    [Analytical Perspectives]
    [Economic Assumptions and Analyses]
    [14. National Income and Product Accounts]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 227]]

                    14. 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. Because the NIPAs include Federal transactions
    and are widely used in economic analysis, it is important to show the
    NIPAs' distinctive presentation of Federal transactions and contrast it
    with that of the budget.
      One of the main 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 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--social benefits, grants to State and
    local governments, subsidies, and 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 current receipts and
    expenditures account, together with government consumption expenditures
    (which includes depreciation on government gross investment).
      Federal transactions are included in the NIPAs 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 framework 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. Also, it covers
    current transactions only, whereas the budget includes transactions that
    the NIPA current account omits from its current receipts and current
    expenditure totals as ``capital transfers.'' NIPA concepts also differ
    in many other ways from budget concepts, and therefore the NIPA
    presentation of Federal finances is significantly different from that of
    the budget.
    ---------------------------------------------------------------------------
      \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.
    ---------------------------------------------------------------------------

                  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 and grossing, timing, and coverage.
    These differences cause current receipts and expenditures in the NIPAs
    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 net Federal Government saving to differ from the budget
    surplus or deficit. Netting and grossing differences have equal effects
    on receipts and expenditures and thus have no effect on net Government
    saving. Besides these differences, the NIPAs combine transactions into
    different categories from those used in the budget.
    ---------------------------------------------------------------------------
      \2\ Over the period 1994-2004, NIPA current expenditures averaged 4.0
    percent higher than budget outlays, while NIPA current receipts averaged
    2.4 percent higher than budget receipts.
    ---------------------------------------------------------------------------
      December 2003 NIPA Revisions.--Comprehensive revisions to the NIPAs
    introduced in December 2003 significantly changed the way Federal
    transactions are measured in the NIPAs, and the ways in which the NIPAs
    differ from the budget. The three most important changes were: 1)
    reclassifying of nontaxes out of current tax receipts into current
    transfer receipts from persons and from business (net); 2) switching
    several items formerly netted against expenditures to current receipts:
    interest and dividends received by Government, the current surplus of
    Government enterprises, and tax receipts from the rest of the world
    (formerly netted against transfer payments to the rest of the world); 3)
    adding a new receipts category called ``income receipts on assets,''
    which includes such items as Outer Continental Shelf oil and gas
    royalties. The categories into which Government current expenditures and
    current receipts are broken down in the NIPAs are now significantly
    different from those used prior to the 2003 comprehensive revision. The
    Bureau of Economic Analysis, however, has converted historical NIPA data
    to the new basis.
      Netting and grossing differences arise when the budget records certain
    transactions as offsets to outlays while they are recorded as current
    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. The budget offsets against
    outlays any income that arises from voluntary business-type transactions
    with the public. The NIPAs often follow this concept as well, and income
    to Government enterprises such as the Postal Service or the power
    administrations is offset against their expenditures--but the NIPAs now
    treat the net surplus of Government enterprises as a component of
    current receipts. However, the NIPAs have a narrower definition of
    ``business-type transactions'' than does the budget. Two classes of
    receipts, rents and royalties, and regulatory or inspection fees, both
    of which are classified as offsets to outlays in the budget, are
    recorded in the NIPAs as Government

    [[Page 228]]

    receipts (income receipts on assets and current transfer receipts,
    respectively). The NIPAs 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 so that total outlays and receipts measure transactions with the
    public. Government contributions for Federal employee social insurance
    (such as Social Security) is 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 Federal
    employee social insurance as expenditures by the employing agencies and
    as governmental (rather than offsetting) receipts. 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 all receipts when they are received. Thus the NIPAs 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 between NIPA and budget measures of
    receipts for any given accounting period.
      Timing differences also occur for expenditures. When the first day of
    a month falls on a weekend or holiday, monthly benefit checks normally
    mailed on the first day 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 NIPAs. The
    NIPA Federal subsector is a current account and excludes capital
    transfers unrelated to current economic production, which are included
    in the budget. Federal investment grants to State and local governments,
    investment subsidies to business, lump sum payments to amortize the
    unfunded liability of the Uniformed Services Retiree Health Care Fund,
    and forgiveness of debt owed by foreign governments are included as
    outlays in the budget but are excluded from NIPA current expenditures as
    being capital transfers. Likewise, estate and gift taxes, included in
    budget receipts, are excluded from NIPA current receipts as being
    capital transfers. Also unlike the budget, the NIPAs exclude
    transactions with U.S. territories. They 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 current production involved.
      A 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. Whereas the budget treats employee payments to
    these pension plans as governmental receipts, and employer contributions
    by agencies as offsets to outlays because they are intragovernmental,
    the NIPAs 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 an 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.
      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
    rather than current production, income, or consumption. In contrast,
    under the Federal Credit Reform Act of 1990, 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, like the
    budget, include all interest transactions with the public, including
    interest received by and paid to the loan financing accounts; and both
    the NIPAs and the budget include administrative costs of program
    operations.
      Deposit insurance outlays for resolving failed banks and thrift
    institutions are similarly excluded from the NIPAs on the grounds that
    there are no offsetting cur

    [[Page 229]]

    rent income flows from these transactions. In 1991, this exclusion was
    the largest difference between the NIPAs and the budget and made NIPA
    net Government saving a significantly smaller negative number 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 a smaller negative figure than NIPA net Federal
    Government saving.

                                                        Table 14-1.  FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 1995-2006
                                                                                        (In billions of dollars)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Actual                                                           Estimate
                             Description                         -----------------------------------------------------------------------------------------------------------------------------------
                                                                     1995       1996       1997       1998       1999       2000       2001       2002       2003       2004       2005       2006
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                          CURRENT RECEIPTS

    Current tax receipts........................................     836.8      913.6    1,010.2    1,105.9    1,165.2    1,305.6    1,266.9    1,087.1    1,056.2    1,118.9    1,237.7    1,307.6
      Personal current taxes....................................     578.2      648.2      729.0      814.1      868.5      987.4      993.8      852.5      780.9      789.4      875.3      942.6
      Taxes on production and imports...........................      77.2       73.0       77.2       80.7       82.5       87.8       86.4       86.4       89.0       94.8      101.3      107.2
      Taxes on corporate income.................................     177.8      187.7      198.9      205.9      207.9      223.5      179.5      140.9      178.5      226.4      252.9      249.6
      Taxes from the rest of the world..........................       3.7        4.7        5.1        5.2        6.2        6.8        7.1        7.4        7.9        8.2        8.2        8.2
    Contributions for government social insurance...............     515.3      535.3      565.4      604.4      642.2      687.8      713.8      728.3      750.9      781.3      833.0      883.4
    Income receipts on assets...................................      23.3       26.6       26.7       22.3       20.9       24.3       26.4       21.4       21.4       20.1       21.7       23.2
    Current transfer receipts...................................      20.2       19.1       23.8       21.0       21.8       24.9       26.5       25.4       25.3       32.1       35.5       37.8
    Current surplus of government enterprises...................       0.3       -1.9        0.2         -*        0.3       -1.3       -6.5       -2.4        7.7        5.3        0.1       -3.9
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total current receipts................................   1,395.9    1,492.7    1,626.4    1,753.5    1,850.3    2,041.2    2,027.1    1,859.9    1,861.5    1,957.7    2,128.0    2,248.1
                                                                 ===================================================================================================================================
                        CURRENT EXPENDITURES

    Consumption expenditures....................................     443.2      436.8      454.6      452.9      469.5      496.0      519.7      576.3      645.9      709.0      769.7      754.2
      Defense...................................................     299.5      295.5      304.4      301.3      307.2      321.2      335.7      368.6      424.1      469.3      510.3      487.7
      Nondefense................................................     143.7      141.3      150.2      151.6      162.3      174.8      184.0      207.8      221.8      239.7      259.4      266.5
    Current transfer payments...................................     836.0      873.0      908.2      940.3      976.4    1,023.2    1,108.0    1,217.5    1,308.3    1,377.3    1,459.1    1,561.7
      Government social benefits................................     635.3      670.2      700.0      716.4      733.0      762.7      823.6      901.6      955.3    1,005.8    1,065.9    1,162.6
      Grants-in-aid to State and local governments..............     184.5      188.6      194.1      209.9      227.7      244.1      268.2      296.8      329.8      349.0      366.8      367.2
      Other transfers to the rest of the world..................      16.2       14.1       14.2       14.0       15.7       16.4       16.3       19.0       23.2       22.5       26.4       31.9
    Interest payments...........................................     285.1      295.8      299.4      299.7      285.9      283.3      267.9      234.8      215.3      219.7      241.5      276.9
    Subsidies...................................................      34.8       33.3       31.3       33.6       36.1       49.6       53.7       37.5       45.6       41.1       52.9       56.6
    Wage disbursements less accruals............................  .........  .........  .........  .........  .........  .........  .........  .........  .........  .........  .........  .........
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total current expenditures............................   1,599.1    1,638.9    1,693.5    1,726.5    1,767.9    1,852.0    1,949.3    2,066.2    2,215.1    2,347.1    2,523.2    2,649.3
                                                                 ===================================================================================================================================
          Net Federal Government saving.........................    -203.2     -146.1      -67.1       27.0       82.4      189.2       77.8     -206.3     -353.6     -389.5     -395.1     -401.3

              ADDENDUM: TOTAL RECEIPTS AND EXPENDITURES

    Current receipts............................................   1,395.9    1,492.7    1,626.4    1,753.5    1,850.3    2,041.2    2,027.1    1,859.9    1,861.5    1,957.7    2,128.0    2,248.1
    Capital transfer receipts...................................      14.6       17.1       19.7       23.9       27.6       28.8       28.2       26.4       21.7       24.7       23.6       26.0
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total receipts........................................   1,410.5    1,509.8    1,646.1    1,777.4    1,877.9    2,070.0    2,055.3    1,886.3    1,883.2    1,982.4    2,151.6    2,274.0

    Current expenditures........................................   1,599.1    1,638.9    1,693.5    1,726.5    1,767.8    1,852.0    1,949.3    2,066.2    2,215.1    2,347.1    2,523.2    2,649.3
    Net investment:
      Gross government investment:
        Defense.................................................      52.2       52.6       44.5       45.4       46.5       48.5       49.9       54.5       58.6       67.4       72.7       71.9
        Nondefense..............................................      27.3       28.5       28.5       29.7       31.9       32.2       30.3       32.7       33.0       31.7       35.2       36.6
      Less: Consumption of fixed capital:
        Defense.................................................      61.9       61.4       60.6       59.8       59.7       60.2       60.3       60.5       61.3       62.9       64.4       65.2
        Nondefense..............................................      19.7       20.6       21.8       22.9       24.5       26.5       27.7       28.2       28.7       28.7       29.6       30.5
    Capital transfer payments...................................      27.2       27.7       28.9       28.2       31.3       35.1       39.8       44.0       45.2       61.9       63.0       66.6
    Net purchases of nonproduced assets.........................      -7.4       -0.1      -11.0       -5.3       -1.7       -0.3       -0.9        0.2   .........       0.1       -0.1       -0.1
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total expenditures....................................   1,616.7    1,665.5    1,702.2    1,741.8    1,791.7    1,880.8    1,980.3    2,108.8    2,261.9    2,417.0    2,600.0    2,729.0
                                                                 ===================================================================================================================================
          Net lending or net borrowing (-)......................    -206.2     -155.7      -56.0       35.7       86.1      189.2       74.9     -222.6     -378.7     -434.3     -448.2     -454.7

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    * $50 million or less.

                         Federal Sector Current Receipts

      Table 14-1 shows Federal current receipts in the five major categories
    and four of the subcategories now used in the NIPAs, which are similar
    to the budget categories but with significant differences.
      Current tax receipts is the largest major category of current
    receipts, and its personal current taxes subcategory--composed primarily
    of the individual income tax--is the largest single subcategory. The
    NIPAs' taxes on corporate income subcategory 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.) The taxes on
    production and imports subcategory is composed of excise taxes and
    customs duties.
      Contributions for Government social insurance is the second largest
    major category of current receipts. It differs from the corresponding
    budget category primarily because: (1) the NIPAs 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 NIPAs include premiums for
    Part B of Medicare as governmental receipts, while the budget nets them
    against outlays; (3) the NIPAs treat Government employee contributions
    to their pension plans as a transfer of personal income within the
    household sector (as if the pension system were private), while the
    budget includes them in governmental receipts; and (4) the NIPAs impute
    employer contributions for Federal employees' unemployment insurance and
    workers' compensation.
      The income receipts on assets category consists mainly of interest
    payments received on Government direct loans (such as student loans) and
    rents and royalties on Outer Continental Shelf oil leases. The current
    transfer receipts category consists primarily of deposit insurance
    premiums, fees, fines and other receipts from both individuals and
    businesses--virtually all of which are netted against outlays in the
    budget. The current surplus (or deficit) of Government enterprises
    category was formerly netted against subsidies on the expenditure side
    of the accounts. This is the profit or loss 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.

                       Federal Sector Current Expenditures

      Table 14-1 shows current expenditures in five major NIPA categories
    and five subcategories, which are also 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
    among the addendum items in Table 14-1) is thus excluded from current
    expenditures in computing net Government saving on a NIPA basis, whereas
    depreciation--charges on federally owned fixed capital--(``consumption
    of general government fixed capital'') is included. The NIPAs 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 transfer payments) 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 NIPAs similar to
    that of the private sector. Investment includes structures, equipment,
    and computer software.
      Current transfer payments is the largest expenditure category.
    Transfer payments for Government social benefits consist mainly of
    income security and health programs, such as Social Security and
    Medicare paid to U.S. residents--and to retirees living outside the U.S.
    Payment of pension benefits to former Government employees is not
    included, as explained previously. Grants-in-aid to State and local
    governments help finance a range of programs, including income security,
    Medicaid, and education (but capital transfer payments for construction
    of highways, airports, waste-water treatment plants, and mass transit
    are excluded). ``Current transfer payments to the rest of the world
    (net)'' consists mainly of grants to foreign governments.
      Interest payments 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). Where the budget nets interest
    received on loans against outlays, the NIPAs now treat it as current
    receipts.
      Subsidies consist of subsidy payments for resident businesses
    (excluding subsidies for investment). 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.

    [[Page 230]]

                          Differences in the Estimates

      From the introduction of the unified budget in January 1968 until the
    early 1990s, NIPA receipts were less than budget receipts in most years.
    This was due principally to the fact that estate and gift taxes, which
    the NIPAs exclude as capital transfers, exceeded Medicare premiums,
    which the NIPAs 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 capital transfer grants and pension
    benefit payments to former Government employees.
      Two components of budget outlays, however, are sometimes sufficiently
    large in combination to exceed the netting and grossing adjustments.
    These are finan

    [[Page 231]]

    cial 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 NIPAs,
    although, unlike the NIPAs, credit subsidies are recorded as budget
    outlays.

                                                                  Table 14-2.  RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPA's
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Actual                                                           Estimate
                             Description                         -----------------------------------------------------------------------------------------------------------------------------------
                                                                     1995       1996       1997       1998       1999       2000       2001       2002       2003       2004       2005       2006
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    -------------------------- RECEIPTS-------------------------------------------------------------------------------------------------------------------------------------------------------------

    Budget receipts.............................................   1,351.8    1,453.1    1,579.3    1,721.8    1,827.5    2,025.2    1,991.2    1,853.2    1,782.3    1,880.1    2,052.8    2,177.6
      Contributions to government employee retirement plans.....      -4.6       -4.5       -4.4       -4.3       -4.5       -4.8       -4.7       -4.6       -4.6       -4.6       -4.6       -4.6
      Capital transfers received................................     -14.6      -17.1      -19.7      -23.9      -27.6      -28.8      -28.2      -26.4      -21.7      -24.7      -23.6      -26.0
      Other coverage differences................................      -2.6       -3.6       -3.8       -5.7       -6.6       -7.8       -7.7       -8.8       -9.1      -10.5      -11.4      -12.3
      Netting and grossing......................................      63.3       62.8       69.5       64.5       65.7       70.8       70.0       76.2       91.0       97.4      106.4      118.7
      Timing differences........................................       2.4        2.0        5.5        1.2       -4.2      -13.3        6.6      -29.8       23.7       20.0        8.4       -5.4

        NIPA current receipts...................................   1,395.9    1,492.7    1,626.4    1,753.5    1,850.3    2,041.2    2,027.1    1,859.9    1,861.5    1,957.7    2,128.0    2,248.1
                                                                 ===================================================================================================================================
                            EXPENDITURES

    Budget outlays..............................................   1,515.8    1,560.5    1,601.2    1,652.6    1,701.9    1,789.1    1,863.0    2,011.0    2,159.9    2,292.2    2,479.4    2,567.6
      Government employee retirement plan transactions..........      28.7       26.8       31.6       31.3       32.1       31.7       31.5       33.7       32.5       34.0       42.4       47.0
      Deposit insurance and other financial transactions........       2.1        0.9        9.3        7.6        5.7        6.0        7.9        1.5       -1.6       -8.6      -20.5       -5.1
      Capital transfer payments.................................     -27.2      -27.7      -28.9      -28.2      -31.3      -35.1      -39.8      -44.0      -45.2      -45.7      -47.3      -50.3
      Net purchases of nonproduced assets.......................      17.3        7.4       -1.4       -1.4       -0.4       -1.1        1.2        1.0       12.3       -0.1        0.1       -0.1
      Net investment............................................       7.4        0.1       11.0        5.3        1.7        0.2        0.9       -0.2          *       -7.5      -13.8      -12.8
      Other coverage differences................................     -11.5       -1.8        6.7       -4.4       -2.9       -3.9        0.6       -8.8      -22.7      -16.9      -21.0      -22.1
      Netting and grossing differences..........................      63.3       62.8       69.5       64.5       65.7       70.8       70.0       76.2       91.0       97.4      106.4      118.7
      Timing differences........................................       3.1        9.8       -5.6       -0.8       -4.7       -5.6       14.1       -4.3      -11.0        2.2       -2.6        6.4

        NIPA current expenditures...............................   1,599.1    1,638.9    1,693.5    1,726.5    1,767.8    1,852.0    1,949.3    2,066.2    2,215.1    2,347.1    2,523.2    2,649.3

                              ADDENDUM

      Budget surplus or deficit (-).............................    -164.0     -107.5      -21.9       69.2      125.5      236.2      128.2     -157.8     -377.6     -412.1     -426.6     -390.1
      NIPA net Federal government saving........................    -203.2     -146.1      -67.1       27.0       82.4      189.2       77.8     -206.3     -353.6     -389.5     -395.1     -401.3
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    * $50 million or less.

      During the period 1975-1992, the budget deficit was a larger negative
    number than net Federal Government saving as measured in the NIPAs every
    year. The largest difference, $78.8 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 net
    Government saving was -$190.5 billion. In 1993-2002, the NIPA net
    Federal Government saving was a larger negative number than the budget
    deficit or lower positive number than the budget surplus each year. For
    2003 and 2004, and in the estimate for 2005, though not that for 2006,
    the NIPA net Federal Government saving is a smaller negative number than
    the budget deficit.
      Table 14-1 displays Federal transactions using NIPA concepts with
    actual data for 1995-2004 and estimates for 2005 and 2006 consistent
    with the Administration's budget proposals. Table 14-2 summarizes the
    reasons for differences between the data. Table 14-3 displays quarterly
    data beginning with the last quarter of 2003 based on NIPA concepts.
    Annual NIPA data for 1948-2006 are published in Section 14 of a separate
    budget volume, Historical Tables, Budget of the U.S. Government, Fiscal
    Year 2006.
      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 and on the Bureau of Economic
    Analysis website at http://www.bea.doc.gov/bea/pubs.htm.

    [[Page 232]]

                                                           Table 14-3.  FEDERAL RECEIPTS AND EXPENDITURES IN THE NIPA's, QUARTERLY, 2004-2006
                                                                      (In billions of dollars; seasonally adjusted at annual rates)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Actual                                                           Estimate
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
                                                                  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.
                                                                                                  -----------                                 -----------                                 ----------
                                                                     2003       2004       2004       2004       2004       2005       2005       2005       2005       2006       2006       2006
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                          CURRENT RECEIPTS
    Current tax receipts........................................   1,074.9    1,073.8    1,098.5    1,096.7               1,168.0    1,189.8    1,205.2    1,214.8    1,235.5    1,247.3    1,262.7
      Personal current taxes....................................     772.5      768.3      781.5      794.3                 850.2      866.5      880.5      892.8      915.5      925.4      937.3
      Taxes on production and imports...........................      89.6       89.0       89.3       89.2                  94.3       97.6       98.4       99.1      101.1      102.5      103.7
      Taxes on corporate income.................................     204.9      207.9      219.5      204.9                 215.4      217.5      218.0      214.6      210.7      211.2      213.5
      Taxes from the rest of the world..........................       7.9        8.6        8.3        8.2                   8.2        8.2        8.2        8.2        8.2        8.2        8.2
    Contributions for government social insurance...............     769.5      787.9      797.6      806.2                 837.1      847.5      857.9      867.8      893.4      904.1      914.7
    Income receipts on assets...................................      25.5       22.9       22.2       22.9                  25.2       25.7       25.9       26.2       26.4       26.9       27.3
    Current transfer receipts...................................      25.6       26.1       26.2       26.6                  28.6       29.2       29.7       30.1       30.8       31.6       32.4
    Current surplus of government enterprises...................       5.0        4.6        4.5        4.3                  -0.3       -1.9       -3.0       -4.2       -4.2       -4.9       -5.7
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total current receipts................................   1,900.6    1,915.3    1,949.1    1,956.7               2,058.7    2,090.3    2,115.8    2,134.5    2,182.0    2,204.9    2,231.4
                                                                 ===================================================================================================================================
                        CURRENT EXPENDITURES

    Consumption expenditures....................................     671.3      691.1      700.3      713.0                 741.9      752.4      761.4      748.5      741.8      729.9      719.9
      Defense...................................................     450.2      465.2      473.6      487.1                 506.1      510.9      513.9      502.7      496.0      484.0      474.0
      Nondefense................................................     221.1      225.9      226.7      225.9                 235.8      241.5      247.5      245.8      245.8      245.9      245.9
    Current transfer payments...................................   1,350.6    1,365.9    1,367.9    1,368.8               1,451.0    1,455.5    1,465.5    1,473.5    1,567.3    1,568.3    1,583.4
      Government social benefits................................     972.5      986.2      993.0    1,004.3               1,050.0    1,057.6    1,064.4    1,072.0    1,162.9    1,171.7    1,180.4
      Grants-in-aid to State and local governments..............     357.2      346.0      351.9      342.1                 364.7      372.0      373.6      370.1      362.8      365.1      369.6
      Other transfers to the rest of the world..................      20.8       33.7       23.0       22.4                  36.4       25.9       27.5       31.4       41.5       31.4       33.3
    Interest payments...........................................     214.7      211.1      220.7      220.0                 232.2      239.7      248.0      257.0      266.6      276.7      287.2
    Subsidies...................................................      43.2       39.7       38.7       39.0                  50.6       54.2       56.8       54.9       59.7       56.1       52.3
    Wage disbursements less accruals............................  .........      -1.5        1.5          *              .........  .........  .........  .........  .........  .........  .........
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total current expenditures............................   2,279.8    2,306.3    2,329.1    2,340.8               2,475.7    2,501.7    2,531.7    2,533.9    2,635.3    2,630.9    2,642.8
                                                                 ===================================================================================================================================
          Net Federal Government saving.........................    -379.2     -391.0     -380.0     -384.1                -417.1     -411.5     -415.9     -399.3     -453.4     -426.0     -411.4

              ADDENDUM: TOTAL RECEIPTS AND EXPENDITURES

    Current receipts............................................   1,900.6    1,915.3    1,949.1    1,956.7               2,058.7    2,090.3    2,115.8    2,134.5    2,182.0    2,204.9    2,231.4
    Capital transfer receipts...................................      22.9       24.2       23.0       26.1                  20.9       21.0       21.3       21.9       22.7       23.8       25.1
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total receipts........................................   1,923.5    1,939.5    1,972.0    1,982.7               2,079.6    2,111.3    2,137.1    2,156.4    2,204.7    2,228.7    2,256.5

    Current expenditures........................................   2,279.8    2,306.3    2,329.1    2,340.8               2,475.7    2,501.7    2,531.7    2,533.9    2,635.3    2,630.9    2,642.8
    Net investment:
      Gross government investment:
        Defense.................................................      63.4       69.0       67.6       69.8                  73.6       72.4       73.6       74.3       71.0       71.9       70.5
        Nondefense..............................................      32.8       33.2       36.5       34.6                  37.1       37.8       38.4       38.4       38.7       38.9       39.2
      Less: Consumption of fixed capital:
        Defense.................................................      61.8       62.5       63.5       63.9                  64.3       64.5       64.7       64.9       65.1       65.3       65.5
        Nondefense..............................................      28.9       29.1       29.3       29.4                  29.5       29.8       30.0       30.2       30.5       30.7       31.0
    Capital transfer payments...................................      61.5       60.0       57.5       66.9                  63.0       65.0       64.9       65.1       66.3       67.2       66.9
    Net purchases of nonproduced assets.........................      -0.7   .........      -0.8        1.8                   0.2        0.2        0.2        0.2        0.2        0.2        0.2
                                                                 -----------------------------------------------------------------------------------------------------------------------------------
          Total expenditures....................................   2,346.1    2,376.9    2,397.2    2,420.4               2,555.8    2,582.8    2,614.0    2,616.7    2,715.9    2,713.1    2,723.0
                                                                 ===================================================================================================================================
          Net lending or net borrowing (-)......................    -422.6     -437.4     -425.2     -437.7                -476.2     -471.6     -477.0     -460.3     -511.2     -484.4     -466.5

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
     Department of Commerce advance estimates for the Oct.-Dec. quarter, released January 28, 2005, were not available in time for inclusion in this table.
    * $50 million or less.