation yields a
cost of $126.7 billion, indicating that a sequester would be required for 2002 if there
are no changes to current law. For 2002,
the maximum savings achievable from a
sequester is $33.3 billion. The Administration
will work with Congress to ensure that
no unintended sequesters of spending occur
under current law or through enactment
of any other proposals that meet the President’s objectives to reduce the debt, fund
priority initiatives, and grant tax relief to
all income tax paying Americans.

67

68

Table 6.

NET COST OF PAY-AS-YOU-GO LEGISLATION ENACTED AS OF AUGUST 15, 2001 1
(In millions of dollars)

Report
Number

Act Number

Act Title

2001

2002

2003

2004

2005

2006

2001–2006

Pay-as-you-go balances in the 2002 Preview Report: 2
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

0
0

16,053
12,884

18,465
14,651

19,336
14,206

20,673
14,551

0
0

74,527
56,292

Legislation enacted in the 1st session of the 107th Congress:
553

N/A

557

–3
–3

0
0

0
0

0
0

0
0

0
0

P.L. 107–15
H.R. 1727

Fallen Hero Survivor Benefit Fairness Act
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

0
1

2
7

4
5

4
5

4
5

4
4

18
27

P.L. 107–16
H.R. 1836

Economic Growth and Tax Relief Reconciliation Act
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

69,501
73,808

35,691
37,570

86,399
90,335

105,457
107,421

106,330
107,102

130,781
134,887

534,159
551,123

P.L. 107–18
S. 1029

Manufactured Housing Program User Fee Authority
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

0
2

0
1

0
0

0
0

0
0

0
0

0
3

P.L. 107–19
S. 657

National 4–H Program Centennial Initiative
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

P.L. 107–25
H.R. 2213

Crop Year 2001 Agricultural Economic Assistance.
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

5,500
5,500

0
0

0
0

0
0

0
0

0
0

5,500
5,500

75,004
79,314

35,690
37,577

86,403
90,339

105,461
107,425

106,334
107,107

130,785
134,891

539,677
556,653

75,004
79,314

51,743
50,461

104,868
104,990

124,797
121,631

127,007
121,658

130,785
134,891

614,204
612,945

OMB balance for sequester ............................................................................ ................

556

3
3

Total, current balances:.
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

555

Wildland Fire Management Reimbursement Authority
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

Subtotal, legislation enacted in the 1st session of the 107th Congress:.
OMB estimate ...................................................................................................
CBO estimate ....................................................................................................

554

P.L. 107–13
H.R. 581

126,747

bills with impact of $500,000 or less in each fiscal year 2001 through 2006 under both OMB and CBO scoring.
2 The Consolidated Appropriations Act of 2001 (P.L. 106–554) set the scorecard to zero for fiscal year 2001.

0

OMB SEQUESTRATION UPDATE REPORT

1 Excludes

OMB does not consider this bill as subject to pay-as-you-go
0
2
–1
–1
0
0

69

III. PAY–AS–YOU–GO SEQUESTRATION REPORT

Table 7.

PAY–AS–YOU–GO LEGISLATION WITH IMPACT OF $500,000 OR LESS
ENACTED AS OF AUGUST 15, 2001 1

Public Law Number
P.L.
P.L.
P.L.
P.L.
Pvt.

107–5
107–8
107–14
107–17
L. 107–1

1 OMB
2 OMB

Act Number
S.J. Res. 6
H.R. 256
H.R. 801
H.R. 1914
S. 560

Act Title
Disapproval of Ergonomics Regulations
Family Farmer Bankruptcy Act Extension until June 1, 2001
Veterans’ Survivor Benefits Improvements Act of 2001
Family Farmer Bankruptcy Act Extension until October 1, 2001
Private relief for Rita Mirembe Revell 2

does not issue pay-as-you-go reports for these bills.
does not consider this bill as subject to pay-as-you-go requirements; CBO does.

Pending legislation.—The Congress completed action on three additional PAYGO bills,
but they have not yet been signed into law.
These bills are the Federal Firefighters Retirement Age Fairness Act (H.R. 93), the Bull Run
Watershed Management Unit Act (H.R. 427),
and the Carson City, Nevada, Land Conveyance Act (H.R. 271). OMB estimates that these
bills would have a negligible PAYGO impact.
Because these bills have not yet been signed
into law, OMB did not take them into account
for this report.
Comparison with CBO estimates.—The
BEA requires that OMB explain differences
with CBO estimates of enacted PAYGO legislation. Table 6 shows the CBO estimate for each

Act as it was reported in CBO’s PAYGO bill
reports. For the sum of 2001 and 2002, OMB
estimates a net cost of $126.7 billion, while
CBO estimates a net cost of $129.8 billion.
OMB’s estimate is $3.0 billion lower due to
its lower cost estimate of the Economic Growth
and Tax Relief Reconciliation Act, partially offset by its higher 2002 PAYGO balance in the
Preview Report. The scoring difference for the
tax bill is the result of different baseline assumptions and estimating models. Over 2001
through 2006, OMB estimates a net cost of
$614.2 billion, $1.3 billion higher than CBO.
This difference results from OMB’s lower scoring of the tax bill, more than offset by its
higher PAYGO balances in the Preview Report.