[Analytical Perspectives]
[Other Technical Presentations]
[17. National Income and Product Accounts]
[From the U.S. Government Printing Office, www.gpo.gov]
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17. NATIONAL INCOME AND PRODUCT ACCOUNTS
The National Income and Product Accounts (NIPA's) are an integrated
set of measures of aggregate U.S. economic activity that are prepared by
the Department of Commerce. Because the NIPA's include Federal
transactions and are widely used in economic analysis, it is important
to show the NIPA's distinctive presentation of Federal transactions and
contrast it with the Budget.
One of the main purposes of the NIPA's 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 a measure of
the Nation's final output, which excludes intermediate product to avoid
double counting. Both government consumption expenditures and government
gross investment--State and local as well as Federal--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 (exports minus imports).
Other government expenditures--transfer payments, grants to State and
local governments, subsidies, and net interest payments--are not
purchases of final output and as such are not included in GDP; however,
these transactions are recorded in the NIPA government receipts and
expenditure account, together with government consumption expenditures
(which includes depreciation on government gross investment).
Federal transactions are included in the NIPA's as part of the
government sector. \1\ The Federal subsector is 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 subsector is not itself a budget,
because it is not a financial plan for proposing, determining, and
controlling the fiscal activities of the Government. 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 subsector of the NIPA government sector is a single set
of transactions for all U.S. State and local units of government,
treated as a consolidated entity.
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Differences Between the NIPA's and the Budget
Federal transactions in the NIPA's are measured according to NIPA
accounting concepts in order to be compatible with the purposes of the
NIPA's and other transactions recorded in the NIPA's. As a result they
differ from the budget in netting, timing, and coverage. These
differences cause total receipts and expenditures in the NIPA's to
differ from total receipts and outlays in the budget, albeit by
relatively small amounts. \2\ 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/deficit.
Besides these differences, the NIPA's combine transactions into
different categories from those used in the budget.
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\2\ Over the period 1993-2001, NIPA current expenditures averaged
three percent higher than budget outlays, while NIPA current receipts
averaged one percent higher than budget receipts.
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Netting differences arise when the budget records certain transactions
as offsets to outlays while they are recorded as receipts in the NIPA's
(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. The budget offsets against outlays any
income that arises from voluntary business-type transactions with the
public. The NIPA's 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 NIPA's have
a narrower definition of ``business-type transactions''. Rents,
royalties, and regulatory or inspection fees, which are classified as
offsetting receipts in the budget, are recorded in the NIPA's as
Government receipts (business nontaxes). The NIPA's include Medicare
premiums as Government receipts, while the budget classifies them as
business-type transactions (offsetting receipts).
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 Federal employee social insurance
(such as social security) is an example: the budget offsets these
payments against outlays. In contrast, the NIPA's treat the Federal
Government like any other employer and show contributions for Federal
employee social insurance as expenditures by the employing agencies and
as governmental (rather than offsetting) receipts. The NIPA's 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
NIPA's 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 NIPA's generally
record personal taxes and social insurance contributions when they are
paid and business taxes when they accrue, while the budget generally
records all receipts when they are received. Thus the NIPA's attribute
corporations' final settlement payments back to the quarter(s) in which
the profits that gave rise to the tax liability occurred. The delay
between accrual of liability and Treasury receipt of payment can result
in significant timing differences be
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tween NIPA and Budget measures of receipts for any given accounting
period.
Timing differences also occur for expenditures. When the first of a
month falls on a weekend, monthly benefit checks normally mailed on the
first of the month may be mailed out a day or two earlier; the budget
then reflects two payments in one month and none the next. On occasion,
the budget totals reflect 13 monthly payments in one year and only 11
the next. NIPA expenditure figures always reflect 12 benefit payments
per year, giving rise to a timing difference compared to the budget.
Coverage differences also differentiate the budget and the NIPA's.
Unlike the budget, the NIPA's exclude transactions with U.S.
territories. The NIPA's 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 NIPA's these transactions are excluded as an exchange of assets
with no production involved.
A type of coverage 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, while the Federal
sector of the NIPA instead excludes current investments but includes a
depreciation charge on past investments (``consumption of general
government fixed capital'') as part of ``current expenditures.'' The
inclusion of depreciation on fixed capital (structures, equipment and
software) in current expenditures is a proxy for the services that
capital renders; i.e., for its contribution to government output of
public services.
The treatment of government pension plan income and outgo creates a
coverage difference. Where the budget treats employee payments to these
pension plans as governmental receipts, and employer contributions by
agencies as offsets to outlays, the NIPA's treat both of these
components of employee compensation as personal income, in the same way
as it treats contributions to pension plans in the private (household)
sector. Likewise, the budget records a government check to a retired
government employee as a current outlay, but under NIPA concepts, no
government expenditure occurs at that time; the payment is treated (like
private pension payments) as a transfer of income within the household
sector.
Federal investment grants to State and local governments (such as for
interstate highway construction), investment subsidies to business, and
forgiveness of debt owed by foreign governments are included as outlays
in the budget but excluded from the NIPA's as being capital transfers
unrelated to current economic production. Likewise, estate and gift
taxes, included in budget receipts, are excluded from the NIPA's as
capital transfers.
Financial transactions such as loan disbursements, loan repayments,
loan asset sales, and loan guarantees are excluded from the NIPA's on
the grounds that such transactions simply involve an exchange of assets
with no production involved. 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 NIPA's, neither the subsidies nor the
loan transactions are included. However, the NIPA's, like the budget,
include all interest transactions with the public, including net
interest paid to the loan financing accounts.
Deposit insurance outlays for resolving failed banks and thrift
institutions are similarly excluded from the NIPA's on the grounds that
there are no offsetting current income flows from these transactions. In
1991, this exclusion was the largest difference between the NIPA's and
the budget and made the NIPA current deficit significantly smaller than
the budget deficit that year. In subsequent years, as assets acquired
from failed financial institutions were sold, these collections tended
to make the budget deficit smaller than the NIPA current deficit.
Table 17-1. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 1993-2004
(In billions of dollars)
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Actual Estimate
Description -----------------------------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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CURRENT RECEIPTS
Personal tax and nontax receipts............................ 500.9 541.2 583.7 654.7 736.3 822.7 878.7 997.2 1,006.4 845.7 826.5 840.4
Corporate profits tax accruals.............................. 131.0 152.5 177.8 187.8 198.6 206.4 207.8 226.5 185.4 167.7 161.7 191.0
Indirect business tax and nontax accruals................... 84.1 94.2 93.8 90.3 97.9 97.3 98.4 107.9 111.5 108.9 112.5 116.4
Contributions for social insurance.......................... 458.4 487.9 515.8 535.8 566.1 604.2 641.1 687.9 712.8 724.6 762.0 807.3
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Total current receipts................................ 1,174.3 1,275.8 1,371.0 1,468.6 1,599.0 1,730.7 1,826.0 2,019.5 2,016.2 1,846.9 1,862.7 1,955.0
===================================================================================================================================
CURRENT EXPENDITURES
Consumption expenditures.................................... 444.8 441.6 441.5 435.8 453.8 452.0 466.9 490.3 516.3 573.7 614.9 646.7
Defense................................................... 311.1 304.6 299.6 295.5 304.0 300.3 306.4 320.8 337.3 373.9 398.7 415.5
Nondefense................................................ 133.7 137.1 141.9 140.2 149.8 151.7 160.5 169.5 179.0 199.8 216.2 231.1
Transfer payments........................................... 590.2 614.8 646.6 680.4 711.0 727.9 741.3 770.3 826.0 907.9 965.4 993.7
To persons................................................ 573.4 599.3 633.8 668.6 699.9 716.9 730.5 756.8 816.3 894.3 951.7 979.5
To the rest of the world.................................. 16.8 15.5 12.8 11.9 11.2 11.0 10.7 13.5 9.7 13.6 13.7 14.2
Grants-in-aid to State and local governments................ 157.7 172.8 184.3 188.4 191.9 207.2 225.4 244.0 268.8 297.0 330.6 353.4
Net interest paid........................................... 228.4 234.0 261.9 272.6 275.4 278.3 267.1 263.0 247.9 217.4 207.8 221.8
Subsidies less current surplus of Government enterprises.... 38.6 32.9 34.3 34.4 30.8 31.8 34.7 49.9 51.2 39.2 39.1 40.5
Wage disbursements less accruals............................ ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
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Total current expenditures............................ 1,459.7 1,496.0 1,568.6 1,611.6 1,663.0 1,697.1 1,735.4 1,817.5 1,910.2 2,035.2 2,157.9 2,256.2
===================================================================================================================================
Current surplus or deficit (-)........................ -285.4 -220.2 -197.5 -143.0 -64.0 33.5 90.5 202.0 106.0 -188.3 -295.2 -301.2
ADDENDUM
Gross investment............................................ 86.2 82.1 83.0 85.5 80.7 85.0 90.3 96.0 98.0 105.6 113.1 118.7
Defense................................................... 56.8 55.2 53.7 54.9 47.9 49.6 50.9 53.0 55.1 58.7 61.9 64.7
Nondefense................................................ 29.4 26.9 29.3 30.6 32.9 35.4 39.3 43.0 42.9 46.9 51.2 54.0
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* $50 million or less.
Federal Sector Current Receipts
Table 17-1 shows Federal current receipts in the four major categories
used in the NIPA's, which are similar to the budget categories but with
significant differences.
Personal tax and nontax receipts is the largest category of current
receipts. It is composed primarily of the individual income tax, but
also includes fees, fines, and other receipts from persons.
Corporate profits tax accruals differs in classification from the
corresponding budget category primarily because the NIPA's 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 NIPA's 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 NIPA's include Federal
employer contributions for social insurance as a governmental receipt,
while the budget offsets these contributions against outlays as
undistributed offsetting receipts; (2) the NIPA's include premiums for
Part B of Medicare as governmental receipts, while the budget nets them
against outlays; (3) the NIPA's treat government employee contributions
to their pension plans as personal income, while the budget includes
them in governmental receipts; and (4) the
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NIPA's impute employer contributions for Federal employees' unemployment
insurance and workers' compensation.
Federal Sector Current Expenditures
Table 17-1 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. Gross investment (shown as
addendum items in Table 17-1) is thus excluded from current expenditures
in computing the government current surplus or current deficit on a NIPA
basis, whereas depreciation--charges on federally owned fixed capital--
(``consumption of general government fixed capital'') is included. The
NIPA's treat State and local investment and capital consumption in the
same way--regardless of the extent to which it is financed with Federal
aid (capital transfers) 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, which
makes the treatment of the government sectors in the NIPA's similar to
that of the private sector. Investment includes structures, equipment,
and computer software.
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. Payment of pension benefits to
former government employees is not included, as explained previously.
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, Medicaid, and education (but
capital transfers for construction of highways, airports, waste-water
treatment plants, and mass transit are excluded).
Net interest paid is the interest paid by the Government on its debt
(excluding debt held by trust funds, other than Federal employee pension
plans; 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 (excluding
subsidies for investment); 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
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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 NIPA's
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 been less than budget receipts in most years. This is due
principally to the fact that estate and gift taxes, which they exclude
as capital transfers, have exceeded Medicare premiums, which they
include as a governmental receipt but the budget treats as an offsetting
receipt. (In the budget, offsetting receipts are netted against the
outlay total and not included in the governmental receipts total.) NIPA
current expenditures have usually been higher than budget outlays (from
which the Medicare premiums and employer retirement contributions are
netted out as offsetting receipts), despite the omission from NIPA
expenditures of grants for capital construction and pension benefit
payments to former government employees.
Table 17-2. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPA's
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Actual Estimate
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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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------------ RECEIPTS-----------------------------------------------------------------------------------------------------------------------------------
Budget receipts................. 1,154.4 1,258.6 1,351.8 1,453.1 1,579.3 1,721.8 1,827.5 2,025.2 1,991.2 1,853.2 1,836.2 1,922.0
Contributions to government -4.8 -4.7 -4.6 -4.5 -4.4 -4.3 -4.5 -4.8 -4.7 -4.6 -4.5 -4.5
employee retirement plans....
Capital transfers received.... -12.3 -15.1 -14.5 -17.1 -19.7 -23.9 -27.6 -28.8 -28.2 -26.3 -20.0 -23.2
Other coverage differences.... -2.0 -2.4 -2.5 -3.6 -3.8 -6.2 -7.0 -8.0 -8.8 -8.9 -10.1 -10.2
Netting and grossing.......... 37.5 39.2 37.3 37.0 41.6 40.8 41.6 45.4 49.9 53.7 58.9 62.0
Timing differences............ 1.6 0.1 3.4 3.6 6.0 2.5 -3.9 -9.6 16.8 -20.2 2.2 8.9
NIPA current receipts....... 1,174.3 1,275.8 1,371.0 1,468.6 1,599.0 1,730.7 1,826.0 2,019.5 2,016.2 1,846.9 1,862.7 1,955.0
=======================================================================================================================
EXPENDITURES
Budget outlays.................. 1,409.5 1,461.9 1,515.8 1,560.5 1,601.2 1,652.6 1,701.9 1,788.8 1,863.9 2,011.0 2,140.4 2,229.4
Government employee retirement 31.7 30.1 29.0 27.0 31.8 31.6 32.2 31.5 31.8 33.9 31.1 35.0
plan transactions............
Deposit insurance and other 20.2 1.5 7.1 -2.0 -7.9 -7.1 -15.9 -2.8 -14.2 6.8 -3.1 -3.5
financial transactions.......
Capital transfers paid........ -23.2 -24.6 -27.1 -27.6 -28.8 -28.2 -31.3 -35.0 -39.7 -43.9 -42.6 -43.3
Net purchases of nonproduced -0.2 -0.2 7.4 0.1 11.0 5.2 1.6 0.2 0.9 -0.2 -0.1 -*
assets.......................
Net investment................ -8.3 -1.4 0.4 -0.5 5.6 2.8 0.2 -1.1 0.1 -4.6 -8.3 -9.5
Other coverage differences.... -8.1 -4.8 -3.0 3.0 11.5 0.9 2.7 4.1 8.1 -17.9 -20.0 -20.6
Netting and grossing 37.5 39.2 37.3 37.0 41.6 40.8 41.6 45.4 49.9 53.7 58.9 62.0
differences..................
Timing differences............ 0.6 -5.7 1.7 14.0 -3.0 -2.1 2.5 -13.6 9.4 -3.5 1.7 6.6
NIPA current expenditures... 1,459.7 1,496.0 1,568.6 1,611.6 1,663.0 1,696.4 1,735.4 1,817.5 1,910.2 2,035.2 2,157.9 2,256.2
ADDENDUM
Budget surplus or deficit (-). -255.1 -203.3 -164.0 -107.5 -22.0 69.2 125.5 236.4 127.1 -157.8 -304.2 -307.4
NIPA current surplus or -285.4 -220.2 -197.5 -143.0 -64.0 33.5 90.5 202.0 106.0 -188.3 -295.2 -301.2
deficit (-)..................
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* $50 million or less.
Two components of budget outlays, however, are sometimes sufficiently
large in combination to match the netting adjustments. These are
financial transactions and net investment (the difference between gross
investment and depreciation). Large outlays associated with resolving
the failed savings and loan associations and banks in 1990 and 1991
caused those year's budget outlays to exceed 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 made since that time
are recorded outside the budget as in the Federal sector of the NIPA's,
although, unlike the NIPA's, credit subsidies are recorded as budget
outlays.
Table 17-3. FEDERAL RECEIPTS AND EXPENDITURES IN THE NIPA's, QUARTERLY, 2002-2004
(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.
----------- ----------- ----------
2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004
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CURRENT RECEIPTS
Personal tax and nontax receipts............................ 1,025.5 874.8 856.6 837.5 827.9 835.9 855.3 875.6 819.4 840.7 862.9
Corporate profits tax accruals.............................. 142.9 170.5 180.2 181.1 166.6 166.3 169.7 180.3 192.1 205.2 219.4
Indirect business tax and nontax accruals................... 107.3 108.4 110.2 112.4 114.8 115.7 116.7 117.8 118.9 119.8 120.5
Contributions for social insurance.......................... 716.6 731.1 736.7 743.0 767.8 777.6 788.0 797.7 812.9 822.1 831.8
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Total current receipts................................ 1,992.3 1,884.7 1,883.7 1,874.0 1,877.0 1,895.5 1,929.7 1,971.3 1,943.3 1,987.8 2,034.6
===================================================================================================================================
CURRENT EXPENDITURES
Consumption expenditures.................................... 543.6 566.3 581.0 589.8 603.3 610.2 615.9 623.7 634.7 644.0 648.5
Defense................................................... 356.0 372.1 382.5 388.9 397.1 401.3 404.1 407.8 413.7 419.3 421.3
Nondefense................................................ 187.5 194.2 198.6 200.9 206.3 208.9 211.9 215.9 221.0 224.6 227.2
Transfer payments........................................... 870.9 916.9 927.6 934.1 968.5 961.7 967.0 971.5 997.7 989.1 992.7
Domestic (``to persons'')................................. 855.6 894.1 917.0 924.4 944.6 949.3 954.5 957.3 973.1 977.1 982.5
Foreign................................................... 15.3 22.8 10.6 9.7 23.9 12.3 12.5 14.2 24.5 12.0 10.2
Grants-in-aid to State and local governments................ 289.4 292.3 309.6 305.0 326.2 333.4 340.7 343.0 349.4 354.6 362.1
Net interest paid........................................... 221.6 208.5 214.9 205.8 202.1 203.0 205.4 209.6 214.3 219.8 225.7
Subsidies less current surplus of Government enterprises.... 45.5 46.6 46.3 39.9 41.0 42.2 42.9 43.1 43.5 43.9 44.0
Wage disbursements less accruals............................ ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
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Total current expenditures............................ 1,971.0 2,030.5 2,079.3 2,074.6 2,141.1 2,150.4 2,171.9 2,190.8 2,239.7 2,251.4 2,273.0
===================================================================================================================================
Current surplus....................................... 21.3 -145.8 -195.6 -200.7 -264.1 -254.9 -242.2 -219.5 -296.3 -263.6 -238.4
ADDENDUM
Gross investment............................................ 103.4 105.7 107.1 107.9 112.0 112.2 115.9 116.0 117.2 117.8 120.6
Defense................................................... 56.8 59.7 59.6 62.4 63.0 62.1 65.0 64.9 65.5 65.2 67.0
Nondefense................................................ 46.6 46.1 47.5 45.5 49.0 50.1 51.0 51.1 51.8 52.6 53.6
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Department of Commerce advance estimates for the Oct.-Dec. quarter, released January 30, 2003, were not available in time for inclusion in this table.
* $50 million or less.
During the period 1975-1992, the budget deficit exceeded the Federal
current deficit as measured in the NIPA's every year. The largest
difference, $78.6 billion, occurred in 1991 as a result of resolving
failed financial institutions as discussed above; the budget deficit was
then $269.3 billion, while the NIPA current deficit was $190.7 billion.
In 1993-1997, the NIPA current deficit was slightly larger than the
budget deficit each year. For 1998-2001, the NIPA current surplus was
lower than the budget surplus. For 2002 the NIPA current deficit was
larger than the budget deficit, while those for 2003 and 2004 are
projected to be slightly smaller.
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Table 17-1 displays Federal transactions using NIPA concepts with
actual data for the years 1993-2002 and estimates for 2003 and 2004
consistent with the Administration's budget proposals. Table 17-2
summarizes the reasons for differences between the data using budget
concepts and NIPA concepts. Table 17-3 displays quarterly data using
NIPA concepts beginning in October 2001. Annual NIPA data for 1960-2004
are published in Section 14 of a separate budget volume, Historical
Tables, Budget of the U.S. Government, Fiscal Year 2004.
Additional detailed estimates of NIPA current receipts and
expenditures will be published in a forthcoming issue of the Department
of Commerce publication, Survey of Current Business.