[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.
---------------------------------------------------------------------------
  \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.
---------------------------------------------------------------------------
   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

[[Page 352]]

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)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 Actual                                                           Estimate
                         Description                         -----------------------------------------------------------------------------------------------------------------------------------
                                                                 1989       1990       1991       1992       1993       1994       1995       1996       1997       1998       1999       2000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          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
                                                             -----------------------------------------------------------------------------------------------------------------------------------
      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............................  .........  .........         *   .........  .........  .........  .........  .........  .........  .........  .........  .........
                                                             -----------------------------------------------------------------------------------------------------------------------------------
      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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* $50 million or less.


[[Page 353]]

   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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Actual                                                     Estimate
                                 -----------------------------------------------------------------------------------------------------------------------
                                    1989      1990      1991      1992      1993      1994      1995      1996      1997      1998      1999      2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
            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
                                 -----------------------------------------------------------------------------------------------------------------------
    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
                                 -----------------------------------------------------------------------------------------------------------------------
    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
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 354]]

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)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Actual                                                           Estimate
                                                            ------------------------------------------------------------------------------------------------------------------------------------
                                                             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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          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
                                                            ------------------------------------------------------------------------------------------------------------------------------------
      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   .........  .........  .........  .........  .........  .........  .........
                                                            ------------------------------------------------------------------------------------------------------------------------------------
      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
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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.