    [Analytical Perspectives]
    [Budget Enforcement Act Preview Report]
    [13. Review of Direct Spending and Receipts]
    [From the U.S. Government Printing Office, www.gpo.gov]

                                  Introduction
      The Budget Enforcement Act of 1990 established caps to control
    discretionary spending and a pay-as-you-go requirement to control
    legislative changes to mandatory programs and revenues. It did not,
    however, control the growth of mandatory spending resulting from
    economic and technical factors. In August 1993, the President
    established procedures to control this growth in mandatory spending by
    issuing Executive Order 12857. The Order set targets on the level of
    mandatory spending, excluding deposit insurance and net interest, for
    1994 through 1997. The Order also specified actions that must be taken
    if the targets are exceeded. These actions may include specific revenue
    or direct spending changes or reductions in the discretionary caps. The
    savings to remove the excess in the prior, current, and/or budget years
    can be achieved over a six-year period covering the current year through
    four years beyond the budget year. The President also has the option to
    recommend breaching the targets because of economic conditions or other
    specific reasons. This chapter fulfills the Order's requirements for an
    annual review of direct spending and receipts.
      As required by the Order, OMB issued an initial report to the Congress
    in September 1993 setting the mandatory targets for 1994 through 1997.
    The initial targets were based on the economic and technical assumptions
    used in preparing the congressional budget resolution for 1994. They
    were consistent with the policies in the resolution as adjusted by final
    congressional action on the Omnibus Budget Reconciliation Act of 1993
    (OBRA93). The Order requires annual adjustment of these targets. In the
    1995 and 1996 Budgets, the targets were revised. This review provides
    the next annual revision of the targets.
                             Adjustments to Targets
      The targets must be adjusted each year for increases in the estimated
    numbers of beneficiaries of mandatory programs, and for changes in
    receipts in legislation enacted during the year. Table 13-1 shows the
    targets as revised for these circumstances. As the table shows, the
    targets have increased by $20.6 billion over the three year period 1995
    through 1997 since February 1995.

      Table 13-1.  SUMMARY OF CHANGES TO MANDATORY TARGETS AND CURRENT LAW
                                     OUTLAYS
                            (In billions of dollars)
    ------------------------------------------------------------------------
                                            1995     1996     1997   1995-97
    ------------------------------------------------------------------------

        Changes to mandatory targets

    Mandatory targets as of February
     1995...............................    793.2    833.3    900.8  .......

    Adjustments for:
       Increase in beneficiaries........      0.2      0.2      1.1      1.5
       Changes in receipts..............     -0.1     -0.1      0.2       -*
       Reclassification of Universal
       Service Fund.....................      4.3      4.3      4.3     12.9
       Changes due to category shifts...      1.8      2.3      2.1      6.3
                                         -----------------------------------
      Total adjustments.................      6.2      6.7      7.7     20.6

    Mandatory targets as of March 1996..    799.5    840.0    908.5  .......

      Changes to outlays under current
                    laws

    Outlays under current laws as of
     February 1995......................    763.2    813.8    873.9  .......

    Adjustments for:
       Cost of living adjustment........     -1.5     -3.9     -5.5    -10.9
       Increases in beneficiaries.......      0.2      0.2      1.1      1.5
       Decreases in beneficiaries.......    -11.0    -11.9    -15.3    -38.1
       Reclassification of Universal
       Service Fund.....................      4.3      4.3      4.3     12.9
      Changes due to category shifts....      1.8      2.3      2.1      6.3
       Enacted paygo legislation........        *      1.1      1.9      3.1
       Other adjustments................      2.1      2.7      5.1      9.9
                                         -----------------------------------
      Total adjustments.................     -4.0     -5.2     -6.2    -15.4

    Outlays under current laws as of
     March 1996.........................    759.2    808.6    867.7  .......
    Amount over (+) or under (-) the
     current target.....................    -40.3    -31.4    -40.8   -112.5

    Memorandum:
      Initial mandatory targets
       (Executive Order 12857)..........    784.7    823.7    887.7  .......
    ------------------------------------------------------------------------
    *$50 million or less
    [[Page 210]]
      Table 13-1 also shows the major changes in current law estimates since
    1996 Budget. Over the three years, current law estimates have declined
    by $15.4 billion. Most of this difference is the result of downward
    reestimates for Commodity Credit Corporation, Social Security, Earned
    Income Tax Credit, Supplementary Security, Income, and Food Stamps
    programs.
      The Order requires an adjustment to the targets to reflect increases
    in estimated beneficiaries. Table 13-2 shows the current estimates of
    beneficiaries of major benefit payment programs as well as the level
    implicit in the 1996 Budget targets. In six programs the estimates of
    beneficiaries have increased. Therefore, the targets have been increased
    by applying the percentage change in the number of beneficiaries to the
    target level of the program. The largest adjustments are for
    Unemployment insurance, Military retirement, and Veterans' pensions. In
    total, the targets have been increased by $1.5 billion for the three-
    year period because of increases in beneficiary estimates.
      An adjustment to the mandatory targets is also required for any
    enacted changes in receipts. This allows for tradeoffs between receipt
    increases and outlay reductions. In the last year, legislation has not
    significantly increased receipts over the three-year period.
      The mandatory targets are adjusted for reclassifications of spending.
    As a result of review, while scoring the Telecommunications Act of 1996,
    the universal service fund of the Federal Communications Commission has
    been reclassified as budgetary to more accurately reflect its
    governmental nature. Inclusion of the fund's pre-Telecommunications Act
    outlays in the budget increases mandatory outlays and the targets by
    $4.3 billion each year. In addition, certain Federal-aid highway
    projects that are exempt from limitations imposed by the Appropriations
    Committee have been reclassified from discretionary to mandatory. This
    change increases the mandatory targets by $1.8 billion in 1995, $2.3
    billion in 1996, $2.1 billion in 1997. The targets have also been
    adjusted for several minor categorical shifts.

                             Table 13-2.  BENEFICIARIES ESTIMATES FOR MAJOR BENEFIT PROGRAMS
                                              (Annual average, in thousands)
    ----------------------------------------------------------------------------------------------------------------
                                                1995     1996     1997     1998     1999     2000     2001     2002
    ----------------------------------------------------------------------------------------------------------------
     Family education loans:
       Level implicit in 1996 Budget target.    5,394    3,898    3,695       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    4,309    3,392    2,918    2,709    2,395    2,453    2,518    2,588
     Direct loans:
       Level implicit in 1996 Budget target.    1,694    3,451    3,940       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    1,031    2,151    2,773    3,146    3,594    3,678    3,771    3,872
     AFDC work programs:
       Level implicit in 1996 Budget target.      708      721      727       NA       NA       NA       NA       NA
       OMB March 1996 estimate\1\...........      641      631      627      624      624      624       NA       NA
     Foster care and adoption assistance:
       Level implicit in 1996 Budget target.      365      392      410       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............      368      387      416      436      458      482      503      528
     Medicaid:
       Level implicit in 1996 Budget target.   36,500   37,715   39,146       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............   36,168   37,516   38,674   39,763   40,825   41,808   42,719   43,548
     Medicare:
       Hospital insurance:
         Level implicit in 1996 Budget
         target.............................   37,009   37,625   38,206       NA       NA       NA       NA       NA
         OMB March 1996 estimate............   36,934   37,528   38,073   38,578   39,054   39,548   40,046   40,554
       Supplementary medical insurance:
         Level implicit in 1996 Budget
         target.............................   35,651   36,244   36,760       NA       NA       NA       NA       NA
         OMB March 1996 estimate............   35,498   36,006   36,490   36,923   37,324   37,740   38,163   38,576
     Railroad retirement:
       Level implicit in 1996 Budget target.      805      783      761       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............      799      778      755      731      708      686      664      643
     Federal civil service retirement:
       Level implicit in 1996 Budget target.    2,297    2,327    2,365       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    2,287    2,324    2,349    2,371    2,391    2,412    2,433    2,459
     Military retirement:
       Level implicit in 1996 Budget target.    1,805    1,826    1,847       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    1,814    1,833    1,854    1,874    1,893    1,908    1,924    1,939
     Unemployment insurance:
       Level implicit in 1996 Budget target.    9,000    9,000    9,000       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    8,100    8,950    9,300    9,250    9,190    9,160    9,170    9,180
     Food stamps:\2\
       Level implicit in 1996 Budget target.   27,314   27,316   27,307       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............   26,622   26,139   25,947   26,101   26,250   26,383   26,516   26,650
     Child nutrition:
       Level implicit in 1996 Budget target.   37,557   38,544   39,499       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............   36,060   37,279   38,476   39,494   39,319   41,281   42,050   42,826
     Family support: maintenance assistance
     (AFDC):\3\
       Level implicit in 1996 Budget target.    5,250    5,330    5,410       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    4,866    4,618    4,684    4,750    4,817    4,876    4,935    4,994
    [[Page 211]]
     Family support: emergency assistance:
       Level implicit in 1996 Budget target.       NA       NA       NA       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............       80       84       87       91       95       98      102      106
     Supplemental security income:
       Level implicit in 1996 Budget target.    6,333    6,822    7,281       NA       NA       NA       NA       NA
       OMB March 1996 estimate:
         Aged...............................    1,327    1,315    1,295    1,280    1,265    1,255    1,240    1,235
         Blind/Disabled.....................    4,743    4,995    5,210    5,405    5,585    5,750    5,910    6,050
                                             -----------------------------------------------------------------------
         Total, OMB March 1996 estimate.....    6,070    6,310    6,505    6,685    6,850    7,005    7,150    7,285
     Earned income tax credit:
       Level implicit in 1996 Budget target.   17,000   17,000   17,005       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............   15,271   15,044   15,219   15,431   15,698   15,885   16,127   16,367
     Social Security (OASDI):
       Old age and survivors insurance:
         Level implicit in 1996 Budget
         target.............................   37,459   37,821   38,166       NA       NA       NA       NA       NA
         OMB March 1996 estimate............   37,309   37,653   38,005   38,335   38,650   38,975   39,308   39,655
       Disability insurance:
         Level implicit in 1996 Budget
         target.............................    5,685    6,050    6,413       NA       NA       NA       NA       NA
         OMB March 1996 estimate............    5,656    5,955    6,277    6,588    6,892    7,178    7,456    7,733
     Veterans' compensation:
       Level implicit in 1996 Budget target.    2,532    2,550    2,557       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............    2,533    2,546    2,551    2,551    2,548    2,543    2,538    2,529
     Veterans' pensions:
       Level implicit in 1996 Budget target.      788      744      706       NA       NA       NA       NA       NA
       OMB March 1996 estimate..............      799      763      731      704      682      665      651      641
    ----------------------------------------------------------------------------------------------------------------
    NA = Not Applicable

    \1\Midsession estimate as of July 1995. Estimates not available for 2001 and 2002.

    \2\Beneficiary estimates do not include Nutrition Assistance Program recipients.

    \3\Average number of monthly cases.

      During the past year, no reconciliation or emergency mandatory
    legislation was enacted into law. Thus, there are no additional
    adjustments to the targets required by the Order.
                          Growth in Mandatory Programs
      Table 13-3 shows outlays for mandatory and related programs for the
    years 1995 through 2002. Under current law, spending on mandatory
    programs including net interest is projected to be $1,102.2 billion in
    1997, $61.5 billion more than the 1996 estimate. By 2002, spending for
    mandatory programs including net interest is projected to reach $1,423.5
    billion.

                                            Table 13-3.  OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW
                                                                     (In billions of dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Estimate
                                                                     1995   ----------------------------------------------------------------------   Total
                                                                    actual     1996      1997      1998      1999      2000      2001      2002    1996-2002
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Human resources programs:
       Education, training, employment, and social services:
         Family education loan...................................       3.5       3.0       2.2       2.0       1.8       1.7       1.8       1.9       14.5
         Direct loan.............................................       0.8       0.6       0.7       0.9       1.3       1.5       1.6       1.7        8.2
         Social services.........................................       8.8       9.6       9.8      10.2      10.7      11.2      11.8      12.4       75.6
         Other...................................................       2.5       1.1       0.8      -0.1      -0.2      -0.3      -0.3      -0.2        0.7
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, education, training, employment, and social
         services................................................      15.7      14.3      13.5      12.9      13.5      14.1      14.9      15.8       99.0
       Health:
         Medicaid................................................      89.1      94.9     102.3     112.0     121.8     133.2     145.6     159.4      869.0
         FEHB and other..........................................       4.3       4.2       4.5       4.6       4.5       4.9       5.4       5.7       33.9
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, health........................................      93.4      99.1     106.8     116.5     126.3     138.0     151.0     165.1      902.9
       Medicare:
         Hospital insurance......................................     113.6     125.5     137.1     149.3     161.9     175.0     188.8     203.1    1,140.6
         Supplementary medical insurance.........................      63.5      69.1      76.3      84.8      93.0     102.1     112.5     124.1      661.8
         Medicare premiums and collections.......................     -20.2     -19.8     -20.3     -22.0     -23.3     -24.3     -25.3     -26.4     -161.5
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, medicare......................................     156.9     174.7     193.1     212.0     231.6     252.8     275.9     300.7    1,640.9
    [[Page 212]]
       Income security:
         General retirement and disability:
           Railroad retirement...................................       3.7       4.1       4.2       4.2       4.2       4.3       4.3       4.4       29.7
           Other.................................................       1.0       0.5       0.3       0.4       0.4       0.6       0.5       0.6        3.2
                                                                  ------------------------------------------------------------------------------------------
           Subtotal, general retirement and disability...........       4.7       4.6       4.4       4.6       4.6       4.9       4.9       5.0       32.9
         Federal employee retirement and disability:
           Civilian employees retirement.........................      38.8      40.1      42.3      44.3      46.4      48.6      50.9      53.6      326.1
           Military retirement...................................      27.8      28.5      29.7      30.8      31.9      32.9      34.0      35.1      222.9
           Other.................................................      -0.8      -0.7      -0.8      -0.6      -0.6      -0.6      -0.5      -0.5       -4.3
                                                                  ------------------------------------------------------------------------------------------
           Subtotal, Federal employees retirement and disability.      65.8      67.8      71.2      74.5      77.7      80.9      84.3      88.2      544.7
         Unemployment compensation...............................      21.3      23.7      24.7      25.3      26.1      27.0      28.1      29.2      184.0
         Food and nutrition assistance:
           Food stamps (incl. Puerto Rico).......................      25.6      26.3      27.5      28.6      29.6      30.7      32.0      33.3      208.0
           Child nutrition programs..............................       7.5       8.2       8.6       9.2       9.7      10.3      10.8      11.4       68.1
           Other.................................................       0.5       0.5       0.4       0.4       0.4       0.4       0.4       0.4        3.1
                                                                  ------------------------------------------------------------------------------------------
           Subtotal, food and nutrition assistance...............      33.5      35.0      36.5      38.2      39.8      41.4      43.2      45.1      279.2
         Other income security:
           Supplemental security incom...........................      24.5      24.5      28.3      30.3      32.1      36.5      33.2      37.7      222.6
           Family support payments...............................      17.1      17.4      18.0      18.4      19.1      19.7      20.4      21.1      133.9
           Earned income tax credit..............................      15.2      18.1      19.9      20.7      21.6      22.6      23.5      24.4      150.9
           Other.................................................      -0.8      -0.9      -1.0      -1.1      -1.3      -1.5      -1.4      -1.5       -8.7
                                                                  ------------------------------------------------------------------------------------------
           Subtotal, other income security.......................      56.0      59.1      65.2      68.3      71.4      77.3      75.7      81.6      498.7
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, income security...............................     181.3     190.3     202.0     210.9     219.6     231.5     236.2     249.1    1,539.5
       Social Security...........................................     333.3     348.1     364.8     383.3     401.7     421.3     441.9     463.5    2,824.7
       Veterans' benefits and services:
        Compensation\1\..........................................      14.8      14.1      15.7      16.2      16.5      18.1      16.2      17.8      114.7
         Pensions\1\.............................................       3.0       2.8       3.0       3.0       3.5       3.9       3.4       3.8       23.3
         Other...................................................       2.0       2.1       2.3       2.3       2.2       2.3       2.3       2.3       15.7
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, veterans benefits and services................      19.9      19.0      20.9      21.4      22.3      24.2      21.9      23.9      153.7
                                                                  ==========================================================================================
    Subtotal, human resources programs                                800.4     845.5     901.1     957.0   1,015.0   1,082.0   1,141.8   1,218.1    7,160.7
    Other programs included in the entitlement target:
       Agriculture:
         Farm price supports (CCC)\2\............................       6.0       3.2       3.6       5.1       5.0       4.4       3.8       3.3       28.5
         Other...................................................      -0.3       0.6       0.1         *         *       0.1       0.2       0.2        1.1
                                                                  ------------------------------------------------------------------------------------------
         Subtotal, agriculture...................................       5.8       3.8       3.7       5.1       5.0       4.5       4.0       3.5       29.6
    Undistributed offsetting receipts:
       Employer share, employee retirement.......................     -34.4     -33.4     -34.4     -35.2     -36.4     -38.2     -40.0     -42.3     -259.9
       Rents and royalties on the Outer Continental Shelf........      -2.4      -2.7      -3.1      -2.6      -2.6      -2.6      -2.6      -2.6      -18.7
       Other offsetting receipts: Spectrum auction, privatize Elk
       Hills, sale of power marketing administration.............      -7.6      -4.2      -1.7      -4.4  ........  ........  ........  ........      -10.3
                                                                  ------------------------------------------------------------------------------------------
      Subtotal, undistributed offsetting receipts................     -44.5     -40.3     -39.2     -42.2     -39.0     -40.7     -42.6     -44.9     -288.9
    Other functions..............................................      -2.6      -0.4       2.1      -0.1      -0.4       0.8        -*      -0.2        1.8
                                                                  ------------------------------------------------------------------------------------------
    Subtotal, other programs included in the entitlement target..     -41.2     -37.0     -33.4     -37.2     -34.3     -35.4     -38.6     -41.5     -257.4
                                                                  ------------------------------------------------------------------------------------------
    Subtotal, mandatory programs included in the entitlement
     target......................................................     759.2     808.6     867.7     919.8     980.7   1,046.6   1,103.2   1,176.6    6,903.3
    Deposit insurance............................................     -17.9      -9.0      -4.6      -1.6        -*      -2.0      -1.3      -1.4      -19.9
    Net interest:
       Interest on the public debt...............................     332.4     344.6     345.8     347.6     352.1     356.8     360.9     367.6     2475.5
       Interest received on trust funds..........................     -93.2     -97.6    -100.4    -103.3    -105.5    -109.1    -108.8    -111.4     -736.1
       Other interest............................................      -7.1      -5.9      -6.3      -5.7      -6.0      -6.7      -7.4      -7.8      -45.9
                                                                  ------------------------------------------------------------------------------------------
    Subtotal net interest........................................     232.2     241.1     239.1     238.6     240.6     241.1     244.6     248.4     1693.5
                                                                  ------------------------------------------------------------------------------------------
    Total, outlays for mandatory and related programs............     973.5   1,040.7   1,102.2   1,156.9   1,221.2   1,285.7   1,346.6   1,423.5    8,576.8
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    *$50 million or less.

    \1\13 benefit payments are outlayed in 2000. Only 11 benefit payments are outlayed in 1996 and 2001.

    \2\Figures reflect the extension of authority for farm programs that was in place in December 1995. However authority for many farm programs expired
      after this date. At the time of the 1997 budget preparation, new authority had not been enacted. Therefore under current law, authority for these
      programs has reverted back to provisions contained in the 1938 and 1949 Farm Bills. See Chapter 15 for estimates of this authority.
    [[Page 213]]
      Spending on programs covered by the mandatory targets is projected to
    grow from $808.6 billion in 1996 to $1,176.6 billion in 2002, an annual
    average rate of 6.5 percent. In percentage terms, the areas of largest
    growth are the health entitlements. More than half of the growth in
    programs covered by the mandatory targets is in Medicaid and Medicare.
    For additional information on the trends in mandatory spending, see
    Chapter 15 ``Current services estimates'' in this volume.
                               Growth in Receipts
      Baseline receipts are projected to be $1,501.5 billion in 1997, $73.6
    billion more than the 1996 estimate. By 2002, baseline receipts are
    projected to reach $1,915.9.0 billion. For additional information on the
    trends in baseline receipts, see Chapter 15 ``Current Service
    Estimates'' in this volume.
      The Order requires a comparison between the current level of receipts
    and the levels projected as of the date of enactment of OBRA93
    (September 1993 Midsession). As shown in Table 13-4, receipts are higher
    than the September 1993 Midsession estimates in each year, by amounts
    ranging from $25.0 billion to $65.9 billion. These increases are the net
    effect of legislative, administrative and regulatory changes; revisions
    in economic assumptions; and technical estimating revisions. Revised
    economic assumptions, primarily higher wages and salaries, and corporate
    profits, have increased receipts in each year, by amounts ranging from
    $17.2 billion to $56.6 billion. Technical revisions, primarily
    reflecting collection experience, updated tabulations from tax returns,
    and revisions in historical economic data, have increased receipts in
    each year except 1996. Regulatory and legislative changes since
    September 1993 have also increased receipts in each year.

    Table 13-4.  COMPARISON OF 1994 MIDSESSION (CBO UPDATED) AND 1996 BUDGET
                                BASELINE RECEIPTS
                             (In billions of dollars)
    ------------------------------------------------------------------------
                                        1995      1996      1997      1998
    ------------------------------------------------------------------------
    1994 Midsession baseline
     estimate.......................   1,329.5   1,402.9   1,457.6   1,512.6
    Revised economic assumptions:
       Individual income taxes......      -0.1       7.6      13.0      19.8
       Corporation income taxes.....      13.9      16.5      22.1      28.4
       Social insurance taxes and
       contributions................      -1.4       0.7       5.2       8.4
       Excise taxes.................       0.8       0.9       0.8       0.8
       Estate and gift taxes........       0.2       0.2       0.2       0.3
       Customs duties...............       1.0       0.5       1.1       1.4
       Federal Reserve deposit of
       earnings.....................       2.8       0.2      -1.6      -2.5
       Other miscellaneous receipts.  ........  ........  ........  ........
                                     ---------------------------------------
      Subtotal, economic assumptions      17.2      26.6      40.9      56.6

    Technical revisions:
       Individual income taxes......      -7.7     -10.7      -9.6      -8.2
       Corporation income taxes.....      15.4      17.8      22.5      30.3
       Social insurance taxes and
       contributions................      -5.5     -11.0      -9.4     -12.6
       Excise taxes.................       0.3      -4.1      -6.6      -7.0
       Estate and gift taxes........       0.8       0.9       1.0       1.2
       Customs duties...............      -1.9      -1.3      -0.9      -0.8
       Federal Reserve deposit of
       earnings.....................       3.1       5.2       5.1       5.4
       Other miscellaneous receipts.      -0.1      -0.4      -0.4      -0.4
                                     ---------------------------------------
      Subtotal, technical revisions.       4.4      -3.5       1.8       7.9

    Enacted legislation.............       3.9       1.9       1.2       1.4
    Administration action\1\........       0.2       0.1       0.1       0.1
                                     ---------------------------------------
       Total changes................      25.7      25.0      43.9      65.9
                                     ---------------------------------------
    1997 Budget baseline estimate...   1,355.2   1,427.9   1,501.5   1,578.6
    ------------------------------------------------------------------------
    \1\Reflects the effect of regulations affecting hedging transactions.

         Comparison of Mandatory Targets and Outlays under Current Laws
      As Table 13-1 shows, estimates of spending for programs covered by the
    targets under current laws are $40.3 billion below the target for 1995,
    $31.4 billion below the target for 1996, and $40.8 billion below the
    target for 1997. Over the three year period from 1995-97, projections of
    current law spending are $112.5 billion below the targets. While the
    targets have increased since the 1995 Budget, current law levels have
    decreased creating more room under the targets. As discussed above, the
    targets have increased as a result of upward revisions in beneficiary
    estimates. Under the Order, decreases in beneficiary estimates, do not
    affect the targets. If the caps were adjusted for the decreases, using
    the same mechanism applied to increases, the targets would have been
    reduced by $38.1 billion over the three years. Current law levels have
    decreased reflecting changes in beneficiaries.
    [[Page 214]]
      Since current law spending is projected to be below the targets, a
    special message to reduce direct spending is not required.
           Comparison of Mandatory Targets and Presidential Proposals
      Enactment of the proposals in the President's budget would change the
    levels of the targets and estimated outlays. As shown in Table 13-5,
    enactment of the President's revenue proposals would decrease the
    mandatory targets by $1.6 billion in 1996 and $11.7 in 1997. This
    reduction in revenue is more than offset by the proposed $13.7 billion
    decrease in direct spending. The target enforcement procedure allows for
    this type of tradeoff between decreases in revenue and decreases in
    direct spending. After adjusting the targets to reflect the President's
    policy initiatives, spending under the President's budget is $34.8
    billion below the target for 1996 and $37.9 billion below the target for
    1997. Over the three year period from 1995-97, spending under the
    President's proposal is $113.0 billion below the targets.

        Table 13-5.  MANDATORY TARGETS ASSUMING ENACTMENT OF PRESIDENTIAL
                                    PROPOSALS
                            (In billions of dollars)
    ------------------------------------------------------------------------
                                        1995      1996      1997     1995-97
    ------------------------------------------------------------------------

            Mandatory targets

    Current mandatory targets.......     799.5     840.0     908.5  ........

     Adjustment to targets if the
     President's proposals are
     enacted:
       Tax reduction................  ........      -1.3     -17.6     -18.8
       Other revenue proposals......  ........      -0.3       5.8       5.5
                                     ---------------------------------------
       Total adjustments............  ........      -1.6     -11.7     -13.3

    Targets adjusted for
     Presidential proposals.........     799.5     838.4     896.8  ........

      Proposed outlays for programs
          covered by the target

    Outlays under current law.......     759.2     808.6     867.7  ........
      Presidential proposals........  ........      -4.9      -8.8     -13.7
                                     ---------------------------------------
    Proposed outlay totals..........     759.2     803.6     858.9  ........

    Amount over (+) or under (-) the
     targets........................     -40.3     -34.8     -37.9    -113.0
    ------------------------------------------------------------------------