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F I S C A L

Y E A R

2 0 0 6

MIDSESSION REVIEW
BUDGET OF THE U.S. GOVERNMENT

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
The Director

July 13, 2005

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, calls for the President to 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 deficit, receipts, outlays, and budget authority for fiscal
years 2005 through 2010. An update of executive branch progress in implementing the
President=s Management Agenda will be provided under separate cover.

Sincerely,

Joshua B. Bolten
Director

Enclosure

Identical Letter Sent to The President of the Senate

TABLE OF CONTENTS
Page

Transmittal Letter
List of Charts and Tables ..................................................................................................

iii

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

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

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

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

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

Glossary ..............................................................................................................................

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
off-budget 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

LIST OF CHARTS
Page

Chart 1.

A Declining Budget Deficit ...........................................................................

Chart 2.

Annual Percent Change in Receipts ............................................................

Chart 3.

Receipts as a Percent of GDP .......................................................................

LIST OF TABLES
Table 1.

Changes from the February Budget .........................................................

Table 2.

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

Table 3.

Comparison of Economic Assumptions .....................................................

Table 4.

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

Table 5.

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

Table S–1.

Budget Totals .............................................................................................

Table S–2.

Discretionary Totals ..................................................................................

Table S–3.

Growth in Discretionary Budget Authority by Major Agency ................

Table S–4.

Discretionary Proposals by Appropriations Subcommittee ....................

Table S–5.

Homeland Security Funding by Agency ...................................................

Table S–6.

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

Table S–7.

Receipts Proposals .....................................................................................

Table S–8.

Budget Summary by Category ..................................................................

Table S–9.

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

Table S–10.

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

Table S–11.

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

Table S–12.

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

Table S–13.

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

Table S–14.

Baseline Category Totals ..........................................................................

Table S–15.

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

Table S–16.

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

iii

SUMMARY
Since the 2006 Budget was released, the
Nation’s budget picture has improved dramatically. Due in large part to tax relief, the
economy is strengthening, and the growing
economy is producing the tax receipts necessary to cut the deficit far faster than
was forecast just five months ago. Even
as the Nation devotes the substantial resources needed to fight and win the War
on Terror, the deficit is now forecast to
fall from $412 billion or 3.6 percent of
GDP, in 2004 to $333 billion, or 2.7 percent,
in 2005. This is a decline of $94 billion
from the Administration’s most recent forecast
for the deficit, released this past February.
At its currently forecast level, the U.S. budget
deficit for 2005 would be smaller than the
deficits in 15 of the last 25 years, and
only slightly above the 40-year historical
average of 2.3 percent.
Under the President’s policies, the budget
deficit is forecast to continue to fall to
$162 billion in 2009, or 1.1 percent of GDP.
That would more than achieve President

Bush’s goal of cutting the deficit in half
from its projected 2004 peak of $521 billion,
or 4.5 percent of GDP. Economists are unlikely
to view a deficit of this size as posing
a significant economic risk. In fact, a deficit
of 1.1 percent of GDP would be less than
half the average deficit over the past 40
years, a period of significant economic growth.
The Role of Economic Growth: This rapid
improvement in the budget picture demonstrates the significance of policies that
contribute to sustained economic growth. The
implementation of the Administration’s progrowth agenda, especially tax relief, restored
growth and investment to the economy. The
Nation’s stock market collapsed in 2000,
and by the time the President entered office
in 2001, the economy was sliding into recession. With the attacks of September 11,
2001, as well as the revelation of corporate
scandals years in the making, and the beginning of the global War on Terror, the Nation’s
economy faced major challenges.

Chart 1. A Declining Budget Deficit
Percent of GDP
February 2004
Projection

February 2005 Projection
July 2005 Projection

3
40-Year Historical Average 2.3%

1
0
2004
Actual

2005

2006

2007

2008

2009

2010

2
Tax relief proposed by the President and
enacted by the Congress in each year from
2001 through 2004 reduced income tax rates,
raised incentives for small businesses to invest
in new equipment, dramatically reduced the
tax rate on dividends and capital gains,
and phased out the death tax. Once fully
in place, tax relief produced the desired
results: The economy has grown by 12.4
percent since the recession ended in November, 2001, and has expanded by at least
3 percent for eight consecutive quarters. Employment is up by 3.7 million jobs since
May of 2003, and the unemployment rate
has fallen to 5 percent, lower than the
average unemployment rate of the 1970s,
1980s, and 1990s. Both inflation and interest
rates have remained low.
If made permanent, the President’s tax
relief will continue strengthening our economy.
Accelerated depreciation of investments will
make it easier for small businesses to invest
in new equipment. Lower taxes on investment
income will make more capital available to
businesses to hire and grow. Lower marginal
income tax rates will increase incentives
to work and encourage workers to save
more. Allowing this tax relief to expire would
endanger the economy’s prospects, placing
into doubt gains in job creation and business
investment that are critical to increases in
tax revenues and further reductions in the
size of the deficit.
The Role of Spending Discipline: As part
of President Bush’s efforts to restore and
sustain economic growth, he has focused
on spending discipline. If the Federal Government sets priorities and limits its claim
on resources taken from the private sector,
it helps sustain a stronger, more productive
economy. When achieved through spending
restraint rather than through tax increases,
deficit reduction bolsters confidence in the
U.S. economy. This confidence of global capital
markets brings important advantages to America’s economy through lower interest rates
and lower borrowing costs, which in turn
lead to more investment and more jobs.
Keeping America’s fiscal house in order, while
holding taxes down, sustains growth and
justifies investors’ confidence in the U.S.
economy.

MID–SESSION REVIEW

In each year of President Bush’s administration, he and the Congress have brought
down the rate of growth in discretionary
spending unrelated to defense and homeland
security. His 2006 Budget calls for an outright
reduction in such spending, the first such
proposed cut since the Reagan Administration.
The improved deficit picture in the later
years of the budgetary window reflected in
this Review assumes the continuation of
the President’s policies of spending restraint.
The Congress has passed a 2006 Budget
Resolution that holds overall discretionary
spending to an increase less than the newlyrevised 2.4 percent projected rate of inflation.
The Resolution’s total discretionary spending
figures assume an actual reduction in nondefense/non-security discretionary spending
compared to last year’s levels.
While the House of Representatives has
completed work on 2006 appropriations bills
that remain within the President’s overall
level and also achieve a reduction in nonsecurity related spending, much work remains
to be done to ensure that the final spending
bills reflect this level of restraint.
Still, discretionary spending accounts for
only about 40 percent of all Federal spending.
Therefore, fiscal policy must also address
the rate of growth in mandatory programs,
which consume more than half of federal
spending now, and are projected to rise
steadily in coming decades.
The President’s 2006 Budget proposed reforms in mandatory programs that would
produce savings of $85 billion over five years.
Congress agreed to $35 billion of these savings
in its Budget Resolution. This would be
the first time since 1997 that Congress
will have employed the expedited reconciliation
process to reduce mandatory spending.
Receipts: Collections of tax revenue have
grown significantly faster than projected five
months ago. After three straight years of
declines due to economic weakness, tax receipts will have risen two consecutive years.
And this Mid-Session Review projects that
tax receipts will rise 14 percent from last
year—the largest such year-over-year increase
in 25 years.

SUMMARY

Chart 2. Annual Percent Change in Receipts
Percent change

20
Projections

15
10
5
0
-5
-10
1980

1984

1988

1992

Federal receipts as a share of the economy
continue to rise, even though tax rates were
lowered in 2001 and 2003. In the Budget
released last February, the Administration
forecast a rebound in receipts from 16.3
percent of GDP in 2004 to 16.8 percent
in 2005 and to 17.7 percent by 2010. In
this Mid-Session Review, the 2005 ratio is
now estimated at 17.4 percent, and the
2010 ratio is projected at 18.1 percent, just
slightly below the historical average of 18.2
percent, even assuming full extension of the
President’s tax relief program. The chart
shows receipts approaching the historical average in coming years.
In the 2005 Budget, released February
of 2004, the Administration forecast receipts
for 2004 of $1,798 billion. By the end of
that fiscal year, the Treasury had collected
$1,880 billion, $82 billion more than had
been forecast. In the Budget released this
February, the Administration forecast receipts
for 2005 of $2,053 billion. As of this MidSession Review, we now forecast 2005 receipts
of $2,140 billion, $87 billion more than had
been forecast. We cannot identify with certainty the composition of this greater-thanexpected surge in tax receipts; detailed data
that would permit such an analysis will

1996

2000

2004

2008

not be available for many months. The data
so far show all major categories of receipts—
corporate income taxes, payroll taxes, and
individual income taxes—are outpacing forecasts. This experience of the Federal Treasury
generally has been matched at the state
level, as nearly all states are reporting income
tax collections above forecasts.
This revision in our forecast of receipts,
a 4 percent increase, is consistent with past
experience when the economy has undergone
a significant shift in direction. It is common
for receipts to rise or fall at a faster pace
than the rate of economic growth. Even
a modest shift downward in the economy
can set off a disproportionate decline in
receipts. And pronounced economic improvement, such as we have seen recently, can
lead to significant gains in receipts. The
biggest factor in producing rising tax receipts,
and therefore a declining deficit, is economic
growth: This demonstrates the high priority
fiscal policy should place on measures that
contribute to economic growth.
Outlays: Total outlays for 2005 track closely
with those forecast five months ago and
are now estimated to be $2,472 billion, down
$7 billion from the February estimate. Small

MID–SESSION REVIEW

Chart 3. Receipts as a Percent of GDP
Percent of GDP

40-Year Historical Average 18.2%
18

16
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

increases due to policy changes are more
than offset by reductions due to estimating
changes.
The Budget Resolution passed by the Congress assumes an additional $50 billion in
2006 for the continuing costs of operations
in Iraq and Afghanistan. This Review assumes
enactment of this funding, which would increase outlays by $37 billion in 2006 and
$13 billion in 2007 and beyond. The full
cost of these operations in 2006 is uncertain,
but they are expected to require additional
funding beyond the $50 billion included in
the Congress’ Budget Resolution. The Administration expects to request additional 2006
funding from the Congress when requirements
for these operations can be estimated more
reliably. This Review also does not reflect
the effect of undetermined but anticipated
supplemental requests for operations beyond
2006.
This update also includes the estimated
budget impact from the creation of personal
accounts under the President’s Social Security
reform proposal. Transition financing for these
accounts would not begin to take effect until
2009, and is easily accommodated within
the President’s deficit reduction goal. Although

transition financing is incorporated into our
deficit projections, it should not have the
same effect on capital markets as traditional
federal borrowing. First, such financing would
essentially bring forward obligations already
owed in the form of promised future benefits,
and as a result, would reduce existing future
obligations by a roughly equal amount. Second,
unlike debt issued to fund government spending, there would be no impact on net national
savings, because every dollar of transition
financing would be saved in a personal account
and invested in the capital markets.
Long-Term Fiscal Outlook: The greatest
fiscal danger over the long-term is posed
by the unfunded obligations in major entitlement programs—Social Security, Medicare,
and Medicaid. The rising costs of these programs are tied largely to two factors: The
aging of the population, and the growing
use and cost of health care. Both of these
factors are largely structural. In 2008, the
first of the Baby Boom generation begins
to collect Social Security benefits. In 2017,
the program will collect less in payroll taxes
than it pays out in benefits. At that point,
the system will be funded partially by general
tax revenue. In 2041, the system is projected
to go bankrupt because it will have insufficient

SUMMARY

resources to pay benefits. It would take
$11 trillion in today’s dollars to erase the
system’s current unfunded obligations. President Bush has proposed reforms to address
the system’s long-term insolvency while making Social Security a better deal for today’s
young workers. Under his approach, Social
Security would include voluntary personal
accounts funded by a portion of worker’s
payroll taxes. The President has also embraced
the idea of indexing benefits for future highincome workers to inflation while providing
for a higher rate of benefit growth for
lower-income workers. This measure would
significantly contribute to the solvency of
the system while protecting low-income seniors
from poverty. The Administration is working
with the Congress to develop legislation that
addresses the solvency of Social Security
in a manner that is fair to young workers
and low-income seniors without raising the
payroll tax rate.
The Administration proposes to protect Medicaid’s original purpose to promote the health
of the least financially fortunate among us,
while fostering a more balanced Federalstate partnership that improves the program’s
long-term financial stability. By enhancing
flexibility, reducing overhead and waste, improving program integrity to reduce inappropriate use of Federal funds, and focusing
on more efficient delivery of care, states
will be better able to address the needs
of their low-income citizens while helping
to control the program’s growth rate. The
Congress’ Budget Resolution calls for $10
billion in savings over five years from Medicaid
reforms, a welcome down-payment on changes
that will be necessary over the long term.
Demographics and the rising cost of health
care combine to create a significant fiscal
challenge to Medicare’s finances. President

5
Bush proposed and signed into law needed
reforms to Medicare, such as a prescription
drug benefit, enhanced preventive care, increased personal choice for seniors, and expanded market-based competition. Together
with greater use of Health Savings Accounts,
advances in health care information technology, and medical liability reform, these
reforms will help address the rising cost
of health care throughout our economy.
Conclusion: As the Nation’s near-term fiscal
outlook improves, we have the opportunity
and responsibility to address the real fiscal
threat: a long-term budgetary picture of steadily rising deficits that are the product of
massive unfunded obligations in mandatory
spending programs. While overcoming the
near-term fiscal effects of recession, terror
attacks, and war will be a significant achievement, the President is committed to meeting
the long-term fiscal threats as well, and
looks forward to working with the Congress
to achieve much needed savings and reforms
in these programs.
Critical to success in both the short and
long term is a strong economy. The Administration will continue to emphasize the need
to make tax relief permanent. Tax relief
had a significant, positive impact on the
economy, and that stronger economy is the
source of the improved tax receipts that
are reported today. In addition, spending
restraint is also necessary to keep the deficit
on a downward trajectory throughout the
rest of the decade. These two key policies—
promoting growth through tax relief and
restraining spending—are crucial to maintaining the improved fiscal outlook over the
near-term, and will prove valuable in helping
address the Nation’s long-term fiscal challenges.

MID–SESSION REVIEW

Table 1.

CHANGES FROM THE FEBRUARY BUDGET
(In billions of dollars)
2005

2006

2007

2008

2009

2010

2006–2010

2006 February Budget deficit ................
Percent of GDP ...................................

–427
–3.5%

–390
–3.0%

–312
–2.3%

–251
–1.7%

–233
–1.5%

–207
–1.3%

–1,393

Economic and technical reestimates:
Receipts ............................................
Social Security .................................
Other programs ...............................
Net interest 1 ...................................

87
–3
16
–5

95
–5
–9
7

84
–7
–6
19

81
–8
–7
27

77
–7
–5
32

73
–10
–3
37

410
–38
–31
123

464

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

................
–37

................
–10

................
–2

–22
–1

–54
–*

–76
–50

–1

–2

–3

–5

–13

–1

–39

–10

–4

–26

–59

–138

Subtotal, economic and technical
reestimates ......................................
Policy changes:
Social Security personal accounts ..
Additional war funding in 2006 .....
Other
legislation
and
policy
changes 2 .......................................
Subtotal, policy changes .....................
Total, changes .........................................

326

Mid-Session Review deficit ....................

–333

–341

–233

–162

–170

–1,067

Percent of GDP ...................................

–2.7%

–2.6%

–1.7%

–1.1%

* $500 million or less.
1 Includes debt service on all reestimates.
2 Includes debt service on all policy changes.

ECONOMIC ASSUMPTIONS
The economy is growing and employment
is rising. The policies pursued by the Administration and the Federal Reserve have paid
off handsomely by reigniting economic growth
and job creation. Since May 2003 payroll
jobs have risen by 3.7 million, while the
unemployment rate, which peaked in June
2003, has fallen to 5.0 percent. Job gains
have been widespread across industries and
regions. Compared with two years ago, the
unemployment rate was lower in 41 of the
50 States in May 2005.
The economic expansion that began three
and one half years ago continues on a
self-sustaining course that should give the
economy great resilience against the normal
disruptions that arise with time. The updated
Administration forecast for this Mid-Session
Review anticipates that growth will continue
at between 3 and 31⁄2 percent per year
over the next five years with substantial
job gains. As the expansion matures, the
growth rate is projected to ease somewhat
while remaining close to the long-run rate
of change in potential GDP. Inflation is
projected to remain under control, falling
back to around 21⁄2 percent per year as
measured by the Consumer Price Index (CPI).
Low inflation and steady growth should result
in solid gains in income which can support
the continuing expansion on a self-sustained
basis. This view of the economic outlook
is broadly shared by most private economic
forecasters, as represented, for example, by
the Blue Chip Consensus. Table 3, below,
compares the Mid-Session Review forecast
with the original forecast for the 2006 Budget
and the July Blue Chip Consensus forecast.
In the Administration’s first term, fiscal
and monetary policies were focused on overcoming a series of powerful shocks that
had brought economic growth to a near
standstill in 2000–2001, and which continued
to impede the economy in 2002 and early
2003. A steep decline in stock prices began
in 2000, reducing household wealth and hurting consumption. Real GDP fell in the third
quarter of 2000, and a recession began early

in 2001. The stock market decline contributed
to falling business investment, which declined
for nine straight quarters in 2001–2003. The
terrorist attacks in September 2001 and the
onset of the global War on Terror delayed
the recovery in business investment by adding
to uncertainty and raising costs. This held
down growth at the beginning of the expansion
and delayed firms’ investment and hiring
decisions until these uncertainties began to
fade. The sluggishness in investment was
further prolonged by the corporate accounting
scandals dating back to the 1990s revealed
in the aftermath of the stock market decline.
Administration policy, especially broad-based
tax relief, and the inherent resilience of
U.S. workers and businesses succeeded in
overcoming these shocks, and since 2003
the economy has proceeded on a solid expansionary path. Investment is growing again
and providing the underpinnings for future
income growth. There have been subsequent
shocks to the economy, notably the sharp
rise in energy prices, but the expansion
has continued apace despite these further
disruptions.
With the economic expansion firmly established, fiscal policy has moved toward greater
spending restraint and monetary policy has
become less accommodative, while both have
emphasized policies that will sustain the
expansion in the long run. A year ago,
the Federal Reserve began to raise shortterm interest rates, seeking to reduce the
policy accommodation it had been providing
at a pace it described in its public statements
as ‘‘measured’’. This shift moves policy toward
a neutral monetary stance intended to provide
enough liquidity to sustain the expansion
while maintaining control of the rate of
inflation. Since June 2004, the Federal Reserve has raised the Federal Funds rate
from 1 percent to 31⁄4 percent. Meanwhile,
the Administration has sought to extend
permanently most of the tax changes enacted
in 2001–2004 with the goal of fostering
long-run incentives for work, saving, and
investment. The Administration proposes to
7

MID–SESSION REVIEW

that is close to the current Blue Chip Consensus of professional forecasters. If the consensus view on growth prevails, the budget
deficit will improve as shown in this report
as long as spending remains restrained.

reduce the budget deficit through the revenue
growth that follows from a strong economy
and through spending discipline and budgetary
reforms aimed at cutting back inefficient
and unnecessary Government programs.
So far in 2005, the budget deficit has
declined much more than projected at the
beginning of the year, largely because of
a surge in Federal receipts. The rapid growth
of receipts partly reflects the revival of economic growth in 2003–2005. In the interest
of prudent budgeting, the Mid-Session Review
takes a cautious view of the economic outlook

Table 2.

Fiscal and Monetary Policy
Fiscal Policy: When the Administration took
office the economy had already slowed substantially from the rapid pace of growth
in the late 1990s. Indeed, it was on the
brink of a recession. Acting promptly, Congress
and the Administration put in place tax

ECONOMIC ASSUMPTIONS 1

(Calendar years; dollar amounts in billions)
2004
Actual
Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars ..................................
Real, chained (2000) dollars .............
Chained price index (2000=100),
annual average ..............................
Percent change, fourth quarter over
fourth quarter:
Current dollars ..................................
Real, chained (2000) dollars .............
Percent change, year over year:
Current dollars ..................................
Real, chained (2000) dollars .............

Projections
2005

2006

2007

2008

2009

2010

11,735
10,842

12,447
11,233

13,142
11,614

13,865
11,999

14,619
12,390

15,395
12,777

16,208
13,173

108.3

110.8

113.2

115.5

118.0

120.5

123.0

6.4
3.9

5.9
3.4

5.5
3.4

5.5
3.3

5.4
3.2

5.3
3.1

6.6
4.4

6.1
3.6

5.6
3.4

5.5
3.3

5.4
3.3

5.3
3.1

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

985
5,373
2,455

1,372
5,755
2,575

1,354
6,109
2,722

1,324
6,468
2,846

1,285
6,852
3,019

1,293
7,230
3,117

1,322
7,613
3,247

Consumer Price Index (all urban): 3
Level (1982–84=100), annual average
Percent change, 4th over 4th ...............
Percent change, year over year ...........

188.9
3.4
2.7

194.6
2.9
3.0

199.5
2.4
2.5

204.3
2.4
2.4

209.2
2.4
2.4

214.2
2.4
2.4

219.4
2.4
2.4

Civilian Unemployment rate:
Fourth quarter level (percent) .............
Annual average (percent) .....................

5.4
5.5

5.1
5.2

5.1
5.1

5.0
5.0

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

4.15
4.1

3.5
3.5

3.1
2.3

NA
NA

Interest rates, percent:
91–Day Treasury Bills 6 .......................
10–Year Treasury Notes ......................

1.4
4.3

3.0
4.3

3.4
4.8

3.5
5.2

3.6
5.4

3.8
5.5

4.0
5.6

NA = Not Available
1 Based on information available as of early June 2005.
2 Rent, interest, dividend and proprietors income components of personal income.
3 Seasonally adjusted CPI for all urban consumers.
4 Percentages apply to basic pay only; 2004 figure is average of various rank- and longevity-specific adjustments; percentages to be proposed for years after 2006 have not yet been determined.
5 Overall average increase, including locality adjustments. Percentages to be proposed for years after 2006 have not yet
been determined.
6 Average rate, secondary market bank discount basis.

ECONOMIC ASSUMPTIONS

reductions that helped shorten the recession
and limited the decline in real GDP. The
economic recovery threatened to stall following
the terrorist attacks on September 11, 2001,
and the beginning of the global War on
Terror, and so further tax reductions were
enacted, intended to strengthen the expansion.
Altogether there were four major tax bills
enacted in the Administration’s first term
which combined to revive and strengthen
economic growth:
• The Economic Growth and Tax Relief and
Reconciliation Act passed in 2001 lowered
marginal income tax rates, began the
phase-out and eventual elimination of the
‘‘death tax’’, reduced the tax code’s marriage penalty, and created a new 10 percent bottom tax bracket.
• The Job Creation and Worker Assistance
Act passed in 2002 had a twofold purpose.
It provided additional, temporary unemployment benefits and it created temporary investment incentives for business
by allowing firms to expense up to 30 percent of the cost of newly purchased assets.
• The Jobs and Growth Tax Relief Reconciliation Act passed in 2003 again extended
temporary unemployment insurance benefits, advanced the effective date of many
of the previously enacted tax cuts, expanded the expensing provisions passed in
2002, and reduced individual income tax
rates on dividends and capital gains, removing much of the ‘‘double’’ taxation to
which such income was previously subject.
• The Working Families Tax Relief Act of
2004 extended most of the tax relief for
working families through 2010, provided
temporary relief from the Alternative Minimum Tax, and extended the Research and
Experimentation Tax Credit.
Together the four tax measures provided
a significant boost to household disposable
income. The initial tax relief in fiscal year
2001 amounted to $68 billion and it rose
to $289 billion in 2004, about 21⁄2 percent
of GDP. In 2005, the amount of tax relief
has been scaled back to around $180 billion
with the expiration of the temporary investment incentives. The economy responded
strongly to the stimulus. After growing at

9
an anemic 2.2 percent annual rate during
the first five quarters of the recovery, the
growth rate jumped to 4.1 percent in the
second quarter of 2003, and jumped again
to 7.4 percent three months later following
passage of the 2003 tax act. This was the
fastest growth rate in almost twenty years.
Since then the growth rate has subsided,
but it has averaged 3.9 percent, which is
much faster than earlier in the recovery
and fast enough to spur substantial job
growth.
With growth reestablished on a solid basis,
the Administration’s fiscal policy has achieved
one of its main objectives. Making the tax
changes permanent will ensure that the incentives for work, saving, and investment are
maintained. Meanwhile, the Administration
seeks to control the deficit through the revenue
growth that follows from a strong economy
and by restraining spending and promoting
greater efficiency in Government program
operations.
Monetary Policy: The Federal Reserve also
sought to revive economic growth. From the
start of 2001 through June 2003, it lowered
its target for the federal funds rate thirteen
times, reducing it from 61⁄2 percent to 1
percent. For the next twelve months, the
Federal Reserve held the funds rate at 1
percent, and then, when it was clear that
growth had rebounded, it began slowly raising
interest rates. Over the last twelve months,
the Federal Reserve has raised interest rates
nine times, bringing its target rate up to
31⁄4 percent. The Federal Reserve has explained that its goal is to remove the policy
accommodation adopted in 2001–2003 at a
‘‘measured pace.’’
While short-term interest rates have closely
tracked changes in Federal Reserve policy,
long-term rates have shown a looser connection. When the Federal Reserve was easing
policy in 2001–2003 there was some concern
that long-term rates did not decline immediately with the cuts in the Federal Reserve’s
interest rate target. Eventually, however, the
yield on 10-year Treasury notes did decline
from 6.0 percent in 2000 (calendar-year average) to 4.0 percent in 2003. The decline
in long-term interest rates lowered Government borrowing costs and reduced the interest

MID–SESSION REVIEW

rates paid by private individuals and corporate
borrowers. The 30-year rate on conventional
mortgages, for example, dropped from 8.1
percent in 2000 to 5.8 percent in 2004,
and has recently been as low as 5.6 percent

succeed in raising interest rates all along
the maturity spectrum, and higher rates
will help to tamp down speculation in real
estate and other markets, while helping to
keep inflation under control.

Lower long-term interest rates helped stimulate demand for interest-sensitive goods, especially consumer durables and new housing,
both of which have grown faster than real
GDP throughout the expansion. Eventually,
lower borrowing costs also helped stimulate
more business fixed investment, although this
response was delayed because of other factors
holding back business investment decisions.

Recent Developments
Since the Budget was released in February
2005, the economy has grown at a healthy
pace, but there have been some unexpected
developments. At the time the Budget forecast
was formulated in late 2004, the oil futures
markets expected world oil prices, which
had peaked at over $53/barrel in October
2004, to decline by $15/barrel over the next
several years. That has not happened. Oil
prices rose again, reaching a new peak of
over $60 per barrel in early July. The
oil price futures market expects crude oil
prices to remain elevated. This forecast recognizes that fundamental factors (such as China’s growing demand for oil) are at least
partly responsible for the latest surge in
fuel prices, and these may not reverse soon.

The Federal Reserve’s shift in policy in
2004 has not yet resulted in a significant
increase in long-term interest rates. Instead,
the spread between the long rate and the
short rate has narrowed. In June 2005,
the long-term Government rate was actually
lower than it had been 12 months earlier
when the Federal Reserve began its shift
in policy. If the Federal Reserve persists,
however, history suggests it will eventually

Table 3.

COMPARISON OF ECONOMIC ASSUMPTIONS
(Calendar Years)
Projections
2005

2006

2007

2008

2009

2010

Real GDP: 1
MSR ...........................................................................
2006 Budget ..............................................................
Blue Chip Consensus ...............................................

3.6
3.6
3.6

3.4
3.5
3.3

3.3
3.3
3.2

3.3
3.2
3.0

3.1
3.1
3.2

3.1
3.1
3.4

Consumer Price Index: 1
MSR ...........................................................................
2006 Budget ..............................................................
Blue Chip Consensus ...............................................

3.0
2.4
3.0

2.5
2.3
2.5

2.4
2.4
2.4

2.4
2.4
2.5

2.4
2.4
2.4

Unemployment Rate: 2
MSR ...........................................................................
2006 Budget ..............................................................
Blue Chip Consensus ...............................................

5.2
5.3
5.2

5.1
5.2
5.1

5.1
5.1
5.0

5.0
5.1
5.0

Interest Rates: 2
91–Day Treasury Bills:
MSR .......................................................................
2006 Budget ..........................................................
Blue Chip Consensus ............................................

3.0
2.7
3.2

3.4
3.5
4.0

3.5
3.8
4.4

3.6
4.0
4.2

3.8
4.1
4.1

4.0
4.2
4.2

10–Year Treasury Notes:
MSR .......................................................................
2006 Budget ..........................................................
Blue Chip Consensus ............................................

4.3
4.6
4.3

4.8
5.2
4.8

5.2
5.4
5.5

5.4
5.5
5.5

5.5
5.6
5.5

5.6
5.7
5.5

MSR = Mid-Session Review
Source: Chapter 12, ‘‘Economic Assumptions’’ of Analytical Perspectives, FY 2006 Budget; July 2005 Blue Chip Economic
Indicators, Aspen Publishers, Inc. for 2005 and 2006; March 2005 Blue Chip Economic Indicators for 2007–2010.
1 Year-over-year percent change.
2 Annual averages, percent.

ECONOMIC ASSUMPTIONS

Despite the changing outlook for oil prices,
the U.S. economic outlook has remained essentially unchanged in the last six months,
and the Administration’s forecast for the
Mid-Session Review is very similar to the
FY 2006 Budget forecast. Rising oil prices
have a much smaller effect on the economy
than they did thirty-five years ago before
the oil price shocks of the 1970s. Since
then U.S. energy use per dollar of GDP
has declined by about 47 percent. Also,
measured in real terms, relative to the CPI,
oil prices are still well below the peak
levels reached in the early 1980s. At that
time, the price of oil was around $40 per
barrel, which would be $80 per barrel in
today’s prices. Growth would likely have
been even faster in 2004–2005 had it not
been for the run-up in the price of oil,
but the net impact of these changes on
the growth rate appears to have been small.
Real Gross Domestic Product (GDP): In
the first quarter of 2005, the growth rate
was initially reported as 3.1 percent, leading
some analysts to speculate that the economy
was encountering a ‘‘soft patch,’’ perhaps
reflecting the effects of higher oil prices.
By the time that the final data arrived
in June, however, the growth rate had increased to 3.8 percent, casting doubt on
such analysis. Over the last four quarters,
real GDP increased by 3.7 percent. Based
on early indications, most forecasters polled
in the Blue Chip survey believe growth
continued at a healthy clip in the 3 to
4 percent range in the second quarter (preliminary official data for second quarter GDP
will not be available until after the MidSession Review is issued), and that growth
will continue in this range for the rest
of 2005 and into 2006.
Business Investment: Business spending on
new equipment has increased rapidly since
the beginning of 2003. Growth was especially
strong in the second half of 2004, perhaps
reflecting the bonus depreciation provisions
in the 2002 and 2003 tax bills, which expired
at the end of 2004. Investment slowed somewhat in the first quarter of 2005, but shipments of capital goods strengthened in April
and May, holding out the promise that equipment investment may be firming again.

11
Business investment in new structures has
not revived as vigorously as equipment spending, but that is a typical cyclical pattern.
It takes longer for businesses to adjust their
plans for new plant or office buildings, so
these investments tend to lag the turnaround
in equipment spending. Structures investment
in future quarters should also see a revival.
Higher oil prices will encourage more oil
drilling which will show up in this component
of GDP.
Consumption and Housing: The consumer
has been the mainstay of the current expansion, and household spending on consumption
and housing helped to sustain economic growth
at the beginning of the recovery even when
other components of GDP were declining.
With the other components of GDP again
on the upswing, consumption and residential
investment can grow more slowly without
threatening the expansion. Household wealth
is high thanks to rising home prices and
the revival in the stock market since 2002.
Household debt has also surged, but the
value of household assets has increased much
more than debt. In real terms, household
wealth was higher at the end of 2004 than
at any time since the peak of the stock
market boom in the first quarter of 2000.
Rising real wages and salaries, thanks to
rising productivity and increased employment,
provide a solid foundation for future increases
in consumption.
Net Exports: The U.S. trade balance has
declined substantially during the current expansion. U.S. consumers have expanded their
purchases of foreign goods at a much faster
rate than U.S. exports have increased. The
oil price shock has also worsened the trade
balance by adding to the cost of imported
oil. The decline in net exports has been
the single biggest restraint on U.S. economic
growth since 2001. Our major trading partners
have not matched the U.S. success in stimulating faster domestic growth, and there are
other imbalances arising from developing
economies. Consequently, U.S. consumers are
the mainstay of worldwide demand.
Inflation: The rate of price inflation increased in 2004–2005. The 12-month change
in the CPI reached 2.8 percent in May
2005. Most of this increase was due to

12
the surge in oil prices. The energy component
of the CPI was up 9.8 percent over the
12 months ending in May. Excluding the
volatile food and energy components, the
index was up only 2.2 percent. There has
been an uptick in this underlying measure
of ‘‘core’’ inflation, but a relatively modest
one. During 2003, core inflation was 1.1
percent, and it has increased by about 1
percentage point since then. As oil prices
stabilize, most forecasters expect overall CPI
inflation to subside to a range around 21⁄2
percent per year.
Labor Markets and Productivity: Payroll
jobs have increased by 3.7 million since
the second quarter of 2003, when the real
GDP growth rate increased, and the unemployment rate has declined from 6.3 percent
in June 2003 to 5.0 percent in June 2005.
So far in 2005, the economy has been adding
jobs at the rate of about 180,000 per month.
Unlike the first 2 years of the expansion,
growth is currently being driven by both
employment increases and productivity gains.
Up until 2003, productivity growth had accounted for all of the increase in output
during the expansion.
The average rate of productivity growth
since the beginning of the expansion is 3.8
percent. This is the fastest productivity has
grown over any comparable phase of the
business cycle since the 1960s. Productivity
growth, however, has slowed to a pace more
consistent with recent history as job growth
has increased. Over the last four quarters,
productivity has advanced at an average
rate of 2.6 percent. This is similar to the
productivity growth in the latter half of
the 1990s, and a substantial improvement
compared with the trend from 1975 to 1995,
but it is less than the stellar performance
in the early stages of the expansion. Rapid
productivity growth is welcome because it
is the main channel through which average
living standards can improve over time, but
the growth of productivity was so rapid
earlier in the expansion that firms did not
need to hire more workers to meet new
demands for their products and job growth
was sluggish. That has changed, and as
productivity growth has slowed significantly
more workers are being added to payrolls.
The current rate of productivity growth can

MID–SESSION REVIEW

support a healthy increase in the standard
of living while allowing for substantial employment gains without requiring further macroeconomic stimulus.
The economy is healthy and the expansion
has a solid foundation which should allow
growth to continue. Unexpected events are
always possible, but so far the economy,
with the help of timely shifts in macroeconomic policy, has been able to withstand
the shocks that have occurred since 2000.
The spike in oil prices over the last two
years is the latest shock, but it did not
derail the expansion. Core inflation has edged
up, but shifts in monetary and fiscal policy
since 2004 are keeping inflation under control.
With low inflation and strong productivity
growth, the economy should be able to continue producing solid gains in employment
and output.
Revised Economic Assumptions
The economic assumptions for the MidSession Review were determined in early
June and they are summarized in table
2. The projections for the main macroeconomic
variables—real GDP, inflation, unemployment,
and interest rates—have not changed materially since the 2006 Budget. The Mid-Session
assumptions are also quite close to those
of the Blue Chip Consensus, an average
of about 50 leading private forecasters.
Real GDP: Real GDP growth has been
close to the 2006 Budget assumptions in
the last quarter of 2004 and the first quarter
of 2005. Some forecasters reduced their projected growth for the year when the preliminary GDP figures for the first quarter showed
less growth than expected, but with the
revised data showing 3.8 percent growth,
the Administration has maintained its view
of the likely outcome for 2005. Over the
next three years, 2006–2008, growth is expected to average 3.3 percent and then to
edge down in 2009–2010 to 3.1 percent.
The year 2008 marks the year in which
the oldest of the ‘‘baby-boom’’ generation
reach 62 and become eligible for early retirement under Social Security. The aging of
the population will accelerate with the retirement of the baby boomers and that is likely
to reduce the growth of the labor force

ECONOMIC ASSUMPTIONS

and real GDP. The main effects of this
demographic transition, however, will not show
up until after 2010, which is outside of
the current budget horizon.
Potential GDP and Unemployment: Potential
GDP measures how much the economy is
capable of producing when the national labor
market is in balance with no tendency for
inflation to increase or decrease. This is
sometimes described as full employment, although in a dynamic economy, with firms
and workers entering and exiting the market,
measured unemployment, even when the labor
market is in balance, will never be zero.
The Administration estimates that an unemployment rate of 5.0 percent is roughly consistent with actual GDP being close to potential. As projected, real GDP grows near
the rate of growth in potential GDP throughout the forecast period.
Inflation: With output close to potential
throughout the forecast, inflation is projected
to remain roughly stable following this year’s
temporary upsurge, which was driven by
higher oil prices. The CPI is projected to
rise 3.0 percent this year, but next year
the CPI inflation rate is projected to drop
to and sustain 2.4 percent (fourth quarter
to fourth quarter) as oil prices stabilize.
The chain-weighted price index for GDP reflects all of the prices that enter GDP
and so is a broader measure of inflation
than the CPI, which reflects only prices
of consumption items. For this and other
reasons, inflation as measured by the two
indices diverges. The Administration projects
that the GDP price index will rise 2.3
percent this year before receding to 2.1
percent in 2006 and beyond. The difference
between the two inflation measures is significant for the Budget forecast, because outlays
tend to rise with the CPI while receipts
tend to increase with the GDP price index.
Increasing the divergence, other things being
equal, makes the projected deficit larger.
Interest Rates: The largest changes in the
forecast since the Budget are in the projected
interest rates. The Administration bases its
projection of short-term interest rates on

13
the financial futures markets. This is a
cautious forecasting rule which reflects the
collective insights of all the millions of market
participants. In early June, when the forecast
was finalized, the markets expected shortterm rates to rise. In forecasting the 10year Treasury rate, the Administration has
assumed that the normal yield spread between
this rate and the short-term rates will reestablish itself over the next year or so, which
would raise the 10-year rate to around 5.0
percent by the end of 2006.
Incomes: A necessary step in preparing
a forecast that can be used to estimate
Federal receipts is to project aggregate incomes. Of special importance for the receipts
projections are future wages and salaries,
which largely determine projected payroll tax
receipts and which also have a major impact
on individual income tax receipts. The Administration assumes that wages and salaries
will rise slightly faster than overall GDP
over the next five years. Wages have yet
to reap the full benefits from the rapid
productivity growth of the last few years
and the projections assume there will be
a catch-up period. Meanwhile, before-tax profits jump in 2005 because of the expiration
of the bonus depreciation provisions in the
2002–2003 tax bills, but afterwards they
drift down relative to GDP. This is the
mirror image of the expected rise in wages
and salaries. Profits have been above their
normal range partly because the surge in
productivity in 2001–2004 showed up initially
in higher profits. With rising wages and
salaries, profits should return to a more
normal ratio to GDP.
Summary: The economic news since the
Budget was issued has been mostly favorable.
Economic growth remains strong, job creation
is robust, and even though inflation has
been temporarily boosted by the oil price
shock, the long-run inflation outlook is still
favorable. The Mid-Session Review economic
forecast calls for continued economic growth,
low and stable inflation, moderately rising
interest rates, and healthy job creation and
wage growth.

RECEIPTS
The current estimates of receipts for 2005
and 2006 exceed the February Budget estimates by $87 billion and $95 billion, respectively. The current estimates for 2007 through
2010 also exceed the February Budget estimates, resulting in receipts that are higher
by $409 billion over the five years, 2006
through 2010. These changes are the net
effect of revised economic assumptions, technical reestimates, enacted legislation, and
revisions in the Administration’s proposals.
Revised economic assumptions and technical
reestimates account for most of the revisions
in receipts since February, increasing receipts
by $87 billion in 2005, $95 billion in 2006,
and $406 billion over the five-year period,
2006 through 2010. Higher-than-expected collections of individual and corporation income
taxes account for most of the increase in
receipts for 2005. These increases are in
large part attributable to higher-than-expected
individual and corporation income tax liability
in tax years 2004 and 2005, as reflected
in collection experience since February. The
revisions in subsequent years primarily reflect
increases in individual income taxes and
social security and Medicare payroll taxes,
attributable in large part to upward revisions

Table 4.

in wages and salaries and revisions in estimating models to reflect current collection
experience.
Legislated tax changes since February increase receipts by small amounts in each
year. These changes, which are modifications
of provisions proposed by the Administration
in the February Budget, include a temporary
extension of the excise taxes deposited in
the Leaking Underground Storage Tank
(LUST) Trust Fund and modification of the
tax treatment of certain disaster mitigation
grants.
The Administration strongly supports the
proposed free trade agreement with the Dominican Republic and Central America
(CAFTA–DR), which was inadvertently excluded from the February Budget. Although
this proposal is estimated to reduce receipts
by $1.4 billion over the five years, 2006
through 2010, relative to the February Budget,
the net cost of the Administration’s initiatives
is estimated to decline by $2.4 billion over
the same period. This net decline is in
large part attributable to reestimates of the
February Budget proposals to reflect updated
economic assumptions and estimating models.

CHANGE IN RECEIPTS
(In billions of dollars)
2005

2006

2007

2008

2009

2010

2,052.8

2,177.6

2,344.2

2,507.0

2,650.0

2,820.9

35.4
39.2
19.0
–6.9

38.8
22.5
37.4
–4.0

46.5
13.0
25.1
–2.8

40.2
15.0
27.1
–2.4

34.9
15.2
27.4
–1.0

32.5
15.1
26.4
–0.9

192.8
80.8
143.4
–11.1

Subtotal, economic assumptions and
technical reestimates ...........................

86.7

94.6

81.7

79.9

76.5

73.1

405.9

Enacted legislation .........................................
Revisions in proposals ....................................

0.1
–*

0.2
0.4

0.2
1.8

0.2
1.2

0.2
–0.2

0.2
–0.9

0.8
2.4

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

86.8

95.2

83.7

81.3

76.5

72.4

409.1

Mid-Session estimate .........................................

2,139.7

2,272.7

2,427.8

2,588.3

2,726.5

2,893.3

February estimate ..............................................
Changes due to:
Economic assumptions and technical reestimates:
Individual income taxes ..............................
Corporation income taxes ...........................
Social security and Medicare payroll taxes
Other sources of receipts ............................

2006–2010

* $50 million or less.
15

SPENDING
Total outlays for 2005 are now estimated
to be $2,472 billion, down $7 billion from
the February estimate. Small increases due
to policy changes are more than offset from
reductions due to estimating changes. For
2006, the estimate for total outlays has
increased by $46 billion relative to February
to $2,613 billion. This increase is largely
the result of additional funding for Iraq
and Afghanistan.
Policy changes
In total, policy changes increase outlays
by $1.1 billion in 2005 and $38.7 billion
in 2006. Over the five-year period 2006
through 2010, policy changes increase outlays
by $137.6 billion. Since the transmittal of
the budget, the Congressional Budget Resolution assumed an additional $50 billion in
2006 funding for the global war against
terrorism in Iraq and Afghanistan and this
amount is included in the Mid-Session estimates. Outlays from this funding will occur
over several years, raising 2006 outlays by
$37.2 billion and 2007 outlays by $9.5 billion.
The Mid-Session estimates also include the
Administration’s proposal for Social Security
personal accounts, which are estimated to
cost $75.8 billion for 2009 and 2010. That
proposal was not fully detailed in time for
the printing of the President’s Budget and
thus could not be estimated.
Estimating changes
Changes in estimates arise from non-policy
related factors including changes in economic
assumptions, discussed earlier in this Review,
and changes in technical factors. For 2005,
estimated outlays are $8.2 billion lower than
in February for non-policy related reasons
while for 2006, they are $7.0 billion higher.
Over the period 2006 through 2010, outlays
are $54.3 billion lower than in February
for non-policy related reasons.
Discretionary appropriations.—Outlays for
discretionary programs decrease by $5.7 billion
in 2005 and increase by $5.6 billion in
2006 relative to the February budget, as

a result of estimating changes. Most of this
reflects delays in the assumed timing of
outlays, based largely on experience to date,
for defense programs.
Social security.—As the result of estimating
changes, outlays for Social Security increase
by $2.6 billion in 2005, $5.1 billion in 2006,
and $37.5 billion over 2006 through 2010
relative to the February estimates. Much
of the increase is driven by higher inflation
in 2005, which raises cost-of-living adjustments notably in 2006, increasing payments
throughout the five-year period. In addition,
recent program experience suggests higher
average benefit amounts than previously projected.
Medicare.—Estimates of medicare outlays
have increased by $16.4 billion over the
five-year period relative to February. This
reflects increases in projections for payments
to skilled nursing facilities, inpatient hospitals,
managed care, and prescription drug coverage,
offset in part by reductions for physician
and durable medical equipment payments.
Food stamps.—Projected outlays for the
food stamp program are $14.8 billion lower
than the February estimate for the period
2006 through 2010. This is largely attributable
to experience so far this year, which indicates
that program participation has leveled off
sooner than expected.
Earned income and child tax credits.—
Outlays for the earned income and child
care tax credits have increased by $12.0
billion over the period 2006 through 2010.
The increases are based largely on experience
to date this year, which indicates larger
than anticipated increases in average credits
as well as in the number of credit recipients.
CCC farm programs.—As a result of estimating assumptions, outlays for CCC farm
assistance have decreased by $4.6 billion
in 2005 because prices for a few crops,
including corn and soybeans, are higher than
expected. However, outlay estimates have
increased by $12.0 billion over the period
17

18
2006 through 2010 as the result of a revised
crop forecast, which projects record or near
record crop supplies for corn both in the
United States and overseas and higher production for other commodities, resulting in lower
prices for many major agricultural products
in the near future. When commodity prices
are lower than the legislated target rate,
payments to farmers for price and income
support programs are increased.
Outer continental shelf (OCS) receipts.—
Increases in projected oil and gas prices
increase anticipated receipts from drilling
on the outer continental shelf. Because these
receipts are recorded as offsets to outlays,
the increases reduce expected outlays by
$7.9 billion over the five-year period.
Medicaid.—As a result of estimating
changes, medicaid outlays are projected to
decrease by $2.1 billion in 2005, $1.0 billion
in 2006, and $6.2 billion over the period
2006 through 2010. The largest factor in
the decrease is a reduction in estimates
for medical assistance payments, driven by
lower estimates provided by the States this
Spring.
Student loans.—Outlays for student loan
programs are projected to increase by $5.4
billion over the period 2006 through 2010
relative to the February estimates. This increase is largely the result of improved
estimating models, which should now more
accurately measure the expected costs of
deferment and forbearance benefits provided
under the programs.

MID–SESSION REVIEW

Unemployment compensation.—Continuing
strength in the labor market has led to
a faster than expected decline in the number
of unemployment compensation beneficiaries,
resulting in outlays for unemployment compensation $2.8 billion below the February
estimate for 2005 and $1.5 billion below
for 2006.
Postal service.—Higher than anticipated
mail volumes and associated revenues as
well as revised estimates of the levels of
capital outlays have reduced projected net
outlays for the Postal Service by $1.8 billion
and $1.9 billion in 2005 and 2006, respectively.
The reestimates do not assume rate increases
over current rates of postage.
Pension
benefit
guaranty
corporation
(PBGC).—Outlays estimates for the PBGC
increase by $1.9 billion in 2006 and $0.2
billion total over 2006 to 2010, primarily
reflecting correction of the accounting for
the Administration’s pension reform proposal.
Net interest.—Excluding the debt service
associated with policy changes, outlays for
net interest have increased by $4.9 billion
in 2005. This reflects slightly higher shortterm interest rates than assumed in the
February budget as well as the expected
settlement of a very large IRS tax case,
dating back a significant number of tax
years. Net interest decreases over the five
year period by $122.8 billion. Roughly half
of this reduction is the result of lower
assumed interest rates and half is the reduced
cost of debt service related to estimating
changes in receipts and outlays.

SPENDING

Table 5.

CHANGE IN OUTLAYS
(In billions of dollars)

2005

2006

2007

2008

2009

2010

2006–10

February estimate ....................................

2,479.4

2,567.6

2,656.3

2,757.8

2,882.9

3,028.2

Changes due to policy:
Social security personal accounts ....
Additional war funding in 2006 .......
War supplemental .............................
Veterans medical care ......................
Other programmatic changes ...........
Related debt service ..........................

................
................
0.3
0.8
*
*

................
37.2
0.5
0.2
*
0.7

................
9.5
–0.8
................
–*
1.6

................
1.9
0.4
................
–*
2.0

22.3
0.7
0.3
................
–*
2.7

53.6
0.3
0.1
................
–*
4.5

75.8
49.5
0.6
0.2
–0.1
11.6

Subtotal, policy .....................................

1.1

38.7

10.3

4.2

25.8

58.5

137.6

Changes due to reestimates:
Discretionary programs .................
Social security ................................
Medicare .........................................
Food stamps ...................................
Earned income tax credit and
child tax credit ...........................
CCC farm programs ......................
OCS receipts ..................................
Medicaid .........................................
Student loans .................................
Unemployment compensation .......
Postal service .................................
PBGC ..............................................
Other programmatic changes .......
Net interest ....................................

–5.7
2.6
–0.1
–1.4

5.6
5.1
5.6
–4.0

–1.3
7.3
3.6
–3.5

–0.3
8.0
2.3
–2.8

–0.3
7.5
2.5
–2.1

–0.2
9.5
2.4
–2.3

3.5
37.5
16.4
–14.8

2.0
–4.6
–0.1
–2.1
1.3
–2.8
–1.8
0.5
–0.9
4.9

1.8
1.9
–1.0
–1.0
0.3
–1.5
–1.9
1.9
1.6
–7.4

2.2
4.7
–1.5
–0.9
1.1
–0.4
*
–0.2
2.4
–19.0

2.4
5.3
–1.7
–1.1
1.2
–0.8
0.2
–0.4
3.2
–27.4

2.7
0.1
–1.9
–1.4
1.4
–0.8
0.2
–0.5
4.6
–32.4

2.9
................
–1.9
–1.8
1.4
–0.7
0.3
–0.5
3.8
–36.6

12.0
12.0
–7.9
–6.2
5.4
–4.1
–1.2
0.2
15.6
–122.8

Subtotal, reestimates ............................

–8.2

7.0

–5.4

–11.9

–20.3

–23.7

–54.3

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

–7.1

45.7

5.0

–7.6

5.5

34.8

83.3

Mid-Session estimate ...............................

2,472.3

2,613.3

2,661.2

2,750.2

2,888.4

3,063.0

* $50 million or less.

SUMMARY TABLES

Table S–1.

BUDGET TOTALS

(Dollar amounts in billions)
2004
Budget Totals:
Receipts .................................................
Outlays ..................................................

1,880
2,292

2005

2,140
2,472

2006

2,273
2,613

2007

2,428
2,661

2008

2,588
2,750

2009

2,727
2,888

2010

2,893
3,063

Deficit ...............................................

–412

–333

–341

–233

–162

–170

Gross Domestic Product (GDP) ...............

11,554

12,271

12,966

13,681

14,429

15,198

16,001

Budget Totals as a Percent of GDP:
Receipts .................................................
Outlays ..................................................

16.3%
19.8%

17.4%
20.1%

17.5%
20.2%

17.7%
19.5%

17.9%
19.1%

17.9%
19.0%

18.1%
19.1%

Deficit ...............................................

–3.6%

–2.7%

–2.6%

–1.7%

–1.1%

MID–SESSION REVIEW

Table S–2.

DISCRETIONARY TOTALS

(Net budget authority; dollar amounts in billions)
Actual
2001

2002

2003

2004

2005
Enacted

2006
Request

2005–2006
Dollar
change

Discretionary budget authority:
Department of Defense ...........................................
Homeland Security (non-Department of Defense)
Other Operations of Government ..........................

303
10
331

328
13
351

365
24
370

376
28
386

400
31
394

419
32
388

19
1
–5

Total, Discretionary budget authority ..............

644

691

758

790

825

840

Percent change by category:
Department of Defense .......................................
Homeland
Security
(non-Department
of
Defense) ............................................................
Other Operations of Government ......................

11%

14%
15%

21%
6%

85%
5%

21%
4%

10%
2%

3%
–1%

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

10%

Enacted supplemental and emergency funding:
Defense and Other Global War on Terror ............
Homeland Security (non-Department of Defense)
Non-Defense, Non-Homeland .................................
Bridge Fund Related to Global War on Terror ....

14
3
3
............

18
12
14
............

80
6
5
............

114
*
3
............

77
1
16
..............

..............
..............
..............
50

117

2007

2008

Total, Supplemental and emergency funding
Memorandum:
Budget authority enacted for Project BioShield ...

2006

2009

2010

Discretionary Outyears by Category:.
Department of Defense ..........................................................................
Homeland Security (non-Department of Defense) ...............................
Other Operations of Government ..........................................................

419
32
388

443
34
388

462
35
388

482
37
388

492
39
388

Total, Discretionary budget authority ..............................................

840

865

886

908

920

Percent change by category:
Department of Defense .......................................................................
Homeland Security (non-Department of Defense) ...........................
Other Operations of Government ......................................................

6%
5%
0%

4%
5%
0%

2%
5%
0%

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

* Less than $0.5 billion.

SUMMARY TABLES

Table S–3.

GROWTH IN DISCRETIONARY BUDGET AUTHORITY BY MAJOR
AGENCY
(Net budget authority in billions of dollars)
Actuals

Estimate

Growth

Agency

2005–2006
2001

2002

2003

2004

2005

Average

2006

Cumulative

Change Percent 2001–2006 2001–2006
Agriculture ..................................
Commerce ....................................
Defense ........................................
Education .....................................
Energy ..........................................
Health and Human Services ......
Homeland Security .....................
Housing and Urban Development .........................................
Interior .........................................
Justice ..........................................
Labor ............................................
State and International Assistance
Programs ..................................
Transportation ............................
Treasury ......................................
Veterans Affairs ..........................
Corps of Engineers ......................
Environmental
Protection
Agency ......................................
Executive Office of the President
Judiciary Branch .........................
Legislative Branch ......................
National Aeronautics and Space
Administration .........................
National Science Foundation .....
Social Security Administration ..
Other Agencies ............................
Total, Discretionary Spending

19.2
5.1
302.5
40.1
20.0
54.0
14.0

20.1
5.4
327.8
48.5
20.9
59.5
15.7

21.7
5.6
365.3
53.1
22.0
65.7
21.9

21.1
5.8
375.7
55.7
23.4
69.2
27.9

21.5
6.3
400.1
56.6
24.2
69.2
29.0

19.1
9.4
419.3
56.0
23.4
68.9
29.3

–2.4 –11.3%
3.1 49.0%
19.3
4.8%
–0.5 –0.9%
–0.8 –3.2%
–0.3 –0.5%
0.4
1.2%

–0.2%
13.0%
6.7%
6.9%
3.2%
5.0%
16.0%

–0.9%
84.5%
38.6%
39.8%
17.1%
27.5%
109.7%

28.4
10.3
18.4
11.9

29.4
10.5
18.6
12.1

30.1
10.5
19.0
11.8

32.0
10.7
19.5
11.8

33.4
10.8
20.2
12.0

28.5
10.6
19.1
11.5

–4.9 –14.7%
–0.1 –1.1%
–1.1 –5.5%
–0.5 –4.4%

0.1%
0.7%
0.8%
–0.7%

0.5%
3.7%
3.9%
–3.6%

20.3
14.6
10.3
22.4
4.7

21.7
12.8
10.5
23.8
4.5

22.8
13.5
10.7
26.4
4.6

25.0
13.9
10.7
29.1
4.6

27.6
12.7
11.1
31.6
4.7

31.8
11.8
11.6
31.3
4.3

4.2
–0.9
0.6
–0.3
–0.3

15.3%
–6.7%
5.2%
–1.0%
–7.2%

9.4%
–4.1%
2.4%
6.9%
–1.6%

56.4%
–18.8%
12.7%
39.8%
–7.6%

7.8
0.3
4.0
2.8

7.9
0.3
4.3
3.0

8.1
0.3
4.6
3.4

8.4
0.3
4.8
3.6

8.0
0.3
5.1
3.6

7.6
0.3
5.6
4.1

–0.5
–0.0
0.5
0.5

–5.6%
–1.7%
9.9%
13.7%

–0.7%
4.6%
7.1%
8.2%

–3.4%
25.5%
41.0%
48.1%

14.3
4.4
6.0
8.1

14.8
4.8
6.4
7.7

15.3
5.3
6.7
10.0

15.4
5.6
7.2
9.0

16.1
5.5
7.5
8.4

16.5
5.6
7.7
6.6

0.4
2.4%
0.1
2.4%
0.2
2.8%
–1.7 –20.6%

2.9%
4.8%
4.9%
–3.9%

15.5%
26.5%
27.3%
–18.2%

643.8

691.0

758.5

790.1

825.2

840.0

5.5%

30.5%

14.8

1.8%

Note: Supplementals are excluded with the exception of Veterans Affairs, which includes an additional $975 million in
2005 for medical services.

MID–SESSION REVIEW

Table S–4.

DISCRETIONARY PROPOSALS BY APPROPRIATIONS
SUBCOMMITTEE
(Net budget authority in billions of dollars)
Appropriations Subcommittee

2005
Enacted

2006
Request

Change
2005–2006

Agriculture and Rural Development ....................................................................................
Defense ...................................................................................................................................
Energy and Water Development ..........................................................................................
Foreign Operations ................................................................................................................
Homeland Security ................................................................................................................
Interior and Environment .....................................................................................................
Labor, Health and Human Services, and Education ..........................................................
Legislative Branch .................................................................................................................
Military Quality of Life and Veterans Affairs .....................................................................
Science, State, Justice, and Commerce ................................................................................
Transportation, Treasury, and Housing and Urban Development ....................................
Allowances ..............................................................................................................................

18.3
351.7
30.1
19.6
29.0
26.8
142.9
3.5
80.5
57.3
65.5
................

16.6
366.7
28.9
22.8
29.3
25.7
141.5
4.0
84.5
60.5
59.9
–0.4

–1.8
15.0
–1.2
3.2
0.4
–1.0
–1.4
0.5
4.0
3.2
–5.6
–0.4

Total, excluding supplemental and emergency funding ......................................

825.2

840.0

14.8

Both the House and the Senate have proposed new structures by Appropriations Subcommittee. This table is consistent
with that of the House structure.

SUMMARY TABLES

Table S–5.

HOMELAND SECURITY FUNDING BY AGENCY
(Budget authority in millions of dollars)
2004
Actual

2005
Enacted

2006
Request

Homeland Security Funding:
Department of Agriculture ..................................................................................................
Department of Commerce ....................................................................................................
Department of Defense-Military (DOD) .............................................................................
Department of Energy .........................................................................................................
Department of Health and Human Services .....................................................................
Department of Homeland Security .....................................................................................
Department of the Interior ..................................................................................................
Department of Justice .........................................................................................................
Department of State ............................................................................................................
Department of Transportation ............................................................................................
Department of the Treasury ...............................................................................................
Department of Veterans Affairs .........................................................................................
Corps of Engineers ...............................................................................................................
Environmental Protection Agency ......................................................................................
General Services Administration ........................................................................................
National Aeronautics and Space Administration ..............................................................
National Science Foundation ..............................................................................................
Smithsonian Institution ......................................................................................................
Social Security Administration ...........................................................................................
Other Agencies .....................................................................................................................

411
125
7,024
1,364
4,062
22,834
83
2,165
696
284
90
271
102
131
79
207
340
78
143
239

600
167
8,570
1,562
4,230
24,917
65
2,678
824
182
101
280
89
107
65
218
342
75
159
813

704
183
9,513
1,666
4,407
27,086
57
3,104
938
192
111
299
72
184
80
205
344
87
178
288

Total, Homeland Security Funding, excluding Project BioShield ..........................

1 40,728

1 46,044

49,698

Less, Department of Defense-Military (DOD) ...................................................................

–7,024

–8,570

–9,513

Total, Homeland Security Funding, excluding DOD and Project BioShield ........

33,704

37,474

40,185

Less, Mandatory Homeland Security Funding 2 ................................................................
Less, Discretionary Fee-Funded Activities 3 ......................................................................

–1,940
–3,289

–2,279
–3,941

–2,286
–5,660

28,475

31,254

32,239

Plus, Department of Homeland Security Project BioShield .............................................

885

2,508

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

Net Non-DOD Discretionary Homeland Security, including Project BioShield ..

29,360

33,762

32,239

Net Non-DOD Discretionary Homeland Security, excluding Project BioShield

1 Excludes $107 million in supplemental appropriations in 2004 and $595 million in supplemental appropriations in
2005.
2 Mandatory homeland security programs include Agriculture Quarantine and Inspections, Border Protection, and Immigration Enforcement.
3 Discretionary fee-funded homeland security programs include Visa Processing, Airport Security, and Social Security
physical and computer security measures.

MID–SESSION REVIEW

Table S–6.

MANDATORY PROPOSALS
(In millions of dollars)

2005
Social Security Personal Accounts
Programmatic Reforms:
Agriculture:
Commodity Credit Corporation:
Limit Loan Deficiency Payments
to historical production ...........
Tighten payment limits ..............
Cut Crop Payments by 5 percent
Sugar marketing assessment 1.2
percent ......................................
Tilt adjustment requirement ......
Extend Milk Income Loss Contract Program ...........................
Crop insurance coverage change ...
Forest Service:
Facilities working capital fund ..
Enhanced facilities disposal authority .......................................
Limit Food Stamp categorical eligibility ..........................................
Allow State Food Stamp Agencies
to use the National Directory of
New Hires (NDNH) .....................
Subtotal, Agriculture ...............
Education:
Reform the Federal Student Aid
Programs:
Payoff Pell Shortfall (non-add
BA only) ....................................
Increase the Pell Grant Maximum Award by $500 over
Five Years ................................
Increase Borrowing Limits and
Other Benefits to Students .....
Recall Federal Perkins Loan Revolving Funds ...........................
Increase Lender Risk Sharing
and Improve Program Efficiency ........................................
Adjust Guaranty Agency Reinsurance and Default Retention
Rates .........................................
Reform Federal Consolidation
Loans ........................................
Extend the Taxpayer-Teacher
Extension Act ...........................
Other Student Loan Reforms .....

2006

2007

2008

2009

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

2010

2006–10

2006–15

22,252

53,557

75,809

662,360

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

–432
–200
–383

–509
–190
–629

–106
–175
–468

–4
–150
–351

–2
–130
–309

–1,053
–845
–2,140

–1,054
–1,200
–3,641

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

–42
–130

–43
–80

–43
–50

–214
–360

–437
–610

600 ................ ................ ................
–140
–140
–140
–140

1,200
–560

1,200
–1,260

–7

–14

..............
600
.............. ..............
..............

–5

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

–9 ................ ................

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

–1

–1 ................ ................
–5 ................

–50

–101

–103

–105

–462

–1,032

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

–2

–8

–18

–1,095

–1,088

–848

–781

–4,463

–8,073

(4,301) ................ ................ ................ ................

(4,301)

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

–651

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

101

509

915

1,321

1,734

4,580

14,959

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

221

660

762

811

866

3,320

7,658

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

–580

–642

–675

–735

–697

–3,329

–5,987

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

–171

–601

–785

–838

–902

–3,297

–8,749

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

–43

–116

–152

–168

–187

–666

–1,788

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

–269

–610

–544

–484

–503

–2,410

–3,769

..............
557

–254
–178

–411
–790

–449
–824

–459
–783

–485
–811

–2,058
–3,386

–4,945
–8,043

Subtotal, Education .................
557 –1,172
–2,001
–1,752
–1,337
Energy:
Allow Power Marketing Administrations to Charge up to Market
Rates ............................................ ..............
–40
–157
–446
–1,145
Bonneville Power Administration
borrowing authority .................... .............. .............. ................ ................ ................

–986

–7,248

–10,667

–1,406

–3,194

–12,434

140

200

Subtotal, Energy .......................... ..............
Health and Human Services:
Medicaid and State Children’s
Health Insurance Program Proposals ............................................
113
State grants and demonstrations .. ..............
Temporary Assistance for Needy
Families Reauthorization ...........
50

–40

–157

–446

–1,145

–1,266

–3,054

–12,234

1,095
400

–1,326
500

–3,533
594

–4,048
605

–4,227
618

–12,039
2,717

–42,543
5,000

268

326

350

361

357

1,662

3,436

SUMMARY TABLES

Table S–6.

MANDATORY PROPOSALS—Continued
(In millions of dollars)
2005

Child Support Enforcement: Increase Collections and Improve
Program Effectiveness ................
Healthy Marriage and Fatherhood
Initiative ......................................
State-Based Abstinence Grants .....
Foster Care Clarify Statutory Eligibility Definition ........................
Foster Care Modify DC FMAP
Rate ..............................................
Child Welfare Program Option ......
Subtotal, Health and Human
Services .....................................
Housing and Urban Development:
Repeal Federal Housing Administration’s General and Special
Risk Insurance Authorities ........
Interior:
Southern Nevada Land Sales ........
Arctic National Wildlife Refuge,
lease bonuses:
State of Alaska’s share:
Receipts ....................................
Expenditures ............................
Federal share:
Receipts ....................................
Royalties Conservation Fund
Outlays ..................................
Pick-Sloan Project Cost Repayment .............................................
Eliminate Bureau of Land Management Range Improvements
Fund .............................................
Subtotal, Interior .....................
Labor:
Pension Benefit Guaranty Corporation Reform 1 ........................
Unemployment Insurance Integrity ................................................
Unemployment Insurance Overpayment Recoveries ....................
Federal Employees’ Compensation
Act Reforms .................................
Subtotal, Labor ............................
Treasury:
Continued Dumping and Subsidy
Offset Act repeal ..........................
Eliminate 10–year Statute-of-Limitations on Non-Tax Debt ............
Extend the Rum Carryover for
Puerto Rico ..................................

2006

2007

2008

2009

2010

2006–10

2006–15

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

–63

122

–71
4

–21
24

37
45

23
49

40
50

119
218

319
468

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

–72

–74

–77

–79

–81

–383

–834

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

7
7

7
67

8
135

8
3

8
–164

38
48

85
49

1,645

–417

–2,397

–3,029

–3,367

–7,565

–33,898

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

–60

–100

–460

–960

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

–227

–418

–636

–641

–642

–2,564

–5,783

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

–1,201
1,201

–1
1

–101
101

–1
1

–1,304
1,304

–1,588
1,588

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

–1,201

–1

–101

–1

–1,304

–1,588

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

115

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

–33

–31

–29

–157

–299

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

–7

–10

–47

–97

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

–267

–1,662

–678

–783

–682

–4,072

–7,652

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

–305

–3,941

–4,126

–3,701

–3,517

–15,590

–29,012

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

–65

–134

–141

–148

–488

–1,341

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

–152

–393

–346

–186

–187

–1,264

–2,223

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

–6

–12

–20

–17

–72

–172

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

–463

–4,411

–4,626

–4,045

–3,869

–17,414

–32,748

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

–1,608

–1,615

–1,624

–855

–865

–6,567

–11,035

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

–11

–6

–35

–65

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

19 ................ ................ ................

Subtotal, Treasury ...................... .............. –1,563
–1,602
Federal Communications Commission (FCC):
Extend Spectrum Auction Authority ................................................. .............. .............. ................
Close Telecommunications Development Fund ............................... ..............
–2
–2
Subtotal, FCC .............................. ..............

–2

–1,630

–861

–871

–6,527

–11,025

1,083

–2,156

–3,239

–4,312

–5,112

–3

–4

–14

–34

1,080

–2,159

–3,243

–4,326

–5,146

MID–SESSION REVIEW

Table S–6.

MANDATORY PROPOSALS—Continued
(In millions of dollars)
2005

2006

Federal Deposit Insurance Corporation:
Merge Bank Insurance Fund and
Savings Association Insurance
Fund ............................................. .............. ..............
Social
Security
Administration
(SSA):
Supplemental Security Income
(SSI) Pre-Effectuation Reviews
and Other Technical Adjustments ............................................ ..............
–4
Extend SSI Eligibility to Refugees
and Asylees to Eight Years after
Entry ............................................ ..............
65

2007

2008

2009

2010

2006–10

2006–15

–1

–2

–1

539

535

2,004

–18

–40

–64

–92

–218

–1,133

84 ................ ................

226

–64

–92

–907

653

–2,512

–11,389

–11,595

–14,372

–14,718

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

–11

–12

–57

–121

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

–139

–142

–145

–148

–151

–725

–1,529

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

–25

–26

–27

–131

–276

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

–3

–15

–30

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

–120

–600

–1,200

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

–8

–17

–76

–170

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

–29

–145

–297

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

–248
–176

–248
–178

–248
–180

–248
–181

–248
–183

–1,240
–898

–2,480
–1,842

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

(424)

(426)

(428)

(429)

(431)

(2,138)

(4,322)

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

–4
–20
–26

–8
–20
–27

–8
–21
–27

–8
–21
–28

–8
–22
–28

–36
–104
–136

–76
–221
–288

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

–50
–500

–150
–500

–300
–480

–300
–450

–800
–1,930

–3,125
–2,580

–809

–1,379

–1,485

–1,622

–1,598

–6,893

–14,235

653

–3,321

–12,768

–13,080

–15,994

–16,316

Outlay Effects of Tax Proposals: 1
Health tax credits:
Health insurance tax credit ........... ..............
Credit for employer contributions
to employee HSAs ....................... ..............

3,695

5,554

6,573

7,091

22,992

64,666

237

392

589

1,323

4,930

Subtotal, SSA ........................... ..............
Total,
Programmatic
Reforms ...................................
User Fee Proposals:
Agriculture:
Animal Plant and Health Inspection Service * ................................
Food Safety and Inspection Service * ...............................................
Grain Inspection, Packers &
Stockyards Administration * ......
Agricultural Marketing Service
Standardization * .........................
Justice:
Bureau of Alcohol, Tobacco, Firearms and Explosives’ Explosives
Regulation * .................................
Transportation:
St. Lawrence Seaway Development
Corporation * ................................
Treasury:
Tax and Trade Bureau Regulatory
Activity * ......................................
Veterans Affairs:
Annual Medical Fees for higher income veterans with non-serviceconnected disabilities * ................
Drug Copay Increase * ....................
Total Medical Services (illustrative
discretionary spending authority—non-add) ...............................
Environment Protection Agency:
Premanufacture Notification Fee
Cap Removal * .............................
Pesticide Tolerance * .......................
Pesticide Registration * ..................
Federal Communications Commission:
Authorize Spectrum License Fees
Analog Spectrum Lease Fees .........

Total, User Fees ....................... ..............
Total, Programmatic Reforms
and User Fee Proposals .............

–54,586 –121,306

–61,479 –135,541

SUMMARY TABLES

Table S–6.

MANDATORY PROPOSALS—Continued
(In millions of dollars)
2005

2006

2007

2008

2009

2010

2006–10

2006–15

Improve the Health Coverage Tax
Credit ........................................... ..............

130

Subtotal, Health tax credits ....... ..............
Earned income tax credit ................... ..............
Child tax credit ................................... ..............

100
–81
–34

3,792
–105
–45

5,802
–118
–50

6,978
–137
–59

7,694
–181
–77

24,366
–622
–265

69,726
–1,569
–670

Total, Outlay effects of tax proposals ............................................ ..............

–15

3,642

5,634

6,782

7,436

23,479

67,487

–6 ................ ................ ................ ................

–6

User Fee Proposals with Mandatory Spending:
Immigration Examination Fees ........
Increase Indian Gaming Commission
Fees 1 ................................................
Foreign Labor Certification User
Fees ..................................................
Army Corps of Engineers:
Additional Recreation User Fees
and Contributions .......................

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

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

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

–9

Total, User fee proposals with
mandatory spending ................ ..............

–15

–5

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

3,356

–443

–433

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

–3,356

443

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

–3,081
3,081

–3,398
3,398

Other Mandatory Proposals:
Black Lung Disability Trust Fund
debt refinancing:
Black Lung Disability Trust Fund
Interest receipts on repayable advances ...........................................
Use Escrow Account for USPS Retiree Health Benefits:
On-budget effect ..............................
Off-budget effect ..............................

–1 ................ ................

–19

–7

–429

–430

1,621

–1,215

433

429

430

–1,621

1,215

–3,716
3,716

–3,888
3,888

–4,174
4,174

–18,257
18,257

–43,238
43,238

Unified budge effect .................... .............. .............. ................ ................ ................ ................ ................ ................
Full-time School Attendance Required for Child’s Social Security
Benefits at Age 16 (off-budget) ...... ..............
–10
–75
–135
–140
–145
–505
–1,326
Correct trust accounting deficiencies
in individual Indian money investments (non-paygo) ...........................
6 .............. ................ ................ ................ ................ ................ ................
Third scorecard effects ....................... ..............
31
–26
–86
–92
–97
–270
–840
Total, Other mandatory proposals ........................................

–101

–221

–232

–242

–775

–2,166

Grand Total (including outlay
costs of tax proposals) ...................

659

–3,330

–9,232

–7,664

12,813

44,440

37,027

592,158

Memorandum:
Paygo ...................................................
Non-Paygo ...........................................

653
6

–3,351
21

–9,131
–101

–7,443
–221

–9,207
22,020

–8,875
53,315

–38,007
75,034

–68,036
660,194

* The Administration will work with Congress to reclassify the enacted fees as discretionary beginning in 2007. Once
reclassified, the Administration proposes to offset these fees against discretionary spending. Discretionary totals in those
years will be reduced by these fees.
1 Affects both receipts and outlays. Only the outlay effect is shown here.

MID–SESSION REVIEW

Table S–7.

RECEIPTS PROPOSALS
(In millions of dollars)
Total

2005

2006

2007

2008

2009

2010
2006–2010 2006–2015

Make Permanent Certain Tax Cuts Enacted in 2001 and 2003 (assumed in
the baseline):
Dividends tax rate structure ....................
Capital gains tax rate structure ..............
Expensing for small business ..................
Marginal individual income tax rate reductions ..................................................
Child tax credit 1 .......................................
Marriage penalty relief 2 ..........................
Education incentives .................................
Repeal of estate and generation-skipping
transfer taxes, and modification of gift
taxes .......................................................
Modifications of pension plans .................
Other incentives for families and children ........................................................
Total make permanent certain tax
cuts enacted in 2001 and 2003 .....

245
535
575
............ ............ ............
............ ............ ............

–15,176
–18,729
–13,517

–104,107
–62,380
–23,333

.............. .............. ..................
.............. .............. ..................
.............. .............. ..................
..............
3
3

–499,423
–92,429
–33,959
–8,693

–20
–541
–934 –1,542 –1,917 –2,270
–7,204
............ ............ ............ .............. .............. .............. ..................

–252,774
–2,323

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

Total invest in health care ................
Provide incentives for charitable giving:
Permit tax-free withdrawals from IRAs
for charitable contributions ..................
Expand and increase the enhanced charitable deduction for contributions of
food inventory ........................................
Reform excise tax based on investment
income of private foundations ..............
Modify tax on unrelated business taxable income of charitable remainder
trusts ......................................................
Modify basis adjustment to stock of S
corporations contributing appreciated
property ..................................................
Repeal the $150 million limitation on
qualified 501(c)(3) bonds .......................

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

............ ............ ............ .............. ..............
225

–6

Tax Incentives:
Simplify and encourage saving:
Expand tax-free savings opportunities ... ............ 4,365
Consolidate employer-based savings accounts ..................................................... ............
–359
Establish Individual Development Accounts (IDAs) ......................................... ............ ............
Total simplify and encourage saving
Invest in health care:
Provide a refundable tax credit for the
purchase of health insurance 3 .............
Provide an above-the-line deduction for
high-deductible insurance premiums ..
Provide a refundable tax credit for contributions of small employers to employee HSAs 4 .........................................
Improve the Health Coverage Tax Credit 5 ...........................................................
Allow the orphan drug tax credit for certain pre-designation expenses ..............

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

595 –16,307
–5,532 –7,851
–3,488 –5,654

–359

–574
–5,346
–4,375

–9,967 –31,729 –12,557

–3,550

–54,618 –1,082,971

9,218

6,314

3,221

593

23,711

3,133

–535

–570

–609

–653

–2,726

–17,271

–134

–286

–326

–300

–1,046

–1,763

8,549

5,458

2,286

–360

19,939

–15,901

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

–19 –1,413

–1,506

–1,333

–1,202

–5,473

–9,631

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

–196 –2,148

–2,686

–2,837

–2,932

–10,799

–30,397

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

4,006

–61

–304

–834

–1,545

–2,025

–4,769

–17,760

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

–3

–4

–5

–17

–49

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

–1

–3

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

–276 –3,868

–5,030

–5,720

–6,164

–21,059

–57,840

–70

–335

–318

–313

–304

–1,588

–3,095

–42

–87

–96

–106

–116

–127

–532

–1,388

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

–148

–98

–105

–111

–119

–581

–1,321

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

–6

–5

–6

–7

–29

–68

–1

–15

–21

–25

–28

–32

–121

–349

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

–7

–10

–11

–10

–48

–93

SUMMARY TABLES

Table S–7.

RECEIPTS PROPOSALS—Continued
(In millions of dollars)
Total
2005

2006

2007

2008

2009

2010
2006–2010 2006–2015

Repeal certain restrictions on the use of
qualified 501(c)(3) bonds for residential rental property ................................ ............
Total provide incentives for charitable giving .....................................
Strengthen education:
Extend, increase, and expand the abovethe-line deduction for qualified out-ofpocket classroom expenses ...................
Encourage telecommuting:
Exclude from income the value of employer-provided computers, software,
and peripherals .....................................
Provide assistance to distressed areas:
Establish Opportunity Zones ...................
Increase housing opportunities:
Provide tax credit for developers of affordable single-family housing .............
Protect the environment:
Extend
permanently
expensing
of
brownfields remediation costs ..............
Exclude 50 percent of gains from the
sale of property for conservation purposes .......................................................
Total protect the environment ..........
Increase energy production and promote energy conservation:
Extend the tax credit for producing electricity from wind, biomass, and landfill gas and modify the tax credit for
electricity from biomass ........................
Provide tax credit for residential solar
energy systems ......................................
Modify treatment of nuclear decommissioning funds .........................................
Provide tax credit for purchase of certain
hybrid and fuel cell vehicles 6 ...............
Provide tax credit for combined heat and
power property ......................................

–2

–5

–9

–16

–24

–56

–278

–113

–600

–553

–579

–600

–623

–2,955

–6,592

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

–27

–267

–279

–282

–285

–1,140

–2,630

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

–29

–50

–55

–65

–249

–767

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

–433

–806

–853

–899

–912

–3,903

–9,594

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

–7

–84

–342

–815

–1,425

–2,673

–17,370

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

–138

–216

–205

–195

–185

–939

–1,750

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

–47

–92

–105

–60 ..............

–304

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

–185

–308

–310

–255

–185

–1,243

–2,054

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

–72

–209

–379

–280

–167

–1,107

–1,862

–5

–11

–19

–24

–34

–16

–104

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

–216

–163

–170

–177

–183

–909

–1,933

–20

–394

–548

–752

–830

–2,510

–2,525

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

–84

–86

–107

–116

–37

–430

–380

–777 –1,025

–1,432

–1,437

–389

–5,060

–6,804

Total increase energy production
and promote energy conservation..
–25
Restructure assistance to New York
City:
Provide tax incentives for transportation
infrastructure ........................................ ............
Repeal certain New York City Liberty
Zone incentives ...................................... ............

–200

–1,000

–2,000

200

1,000

2,000

Total restructure assistance to New
York City ........................................ ............ ............ ............ .............. .............. .............. .................. ..................
Total tax incentives ....................

–138

Simplify the Tax Laws for Families:
Simplify adoption tax benefits ..................... ............
Clarify eligibility of siblings and other
family members for child related tax
11
benefits 7 ....................................................
Total simplify the tax laws for families

1,672

1,588

–3,417

–7,777 –10,408

–18,343

–119,552

–4

–40

–42

–43

–45

–174

–426

306

536

–5

132

110

MID–SESSION REVIEW

Table S–7.

RECEIPTS PROPOSALS—Continued
(In millions of dollars)
Total
2005

2006

2007

2008

2009

2010
2006–2010 2006–2015

Strengthen the Employer-Based Pension
System:
Ensure fair treatment of older workers in
cash balance conversions and protect defined benefit plans .................................... ............
57
Strengthen funding for single-employer
pension plans ............................................ ............
151
Reflect market interest rates in lump sum
payments ................................................... ............ ............
Total strengthen the employer-based
pension system ................................... ............
Close Loopholes and Improve Tax Compliance:
Combat abusive foreign tax credit transactions ........................................................
1
Modify the active trade or business test ....
2
Impose penalties on charities that fail to
enforce conservation easements ...............
1
Eliminate the special exclusion from unrelated business taxable income for gain or
loss on the sale or exchange of certain
brownfields ................................................
1
Apply an excise tax to amounts received
under certain life insurance contracts .... ............
Limit related party interest deductions .....
74
Clarify and simplify qualified tuition programs ......................................................... ............
Total close loopholes and improve tax
compliance ..........................................
Tax Administration, Unemployment Insurance, and Other:
Improve tax administration:
Implement IRS administrative reforms
and initiate cost saving measures 8 .....
Strengthen financial integrity of unemployment insurance:.
Strengthen the financial integrity of the
unemployment insurance system by
reducing improper benefit payments
and tax avoidance 6 ...............................
Other proposals:
Modify pesticide registration fee .............
Increase Indian gaming activity fees ......

104

393

1,096

1,432

–869

–2,699

–1,762

–3,747

–12,735

–3

–8

–15

–20

–46

–241

208

1,491

–799

–2,622

–1,678

–3,400

–11,880

2
6

2
8

3
8

11
38

26
87

125

242

7
128

12
134

17
141

23
148

28
155

87
706

323
1,607

222

161

188

212

241

272

1,074

2,605

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

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

–383

–2,445

............ ............ ............ .............. .............. .............. ..................
............ ............
4
4
5
5
18

–152
43

Total tax administration, unemployment insurance, and other ................ ............ ............

–3

–204

–183

–199

–178

–365

–2,554

–22

–47

–75

–92

–97

–333

–601

Total reauthorize funding for the
Highway Trust Fund ......................... ............

–12

–36

–64

–81

–86

–279

–536

Promote Trade:
Implement the CAFTA–DR free trade
agreement and free trade agreements
with Bahrain and Panama 6 ................. ............

–26

–39

–43

–819

–885

–1,812

–6,591

Reauthorize Funding for the Highway
Trust Fund:
Extend excise taxes deposited in the Highway Trust Fund 6 ...................................... ............
Allow tax-exempt financing for private
highway projects and rail-truck transfer
facilities ..................................................... ............

SUMMARY TABLES

Table S–7.

RECEIPTS PROPOSALS—Continued
(In millions of dollars)
Total
2005

2006

2007

2008

2009

2010
2006–2010 2006–2015

Extend Expiring Provisions:
Research & Experimentation (R&E) tax
credit ......................................................
Combined work opportunity/welfare-towork tax credit ......................................
First-time homebuyer credit for DC ........
Authority to issue Qualified Zone Academy Bonds ..............................................
Deduction for corporate donations of
computer technology .............................
Disclosure of tax return information related to terrorist activity 8 ....................
Abandoned mine reclamation fees ...........
Excise tax on coal 6 ...................................

............ –2,097 –4,601
............
............

–132
–1

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

–3

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

–73

–7,669

–27,200

–76,225

–167
–65
–16
–5
–18 .............. .............. ..............

–385
–19

–20

–62

–162

–49 .............. .............. ..............

–122

–8

–5,944

–13

–6,889

–18

............ ............ ............ .............. .............. .............. .................. ..................
............
304
312
318
322
323
1,579
3,230
............ ............ ............ .............. .............. .............. ..................
480

Total extend expiring provisions ...... ............ –2,002 –4,531

–5,704

–6,601

–7,371

Total budget proposals, including proposals assumed in the baseline ..........

177

42 –1,649 –19,746 –49,570 –32,896

Total budget proposals, excluding proposals assumed in the baseline ..........

–48

48 –1,290

–9,779 –17,841 –20,339

–26,209

–73,203

–103,820 –1,294,572
–49,202

–211,601

1 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $40,955 million for
2006–2015.
2 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $7,521 million for
2006–2015.
3 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $79 million for 2006, $3,695
million for 2007, $5,554 million for 2008, $6,573 million for 2009, $7,091 million for 2010, $22,992 million for 2006–2010
and $64,666 million for 2006–2015.
4 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $18 million for 2006, $87
million for 2007, $237 million for 2008, $392 million for 2009, $589 million for 2010, $1,323 million for 2006–2010 and
$4,930 million for 2006–2015.
5 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $3 million for 2006, $10
million for 2007, $11 million for 2008, $13 million for 2009, $14 million for 2010, $51 million for 2006–2010 and $130 million for 2006–2015.
6 Net of income offsets.
7 Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is –$115 million for 2006,
–$150 million for 2007, –$168 million for 2008, –$196 million for 2009, –$258 million for 2010, –$887 million for
2006–2010 and –$2,239 million for 2006–2015.
8 Policy proposal with a receipt effect of zero.

MID–SESSION REVIEW

Table S–8.

BUDGET SUMMARY BY CATEGORY
(In billions of dollars)
2004

Discretionary:
DoD military .........................................
Homeland security ................................
Other ......................................................

2005

2006

2007

2008

2009

2010

436
25
434

470
30
460

490
33
467

452
34
457

449
36
452

468
37
449

483
38
450

Total, Discretionary ..........................
Mandatory:
Social Security:
Personal accounts ..............................
Current program ...............................
Medicare ................................................
Medicaid & SCHIP ...............................
Other ......................................................

895

960

990

943

937

954

972

................
492
265
181
299

................
518
290
192
330

................
545
346
198
330

................
574
385
208
324

................
604
409
224
330

22
637
435
243
332

54
675
463
265
354

Total, Mandatory ...............................
Net Interest ..............................................

1,237
160

1,329
183

1,419
204

1,491
228

1,567
247

1,670
265

1,809
282

Total Outlays ............................................
Receipts .....................................................

2,292
1,880

2,472
2,140

2,613
2,273

2,661
2,428

2,750
2,588

2,888
2,727

3,063
2,893

Surplus/deficit .......................................

–412

–333

–341

–233

–162

–170

On-budget deficit ..................................
Off-budget surplus ................................

–567
155

–508
176

–535
195

–438
205

–388
226

–381
219

–375
206

SUMMARY TABLES

Table S–9.

RECEIPTS BY SOURCE
(In billions of dollars)

2004
Actual
February 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 .......................
Corporation income taxes .....................
Social insurance and retirement
receipts ...............................................
Excise taxes ...........................................
Estate and gift taxes ............................
Customs duties .....................................
Miscellaneous receipts ..........................
Total ..................................................

Estimate
2005

2006

2007

2008

2009

2010

809.0
189.4

893.7
226.5

966.9
220.3

1,071.2
229.8

1,167.2
243.4

1,245.1
252.4

1,353.3
257.6

733.4
69.9
24.8
21.1
32.6

773.7
74.0
23.8
24.7
36.4

818.8
75.6
26.1
28.3
41.6

866.2
77.2
23.5
30.6
45.6

911.7
79.0
24.3
31.9
49.5

959.1
81.0
26.0
33.9
52.6

1,016.2
82.9
20.1
35.3
55.5

1,880.1

2,052.8

2,177.6

2,344.2

2,507.0

2,650.0

2,820.9

809.0
189.4

929.1
265.8

1,006.2
242.7

1,119.3
242.9

1,208.5
258.3

1,280.8
267.6

1,385.2
272.9

733.4
69.9
24.8
21.1
32.6

793.5
71.7
23.8
25.1
30.6

856.0
73.7
26.0
28.8
39.3

891.3
75.7
23.0
31.5
44.2

938.7
77.8
23.8
33.6
47.5

986.4
79.9
25.5
35.4
51.0

1,042.3
81.7
19.7
37.0
54.5

1,880.1

2,139.7

2,272.7

2,427.8

2,588.3

2,726.5

2,893.3

Difference:
Individual income taxes .......................
Corporation income taxes .....................
Social insurance and retirement receipts ..................................................
Excise taxes ...........................................
Estate and gift taxes ............................
Customs duties .....................................
Miscellaneous receipts ..........................

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

35.4
39.2

39.3
22.5

48.1
13.1

41.4
14.9

35.7
15.3

31.9
15.3

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

19.7
–2.3
0.1
0.5
–5.9

37.1
–1.9
–0.1
0.6
–2.3

25.0
–1.5
–0.5
0.9
–1.4

27.0
–1.2
–0.5
1.7
–2.0

27.3
–1.1
–0.5
1.5
–1.5

26.1
–1.1
–0.4
1.7
–1.0

Total ..................................................

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

86.8

95.2

83.7

81.3

76.5

72.4

MID–SESSION REVIEW

Table S–10.

OUTLAYS BY AGENCY

(In billions of dollars)
2004
Actual
Legislative Branch ..................................................................
Judicial Branch .......................................................................
Agriculture ..............................................................................
Commerce ................................................................................
Defense—Military ...................................................................
Education .................................................................................
Energy ......................................................................................
Health and Human Services ..................................................
Homeland Security .................................................................
Housing and Urban Development .........................................
Interior .....................................................................................
Justice ......................................................................................
Labor ........................................................................................
State .........................................................................................
Transportation ........................................................................
Treasury ..................................................................................
Veterans Affairs ......................................................................
Corps of Engineers-Civil Works .............................................
Other Defense Civil Programs ...............................................
Environmental Protection Agency .........................................
Executive Office of the President ..........................................
General Services Administration ...........................................
International Assistance Programs .......................................
National Aeronautics and Space Administration .................
National Science Foundation .................................................
Office of Personnel Management ...........................................
Small Business Administration .............................................
Social Security Administration ..............................................
Other Independent Agencies ..................................................
Allowances ...............................................................................
Undistributed Offsetting Receipts .........................................
Total .....................................................................................

February estimates
2005

3.9
5.4
71.8
5.8
437.1
62.8
20.0
543.4
26.5
45.0
8.9
29.0
56.7
10.9
54.5
374.8
59.6
4.8
41.7
8.3
3.3
–0.4
13.7
15.2
5.1
56.5
4.1
530.2
5.9
....................
–212.5

4.1
5.7
94.9
6.3
444.1
71.0
22.2
585.8
33.3
42.6
9.4
21.2
50.0
11.9
58.2
403.0
68.0
4.9
43.5
7.9
5.8
0.5
14.8
15.7
5.6
61.0
3.0
559.0
19.7
34.9
–228.4

2,292.2

2,479.4

2006

Mid-Session estimates
2005

4.4
4.2
6.1
5.7
94.6
89.5
6.5
6.3
426.3
470.9
64.3
72.2
22.0
21.9
643.9
583.6
33.3
34.0
40.2
43.5
9.8
9.4
23.4
21.6
51.7
47.8
14.1
13.1
60.6
58.2
441.2
408.5
68.3
68.9
4.6
4.9
44.5
44.1
8.2
7.9
7.2
5.8
0.1
0.5
17.0
14.4
15.7
15.7
5.7
5.6
64.3
61.0
0.8
2.6
583.5
561.4
22.6
15.6
24.2 ....................
–241.3
–226.7
2,567.6

2,472.3

2006
4.4
6.2
94.0
6.5
492.3
64.5
22.3
648.4
33.6
40.2
9.7
23.4
52.1
15.1
60.6
435.2
68.8
4.6
45.5
8.2
7.2
0.1
16.4
15.7
5.7
64.7
1.0
588.5
19.8
–0.4
–241.1
2,613.3

SUMMARY TABLES

Table S–11.

OUTLAYS BY FUNCTION
(In billions of dollars)
2004
Actual

National defense .....................................................................
International affairs ...............................................................
General science, space, and technology .................................
Energy ......................................................................................
Natural resources and environment ......................................
Agriculture ..............................................................................
Commerce and housing credit ...............................................
Transportation ........................................................................
Community and regional development .................................
Education, training, employment, and social services .........
Health ......................................................................................
Medicare ..................................................................................
Income security .......................................................................
Social Security .........................................................................
Veterans benefits and services ..............................................
Administration of justice ........................................................
General government ...............................................................
Net interest .............................................................................
Allowances ...............................................................................
Undistributed offsetting receipts ...........................................
Total .....................................................................................

February estimates
2005

455.9
26.9
23.1
–0.2
30.7
15.4
5.3
64.6
15.8
87.9
240.1
269.4
332.8
495.5
59.8
45.5
21.8
160.2
....................
–58.5

465.9
32.0
24.0
1.4
31.0
30.5
10.7
68.5
20.1
96.3
257.5
295.4
350.9
519.7
68.2
40.7
18.9
177.9
34.9
–65.0

2,292.2

2,479.4

2006

Mid-Session estimates
2005

447.4
492.7
38.4
33.0
24.0
24.0
2.1
0.6
31.2
31.0
26.0
27.0
6.8
7.7
70.7
68.6
19.1
20.1
88.7
97.6
268.4
256.2
345.7
295.3
359.5
349.2
544.8
522.3
68.4
69.0
43.1
41.2
17.8
19.1
211.1
182.9
24.2 ....................
–69.8
–65.1
2,567.6

2,472.3

2006
513.9
38.9
24.0
1.3
30.9
28.6
4.2
70.8
20.3
89.0
268.0
351.3
358.8
550.0
68.9
43.2
18.0
204.4
–0.4
–70.8
2,613.3

MID–SESSION REVIEW

Table S–12.

DISCRETIONARY BUDGET AUTHORITY BY AGENCY
(In billions of dollars)
2004
Actual

Legislative Branch ..................................................................
Judicial Branch .......................................................................
Agriculture ..............................................................................
Commerce ................................................................................
Defense—Military ...................................................................
Education .................................................................................
Energy ......................................................................................
Health and Human Services ..................................................
Homeland Security .................................................................
Housing and Urban Development .........................................
Interior .....................................................................................
Justice ......................................................................................
Labor ........................................................................................
State .........................................................................................
Transportation ........................................................................
Treasury ..................................................................................
Veterans Affairs ......................................................................
Corps of Engineers-Civil Works .............................................
Other Defense Civil Programs ...............................................
Environmental Protection Agency .........................................
Executive Office of the President ..........................................
General Services Administration ...........................................
International Assistance Programs .......................................
National Aeronautics and Space Administration .................
National Science Foundation .................................................
Office of Personnel Management ...........................................
Small Business Administration .............................................
Social Security Administration ..............................................
Other Independent Agencies ..................................................
Allowances ...............................................................................
Total .....................................................................................

February estimates
2005

2006

Mid-Session estimates
2005

2006

3.6
4.8
21.5
5.8
468.5
55.6
23.4
69.2
30.3
32.0
10.8
19.6
11.8
11.4
13.9
10.7
29.1
4.6
0.2
8.4
18.8
0.1
16.8
15.4
5.6
0.3
0.8
7.2
7.8
....................

3.6
5.1
22.0
6.3
401.1
56.6
23.9
69.5
35.5
32.4
10.9
20.2
12.0
11.3
13.9
11.2
30.7
5.0
0.2
8.0
0.4
0.3
16.4
16.2
5.5
0.3
1.5
7.5
7.0
81.0

4.1
3.7
5.6
5.1
19.4
22.4
9.4
6.3
419.3
477.0
56.0
56.6
23.4
24.3
68.9
69.6
29.3
36.1
28.5
33.6
10.6
10.9
19.1
20.4
11.5
12.0
13.3
14.0
11.8
13.9
11.6
11.1
31.3
31.7
4.3
5.0
0.2
0.2
7.6
8.0
0.3
0.4
0.1
0.3
18.5
18.3
16.5
16.2
5.6
5.5
0.2
0.3
0.6
1.5
7.7
7.5
6.0
7.2
–0.4 ....................

4.1
5.6
19.1
9.4
469.3
56.0
23.4
68.9
29.3
28.5
10.6
19.1
11.5
13.3
11.8
11.6
31.3
4.3
0.2
7.6
0.3
0.1
18.5
16.5
5.6
0.2
0.6
7.7
6.0
–0.4

907.6

915.6

840.3

890.0

919.2

SUMMARY TABLES

Table S–13.

DISCRETIONARY BUDGET AUTHORITY BY FUNCTION
(In billions of dollars)
2004
Actual

National defense .....................................................................
International affairs ...............................................................
General science, space, and technology .................................
Energy ......................................................................................
Natural resources and environment ......................................
Agriculture ..............................................................................
Commerce and housing credit ...............................................
Transportation ........................................................................
Community and regional development .................................
Education, training, employment, and social services .........
Health ......................................................................................
Medicare ..................................................................................
Income security .......................................................................
Social Security .........................................................................
Veterans benefits and services ..............................................
Administration of justice ........................................................
General government ...............................................................
Allowances ...............................................................................
Total .....................................................................................
* $50 million or less.

February estimates
2005

2006

Mid-Session estimates
2005

2006

485.7
49.3
23.4
3.6
31.1
5.8
–*
23.6
17.4
78.1
50.8
5.4
45.2
4.1
29.2
37.9
16.9
....................

421.3
29.6
24.3
3.8
31.3
5.7
1.1
23.3
22.7
79.5
52.0
4.0
46.1
4.4
30.9
38.7
15.9
81.0

438.8
497.9
33.7
34.5
24.6
24.3
3.7
3.8
28.0
31.5
5.3
5.8
0.3
2.3
21.4
23.4
12.6
22.7
77.9
79.5
51.0
52.1
5.1
4.0
47.3
46.1
4.7
4.4
31.4
31.9
38.7
39.4
16.3
15.8
–0.4 ....................

488.8
33.7
24.6
3.7
28.0
5.3
0.3
21.4
12.6
77.9
51.0
5.1
47.0
4.7
31.4
38.7
16.3
–0.4

907.6

915.6

840.3

890.0

919.2

MID–SESSION REVIEW

Table S–14.

BASELINE CATEGORY TOTALS
(In billions of dollars)
2004

Discretionary:
DoD military .........................................
Homeland security ................................
Other ......................................................

2005

2006

2007

2008

2009

2010

436
25
434

470
30
459

446
33
467

432
34
474

430
34
482

440
35
488

453
36
498

Total, Discretionary ..........................
Mandatory:
Social Security ......................................
Medicare ................................................
Medicaid & SCHIP ...............................
Other ......................................................

895

960

945

940

947

964

987

492
265
181
299

518
290
192
329

545
346
197
334

574
385
209
332

604
409
228
334

637
435
248
337

675
463
269
359

Total, Mandatory ...............................
Net Interest ..............................................

1,237
160

1,329
183

1,422
204

1,500
226

1,575
245

1,658
262

1,766
278

Total Outlays ............................................
Receipts .....................................................

2,292
1,880

2,471
2,140

2,571
2,273

2,666
2,429

2,767
2,598

2,884
2,744

3,031
2,914

Surplus/deficit .......................................

–412

–331

–299

–237

–169

–140

–117

On-budget deficit ..................................
Off-budget surplus ................................

–567
155

–507
176

–497
198

–445
208

–398
229

–385
246

–382
265

SUMMARY TABLES

Table S–15.

OUTLAYS FOR MANDATORY PROGRAMS UNDER CURRENT
LAW 1
(In billions of dollars)
2004
Actual

Estimate
2005

2006

2007

2008

2009

2010

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

13
192
265
281
492
31

17
206
290
295
518
40

11
212
346
304
545
39

11
226
385
312
574
38

11
245
409
325
604
43

11
266
435
336
637
46

11
288
463
347
675
48

Subtotal, human resources programs ............

1,273

1,366

1,457

1,545

1,637

1,731

1,832

Other mandatory programs:
International affairs ...........................................
Energy .................................................................
Natural resources and environment .................
Agriculture ..........................................................
Commerce and housing credit ...........................
Transportation ....................................................
Justice ..................................................................
General government ...........................................
Undistributed offsetting receipts .......................
Other functions ...................................................

–7
–4
*
10
5
2
8
6
–59
2

–4
–3
–*
21
6
2
1
2
–65
3

–2
–3
1
24
4
2
2
2
–68
4

–2
–3
1
23
*
2
1
2
–73
2

–2
–2
1
21
–*
2
1
2
–87
2

–2
–2
1
14
–1
2
1
2
–90
2

–2
–2
2
13
–1
2
1
2
–83
3

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

–37

–35

–45

–62

–73

–67

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

1,237

1,329

1,422

1,500

1,575

1,658

1,766

1 This

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

MID–SESSION REVIEW

Table S–16.

FEDERAL GOVERNMENT FINANCING AND DEBT
(In billions of dollars)
Actual
2004

Financing:
Unified budget deficit (–) ...................................

Estimate
2005

2006

2007

2008

2009

2010

–412

–333

–341

–233

–162

–170

–3

–1

–1
22
7
1

1
..............
7
1

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

–5
9

–8
9

–13
2

–20
–1

–21
–1

–21
–2

–22
–2

Total, financing other than the change
in debt held by the public ....................

–10

–20

–21

–22

–23

Total, requirement to borrow from
the public .......................................

–382

–324

–351

–254

–183

–184

–192

Change in debt held by the public ....................

382

324

351

254

183

184

192

Changes in Debt Subject to Limitation:
Change in debt held by the public ....................
Change in debt held by Government accounts
Change in other factors ......................................

382
213
1

324
264
–13

351
294
*

254
324
1

183
341
1

184
331
3

192
316
2

Total, change in debt subject to statutory
limitation ......................................................

Financing other than the change in debt held
by the public:
Net purchases (–) of non-Federal securities
by the National Railroad Retirement Investment Trust ............................................
Changes in: 1
Treasury operating cash balance ...............
Compensating balances 2 .............................
Checks outstanding, etc. 3 ...........................
Seigniorage on coins ........................................
Less: Net financing disbursements:
Direct loan financing accounts ...................
Guaranteed loan financing accounts ..........

596

574

645

579

525

518

511

Debt Subject to Statutory Limitation, End
of Year:
Debt issued by Treasury ....................................
Adjustment for discount, premium, and coverage 4 ...............................................................

7,328

7,916

8,561

9,139

9,664

10,180

10,689

–8

–6

–5

Total, debt subject to statutory limitation 5 ..

7,333

7,907

8,552

9,131

9,656

10,173

10,684

Debt Outstanding, End of Year:
Gross Federal debt: 6
Debt issued by Treasury .................................
Debt issued by other agencies ........................

7,328
27

7,916
26

8,561
26

9,139
26

9,664
25

10,180
24

10,689
24

7,355

7,942

8,587

9,165

9,689

10,204

10,713

3,059
4,296
37.2%

3,323
4,619
37.6%

3,617
4,970
38.3%

3,941
5,224
38.2%

4,282
5,407
37.5%

4,613
5,591
36.8%

4,929
5,783
36.1%

Total, gross Federal debt ............................
Held by:
Debt held by Government accounts ...............
Debt held by the public 7 ................................
As a percent of GDP ....................................

* $500 million or less.
1 A decrease in the Treasury operating cash balance or compensating balances (which are assets) is a means of financing
a deficit and therefore has a positive sign. An increase in checks outstanding (which is a liability) is also a means of financing a deficit and therefore also has a positive sign.
2 Compensating balances were non-interest bearing Treasury bank deposits that Treasury mainly used to compensate
banks for collecting tax and non-tax receipts under financial agency agreements. Most of the balances at the end of 2003
were required to be invested in nonmarketable Depositary Compensation Securities issued by the Treasury; the rest of the
balances, and the entire amount in previous years, was invested in the way that the banks decided. The use of compensating balances was discontinued in 2004, and the amounts were drawn down to zero.
3 Besides checks outstanding, includes accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liability accounts; and, as an offset, cash and monetary assets (other than
the Treasury operating cash balance and compensating balances), other asset accounts, and profit on sale of gold.
4 Consists mainly of Federal Financing Bank debt (which is not subject to limit), the unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds), and the unrealized discount on Government account series securities.
5 The statutory debt limit is $8,184 billion.

SUMMARY TABLES

6 Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at
sales price plus amortized discount or less amortized premium. Agency debt securities are almost all measured at face
value. Treasury securities in the Government account series are otherwise measured at face value less unrealized discount
(if any).
7 At the end of 2004, the Federal Reserve Banks held $700 billion of Federal securities and the rest of the public held
$3,595 billion. Debt held by the Federal Reserve Banks is not estimated for future years.

GLOSSARY
Appropriation.—An appropriation provides
legal authority for Federal agencies to incur
obligations and to make payments out of the
Treasury for specified purposes. Regular appropriations bills are considered every year by
the Congress and supplemental appropriations
are considered from time to time.
Authorization.—An authorization is an act
of the Congress that establishes or continues
a Federal program or agency and sets forth
the guidelines to which it must adhere.
Budget Authority.—Budget authority is the
authority provided by law to incur financial
obligations that will result in outlays.
Budget Resolution.—The budget resolution
is Congress’ annual framework that sets targets for total budget authority, total outlays,
total revenues, and the deficit (on-budget), as
well as discretionary and mandatory allocations within the spending targets. These targets guide the committees’ deliberations. A
budget resolution does not become law and is
not binding on the Executive Branch.
Cap.—A ‘‘cap’’ is a legal limit on annual
discretionary spending.
Deficit.—A deficit is the amount by which
outlays exceed receipts in a fiscal year.
Discretionary
Spending.—Discretionary
spending is what the President and the Congress decide to spend through annual appropriations bills. Examples include spending for
such activities as the FBI, the Coast Guard,
education, space exploration, highway construction, defense, and foreign aid. (See Mandatory Spending.)
Entitlement.—An entitlement program is
one in which the Federal Government is legally obligated to make payments or provide
aid to any person who meets the legal criteria
for eligibility. Examples include Social Security, Medicare, Medicaid, and Food Stamps.

Fiscal Year.—The fiscal year is the Federal
Government’s accounting period. It begins on
October 1st and ends on September 30th. For
example, fiscal year 2006 begins on October
1, 2005, and ends on September 30, 2006.
Gross Domestic Product (GDP).—GDP is
a measure of the market value of goods and
services produced within the United States. It
is the standard measure of the size of the economy.
Mandatory Spending.—Mandatory spending is provided by permanent law rather than
annual appropriations. Examples are Social
Security and the Student Loan Program. The
President and the Congress can change the
law with respect to the eligibility criteria or
the payment formula, and thus change the
level of spending on mandatory programs, but
they don’t have to take annual action to ensure
the continuation of spending. (See Discretionary Spending.)
Obligations.—Obligations
are
binding
agreements that result in outlays, immediately
or in the future.
Outlays.—Outlays are the amount of money
the Government spends, minus business-like
collections, in a given fiscal year.
Receipts.—Governmental receipts (often
simply ‘‘receipts’’) are the collections of money
that primarily result from taxes and similar
Government powers to compel payment. Examples of governmental receipts include income
taxes, payroll taxes, excise taxes, and customs
duties. They do not include offsetting receipts
or collections from the Federal Government’s
business-like activities, such as the entrance
fees at national parks, or collections by one
Government account from another.
Surplus.—A surplus is the amount by
which receipts exceed outlays in a fiscal year.

Full text of Mid-Session Review of the Budget : Fiscal Year 2006

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