[Analytical Perspectives]
[Other Technical Presentations]
[16. National Income and Product Accounts]
[From the U.S. Government Publishing Office, www.gpo.gov]
[[Page 351]]
16. 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 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 surplus or
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 U.S. 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 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 surplus or deficit to differ from
the budget surplus or deficit. Netting differences have equal effects on
receipts and expenditures and thus have no effect on the current surplus
or 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 (or vice versa). 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 as Government receipts (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 pensions and social insurance as expenditures
by the employing agencies and governmental (rather than offsetting)
receipts to the appropriate social insurance funds. The NIPAs also
impute certain transactions that are not explicit in the budget. 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 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
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of the NIPA treatment of government investment. The budget includes
outlays for Federal investments as they are paid for, while the Federal
sector 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 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, under the Federal Credit Reform Act of 1990, for direct loan
obligations and loan guarantee commitments made after 1991, 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
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 tended to make
the budget deficit smaller than the NIPA current deficit.
Federal Sector Receipts
Table 16-1 shows Federal receipts in the four major categories used
in the NIPAs, which are similar to the budget categories but with
significant differences.
Table 16-1. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 1989-2000
(In billions of dollars)
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Actual Estimate
Description -----------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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RECEIPTS
Personal tax and nontax receipts............................ 458.3 477.3 477.4 485.8 513.3 555.2 598.2 670.1 753.2 851.8 898.1 925.3
Corporate profits tax accruals.............................. 119.1 116.5 111.5 115.4 130.6 152.5 178.0 191.0 205.4 211.1 207.8 210.9
Indirect business tax and nontax accruals................... 61.7 63.6 75.8 80.9 85.2 97.1 94.7 89.7 97.6 95.6 95.3 112.3
Contributions for social insurance.......................... 430.8 455.1 476.7 499.0 522.7 551.7 579.0 598.7 635.9 669.3 703.7 738.4
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Total receipts........................................ 1,069.9 1,112.5 1,141.5 1,181.0 1,251.8 1,356.5 1,449.9 1,549.5 1,692.1 1,828.1 1,904.9 1,987.0
===================================================================================================================================
CURRENT EXPENDITURES
Consumption expenditures.................................... 401.4 419.9 444.4 447.6 449.9 445.6 444.4 441.6 457.8 455.1 473.1 477.3
Defense................................................... 301.8 308.8 326.0 318.0 313.2 305.7 299.7 297.2 305.9 302.6 307.9 305.9
Nondefense................................................ 99.7 111.1 118.4 129.6 136.7 139.9 144.6 144.4 151.9 152.5 165.2 171.4
Transfer payments........................................... 461.4 505.6 509.6 607.4 651.6 678.3 713.7 751.9 785.3 805.1 844.0 881.6
To persons................................................ 449.7 490.7 535.7 595.8 634.3 661.9 699.6 737.8 772.0 793.6 831.6 869.0
To the rest of the world.................................. 11.7 14.9 -26.1 11.5 17.3 16.4 14.2 14.1 13.3 11.6 12.3 12.6
Grants-in-aid to State and local governments................ 115.8 128.4 147.1 168.4 180.3 197.2 211.9 216.2 221.5 235.4 257.0 277.5
Net interest paid........................................... 161.9 178.5 187.1 197.9 192.2 195.6 220.3 227.5 231.2 233.4 215.3 202.1
Subsidies less current surplus of Government enterprises.... 32.9 29.5 31.7 34.1 38.7 38.4 36.2 33.7 33.4 28.6 30.8 29.4
Wage disbursements less accruals............................ ......... ......... * ......... ......... ......... ......... ......... ......... ......... ......... .........
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Total current expenditures............................ 1,173.4 1,261.9 1,319.9 1,455.3 1,512.6 1,555.1 1,626.5 1,670.9 1,729.2 1,757.6 1,820.2 1,867.9
===================================================================================================================================
Current surplus or deficit (-)........................ -103.5 -149.4 -178.4 -274.3 -260.8 -198.6 -176.6 -121.3 -37.0 70.4 84.7 119.1
ADDENDUM
Gross investment............................................ 72.2 75.8 77.7 75.7 73.2 67.6 67.5 67.3 60.2 60.4 64.0 63.1
Defense................................................... 58.2 59.1 60.3 55.2 50.9 48.5 47.1 47.3 39.6 39.4 41.6 39.4
Nondefense................................................ 14.1 16.7 17.4 20.5 22.3 19.0 20.3 20.1 20.6 21.0 22.4 23.7
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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 impute contributions for
Federal employees' unemployment insurance and workers' compensation.
Federal Sector Current Expenditures
Table 16-1 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 three years ago as part of the regular comprehensive revision
of the NIPAs. It replaced a category, government purchases of goods and
services, that included gross investment spending rather than
depreciation charges on federally owned fixed capital (``consumption of
general government fixed capital''), as the new category does. Gross
investment (shown as addendum items in Table 16-1) is thus excluded from
current expenditures in computing the government current surplus or
current deficit on a NIPA basis, where depreciation is included. The
NIPAs treat State and local fixed capital in the same way--regardless of
the extent to which it is financed from Federal grants in aid or from
State and local own source receipts.
Although gross investment is not included in government current
expenditures, both government gross investment and current consumption
expenditures (including depreciation) are included in total GDP (both in
current estimates and in historical NIPA data), which makes the
treatment of the government sectors in the NIPAs similar to that of the
private sector.
Transfer payments are 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 payments under
Social Security and other similar programs to individuals living abroad.
Grants-in-aid to State and local governments help finance a range of
programs, including income security,
Table 16-2. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPA
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Actual Estimate
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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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RECEIPTS
Budget receipts................. 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 1,721.8 1,806.3 1,883.0
Coverage differences.......... -1.4 -1.6 -1.7 -1.8 -1.9 -2.1 -2.3 -2.3 -2.6 -5.5 -5.6 -7.7
Contributions to government
employee retirement funds
(grossing)................... 60.9 62.2 66.0 67.6 67.3 66.9 66.5 65.0 71.3 72.1 73.2 76.4
Other netting and grossing.... 13.9 16.6 20.9 25.5 29.3 31.2 29.6 30.0 34.0 31.3 29.4 32.2
Timing differences............ 3.6 3.5 2.2 -1.0 3.6 4.6 6.7 5.7 11.9 11.0 4.2 5.7
Other......................... 1.7 -0.2 -0.9 -0.6 -0.9 -2.7 -2.4 -1.9 -1.7 -2.7 -2.5 -2.6
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NIPA receipts............... 1,069.9 1,112.5 1,141.5 1,181.0 1,251.8 1,356.5 1,449.9 1,549.5 1,692.1 1,828.1 1,904.9 1,987.0
=======================================================================================================================
EXPENDITURES
Budget outlays.................. 1,143.7 1,253.2 1,324.4 1,381.7 1,409.4 1,461.7 1,515.7 1,560.5 1,601.2 1,652.6 1,727.1 1,765.7
Net lending................... -10.7 1.4 -2.9 -5.0 -5.4 0.4 -15.9 -16.0 -17.2 -19.5 -34.4 -20.6
Deposit insurance and other
financial transactions....... -9.9 -56.1 -65.0 -4.7 24.1 7.5 20.8 15.2 17.5 5.1 8.8 3.0
Net purchases of nonproduced
assets....................... 0.7 1.0 -0.2 -0.2 -0.2 -0.2 7.4 0.1 10.1 5.4 0.8 4.5
Other coverage differences.... -6.4 -6.9 -7.4 -5.0 -7.6 -5.4 -2.3 1.4 3.1 -0.5 7.7 0.4
Contributions to government
employee retirement funds.... 60.9 62.2 66.0 67.6 67.3 66.9 66.5 65.0 71.3 72.1 73.2 76.4
Other netting and grossing
differences.................. 13.9 16.6 20.9 25.5 29.3 31.2 29.6 30.0 34.0 31.3 29.4 32.2
Difference between investment
and depreciation............. -15.9 -16.3 -14.3 -10.3 -5.8 1.6 2.9 3.4 10.5 9.4 5.5 6.5
Other timing differences...... -2.9 6.8 -1.6 5.7 1.5 -8.6 1.6 11.2 -1.3 1.8 2.2 -0.2
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NIPA current expenditures... 1,173.4 1,261.9 1,319.9 1,455.3 1,512.6 1,555.1 1,626.5 1,670.9 1,729.2 1,757.6 1,820.2 1,867.9
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Medicaid, capital expenditures on infrastructure, and others.
Net interest paid is the interest paid by the Government on its debt
(excluding debt held by trust funds and other Government accounts), less
interest received on its loans.
Subsidies less current surplus of Government enterprises consist of
two elements: (1) subsidy payments for resident businesses; and (2) the
current surplus (or 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.
Depreciation (consumption of enterprise fixed capital) is netted in
calculating the current surplus of government enterprises.
NIPA subsidies do not include the imputed credit subsidies estimated
as budget outlays under credit reform. Rather, loans and guarantees are
categorized as financial transactions and are excluded from the NIPAs
except for associated interest and fees.
Wage disbursements less accruals is an adjustment that is necessary
to the extent that the wages paid in a period differ from the amount
earned in the period.
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
their inclusion of employer contributions for employee retirement. NIPA
current expenditures have usually been higher than budget outlays for
the same reason. However, two components of budget outlays 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, credit
subsidies are recorded as budget outlays.
During the period 1975-1992, the budget deficit exceeded the Federal
current deficit as measured in the NIPAs every year. The largest
difference, $91.0 billion,
Table 16-3. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIPAs, QUARTERLY, 1998-2000
(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-Sept. Oct.-Dec. Jan.-Mar. Apr.-June July- Oct.-Dec. Jan.-Mar. Apr.-June July-
Description ------------------------------------------------------------------------------ Sept. --------------------------------- Sept.
----------- ----------
1997 1998 1998 1998 1998 1999 1999 1999 1999 2000 2000 2000
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RECEIPTS
Personal tax and nontax receipts........................... 798.6 836.5 855.7 863.8 NA 868.7 880.3 889.6 897.2 905.5 910.4 914.6
Corporate profits tax accruals............................. 212.8 204.8 206.2 207.5 NA 209.0 208.2 207.9 209.6 208.6 212.8 214.1
Indirect business tax and nontax accruals.................. 93.8 93.9 95.2 98.3 NA 96.5 96.9 99.8 111.9 114.1 115.6 116.7
Contributions for social insurance......................... 660.3 673.9 681.2 689.2 NA 707.9 714.1 719.8 725.2 739.0 745.6 752.2
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Total receipts....................................... 1,765.5 1,809.1 1,838.3 1,858.8 NA 1,882.1 1,899.6 1,917.2 1,943.9 1,967.2 1,984.4 1,997.6
====================================================================================================================================
CURRENT EXPENDITURES
Consumption expenditures................................... 460.1 450.9 463.9 458.7 NA 470.5 478.4 484.5 480.5 479.7 475.0 468.3
Defense.................................................. 304.8 293.3 303.0 302.9 NA 306.5 312.4 317.4 312.8 309.3 304.3 297.3
Nondefense............................................... 155.3 157.6 160.9 155.8 NA 164.0 166.0 167.1 167.7 170.4 170.7 171.0
Transfer payments.......................................... 805.9 808.5 811.1 817.0 NA 846.0 852.7 860.4 876.7 886.5 889.3 898.0
To persons............................................... 784.4 798.6 802.1 805.8 NA 836.2 842.9 848.4 852.7 874.5 880.4 887.0
To the rest of the world................................. 21.5 9.9 9.0 11.2 NA 9.9 9.9 12.0 24.0 12.0 8.9 11.0
Grants-in-aid to State and local governments............... 231.8 228.7 226.9 231.4 NA 247.8 256.2 265.6 264.9 270.8 271.7 279.2
Net interest paid.......................................... 231.8 228.8 228.3 225.7 NA 214.2 209.6 205.4 201.7 199.2 197.6 196.8
Subsidies less current surplus of Government enterprises... 33.7 33.4 33.5 34.0 NA 33.3 33.5 33.9 35.1 34.6 34.9 35.3
Wage disbursements less accruals........................... ......... ......... ......... .......... NA ......... ......... ......... ......... ......... ......... .........
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Total current expenditures........................... 1,763.4 1,750.3 1,763.9 1,766.7 NA 1,811.9 1,830.3 1,849.8 1,859.0 1,870.9 1,868.6 1,877.6
====================================================================================================================================
Current deficit (-).................................. 2.1 58.8 74.4 92.0 NA 70.3 69.3 67.4 85.0 96.3 115.8 119.9
ADDENDUM
Gross investment........................................... 60.0 60.7 56.8 60.7 NA 62.0 64.0 64.2 62.5 62.6 61.1 64.4
Defense.................................................. 41.7 38.3 36.8 40.9 NA 40.6 42.1 41.7 39.8 39.6 37.7 40.6
Nondefense............................................... 18.3 22.4 20.0 19.9 NA 21.4 21.9 22.4 22.7 22.9 23.4 23.8
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NA = Not available.
* $50 million or less.
[[Page 355]]
occurred in 1991 as a result of resolving failed financial institutions
as discussed above; the budget deficit was then $269.4 billion, while
the NIPA current deficit was $178.4 billion. In 1993 and 1995-1997, the
NIPA current account deficit was slightly above the budget deficit,
while for 1998-2000, the NIPA current account surplus is projected to be
higher than the budget surplus.
Table 16-1 displays Federal transactions using NIPA concepts with
actual data for the years 1989-1998 and estimates for 1999 and 2000
consistent with the Administration's budget proposals. Table 16-2
summarizes the reasons for differences between the data using budget
concepts and NIPA concepts. Table 16-3 displays quarterly data using
NIPA concepts beginning in October 1997. Annual NIPA data for 1960-2000
are published in Section 14 of a separate budget volume, Historical
Tables, Budget of the U.S. Government, Fiscal Year 2000.
Additional detailed estimates of receipts and current expenditures
will be published in a forthcoming issue of the Department of Commerce
publication, Survey of Current Business.