[Analytical Perspectives]
[Other Technical Presentations]
[18. National Income and Product Accounts]
[From the U.S. Government Publishing Office, www.gpo.gov]
[[Page 339]]
18. NATIONAL INCOME AND PRODUCT ACCOUNTS
The National Income and Product Accounts (NIPAs) are an integrated set
of measures of aggregate U.S. economic activity that are prepared by the
Bureau of Economic Analysis of the Department of Commerce. One of the
many purposes of the NIPAs is to measure the Nation's total production
of goods and services, known as gross domestic product (GDP), and the
incomes generated in its production. GDP is measured as the sum of final
expenditures--consumer spending, private investment, net exports, and
government consumption and investment. Because the NIPAs are widely used
in economic analysis, it is important to show the NIPA presentation of
Federal transactions.
Federal transactions are included in the NIPAs as part \1\ of the
government sector. The concepts for the Federal sector have been
designed to measure certain important economic effects of Federal
transactions in a way that is consistent with the conceptual structure
of the entire set of integrated accounts. The NIPA Federal sector is not
itself a budget, because it is not a financial plan for proposing,
determining, and controlling the fiscal activities of the Government.
Rather, it is an accounting translation of the budget to meet
specialized and important needs, chiefly the measurement of the impact
of Federal receipts, current expenditures, and the current deficit on
the national economy. NIPA concepts differ in many ways from budget
concepts, and therefore the NIPA presentation of Federal finances is
significantly different from that of the budget.
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\1\ The other part of the government sector is a single consolidated
set of transactions for all State and local units of government
combined.
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GDP is a measure of the Nation's final output, which excludes
intermediate product to avoid double counting. Government consumption
expenditures and gross investment are included in GDP as part of final
output, together with personal consumption expenditures, gross private
domestic investment, and net exports of goods and services. Other
Federal expenditures--transfer payments, grants to State and local
governments, subsidies, and net interest payments--are not final output.
An entire set of receipt and current expenditure transactions of the
Federal Government is prepared as one sector of the NIPAs; however, when
the accounts for all the sectors are consolidated into an account for
the Nation as a whole, transfer payments, grants, subsidies, and
interest are canceled out by the receipt of those payments as income in
other sectors. This leaves only government consumption expenditures and
gross investment--State and local as well as Federal--to be included in
final output.
Differences Between the NIPAs and the Budget
Federal transactions in the NIPAs are measured according to NIPA
accounting concepts in order to be compatible with the purposes of the
NIPAs and other transactions recorded in the NIPAs. As a result, on a
fiscal year basis, they differ from the budget in netting, timing, and
coverage. These differences cause total receipts and expenditures in the
NIPAs to differ from total receipts and outlays in the budget.
Differences in timing and coverage also cause the NIPA current deficit
to differ from the budget deficit. Netting differences have equal
effects on receipts and expenditures and thus have no effect on the
current deficit. Besides these differences, the NIPAs combine
transactions into different categories from those used in the budget.
Netting differences arise when the budget records certain transactions
as offsets to outlays while they are recorded as receipts in the NIPAs.
The budget treats all income that comes to the Government due to its
sovereign powers--mainly, but not exclusively, taxes--as governmental
receipts. On the other hand, the budget offsets against outlays any
income that arises from voluntary business-type transactions with the
public. The NIPAs generally follow this concept as well, and all income
to government enterprises such as the Postal Service or the power
administrations is offset against expenditures. However, the NIPAs have
a narrower definition of ``business-type transactions''. Rents,
royalties, and regulatory or inspection fees are recorded in the NIPAs
under receipts as business nontaxes. The NIPAs include Medicare premiums
as Government receipts, while the budget classifies them as business-
type transactions.
In the budget, any intragovernmental income from one account to
another is offset against outlays rather than being recorded as a
receipt. Government contributions for employee pensions are an example:
the budget offsets these payments against outlays. In contrast, the
NIPAs treat the Federal Government like any other employer and show
contributions for employee social insurance as expenditures by the
employing agencies and governmental (rather than offsetting) receipts to
the appropriate social insurance funds. The NIPAs also include certain
imputations that the budget does not. For example, unemployment benefits
for Federal employees are financed by direct appropriations rather than
social insurance contributions. The NIPAs impute social insurance
contributions by employing agencies to finance these benefits--again,
treating the Federal Government like any other employer.
Timing differences for receipts occur because the NIPAs generally
record personal taxes and social insurance contributions when they are
paid and business
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taxes when they accrue, while the budget generally records receipts when
they are received. A type of timing difference arises on the expenditure
side because of the NIPA treatment of government investment. The budget
includes outlays for Federal investments as they are paid for, while the
Federal current account of the NIPAs instead includes a depreciation
charge on past investments (``consumption of general government fixed
capital'') among ``current expenditures.'' The inclusion of depreciation
on fixed capital (structures and equipment) in current expenditures is
intended as a proxy for the services of capital; i.e., for its
contribution to government output of public services.
The budget and the NIPAs also have coverage differences. The NIPAs
exclude transactions with U.S. territories. The NIPAs also exclude the
proceeds from the sales of nonproduced assets such as land. Bonuses paid
on Outer Continental Shelf oil leases and proceeds from broadcast
spectrum auctions are shown as offsetting receipts in the budget and are
deducted from budget outlays. In the NIPAs these transactions are
excluded as an exchange of assets with no production involved.
Financial transactions such as loan disbursements, loan repayments,
loan asset sales, and loan guarantees are excluded from the NIPAs on the
grounds that such transactions simply involve an exchange of assets. In
contrast, the budget records the estimated subsidy cost of the direct
loan or loan guarantee as an outlay when the loan is disbursed. The cash
flows with the public are recorded in nonbudgetary accounts as a means
of financing the budget deficit rather than as budgetary transactions
themselves. This treatment recognizes that part of a Federal direct loan
is an exchange of assets with equal value but part is a subsidy to the
borrower. It also recognizes the subsidy normally granted by loan
guarantees. In the NIPAs, neither the subsidies nor the loan
transactions are included; however, the NIPAs include all interest
transactions with the public, including net interest paid to the
financing accounts.
Deposit insurance outlays for resolving failed banks and thrift
institutions are similarly excluded from the NIPAs on the grounds that
there are no offsetting current income flows from these transactions. In
1991, this exclusion was the largest difference between the NIPAs and
the budget and tended to make the budget deficit larger than the NIPA
current deficit. In subsequent years, as assets acquired from failed
financial institutions have been sold, these collections have tended to
make the budget deficit smaller than the NIPA current deficit.
Federal Sector Receipts
Table 18-1 shows Federal receipts in the four major categories used in
the NIPAs, which are similar to the budget categories but with
significant differences.
Table 18-1. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 1988-1999
(In billions of dollars)
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Actual Estimate
Description ------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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RECEIPTS
Personal tax and nontax receipts............................ 407.9 458.3 477.3 477.4 485.8 513.3 555.2 598.6 668.6 757.3 785.1 807.8
Corporate profits tax accruals.............................. 107.7 119.1 116.5 111.4 115.4 130.6 152.5 180.0 192.4 206.0 220.8 223.9
Indirect business tax and nontax accruals................... 60.4 61.7 63.6 75.9 80.9 85.2 97.1 95.2 91.1 92.1 92.1 105.7
Contributions for social insurance.......................... 405.6 430.8 455.1 476.6 499.0 522.7 551.7 578.4 599.8 636.5 664.5 694.8
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Total receipts........................................ 981.5 1,069.9 1,112.5 1,141.5 1,181.0 1,251.8 1,356.5 1,452.2 1,551.9 1,691.9 1,762.4 1,832.1
==============================================================================
CURRENT EXPENDITURES
Consumption expenditures.................................... 385.4 401.4 419.9 444.4 447.6 449.9 445.6 444.9 442.1 457.5 459.7 468.6
Defense................................................... 296.3 301.8 308.8 324.4 318.0 313.2 305.7 300.5 298.1 307.5 304.7 305.7
Nondefense................................................ 89.1 99.7 111.1 118.1 129.6 136.7 139.9 144.5 144.0 150.0 154.9 162.9
Transfer payments........................................... 431.6 461.4 505.6 509.5 607.4 651.6 678.3 714.2 750.9 786.3 815.1 851.2
To persons................................................ 420.5 449.7 490.7 535.7 595.8 634.3 661.9 699.9 737.3 774.1 802.8 839.0
To the rest of the world.................................. 11.1 11.7 14.9 -26.1 11.5 17.3 16.4 14.3 13.6 12.2 12.3 12.2
Grants-in-aid to State and local governments................ 108.4 115.8 128.4 147.1 168.4 180.3 197.2 211.9 215.3 220.0 235.6 259.0
Net interest paid........................................... 146.5 161.9 178.5 187.1 197.9 192.2 195.6 220.3 226.2 234.2 231.0 229.3
Subsidies less current surplus of Government enterprises.... 34.4 32.9 29.5 31.6 34.1 38.7 38.4 37.5 37.7 38.2 37.2 35.7
Wage disbursements less accruals............................ 0.1 ......... ......... 0.1 ......... ......... ......... ......... ......... ......... ......... .........
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Total current expenditures............................ 1,106.4 1,173.4 1,261.9 1,319.9 1,455.3 1,512.6 1,555.1 1,628.9 1,672.2 1,736.2 1,778.5 1,843.8
==============================================================================
Current deficit (-)................................... -124.9 -103.5 -149.3 -178.4 -274.3 -260.8 -198.6 -176.7 -120.2 -44.3 -16.1 -11.7
ADDENDUM
Gross investment............................................ 73.8 65.9 78.5 79.5 74.4 70.8 67.6 67.3 68.0 61.2 58.3 58.6
Defense................................................... 60.2 51.7 61.7 61.9 54.3 48.1 48.5 46.9 47.1 39.9 36.3 35.4
Nondefense................................................ 13.5 14.2 16.8 17.6 20.1 22.7 19.0 20.4 21.0 21.3 22.0 23.1
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* $50 million or less.
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Personal tax and nontax receipts is the largest category. It is
composed primarily of personal income taxes, but also includes estate
and gift taxes, fees, fines, and other receipts from persons.
Corporate profits tax accruals differs in classification from the
corresponding budget category primarily because the NIPAs include the
deposit of earnings of the Federal Reserve System as corporate profits
taxes, while the budget treats these collections as miscellaneous
receipts. The timing difference between the NIPAs and the budget is
especially large for corporate receipts.
Indirect business tax and nontax accruals is composed of excise taxes,
customs duties, royalties, fines, and other receipts from business.
Contributions for social insurance differs from the corresponding
budget category primarily because: (1) the NIPAs include Federal
employer contributions for employee retirement in this category as a
Government receipt, while the budget offsets the contributions against
outlays as undistributed offsetting receipts; (2) the NIPAs include
premiums for Part B of Medicare as Government receipts, while the budget
nets them against outlays; and (3) the NIPAs include imputations for
contributions for Federal employees' unemployment insurance and workers'
compensation.
Federal Sector Current Expenditures
Table 18-1 shows current expenditures in the six major NIPA
categories, which are very different from the budget categories.
Government consumption expenditures are the goods and services
purchased by the Federal Government in the current account, including
compensation of employees and depreciation. This category is a new one
introduced two years ago as part of the regular comprehensive revision
of the NIPAs. The previous category, government purchases of goods and
services, included gross investment spending but did not include imputed
depreciation on federally owned fixed capital (``consumption of general
government fixed capital''); the new category does. Gross investment
(shown as addendum items in Table 18-1) is now excluded from current
expenditures in computing the government current surplus or current
deficit on a NIPA basis. The same changes were made to the State and
local government sector of the NIPAs, which now reflects depreciation of
State and local fixed capital (including that financed by Federal grants
in aid).
Although gross investment is not included in government current
expenditure, both government gross investment and current consumption
expenditures (including depreciation) are now included in total GDP
(both in current estimates and in historical NIPA data), which makes the
treatment of the government sector in the NIPAs more like that of the
private sector. This new treatment had the effect of increasing the
level of measured GDP by the amount of depreciation on general
government capital (Federal, State and local; the consumption of fixed
capital owned by government enterprises did not affect the level of
GDP). This raised calendar year 1995 GDP, for example, by $122 billion,
or 1.7 percent.
Transfer payments is the largest expenditure category. Transfer
payments to persons are mainly for income security and health programs,
such as Social Security and Medicare. Transfer payments to the rest of
the world include grants to foreign governments and
Table 18-2. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPA
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Actual Estimate
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1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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RECEIPTS----------------------------------------------------------------------
Budget receipts................. 909.3 991.2 1,032.0 1,055.0 1,091.3 1,154.4 1,258.6 1,351.8 1,453.1 1,579.3 1,657.9 1,742.7
Coverage differences.......... -1.2 -1.4 -1.6 -1.7 -1.8 -1.9 -2.1 -2.2 -2.3 -2.6 -2.7 -2.8
Contributions to government
employee retirement funds
(grossing)................... 59.6 60.9 62.2 66.0 67.6 67.3 66.9 66.5 65.0 71.4 72.2 73.8
Other netting and grossing.... 13.8 13.9 16.6 20.9 25.5 29.3 31.2 29.5 28.5 33.8 29.7 30.4
Timing differences............ 0.5 3.6 3.5 2.2 -1.0 3.6 4.6 8.5 8.7 16.2 9.8 -2.6
Other......................... -0.5 1.7 -0.2 -0.9 -0.6 -0.9 -2.7 -1.9 -1.1 -6.2 -4.5 -9.4
NIPA receipts............... 981.5 1,069.9 1,112.5 1,141.5 1,181.0 1,251.8 1,356.5 1,452.2 1,551.9 1,691.9 1,762.4 1,832.1
==============================================================================
EXPENDITURES
Budget outlays.................. 1,064.5 1,143.7 1,253.2 1,324.4 1,381.7 1,409.4 1,461.7 1,515.7 1,560.3 1,601.2 1,667.8 1,733.2
Net lending................... -10.4 -10.7 1.4 -2.9 -5.0 -5.4 0.4 -10.1 -10.5 -5.9 -21.4 -8.9
Deposit insurance and other
financial transactions....... -1.0 -9.9 -56.1 -65.0 -4.7 24.1 7.5 21.0 15.2 11.0 6.6 -2.1
Net purchases of nonproduced
assets....................... 0.1 0.7 1.0 -0.2 -0.2 -0.2 -0.2 7.4 0.1 10.2 4.3 2.6
Other coverage differences.... -5.8 -6.4 -6.9 -7.4 -5.0 -7.6 -5.4 -3.9 1.0 2.5 5.1 -1.7
Contributions to government
employee retirement funds.... 59.6 60.9 62.2 66.0 67.6 67.3 66.9 66.5 65.0 71.4 72.2 73.8
Other netting and grossing
differences.................. 13.8 13.9 16.6 20.9 25.5 29.3 31.2 29.5 28.5 33.6 29.7 30.4
Difference between investment
and depreciation............. -17.5 -15.9 -16.3 -14.3 -10.3 -5.8 1.6 3.2 3.3 10.2 13.5 13.8
Other timing differences...... 3.1 -2.9 6.8 -1.6 5.7 1.5 -8.6 -0.4 9.3 1.8 0.6 0.7
NIPA current expenditures... 1,106.4 1,173.4 1,261.9 1,319.9 1,455.3 1,512.6 1,555.1 1,628.9 1,672.2 1,736.2 1,776.5 1,843.8
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payments under Social Security and other similar programs to individuals
living abroad.
Grants-in-aid to State and local governments are designed to help
finance a range of programs. Grants are for income security, Medicaid,
capital expenditures for infrastructure, and other purposes.
Net interest paid is the interest paid by the Government on its debt,
less interest received on its loans.
Subsidies less current surplus of Government enterprises consists of
two elements: (1) subsidy payments for resident businesses; and (2) the
current surplus (or current deficit) of ``Government enterprises,'' such
as the Postal Service, which are business-type operations of Government
that usually appear in the budget as public enterprise revolving funds.
As part of the changes made in the 1996 comprehensive revision of the
NIPAs, imputed depreciation (consumption of enterprise fixed capital)
now reduces the current surplus of government enterprises in comparison
to the previous treatment.
NIPA subsidies do not include the imputed credit subsidies estimated
as part of credit reform in the budget. Rather, loans and guarantees are
categorized as financial transactions and are excluded from the NIPAs.
Wage disbursements less accruals is an adjustment that is necessary to
the extent that wages are earned in a different period than they are
paid.
Differences in the Estimates
Since the introduction of the unified budget in January 1968, NIPA
receipts have exceeded budget receipts in each year, due principally to
the imputed employer contributions for employee retirement. NIPA current
expenditures have usually been higher than budget outlays for the same
reason. There are, however, two components of budget outlays that are
sometimes sufficiently large in combination to match the netting
adjustments. These are financial transactions and payments to U.S.
territories. Large outlays associated with resolving the failed savings
and loan associations and banks in 1990 and 1991 made those year's
budget outlays nearly equal to NIPA current expenditures. With the
change in budgetary treatment of direct loans in 1992 under credit
reform, one type of financial transaction--direct loans to the public--
has been recorded in the budget in a way that is closer to the NIPA
treatment. Disbursement and repayment of loans are now recorded outside
the budget as in the Federal sector of the NIPAs, although, unlike the
NIPAs, imputed credit subsidies are recorded as budget outlays.
Table 18-3. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIPAs, QUARTERLY, 1997-1999
(In billions of dollars; seasonally adjusted at annual rates)
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Actual Estimate
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Oct.-Dec. Jan.-Mar. Apr.-June July- Oct.-Dec. Jan.-Mar. Apr.-June July- Oct.-Dec. Jan.-Mar. Apr.-June July-
Description --------------------------------- Sept. --------------------------------- Sept. --------------------------------- Sept.
----------- ----------- ----------
1996 1997 1997 1997 1997 1998 1998 1998 1998 1999 1999 1999
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RECEIPTS
Personal tax and nontax receipts............................ 717.5 746.9 767.9 781.9 NA 778.9 785.8 793.1 800.3 799.7 807.3 814.9
Corporate profits tax accruals.............................. 192.0 204.9 207.7 219.3 NA 220.6 221.4 221.0 222.1 224.0 224.3 225.1
Indirect business tax and nontax accruals................... 110.2 88.2 92.2 92.4 NA 92.8 93.1 92.9 100.6 100.1 100.2 101.3
Contributions for social insurance.......................... 622.0 635.3 641.5 648.2 NA 664.1 670.2 676.3 683.1 692.9 698.9 704.9
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Total receipts........................................ 1,641.6 1,675.3 1,709.3 1,741.9 NA 1,756.3 1,770.5 1,783.2 1,806.3 1,816.7 1,830.6 1,846.2
==============================================================================
CURRENT EXPENDITURES
Consumption expenditures.................................... 453.6 458.0 464.2 464.7 NA 469.3 461.4 457.8 456.5 463.4 464.7 469.0
Defense................................................... 307.6 306.4 311.3 311.6 NA 313.5 304.1 298.7 295.9 299.4 299.3 302.1
Nondefense................................................ 146.0 151.7 152.9 153.1 NA 155.8 157.3 159.1 160.6 164.1 165.4 166.9
Transfer payments........................................... 777.3 785.9 791.4 794.5 NA 814.6 819.8 825.6 838.0 851.0 856.6 862.5
Domestic (``to persons'')................................. 754.4 775.5 780.5 784.5 NA 803.9 809.3 815.1 820.4 840.8 846.4 852.4
Foreign................................................... 22.9 10.5 10.8 10.0 NA 10.6 10.4 10.5 17.6 10.2 10.2 10.1
Grants-in-aid to State and local governments................ 217.5 219.6 222.5 224.2 NA 228.3 236.8 241.4 246.5 255.2 262.2 268.3
Net interest paid........................................... 231.8 228.9 229.8 231.2 NA 230.6 229.7 229.0 228.9 228.6 228.4 228.3
Subsidies less current surplus of Government enterprises.... 38.5 38.4 38.1 37.9 NA 39.9 40.3 38.4 38.8 38.3 38.1 37.8
Wage disbursements less accruals............................ ......... ......... ......... ......... NA ......... ......... ......... ......... ......... ......... .........
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Total current expenditures............................ 1,718.8 1,730.8 1,746.0 1,752.6 NA 1,782.6 1,788.0 1,792.1 1,808.7 1,836.6 1,850.1 1,865.9
==============================================================================
Current deficit (-)................................... -77.1 -55.5 -36.8 -10.8 NA -26.3 -17.5 -8.9 -2.4 -19.9 -19.5 -19.7
ADDENDUM
Gross investment............................................ 63.9 58.1 61.9 61.0 NA 57.4 56.4 55.8 57.1 58.7 59.3 58.8
Defense................................................... 42.9 37.0 39.3 40.5 NA 35.6 34.4 33.5 34.5 35.8 35.9 35.5
Nondefense................................................ 21.0 21.1 22.6 20.5 NA 21.9 22.0 22.3 22.6 22.9 23.3 23.4
------------------------------------------------------------------------------NA = Not available.
* $50 million or less.
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During the period 1975-1992, the budget deficit exceeded the Federal
current deficit as measured in the NIPAs every year. The largest
difference, $92.7 billion, occurred in 1991, when the budget deficit was
$269.4 billion, while the NIPA current deficit was $176.6 billion. In
1993-1997, the NIPA current account deficit was slightly above the
budget deficit, and it is projected to remain higher in 1998 and to show
a small NIPA deficit for 1999, where the unified budget shows a small
surplus.
Table 18-1 displays Federal transactions using NIPA concepts with
actual data for the years 1987-1997 and estimates for 1998 and 1999
consistent with the Administration's budget proposals. Table 18-2
displays the reasons for differences between the data using budget
concepts and NIPA concepts. Table 18-3 displays quarterly seasonally
adjusted data using NIPA concepts beginning in October 1996. These
differ slightly from the fiscal year totals computed from not seasonally
adjusted data, because seasonal adjustment is on a calendar year basis.
Annual NIPA data for 1960-1999 are published in Section 14 of a separate
budget volume, Historical Tables, Budget of the U.S. Government, Fiscal
Year 1999.
Additional detailed estimates of receipts and current expenditures,
including estimates for the October -December 1997 quarter, will be
published in a forthcoming issue of the Department of Commerce
publication, Survey of Current Business.