    [Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
    [III. Major Functions of the Federal Government]
    [18.  General Government]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 191]]

                             18.  GENERAL GOVERNMENT

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                             Table 18-1.  Federal Resources in Support of General Government
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Percent
                                    Function 800                                     1993        2001       Change:
                                                                                    Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary budget authority............................................     11,642      14,011         20%
      Mandatory outlays.........................................................      1,540       2,283         48%
    Credit Activity:
       Direct loan disbursements................................................  ..........         16          NA
    Tax expenditures............................................................     37,205      71,300         92%
    ----------------------------------------------------------------------------------------------------------------
    NA = Not applicable.

      ----------------------------------------------------------------------
      The General Government function encompasses the central management
    activities of the executive and legislative branches. Its major
    activities include Federal finances (tax collection, debt financing,
    currency and coinage, Government-wide accounting), personnel management,
    and general administrative and property management.
      Four executive branch agencies are responsible for these activities:
    the Department of the Treasury (2001 enacted level of $14.0 billion),
    the General Services Administration ($590 million), the Office of
    Personnel Management ($207 million), and the Office of Management and
    Budget in the Executive Office of the President ($69 million).

    Department of the Treasury

      Treasury is the Federal Government's financial agent--collecting
    revenue, making payments and managing the Government's finances. It
    produces and protects the Nation's currency; helps set domestic and
    international financial, economic, and tax policy; enforces economic
    embargoes and sanctions; regulates financial institutions and the
    alcohol, tobacco, and firearms industries; and protects citizens and
    commerce against those who counterfeit money, engage in financial fraud,
    violate our border, and threaten our leaders. Treasury's law enforcement
    functions are discussed in Chapter 17, ``Administration of Justice.''
      Treasury has enjoyed eight years of success in delivering its
    missions. In 2000 Treasury collected $2 trillion in tax and tariff
    revenues due under law; issued nearly $2 trillion in marketable
    securities and savings bonds to finance the Government's operations and
    promote citizens' savings; and, produced nine billion Federal Reserve
    Notes, 17.5 billion postage stamps, and 27.2 billion coins.

      Internal Revenue Service (IRS): The Clinton-Gore Administration
    inherited an IRS with an outdated organizational structure, work
    processes and technology. Confronted with a steadily increasing workload
    (well over one-billion documents each year), IRS was failing to provide
    the level of service expected by America's taxpayers.
      Since 1993, the IRS has been transformed. As required by the bi-
    partisan IRS Restructuring and Reform Act of 1998, IRS reorganized into
    four operating divisions, each focused on serving groups of taxpayers
    with similar needs (i.e., wage and investment earners, small business
    and self-employed, middle and large corporate, and tax exempt and
    government entities). This transformation is the most fundamental
    organizational modernization of the IRS since the early 1950s.

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     IRS also adopted a new mission statement that reflects both its
    customer service and enforcement roles: ``to provide America's taxpayers
    with top quality service by helping them understand and meet their tax
    responsibilities and by applying the tax law with integrity and fairness
    to all.''
      Currently, the IRS is engaged in a massive effort to modernize its
    outdated technological infrastructure to dramatically improve
    compliance, productivity, and customer service. The management capacity
    to succeed in this extraordinarily complicated effort was instituted
    over the last three years. IRS will require another decade to complete
    the full program.
      IRS introduced a new balanced performance measurement system to
    improve its management. Over the last several years, balanced measures
    of business results (including quality and quantity measures), customer
    satisfaction, and employee satisfaction were developed for each major
    work product (e.g., examinations, telephone customer service, etc.). In
    addition, IRS is engaged in a long-term study to improve its
    understanding of taxpayer compliance burden so that this burden can be
    minimized.
      IRS managed its growing workload while implementing its modernization
    program. In 2000, IRS:
       provided 92.2 million refunds to taxpayers on 127.7 million
              individual returns (83.7 million refunds on 114.2 million
              returns in 1993); and,
       received 28 percent of individual tax returns electronically
              (11 percent in 1993).

      Financial Management Service (FMS):  The FMS seeks to improve the
    quality of Federal Government financial management by providing
    financial services and information to Federal program agencies and other
    clients. Over the past eight years, FMS has drastically improved its
    electronic payment and collection systems; and, in doing so, has been
    able to better serve its customers. For example, the percentage of
    payments transmitted electronically has increased from 50 percent in
    1995 to 70 percent in 2000. In addition, FMS received over 75 percent of
    its collections electronically in 2000, compared to 28 percent in 1995.
    FMS also has been successful providing debt collection and debt
    management services to Federal agencies to aid in its implementation of
    the Debt Collection Improvement Act (DCIA). Since the passage of the
    DCIA in 1996, Treasury has collected approximately $9.1 billion in
    delinquent debt.
      Bureau of Public Debt (BPD): BPD handles all Treasury debt financing
    operations and promotes the sale of U.S. savings bonds. During this
    Administration, BPD streamlined and consolidated the issuance and
    redemption process, allowing the Bureau to:
       consistently issue at least 99 percent of over-the-counter
              bonds within three weeks of their purchase; and,
       announce auction results within one hour 90 percent of the
              time (100 percent in 1999 and 2000).

      U.S. Mint: The U.S. Mint--a self-financing entity which returns almost
    $3 billion to the Treasury each year--produces the Nation's coinage and
    manufactures numismatic products (commemorative coins, medals, and
    bullion) for the public as well as safeguards the Government's holdings
    in monetary metals. Highlights of the Mint's activities during the last
    eight years follow:
       The implementation of the 50 States Commemorative Quarter
              Program in 1999. Approximately every 10 weeks, through 2008,
              the Mint will issue a new State quarter.
       The issuance of the new golden dollar in 2000. To date, the
              Mint estimates that it will produce close to two billion
              dollar coins.
       Achieving impressive customer service goals. In 1999, the
              Mint received a high customer satisfaction rating from buyers
              of numismatic and commemorative coins. Exceeding the scores of
              many private sector firms in the American Customer
              Satisfaction Index (ACSI), the Mint scored among the highest
              of the 29 ``high impact'' Federal agencies evaluated by ACSI.

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      Bureau of Engraving and Printing (BEP): BEP produces all U.S.
    currency, about half of U.S. postage stamps, and other Government
    securities. During this Administration, the Bureau increased its
    capacity to produce currency. Over the past eight years, BEP efficiency
    and cost-effectiveness have increased, allowing the Bureau to:
       successfully redesign and issue new $100, $50, $20, $10, and
              $5 bills, which contain many new features intended to make our
              currency secure and to defeat high-tech printing equipment;
              and,
       meet all Federal Reserve and United States Postal Service
              orders as requested.

    General Services Administration (GSA)

      GSA provides policy leadership and expertly managed space, products,
    and services to support the administrative needs of Federal agencies.
    Over the past eight years, GSA has expanded the range of choices
    available to its customers for office space, supplies, and
    administrative services. It has also strengthened its role as the
    central management agency for administrative services policies. During
    this same period, GSA reduced its staffing by 30 percent, from 20,248 to
    14,027, and increased its annual operating revenues by nearly 60
    percent, from $8.4 billion to $13.3 billion. Highlights of GSA's
    activities over the past eight years follow.
       In 1995, GSA centralized its policy and regulatory
              authorities into an Office of Government-wide Policy (OGP)
              reporting directly to the Administrator. Since then OGP has
              begun a complete revision of GSA regulations to replace overly
              complex and outdated policies with simpler, ``plain language''
              guidance. OGP has also modernized its Government-wide
              information systems that capture agency data on the management
              of various administrative activities such as real property
              holdings, motor vehicles, aircraft, and travel.
       The Public Buildings Service (PBS) is GSA's largest business
              activity and provides real estate and related services for
              more than 100 Federal organizations. Since 1993, PBS has
              constructed 86 new Federal buildings, of which 37 were
              courthouses. During this same period, PBS completed major
              repair and alteration projects on 156 Federal buildings. PBS
              currently manages almost 186 million square feet of space in
              Federal buildings and nearly 153 million square feet of space
              in leased buildings. During the past six years, PBS has
              improved its responsiveness to its agency customers by
              reducing the average time for an agency to lease space through
              GSA from 244 days to 136 days. In 2000, PBS operated
              Government owned space at a cost 13 percent below the private
              sector and since 1985 has reduced its energy consumption by 20
              percent.
       The Federal Supply Service (FSS) has begun a fundamental
              shift in its business model. In 1993, agencies ordered $926
              million in supplies from FSS warehouses and purchased $2.9
              billion in supplies and services directly from vendors on FSS'
              Multiple Award Schedules contracts. Last year, agencies
              ordered $781 million from FSS warehouses, but purchased more
              than $11.4 billion through the Multiple Award Schedules
              contracts. FSS has also led the Federal Government in
              simplifying the processes used by agencies to order and pay
              for supplies and services. GSA Advantage! is an FSS web site
              through which agencies can order more than 800,000 supply
              items on-line. GSA's Smart Pay program offers agencies charge
              cards through which they can purchase goods and services and
              charge travel expenses. Agency charges through this FSS
              program have grown from $2.3 billion in 1993 to $10.1 billion
              in 1999.
       The Federal Technology Service (FTS) is the smallest of the
              three GSA business units but has made the greatest
              contribution to GSA's revenue growth. In the last eight years,
              FTS revenues increased over 2\1/2\ times, from $1.1 billion in
              1993 to almost $4.2 billion in 1999, most of the increase
              coming from the sales of information technology services.
              During this period, FTS also negotiated new long-distance
              telecommunications contracts that bring the average cost of a
              long-distance phone call below five cents per minute.

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    Office of Personnel Management (OPM)

      OPM provides human resource management leadership and services to
    Federal agencies and the 1.8 million employees in the civil service. OPM
    works closely with agencies to create effective policies and systems to
    recruit, develop, manage and retain the high quality and diverse work
    force needed to deliver results. OPM provides policy guidance, advice,
    and direct personnel services and systems to the agencies. It operates
    USAJOBS, a worldwide job information and application system. It provides
    fast, friendly, accurate, and cost-effective retirement, health benefit,
    and life insurance services to Federal employees, annuitants, and
    agencies. See Chapter 12, ``Health,'' for a discussion of the health
    benefits program and Chapter 14, ``Income Security,'' for a discussion
    of the retirement program.
      OPM provides oversight of the Federal merit system, through on-site
    evaluations that are conducted on a four-year cycle for the 30 major
    departments and agencies, and a five-year cycle for 35 small agencies.
    These oversight reviews ensure that agencies are adhering to the merit
    system principles (5 USC 2301), and other policies and principles such
    as veteran's preference and protection from prohibited personnel
    practices, while allowing agencies enough flexibility to focus on
    results, not process.
      Over the past eight years OPM achieved considerable success in
    refocusing its mission and goals to ensure that the Federal work force
    is effectively poised to meet the challenges of the 21st Century. It
    positioned itself to help agencies better align human resources
    management to support agency goals. OPM privatized its training and
    background investigations programs, the latter resulting in the first
    Government Employee-owned Stock Ownership Plan (ESOP). The ESOP has
    exceeded expectations of success many times over. Extensive use of
    automation and application of state-of-the-art information technology
    has provided agencies with the tools needed to better recruit, train,
    retain and manage their work forces to best serve the American people.
      As the Government's central human resources management agency, OPM
    presided over dramatic work force changes experienced by the Executive
    Branch during the last decade. Between 1993 and 1999, the Federal work
    force declined by 17 percent, or 377,000 full time equivalent (FTE)
    positions, resulting in the smallest Federal work force in 39 years (see
    Chart 18-1). Almost all of the 14 Cabinet Departments and large
    independent agencies have reduced their work force. OPM itself reduced
    its work force by 45 percent during this period. (It should be noted
    that some argue that the work force needed to deliver the mission of the
    Federal Government also includes uniformed military, postal workers,
    contractors, grantees, and State and local government employees, putting
    the work force needed to do the job closer to 16.8 million in 1999.)
    These work force reductions accompanied intensive management reform
    efforts to achieve a Government that works better, costs less, and gets
    results Americans care about.

      OPM's significant accomplishments in 2000 included: new procedures for
    evaluating senior executives that reinforce excellence and
    accountability; a career intern hiring program to attract top quality,
    diverse applicants; regulations to allow repayment of student loans as a
    recruitment incentive; higher pay rates to attract and retain key
    Federal information technology workers; child care tuition assistance to
    support low-income employees; an Executive Order increasing the
    opportunity for individuals with disabilities to be employed in the
    Federal work force; and USA Staffing--a fully automated system for
    posting vacancies, accepting and rating applications, and notifying
    applicants and agencies of results.

    Office of Management and Budget (OMB)

      OMB assists the President by preparing the Federal budget and
    overseeing its execution in the departments and agencies. In helping
    formulate the President's spending plans, OMB coordinates the review and
    examines the effectiveness of agency programs, policies, and procedures;
    assesses competing funding demands among agencies; and, provides policy
    options. OMB works to ensure that proposed legislation, and agency
    testimony, reports, and policies are consistent with Administration
    policies, leveraging use of interagency programs and Councils. On

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    behalf of the President, OMB often presents and justifies major policies
    and initiatives related to the budget and Government management before
    the Congress. It performs a critically important function in
    representing the President's position during face-to-face negotiations
    with members of the Congress over budget and policy issues. In addition,
    OMB is often called upon to provide Government-wide policy development
    and coordination on issues of importance to the national interest, such
    as the U.S. policies on responding to the crisis in Kosovo and on the
    protection of our natural resources.
      OMB has a central role in developing, overseeing, coordinating, and
    implementing Federal procurement, financial management, information, and
    regulatory policies. OMB helps to strengthen administrative management,
    develop better performance measures, and improve coordination among
    Executive Branch agencies.
      Over the past eight years, OMB has exercised its leadership and
    oversight role on a number of significant Government-wide efforts.
    Examples include: (1) continued implementation of the Chief Financial
    Officers Act, which resulted in 15 agencies receiving unqualified audit
    opinions on 1999 financial statements; (2) the Government Performance
    and Results Act, which resulted in a closer integration of budget and
    performance data and a Government-wide performance plan; (3) the
    Government Management Reform Act, which led to agencies' issuing
    accountability reports for the first time; (4) the Clinger-Cohen Act,
    which put in place sound information technology resources capital
    planning and investment control, with performance based acquisition
    strategies, all firmly linked to budget requests; (5) provided overall
    coordination of Y2K resource allocations for the agencies; and, (6) the
    Federal Acquisition Streamlining Act, which has resulted in the
    Government buying better goods and services

    [[Page 196]]

    for fewer dollars and has propelled acquisition reform throughout the
    Government. A series of Priority Management Objectives was established
    and issued in the annual budget, focusing top management attention on
    the most pressing management improvements needed in Government.
      OMB produced the annual budget for 2001 using a state-of-the art off-
    site secure data center to improve efficiency and timeliness, improve
    services to agency customers, and ensure Y2K compliance. In 2001, OMB is
    investing in additional information technology applications to improve
    efficiency and effectiveness of the OMB's staff in completing an ever-
    increasing workload under continually shrinking deadlines. In addition,
    OMB staffing is being increased to permit completion of more thorough
    technical and analytical work in key functional areas such as financial
    management, procurement, regulatory analysis, economic forecasting, and
    technology systems investment analyses.

    Tax Incentives

      The Federal Government provides significant tax incentives that
    benefit State and local governments and U.S. possessions. The two
    largest are the deductibility of State and local taxes ($46 billion in
    2001) and the exclusion of interest on State and local bonds ($23
    billion in 2001). During this Administration, the effectiveness of tax
    incentives has been improved through reform of the possession credit and
    the expansion of credits to holders of qualified zone academy bonds.
       The Omnibus Budget and Reconciliation Act (OBRA) of 1993
              reduced the cost of the possession tax credit and greatly
              improved its effectiveness in creating jobs in the
              possessions. Before OBRA 1993, U.S. corporations operating in
              a possession received a credit for the U.S. tax liability on
              their income in the possession. These profits tended to be
              very high because valuable intangible assets such as patents
              and trademarks were routinely transferred to the possessions
              corporation. Treasury studies indicated that the revenue loss
              per job created by possession corporations was very high, in
              excess of 100 percent of the compensation paid. In 1993, the
              President proposed to convert the income-based possession
              credit to an activity-based credit. The credit would be
              limited to 60 percent of the wages paid. The compromise
              reached in OBRA 1993 permits taxpayers to choose between the
              wage credit and a substantially reduced income-based credit,
              phasing down eventually to 40 percent of its pre-OBRA level.
              The cost of the program has been reduced by about 40 percent
              or almost $2 billion per year. Employment in possessions
              corporations has risen.
              In 1994, the Congress further restricted the possession credit
              by imposing base period constraints on future credits. In the
              1996 Small Business Job Protection Act, the Congress enacted
              the complete termination of the possession credit for all
              taxable years beginning after December 31, 2005.
       The Taxpayer Relief Act of 1997 provided a tax credit to
              holders of Qualified Zone Academy Bonds (QZABs). The law
              created $400 million of authority to issue QZABs for 1998 and
              1999 and allocate it among State education agencies. The
              proceeds of the bonds may be used for renovation of and
              equipment in Zone Academies, i.e., elementary or secondary
              schools in enterprise communities or empowerment zones or
              having 35 percent or more of their pupils eligible for the
              free and reduced-price lunch program. Private entities must
              make a contribution to the school program equal to 10 percent
              of the face amount of the bonds. Holders of the bonds receive
              the tax credit in lieu of interest payment; issuers are
              responsible for repayment of principal. An additional $400
              million of bond authority was provided for 2000 and 2001 by
              the Ticket to Work and Work Incentives Improvement Act of
              1999.