View original document

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

A BUDGET FOR

FISCAL YEAR 2021

’
AMERICA S

FUTURE
MID-SESSION REVIEW

BUDGET OF THE U.S. GOVERNMENT
OFFICE OF MANAGEMENT AND BUDGET | OMB.GOV

A BUDGET FOR

FISCAL YEAR 2021

AMERICA S
FUTURE
’

MID-SESSION REVIEW

BUDGET OF THE U.S. GOVERNMENT
OFFICE OF MANAGEMENT AND BUDGET | OMB.GOV

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

July 1,2020
The Honorable Nancy Pelosi
Speaker of the House of Representatives
U.S. House of Representatives

Washington, D.C. 20515

Dear Madam Speaker:
Section 1106 of Title 31, United States Code, requires the President send to the Congress a
supplemental update of the Budget that was transmitted to the Congress earlier in the year. The
supplemental update of the Budget, commonly known as the Mid-Session Review, is enclosed.

Sincerely,

Russell T. Vought
Acting Director

Enclosure

Identical letter sent to The Honorable Michael R. Pence

TABLE OF CONTENTS

Page

List of Tables ���������������������������������������������������������������������������������������������������������������������������������������������ix
List of Charts ��������������������������������������������������������������������������������������������������������������������������������������������ix
Summary ����������������������������������������������������������������������������������������������������������������������������������������������������1
Economic Overview ������������������������������������������������������������������������������������������������������������������������������������3
Implications for Receipts and Expenditures ��������������������������������������������������������������������������������������������5
Receipts�������������������������������������������������������������������������������������������������������������������������������������������������7
Expenditures�����������������������������������������������������������������������������������������������������������������������������������������9
Implications for Federal Borrowing And Debt ���������������������������������������������������������������������������������������17

GENERAL NOTES
1.	 Unless otherwise noted, years referenced for budget data are fiscal
years, and years referenced for economic data are calendar years.
2.	 All totals in the text and tables include both on-budget and off-budget spending and receipts.
3.	 Web address: https://budget.gov

vii

LIST OF TABLES

Page

Table 1. Estimated Outlays from Laws Enacted in Response to Covid-19 since the Release of the
Budget �������������������������������������������������������������������������������������������������������������������������������6
Table 2. Outlays and Receipts through May 2020, as a Percentage of the Estimate in the Budget,
Compared to the Average for the Past Five Years ����������������������������������������������������������7
Table 3. Discretionary Budget Authority Provided in the Four Supplementals �����������������������������������13
Table 4. Estimated Spending from 2021 Balances of Budget Authority: Discretionary Programs �����14

LIST OF CHARTS
Unemployment Insurance: Initial Claims�������������������������������������������������������������������������������������������������9
Unemployment Insurance: Continued Claims����������������������������������������������������������������������������������������10

ix

SUMMARY
The Office of Management and Budget
(OMB) is required by 31 U.S.C. 1106 to produce a supplemental update of the Budget,
commonly known as the Mid-Session Review
(MSR), to provide updated information to the
Congress on the Budget and obligations of the
U.S. Government. The MSR reflects changes in
obligations, current information on estimated
outlays and receipts, and the condition of the
Treasury (i.e., debt).
Since the release of the 2021 Budget, the
short-term economic outlook has changed dramatically and rapidly. The public health emergency (PHE) resulting from the COVID-19
pandemic, along with the economic contraction
resulting from many State-level stay-at-home
and social distancing orders, has transformed
the Federal fiscal outlook in the near and immediate term.
The Administration has taken action to address the PHE, minimize the economic impact
of social distancing measures, and ensure a
rapid return to economic prosperity. Actions
include prioritizing the public health response, delaying tax payments, and reducing
the regulatory burden for small businesses.
The President has also signed into law four

stimulus bills, increasing the deficit by nearly
$3 trillion over the 10-year budget window.
In most years, OMB goes beyond the statutory requirements for the MSR and develops a
revised set of economic variables that agencies
use to develop re-estimates of baseline outlays
and spending. This year, given the jump in economic uncertainty caused by the COVID-19
public health emergency and the resulting
economic downturn, the MSR does not report
updated economic assumptions or provide updated revenue and deficit estimates for the
budget window. Any such estimates would be
entirely speculative, given the range of uncertainty underlying potential future paths of
economic growth.
Instead, this year’s MSR reports on actual
changes in spending and revenues to date, and
changes to outlays and receipts for 2020 and
2021 where they are known. The MSR also reports expected changes due to legislative and
administrative activity since February 2020 in
cases where estimation is possible. OMB will
work with agencies on a case-by-case basis to
ensure they have the information needed to
prepare for the 2022 Budget.

1

ECONOMIC OVERVIEW
Since the 2021 Budget’s economic forecast
was finalized in November 2019 and released
in February 2020, a global pandemic has given
rise to a dramatic shift in the economic landscape.
Notably:
• The 2021 Budget anticipated real Gross
Domestic Product (GDP) growth averaging 2.9 percent during the 11-year forecast interval, but real GDP fell at an annualized rate of 5.0 percent in the first
quarter of 2020 and will not grow at the
projected rate of 3.1 percent over the four
quarters of 2020.
• The Budget assumed the unemployment
rate would continue to decline in the near
term and then rise slightly to a long-run
equilibrium of 4.0 percent. Due to the
COVID-19 pandemic, the unemployment
rate rose to 14.7 percent in April before
edging down to 13.3 percent in May.
• Consumer Price Index (CPI) inflation was
expected to rise to 2.3 percent during the
four quarters of 2020, a rate consistent

with Federal Reserve targets. Interest
rates were expected to remain steady in
the near term, then settle at a rate roughly consistent with rates implied by the
term structure of current rates. Instead,
core CPI inflation was just 1.2 percent
during the 12 months through May while
interest rates have fallen to historic lows.
Signs of future strength, however, have appeared. Consumer confidence has stabilized,
low mortgage rates will eventually boost housing demand, and regional business outlook surveys show that firms expect economic activity
to increase in the coming months. In May, payroll employment increased 2.5 million, and retail sales increased 17.7 percent. Even though
the unemployment rate spiked to 14.7 percent
in April, it retraced some of that increase in
May. Matching workers to jobs will be easier
than usual during the recovery because nearly 73 percent of unemployed workers in May
reported that they were on temporary layoff
and expected to be recalled to their previous
jobs.1 States also continue to implement plans
to safely reopen their economies, which should
help improve national employment and consumer spending.

1
The report showed 15.3 million out of the 21.0 million
unemployed workers reporting to be on temporary layoff:
https://bls.gov/news.release/empsit.nr0.htm.

3

IMPLICATIONS FOR RECEIPTS
AND EXPENDITURES
Expansions and contractions of the economy
impact Federal receipts and outlays, generally
in opposite directions, and can greatly affect
deficits. The cumulative 2020 deficit as of May
is $1,880 billion, reflecting the impact of the
COVID-19 PHE and the effect of stay-at-home
orders and social distancing guidelines on the
economy. This compares with the 2019 year-todate deficit of $739 billion.
Receipts to date have decreased by
$256 billion relative to the same period last
year. While this difference is largely due to
the economic impact of COVID-19, actual receipts also are lower this year due to the delay
in Federal tax filing deadlines from April to
July and tax relief policies enacted into law in
the CARES Act and other legislation that responds to COVID-19. While receipts through
May are down compared from prior years, receipts for the full fiscal year will recover somewhat after the delayed July 15 filing deadline.
Changes in Federal spending are typically
driven by the cost of large entitlement programs, such as Social Security, Medicare, and
Medicaid, as well as by appropriations and
budget agreements enacted by the Congress.
Growth in outlays increases markedly during
periods of economic contraction as individuals
and businesses rely on Federal programs that
provide relief to those experiencing financial
hardship. For example, outlays for Federal
programs that provide income support, food
assistance, and health care for individuals and
families with lower incomes are countercyclical, rising during periods of lower GDP and
higher unemployment.
In addition to these countercyclical changes
in Federal spending, the Administration has
worked with the Congress to enact major legislation to respond to COVID-19. To date, the
President has signed into law:
• The Coronavirus Preparedness and
Response Supplemental Appropriations
Act, 2020 (Public Law 116-123);

• The Families First Coronavirus Response
Act (Public Law 116-127, FFCRA);
• The Coronavirus Aid, Relief, and
Economic Security Act (Public Law 116136, CARES Act); and
• The Paycheck Protection Program and
Health Care Enhancement Act (Public
Law 116-139).
These supplemental Acts, which affected
both discretionary and mandatory spending,
provided additional resources for combatting
the spread of COVID-19 at the local, State, national, and international levels. The enacted
legislation also supported the U.S. economy
and the American people by ensuring that employers could keep employees on payrolls as
the pandemic placed enormous strain on the
Nation’s businesses and non-profit organizations.
This legislation has contributed to a large
increase in spending and reduction in revenues compared with the 2021 Budget. In total, the four legislative packages to date are
estimated to have a deficit impact of nearly
$3 trillion, with many of the effects occurring
in 2020 as an immediate response to the PHE
and economic downturn. Table 1 shows the additional spending provided in the four laws to
date, for those provisions that provided definite amounts.
Another substantive component of three of
the four bills (and the FFCRA and CARES
Act in particular) are changes to mandatory
programs and the tax code that could have a
range of outlay and receipt effects depending
on the length of the PHE and the economic
forecast. While this document does not update
the Administration’s economic forecast, and
therefore does not attempt to measure the deficit impact of these changes, the Congressional
Budget Office (CBO) and the Joint Committee
on Taxation (JCT) estimated the budgetary
effects of those Acts using updated unemploy5

6

MID-SESSION REVIEW

Table 1. ESTIMATED OUTLAYS FROM LAWS ENACTED IN
RESPONSE TO COVID-19 SINCE THE RELEASE OF THE BUDGET
(In billions of dollars)
2020

2021

The Coronavirus Preparedness and Response Supplemental Appropriations Act
(Public Law 116–123):
Discretionary ����������������������������������������������������������������������������������������������������������������������������������������

1.6

2.8

Families First Coronavirus Response Act (Public Law 116–127):
Discretionary ����������������������������������������������������������������������������������������������������������������������������������������
Mandatory (Definite) ���������������������������������������������������������������������������������������������������������������������������

7.9
24.6

5.7
1.0

Coronavirus Aid, Relief, and Economic Security Act (Public Law 116–136):
Discretionary ����������������������������������������������������������������������������������������������������������������������������������������
Mandatory (Definite) ���������������������������������������������������������������������������������������������������������������������������

126.6
459.9

90.7
178.6

The Paycheck Protection Program and Health Care Enhancement Act (Public Law 116–139):
Discretionary ����������������������������������������������������������������������������������������������������������������������������������������
Mandatory (Definite) ���������������������������������������������������������������������������������������������������������������������������

71.4
188.5

23.5
125.7

Notes: This table does not score changes to entitlement or revenue provisions, as those would require updated economic assumptions. Amounts are reflected as discretionary or mandatory as scored at enactment. Estimated outlays
for Public Law 116-136 and Public Law 116-139 reflect changes to the Paycheck Protection Program enacted in the
Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142).

ment projections. CBO estimated that FFCRA
would increase mandatory outlays by $95 billion and decrease receipts by $94 billion, and
that the CARES Act would increase mandatory outlays by $988 billion and decrease receipts by $408 billion. While CBO did make
some updates to economic projections for these
scores, the agency also recognized the limitation of point estimates noting those “estimated
effects are extremely uncertain because they
depend on the severity of the novel coronavirus pandemic and its related economic effects”
in the estimate for FFCRA and that “actual
costs could vary significantly” in the estimate
for the CARES Act.

The effect of the PHE and its economic
effects can also be seen in actual outlays
and receipts to date. Outlays through May
equaled 81 percent of the Budget estimate
for all 12 months of 2020, a larger percentage
of the estimate than the average for the past
five years (65 percent). Receipts through May
comprised 54 percent of the annual estimate,
a lower percentage than the average for the
past five years (65 percent). See Table 2 for
comparison of outlays to date and estimates
for selected programs for the current year of
the respective Budget.

7

Implications for Receipts and Expenditures

Table 2. OUTLAYS AND RECEIPTS THROUGH MAY 2020,
AS A PERCENTAGE OF THE ESTIMATE IN THE BUDGET,
COMPARED TO THE AVERAGE FOR THE PAST FIVE YEARS
Year-to-date total
through May
2020, in billions of
dollars
Outlays for selected programs:
Agriculture:
Child Nutrition ��������������������������������������������������������
Supplemental Nutrition Assistance Program �������
Education: 
Elementary and Secondary Education ������������������
Health and Human Services:
Medicaid ������������������������������������������������������������������
Medicare ������������������������������������������������������������������
Departmental Management 1 ����������������������������������
Homeland Security: 
Disaster Relief ���������������������������������������������������������
Labor:
Unemployment Insurance ��������������������������������������
Small Business Administration ���������������������������������
Transportation: 
Federal Transit Administration �����������������������������
Treasury (excluding gross interest on debt
securities) ����������������������������������������������������������������
Memorandum:
Outlays, total ���������������������������������������������������������������
Receipts, total ��������������������������������������������������������������

Year-to-date
total through
May 2020, as a
percentage of the
annual estimate
for 2020

Year-to-date total
through May, as a
percentage of the
annual estimate,
2015-2019
average

17.2
46.8

75
71

74
64

20.5

83

65

292.8
532.0
68.6

65
76
1,417

66
65
48

10.8

79

64

161.0
25.6

518
N/A

67
N/A

11.6

81

57

578.2

464

122

3,899.5
2,019.2

81
54

65
65

Includes Public Health and Social Services Emergency Fund
N/A=Not available. Current year estimates in the Budget for the Small Business Administration are typically less
than $500 million and occasionally negative due to credit reestimates of the agency’s loan portfolio. The comparison of
outlays to date as a percentage of those estimates is not meaningful.
1

Receipts
Receipts to date for 2020 have decreased by
$256 billion relative to the same period last
year, largely because of the delay in tax filing
deadlines from April to July, and the negative
impact of COVID-19 on wages and profits. As
the PHE begins to subside, economic activity
is likely to increase, and tax receipt levels tied
to wages and profits will rise as a result.
Baseline changes
Reduced profits and wages have an immediate and direct impact on collections of corporation income taxes, withheld individual income

taxes, and social insurance and retirement receipts (payroll taxes).
In order to provide individuals and businesses with additional liquidity to weather the
crisis, the Secretary of the Treasury delayed
this year’s tax filing and payment deadlines to
July 15, 2020. Individuals and businesses have
an additional quarter to file and make payments of final 2019 tax liability, and quarterly
estimated payments for preliminary 2020 tax
liability. This also delayed the normal infusion
of receipts into the Treasury from April to July,
because a large portion of payments for individual and corporation income taxes are made

8
in the days before the filing date. After that
time, the impact of the PHE on receipts will
be clearer.
In the first eight months of 2020, receipts
were $2,019 billion, a reduction of $256 billion relative to the same period in 2019. This
effect is primarily attributable to lower collections of individual income taxes of $268
billion­
—reflecting lower withheld collections
of $25 billion, lower nonwithheld collections
of $275 billion, and lower refunds of $34 billion. Collections of corporation income taxes
were also lower than last year by $27 billion,
and excise tax receipts were $21 billion lower.
However, social insurance and retirement receipts were $41 billion higher than the same
period last year.
Legislative changes
Two recently enacted laws provided various
tax relief for businesses and individuals facing
difficulties related to COVID-19.
FFCRA provided refundable tax credits for
employers who provide paid sick and family leave to individuals impacted or caring for
family members affected by COVID-19.
In addition, the CARES Act included a number of tax relief provisions for individuals and
businesses. It created a temporary employee
retention tax credit to encourage businesses to
keep employees on payroll and allowed businesses to claim advances for this and for the
FFCRA credits. It delayed payment of the employer share of payroll taxes through the end
of calendar year 2020 and allows employers
to repay them over the next two years, which
will reduce receipts this calendar year, but increase receipts over the subsequent two years.
The CARES Act also allows taxpayers to use

MID-SESSION REVIEW

the full amount of their business losses to
offset nonbusiness income for tax years 2018
through 2020, and provided a five-year carryback for net operating losses in 2018, 2019, or
2020, allowing firms to modify tax returns up
to five years prior to offset taxable income from
those years. It also suspended aviation excise
taxes through the rest of calendar year 2020;
waived penalties for certain early withdrawals and waives required minimum distribution
rules for certain retirement accounts in 2020;
created a partial above-the-line deduction
for non-itemizers of up to $300 in charitable
contributions; excluded from taxation certain
employer-paid student loan repayments; and
reduced the period over which the cost of improvements to certain nonresidential real estate must be depreciated from 39 to 15 years,
along with other, smaller provisions.
Future expected trends in receipts
The full effect of the pandemic on 2020 and
2021 receipts will depend upon the length of
the PHE, the duration of social distancing
measures, and ultimately the effects on economic activity.
Receipt collections in 2021 may remain
lower than the Budget estimate. Even assuming robust economic growth after the stay-athome orders are lifted, receipts are expected to
be lower than projected in the Budget merely
because the declines in first- and second- quarter GDP are projected to be so large that even
a strong rebound will leave annual average
income lower. CBO estimates a robust recovery in 2021 (four-quarter GDP growth of 2.8
percent in 2021 after falling by a projected 5.6
percent in 2020), and has estimated that receipt collections will remain below previouslyprojected levels through 2021.

9

Implications for Receipts and Expenditures

Expenditures
Because of the unprecedented response
to the COVID-19 pandemic, outlays for the
first eight months of the fiscal year reached
$3,900 billion, an increase of $886 billion (29
percent) compared with the same period last
year. Actuals for the entire year are expected
to well exceed the Budget estimate of $4,790
billion for 2020. Higher outlays for programs
in the Departments of Labor, Health and
Human Services (HHS), and the Treasury are
the primary contributors to the change from
last year. The growth in outlays is expected to
decline as the Nation re-opens and the economy rebounds.
Mandatory Programs
Definite appropriations in enacted legislation have increased estimated mandatory
outlays by over $900 billion (see Table 1). The
sections below describe the impact of those
appropriations and administrative actions on
estimated outlays in 2020 and 2021, and the
following four years (through 2025) where
known. These sections do not report updates
to Budget estimates where those updates rely
on economic assumptions.

Unemployment Insurance
Baseline changes
Unemployment Insurance (UI) is a joint
Federal-State program providing temporary
and partial wage replacement to individuals
who are involuntarily unemployed through no
fault of their own. Each State determines its
own benefit formula, which is generally based
on a percentage of prior earnings, up to a cap.
The nationwide average weekly benefit payment is $378, which can be paid for a maximum of 26 weeks in most States. While States
design and operate their own programs, they
operate within the Federal framework provided by the Social Security Act. Benefit payments
are financed by State Unemployment Tax Act
(SUTA) taxes. Federal Unemployment Tax Act
(FUTA) taxes fund State administrative costs,
typically make up 50 percent of the cost of the
Extended Benefits (EB) program discussed in
more detail below, and provide loans to insolvent State trust funds.
Since March 14, 2020, 44.2 million people
have applied for regular UI on a seasonally-

UNEMPLOYMENT INSURANCE: INITIAL CLAIMS
7,000,000

(Seasonally adjusted)

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0

Source: U.S. Department of Labor

10

MID-SESSION REVIEW

UNEMPLOYMENT
INSURANCE:
CONTINUED
CLAIMS
Unemployment
Insurance: Continued
Claims
(Seasonally adjusted)
(Seasonally
adjusted)

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0

Source: U.S. Department of Labor

adjusted basis. Weekly claims have far exceeded the number recorded during the peak of the
Great Recession (UI claims peaked in 2009).
Because some workers who lost their jobs during the COVID-19 pandemic may not have yet
filed for UI, this could understate the number
of workers losing their jobs (or filing a claim
due to reduced hours) since mid-March.
The insured unemployment rate (IUR), or
the number of people receiving UI divided by
the labor force, was 14.4 percent nationwide,
up from 1.2 percent in March. State employment officials report COVID-19 related layoffs
across nearly every industry, with particularly
harsh impacts in leisure and hospitality (36
percent decline in employment), the service
sector (18 percent decline), and construction
(13 percent decline). A State qualifies for 13
or 20 weeks of federally-funded Extended
Benefits (EB) once its 13-week IUR exceeds 5
percent and is higher than the previous two
years. The EB program is available to workers
who have exhausted regular UI benefits during periods of high unemployment. As of June
11, 2020, 48 States have met or exceeded the
threshold of high unemployment and triggered
onto EB, and two more may trigger eligibility
later this month.

Current levels of unemployment are significantly higher than the levels assumed in
the 2021 Budget. As a result, expenditures for
unemployment compensation have far exceeded the Budget estimate. The same is true for
the cost of administering State UI programs,
which fluctuates along with demand for the
program. Outlays for unemployment compensation are also likely to be higher over the fiveyear window relative to the 2021 Budget, as
employment returns to pre-pandemic trends.
Legislative changes
In addition to a surge in claims, legislation
enacted over the past two months has led to
a substantial increase in UI outlays. FFCRA
provided up to $1.0 billion in emergency transfers to State agencies for unemployment compensation administration expenses, and increased the Federal share of EB to 100 percent
through the end of calendar year 2020.
Additionally, the CARES Act increased
benefits and expanded coverage to the selfemployed, independent contractors, and those
with limited work history, among others. Major
provisions of the CARES Act include:

11

Implications for Receipts and Expenditures

• Federal
Pandemic
Unemployment
Compensation (FPUC). FPUC increases
weekly benefits by $600 through July 31,
2020. An estimated $110 billion has been
obligated for FPUC as of June 5, 2020.
• Pandemic Unemployment Assistance
(PUA). PUA is a new program that
provides UI benefits for the self-employed and “gig workers,” among other
groups. This benefit is available through
December 31, 2020. In addition to the
44.2 million people that have applied for
regular UI, 9.7 million people nationwide have filed continuing claims for
PUA, and another 706,000 PUA applications are under review in 42 States that
reported data as of June 6, 2020. The
estimated cost of PUA to date is $11.3
billion.
• Pandemic Emergency Unemployment
Compensation (PEUC). PEUC provides
an additional 13 weeks of benefits on
top of regular benefits, which last for 26
weeks in most States, until the end of
December 2020. An estimated $2.1 billion has been paid in additional weeks of
benefits under PEUC.
These provisions provide affected workers
the ability to mitigate the spread of COVID-19
by maintaining distance from others, while
ameliorating the economic downturn as these
workers purchase food and pay their mortgages or rent, reducing the overall impact on the
economy.
Future expected trends in UI
The cost of these provisions is particularly
uncertain because it depends on the length
of the PHE and the ultimate effects of the
pandemic on the labor market.
CBO projects the unemployment rate will
average 15 percent over the second and third
quarters of calendar year 2020. The first
quarter unemployment rate was 3.1 percent.
However, as jurisdictions begin to repeal or
expire their stay-at-home orders and business
activity gradually rebounds, the labor market
is expected to improve, particularly starting in
the fourth quarter of 2020.

Medicare
Baseline changes
Spending for Medicare through the first
eight months of the fiscal year reached
$532 billion, an increase of $69 billion, or
15 percent compared with the same period last year. The growth in spending this
year is largely due to actions to accelerate
or increase payments due to the COVID-19
PHE. Those actions include accelerated and
advance claim payments to providers and
suppliers, as authorized under current law
and expanded by the CARES Act. Those
advances shifted the timing of payments
forward, resulting in higher outlays in the
near-term and potentially lower outlays for
future payments that are offset to recoup
accelerated and advanced amounts. The effect of accelerated and advance claim payments was offset in part by reduced health
care utilization at the beginning of the PHE,
as providers responded to guidance that recommended limiting elective procedures. The
Administration has also taken regulatory
and administrative actions to broaden access to certain Medicare services during the
COVID-19 PHE, which may result in outlay
changes.
Legislative changes
In addition to expanding the accelerated
and advance claim payments to providers
and suppliers, the CARES Act also created a
Medicare hospital inpatient prospective payment system add-on payment for COVID-19
patients, and increased payments for durable
medical equipment by delaying scheduled payment reductions. Medicare outlays also may
be affected by provisions in the FFCRA and
the CARES Act that eliminate cost-sharing
under Part B for certain medical visits associated with COVID-19 testing and for vaccines, expand telehealth coverage, increase
access to post-acute care, and delay payment
reductions for clinical diagnostic laboratory
tests. Additionally, the CARES Act suspended
Medicare sequestration from May 1 through
December 31, 2020, which will increase outlays. It also extended sequestration of mandatory spending an additional year, through
2030, which will decrease outlays during that
period.

12
Future expected trends in Medicare
These administrative and legislative actions discussed above will increase Medicare
outlays through the duration of the
COVID-19 PHE and may lead to higher outlays in 2021 than estimated in the Budget.
Changes in the utilization of health care services, the number of Medicare beneficiaries,
and spending per beneficiary also will affect
Medicare outlays in 2021 and the following
four years. The assumptions necessary to estimate the impact of these factors on future
Medicare outlays cannot be accurately calculated at this time.
Medicaid
Baseline changes
Medicaid outlays through the first eight
months of the fiscal year have increased by
$24 billion (or 9 percent) compared with the
same period last year. Before the COVID-19
pandemic, 2020 outlays for Medicaid were
expected to be lower than estimated in the
Budget. However, Medicaid spending in 2020
is expected to rise to support the response to
COVID-19 both as a result of higher enrollment and as a result of enacted law.
Legislative changes
The FFCRA increased the Federal Medicaid
match rate by 6.2 percentage points for States
and Territories that maintain eligibility and
enrollment criteria for the length of the PHE,
to provide fiscal relief and help States manage
increased enrollment and health care costs.
CBO estimated this provision will provide an
additional $50 billion to States, before accounting for increases in enrollment. The FFCRA
also created a new option for States to cover
certain uninsured individuals at 100 percent
Federal match for COVID-19 testing.
Future expected trends in Medicaid
Outlays for Medicaid in 2021 are likely to
exceed Budget estimates, largely due to the
impact of the COVID-19 PHE and legislative
changes that increased the Federal Medicaid
match rate by 6.2 percentage points for a period of time. Additionally, the FFCRA delayed
and decreased reductions in State Medicaid

MID-SESSION REVIEW

Disproportionate Share Hospital (DSH) allotments required by the Affordable Care Act
and subsequent legislation. By decreasing the
reduction, the FFCRA will increase Federal
Medicaid outlays by $4 billion between 2021
and 2025. Other actions that are estimated to
affect Medicaid outlays in 2021 include any
continuing or subsequent actions affecting
COVID-19 testing and treatment costs and the
economic contraction.
Technical changes that may affect future
outlays in 2021 and the following four years,
beyond the direct effects of the COVID-19 pandemic, include: whether delayed discretionary
medical care rebounds; changes in utilization,
enrollment or per-beneficiary spending; and
beneficiary access to health care providers
and facilities. The assumptions necessary to
estimate the impact of these factors on future
Medicaid outlays cannot be accurately calculated at this time.
Other mandatory programs
Baseline
While some of the largest spending increases since the release of the 2021 Budget were
in Unemployment Insurance, Medicare, and
Medicaid, outlays for other mandatory programs have also increased. Outlays for the
Supplemental Nutrition Assistance Program
(SNAP) in April and May were higher than
earlier months this fiscal year in part due to
increased participation.
Legislative changes
The CARES Act created a number of new
programs to support small businesses and certain distressed industries. Notably, the CARES
Act established the Paycheck Protection
Program (PPP) to provide forgivable low-cost
loans to businesses that keep their workers on
payroll, and provided $349 billion for this program. An additional $321 billion was provided
for PPP in the Paycheck Protection Program
and Health Care Enhancement Act, and the
Paycheck Protection Program Flexibility Act
of 2020 (Public Law 116-142) provided technical and programmatic fixes to the programs.
The CARES Act and the Paycheck Protection
Program and Health Care Enhancement Act
also authorized new Economic Injury Disaster
Loan (EIDL) grant programs, making avail-

13

Implications for Receipts and Expenditures

able $20 billion in EIDL grants and certain
other small-business loans. 1
The CARES Act also created an economic impact payment for individuals. The law provided
a refundable 2020 tax credit of up to $1,200 for
individuals and $2,400 for married couples filing
jointly and $500 for children under the age of 17.
The payment phases out for individuals starting
at $75,000, for head of household at $112,500,
and for couples at $150,000. JCT and CBO estimated a deficit impact of $292 billion.
The CARES Act also authorized grants,
loans, and equity purchases to support certain hard-hit industries, States, and localities,
and to backstop losses for the Federal Reserve
when creating new lending facilities. The law
appropriated $500 billion to the Department
of the Treasury for these economic stabilization activities. It also provided $150 billion for
a Coronavirus Relief Fund to provide general economic support to States, localities, and
tribal governments. These funds can be used
to address medical or public health needs related to COVID-19, as well as unemployment
or business closures.
In the case of Federal student loans, administrative actions taken by the Department of
Education, and provisions in the CARES Act
suspended principal and interest payments on
federally held student loans, and set the interest rate to zero, through September 30, 2020.
Finally, the FFCRA and the CARES Act
provided an estimated $34 billion in additional resources to nutrition programs, such
as SNAP and school meals, for the COVID-19
PHE. Specifically, those acts appropriated an
additional $8.8 billion for Child Nutrition,
$15.5 billion for the SNAP Contingency Fund,
$300 million for nutrition assistance block
grants to territories, $100 million for the Food
Distribution Program on Indian Reservations,
and an estimated $8.9 billion for the new
pandemic electronic benefit transfer (EBT)
program to feed low-income children while
schools are closed.
1
The $10 billion for EIDL grants provided by
the Paycheck Protection Program and Health Care
Enhancement Act was scored as discretionary and executed as mandatory. This report’s tables showing budget authority provided by that Act or estimated outlays include
those grants in discretionary totals as scored.

Future expected trends
Most additional funds provided to SBA to
support small businesses are expected to be
obligated and outlayed in 2020. The Paycheck
Protection Program Flexibility Act of 2020
extended the period during which borrowers
may use a loan and extended the loan forgiveness period through December 31, 2020.
The costs of the Treasury’s economic stabilization activities are measured in accordance
with the provisions of the Federal Credit
Reform Act of 1990. Using this methodology,
which estimates the cost of loans and other investments accounting for the estimated present value of expected returns or losses on those
investments, CBO estimated the Treasury economic stabilization provisions would have no
cost. OMB’s estimate is not final, as the terms
of some of the programs under the economic
stabilization provisions are still under development, but OMB expects that the costs of the
programs measured under credit reform will
be substantially less than the face value of the
investments. Regardless, because costs are
measured at their present value at the time of
disbursement, the deficit impact of these provisions will be recognized in 2020 and 2021.
Relief provided to student loan borrowers will
similarly be recorded under credit reform, and
impact the deficit in 2020.

Table 3. DISCRETIONARY
BUDGET AUTHORITY
PROVIDED IN THE FOUR
SUPPLEMENTALS
(In billions of dollars)
Budget
Authority
The Coronavirus Preparedness and Response
Supplemental Appropriations Act (Public
Law 116-123, Div. A) ��������������������������������������
7.8
Families First Coronavirus Response Act
(Public Law 116-127, Div. A) ��������������������������
11.3
Coronavirus Aid, Relief, and Economic Security
Act
(Public Law 116-136, Div. B) �������������������������
329.5
The Paycheck Protection Program and Health
Care Enhancement Act (Public Law 116-139,
Div. B) �������������������������������������������������������������
162.1
Total Discretionary Budget Authority ������
510.7
Note: The Seven-Day-After reports are available on
OMB’s website: https://whitehouse.gov/omb/legislative/
budget-enforcement-act-7-day-reports/

14

MID-SESSION REVIEW

Most SNAP funding is expected to outlay in
2020 and the remainder will outlay in 2021. The
Child Nutrition funding is designed to cover additional anticipated costs associated with waivers authorized by the FFCRA during the PHE.

Table 4. ESTIMATED SPENDING
FROM 2021 BALANCES
OF BUDGET AUTHORITY:
DISCRETIONARY PROGRAMS
(In billions of dollars)

Estimated expenditures from
mandatory programs for the four
years following the Budget year
The sections above on mandatory spending describe programs where there are quantifiable, substantive changes from the 2021
baseline estimates (as included in the 2021
Budget) due to the effects of COVID-19 and
enacted legislation. For other mandatory programs, such as Social Security, assumptions
that would allow for updated estimates to future fiscal year outlays (from the 2021 Budget)
are not available.
Discretionary Programs
Before accounting for the COVID-19 response, outlays for non-defense discretionary
programs relative to the Budget were expected
to be slightly higher in 2020 ($1.2 billion) and
slightly lower in 2021 (-$0.5 billion) due to
small policy changes and technical fixes. No
notable changes were expected in outlays for
defense programs.
The enacted supplemental legislation for
COVID-19 provided nearly $511 billion in
discretionary budget authority, which substantially increases estimates of discretionary
outlays. As a result of this authority, defense
outlays are estimated to increase by $7 billion
in 2020 and $2 billion in 2021 while non-defense programs are estimated to increase by
$201 billion in 2020 and $121 billion in 2021.
The remaining authority is estimated to outlay in subsequent years.
The largest new discretionary supplemental
appropriations were provided in the CARES
Act, including:
• $127 billion for the Public Health and
Social Services Emergency Fund for
countermeasures and support for emergency response and healthcare entities.
• $45 billion for the Disaster Relief Fund
for emergency protective measures in-

Total
Outlays from end-of-2021 balances:
2022 �������������������������������������������������
850.6
2023 �������������������������������������������������
366.8
2024 �������������������������������������������������
149.3
2025 �������������������������������������������������
69.5
2026 �������������������������������������������������
37.7
2027 �������������������������������������������������
20.8
2028 �������������������������������������������������
13.5
2029 �������������������������������������������������
7.2
2030 �������������������������������������������������
5.2
Note: Required by 31 USC 1106(a)(3). Balances as of
the end of 2021 include unspent balances of discretionary
budget authority provided in 2021 and prior years, as well
as unspent balances of mandatory contract authority that
is subject to discretionary obligation limitations.

cluding: personal protective equipment
(PPE) and medical supplies, temporary
medical facilities and personnel, sheltering, and 100 percent of National Guard
Title 32 costs until August 21, 2020.
• $35 billion for Transportation: Transit
Infrastructure Grants ($25 billion) and
Grants in Aid for Airports ($10 billion).
The transit grants cover capital and operating expenses to maintain service,
and to reimburse lost revenue due to the
PHE. The airport grants cover operating and capital expenses at over 3,000
airports. Both grants reflect nearly three
times the level of funding provided for
these programs in 2020.
• $31 billion for the Education Stabilization
Fund to support States, school districts,
and institutions of higher education
to prevent, prepare for, and respond to
COVID-19, as well as direct financial assistance to students that can be used to
cover education, food, housing, healthcare, and child care expenses.
In addition, the Paycheck Protection Program
and Health Care Enhancement Act provided
$50 billion for Economic Injury Disaster Loans
to provide small businesses and private, non-

Implications for Receipts and Expenditures

profit organizations low interest loans to alleviate economic injury caused by COVID-19.
Table 4 shows the outlays from balances of
budget authority carried over from 2021, as required by subsection (a)(3) of the MSR statute

15
(31 U.S.C. 1106). Balances as of the end of 2021
include unspent balances of discretionary budget authority provided in 2021 and prior years,
as well as unspent balances of mandatory contract authority that is subject to discretionary
obligation limitations.

IMPLICATIONS FOR FEDERAL
BORROWING AND DEBT
The 2021 Budget projected that debt held by
the public would increase by $1,080 billion in
2020, to $17,881 billion. The $1,080 billion increase in debt held by the public was comprised
of the projected $1,083 billion deficit, slightly
offset by a net -$3 billion in other transactions
affecting borrowing from the public, such as
the change in the Treasury cash balance and
the cash flows of Federal credit programs.
In May, in conjunction with the Quarterly
Refunding, the Department of the Treasury
announced projected 2020 borrowing totaling
$4.5 trillion. The higher-than-estimated 2020
increase in debt held by the public is due both
to the higher expected deficit and to higher financing needs associated with other transactions affecting borrowing from the public. The
Budget had projected that the Treasury cash
operating balance would increase by $3 billion
in 2020, to $385 billion. In May, Treasury announced an expected end-of-2020 cash balance
of $800 billion.
For risk management purposes, Treasury
seeks to maintain a cash balance roughly

equal to at least one week of Government
outflows. The higher cash balance is needed
to manage the changes to outlays and receipts associated with the COVID-19 impacts
and Federal response. In addition, the net
cash flows of Federal loan and loan guarantee programs have increased due to the creation of the Paycheck Protection Program and
the Treasury credit support provided under
Section 4003 of the CARES Act, as well as the
suspension of many student loan payments in
the current fiscal year.
Debt held by the public is also expected to
grow more quickly in 2021 than had been projected in the Budget, due to the higher projected borrowing required to finance the Federal
deficit and the continued higher net cash flows
for Federal credit programs.
Due to the changes to outlay, receipt, and
other financing projections discussed throughout this document, 2020 and 2021 end-of-year
debt held by the public are projected to be
higher than the Budget estimates.

17

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

BUDGET OF THE U.S. GOVERNMENT
F IS CAL Y E AR 2021